Bondpro Corp. v. Siemens Power Generation, Inc. - 463 F.3d 702 (7th Cir. 2006)

Rule:

Where there would be no patent application, but for an alleged theft of a trade secret by a defendant, someone who learns about the allegedly stolen process from the defendant's patent application or some other source traceable to the defendant will have no liability for using the process without the plaintiff's consent, but the defendant will be liable to the plaintiff for the consequences of enabling the innocent copying by revealing the plaintiff's trade secret to the world. To disclose a trade secret without authorization is unlawful, Wis. Stat. § 134.90(2)(b), and the wrongdoer is liable for the consequences.

Facts:

Plaintiff Bondpro Corporation was a small company that manufactured products that require the bonding of dissimilar materials. On the other, defendant Siemens Power Generation Inc., made electrical generators. The generators produced electrical power by spinning rotors over magnets. The rotors had slots into which copper coils were wedged. The outer layer of each coil consists of insulation material in the form of a U-shaped slot cell. Defendant manufactured slot cells by first placing the insulation material in a U-shaped (female) container and then pressing a male mold on top and applying heat. This process compressed the insulation into a rigid U-shaped material that can slide into the slots. The disadvantage of the process was that the slot cell may emerge with wrinkles in the insulation material that were difficult to smooth out. Plaintiff developed, although it has never marketed, a process that dispenses with the female mold. In 2001, plaintiff’s principal explained and later demonstrated the process to a materials engineer employed by defendant. Though there were some negotiations, they resulted only in agreement on confidentiality; defendant did not seek a license from plaintiff to use the process, even though the latter had made clear in the course of the negotiations that it believed it had proprietary rights to it. Instead, the employee filed a patent application on behalf of defendant for a process similar to plaintiff. The Patent Office rejected defendant’s application and defendant has never used the process. Plaintiff sued defendant in a state court for theft of a trade secret in violation of Wisconsin's Uniform Trade Secrets Act. Defendant removed the suit to the district court, which bifurcated the trial. A jury rendered a liability verdict for plaintiff. Plaintiff then filed an appeal after the district court, notwithstanding the jury's verdict, granted judgment to defendant as a matter of law.

Issue:

Did the defendant violate Wisconsin's Uniform Trade Secrets Act?

Answer:

No.

Conclusion:

In arriving at the decision, the court noted that several jurisdictional issues existed in the case. The court found that the parties failed to comply with 7th Cir. R. 28(a)(1), which required them to provide a proper jurisdictional statement establishing the basis for the district court's diversity jurisdiction, that had since been established. The court also noted that the fact that plaintiff was listed as a delinquent corporation did not bar it from filing the suit. On the other, the court held that defendant waived the issue concerning plaintiff's capacity to bring the suit under Fed. R. Civ. P. 9(a) as it failed to raise it as a defense in its pleadings. As for the second jurisdictional issue, it concerned whether a case or controversy existed for U.S. Const. art. III purposes. The court held that no controversy would exist if plaintiff did not have anything tangible to gain from reinstatement of the jury's verdict. Plaintiff had not shown that the trade secret at issue had any measurable commercial value. However, its request injunctive relief was sufficient to satisfy the case or controversy requirement. The court concluded that plaintiff failed to show that defendant violated Wis. Stat. § 134.90(2)(b) by disclosing its alleged trade secret in a patent application. As the process disclosed by defendant was known to the trade. Accordingly, the court affirmed the district court's judgment and directed the parties' counsel to show cause as to why they should not be sanctioned for violating 7th Cir. R. 28(a)(1).