July 22, 2019

July 22, 2019

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Michigan Federal Court Confirms that Mere Variations on Widely Used Manufacturing Processes Are Not Protectable Trade Secrets

In Quantum Sail Design Group LLC v. Jannie Reuvers Sails Ltd., the Honorable Gordon J. Quist was faced with deciding whether the process used by Quantum to design and manufacture high-performance sails used on top-of-the-line racing and cruising yachts was a protectable trade secret under Michigan law. Defendant JRS asked the district court to dismiss the trade secrets claim before trial as meritless pursuant to Fed. R. Civ. P. 16(c)(2)(A), a procedure that is very rarely invoked in the Western District of Michigan. The court treated JRS's motion as a motion for summary judgment under Rule 56, ultimately granting the motion.

The court began its analysis by noting an important point often overlooked in trade secret cases. It is incumbent upon the party alleging trade secret misappropriation to "particularize and identify the purported misappropriated trade secret with specificity." Op. at 8 (quoting Dura Global Techs. Inc. v. Magna Donnelly Corp., 662 F. Supp. 2d 855, 859 (E.D. Mich. 2009)). The dispute focused on whether Quantum's manufacturing process for laminating membrane sails was a trade secret. Quantum acknowledged that elements of its manufacturing process are known and used by other manufacturers, but argued that the "total process that it uses is not generally known by its competitors." Id. at 11.

The court was not persuaded by the evidence presented by Quantum, noting that videos and other online materials available publicly from Quantum's competitors depict, essentially, what Quantum does in its manufacturing process. Although the court acknowledged that a "unified manufacturing process, design, or operation may constitute a protectable trade secret if it compromises a 'unique combination,'" the court found that the facts did not support such a conclusion. Rather, the court concluded that Quantum's manufacturing process was only a variation on a widely-used manufacturing process from others, holding that "mere variations on widely used processes cannot be trade secrets" and "proprietary ways of doing the same thing that others in the same field do are not trade secrets" (quotations omitted). The root of Quantum's advantage was not a protectable trade secret, but the expertise gained from experience in manufacturing, which cannot be protected as a trade secret.

© 2019 Varnum LLP


About this Author

Bryan R. Walters, Varnum, business and IP litigation lawyer

Bryan helps companies successfully resolve business disputes, representing clients in a wide range of industries including manufacturing, health care, and professional services. Bryan believes in an individualized approach to each situation; some disputes are best resolved through early negotiation/mediation, while others should be actively litigated in court. Bryan is particularly experienced in federal court litigation, both in West Michigan and across the country. He also represents clients in intellectual property disputes involving trademarks, copyrights, patents,...