Keeping your work private from the world is not sufficient to maintain it as a trade secret. On May 24, 2007, in Incase Inc. v. Timex Corp., 488 F.3d 46 (1st Cir. 2007), the First Circuit Court of Appeals ruled that to protect a trade secret, affirmative steps must be taken to preserve its secrecy regarding a party against whom misappropriation is claimed.
The lawsuit arose from a business deal in which Timex hired product packaging designer and manufacturer Incase to design packages for Timex watches. The parties worked together to design a watch packaging for retail display that included a price flag for displaying the watch price. Timex ultimately purchased fewer of the units than initially agreed. In the meantime, the parties had begun work on a next generation packaging design including a removable price flag that was particularly important to Timex and that was more advanced than prior removable flags. Over the course of a year, the parties went back and forth with different designs for this new packaging until the design was nearly finished. Unbeknownst to Incase, however, Timex was also in discussions with Yuhig, a manufacturing company in the Philippines. Timex used Incase’s packaging drawings and prototypes to produce a similar packaging with Yuhig, including the removable price flag. Timex ultimately purchased all of its packaging units from Yuhig rather than Incase.
In March 2001, Incase’s vice president noticed the Timex watches displayed in a Target store in the Yuhig packaging with the removable price flag design. Incase responded by suing Timex for trade secret misappropriation of the flag design, among other claims. The jury returned a verdict for Incase on all claims, but the district court overturned the jury’s verdict as a matter of law on the trade secret issue. Both parties appealed, including an appeal from Incase on the trade secret judgment.
The appeal of the trade secret ruling focused on whether Incase took reasonable steps to preserve secrecy of the removable price flag design. Incase had not marked any documents “confidential,” had not taken security precautions or required a non-disclosure agreement, and had not told Timex the design was a secret. Further, Incase’s principal designer admitted that he did not believe the design to be a secret. Incase argued, however, that they had maintained secrecy by showing the designs only to Timex. Incase further pointed to the standard trade practices of secrecy in the watch packaging industry along with Timex’s treatment of the designs as confidential when dealing with Yuhig.
The First Circuit found that there was no evidence to support Incase’s arguments that reasonable steps were taken to preserve secrecy of the design. Though Incase’s vice president testified that he had treated the designs as confidential, he admitted that this policy was never articulated to Timex. The court concluded that keeping the design secret from the public was insufficient to make it a trade secret since discretion is a normal feature of business relationships. Instead, affirmative steps should have been taken to protect a trade secret from Timex, the particular party against whom the misappropriation is claimed.