Kadant, Inc. v. Seeley Machine, Inc

Facts

Corlew was employed at Kadant, Inc. (Plaintiff) in its AES division. The products made by Plaintiff were used in the pulp and papermaking industry. At AES, Corlew had access to both Plaintiff’s design specifications for its products, and its entire computer system. Through his employment with AES, Corlew was subject to a signed confidentiality agreement, in which he agreed not to disclose or use to his benefit any confidential information, including information about AES customers. Plaintiff eventually terminated Corlew’s employment, and then Corlew went to work for Seeley Machine, Inc. (Defendant), one of Plaintiff’s competitors. At Seeley (D), Corlew was responsible for developing and marketing a new line of Seeley (Defendant) products for sale to the pulp and papermaking industry. This new line came out soon after Defendant employed Corlew. Plaintiff brought suit in federal district court, alleging, inter alia, that Corlew and Seeley (Defendant) had misappropriated its trade secrets. Plaintiff claimed the only way Defendant could have developed and placed for sale this new line of products so quickly was by Corlew’s theft of AES’s trade secrets including its design specifications and customer databases. Defendant claimed that it had reverse engineered the products from existing products that were freely available in the public domain and unprotected by published patent applications, in-force patents, or trade secrets. Plaintiff argued that it was not possible for Defendant to have reverse engineered its products, claiming that reverse engineering is time consuming, expensive, and requires technical skill. Specifically, Plaintiff claimed that, using Defendant’s own expert as a frame of reference, it would take Defendant 1.7 years to reverse engineer all of Plaintiff’s products. However, Defendant maintained that only a small fraction of Kadant’s products were reverse engineered.