Thursday, January 12, 2006, 1/12/2006 05:41:00 PM

Judge Posner on Trade Secrets

A new case from the Seventh Circuit, Confold Pacific, Inc. v. Polaris Industries, Inc., gives Judge Posner a crack at trade secrets jurisprudence.

The case concerned defendant's alleged copying of plaintiff's container design. The district court ruled that plaintiff took no steps to protect its design by contract and plaintiff was forced to concede that its designs were not trade secrets.

Even though the case did not turn on the issue of trade secrets, Judge Posner was able to analyze the term and its underlying concepts in his usual trenchant way:

"ConFold believes mistakenly that a trade secret is a property right in the same sense in which a person has a property right in his mattress. A property right in the latter sense is a right good against the whole world, which a trade secret is not, because it is perfectly lawful to 'steal' a firm's trade secret by reverse engineering."

Instead,

"A trade secret is really just a piece of information (such as a customer list, or a method of production, or a secret formula for a soft drink) that the holder tries to keep secret by executing confidentiality agreements with employees and others and by hiding the information from outsiders by means of fences, safes, encryption, and other means of concealment, so that the only way the secret can be unmasked is by a breach of contract or a tort."

Thus,

"In general, if information is not a trade secret and is not protected by patent, copyright, or some other body of law that creates a broader intellectual property right than trade secrecy does, anyone is free to use the information without liability."

Expect to find these quotations showing up in defendant's briefs and court opinions for years to come.

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