On Thursday, May 9th, a California appeals court held that designs and ideas are protectable as trade secrets. The decision may make it easier for future trademark litigants to prove that ideas and designs are both protectable as a whole and may have independent economic value.
Defendant in Thursday’s case, Konica Minolta Systems Laboratory, Inc. (KMSL), manufactures multifunction printers (MFPs) and other devices with printing and copying functionalities. Plaintiff, a small company named Altavion, invented a process called DST which employs barcodes to create self-authenticating documents.
Negotiations between KMSL and Altavion aimed at utilizing Altavion’s technology, “were subject to a nondisclosure agreement and centered around the possibility of embedding Altavion’s invention in one of KMSL’s MFPs…. After the negotiations failed, Altavion discovered that KMSL had filed for patents encompassing Altavion’s DST.” At trial court, the court concluded that “KMSL misappropriated trade secrets disclosed by Altavion during negotiations aimed at exploiting Altavion’s technology,” and ordered a $5 million penalty against KMSL. Id.
On Thursday, the appeals court denied KMSL’s challenge to this award, and rejected KMSL’s contention that a ruling on trade secret appropriation could not be based on misappropriation of Altavion’s DST barcode concept as a whole. Further, the court found that, “even if some or all of the elements of Altavion’s design were in the public domain and thus unprotectable, the combination [of these elements] was a protectable trade secret if it was secret and had independent economic value.” Id. at 18.