US Appellate Court’s Ruling Over Design Drawings Sends a Strong Message to Trade Secret Owners

August 18, 2023

IAM Media

Jim Pooley was quoted in an edition of IAM Media on August 18, 2023. His comments are presented below, and you can read the full text of the article by clicking the "Read Article" button.

James Pooley, frequently serving as a lead counsel in trade secret disputes, was an expert witness for Dril-Quip. He says that this case sends an important message to companies that they should think carefully about their strategies when looking to protect key innovations.

Pooley told the courts that while FMC favoured a patenting strategy as a whole, and had “some infrastructure in place” to secure that type of IP protection, he could not recognise a clear strategy for protecting trade secrets. He believes it may be the case that, because FMC was aiming to rely ultimately on patenting, it failed to “carefully police whether the patent applications were stamped confidential”.

FMC was selling large pieces of equipment that went out to the market where they could be viewed, examined and reverse engineered easily, meaning that pursuing patent protection was an understandable choice, Pooley says. But along the way, some significant mistakes were made in protecting its innovation.

In the case, the court heard FMC had opened up its engineering database “to everybody, instead of partitioning it for those who needed to have access to confidential information”, Pooley explained. All FMC engineers had remote access to TeamCenter, where many of those documents Murphy was working on were stored.

Pooley argues that “neither FMC's code of business conduct nor anything else at the company prohibited FMC's employees from copying confidential company documents onto an external drive” and that large companies would not make “engineering documents containing trade secrets available to every engineer in the company”.

Pooley believes that the case sends a strong message to the industry that the requirement for “reasonable efforts” is a very serious one. “It requires focus on the trade secrets that you are trying to protect as opposed to general security issues, such as having a very good IT system, requirements for using passwords, having a front desk and so on,” he told IAM. “When you go to the court to protect your special information because it has extremely high value, the courts would expect you to have behaved in a way that reflects that high value.”

Pooley told the court that soon after the chief engineer left, FMC tightened up its safeguarding measures, introducing more focused procedures and policies around trade secret protection. This included new practices to label trade secrets “highly confidential” or “highest level of sensitivity” and ban remote access to such information. 

But as a saying goes, that’s like closing the stable door after the horse has bolted, Pooley mused.

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