The Seventh Circuit Court of Appeals recently upheld a preliminary injunction prohibiting a former distributor and its parent company from selling a spine implant device that incorporated trade secret information. Plaintiff Life Spine, Inc. had created a device to correct spinal spacing issues during surgery. Life Spine contracted with Defendant Aegis Spine to distribute the device only to medical facilities nationwide and to keep Life Spine’s confidential information secret and use the confidential information only in furtherance of the business relationship. However, Life Spine alleged that Aegis Spine passed confidential details, such as component dimensions to fractions of a millimeter of the device, to Aegis Spine’s parent company, who quickly developed a similar device that competed against Life Spine’s device. Life Spine sued Aegis Spine and its parent, alleging that Aegis Spine misappropriated its trade secrets, as well as other contractual and tort claims, and sought a preliminary injunction. Based on findings of trade secret misappropriation and breach of contract, the Northern District of Illinois entered a preliminary injunction against Aegis Spine and its business partners from making, marketing, distributing, selling, or obtaining intellectual property rights in the competing device to Life Spine’s device.
On appeal, Aegis Spine argued that the preliminary injunction ruling was improper because the trade secrets were public knowledge generally known in the industry, or readily ascertainable therefrom and therefore not trade secrets under both federal (Defend Trade Secrets Act) and Illinois state law. Aegis Spine argued that Life Spine’s patent directed to the device at issue disclosed the trade secret information, and that Life Spine had showcased the entire device at public events. The district court disagreed with Aegis Spine on this point when granting the preliminary injunction, and the Seventh Circuit observed that Aegis Spine did “not come close” to showing this factual finding was clear error. Although the appearance and overall functionality of the device itself was publicly disclosed through the patent, and was visible at trade shows and in advertising, the Seventh Circuit noted that the claimed trade secrets were in the dimensions and measurements and component-connection details of the device (at the fraction of a millimeter level), and they could not be readily discovered or ascertained from the patent disclosure or public device display without additional instruction from Life Spine or sophisticated laboratory measurement equipment. Further, Life Spine imposed confidentiality obligations on all purchasers of its device to protect this trade secret information and the limited sales to non-manufacturing parties (like surgeons and hospitals) were for scheduled surgeries with Life-Span distributors acting as fiduciaries of these devices up to and including at each scheduled surgery because they were present in the operating room. Accordingly, the Seventh Circuit concluded there was no clear error in the district court’s finding that there had not been public disclosure of the asserted trade secrets.
While generally speaking, disclosures in a patent are not entitled to trade secret protection, the Seventh Circuit affirmance of the preliminary injunction highlights that certain details of a product not disclosed to the general public and not readily ascertainable from these public disclosures may be enforceable trade secrets. Companies can obtain patent protection on a product and still maintain trade secret protection on attributes of the product that are not disclosed by, or readily ascertainable from, the patent’s written description and drawings.