Saforo & Associates, Inc. v. Porocel Corp. , 337 Ark. 553 ( 1999 )

Ray Thornton, Justice,

dissenting. I respectfully dissent from the majority in this case on the grounds that appellees failed to satisfy the requirements of the factors articulated in Vigoro Industries, Inc. v. Cleveland Chemical Co. of Arkansas, Inc., 866 F. Supp. 1150 (E.D. Ark. 1994), and I would hold that the trial court’s finding that appellee’s wash water system constituted a trade secret under Ark. Code Ann. § 4-75-601 was clearly erroneous.

The trial court and the majority rely upon secrecy agreements between Saforo and AluChem, between AluChem and Englehard, and confidentiality agreements signed by Porocel employees with first Engjehard and later AluChem. However, the wash-water system was designed by Mr. Ron Bell, a chemical engineer who was a part owner of AluChem. As stated by counsel for appellee, Mr. Bell was the owner of whatever trade secrets were incorporated in his design. At the time he completed the wash-water design and sent it to Bill Evans, an employee of Porocel, in February of 1996, Mr. Bell had not consummated any relationship with Mr. Evans or with Porocel. The requirement of maintaining the secrecy of a trade secret was discussed in Ruckelshaus v. Monsanto, 467 U.S. 986 (1983), when the Supreme Court stated: “If an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished.” Id.

At the time of the disclosure, there was only the anticipation of the relationship between AluChem and Porocel. That relationship did not develop until May 7, 1997, several months after the design was disclosed, and during which interval Porocel built the machine and produced Bayer Scale using the design. There is no evidence to support a finding that a confidentiality agreement existed between Mr. Bell and Porocel in February. The majority is willing to bootstrap a later purchase of the corporate entity to create a confidential relationship that simply did not exist at the time the disclosure was made. The only support for the majority’s leap of faith was Mr. Bell’s testimony that he believed there was a confidentiality agreement in place and that, while he never designated his sketch as “confidential,” he intended it to be proprietary. In my view, this subjective test of what Mr. Bell believed is insufficient to convey trade-secrecy protection upon the wash-water system, in light of Arkansas law which requires that those who claim the protection must take reasonable measures to maintain their secrecy.

In oral arguments, counsel for Porocel conceded that Mr. Bell was the original owner of the trade secret, and that he had given away his trade secret in the hope that he could sometime later acquire Porocel. Counsel further agreed that if the acquisition did not go through, Bell would have lost any protection for the wash-water system as a trade secret. Once the trade secret was destroyed by disclosure, it entered the public domain. Even if it had been a unique solution to the needs of one customer, it was not modified or redesigned by Porocel. There is no showing that Porocel added any concepts to the design. No new trade secret came into existence, but only Mr. Bell’s design, which had already entered the public domain, was utilized by Porocel. No argument was made by Porocel that after a trade secret is destroyed by disclosure, it can be brought back into existence by purchasing the company to which it was disclosed. Mr. Bell did not take appropriate measures to protect his trade secret, and when it was disclosed, it ceased to be a trade secret. “With respect to a trade secret, the right to exclude others is central to the very definition of the property interest. Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data.” Ruckelshaus, supra.

This clearly does not meet the Vigoro test of making reasonable efforts to maintain its secrecy. As a matter of interest, during the time after Mr. Bell’s trade secret had been terminated by its disclosure to Porocel, and before Mr. Bell’s purchase of Porocel, Porocel built the wash-water machine, installed it, and commenced selling the product to Saforo. It was not until May 7, 1997 that Bell consummated the purchase of the facilities under the name of Porocel, and, as appellees conceded at oral arguments, if that purchase had not been completed, Bell would have lost any claim of a trade secret. I dissent because, as I read the law, there were no appropriate measures taken to guard the secrecy of the wash-water system; therefore, appellees should be denied the protection of the trade-secrecy laws.

I am authorized to state that Justice Smith joins in this dissent.