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.

Walker v. University Books, Inc.

602 F.2d 859, 202 U.S.P.Q. (BNA) 793 (9th Cir. 1979)

Before Browning and Wallace, Circuit Judges, and Curtis, District Judge.  Honorable Jesse W. Curtis, United States District Judge, Central District of California, sitting by designation. [*860]

This is an appeal by the plaintiff from a summary judgment in favor of the defendants.  Appellant originally brought this action for copyright [*861] infringement, unfair competition resulting from misappropriation of trade secrets, and fraud.  The latter count has been dismissed and is not in issue on appeal.  For reasons hereinafter appearing, we affirm in part, reverse in part, and remand.  

Walker copyrighted and published a set of 72 cards which she entitled "I Ching Cards" and which are designed to aid in the instruction of an ancient Chinese method of divination or fortune-telling.  Appellant concedes that her cards were an adaptation of the James Legge translation of the I Ching, a work in the public domain.  The validity of her original copyright of the format is not in issue on appeal.  In the fall of 1971, the appellant determined to enlist the aid of a professional New York publishing firm in the marketing of her cards and, pursuant to this goal, met and conferred with Defendant-Appellee Sol Weinreich, president of Appellee Noble Offset Printers, Inc.  Weinreich introduced Appellant to Felix Morrow who had some expertise in the area of publishing with which the Appellant was concerned.  Appellant attempted to interest both men in a joint publishing venture regarding her cards and in this connection, revealed to them, allegedly in confidence, her ideas for improving the format and appearance of the I Ching cards.  These proposed embellishments consisted of the use of a higher quality stock, brighter colors, rounded corners, red borders, larger hexagrams on the face of each card, and a higher quality container in which the cards would be sold.

Initially, Morrow appeared to be willing to participate in the venture; however, this interest was apparently short-lived and no agreement was forthcoming.  Later in the fall of 1971, Appellant received a letter from Appellee Robert Salomon, then vice-president of Appellee Lyle Stuart, Inc. and president of Appellee University Books, requesting a sample deck of her cards pursuant to their possible use by Lyle Stuart's Mystic Arts Books Society.  Appellant provided the requested set to Lyle Stuart, Inc. and also sent one to Sol Weinreich.  

In December of 1971, Appellant became aware of a promotional flyer then being circulated to booksellers by Lyle Stuart, Inc. which advertised its upcoming publication of "I Ching Cards" based on the original James Legge translation.  Indicated was a prospective distribution date of sometime in February, 1972 and potential purchasers were urged to "order now."  

* * * [*862] * * *

The Appellant's contentions before the district court, briefly stated, were as follows.  Appellees published their I Ching cards in violation of her copyright, copying her work and utilizing the improvements which were the product of her creative efforts and disclosed to them in confidence as trade secrets.  Appellees assert that, although they admittedly had access to Appellant's version of the I Ching, they, like her, based their presentation on the original James Legge translation which could be freely copied since it was in the public domain.  Further, Appellees contend that their cards were developed without incorporation of the Appellant's suggested improvements and that the alterations which were revealed to them are standard practices and common knowledge in the area of the publishing industry at issue and thus can not form the basis for a claim of misappropriation of trade secrets.

* * * [*863] * * * [*864] * * *


The court [below] granted summary judgment to the Appellees on the issue of misappropriation of trade secrets on the basis that the improvements which the Appellant revealed, allegedly in confidence to the Appellees, could not constitute protectible "trade secrets" as that term is defined in Restatement of Torts § 757,(1) admitted by both parties to be controlling here. [*865]

The improvements which were communicated to the Appellees consisted of the following: 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.  The Appellant asserts on appeal that the grant of summary judgment against her precluded her efforts to demonstrate at trial the validity of her contention that the embellishments listed above represented "trade secrets" using the factors applicable under Restatement of Torts, § 757, Comment (b).(2)

The district court refused to view the improvements listed above as protectible in that they are "both vague and obvious, and as a matter of law (do) not constitute ‘information . . .  which gives (a party) an opportunity to obtain an advantage over competitors . . .' Restatement of Torts, § 757, Comment (b)."

With this finding we agree and therefore affirm the lower court on the issue of unfair competition.

* * *

Affirmed in part, reversed in part, and remanded.
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One who discloses or uses another's trade secret, without a privilege to do so, is liable to the other if

    (a) he discovered the secret by improper means, or
    (b) his disclosure or use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him, or
    (c) he learned the secret from a third person with notice of the facts that it was a secret and that the third person discovered it by improper means or that the third person's disclosure of it was otherwise a breach of his duty to the other, or
    (d) he learned the secret with notice of the facts that it was a secret and that its disclosure was made to him by mistake.
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2.   [court's footnote 2]

    "A trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.  It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers.  * * *  Generally it relates to the production of goods, as, for example, a machine or formula for the production of an article.  It may, however, relate to the sale of goods or to other operations in the business, such as a code for determining discounts, rebates or other concessions in a price list or catalogue, or a list of specialized customers, or a method of bookkeeping or other office management.
    "Secrecy.  The subject matter of a trade secret must be secret.  Matters of public knowledge or of general knowledge in an industry cannot be appropriated by one as his secret.  Matters which are completely disclosed by the goods which one markets cannot be his secret.  Substantially, a trade secret is known only in the particular business in which it is used.  It is not requisite that only the proprietor of the business know it.  He may, without losing his protection, communicate it to employees involved in its use.  He may likewise communicate it to others pledged to secrecy.  Others may also know of it independently, as, for example, when they have discovered the process or formula by independent invention and are keeping it secret.  Nevertheless, a substantial element of secrecy must exist, so that, except by the use of improper means, there would be difficulty in acquiring the information.  An exact definition of a trade secret is not possible.  Some factors to be considered in determining whether given information is one's trade secret are: (1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others."
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