Ronald Russo is an inventor. Ballard Medical Products is a subsidiary of Kimberly-Clark. Ballard Medical Products has six subsidiary companies: Medical Innovations Corporation; Ballard Real Estate Holdings, Inc.; Ballard International, Inc.; Ballard Medical Products (Canada) Inc., dba Preferred Medical Products; Mist Assist, Inc.; Plastic Engineered Products Company. (http://www.fundinguniverse.com/company-histories/Ballard-Medical-Products-Company-History.html) Ballard had one product line that allowed for sucking fluid from a patients airway while simultaneously giving the patient air to breath. Russo designed this device for Ballard. When Ballard couldn't get the FDA to approve the device for use for longer than 24 hours, Russo was contacted again about improvements to the device. Russo agreed to show Ballard the improvements he had made but conditioned the disclosure on a confidential disclosure agreement. After signing the confidential disclosure agreement, Ballard and Russo were not able to come to an agreement about licensing Russo's innovations. Russo asked for his materials back and Ballard told him that the materials could not be found. Ballard was actually using the materials and patented inventions based on Russo's materials, they also used Russo's materials to introduce a new product to the market. Ronald Russo sued Ballard Medical Products because he said they misappropriated his trade secrets and breached the parties' confidentiality agreement by incorporating some of Russo's innovations into Ballard's medical devices without Russo's consent.
At district court a jury found for Mr. Russo and gave him $20 million in damages. The Jury awarded $17 million in unjust enrichment and $3 million in damages for the breach of the confidentiality agreement. To make a point: Ballard was forced to pay $20 million for innovations that Russo offered to license to Ballard for 3% of sales and a guarantee of $50,000 a year. Ballard appealed and argued that Russo's state law claims were pre-empted by federal patent law. On appeal Russo claimed that the district court made a mistake by not adding pre-judgment interest to his award. This court affirmed both decisions.
The court said that although there was a substantial issue of patent law involved in the case, having a substantial issue of patent law does not pre-empt the trade secret complaint. They held that this logic was true for Russo's trade secret claim and his breach of contract claim. The court went on to say that there are three types of pre-emption: explicit, field, and conflict pre-emption. The court held that conflict pre-emption applied in this case but that "[c]onflict preemption[sic] arises when state law [']stands as an obstacle to the accomplishment and execution of the full purposes and objectives of congress,['] as expressed in this case in the Patent Act... When it comes to assessing this question, two particular doctrinal strands bear upon our analysis, one illustrated by Kewanee Oil, the other by Bonito Boats..."
In Kewanne Oil, the court in that case concluded that patent law and state trade secret law usually complement each other. The court in that case held that no one would run the risk of losing exclusive rights to their invention, guaranteed by the patent system, in favor of the much more circumventable rights of a trade secret. In Bonito boats the court held that as long as the trade secret protection requires secrecy there is no conflict with a patent law system that requires commitment to the public or application for patent protection on disclosure of that trade secret.
The court considered Ballard's assertion that Russo's complaint challenged patent law's presumption of inventorship. The court held that Russo's complaint didn't attempt to be named the inventor of the patent or seek any of the rights granted by the patent. The court felt that this showed that there was no need for pre-emption of the state claims by federal patent law. The court went on to say that the only reason Russo even brought the subject of patents up, was to show that Ballard had misappropriated Russo's trade secrets.
So in the end the court, once again, held that there is no inherent conflict between trade secret law and federal patent law. I think what is also important is that the court went on to say what might cause a conflict, citing that the complaint didn't ask for a reassignment of patent rights as a remedy for a state law trade secret cause of action. That's important because it gives practitioners a fairly clear way to allege conflict pre-emption for trade secret cases in the future.
At district court a jury found for Mr. Russo and gave him $20 million in damages. The Jury awarded $17 million in unjust enrichment and $3 million in damages for the breach of the confidentiality agreement. To make a point: Ballard was forced to pay $20 million for innovations that Russo offered to license to Ballard for 3% of sales and a guarantee of $50,000 a year. Ballard appealed and argued that Russo's state law claims were pre-empted by federal patent law. On appeal Russo claimed that the district court made a mistake by not adding pre-judgment interest to his award. This court affirmed both decisions.
The court said that although there was a substantial issue of patent law involved in the case, having a substantial issue of patent law does not pre-empt the trade secret complaint. They held that this logic was true for Russo's trade secret claim and his breach of contract claim. The court went on to say that there are three types of pre-emption: explicit, field, and conflict pre-emption. The court held that conflict pre-emption applied in this case but that "[c]onflict preemption[sic] arises when state law [']stands as an obstacle to the accomplishment and execution of the full purposes and objectives of congress,['] as expressed in this case in the Patent Act... When it comes to assessing this question, two particular doctrinal strands bear upon our analysis, one illustrated by Kewanee Oil, the other by Bonito Boats..."
In Kewanne Oil, the court in that case concluded that patent law and state trade secret law usually complement each other. The court in that case held that no one would run the risk of losing exclusive rights to their invention, guaranteed by the patent system, in favor of the much more circumventable rights of a trade secret. In Bonito boats the court held that as long as the trade secret protection requires secrecy there is no conflict with a patent law system that requires commitment to the public or application for patent protection on disclosure of that trade secret.
The court considered Ballard's assertion that Russo's complaint challenged patent law's presumption of inventorship. The court held that Russo's complaint didn't attempt to be named the inventor of the patent or seek any of the rights granted by the patent. The court felt that this showed that there was no need for pre-emption of the state claims by federal patent law. The court went on to say that the only reason Russo even brought the subject of patents up, was to show that Ballard had misappropriated Russo's trade secrets.
So in the end the court, once again, held that there is no inherent conflict between trade secret law and federal patent law. I think what is also important is that the court went on to say what might cause a conflict, citing that the complaint didn't ask for a reassignment of patent rights as a remedy for a state law trade secret cause of action. That's important because it gives practitioners a fairly clear way to allege conflict pre-emption for trade secret cases in the future.
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