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Court Affirms Jury’s Verdict Finding Trade-Secret Misappropriation and Patent Infringement

August 30, 2002
Masurovsky, Laura P.

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Last Month at the Federal Circuit - September 2002

Judges: Linn (author), Newman, and Dyk (dissenting-in-part)

In BBA Nonwovens Simpsonville, Inc. v. Superior Nonwovens, LLC, No. 02-1053 (Fed. Cir. Aug. 30, 2002), the Federal Circuit affirmed the district court’s judgment on post-trial motions following a jury’s verdict finding trade-secret misappropriation and patent infringement.

BBA Nonwovens Simpsonville, Inc. and several other Plaintiffs (collectively “BBA”) manufacture nonwoven fabrics used in the production of products such as carpet underlay, filters, and dryer sheets. Superior Nonwovens, LLC (“Superior”) was formed by several former employees and consultants of BBA. BBA brought suit against Superior for trade-secret misappropriation and patent infringement. A jury returned a verdict finding Superior liable for willful misappropriation of trade-secrets and patent infringement. The jury found no trade-secret misappropriation against one of the Plaintiffs, Reemay, Inc. (“Reemay”).

The district court denied Superior’s motions for JMOL or a new trial, and awarded punitive damages in addition to the actual damages awarded by the jury. The district court also enjoined Superior from using or otherwise disclosing trade secrets and from using the apparatus covered by the patent-in-suit, but stayed the trade-secrets portion of the injunction and instead imposed a royalty escrow on Superior of ten percent of its net sales pending appeal.

On appeal, the Federal Circuit applied Fourth Circuit law and the trade-secrets law of South Carolina to the trade-secret issues. The Federal Circuit agreed with the district court that Plaintiff, Fiberweb France S.A.’s (“Fiberweb”) trade secret was a unique combination of otherwise known components under South Carolina’s trade-secrets statute and common law. The Court also ruled that misappropriation did not turn on whether the person passing the information was in a master-servant relationship with Superior or was merely a consultant, but on whether the information was acquired by a person who knew or had reason to know that it was acquired by improper means. The Court rejected Superior’s argument that willful, wanton, or reckless misappropriation requires an element of malice or aggravation and found that the record amply supported a finding of willful misappropriation.

In deciding Reemay’s cross-appeal of the jury’s finding in favor of Superior on its trade-secret claim, the Federal Circuit ruled that the district court was not required to instruct the jury based on Servo Corp. of America v. General Electric Co., 393 F.2d 551 (4th Cir. 1968), nor to exclude evidence of certain expired patents not relied upon by Superior in developing the accused technology. Servo does not apply in this case because it involved an issue of Virginia law, not South Carolina law, and because the issue of whether Reemay’s technology was a trade secret did not turn on any confidential relationship, which was central to Servo’s trade-secret cause of action.

As to patent infringement, the Court agreed with the district court’s claim construction and affirmed the judgment of infringement.

Finally, the Federal Circuit found no abuse of discretion concerning the nature of the injunction awarded, in particular, the requirement that Superior place ten percent of sales in escrow.

Judge Dyk dissented-in-part, concluding that the evidence did not support a finding that Fiberweb had established the existence of a trade secret under South Carolina law.