Question: INCASE, INC. v. TIMEX CORP., 488 F.3D 46 (1ST CIR. 2007)
FACTS Incase designs and manufactures injectionmolded plastic packaging products. It does not normally charge directly for design services, but provides those in conjunction with manufacturing. Incase designed and developed two unique watch cases for Timex. Incase produced more than 2 million units of the first design. However, despite numerous exchanges and communications regarding the second design, Timex never placed an order or entered into a contract with Incase for the second type of watch case. Eventually, an Incase executive was in a large retail store and noticed Timex watches being sold in watch cases virtually identical to the Incase design. It turned out that Timex had contracted with a Philippine manufacturing company for the production of the second type of case. Incase argued that its design was proprietary and confidential, and it sued Timex for misappropriation of a trade secret. Although Incase won a jury verdict of $131,191, the trial judge overturned the verdict as a matter of law. Incase appealed. DECISION The appellate court affirmed the trial court, stating: To prevail on a claim of misappropriation of trade secrets, a plaintiff must show:
1) the information is a trade secret;
2) the plaintiff took reasonable steps to preserve the secrecy of the information; and
3) the defendant used improper means, in breach of a confidential relationship, to acquire and use the trade secret.
In issuing its judgment as a matter of law, the court held that Incase had not presented any evidence that the information was secret or that it had taken reasonable steps to preserve the secrecy of the information. The appeal on this claim turns on the second element of the misappropriation cause of action: whether Incase took reasonable steps to preserve the secrecy of the design.
The district court noted that no documents were marked "confidential" or "secret"; there were no security precautions or confidentiality agreements; Incase had not told Timex the design was a secret; and Incase's principal designer on the project, Bob Shelton, did not think the design was a secret. Timex adds that Frank Zanghi, Incase's vice president, did not tell anyone at Timex that the design was confidential. The appellate court went on to note: "The fact that Incase kept its work for Timex private from the world is not sufficient; discretion is a normal feature of a business relationship. Instead, there must be affirmative steps to preserve the secrecy of the information as against the party against whom the misappropriation claim is made. Here, there is no evidence that any such steps were taken." The court concluded: "Protecting 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.'" Thus, the appellate court affirmed the district court's judgment as a matter of law on the misappropriation of trade secrets claim.