Opinion ID: 1800234
Heading Depth: 2
Heading Rank: 1

Heading: The existence of a trade secret.

Text: It is not always easy to follow Jostens' contentions because its claim of a trade secret is rather elastic. At times, the claim appears to include the entire CAD/CAM system; at other times, something less. Plainly, Jostens is claiming secret status for the computer graphics subsystem, purchased from Adage, and for the customizing work done at Jostens' own plant to connect the subsystem and make the adjustments needed for the manufacture of ring molds. This seems to be the clearest and most plausible of Jostens' claims, but even here clarity is not always present. Does the trade secret encompass all three parts of Adage's graphics subsystem? For there is the hardware (a standard feature of Adage packages), the operating system software (also standard), and the application software (a more particularized feature, using some standard or utility routines). Or does the claim include only those programs and routines within the application software segment specifically written for Jostens? Or does the claim lie in the distinct combination of all these parts, standard and original, in Jostens' system? A. Before reaching these questions, we must first consider a preliminary issue: What is the effect of the proprietary clause in Jostens' purchase order to Adage, where it is said, all material prepared for Jostens specific requirements shall become the property of Jostens? The trial court held this clause was never accepted by Adage and did not become a contract provision. We agree. 1. Adage's own quotation stated that the contract did not include research or development work by Adage and, in addition, expressly provided that no variation from the terms of the quotation would become a part of the contract unless specifically approved in writing by Adage. It is clear Adage never specifically approved Jostens' proposed proprietary clause. Mere performance and delivery of the items ordered, together with silence concerning the proposed additional clause, did not constitute an acceptance of that term where acceptance was expressly conditioned on the seller's assent to additional terms. Uniroyal, Inc. v. Chambers Gasket & Manufacturing Co., 380 N.E.2d 571 (Ind.Ct.App.1978); see Minn.Stat. § 336.2-207(2)(a) (1980). 2. The trial court found, however, that the parties, nevertheless, did have an understanding that Adage would not sell to any other party a duplicate of Jostens' application software package and that, in the light of industry custom and practice, Jostens' sole proprietary interest was in the application software package as a whole, and not in the individual routines or lines of code. See Minn.Stat. §§ 336.2-207(3), 336.2-208(2) (1980). There was evidence to support this finding and we cannot say it is clearly erroneous. To say, however, that Jostens had a proprietary interest in the Adage application software package as a whole, does not advance Jostens' claim very far. No one claims Adage sold a duplicate package to anyone else, not even to NCS. No one is suing Adage. On the other hand, Jostens' proprietary interest in the whole package may have a bearing on defendant Titus' conduct, reflecting on what he believed to be his employer Jostens' property. B. This brings us, then, to the main issue, whether Jostens had a trade secret in the CAD/CAM system or any of its parts or any combination of the parts. The trial court held Jostens did not, and we agree. 1. In Cherne Industrial, Inc. v. Grounds & Associates, Inc., 278 N.W.2d 81, 90 (Minn. 1979), we held that a trade secret has four characteristics: (1) the matter involved is not generally known or readily ascertainable, (2) it provides a demonstrable competitive advantage, (3) it was gained at expense to the plaintiff-owner, and (4) the plaintiff-owner intended to keep it confidential. This characterization has been given statutory recognition under our state's Uniform Trade Secrets Act, enacted in 1980, after the events of this lawsuit. [4] Here, however, the trial court found that Jostens failed to establish any of the four Cherne requirements. Although it appears that appellant's proof fell short on the second and third Cherne requirements, we need not decide this, as we find only the first and fourth need to be discussed. 2. The first requirement is that the information be not generally known or readily ascertainable. Courts agree that trade secrets lie somewhere on a continuum from what is generally known in a field to what has some degree of uniqueness, although there need not be the degree of novelty or originality required for patent or copyright protection. Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476, 94 S.Ct. 1879, 1883, 40 L.Ed.2d 315 (1974). Within these limits, courts have suggested a variety of further limitations. Some measure of discovery is required. Koehring Co. v. E. D. Etnyre & Co., Inc., 254 F.Supp. 334, 361 (N.D.Ill.1966). Mere variations in general processes known in the field which embody no superior advances are not protected. American Chain & Cable Co., Inc. v. Avery, 143 U.S.P.Q. 126, 130 (1964). But unique principles, engineering, logic and coherence in computer software may be accorded trade secret status. Com-Share, Inc. v. Computer Complex, Inc., 338 F.Supp. 1229, 1234 (E.D.Mich.1971). And a trade secret may modify and improve standard models to a point at which the newer version is unique in the industry. Kubik, Inc. v. Hull, 56 Mich.App. 335, 224 N.W.2d 80 (1974). Further, generally known computer elements may gain trade secret protection from the nature of their combination. Cybertek Computer Products, Inc. v. Whitfield, 203 U.S.P.Q. 1020 (1977). Thus a combination of elements produced a unique and valuable computer software program in Structural Dynamics Research Corp. v. Engineering Mechanics Research Corp., 401 F.Supp. 1102 (E.D.Mich.1975). See also Allen Manufacturing Co. v. Loika, 145 Conn. 509, 144 A.2d 306 (1958). 3. Jostens starts with the fact it had the first and only CAD/CAM system in the jewelry ring industry. In that sense, perhaps, it can be said this system was not generally known; but, as the trial court found, the technology involved in CAD/CAM systems was both generally known and readily ascertainable. There was evidence that computer aided graphics systems were used for machine tooling in industries other than ring manufacture before Jostens ordered its CAD/CAM system and that the concept was known to the industry by the early sixties and is still developing. A defense witness and computer graphics expert involved in the design of similar hardware and software for Bell Telephone testified that within his company design teams had worked on interactive graphics programs performing functions similar to those performed by the Jostens system. Both the scanner subsystem and the engraving subsystem as well as the hardware and operating systems software for the graphics subsystem were all standard vendor products. 4. Although Jostens had purchased the hardware from outside vendors, it argues what is important is that it built a system by combining components from a number of vendors because no complete system was commercially available. It argues substantial customization was needed to make the commercially available components into a productive system, and it points to such instances as Titus' work in constructing a three-axis capability for the engraving table. The trial court found, however, that the assembly of Jostens' CAD/CAM system did not require substantial research or experimentation and that the system came about through Titus' application of his general skill and knowledge to the integration of commonly available components to perform the desired function. We cannot say, after reviewing the evidence, that the trial court's findings are clearly erroneous. Clearly, the CAD/CAM system as such, as the combination of three generally known subsystems, does not achieve the degree of novelty or unknownness needed for a trade secret. As to a combination of lower levels within the system or within a subsystem, the likelihood of novelty increases, but even here we do not find plaintiff's burden of proof has been sustained. Again, we are plagued with the elasticity of plaintiff's claim. Simply to assert a trade secret resides in some combination of otherwise known data is not sufficient, as the combination itself must be delineated with some particularity in establishing its trade secret status. Cf. Struthers Scientific & International Corp. v. General Foods Corp., 51 F.R.D. 149, 153, 168 U.S.P.Q. 202, 204-05 (D.Del.1970) (requiring greater specificity in interrogatories regarding alleged trade secret in combination of elements). 5. Beyond a trade secret claim based on combination of parts or customization, Jostens spends the most time urging that the application software portion of the graphics subsystem, prepared for it by Adage, was not generally known or reasonably ascertainable. Jostens points out that when it placed its order with Adage, Adage at that time had never done an industrial numerical control application. On the other hand, there was evidence that Jostens' application software package was assembled by Adage's modified use of two application software systems (ORTHO and Cubic) that it already had in hand, having been written for other prior customers. Adage had used a modular or structured program practice, putting together small, self-contained routines and using them as building blocks for new application packages. Like others in the industry, Adage maintained a library of previously written routines and programs to use in building new programs. Experts for the defendants testified Jostens' application software did not involve any new or innovative advances in algorithmic technique. On the conflicting evidence the trial court could find, as it did, that Jostens' CAD/CAM system did not represent an `invention', a discovery of any kind, or a novel technological contribution which differed materially from methods already well known in the field of manufacturing engineering, and that    Jostens' system was no different in concept from other systems already in the public domain. 6. Even if a trade secret were not generally known or readily ascertainable, it might become so if its possessor disclosed it to the public. Here, especially, Jostens' proof fails to persuade. The trial court found that Jostens failed to meet the fourth requirement of the Cherne test, namely, that it intended to keep the relevant information secret. We agree. [5] Secrecy need not be total; depending on the circumstances, only partial or qualified secrecy will do. Radium Remedies Co. v. Weiss, 173 Minn. 342, 217 N.W. 339 (1928). The information must be, as Minn.Stat. § 325C.01, subd. 5 (1980), now puts it, the subject of efforts that are reasonable under the circumstances to maintain secrecy. See also 1 Milgrim, Trade Secrets § 2.04 (1980). These efforts may extend both to internal secrecy, keeping the information in-house, and to external secrecy, keeping the information from those outside in the general trade or industry. Thus, in Com-Share, Inc. v. Computer Complex, Inc., 338 F.Supp. 1229 (E.D.Mich.1971), computer software was protected both by plaintiff marking each page of the listings to emphasize its system as confidential and by building passwords into the system to prevent unauthorized access. Employees need to understand that information which is not readily available to the trade is not to be made so by them. Kubik, Inc. v. Hull, 56 Mich.App. 335, 358, 224 N.W.2d 80, 92 (1974). The plaintiff employer in Structural Dynamics Research Corp. v. Engineering Mechanics Research Corp., 401 F.Supp. 1102 (E.D.Mich.1975), specifically called the confidential nature of the work to each employee's attention in an individual confidential disclosure agreement each signed. On the other hand, in Pressure Science, Inc. v. Kramer, 413 F.Supp. 618 (D.Conn.1976), the court found that a plaintiff's failure to require all employees working in a supposedly confidential area to sign a nondisclosure agreement evidenced a fatal lack of concern for confidentiality. Here there was evidence that when Jostens installed its CAD/CAM system, no consideration was given or policy established to keep the development secret or confidential. Not until May 1975 did Jostens bar potential customers for its system from the Burnsville plant; until then, prospects were allowed in, although it is disputed what they might have learned. Particularly damaging, we think, is the presentation made and the article written by Titus, with Jostens' approval, explaining Jostens' CAD/CAM system to other experts in the field. The parties disagree on whether the information revealed was sufficient to make the purported trade secret accessible to other technologically sophisticated persons. NCS' expert testified that from Titus' article alone he could have duplicated the functions of Jostens' system, while an expert called by Jostens said it would be very, very difficult to translate into practical application the theoretical concepts described in the article. The trial court found that the information given in Titus' authorized disclosure was sufficient to enable an experienced engineer to duplicate both the hardware and the software of Jostens' system without too much difficulty. There was also evidence that none of the software tapes or documents at Jostens was marked secret or confidential until after this litigation began. Some of the employees working with the system were never asked to sign a confidentiality agreement even though Jostens had employed such a form elsewhere. We hold the trial court's finding that Jostens did not take reasonable steps to protect its alleged trade secrets is not clearly erroneous.