Specialized Technology Resources (STR) is a Connecticut-based company that makes plastic sheeting material for encapsulating solar cells.
In the 1990′s, STR engaged in about five years of intensive R&D to develop a proprietary method to produce a “low-shrink” ethylene vinyl acetate (EVA), which avoided shrinkage of the resulting encapsulant.
STR began manufacturing and selling its low shrink EVA in late 1996 and subsequently grew to hold about 25% of the global market for EVA encapsulants.
James P. Galica was the director of STR’s materials science division during the low shrink EVA R&D project and oversaw the project team. Galica left STR in 2005 and joined JPS Elastomerics in 2006.
Shortly thereafter, JPS began producing and selling an encapsulant product using a method substantially identical to the one developed by STR.
STR sued JPS and Galica in state court in Massachusetts for breach of Galica’s employment contract, misappropriation of trade secrets, and violation of the state’s unfair trade practices law.
The trial judge, contrary to the jury’s findings, held that JPS and Galica misappropriated STR’s trade secret and thereby engaged in unfair trade practices. The trial court enjoined JPS from producing low shrink EVA for five years, and the defendants appealed the decision.
Recently, a Massachusetts Appeals Court affirmed (JPS_Decision) the trial judge’s holding of liability on trade secret misappropriation and violation of the Massachusetts unfair trade practices statute.
The appeals court agreed the evidence demonstrated that it was Galica’s knowledge of the causes of shrinkage, gained from STR’s trade secret method, which yielded the low shrinkage properties in JPS’s process:
Prior to Galica’s employment by JPS, JPS did not manufacture or produce EVA by any means. Prior to development of its trade secret method, STR produced EVA by contentional methods, but the resulting product did not have low shrink characteristics. The trial judge found that, under Galica’s supervision, JPS was able to modify its production processes in a manner which utilized [STR's] discovery about the causes of shrinkage, but which employed adjustments to the production sequences different from those incorporated in the particular method which constituted STR’s trade secret method.
Thus, the 5-year injunction was justified:
Because the method developed by JPS derived from specialized knowledge brought by Galica from STR to JPS, and particularly because the evidence suggested that JPS would not have been able to develop such a method independently, the judge’s order enjoining JPS from production of low shrink EVA by any means for a period of five years (a period equivalent to the time STR spent in development of its trade secret method) was justified.