Reference no: EM131738957

Case Scenario: Incase designs and manufactures injection-molded plastic packaging products. The company discussed at length with Timex, a manufacturer of watches, about providing packaging for some of Timex's watches. Incase showed Timex two watch packages, but after extensive talks and negotiations, Timex got its packaging made by a Philippines manufacturer. Later. Incase noticed that the Timex watch packages incorporated one of the Incase designs and sued Timex for misappropriating trade secrets. Although the jury returned a verdict of damages for Incase, the trial judge overturned the jury's verdict and ruled as a matter of law that Incase had not taken reasonable steps to pre-serve the secrecy of the design. Incase appealed. STAHL, J.: ... To prevail on this type of claim of misappropriation of trade secrets, a plaintiff must show

(1) the information is a trade secret;

(2) the plaintiff took reasonable steps to preserve the secrecy of the information; and

(3) the defendant used improper means, in breach of a confidential relationship, to acquire and use the trade secret. The appeal on this claim turns on whether Incase took reasonable steps to preserve the secrecy of the design. The district court noted that no documents were marked "confidential" or "secret"; there were no security precautions or confidentiality agreements; Incase had not told Timex the design was a secret; and Incase's principal designer on the project, Bob Shelton, did not think the design was a secret. Timex adds that Frank Zanghi, Incase's vice president, did not tell any-one at Timex that the design was confidential. Incase argues that the jury could have found evidence of steps to preserve secrecy in the fact that Incase showed the designs only to Timex, the trade practice of the watch industry, and the fact that Timex treated the designs as confidential in its dealing with the Philippine manufacturer. It also argues that Shelton's testimony should not have been given the weight it was by the court, since he was speaking for himself, not the company, when he said that he did not believe the design was secret.

Incase also points to other testimony by Shelton where he said that he did not show the work to anyone other than Timex. After a careful review of the record, we have not found any evidence to support Incase's argument that it took reasonable steps to preserve the secrecy of the design. Although Frank Zanghi testified, for example, that when Incase works on a project, it is treated as "confidential between Incase and the company," that the design is "proprietary" and "our property," and that he believed that the designs were secret, he admitted under cross-examination that this policy was never articulated to Timex. The fact that Incase kept its work for Timex private from the world is not sufficient; discretion is a normal feature of a business relationship. Instead, there must be affirmative steps to preserve the secrecy of the information as against the party against whom the misappropriation claim is made. Protecting a trade secret "calls for constant warnings to all persons to whom the trade secret has become known and obtaining from each an agreement, preferably in writing, acknowledging its secrecy and promising to respect it. To exclude the public from the manufacturing area is not enough." Here, there is no evidence that any such steps were taken. Therefore, we affirm the district court's judgment as a matter of law on the misappropriation of trade secrets claim.

Case Question

1. Why was this case tried in federal court, rather than state court?

2. Why did Incase think it had a trade secret?

3. What did the appellate court say on the issue of whether Incase had preserved its trade secret?

4. What should Incase have done to preserve exclusive private boundaries on its trade secret?