Life Spine, Inc. v. Aegis Spine, Inc.
N/A (unpublished opinion) (2021)
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Rule of Law:
A company can maintain trade secret protection for the precise, non-obvious, and not readily ascertainable dimensions, measurements, and interconnectivity of its product's components, as well as related testing data and pricing information, even if the product itself is patented, publicly displayed, or sold, provided reasonable measures are taken to keep these specific details secret.
Facts:
- Life Spine, Inc. developed the ProLift Expandable Spacer System over three years, securing FDA approval in March 2016 and a patent in October 2017.
- Life Spine considers the ProLift's precise component dimensions, measurements, and interconnectivity, along with static shear compression testing data and pricing information, to be confidential trade secrets.
- Aegis Spine, Inc., whose parent company L&K Biomed, Inc. was a direct competitor of Life Spine, sought to develop its own expandable cage product to remain competitive in the U.S. market.
- In October 2017, Aegis contacted Life Spine to become a ProLift distributor and received a device after promising in writing to protect confidential information and refrain from reverse engineering, but then showed the ProLift to a surgeon to help L&K develop a competing product.
- In January 2018, Life Spine and Aegis signed a formal distribution agreement that included confidentiality, fiduciary duty, and anti-copying provisions regarding the ProLift.
- Between March and June 2018, Aegis sent ProLift devices to L&K without Life Spine's knowledge or consent, and L&K later informed Aegis it was copying the ProLift installer's basic design.
- In September 2018, Aegis forwarded a confidential email with details about a custom ProLift installer to L&K and somehow obtained Life Spine's confidential static shear compression testing data.
- By March 2019, L&K, after a prior design failed, redesigned its AccelFix-XT to change a square component to a dovetail feature essentially identical to ProLift's, before launching the competing product in September 2019.
Procedural Posture:
- Life Spine sued Aegis in the United States District Court for the Northern District of Illinois, Eastern Division, alleging breach of the distribution agreement and misappropriation of trade secrets under federal and state law.
- The parties consented to Magistrate Judge Kim's jurisdiction for the proceedings.
- Life Spine moved for a preliminary injunction.
- The district court held a nine-day evidentiary hearing on Life Spine's motion for a preliminary injunction.
- The district court granted Life Spine's motion for a preliminary injunction, finding a strong likelihood of success on its trade secret misappropriation and breach of contract claims, that Life Spine suffered irreparable harm, and that the balance of harms favored an injunction.
- Aegis filed an interlocutory appeal of the order granting the preliminary injunction to the United States Court of Appeals for the Seventh Circuit.
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Issue:
Is a company legally precluded from claiming trade secret protection for the precise dimensions and interconnectivity of its product's components, along with related testing data and pricing information, merely because it has obtained a patent for the product, displayed it at conventions, and sold it to specialized users, where those specific details are not readily ascertainable from the public disclosures?
Opinions:
Majority - St. Eve, Circuit Judge
No, a company is not legally precluded from claiming trade secret protection for such information. The Seventh Circuit affirmed the preliminary injunction, holding that the district court did not commit clear error in finding that Life Spine's precise specifications, testing data, and pricing information qualified as trade secrets, despite the ProLift being patented, displayed, and sold. The court clarified that trade secret protection is not an "all-or-nothing proposition" for a product; rather, it focuses on the precise information sought to be protected. Public disclosure in a patent only destroys trade secret protection if the patent and trade secret cover the same subject matter. Similarly, selling or displaying a product does not forfeit protection unless the trade secret is "readily ascertainable" upon examination. The court found ample evidence that Life Spine's patent did not disclose granular, precise specifications, nor were they readily ascertainable from supervised displays or sales to hospitals and surgeons who use the device in sealed, supervised conditions. The court rejected Aegis's speculative arguments about reverse engineering by surgeons or patients as unsupported, noting that Life Spine took "reasonable measures" to preserve secrecy, which is the statutory requirement. Regarding the breach of contract claims, the court found Aegis likely breached confidentiality, fiduciary duties, and anti-copying provisions by sharing ProLift devices, pricing data, and custom installer information with L&K, and by failing to train employees, even if some breaches occurred after the initial agreement expiration due to the survival clause or ongoing oral agreement. While the district court erred in relying on a presumption of irreparable harm for trade secret claims post-eBay, the error was harmless because Life Spine independently demonstrated irreparable harm through lost unquantifiable customers/market share and damaged goodwill/reputation.
Analysis:
This case clarifies the nuanced scope of trade secret protection for complex products that are also subject to patent protection and commercial distribution. It emphasizes that trade secret status depends on the specific information sought to be protected, rather than the product as a whole. The ruling reinforces that public disclosure (like patents or sales) does not automatically negate trade secret protection for non-readily ascertainable details if reasonable secrecy measures are maintained. This distinction is crucial for innovative companies in industries like medical devices, allowing them to simultaneously pursue patent protection for broad concepts while safeguarding proprietary granular specifications as trade secrets against improper acquisition. Future cases will likely refer to this decision when distinguishing between generally known product features and precise, secret engineering details.
