Exemplary Trade Secret Cases

Of course, it goes without saying that technical and commercial

information and collateral know-how that can be protected with trade
secrets cannot include information that is generally known, readily
ascertainable, or constitutes personal skill. But this exclusion still leaves
masses of data and know-how that are protectable as trade secretsand
often also with additional improvement patents. For example, GEs
industrial-diamond-process technology is an excellent illustration of the
synergistic integration of patents and trade secrets to secure invulnerable
exclusivity.
The artificial manufacture of diamonds for industrial uses was very big
business for GE, and they had the best proprietary technology for making
these diamonds. GE patented much of its technology, and when the
patents expired, much of the technology was in the technical literature
and in the public domain. But GE also kept certain distinct inventions and
developments secret. The Soviet Union and a Far East country were very
interested in obtaining licenses to this technology, but GE refused to
license to anyone. After getting nowhere with GE, the Far East interests
resorted to industrial espionage. A trusted fast-track star performer at GE,
a national of that country, was enticed with million dollar payments to
spirit away GEs precious trade secrets. The employee was eventually
caught, tried and jailed.
Similarly, Wyeth has had an exclusive position on Premarin, the high-
selling hormone-therapy drug, since 1942. Their patents on the
manufacturing process (starting with pregnant mares urine) expired
decades ago, but the company also held closely guarded trade secrets. On
behalf of a pharmaceutical company that had been trying to come out
with a generic form of Premarin for 15 years, Natural Biologics stole the
Wyeth trade secrets. Wyeth sued, prevailed, and got a sweeping
injunction, as this was clearly an egregious case of trade-secret
misappropriation.
These cases illustrate the value of trade secrets and, more importantly, the
merits of marrying patents with trade secrets. Indeed, these cases show
that GE and Wyeth could have the best of both worlds, patenting their
inventions and still keeping their competitive advantage by maintaining
production details in secrecy. Were GEs or Wyeths policies to rely on
trade secrets in this manner or was Coca Colas decision to keep its
formula a secret rather than to patent it, unwise and careless? Clearly not
Other recent decisions, such as C&F Packing v. IBP and Pizza
Hut and Celeritas Technologies v. Rockwell International, demonstrate
that dual or multiple IP protection is not only possible but essential to
exploit the IP overlap and provide a fallback.34
In the Pizza Hut case, for instance, Pizza Hut was made to pay US$10.9
million to C&F for misappropriation of trade secrets.35 After many years
of research, C&F had developed a process for making and freezing a
precooked sausage for pizza toppings that had the characteristics of
freshly cooked sausage and surpassed other pre-cooked products in price,
appearance, and taste. C&F had obtained a patent on the equipment to
make the sausage and also one on the process for making the sausage.
C&F improved the process after submitting its patent applications and
kept its new developments as trade secrets.
Pizza Hut agreed to buy C&Fs precooked sausage on the condition that
C&F divulge its process to several other Pizza Hut suppliers, ostensibly
to assure that backup suppliers were available to Pizza Hut. In exchange,
Pizza Hut promised to purchase a large amount of pre-cooked sausage
from C&F. Accordingly, C&F disclosed the process to several Pizza Hut
suppliers and entered into confidentiality agreements with them.
Subsequently, Pizza Huts other suppliers learned how to duplicate
C&Fs results. Pizza Hut then told C&F that it would not purchase any
more of their sausage without drastic price reductions.
One of Pizza Huts largest suppliers of meat products other than sausage
was IBP. Pizza Hut furnished IBP with a specification and formulation of
the sausage toppings and IBP signed a confidentiality agreement with
Pizza Hut concerning this information. In addition, IBP hired a former
supervisor in C&Fs sausage plant as its production superintendent, but
then fired this employee five months later, after it had implemented its
sausage-making process and Pizza Hut was buying the precooked sausage
from IBP.
C&F then brought suit against IBP and Pizza Hut for patent infringement
and misappropriation of trade secrets, and the court found on summary
judgment that the patents of C&F were invalid because the inventions had
 been on sale more than one year before the filing date. However, the
court determined that C&F possessed valuable and enforceable trade
secrets, which had indeed been misappropriated. What a great example of
trades secrets serving as backup where patents fail to provide any
protection!
In certain instances, a patent is a weak instrument indeed, given the many
potential patent attrition factors, such as:
doubtful patentability due to patent-defeating grounds
narrow claims granted by a patent office
the fact that only about 5% of a large patent portfolio has commercial
value36
the short life of a patent (average effective economic life is only about five
years)37
enforcement of patents is daunting and expensive
limited nature or lack of coverage in some countries

One of the most famous trade secrets in the world, the secret Coca-Cola formula,
haslong been a subject of fascination. Tales of this century-long, highly maintained
secrethave become part of the company.s folklore.1 However, Coca-Cola.s
secrecy wastested in 2006 when Joya Williams and her two partners attempted to
sell Coke secretsto its main rival, Pepsi, for $1.5 million.2 Pepsi turned these
unmasked offenders overto the authorities and Williams was subsequently
sentenced to eight years in prison.3The law that led to Williams.s incarceration is
the Economic Espionage Act of 1996(EEA). Amid concerns over the vulnerability
of American trade secrets, the United States enacted the EEA in 1996. Prior to the
EEA, the theft of trade secrets was, by itself, not a crime. Using data from EEA
prosecutions, this essay provides institutional detail and policy analysis of the
EEA. It begins with a short history of the legislation, presents the theoretical
underpinnings for trade secrecy protection progresses to a statistical analysis of the
composition of EEA cases and concludes with a statistical and theoretical
examination of the criminalization of trade secrets.

Pepsico, Inc. v. Redmond

Facts: Redmond worked for PepsiCo for ten years, eventually rising to the
position of general manager of the business unit
covering California. Redmond signed a confidentiality agreement with
PepsiCo stating that he would not disclose confidential information. In 1994,
Redmond accepted an offer from Quaker, a competitor of PepsiCo. Eight days
later, PepsiCo filed a complaint and motion for preliminary injunction against
Redmond from taking the position at Quaker and to prevent him from disclosing
trade secrets. PepsiCo submitted evidence that Redmond had knowledge of
PepsiCos strategic plans to manufacture, price, distribute, and market sport drinks
that competed directly with Quakers more successful Gatorade line of sport
drinks.

History: The district court allowed the motion, enjoining Redmond from taking
the position until May of 1995 and ordering him never to reveal PepsiCos trade
secrets. Redmond appealed to the Circuit Court of Appeals.

Issue: In litigation involving trade secrets, may a court enjoin the actual or
threatened misappropriation of trade secrets?

Rule: In litigation involving trade secrets, a court may enjoin the actual or
threatened misappropriation of trade secrets.

Reasoning: Trade secret law protects standards of commercial morality, but that
same law should not be used to prevent employees from pursing their
livelihoods. Here, the alleged harm is not actual misappropriation of secrets but
rather the threatened misappropriation thereof. A plaintiff may prove a claim of
threatened misappropriation of trade secrets by successfully demonstrating that the
employee will inevitably rely upon the trade secrets while in his new
position. PepsiCo had successfully demonstrated that Redmond had knowledge of
PepsiCos plans to price, distribute and market its new age sport drinks. In
addition, there was evidence that Redmond was not entirely forthright with
PepsiCo as to his dealings with Quaker.

Notes: A court faced with a typical motion for preliminary injunction will review
the following four factors: (1) the plaintiffs likelihood of success on the merits of
the underlying claim; (2) the likelihood of irreparable harm to the plaintiff; (3) the
harm to the defendant caused by the injunction; and (4) the public;s interest, if any,
in the subject of the litigation.