Following up on our recent post about Faiveley Transport Malmo AB v. Wabtec Corporation, No. 08-5126 (2d Cir. March 9, 2009), the Second Circuit's reversal of the preliminary injunction in that case effectively granted a compulsory license to Wabtec, the likely trade secret misappropriator. The evidence showed that Wabtec was using the Faiveley air brake secrets to sell its own air brakes. The court reasoned that there was no evidence that Wabtec had or was threatening to disseminate Faiveley’s secrets any further. Indeed, Wabtec itself gained a competitive advantage by not further disclosing the secrets. The “only possible injury that [the] plaintiff may suffer is loss of sales to a competing product . . . [which] should be fully compensable by money damages.” As a result, according to the Second Circuit, Faiveley did not face irreparable injury sufficient to justify equitable relief.
Based on this analysis, the Second Circuit’s decision could be seen as a license to steal. It means that a trade secret misappropriator who “only” uses a purloined secret for its own benefit may not be enjoined. It would be as if a soft drink company could steal the formula for Coke, without fear of being enjoined, so long as it “merely” used the formula itself to compete with Coke and thus Coke could obtain money damages. This flies in the face of the well-accepted presumptions that trade secrets are unique and that their loss might not be able to be measured in money damages. This result could also empower misappropriators to steal their competitor’s secrets, confident that they can compel a license and that the worst that might happen if they get caught is that they would have to disgorge some amount of profits.