Metallurgical Industries, Inc. v. Fourtek, Inc., 790 F.2d 1195 (7th Cir 1986)
Feb 03, 2015 by Vahid Dejwakh

Facts and Procedural History

a. Subcontractors (Fourtek) of Metallurgical use Metallurgical’s trade secret regarding how to efficiently recycle tungsten carbide
b. State law applies, since diversity
c. Industry expert testifies, saying the process is not known in the industry
d. Defendants say that the process was publicly available, and that Metallurgical didn’t take precautions to keep it secret

Issue(s)

Did owners of the trade secret take enough precautions to keep it secret?

Holding and Dissent(s)

Reversed in favor of Metallurgical
i. Metallurgical took enough steps to keep the secret by hiding the location of the furnaces and only allowing access to authorized employees, requiring non-disclosure agreements to anyone who learns about the T.S.
ii. Subjective belief in the worth of the secret, as demonstrated by efforts to protect the secret, is sufficient to show the secret is real
iii. Secrecy need not be absolute, only sufficient to prevent competitors from easily discovering the trade secret → the limited disclosure to the two manufacturing companies, even if outside of a confidential agreement, does not render the secret public because of the purpose of the relationship being in furtherance of the plaintiff’s economic interests
1. A confidential relationship would have been better, but its absence is not dispositive
iv. The secret process added economic value, and Metallurgical had significant costs to develop the T.S.

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