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Law School Case Brief

Smith v. Dravo Corp. - 203 F.2d 369 (7th Cir. 1953)

Rule:

It is unquestionably lawful for a person to gain possession, through proper means, of his competitor's product and, through inspection and analysis, create a duplicate, unless, of course, the item is patented. But the mere fact that such lawful acquisition is available does not mean that he may, through a breach of confidence, gain the information in usable form and escape the efforts of inspection and analysis. The fact that a trade secret is of such a nature that it can be discovered by experimentation or other fair and lawful means does not deprive its owner of the right to protection from those who would secure possession of it by unfair means.

Facts:

Plaintiffs were engaged in the business of designing, building, and selling steel freight containers. Defendant was interested in the container, primarily, it appears, for use by its subsidiary, the Union Barge Lines. Defendant approached Cowan, plaintiffs' eastern representative, and demonstrated an interest in the entire container development. Thus, what started as a meeting to discuss the purchase of individual containers ended in the possible foundation for a sale of the entire business. Based upon this display of interest, Cowan sent detailed information to defendant concerning its  business. The purchase of the company did not push through. Later on, defendant announced that it "intended to design and produce a shipping container.” Defendant had set up a stock order for a freight container which was designed, by use of plaintiffs' patent applications, so as to avoid any claim of infringement. However, Agwilines(ship operator) rejected this design, insisting on an adaptation of plaintiffs' idea. In short defendant's final product incorporated many, if not all, of the features of plaintiffs' design. Plaintiffs filed an action against defendant and sought injunctive relief and damages in four counts alleging unlawful appropriation, unjust enrichment, and patent infringement. The trial court entered judgment for defendant and plaintiffs appealed.

Issue:

Did defendant obtain, through a confidential relationship, knowledge of plaintiffs' secret designs, plans and prospective customers, and then wrongfully breached that confidence by using the information to its own advantage?

Answer:

Yes

Conclusion:

The court reversed as to count one, and affirmed as to counts two through four. For information to be held in secret, all that was required was that the information or knowledge represent in some considerable degree the independent efforts of its claimant. Clearly plaintiffs' plans and customer lists fell within this broad field of knowledge and could properly be the subject matter of a trade secret. The court remanded the case with directions for the trial court to take further evidence on the issue of misappropriation of trade secret by alleged misuse of customer lists. The court found that plaintiffs had not achieved a patentable invention, therefore, defendant's design did not infringe on plaintiffs' patents nor were plaintiffs entitled to recover on theory of unjust enrichment. 

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