The Trade Secrets Blog

Following Trade Secrets Litigation

Sears Gets “Roto Zipped” for $21M

For anyone following the Sears trade secrets case in Chicago where Roto Zip Tool Corp. alleged that Sears had breached a non-disclosure agreement and misappropriated a trade secret regarding a rotary cutting tool combined with a plunge base router, IP Law360 is reporting that a jury has found that Sears stole the trade secrets of Roto Zip and awarded Roto Zip (now known as RRK Holding Co.) damages of $21M ($8M of which was for punitive damages).

A family-owned company has won a $21 million verdict against national retailer Sears, Roebuck and Co. after a jury found the appliance store chain guilty of stealing the invention for a popular power tool.

The federal jury in Illinois ruled Sears had misappropriated the trade secrets of Wisconsin carpenter Bob Kopras and the company he started 30 years ago in his basement, Roto Zip Tool Corp.

Instructive in this case was the court’s denial of summary judgment relative to Sears’ argument that the tool was generally known within the relevant industry because it was comprised of two well-known tools and could thus not be considered a trade secret. However, the court found that “although a spiral saw and a plunge base router were marketed and known as separate products, the combination of the two into a single convertible product was not on the market, and was referred to as “new” and “innovative” by the Defendant itself. . . . The new combination of tools offered a lucrative and competitive product.” The court also stressed that the combination tool “had never been on the market before.”

Thus, this case may stand for the precedent that a trade secret does not have to be totally comprised of confidential information, but rather can be a “new” and “inventive” way of combining products already known to the industry and not protected by trade secret law because they have been previously disclosed to the public.

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December 3, 2007 Posted by | Intellectual Property, misappropriation, non-disclosure agreement, Trade Secrets | , , , , | 1 Comment

The Costs of Corporate Espionage

An interesting article referenced on the Legal Infrastructure of Business Blog about corporate espionage and trade secrets.

According to the referenced article by Chris Warren, “the FBI places the losses to U.S. companies as the result of theft at somewhere between $25 billion and $100 billion. (…) The U.S. International Trade Commission estimates annual losses are closer to $300 billion, and the Office of the National Counterintelligence Executive reports that foreign countries are involved in efforts to collect sensitive information from U.S. companies.”

Corporate espionage is clearly a major issue confronting businesses today and a hard look at a company’s trade secret protection plan must be taken to ensure that its trade secrets are, in fact, adequately protected.

Professor Randal C. Picker says it best:

My major concern is that the huge value of estimated annual losses only means that something is wrong. Either companies are not being efficient in keeping their secrets (or maybe can´t due to the sophistication of “spying” methods), or maybe it means that additional regulation is required to help companies protect secrets (processes, methods, etc) that they decided not to protect via patents. Maybe this decision of not filing for a patent reflects the complexities or vulnerabilities of the process.

Even if a business does what is required under the relevant statutory scheme, it may be that the price tag on adequate trade secrets protection forces a change in how companies do business because of the high level of corporate espionage. In other words, it may not matter that you have done enough under the Uniform Trade Secrets Act, as drafted, to protect your trade secrets because the trade secrets are still being stolen, along with your competitive advantage. I think that the point that Professor Picker makes is that more proactive trade secret protection measures will be required by companies in the future to maintain a competitive advantage, regardless of whether the measures go beyond the types of measures required to initially attain statutory trade secret protection.  Of course, additional measures means additional expense for companies seeking to protect their trade secrets.

December 3, 2007 Posted by | Intellectual Property, Trade Secrets, uniform trade secret act | , , , , , | 1 Comment