Seventh Circuit Holds that, for a Case or Controversy to Exist in Trade Secret Action, There Must Be Evidence of Trade Secret and Value of the Secret

In BondPro Corporation v. Siemens Power Generation, Inc., 2006 U.S. App. LEXIS 23183 (7th Cir. 2006), the 7th Circuit affirmed the district court’s judgment for manufacturer Siemens as a matter of law, finding that BondPro’s claimed trade secret had not been revealed in detail sufficient to show that it had commercial value.

BondPro demonstrated to Siemens a particular method of bonding insulation to U-shaped slots that form part of Siemens’ generators, hoping to license the technique.  Siemens, although told by BondPro that this technique was proprietary, later applied for a patent on a similar process.  The Patent Office rejected the application and neither Siemens nor BondPro ever put the method into use.  Yet BondPro sued for theft of a trade secret.  The district court jury found for plaintiff BondPro, but the judge found for the defendant Siemens as a matter of law. BondPro appealed.

After resolving several jurisdictional issues that resulted largely from the sloppiness of the lawyers in this case, the court turned to the issue of if there is a case or controversy.  Here, the court explained that to have a case or controversy, BondPro needs to showing that it has something tangible to gain from reinstating the jury’s verdict. Thus the court examined the claimed trade secret to see if it has value.

The court pointed out that in many cases applying for a patent on what was previously a trade secret will destroy that trade secret by making it public knowledge, even if no patent is granted, since the PTO publishes applications after 18 months.  However, in this case, Siemens allegedly stole the secret method, and in these circumstances would be liable.

Liable for what?  Judge Posner precluded money damages, noting that there was no evidence that the technique had any commercial value whatsoever.  Yet he inquired further into injunctive relief.  BondPro appeared to have taken the proper steps to protect its trade secret, avoiding invalidation by its own inaction.

It all comes down to, in the court’s opinion, what the claimed trade secret is.  The general process as described in the first claim of the Siemens application was arguably something known in the trade already, as it had been demonstrated at a year 2000 trade convention.   But no further details of its secret process were provided by BondPro at trial.  The court noted that usually one expects trade secrets to be highly detailed because general processes will most often be known to experts in the field.  Since BondPro has not provided details that would distinguish its “trade secret” from publicly-known methods, the court concluded that there was no trade secret.  Since there was no trade secret, BondPro has nothing to gain from reinstating the jury verdict; and thus there was no case or controversy as required by the Constitution.  As such, the district court’s JNOV is affirmed.

Significance to Trade Secrets Owners

This case highlights an important rule in trade secrecy protection: the trade secret must be provable as a secret.  One easy mechanism for so doing is to ensure all proprietary materials are specifically identified, such as by a label on a header of each page and/or by including in a license clarifying that trade secrets are being delivered.  However indicated, such evidence is a pre-requisite to successful trade secret enforcement.

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