About the author: PJ Kee is an associate at the Jones Walker law firm in New Orleans. He and a few colleagues recently launched Trade Secret Insider, which chronicles legal insights on trade secrets, non-competes, computer fraud and confidential data theft. This article was originally posted on tradesecretsinsider.com.
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Are you confident in your ability to prosecute a trade secret case without losing those “secrets” in the process? The U.S. Fourth Circuit Court of Appeals’ recent decision should give you pause before answering. The Court’s holding in E.I. DuPont De Nemours & Co. v. Kolon Industries, Inc., underscores the significant risks of putting evidence into the public record when litigating trade secret cases.
Initially, this appeared like a strong case for DuPont, who viewed its complex chemical manufacturing process for making Kevlar as a “well-guarded secret.” DuPont alleged that Kolon — a Korean synthetic fibers manufacturer — employed five former DuPont employees to collect and utilize DuPont’s confidential information relating to this manufacturing process.
The jury agreed. After a seven-week trial, it found that Kolon willfully and maliciously misappropriated 149 of DuPont’s trade secrets and awarded DuPont $919.9 million in damages and a 20-year non-compete injunction.
But the Fourth Circuit recently reversed that verdict, holding that the district court abused its discretion when excluding evidence that Kolon obtained from the public record in an earlier case between DuPont and a different competitor. Specifically, Kolon wanted to show that DuPont failed to take reasonable measures for protecting its trade secrets by allowing information relating to its Kevlar manufacturing process to remain in the public record. The Fourth Circuit stated that:
Although it is true, as DuPont contends, that the mere ‘presence [of confidential information] in [a federal court’s] public files, in and of itself, did not make the information contained in the document ‘generally known’ for purposes of the [UTSA],’ … we also emphasized in that very case that ‘whether [ostensibly confidential information] remains a trade secret’ ‘is a fact-intensive question to be resolved upon trial.
The district court’s blanket exclusion of this evidence, the Fourth Circuit held, seriously prejudiced Kolon’s defense and, thus, justified vacating the jury’s verdict.
This decision underscores the extreme caution that companies and their attorneys must take when prosecuting a trade secret case. There’s a delicate balance between winning an individual case but losing future trade secret protections. A misstep could cost close to a billion dollars.