Opinion ID: 470034
Heading Depth: 1
Heading Rank: 10

Heading: disclosure or use of a trade secret

Text: 53 Wrongful misappropriation occurs if one discloses or uses another's trade secret without a privilege to do so.... Restatement, Sec. 757. The district court directed verdict for appellees in part because it saw no evidence of Bielefeldt's actual use or disclosure of Metallurgical's secrets. In reviewing this conclusion, we keep in mind the rule of Boeing Co. v. Shipman by scouring the record for reasonable inferences favorable to Metallurgical. One fact jumps out from this review: in their original form, the furnaces delivered to Metallurgical differed from those that Smith purchased. The former furnaces lacked the key features needed to achieve commercial operation, while the latter possessed those features--features that Metallurgical had devised by extensive and expensive trial and error. Bielefeldt himself testified that he did not look to public sources of information in designing the Smith furnace; he instead claimed that he relied on his memory. That his earlier efforts lacked the features at issue suggests that his memories may well have been of working with Metallurgical. This issue is therefore an inappropriate ground for a directed verdict. 54 Smith's liability can arise, however, only if it in turn used the secrets gained from Bielefeldt. Use, as it turns out, is not so easily defined. Smith claims that it never used any secrets gained because its inability to procure substantial quantities of scrap carbide prevented commercial operation of the furnace Fourtek provided. Lykes-Youngstown, 504 F.2d 518, guides us in determining commercial use. We must first recognize the unfortunate blurring of analyses in that case. The Lykes-Youngstown court's discussion of commercial use was in the context of inquiring whether damages might be available. It is preferable, of course, to divorce these concepts. Commercial use is an element of the tort as enounced in Sec. 757 of the Restatement; while the nature of the use may be relevant in determining the proper extent of damages, its existence must also be shown to establish wrongdoing in the first place. Despite this confusion, Lykes-Youngstown provides useful analysis. 55 Metallurgical looked to that case in arguing that the law provides a liberal definition of commercial use. Lykes-Youngstown does indeed state a broad definition; any misappropriation, followed by an exercise of control and dominion ... must constitute a commercial use.... 504 F.2d at 542. Lykes-Youngstown differs from our case, however, in one very important respect. It was a case in which the trade secret itself was what was to be sold.... Id. at 540. The court there explicitly contrasted a case like ours, where the trade secret is used to improve manufacturing, and subsequently manufactured items were sold at a profit.... Id. Although the court made this distinction in determining the proper method of computing damages, we think it also applies logically to developing a definition of use. The discussion in Lykes-Youngstown following this distinction is therefore inapposite to our case, for which we instead employ the everyday meaning of the term. If Smith has not put the furnace into commercial operation to produce carbide powder it can then use, then no commercial use has occurred. Because Metallurgical failed to provide any evidence that Smith has so far benefitted from any misappropriation, directed verdict in Smith's favor was proper. Should it in future seek to profit from use or sale of the furnace, a new fact situation will be presented.