FALL 2010

Trade Secrets


Course No. 9200-704 (& 804)-801

ID No. 85737 & 85736

Time:  W 6:30 - 9:30 p.m.
Room:  W-215
Professor Jay Dratler, Jr.
Room Across from 231D (IP Alcove)
Home: 330-835-4537
Copyright © 2000, 2002, 2003, 2006, 2008, 2010   Jay Dratler, Jr.   For permission, see CMI.

Questions and Notes on Walker, Wallersheim and Scott

1.  Walker is an odd trade-secret case, of the "idea-submission" variety, which often also raises contract or implied-contract claims.  The court mentions at least four separate grounds for refusing to find a trade secret: that the information: (1) was generally known, (2) was "vague," (3) was "obvious," and (4) failed to provide an advantage over competitors.  Which of these objections to trade secrecy finds textual support in the Uniform Trade Secrets Act?  Which do you think provides the most persuasive support for the result?

What does the court mean in saying that the alleged trade secret was "vague"?  The court describes the plaintiff's claim as relating to the following alleged improvements in I Ching cards: "use of a higher quality stock for the cards, brighter colors, rounded corners, wide red borders, larger hexagrams on the face of the cards and a higher quality box in which the cards would be packaged for sale."  Does the court mean that this information was insufficiently specified to determine whether it met the requirements for trade secrecy?   Does the court mean that the description was insufficiently specific to determine whether the defendant misappropriated the information from the plaintiff or got it from another source?  Might the court mean both of the above?  In any event, is there textual support in the UTSA for the court's approach?  (Note that Walker, like many of our cases, predated the UTSA.)

What does the court mean in saying the alleged trade secret was "obvious"?  Is the court applying the patent standard of nonobviousness (see 35 U.S.C. § 103)?  If so, is that appropriate?  Is requiring patent-law nonobviousness consistent with the Water Services decision, which refused to apply the patent standard of novelty?  If the court is not referring to the patent standard, what does it mean by "obvious" and does that criterion find any support in the current statute?

Finally, to what part of the UTSA does the court's reference to lack of competitive advantage relate?  Would the same result apply under the corresponding language of the UTSA?

2.  All three cases—Walker, Wallersheim, and Scott—purport to apply the second element of trade secrecy under the UTSA, whether the alleged trade secret "derives independent economic value, actual or potential" from not being "generally known" or "readily ascertainable[.]"  UTSA § 1(4)(i).  Like the "utility" requirement in patent law, see 35 U.S.C. § 101 (patentable invention must be "new and useful"), the "economic value" requirement in trade-secret law is usually easy to satisfy.  Normally parties do not litigate over matters that have no economic value.

Occasionally, however, the "economic value" criterion becomes a real issue in a case.  This situation may occur for two reasons: (1) the motive for the ligitation is noneconomic; or (2) there is economic value but that value is intrinsic and does not arise from secrecy or the competitive advantage that secrecy brings.  Which of these reasons best describes Walker?  Wallersheim?

3. Note the Religious Technology Center's change in position between Wollersheim and Scott.  Why do you suppose the Center took the position in Wallersheim that there was no economic motive for keeping its scriptures secret?  Was the Center badly advised about trade-secret law, or might it have had tax considerations in mind?  Does reversal of the result in Scott suggest that the "economic value" criterion is manipulable?  Do you agree with the dissent in Scott that the Center should not have been allowed to take one position in Wallersheim and an inconsistent position later in Scott?

4.  Can you imagine other situations in which the "economic value" criterion might arise?  Suppose a public figure is involved in an embarrassing sexual escapade, which he records in complete detail in his private diary.  Suppose further that an investigative reporter obtains the diary surreptiously through the public figure's gullible child.  Can the public figure enjoin disclosure of the contents of the diary on the grounds that they are trade secrets?  Could the public figure make a credible claim to economic value, as the Center did in Scott?  Could the public figure also make a credible claim that the trade secret "derive[d] independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use[,]" as required by UTSA § 1(4)(i)?

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