When Business Relationship Information is Not a Trade Secret: Review by the Federal CircuitMarch 28, 2021

On March 12, 2021 the Federal Circuit provided a precedential opinion affirming a Florida district court’s decision declining to seal information regarding a business relationship between two businesses where the party seeking redaction failed to prove that the information was a trade secret.

Plaintiff DePuy and Defendant Veterinary Orthopedic Implants, Inc. (VOI) are competitors in the market for veterinary orthopedic implants, and DePuy filed suit against VOI for alleged infringement of its patent relating to an osteotomy plate. In July 2019 DePuy filed under seal an amended complaint which joined as a defendant the manufacturer of VOI’s accused products, therein disclosing the manufacturer’s identity as well as information about the business relationship between VOI and the manufacturer.

VOI objected to the Florida district court’s decision to unseal the amended complaint. DePuy argued the District Court’s decision was proper because the manufacturer’s identity was public knowledge, and further that VOI and the manufacturer have no confidentiality agreement. Further, other manufacturer information was publicly available through the manufacturer’s website, shipping records of public carriers, etc.

On appeal, the Federal Circuit found the district court did not abuse its discretion in ordering the amended complaint to be unsealed. There was no clear error in the district court’s determination that the manufacturer’s identity was not a trade secret where the manufacturer openly advertised itself and its services as an orthopedic manufacturer, and where the manufacturer and VOI did not have a confidentiality agreement or confidential relationship giving rise to an obligation of confidentiality. Further, third-party correspondence discussing VOI’s relationship with the manufacturer suggested that the relationship between VOI and the manufacturer was well known within the relevant community.

Companies involved in intellectual property litigation should note that the Federal Circuit maintained the standard of a trade secret outlined by the Uniform Trade Secrets Act (as adopted in Florida), wherein a trade secret includes information that (1) derives economic value from not being readily ascertainable by others and (2) is the subject of reasonable efforts to maintain its secrecy. Proof of a trade secret requires a showing that the alleged trade secret  (1) was distinct from general knowledge; (2) was not readily ascertainable; (3) had independent value, and (4) was subject to reasonable security measures. The takeaway, then, from the Federal Circuit decision in DePuy is that the best practice for companies seeking to protect communications and information shared between two entities as a trade secret should enact express agreements establishing the existence of a confidential relationship where both parties have an obligation not to use or disclose a trade secret. Although lesser actions taken to protect information may still qualify for trade secret information, an express agreement to that effect will clearly signal intent to protect a trade secret.

Sarah M.D. Luth is an Intellectual Property Attorney in the MVS Biotechnology & Chemical Practice Group. To learn more, visit our MVS website , or contact Sarah directly via email .

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