Trade Secret Misappropriation
In Brief: Generally, a patent has to disclose all enabling features of the invention. However, an invention can be partially protected by a patent and partially protected by trade secrets.
Here’s What Happened:
Life Spine Inc. created a device that helps with spinal placement during surgery. Life Spine had a patent on the device. Life Spine protected the dimensions of the device to fractions of a millimeter as trade secrets.
Life Spine entered into a distributorship agreement with Aegis Spine Inc. to distribute the device to medical facilities nationwide. The distributorship agreement contained a clause that required Aegis to keep all information confidential and only use the confidential information only in furtherance of the business relationship. Aegis passed the trade secret details to its parent company. The parent company quickly developed a similar device and started selling it in competition with Life Spine.
Life Spine sued Aegis and its parent company for trade secret misappropriation and Aegis for breach of contract.
The district court entered a preliminary injunction against the Aegis defendants. The Aegis defendants appealed to the Seventh Circuit Court of Appeals.
Aegis argued that the appearance and overall functionality of the device was publicly disclosed through the patent and was visible at trade shows and in advertising. So Life Spine didn’t have any trade secrets. The Seventh Circuit disagreed noting that the claimed trade secrets were in the dimensions and measurements and component-connection details of the device. Those dimensions were not readily discovered or ascertained from the patent disclosure or public display of the device. Use of the device for specific patients required additional instructions from Life Spine or sophisticated laboratory measurement equipment.
To protect its trade secrets, Life Spine required all purchasers of the device to be bound by the confidentiality obligations. Sales were limited to non-manufacturing parties (like surgeons and hospitals). Life Spine’s distributors acted as fiduciaries of these devices up to and including at each scheduled surgery because they were present in the operating room. So, the Seventh Circuit agreed with the district court that Life Spine hadn’t publicly disclosed its trade secrets.
Even if Aegis could prove public disclosure of the trade secrets, it was bound by the confidentiality clause.
The Seventh Circuit affirmed the preliminary injunction order.
WHY YOU SHOULD KNOW THIS: Life Spine did several things exactly right. First, it properly identified its trade secrets with sufficient detail that the courts could understand exactly what Life Spine was protecting. Second, Life Spine made sure that its trade secrets didn’t compromise the claims disclosed in the patent. Third, Life Spine tailored its trade secrets protection measures to its device and the use of its device. It used confidentiality agreements, limited to whom sales could be made, and disclosed the information on a need to know basis.