If a trade secret is published by a third party – especially if it was published long ago – it is public knowledge and cannot be claimed as a trade secret. Right?
Well, as it turns out, life is not as simple as we would like. And sometimes, an interesting story comes along that makes us wonder what in the world is going on. This is one of those stories.
Once upon a time, an electrical engineer named Dr. Marcelo Lamego developed an algorithm to determine the concentration of total hemoglobin in a person’s blood. His algorithm was installed in a small LED device that could be held against a patient’s fingertip. When the LED emitted a pulse of light, a sensor on the other side of the finger would measure how much light passed through the finger, and then use those measurements to calculate the concentration of hemoglobin in the patient’s blood. In his algorithm, Dr. Lamego used a linear algebra equation well-known in the field of statistics. However, even though the equation was well-known, he, and the company he worked for, Cercacor, treated his algorithm as a trade secret.
Dr. Lamego eventually left Cercacor. Then, sometime later, he started his own company, True Wearables. While at True Wearables, Dr. Lamego designed and built a new pulse oximeter. To protect his invention, he filed a patent application, and part of that application included a description of the hemoglobin algorithm he had developed while at Cercacor.
Cercacor found out about Dr. Lamego’s patent application and quickly filed a lawsuit asking the district court to issue a preliminary injunction to prevent the patent application from being published. They argued that the hemoglobin algorithm described in the application was a trade secret and should be protected from disclosure.
At the district court, Dr. Lamego made several arguments. To me, the most interesting argument was that his linear algebra equation had been independently described (in equivalent form) in a published technical paper that had been cited by other papers over 1,200 times. If that’s not a public disclosure, I don’t know what is. Moreover, Dr. Lamego’s expert testified that variants of that same linear algebra equation had appeared in statistics textbooks since the early 1960s. This means we are not talking about some obscure public disclosure. We are talking about a very old public disclosure found in multiple textbooks going back 50 years. In any other universe, this would have been a slam dunk. Public information should not be protectable as a trade secret. But in this case, it was.
Both the district court and the Federal Circuit Court of Appeals (because Dr. Lamego appealed the district court’s decision) reasoned that “the existence of the [linear equation’s decades-old] publication did not mean that the particular techniques described in them were generally known to people who could obtain economic value from developing noninvasive blood content detectors.” In other words, all the judges who heard this case – at least one of whom holds a degree in electrical engineering from MIT – decided that a well-known, long-ago published linear algebra equation for determining and optimizing statistical coefficients (a subject that many engineering students are taught as an undergraduate) was somehow beyond the reach of discovery by engineers who were building light-wave detectors (a subject that often requires the use of statistical equations and algorithms), and therefore the linear algebra equation should be treated as a secret. Astounding.
The Lamego case involved California’s trade secret law, but Virginia’s law is very similar. In Virginia, a trade secret is protected information that “derives independent economic value … from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.”
Applying California law, using logic that might also apply in Virginia, the judges ruled that a trade secret owner can maintain information as a trade secret, even though the information has been published for 50 years and cited in 1,200 papers (and therefore is not a secret), as long as (1) the owner can show that he treated the information as a secret (even though it wasn’t a secret), and (2) the defendant is unable to show that he obtained the information from the published source.
That last point is crucial. Both courts seemed to conclude that because Dr. Lamego did not offer evidence that he had obtained the linear algebra equation from the cited public source, he must have taken the equation from his prior work, which, in the minds of the judges, looked like a trade secret violation, even though the equation was not a secret, and even though it could have been “readily ascertainable” by engineers working in Dr. Lamego’s field. Somehow, without offering any real explanation, the judges decided that the subject of statistics was so far removed from light-wave detector engineering that no one who was building a light-wave detector would have thought to search the statistics literature for equations that might help them process light-wave signals.
The moral of this story: If you are accused of using someone else’s trade secret and you want to invoke a public information defense, you should try to prove that you used the public version of the information and not the plaintiff’s version. It may not be enough merely to cite a well-known document published by a third party, and argue that the publication, by itself, is sufficient to destroy the secrecy of a claimed trade secret. It may not be.
Several closing thoughts are in order:
- Lamego’s publication of the linear algebra equation in his patent application seems equivalent to the earlier publication of the same information in statistics textbooks 50 years ago. I see no reason to treat those two categories of publication as significantly different.
- Lamego’s case concerns a preliminary injunction. It is possible – and hopefully likely – that in subsequent proceedings, the district court will correct what I think has been an egregious error. It also seems possible that both courts realized that the publication of Dr. Lamego’s patent would ruin whatever trade secret protection Cercacor may have enjoyed; and the judges were willing to issue an injunction to temporarily protect Cercacor’s trade secret until the evidence could be more fully developed and analyzed.
- The Federal Circuit’s decision in this case is nonprecedential, meaning it should not be cited as a precedent in future cases. This is probably the best thing about this story.
The Federal Circuit case is Masimo Corp. v. True Wearables, Inc., No. 2021-2146 (Jan. 24, 2022). A copy of the court’s decision can be found at https://cafc.uscourts.gov/opinions-orders/21-2146.OPINION.1-24-2022_1897012.pdf.
My review of this case is based in part on a blog posted by Dennis Crouch, who is a Professor of Law at the University of Missouri School of Law. Professor Crouch’s blog may be found here: https://patentlyo.com/patent/2022/01/publication-extinguish-secret.html.