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 Winston Research Corp. v. 3M Co.


1.  The Mincom Division of 3M Co. had made a tape recorder whose temporal tracking was better than that of competitors' machines.  It accomplished this feat by reducing the intertia or moving parts and eliminating resonances (unwanted vibrations) in the motion control system.  Were these methods of making a better machine trade secrets or basic principles of physics engineering?  If the latter, what were the trade secrets?


2.  The two employee defendants, Johnson and Tobias, had been in charge of Mincom's program and its sales, respectively, though Tobias had been fired. Together, they must have had access to all the trade secrets developed by the entire Mincom division.  Is this case therefore a case of "inevitable disclosure" like Wohlgemuth?  If so, why not grant a perpetual injunction, rather than just a "head start" injunction?


3.  The parties here argued the classic cases of Shellmar Products Co. v. Allen-Qualley Co., 87 F.2d 104 (7th Cir. 1936), cert. denied, 301 U.S. 695 (1937), and Conmar Products Corp. v. Universal Slide Fastener Co., 172 F.2d 150 (2d Cir. 1949).  See N.1.  The two cases represent both opposite ends of the remedial spectrum and differing conceptions of the nature of trade-secret protection.

In Shellmar, the court conceived of trade-secret law as based upon the wrong of breach of confidence.  It therefore upheld a permanent injunction against a party that had inequitably bought a patent and had received the trade secret in confidence, even though the issued patent had disclosed the secret to the world before the confidential disclosure.  See 87 F.2d at 107-108.  In Conmar, in contrast, the court conceived of trade-secret protection as based upon property rights and granted no relief for misappropriation after disclosure of the secret in a patent, on the theory that the patent's disclosure had destroyed the secret.  See 172 F.2d at 155-156.  Among other things, these cases illustrate how differing conceptions of substantive law—the nature of the right—can affect courts' ruling on remedies.


4.   Now let us look at the same question from a different perspective.  Instead of focusing on the abstract nature of the right, consider the purpose of the remedy: putting the plaintiff in the rightful position.

In all three cases—Shellmar, Conmar, and this one—the secret was in the public domain, or it shortly would be.  In Shellmar and Conmar, issued patents had disclosed the secrets to the world.  Here the plaintiff's past advertising and impending sales of the machines would soon disclose all the details of their construction.  In each case, the rest of the world (other than the defendant) had or would soon have the right to obtain the trade secrets from the public disclosure of the patents, the advertising or the machine itself.  The relevant question is, what should the law do about the defendant, who got the secrets by improper means before their disclosure to the world?  (We leave aside the suggestion in Shellmar that the patent disclosure there occurred before the confidence, see 87 F.2d at 107, because the Conmar court characterized Shellmar otherwise, see 172 F.2d at 155 & n..3, and that characterization has descended to posterity.)

In each case, assess the remedy (a permanent injunction in Shellmar, no injunction in Conmar, and a "head start" injunction in Winston) against the goal of putting the plaintiff in the "rightful position."  Does any of these remedies overcompensate or undercompensate the plaintiff?  Is any of them "just right"?  Try to articulate, as precisely was possible and based upon the facts, your analysis of how well each remedy meets the "rightful position" goal.


5.  Sometimes the abstract nature of a thing is ambiguous.  In physics, for example, light can be viewed as particles (photons) or a wave.  Which conceptualization works best depends upon context; experiment has verified both views beyond cavil.  Are trade secrets similarly subject to an inherent duality?  Are they better viewed as property for some purposes and as reflections of duties of confidence and fairness for others?  Does it matter how you characterize them as long as the remedy for their misappropriation satisfies the "rightful position" standard?


6.  It took the Mincom division four years to develop its tape recorder; yet it took the defendants only fourteen months.  The trial court set the "head start" period at two years (24 months).  Was the trial court right to choose an intermediate number?  What facts suggest that fourteen months would be an insufficient period?  What facts suggest that four years would be too long?  If there is uncertainty in determining the appropriate duration, who should bear the risk of error, plaintiff or defendant, and why?


7.  The trial court set the injunction to run from the date of judgment below.  Shouldn't the "head start" period normally run from the date of misappropriation?  Why did a different starting date apply here?  Does that starting date make sense? 8.  No damages were awarded in this case.  What was the rationale for refusing to award damages?  Was it correct?

Couldn't the plaintiff have predicted that a damage award would be unlikely?  If so, why did the parties fight this litigation all the way up to a federal circuit court of appeals?  What were plaintiff's likely business and economic goals in the litigation?  Did it realize them?  Do the answers to these questions suggest something about the importance of injunctive relief in trade-secret cases involving high-tech competitors?

Back to Top