Tewari De-Ox Systems v. Mountain States (5th Cir. 2011)
In 2005, Tewari's CEO (Dr. Tewari) visited Mountain Systems (MTSR) to demonstrate his “zero ppm oxygen meat-packing method” that greatly extends the shelf life of packaged meats. Prior to the demonstration, the two companies signed a non-disclosure agreement (NDA). When MSTR allegedly began using the method without permission.
The major catch in Tewari's breach of trade secret argument was that the bulk of the disclosed method could also be found in Tewari's already published patent application. (The application was abandoned after receiving a final rejection on obviousness grounds).
Trade secret is derived from state law. Under Texas law (the law of this case), a successful trade secret plaintiff must prove that (1) a trade secret existed; (2) the trade secret was “acquired through a breach of a confidential relationship or discovered by improper means;” and (3) that the trade secret was then used without authorization.
Patent Publication Eliminates Trade Secret: In a straightforward opinion, the appellate panel held once published, the information in a patent application should be considered “generally known and readily available” and therefore are no longer amenable to trade secret protection.
Tewari argued that the patent application publication should not matter in this case because the defendants obtained their information from him in a confidential transaction rather than from the public source. The appellate court, however, rejected that argument because the application was already published at the time of his disclosure. (The court noted that the source of defendant's trade secret knowledge may be important for trade secret analysis if the publication occurred subsequent to the fiduciary relationship.)
Although the material disclosed in the patent application is not protectable under Texas trade secret law, the court held that Tewari may have transferred protectable information that was not in the patent application — such as specific information regarding making and using the invention that was not particularly identified in the patent application.
Remanded for further consideration.