Brief Fact Summary.
Metallurgical Industries, Inc. (Plaintiff) claimed that its zinc recovery furnace modifications were trade secrets misappropriated by Fourtek, Inc. (Defendant).
Synopsis of Rule of Law.
One who holds a trade secret may reveal a limited amount of information without destroying the trade secret status.
Metallurgical Industries, Inc. (Metallurgical) (Plaintiff) spent time, money, and effort to modify zinc furnaces it had purchased from a bankrupt company.Â A former employee (Defendant) of the bankrupt company, who had been told the process was a secret, formed Fourtek, Inc. (Defendant) and contracted with a third party to build a furnace incorporating the modifications.Â Plaintiff then sued, alleging a trade secret had been misappropriated.Â The district court ruled there was no trade secret involved in the basic zinc recovery process because the process had been publicized in the trade previousy, therefore, misappropriation did not occur.Â Plaintiff appealed.Â It countered that its modifications gave it a clear advantage over its competitors.Â Plaintiff also claimed that its modifications were trade secrets because the holder of a secret may communicate to employees and others pledged to secrecy without losing his protection.
May one who holds a trade secret reveal a limited amount of information without destroying the trade secret status?
(Gee, J.)Â Yes.Â One who holds a trade secret may reveal a limited amount of information without destroying the trade secret status.Â When disclosure to others is made to advance the holder’s economic interest, it should be considered a limited disclosure that does not destroy the required secrecy.Â Here, the disclosures were not public announcements, Metallurgical (Plaintiff) only revealed its information to two businesses it was dealing with, and the disclosures were made to advance Plaintiff’s economic interests.Â Plus, the modifications that led to the commercial operation of the zinc recovery furnace provided a clear advantage over the competition.Â That the scientific principles involved are generally known does not necessarily refute Plaintiff’s claim of trade secrets.Â The district court misconstrued the nature and elements of the cause of action and abused its discretion in excluding certain evidence.Â Affirmed in part, reversed in part, and remanded for a new trial.
In calculating what a reasonable royalty would have been had the parties agreed, the trier of fact should consider the following factors: (1) the resulting and foreseeable changes in the parties competitive posture; (2) prices paid by licensees in the past; (3) the total value of the secret to the plaintiff, including the plaintiff's development cost and the importance of the secret to the plaintiff's business; (4) the nature and extent of the use the defendant intended for the secret; and (5) whatever other unique factors in the particular case might have been affected by the parties agreement, such as the ready availability of alternative process.View Full Point of Law
The definition of a â€œtrade secretâ€ was reviewed in this case.Â First of all, the subject matter must be a secret.Â Second, efforts must be made to keep the subject matter secret.Â Third, the law requires secrecy, but not necessarily absolute.