The Eleventh Circuit recently struck down an award of $4.5 million in damages after a jury determined that a manufacturer had misappropriated a shared trade secret. AcryliCon USA, LLC (“AcryliCon”) and Silikal GmbH (“Silikal”) had a business relationship in which Silikal manufactured and AcryliCon distributed a proprietary flooring resin of superior compressive strength (1061 SW), and each claimed ownership of the 1061 SW formula trade secret to the exclusion of the other. While ownership of a trade secret is a critical issue in trade secret misappropriation claims, the Court did not address whether AcryliCon owned the trade secret because it determined that Silikal did not misappropriate the formula as a matter of law.
A bit of history is in order to explain the decision. 1061 SW was invented in 1987. Silikal claims to have invented the formula independently, while AcryliCon argued that Bjorn Hegstad, founder of AcryliCon International (AC International) (an affiliate of AcryliCon), came up with the idea. AC International and Silikal sold 1061 SW in Norway under an agency relationship for ten years, and in 1997 AC International became the exclusive distributor of 1061 SW resin. AcryliCon was founded in 2008, and was given the right to import, market and sell AC International products in the U.S., including 1061 SW. Shortly thereafter, a dispute arose between Silikal and AC International, resulting a global settlement agreement (“GSA”) in 2010. AcryliCon was also a party to the GSA, under which Silikal promised to “preserve the secrecy of” the 1061 SW formula, and promised not to sell it to anyone other than AcryliCon without AcryliCon’s consent.
The present lawsuit originated when AcryliCon sued Silikal for breach of the GSA and misappropriation of the 1061 SW formula trade secret, under the Georgia Trade Secret Act (“GTSA”). Silikal did not dispute that it had breached the GSA. However, under the GTSA, AcryliCon had to show that 1) Silikal owed AcryliCon a duty to maintain the secrecy of the 1061 SW formula, and 2) that this duty arose at the same time that Silikal acquired the formula. O.C.G.A. § 10–1–761 et seq.
Here, there was no dispute that Silikal had obtained the formula in 1987 – a full 13 years before Acrylicon even existed and 15 years before it entered into the GSA. As a result, AcryliCon could not meet the “same time” statutory requirement to prove that Silikal owed AcryliCon a duty of secrecy when it obtained the trade secret. Based on the factual impossibility that Silikal could have owed a duty of secrecy to AcryliCon necessary to sustain its misappropriation claim, the Court vacated AcryliCon’s jury award for misappropriation.
As a final note, just because AcryliCon could not assert trade secret misappropriation against Silikal, it was not without remedy. The Court upheld the breach of contract decision, but it was a costly distinction, as the Court found only nominal damages for the breach.