Better Living Through Chemistry (Chemical Trade Secrets, That Is)

By Steve McDaniel, Technology Litigators | December 20, 2012

In this space, we have spent considerable time discussing the laws of trade secrecy.  That’s what us lawyers do – geek out on the law.  But, if you look up under my crisp Armani suit (yeah, like I have one!), what you will find is the rumpled and stained lab jacket of a seasoned chemist with years of bench experience (more than I care to recall).  And, what I really like to “geek out” about is chemistry. So bear with me as I discuss my heart-of-hearts with a legal twist about protecting our chemical inventions.

With the hard-won position that such reviews are of significant value for my trade secret audit clients, I have routinely looked at trade secret cases with the chemist’s perspective.  It turns out that it’s kinda easy to find all sorts of chemical trade secrets cases that give us paint guys an insight into what might be protectable or not.  These are just anecdotal, but hopefully they will stimulate your imagination as to what things you are doing that you might NOT want to share at the American Coatings Show social hour with your buddies from other companies (stick to lying about the fish you are catching or the beer-goggled romantic conquests you seem to recall having had in college).  And remember, as we have discussed in the past, trade secret law is vastly a creature of state law, so the cases from which we pluck these anecdotes come from all over the U.S. map, not necessarily the state in which you operate your chemical business.

The common wisdom is that a mixture of commonly-known chemicals (such as solvents, resins, fillers, etc. in a latex paint) will not qualify as a trade secret.  But, specific proportions, acceptable ranges of concentrations, orders of addition, pot times, etc. might very well be protectable. Get this, more than once courts have held that the use of a commercially-available ingredient, as-is off-the-shelf, but with the label removed and put to a new purpose is a protectable trade secret!  Similarly, although your publicly-available MSDS may clearly state that such and such ingredient is in your product formulation, the fact that you secure that ingredient from a particular supplier that works while other supplier’s products do not work or work as well IS a protectable trade secret.

Formulae that have been found protectable in at least one state court as a trade secret include . . . an edible, apple-based shellac . . . ink formulas . . . sealants for use in nuclear power plants . . . customized resin formulations specific for adhesive sheeting . . . polyurethane foams especially built for lightweight marine craft . . . dye hues and color variations . . . recipes for pre-dipped or coated electrical insulation gloves . . . “pearlizing” glass beads . . . to name a few.  What I glean more as a chemist than a lawyer from such cases is that, while the polymeric coating I am using may be well-known in the industry and perhaps unpatentable, my tweaks of such formulas to fit the coating into a particular application likely ARE protectable trade secrets. And, as a lawyer, I know that such assets can form the basis of very lucrative licensing agreements struck with customers and competitors that DO NOT KNOW the nuances that are used.

Processes for formulating our witches’ brews that have been found to qualify as trade secrets include . . . processes for making gas-permeable polymers for soft contact lenses . . . processes for packaging resulting in longer shelf-life for chemical products . . .  generally, processes at least as varied and as numerous as the products we sell.  The process has to be substantive, of course, and can’t just be “emphasizing care in mixing well-known ingredients.”  But, it doesn’t have to rise to the requirements for novelty and unobviousness needed to be patentable either.  So, while merely cautioning to “mix carefully” may not hit the mark, specifically listing shear maxima and times of mixing might very well do so. Processes concerning applying a known coating to a particular surface such as iron pentacarbonyl have been held to be protectable, as have . . . manufacturing fiberglass using a particular type of combustion chamber with specific types of air jets and air rings . . . how to build epoxy rods reinforced with fiberglass for handling hot electrical wires . . . using pigment-carrying “vehicles” to enhance color quality in latex paint . . . more environmentally-sound manufacturing of coated paper . . . dust mitigation techniques peculiar to a particular toxic ingredient in a manufacturing process . . . high-pressure processes for making polyethylene where the trade secrets lay in the minor pressure variances (in this case, eight-ninths of the process was admittedly publicly known) . . . a pressure process for expanding polystyrene to maximize resiliency/pliability/shock absorbence . . . processes for recovering and re-using catalysts and reactants from a manufacturing process.  As a chemist, the take home lessons for me include looking outside my actual formulation to the processes I use for brand new (to me and my clients) trade secret assets.  As a lawyer, I can tell you that while “process” and “methods” patents typically have much less value than “composition of matter” patents, it is not uncommon for the exact opposite hierarchy to be true for trade secret processes.  In fact, since processes are usually as much art as they are science, these techniques are routinely the quintessential trade secret surrounding a coating.

Machines and other tools that we use to make our paints and coatings, even when they are only slightly modified from the store-bought version can be protected as trade secrets, such as . . . off-the-shelf computer software used to automate a process that has been modified to the particular process . . . increasing the precision of certain monitoring equipment that leads to superior products . . . the design of automatic or even semi-automatic spray-painting equipment . . . heck, even processes and methods one uses in filing a patent application on your formulation can rise to protectabilty as a trade secret (but, proceed with caution, see iPaint, Coatings World April 2012, “Patent Pendency, A Good Reason to Cherish Your Trade Secrets”).  Certainly, your laboratory notebooks, your production run logs, etc. are your trade secrets.  But, so may be your Standard Laboratory Operating Procedures (even if they are only your hand-picked collections of ASTM methods), quality control manuals, regulatory compliance manuals, etc.  And, here’s one that my clients usually overlook, but one that courts have routinely upheld as almost ideal trade secrets – maintenance and repair methods and logs. 

You need to know that courts have routinely held that, despite sale or other commercialization steps, secrets in a product like a coating itself remain trade secrets.  This is good.  What we all appreciate only too well, and few outside our industry know, is that coatings are typically very concentrated suspensions of solids.  And, we know and many others don’t, that even minor alterations in the characteristics of that suspension can result in cataclysmic failure.  And, we know that once the film formation process starts, many of the volatile components depart the coated surface never to be seen (or detected) again – despite the fact that without them, the film would not have formed and the product would have failed.  So, as chemists we actually can enhance the trade secret protection status of our products with this knowledge.  We can maintain as a trade secret our “negative” data where we have either purposefully caused our formulations to fail or simply found them to fail in the normal laboratory process.

So, dig deep again and identify even more of your corporate assets heretofore un- or under-appreciated.  Search for them where they lie cloaked and unseen, in the intimacy of the chemistry itself.  Look for something that in many cases is unrecognizable but to a few chemistry nerds like us, and certainly not necessarily in the common knowledge surrounding our formulations.  Do your trade secret audits with Sam Cooke’s famous lyrics in “Wonderful World,” in mind. “Don’t know much about history, don’t know much biology, don’t know much about a science book, don’t know much about the French I took, but I do know that I love you (my beloved trade secrets), and I know that if you love me too, what a wonderful world this would be.”  Admit it.  You’re gonna be whistling this classic all day long. You’re welcome. 

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