2023 Trade Secret Update: A Look Back At Recent Trade Secret Developments

• Published date: 14 June 2023
• Subject Matter: Intellectual Property, Trade Secrets
• Law Firm: WilmerHale
• Author: Mr Joshua H. Lerner, Mitch Santos, Kaia Boonzaier and Mihdi Afnan

WilmerHale lawyers advise clients on every aspect of trade secret law from contracts to complex litigation. Below is a short update on important cases and developments.

IDENTIFYING A TRADE SECRET

Trade secret identification remains a hot button issue. Notwithstanding years of commentary and a statutory framework for trade secret identification in some states, including California, courts across the country continue to take differing approaches to trade secret allegations.

• REXA, Inc. v. Chester, 42 F.4th 652 (7th Cir 2022)'Insufficiently alleging a trade secret

In 1993, Koso America purchased the assets of Rexa Corporation. In 1998, Koso hired Defendant Mark Chester but did not enter into a formal employment agreement with Chester. In 2002, Chester participated in a project to investigate potential "alternate valves" for an actuator that would enable Koso to cease having to pay royalties to a third party. For several weeks, Chester and a colleague sought to create a replacement "flow matching valve" for an actuator, but they did not succeed. Instead, they succeeded in creating a prototype of a new actuator. Within months, Koso terminated the project, and no information was used for any later product or plan. Chester resigned from Koso in July 2003. In 2014, Koso underwent a reorganization, which created REXA, Inc.

Chester later joined MEA Inc. as a senior engineer. At MEA, Chester worked on a new actuator prototype, and MEA eventually filed a related patent application. In December 2017, REXA filed suit against Chester and MEA alleging "misappropriation of REXA's trade secret designs for solenoid- based electro-hydraulic actuators, which Defendants improperly, and without REXA's consent, disclosed and claimed in U.S. Patent Application No. 14/511,463." The parties filed cross motions for summary judgment. The Northern District of Illinois court ruled for Chester and MEA. REXA appealed those rulings to the Seventh Circuit.

At the core of REXA's appeal was the dispute over whether REXA adequately identified a trade secret. REXA contended that its "2002 Designs," including the actuator prototype, qualified as trade secrets. Chester and MEA, on the other hand, argued that "2002 Designs" is vague and that several aspects of the 2002 actuator prototype were well known in the industry. REXA countered that the trade secret was the use of solenoid valves "in conjunction with other components to create a previously unknown actuator." The Seventh Circuit held that...