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Konica Minolta Busted For Stealing Trade Secrets
Ideas Can Be Shielded As Trade Secrets: Calif. Appeals Court
By Kurt OrzeckLaw360, Los Angeles (May 09, 2014, 7:23 PM ET) — A California appeals court on Thursday refused to toss a $5 million court-ordered penalty against Konica Minolta Systems Laboratory Inc. over allegations that it misappropriated Altavion Inc.'s confidential information about its digital stamping technology, ruling that ideas and designs are protectable as trade secrets. Affirming a trial court's judgment that KMSL violated a privacy agreement by filing for a patent encompassing Altavion's technology, the appeals court decided that if a patentable idea is kept secret, the idea itself can constitute information protectable by trade secret law.
Altavion alleged that KMSL had misappropriated trade secrets it shared during negotiations — subject to a nondisclosure agreement — involving whether KMSL could embed Altavion’s digital stamping technology in one of its printers. But KMSL claimed on appeal that generalized ideas and inventions were protectable by patents and thus couldn't be trade secrets.
The appeals court sided with Altavion, saying, "when KMSL secretly filed patent applications disclosing Altavion’s ideas, and subsequently obtained patents covering Altavion’s ideas, it was a classic violation of trade secret law."
KMSL is a research and development subsidiary of multinational corporation Konica Minolta Business Technologies Inc., which manufactures multifunction printers — or multifunction peripherals — that can copy, scan and print documents, according to court documents. Altavion is a small company that invented a way to make self-authenticating documents by using barcodes with encrypted data about the contents of the original documents, according to court filings.
After their negotiations failed, Altavion allegedly discovered in October 2006 that KMSL had filed for patents encompassing Altavion’s digital stamping technology, and it sued in November 2007.
A trial court decided that KMSL had misappropriated Altavion’s DST concept as a whole, as well as particular design concepts. The court awarded Altavion damages of $1 million and prejudgment interest of about $500,000, as well as about $3.3 million in attorneys' fees and additional expert fees and costs.
KMSL argued that Altavion hadn't shown that it made reasonable efforts to protect the secrecy of its purported trade secrets because Altavion had disclosed the secrets to other entities without assurances of confidentiality. But the appeals court said Thursday that Altavion had disclosed only its general digital stamping technology concept, not the underlying design details.
While KMSL argued on appeal that design concepts weren't protectable trade secrets, the appeals court held that Altavion hadn't disclosed those concepts to anyone other than KMSL.
KMSL further claimed that Altavion's design concepts didn't have any independent economic value because the company hadn't shown that any of its trade secrets weren't generally known. But the appeals judges again disagreed, saying the evidence showed that Altavion had kept secret all but the most general idea for its digital stamping technology.
Glenn W. Peterson of Millstone Peterson & Watts LLP, which is representing Altavion, told Law360 on Friday that he and his client were very pleased not just with the outcome, but also with the depth of the court's review and analysis.
"It clearly articulates that one of the policies served by the [Uniform Trade Secrets Act] is protection of the underdog. And that was the bedrock of our case — proving that the underdog can win and that all the money in the world can't escape justice," he said. "I expect the court's opinion to be frequently cited in the future, especially for its analysis that ideas and design concepts are protectable."
An attorney for KMSL declined to comment Friday.
Justices Mark B. Simons, Barbara J.R. Jones and Henry E. Needham Jr. sat on the panel for the appeals court.
Altavion is represented by Glenn W. Peterson of Millstone Peterson & Watts LLP and John P. Costello of Costello Law Corp.
KMSL is represented by Miriam A. Vogel, Bryan J. Wilson, Roman A. Swoopes and Daniel Wan of Morrison & Foerster LLP.
The case is Altavion Inc. v. Konica Minolta Systems Laboratory Inc., case numbers A134343 and A135831, in the Court of Appeal of the State of California, First Appellate District.
–Editing by Elizabeth Bowen.
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