Korrent Equipment Co. and Troy Machine Co. design and sell similar types of specialized industrial machinery. In particular, in 1992, Korrent designed and developed an industrial polisher. Two of the engineers working on the project were Chris Cooke and Lee Schultz. Both were involved in making detailed drawings of Korrent’s polisher. Only a small group of engineers were involved in the project and knew how to make the polisher. All were told, in writing and orally, that the design and development of the polisher was a trade secret belonging to Korrent. All documentation relating to the project was kept in a secured area to which access was limited to those with a demonstrated need to know.
Korrent’s polisher was an immediate success in the market. Korrent did not seek to patent the invention, but rather treated it as a trade secret. Troy immediately purchased units of the polisher, and took them apart to study, hoping to reverse engineer the polisher. It was unsuccessful in doing so, however.
In December, 2008, Cooke left her employment with Korrent and went to work for Troy. The next month, Shultz also left Korrent for Troy. Both employees were recruited by Troy. At the time that they were hired, their supervisor at Troy was aware that both had worked for Korrent and had worked on Korrent’s polisher design. The two employees were not told by Troy to misappropriate Korrent’s design, but neither were they warned against such behavior.
The two began work on a polisher for Troy and by May, 2009, Cooke had completed a set of drawings for Troy. Within a month, Troy was displaying a prototype of its polisher at a trade convention. Korrent immediately accused Troy of copying its polisher and misappropriating its trade secret, and indicated its belief that its former employees, Cooke and Schultz, were responsible for the misappropriation. Troy then inquired of the employees whether they had independently created their drawings and the polisher for Troy; when told orally that the employees had, Troy did not pursue the topic further. Despite Korrent’s repeated communications on this topic, Troy went ahead with a launch of its polisher in July, 2009.
Korrent has filed suit against Troy for trade secret misappropriation. Troy has defended by stating to the extent that any misappropriation might have occurred, it was engaged in by the individuals Cooke and Schultz), not Troy, and so Troy is not liable.
a.Is Troy’s argument correct?
b.What might each party have done to minimize the likelihood of this type of dispute arising?

Question

Korrent Equipment Co. and Troy Machine Co. design and sell similar types of specialized industrial machinery. In particular, in 1992, Korrent designed and developed an industrial polisher. Two of the engineers working on the project were Chris Cooke and Lee Schultz. Both were involved in making detailed drawings of Korrent’s polisher.  Only a small group of engineers were involved in the project and knew how to make the polisher. All were told, in writing and orally, that the design and development of the polisher was a trade secret belonging to Korrent. All documentation relating to the project was kept in a secured area to which access was limited to those with a demonstrated need to know. 
Korrent’s polisher was an immediate success in the market. Korrent did not seek to patent the invention, but rather treated it as a trade secret. Troy immediately purchased units of the polisher, and took them apart to study, hoping to reverse engineer the polisher. It was unsuccessful in doing so, however.  
In December, 2008, Cooke left her employment with Korrent and went to work for Troy. The next month, Shultz also left Korrent for Troy. Both employees were recruited by Troy.  At the time that they were hired, their supervisor at Troy was aware that both had worked for Korrent and had worked on Korrent’s polisher design. The two employees were not told by Troy to misappropriate Korrent’s design, but neither were they warned against such behavior. 
The two began work on a polisher for Troy and by May, 2009, Cooke had completed a set of drawings for Troy. Within a month, Troy was displaying a prototype of its polisher at a trade convention. Korrent immediately accused Troy of copying its polisher and misappropriating its trade secret, and indicated its belief that its former employees, Cooke and Schultz, were responsible for the misappropriation. Troy then inquired of the employees whether they had independently created their drawings and the polisher for Troy; when told orally that the employees had, Troy did not pursue the topic further. Despite Korrent’s repeated communications on this topic, Troy went ahead with a launch of its polisher in July, 2009.  
Korrent has filed suit against Troy for trade secret misappropriation. Troy has defended by stating to the extent that any misappropriation might have occurred, it was engaged in by the individuals Cooke and Schultz), not Troy, and so Troy is not liable. 
a.Is Troy’s argument correct? 
b.What might each party have done to minimize the likelihood of this type of dispute arising?

Quizplus · Accepted Answer

The Answer of Korrent Equipment Co. and Troy Machine Co. design and sell similar types of specialized industrial machinery. In particular, in 1992, Korrent designed and developed an industrial polisher. Two of the engineers working on the project were Chris Cooke and Lee Schultz. Both were involved in making detailed drawings of Korrent’s polisher.  Only a small group of engineers were involved in the project and knew how to make the polisher. All were told, in writing and orally, that the design and development of the polisher was a trade secret belonging to Korrent. All documentation relating to the project was kept in a secured area to which access was limited to those with a demonstrated need to know. 
Korrent’s polisher was an immediate success in the market. Korrent did not seek to patent the invention, but rather treated it as a trade secret. Troy immediately purchased units of the polisher, and took them apart to study, hoping to reverse engineer the polisher. It was unsuccessful in doing so, however.  
In December, 2008, Cooke left her employment with Korrent and went to work for Troy. The next month, Shultz also left Korrent for Troy. Both employees were recruited by Troy.  At the time that they were hired, their supervisor at Troy was aware that both had worked for Korrent and had worked on Korrent’s polisher design. The two employees were not told by Troy to misappropriate Korrent’s design, but neither were they warned against such behavior. 
The two began work on a polisher for Troy and by May, 2009, Cooke had completed a set of drawings for Troy. Within a month, Troy was displaying a prototype of its polisher at a trade convention. Korrent immediately accused Troy of copying its polisher and misappropriating its trade secret, and indicated its belief that its former employees, Cooke and Schultz, were responsible for the misappropriation. Troy then inquired of the employees whether they had independently created their drawings and the polisher for Troy; when told orally that the employees had, Troy did not pursue the topic further. Despite Korrent’s repeated communications on this topic, Troy went ahead with a launch of its polisher in July, 2009.  
Korrent has filed suit against Troy for trade secret misappropriation. Troy has defended by stating to the extent that any misappropriation might have occurred, it was engaged in by the individuals Cooke and Schultz), not Troy, and so Troy is not liable. 
a.Is Troy’s argument correct? 
b.What might each party have done to minimize the likelihood of this type of dispute arising?