document provided to J&J by [the competitor]." Defs.' Br. at 14. Merckle disagrees claiming that the protocol EPO-05 is significantly more detailed. See PSUF P D.36.
D. Evidence of Competitive Use
Ortho maintains that the record is devoid of any evidence of competitive use of Merckle's alleged trade secrets. Ortho highlights that Merckle has deposed ten present and former employees of defendants or their affiliates and contends that these witnesses "would necessarily have been knowledgeable about any commercial use made by defendants of Merckle's alleged trade secrets." Defs.' Br. at 25. Ortho also insists that it had no reason to misappropriate Merckle's alleged trade secrets because, inter alia, the PRI report indicated that Merckle's product was inferior and the Merckle product derived from BHK cells, which are fundamentally different from the CHO cells used by Ortho. See id. at 25-26.
Merckle strongly refutes Ortho's claim that no evidence of competitive use exists in the record and maintains that a reasonable jury could infer that Ortho used Merckle's trade secrets to the detriment of Merckle. Merckle first contends that Ortho's use of the alleged trade secrets in the patent infringement litigation in Germany constitutes detrimental use. Ortho counters this allegation by claiming that its use of Merckle's alleged trade secrets in the patent litigation was privileged.
Merckle also posits that Ortho reformulated its product to be more like Merckle's after misappropriating Merckle's product. See PSUF P F.2; Pl.'s Br. at 25-26; see generally Sewing Decl. Indeed, it is undisputed that Ortho altered one aspect of the formulation of its rHuEPO after the date on which it obtained samples of Merckle's rHuEPO. See Defs.' Reply Br. at 6. Ortho, however, insists that the change was rooted in publicly available knowledge and that it was the result of a well-documented, two year long laboratory study that presumably predated the receipt of the Merckle product information. See id. at 6-8; see generally Corbo Decl.
Finally, Merckle opines that Ortho's commission and circulation of the PRI and SRI reports give rise to an inference of detrimental use by Ortho. See Pl.'s Br. at 25-26.
A. Summary Judgment Standard
Summary judgment shall be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The party moving for summary judgement has the burden of demonstrating that there is no genuine issue as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). In making this determination, the Court must draw all reasonable inferences in favor of the non-movant. See National State Bank v. Federal Reserve Bank of New York, 979 F.2d 1579, 1581 (3d Cir. 1992).
If the moving party has sustained its burden, the burden shifts to the non-moving party to demonstrate to the Court that sufficient evidence exists from which a jury might return a verdict in its favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); see also J.E. Mamiye & Sons, Inc. v. Fidelity Bank, 813 F.2d 610, 618 (3rd Cir. 1987) (Becker, J., concurring). The non-movant may not "rest upon mere allegations, general denials," or "vague statements." Quiroga v. Hasbro, Inc., 934 F.2d 497, 500 (3d Cir.), cert. denied, 502 U.S. 940, 116 L. Ed. 2d 327, 112 S. Ct. 376 (1991); Schoch v. First Fidelity Bancorp., 912 F.2d 654, 657 (3d Cir. 1990) ("unsupported allegations in [a non-movant's] memorandum and pleadings are insufficient to repel summary judgment"); see Fed. R. Civ. P. 56(e). If the non-movant's evidence is merely "colorable" or "not significantly probative," summary judgment may be granted. Anderson, 477 U.S. at 249-50. The summary judgment procedure enables a party "who believes there is no genuine dispute as to a specific fact essential to the other side's case to demand at least one sworn averment of that [specific] fact before the lengthy process of litigation continues." Lujan v. National Wildlife Fed'n, 497 U.S. 871, 888-89, 111 L. Ed. 2d 695, 110 S. Ct. 3177 (1990).
The Court's function at the summary judgment stage of litigation is to determine whether there is a genuine issue for trial. See Anderson, 477 U.S. at 249. Absent evidence sufficient to permit a jury to return a verdict for the non-moving party, there is no issue for trial, and summary judgment must be granted. See id.
B. Misappropriation of Trade Secrets
"A trade secret claim in the federal courts is governed not by federal common law but by state law." Rohm and Haas Co. v. Adco Chem. Co., 689 F.2d 424, 429 (3d Cir. 1982). The parties have agreed, for purposes of this motion, that New Jersey law applies. See Defs.' Br. at 28 n.4.
New Jersey law establishes five basic elements of a claim of trade secret misappropriation: "(1) the existence of a trade secret; (2) communicated in confidence by the plaintiff to the employee; (3) disclosed by the employee in breach of that confidence; (4) acquired by the competitor with knowledge of the breach of confidence, and (5) used by the competitor to the detriment of the plaintiff." Rohm and Haas, 689 F.2d at 429-30 (citations omitted). New Jersey law also requires "that the plaintiff show that he took precautions to maintain the secrecy of the trade secret." Id. (citing Sun Dial Corp. v. Rideout, 16 N.J. 252, 260, 108 A.2d 442 (1954) ("Sun Dial ")). Indeed, adequate precautions to protect the secrecy of information are indispensable to a plaintiff's claim that a trade secret exists and is entitled to protection. See 1 Roger Milgrim, Trade Secrets § 1.03 at 1-86 (1994) ("Trade Secrets "). Merckle will bear the burden of proving these elements at trial. See Schmidinger v. Welsh, 243 F. Supp. 852, 864 (D.N.J. 1965), aff'd in relevant part, 383 F.2d 455 (3d Cir. 1967), cert. denied, 390 U.S. 946, 19 L. Ed. 2d 1134, 88 S. Ct. 1031, argues that summary judgment is appropriate on Merckle's misappropriation of trade secrets claim because: (1) Merckle's alleged trade secrets were not secret; (2) Merckle failed to adequately protect its alleged trade secrets; and (3) Ortho's use of the alleged trade secrets was privileged and, therefore, not actionable.
1. Existence of Trade Secret; Adequacy of Protection
In any trade secret case, the Court must first determine whether there exists, in fact, a trade secret. See Continental Data Sys., Inc. v. Exxon Corp., 638 F. Supp. 432, 442 (E.D. Pa. 1986); Sun Dial Corp. v. Rideout, 29 N.J. Super. 361, 365, 102 A.2d 90 (App. Div.) ("Sun Dial Corp. "), aff'd, 16 N.J. 252, 108 A.2d 442 (1954). According to the Restatement of Torts section 757, comment b:
A trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound [or] a process of manufacturing, treating or preserving materials . . . .
See also Sun Dial, 16 N.J. at 257. Neither party contests that the type of information at issue here (i.e., the process for making rHuEPO) is worthy of trade secret protection.
The subject matter of a particular trade secret, however, must be secret. See Restatement of Torts § 757, cmt. b (1939). With respect to secrecy, the Restatement of Torts instructs:
Matters of public knowledge or of general knowledge in an industry cannot be appropriated by one as his secret. Matters which are completely disclosed by the goods which one markets cannot be his secret. Substantially, a trade secret is known only in the particular business in which it is used. It is not requisite that only the proprietor of the business know it. He may, without losing his protection, communicate it to employees involved it its use. He may likewise communicate it to others pledged to secrecy. Others may also know of it independently, as, for example, when they have discovered the process or formula by independent invention and are keeping it secret. Nevertheless, a substantial element of secrecy must exist, so that, except by the use of improper means, there would be difficulty in acquiring the information.
Id. "Secrecy is essentially a question of fact," 1 Trade Secrets § 1.03 at 1-87 to 1-88, and the parties here vigorously dispute whether the process by which Merckle produced its rHuEPO is secret.
After a thorough review of the parties' voluminous written submissions, the Court is unable to conclude at this time that Merckle's alleged trade secrets were published to the extent that secrecy was destroyed. Among the issues of fact to be resolved at trial that bear upon the secrecy of Merckle's purported trade secrets include: (1) whether Merckle's packaging of its rHuEPO, and the handling of such packaging, disclosed the formulation of Merckle's rHuEPO to the public; (2) whether a product (i.e., Elanex's EPO) that was identical to Merckle's rHuEPO was publicly available; and (3) whether Merckle's clinical rHuEPO was discussed in publicly available articles and the extent to which the secrecy of Merckle's rHuEPO was disclosed by the publication of such articles. The resolution of these questions will rest largely upon the credibility of witnesses, and, therefore, the Court is unable to grant summary judgment as to whether Merckle's alleged trade secrets were public knowledge.
Ortho also claims that Merckle failed to adequately protect its alleged trade secrets; consequently, Ortho insists that Merckle cannot assert a claim of misappropriation and summary judgment is justified.
Faced with this claim in the context of a summary judgment motion, the Court must review the record in the light most favorable to Merckle, the non-movant, and determine whether a reasonable jury could conclude that Merckle took reasonable measures to protect the secrecy of its information. See Anderson, 477 U.S. at 249; Shamrock Tech., Inc. v. Medical Sterilization, Inc., 808 F. Supp. 932, 937 (E.D.N.Y. 1992) (applying New Jersey substantive law), aff'd, 6 F.3d 788 (Fed. Cir. 1993); Sun Dial Corp., 29 N.J. Super. at 371 ("We conclude, therefore, that plaintiff took reasonable measures to maintain the secrecy of its process, and that the necessary element of secrecy exists in this case."). Notably, "the secrecy in which a purported trade secret is shrouded need not be absolute." Anaconda Co. v. Metric Tool & Die Co., 485 F. Supp. 410, 422 (E.D. Pa. 1980) (Becker, J.) (citation omitted); see also Sun Dial Corp., 29 N.J. Super. at 368 ("Absolute secrecy is not required, but rather that qualified secrecy which arises from mutual understanding and is required alike by good faith and good morals.").
The Court concludes that the present record evinces genuine issues of material fact that preclude granting summary judgment in favor of Ortho as to the precautions taken by Merckle to protect the secrecy of its alleged trade secrets. As exhibited above, the factual record in this case is complex and heatedly contested; this is particularly true with respect to the parties' assertions as to the precautions, or lack thereof, taken by Merckle to keep its proprietary information out of the public domain. See, e.g., supra §§ I.C.2, 4-5; see generally DSUF and PSUF.
For example, while Ortho avers that Merckle's failure to obtain confidentiality agreements from all hospital and clinical personnel who administered product trials eradicates Merckle's claim of secrecy, Merckle argues otherwise, claiming that confidentiality protections were in place via (1) confidentiality agreements and protocols signed by lead clinicians, (2) the European GCP guidelines and (3) German drug laws. Drawing all inferences in favor of Merckle, the Court concludes that a reasonable jury could conclude that these measures adequately protected the confidentiality of Merckle's rHuEPO and trial protocols. See Shamrock Tech. v. Medical Sterizilation, 808 F. Supp. 932 at 937-38 ("Nor is the failure of [the trade secret owner] to require secrecy or confidentiality agreements to maintenance people and visitors a failure to take reasonable precautions to maintain secrecy."); Continental Data Sys., Inc., 638 F. Supp. at 443 (citing company rules requiring assurances of confidential treatment from prospective purchasers as evidence of "significant precautions" taken by the trade secret owner); Anaconda Co., 485 F. Supp. at 422 (finding secrecy precautions reasonable, albeit not absolute, where employees were merely aware of the confidential nature of the machinery at issue).
The Court notes that no one factor is dispositive of whether Merckle took reasonable precautions to protect its purported trade secrets. See, e.g., Geritrex Corp. v. Dermarite Indus., LLC, 910 F. Supp. 955, 962 (S.D.N.Y. 1996) (finding plaintiff's efforts to secure its facility indeterminate of secrecy in light of the "overwhelming indications" that plaintiff otherwise failed to protect the confidentiality of its product information). The test is one of reasonable, not absolute, precautions, and the jury will be charged with considering the entire record to determine whether Merckle's alleged trade secrets were, in fact, secret.
In the Court's view, the record certainly indicates something less than absolute secrecy. As evidenced by the parties' conflicting factual accounts, however, the resolution of several of the above issues will hinge on factual issues properly resolved by the factfinder. Therefore, based on the record before it, the Court cannot conclude that there exist no genuine issues of fact with respect to the secrecy of Merckle's rHuEPO.
2. Disclosure and Use of Alleged Trade Secrets by Ortho
As set forth above, the fifth required element in a claim of trade secret misappropriation is use of the trade secret by the competitor to the detriment of the plaintiff. See Rohm and Haas, 689 F.2d at 430. The parties have cited, and the Court has found, scant case law discussing what constitutes detrimental use; in the vast majority of cases, the defendant's use of the trade secret is obvious. See, e.g., id. at 431 ("There is no dispute that defendants used the [trade secret] to compete against plaintiff by putting on the market two products touted as duplicates of plaintiff's products."). The use primarily at issue here -- Ortho's use of the information in connection with the commercial litigation in Germany -- is unique and cannot easily be measured against available precedent.
Ortho maintains that it used Merckle's purported trade secrets only for the purpose of litigating its patent infringement claims against Merckle. Ortho urges the Court to hold that "the use of trade secrets for evidentiary purposes in litigation is not a 'detrimental use' that is actionable at the suit of the person against whom the secrets are used." Defs.' Br. at 28. Ortho argues that this holding is justified "because public policy encourages the exposure of possible wrongdoing." Id. at 29 (citing McGrane v. Reader's Digest Ass'n, Inc., 822 F. Supp. 1044 (S.D.N.Y. 1993) and Lachman v. Sperry-Sun Well Surveying Co., 457 F.2d 850 (10th Cir. 1972)); see also Defs.' Reply Br. at 3 ("Patent infringement and willful contempt of court constitute wrongdoing of sufficient public concern as to implicate the privilege.").
Ortho roots its claim of privilege in the discussion of privileged use and disclosure found in the Restatement of Torts section 757, comment d:
A privilege to disclose or use another's trade secret may arise from the other's consent or from other conduct on his part by which he is estopped from complaining. A privilege to disclose may also be given by the law, independently of the other's consent, in order to promote some public interest.
See Defs.' Br. at 28; see also System Operations, Inc. v. Scientific Games Dev. Corp., 425 F. Supp. 130, 136 (D.N.J. 1977) (stating in dictum that "disclosure of trade secret information may itself be privileged").
Ortho also claims that the concept of privilege is recognized in the Restatement (Third) of Unfair Competition section 40, comment c. See Defs.' Reply Br. at 2. Section 40 discusses privileged disclosure:
The unauthorized disclosure of a trade secret ordinarily occurs as part of an attempt to exploit the commercial value of the secret through use in competition with the trade secret owner or through a sale of the information to other potential users. . . . If the trade secret is disclosed primarily for the purpose of causing harm to the trade secret owner, a court may properly conclude that the actor is subject to liability despite an absence of commercial exploitation. . . . In other circumstances, however, the disclosure of another's trade secret for purposes other than commercial exploitation may implicate . . . another significant public interest. . . . The existence of a privilege to disclose another's trade secret depends upon the circumstances of the particular case, including the nature of the information, the purpose of the disclosure, and the means by which the actor acquired the information. A privilege is likely to be recognized, for example, in connection with the disclosure of information that is relevant to public health or safety, or to the commission of a crime or tort, or to other matters of substantial public concern.