For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

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Friday, 9 July 2010

When a School Boy's Trick Meets Strangers in a Train (on in the Air)

Trade secret law (or various other names for more or less the same type of right, including the law of confidential information) has enjoyed an uncertain role in the IP world. For many years, the topic was largely unaddressed in law school curricula and, when it was addressed, it was done so in a course which was separate from the standard IP offerings. I remember promoting such a course in the early 1990s. I managed to keep it in the program for two years, before budgetary and other constraints forced the course to be removed from the curriculum.

Against that backdrop, it seems to me that the past decade has witnessed an ever-increasing interest in the topic, even if its relationship with traditional IP still remains tenuous. In fact, I have found it easier and, in some senses, more natural, to weave considerations into various MBA courses that address the role of IP in the managerial context. In that setting, the distinctions between traditional IP and trade secrets largely melt away--business realities are stronger than academic categories.

One of the topics that has long interested me in connection with trade secrets is the question of whether, at least under Anglo-American law, a duty to maintain infomation in confidence as a trade secret can be created between otherwise total strangers. We are all familiar with the creation of the duty in the employer-employee relationship, and in the context of a contract between two parties. But what happens when the parties are otherwise total strangers? Can and should the law countenance a trade secret duty in such a situation?

The U.S. judgment that is frequently brought to support the proposition that a trade secret duty may be created in such a situation is E.I. du Pont de Nemours & Co. v Christopher, 431 F.2d 1012 (5th Cir. 1970). In this case, the defendants were hired by an unknown third party to take aerial photographs of new construction at a du Pont plant. When du Pont was unable to extract from the defendants information about who their client was, they sued on the ground that the defendants had wrongfully obtained the plaintiff's trade secrets, namely a secret but unpatented process for developing methanol, which was then sold to an undisclosed thirty party.

The trial summarily dismissed the claim, not finding that any duty to maintain trade secrets had been established. As argued by the defendants, there had been no actionable wrong. Thus the defendants had carried out all of their activities in public airspace, they had violated no government aviation standard, no undertaking to maintain confidentiality had been created, and the defendants had not engaged in any other fradulent or illegal conduct.

On appeal, the court overuled the trial court and held that the defendants were liable for unlawful misappropriation of the plaintiff's trade secret. In particular the court of appeals, ruling on its construction of the applicable state law, ruled "aerial photography of plant construction is an improper means of obtaining another's trade secret." The court emphasized that, in so doing, the defendants were liable for "improper means of discovery."

Find the Trade Secret

Thus, while one is permitted to learn the trade secret of another if he engages in reverse engineering (or at least lawful reverse engineering), "one may not avoid these labors by taking the process from the discover without his permission at a time when he is taking reasonable precautions to maintain its secrecy." Stated otherwise, "[t]o require du Pont to put a roof over the unfinished plant to guard its secret would impose an enormous expense to prevent nothing more than a school boy's trick" (emphasis added).

It is this last quote from the judgment that continues to attract attention 40 years later. This is because the reference to a mere "school boy's trick" introduces an overt element of commercial morality into the calculus for liability for making unauthorized use of a trade secret. But what is the ultimate legal source for this considertion of commercial ethics? After all, the court excuses du Pont from protecting its "highly secret" process, which is exposed while the plant was being completed, on the ground that to take precautions in such a circumstance was not cost-beneficial.

That is a curious position. If it was not economically justifiable for du Pont to prevent aerial photographs of the process, then why should the foray into ethics and morality impose a duty of confidentiality on the defendants? Read the judgment--once, twice, three times--and the puzzle remains: Since when does a "school boy's trick" give rise to such a duty?

Two final comments here. First, this judgment remains a centrepiece of U.S. law for the proposition that a duty to maintain infomation in confidence may be created even when the parties are total stangers. Secondly the underlying rationale, whereby the this duty derives from an appeal to commerial morality, embues trade secret with an ethical dimension of uncertain metes and bounds. Whether these two ongoing implications for trade secret law are desirable continues to be an open question.

But Were There Any Trade Secrets Between Them?

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