Hiding Secrets in Plain Sight? Unsealed Court Papers can Jeopardize Trade Secrets
Apr 16th, 2014 by Frederick Spaeth | News | Recent News & Articles |
In 2011 DuPont won a near billion-dollar verdict in a trade secret case which is now subject to remand following the defendant’s appeal, providing a lesson for future litigants. DuPont initiated the high-stakes litigation against a competitor and a former employee, alleging that the employee shared DuPont trade secrets with Kolon Industries in breach of an obligation of confidentiality the employee owed to DuPont.
The former DuPont employee, Michael Mitchell, was a chemist who worked on polymers at DuPont where he developed and was exposed to DuPont Trade Secrets about Kevlar fiber technology. DuPont let him go in 2006, and reminded him then that he could not take DuPont trade secrets with him….but in 2007 he signed a consulting contract with Kolon Industries to help Kolon develop a competing polymer using his knowledge of Kevlar from DuPont. DuPont soon found out, and initiated civil and criminal enforcement actions.
The case made headlines when a jury entered and returned a $919.9 million verdict for DuPont against Kolon. Not surprisingly, Kolon appealed.
Kolon argued on appeal, as it did at trial, that some of the information that DuPont claimed as a trade secret was publicly known – and therefore outside the scope of Mitchell’s obligations to DuPont and DuPont’s claim under the Virginia Uniform Trade Secrets Act – because it was disclosed in court documents in an earlier DuPont litigation with Akzo, N.V., and were not subject to a protective order. Kolon argued that like all other open court documents, the information in the court document in the earlier DuPont litigation made the information available to the public, so its contents could no longer be claimed as a trade secret. The trial court refused to accept that argument, but the Fourth Circuit Court of Appeals ruled on April 3, 2014 that the trial court’s ruling was in error. The mere fact that particular information can be found in open court records does not necessarily make that information publicly known so as to defeat its ‘secret’ nature, but the Court of Appeals said that it is a factor that a trier of fact should consider. Accordingly, the case was remanded for a new trial, and DuPont’s near billion-dollar award will hang in the balance.
The clear lesson for companies that draw trade secrets into litigation is to be sure that the court records containing that information are properly protected. While there is a strong public policy favoring the accessibility of court records, the Federal Rules of Civil Procedure provides mechanisms for protecting the trade secrets of litigants, witnesses and third parties that are presented to a court. Litigants in DuPont’s position will do well to refer to FRCP Rule 5.2, which provides privacy protection for filings made with the court. Related provisions can be found in Rule 26(c) which makes protective orders available as an exception to the Duty to Disclose evidence during discovery, and Rule 45, which allows witnesses to ask that a subpoena be quashed or modified if it requires disclosing a trade secret or other confidential re-search, development, or commercial information.
– Fred Spaeth
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