SHARE

November 29, 2022

A Healthy Dose of Seeds: Unique Combination Trade Secrets Entitled to Protection

You've Reached Your
Free Article Limit This Month
Register for free to get unlimited access to all Law.com OnPractice content.
Register Now

The US Court of Appeals for the Sixth Circuit upheld a jury verdict finding a dietary supplement company liable for misappropriating another company's research and development (R&D) related to broccoli-seed extract. Caudill Seed & Warehouse Co., Inc. v. Jarrow Formulas, Inc., Case No. 21-5354 (6th Cir. Nov. 10, 2022) (per curiam) (Moore, J., concurring in part and dissenting in part). The decision addressed several issues relating to so-called "combination" trade secrets.

Caudill manufactures and sells various nutritional supplements, including a supplement made using broccoli-seed extract. Caudill sued Jarrow Formulas for trade secret misappropriation after its Director of Research Ken Ashurst left Caudill and joined Jarrow. Ashurst had led Caudill's R&D efforts for nine years, including extensively researching the development of broccoli-seed derivatives and assembling a large body of research related to broccoli seeds. After he joined Jarrow, Ashurst delivered a curated collection of broccoli product research to Jarrow and helped it bring its own competing broccoli-seed extract supplement to the market in just four months.

The case proceeded to trial. The jury found that Caudill had a protectable trade secret; Jarrow misappropriated said trade secret; and Caudill was entitled to more than $2 million in actual losses, more than $400,000 in unjust enrichment damages, and exemplary damages. Jarrow moved for judgment as a matter of law and for a new trial. After the district court denied the motions, Jarrow appealed.

Jarrow argued that Caudill improperly asserted a "kitchen-sink theory" of trade secrets by broadly defining all its research activities as a single trade secret. Jarrow also argued that Caudill failed to show that it had acquired the alleged trade secret. Finally, Jarrow challenged the damages awards on legal grounds. The Sixth Circuit rejected each of Jarrow's arguments on appeal.

The Sixth Circuit first found that Caudill properly defined its alleged trade secret as its "research and development on supplements, broccoli, and chemical compounds." The Court treated Caudill's alleged trade secret as a "combination" trade secret (i.e., a collection of elements that individually are generally known but are unique in combination.) The Court concluded that Caudill demonstrated it had assembled a unique collection of processes and information relating to its R&D process, and therefore, Caudill properly defined its entire R&D process as a trade secret. The Court rejected Jarrow's argument that Caudill's alleged trade secret mostly consisted of public domain materials on the basis that the materials were unique in combination.

The Sixth Circuit also rejected Jarrow's argument that Caudill failed to show that Jarrow acquired and used the entire combination trade secret. The Court noted differing authority on whether a plaintiff alleging a combination trade secret must show acquisition and use of the entire combination but concluded that trade secret law does not require proving acquisition of "each atom" of the combination trade secret. The Court reasoned that when a trade secret consists of a "mass of public information" that has been collected, the defendant will always be able to identify some minute detail of the combination that it did not use. Here, the evidence demonstrated that Jarrow acquired "vast quantities of information" concerning Caudill's R&D process, and the Court held that this evidence supported a finding of misappropriation.

Finally, the Sixth Circuit upheld all the damages awarded to Caudill, rejecting Jarrow's argument that Caudill could not recover the full value of its R&D efforts—more than $2 million—as compensatory damages because that trade secret was not destroyed via public disclosure. The Court rejected this argument, reasoning that the jury could find that the $2 million represented the value of the trade secret to Jarrow. Judge Moore dissented on this point, concluding that if the jury conceived of $2 million as the value of the trade secret conferred to Jarrow, then it should have been included in the jury's unjust enrichment (as opposed to compensatory damage) award.

ALM expressly disclaims any express or implied warranty regarding the OnPractice Content, including any implied warranty that the OnPractice Content is accurate, has been corrected or is otherwise free from errors.

More From McDermott Will & Emery

Oil License Corruption Charges Don't Stick In Milan Court Of Appeal

By McDermott Will & Emery attorneys McDermott Will & Emery January 27 , 2023

In 2011, global oil company Shell and Italian state-owned oil company ENI struck a deal with the Nigerian government to jointly acquire the license to one of the most valuable oil blocks in Nigeria, known as Oil Prospecting License 245 (OPL 245).

This Week in 340B: January 17 - 23, 2023

By Emily Jane Cook McDermott Will & Emery January 26 , 2023

This weekly series provides brief summaries to help you stay in the know on how 340B cases are developing across the country.

IRS Releases Memorandum on Deducting Cryptocurrency Losses

By Andrew M. Granek McDermott Will & Emery January 26 , 2023

On January 13, 2023, the Internal Revenue Service (IRS) released a Chief Counsel Advice Memorandum (CCA 202302011) concluding that taxpayers cannot claim a deduction for cryptocurrency losses that have, absent a sale or other taxable disposition, substantially declined in value if such cryptocurrency continues to trade on at least one cryptocurrency exchange and has a value that is greater than zero.

More From Trade Secrets

Your Gang Did What!? No Matter—No Forfeiture of IP

By Kat Lynch McDermott Will & Emery January 26 , 2023

In a unique case blending intellectual property and criminal law, the US Court of Appeals for the Ninth Circuit agreed that a district court properly exercised jurisdiction over a motorcycle club and upheld the lower court’s finding that the club did not have to forfeit its collective membership marks.

Deleting Goods from Registration Subject to Cancellation During Audit May Result in Adverse Judgment

By Eleanor B. Atkins McDermott Will & Emery January 26 , 2023

The Trademark Trial & Appeal Board (Board) addressed, for the first time, whether the deletion of goods and services as a result of a post-registration audit during a cancellation proceeding triggers Trademark Rule 2.134 and found that it does.

Bursting the Bubble on Prosecution Delays

By Christopher M. Bruno McDermott Will & Emery January 26 , 2023

Addressing a case where a patent owner filed hundreds of applications as part of a strategy to maintain extraordinarily lengthy patent coverage, the US Court of Appeals for the Federal Circuit affirmed a district court’s determination that the patent owner had engaged in a calculated and unreasonable scheme to delay patent issuance.

Featured Stories
Closeclose
Search
Menu

Working...