Monday, September 11, 2006, 9/11/2006 09:10:00 AM

For Trade Secrets, For Heaven's Sake, Get it in Writing (Pacer Req'd)

A new case from the Eastern District of New York, Scientific Components Corp. v. Sirenza Microdevices, Inc., 2006 WL 2524187 (E.D.N.Y. Aug. 30, 2006), beautifully illustrates this important trade secrets principle.

The case concerned two companies that entered into a contract in 1995 whereby defendant would manufacture amplifiers used in wireless communications according to plaintiff's performance specifications to be resold to the public under plaintiff's trade name. After the relationship deteriorated, plaintiff accused defendant of failing to meet the specifications in the contract and then started selling its own products. As usual, claims and counterclaims ensued.

The one of most interest to us here is defendant's counterclaim that plaintiff manufactured the product using defendant's trade secrets.

On summary judgment, plaintiff argued that defendant's trade secrets claim should fail on a number of counts, including that defendant failed to specify the trade secrets, that all of the alleged trade secrets were readily ascertainable and well-known in the industry, and that plaintiff had not used any of defendant's trade secrets in any event.

The memorandum and recommendation of the magistrate-judge, adopted by the trial judge in granting summary judgment on this claim, looked at each of those arguments, but ultimately settled on one reason for summary judgment: the parties failed to embody any confidentiality obligation in any contract between them.

In fact, the information at issue was freely disclosed by defendant to plaintiff in order to validate the product and enourage the parties' supply relationship. There was no written contractual duty on the part of plaintiff to keep the information secret and no oral agreement either. Defendant even produced the bulk of the information without a confidentiality stamp.

Ultimately, the court ruled, there was no duty of fidelity or confidentiality created as required to support a trade secrets claim.

We can't stress it enough. Before you share your trade secrets with anyone under any circumstances, get a confidentiality agreement in writing.

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