Winston Research Corp. v. 3M Corp

Brief Fact Summary.

Mincom (Plaintiff) argued that a two-year injunctive period protecting its trade secrets was too short, and that money damages should have been awarded for Winston Research Corp.’s (Defendant) infringement of its trade secrets, while Defendant argued that an injunction was not appropriate because the definition of trade secrets the district court used was too broad. 

Synopsis of Rule of Law.

(1) A particular embodiment of a general approach to solving a problem can be a trade secret.  (2) A court has discretion to enjoin disclosure of a trade secret for the period of time during which it would take a competitor to develop a competing product after the holder of the trade secret has disclosed it publicly. 

Facts.

Mincom (Plaintiff) developed an improved precision tape recorder and reproducer.  Within fourteen months of Johnson and Tobias leaving Mincom (Plaintiff), and forming Winston Research Corp. (Defendant), Defendant developed a similar machine.  Plaintiff alleged that the Defendant machine was developed by Mincom’s former employees, including Johnson and Tobias, by using confidential information that they had acquired while working on the Plaintiff’s machine.  Plaintiff brought suit in federal district court for damages and an injunction.  The district court found that Johnson and the other former Plaintiff employees based Defendant’s development program upon the same approach to solving the problem posed by prior versions of the recorder as they had pursued in developing the Plaintiff machine.  The district court further found that this general approach was not a trade secret of Plaintiff.  Finally, the district court found that the particular embodiment of these general concepts in the Plaintiff machine was Plaintiff’s trade secret, and had been improperly utilized by the former employees of Plaintiff in developing the Defendant machine.  The district court enjoined Defendant, Johnson, and Tobias from disclosing or using Mincom’s (Plaintiff) trade secrets in any manner for the duration of two years from the date of judgment, but denied damages.  Both sides appealed, and the court of appeals granted review.

Issue.

(1) Can a particular embodiment of a general approach to solving a problem be a trade secret.  (2) Does a court have discretion to enjoin disclosure of a trade secret for the period of time during which it would take a competitor to develop a competing product after the holder of the trade secret has disclosed it publicly?

Held.

(Browing, J.)  (1) Yes.  A particular embodiment of a general approach to solving a problem can be a trade secret.  Mincom (Plaintiff) argued that the court defined Plaintiff’s trade secrets too narrowly; Winston (Defendant), that the court’s definition was too broad.  In describing Plaintiff’s trade secrets in the judgment, the district court first outlined the general approach that both Plaintiff and Defendant used when developing their machines.  The court then set out the detailed specifications of the different elements of the Mincom (Plaintiff) machine.  Winston (Defendant) read the court’s initial outline of the general approach as a determination that this was itself a Mincom (Plaintiff) trade secret.

 

(2) Yes.  A court has discretion to enjoin disclosure of a trade secret for the period of time during which it would take a competitor to develop a competing product after the holder of the trade secret has disclosed it publicly.  Plaintiff was entitled to protection of its trade secrets for as long as they remained secret.  The district court’s decision to limit the duration of injunctive relief was necessarily premised upon a determination that Plaintiff’s trade secrets would shortly be fully disclosed, through no fault of Defendant, as a result of public announcements, demonstrations, and sales and deliveries of Mincom (Plaintiff) machines.  This was a sound approach.  A permanent injunction, like the one sought by Plaintiff, would subvert the public’s interest in allowing technical employees to make full use of their knowledge and skill and in fostering research and development.  On the other hand, denial of any injunction at all would leave the faithless employee unpunished where, as in this case, no damages were awarded; and he and his new employer would retain the benefit of a head start over legitimate competitors who did not have access to the trade secrets until they were publicly disclosed.  By enjoining use of the trade secrets for the approximate period it would take a legitimate Mincom (Plaintiff) competitor to develop a successful machine after public disclosure of the secret information, the district court denied the employees any advantage from their faithlessness, placed Plaintiff in the position it would have occupied if the breach of confidence had not occurred before the public disclosure, and imposed the minimum restraint consistent with the realization of these objectives upon the utilization of the employees’ skills.  Affirmed.

Discussion.

The court also held that the former employees’ knowledge of what not to do (negative know-how) could not be protected as a trade secret I this case (but could in other cases) because there would be no way to prohibit the former employees from using such knowledge without prohibiting them from using their general knowledge and experience at the same time.  The court also affirmed the district court’s decision to not award money damages, reasoning that Defendant had not profited from sales of its machines, and that possible future profits were too speculative.  Finally, the court also affirmed the assignment of patents to Mincom (Plaintiff), pursuant to an employment agreement, for inventions by former employees that were based on Plaintiff’s confidential information.