Incase v. Timex: Rare Trade Secret Case From First Circuit

by Lee Gesmer on June 21, 2007

It’s rare for a trade secret case to reach the First Circuit Court of Appeals. In fact, based on a Westlaw search only about five cases dealing with trade secret issues (except in passing) have reached the First Circuit in the last ten years. So, a trade secret decision from a court of that eminence is worth noting.

In Incase Inc. v. Timex Corp., Incase (a packaging design and manufacturing company based in Hopedale, Massachusetts), sued Timex after Timex commissioned Incase to design watch packaging for the secure retail display of Timex watches. After Incase designed the cases Timex bought some cases from Incase, but far fewer than had been discussed. Instead, Timex off-shored most of the manufacturing work to a Philippines company, using Incase’s designs and prototypes. The Philippine product was very similar to the Incase design.

An Incase employee stumbled across Timex watches displayed in the Philippine company’s package in a Target store. Miffed, Incase began a long and arduous litigation against Timex. After a trial in federal court in Boston before Judge F. Dennis Saylor, the jury found in favor of Incase on several claims, of which only the trade secret claim is of interest here. Judge Saylor, however, took the trade secret verdict away from Incase following the trial (yes, judges can do that), holding that Incase did not take reasonable steps to preserve the secrecy of their design. To wit, Incase never told Timex the design was confidential and never had Timex sign an NDA.

Clients often ask us to advise them on the tension between showing a confidential idea to a potential investor/customer/distributor who refuses to sign an NDA, and by doing so losing trade secret rights to the idea, or not revealing the idea at all and losing the commercial opportunity. This case shows that the risk of misplaced trust can be significant.

A careful study of this case also shows that seemingly still waters run deep in this area of business practice, and that businesses on either side of the transaction should be guided by competent counsel, lest they get caught in currents similar to those that snared both Incase and Timex.

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