February 6, 2023

Volume XIII, Number 37

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February 03, 2023

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Confidentiality Agreement Not Enough to Protect Trade Secret

The Seventh Circuit Court of Appeals, applying Illinois law, recently held that a confidentiality agreement signed before disclosing information to a subcontractor may not be sufficient to avoid summary judgment in favor of the subcontractor accused of violating the agreement by using the trade secret.   

The plaintiff and appellant in nClosures, Inc. v. Block & Co., (Oct. 22, 2014), was a design firm with rights to a design for a metal case for electronic tablets that had been designed by an independent contractor, LeBlanc.  nClosures entered into a confidentiality agreement with Block for the purposes of engaging in discussions and evaluating a potential business relationship with respect to iPad Enclosures.  nClosures thereafter provided Block the design files for its Rhino products and Block began producing a product called the “Rhino Elite.”  At about the same time that the Rhino Elite entered the market, Block developed a design for its own table enclosure.  The relationship was later terminated and nClosures sued, alleging fraud, trade secret misappropriation, breach of fiduciary duty and breach of contract.  The district court granted Block summary judgment dismissing all claims.

nClosures appealed the grant of summary judgment on its breach of contract claim.  The Seventh Circuit held that when the breach is of a confidentiality agreement, Illinois law requires that the information protected must actually be confidential and that reasonable efforts be made to keep it confidential.  The Court of Appeals agreed that on the facts, no reasonable jury could find that nClosures took reasonable steps to preserve the confidentiality of the Rhino design.  While it entered the agreement with Block, nClosures had no such agreements with the designer LeBlanc, with employees of Block who had access to the designs nor with manufacturers of prior versions of the Rhino Elite.  The drawings themselves contained no markings suggesting confidentiality.  Accordingly, the grant of summary judgment was affirmed.

The lesson of nClosures is that a confidentiality agreement must be viewed as but one part of an overall strategy of protecting and preserving the confidentiality of information shared with others.

© 2023 Honigman Miller Schwartz and Cohn LLP National Law Review, Volume IV, Number 317

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William Berndt  Honigman Miller trade secrets false advertising trade secret law

 Mr. Berndt is a trial lawyer with substantial experience in state and federal courts across the country. He focuses his practice on trade secret and false advertising claims. He represents businesses and senior executives in disputes relating to noncompetition agreements, trademark and copyright, fraud, professional liability, internal investigations, and general business and commercial litigation. Mr. Berndt has first-chair experience in trials, arbitrations and other proceedings.

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Mr. De Bruin is a seasoned first-chair trial and appellate attorney. He concentrates his practice on patent litigation and related proceedings before the United States Patent and Trademark Office. Mr. De Bruin successfully argues legal issues, as well as explain the most complex technology to judges and juries.

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Mr. Gowen represents companies, individuals and law firms in disputes, including those involving intellectual property, trade secrets, unfair competition, employment matters and other business litigation matters. He approaches litigation with an eye toward results; understanding that advancing his clients’ litigation strategies should fit within their overall business interests.

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Steven A Weiss Litigation attorney Honigman Law firm Chicago ediscovery
Leader, Complex Commercial Litigation Practice Group

Mr. Weiss provides advice on a wide variety of business litigation for companies and business people. He is focused on resolving business disputes with particular experience handling intellectual property, breach of contract, trade secret, employment and covenant not to compete matters. Local and national companies and individuals retain Mr. Weiss to handle a full range of business disputes because they trust his judgment and litigation skills.

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