Written by: Jameson Pasek

First, we start by defining the term “trade secret.” The Restatement (First) of Torts, a widely cited legal treatise, states that “a trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which provides an opportunity to obtain an advantage over competitors.”¹ The Restatement (Third) of Unfair Competition, another treatise focusing on commercial relations, defines a trade secret as “any information that can be used in the operation of a business or other enterprise that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.”²

Further, the Defend Trade Secrets Act (“DTSA”) and the Uniform Trade Secrets Act (“UTSA”)—a federal and model statute, respectively—both define trade secrets to mean information that “derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.”³ In addition, the DTSA states that the owner of a trade secret must take “reasonable measures to keep such information secret,” or, under the UTSA, steps that are “reasonable under the circumstances to maintain [] secrecy.”

What happens, then, when such information is shared with third parties? Courts have generally held that information is still a trade secret if it is disclosed to third parties for a specific purpose and protective measures are enforced—such measures may include confidentiality provisions in a license or third-party agreement or disclosing information in confidence. Often cited in the Commonwealth is the matter J.T. Healy & Son, Inc. v. James A. Murphy & Son, Inc., which states that “[p]rotecting a trade secret ‘calls for constant warnings to all persons to whom the trade secret has become known and obtaining from each an agreement, preferably in writing, acknowledging its secrecy and promising to respect it.’”⁴

What about information included in public filings? Decades ago, in the matter of Apollo Techs. Corp. v. Centrosphere Indus. Corp., the New Jersey District Court found that a plaintiff could not recover for trade secret misappropriation when the idea had become part of the public domain through the issuance of a patent. The court essentially held that matters of public or general knowledge cannot be trade secrets citing Ferber v. Sterndent Corp. and Laurie Visual Etudes, Inc. v. Chesebrough–Pond’s, Inc.⁵ In both Ferber and Laurie Visual Etudes, Inc., trade secret status was lost upon information falling into the public domain—in each case, through the issuance of a patent.  

However, trade secrets are not forfeited through public disclosure or selling a product unless “the trade secret is ‘readily ascertainable’ upon examination of the product.”⁶ If acquisition of the information through an examination of a competitor’s product would be difficult, costly, or time-consuming, the trade secret owner retains protection.⁷ More specifically, a patent destroys the secrecy necessary to maintain a trade secret only when the patent and the trade secret both cover the same subject matter.⁸

Accordingly, the Seventh Circuit in the matter Life Spine, Inc. v. Aegis Spine, Inc., found that limited disclosure of information in a patent does not destroy trade secret protection. The court focused on the precise information that the plaintiff took steps to protect. First, the court found that the plaintiff “did not disclose [the] specifications of the [product]” in its patent. As such, the defendant’s view of whether trade secret information is protected—“an all-or-nothing proposition for a given product”—is flawed.⁹ In other words, whether the trade secret was made public is “more nuanced,” says the Seventh Circuit.¹⁰ Simply put, the plaintiff’s patent materials did not cover the specifications of its products (the specifications being the trade secret) and therefore the proprietary information stayed protected. Further, the plaintiff’s director of engineering explained that the products measurements are precise, “granular,” and not available from patent materials. Of note, the defendant’s argument that the product could be reverse engineered was unfounded because distributors of the device acted as fiduciaries and the product was only accessible to third parties who sign confidentiality agreements.

Unsurprisingly, the Seventh Circuit found that the plaintiff took appropriate steps to protect its trade secrets following patent filings and sales to third parties. Indeed, rulings on this issue will likely be specific and nuanced; at the very least, the Seventh Circuit provides a good roadmap. Nevertheless, to maintain trade secret status, parties should carefully consider what type of information they are disclosing, to whom, and in what fashion.

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1. Restatement (First) of Torts § 757 (1939)
2. Restatement (Third) of Unfair Competition § 1:4 (1995).
3. 18 U.S.C.A. § 1839 (West); § 1. Definitions., Unif. Trade Secrets Act § 1.
4. J.T. Healy & Son, Inc. v. James A. Murphy & Son, Inc., 357 Mass. 728 (1970)
5. Ferber v. Sterndent Corp., 51 N.Y.2d 782 (1980); Laurie Visual Etudes, Inc. v. Chesebrough–Pond’s, Inc., 83 A.D.2d 505 (1st Dep’t 1981)
6. See supra note 1, at § 39.
7. Id. (internal citations omitted).
8. Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867, 875 (5th Cir. 2013).
9. Life Spine, Inc. v. Aegis Spine, Inc., 8 F.4th 531, 541 (7th Cir. 2021).
10. Id.