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04-1234

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UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT ________________________________________________________________

MARKLEYLABS, INC., Defendant-Cross Appellant, v. SMILEYVISION, INC., Plaintiff-Appellant. ________________________________________________________________

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALIFORNIA IN No. 2332.

________________________________________________________________

BRIEF OF DEFENDANT-CROSS APPELLANT MARKLEYLABS, INC.

JAMES LUND PAUL SHERBURNE LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123 (651) 555-4321 Attorneys for Defendant-Cross Appellant February 7, 2005

CERTIFICATE OF INTEREST

UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

SmileyVision, Inc. v. MarkleyLabs, Inc.

No. 04-1234

Counsel for the defendant-cross appellant MarkleyLabs, Inc., certify the following: 1. The full name of every party or amicus represented by me is: MarkleyLabs, Inc. 2. The name of the real party in interest (if the party named in the caption is not the real party in interest) represented by me is: MarkleyLabs, Inc. 3. All parent corporations and any publicly held companies that own 10 percent or more of the stock of the party or amicus curiae represented by me are: None 4. The names of all law firms and the partners or associates that appeared for the party or amicus now represented by me in the trial court or expected to appear in this court are: February 7, 2005 _____________________________ James Lund LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123

_____________________________ Paul Sherburne LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123

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TABLE OF CONTENTS

CERTIFICATE OF INTEREST ......................................ii TABLE OF CONTENTS ...........................................iii TABLE OF AUTHORITIES .........................................vi STATEMENT OF RELATED CASES ....................................x JURISDICTIONAL STATEMENT ......................................1 ISSUES ........................................................1 STATEMENT OF THE CASE .........................................2 FACTS .........................................................2 SUMMARY OF THE ARGUMENT .......................................6 ARGUMENT ......................................................7 I. The district court properly construed claim 2 of

Smiley’s ‘321 patent as being limited to “proteins which are inherently adhesive,” which are not literally

infringed by Markley’s “lock and key” proteins............7 A. The district court’s patent claim construction is

a matter of law, subject to de novo review on appeal...............................................9

B. The district court correctly looked first to the

plain meaning of the claim language, viewed in light of the intrinsic evidence provided by the written specification and prosecution history, in defining “adhesive proteins” to exclude

“lock and key” proteins..............................9 C. If this court considers dictionary definitions to

define “adhesive proteins” as “sticky proteins derived from vegetable or animal matter,” Markley’s non-sticky, synthetic “lock and key” proteins remain outside the literal scope of

claim 2.............................................11

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II. The district court properly held claim 2 of the‘321 patent invalid under 35 U.S.C. § 102 in view of the

fully-enabled anticipatory JME reference.................12

A. The district court’s legal determination of patent invalidity is reviewed de novo, while the underlying fact determinations are reviewed for

“clear error.”......................................13 B. The district court properly held claim 2 of the

‘321 patent invalid in view of the advanced state of the art, as the anticipatory JME reference enables one skilled in the art to make and use the claimed nano-pump without undue

experimentation.....................................13 C. Alternatively, if the district court erred in

invalidating the ‘321 patent as anticipated by the JME reference, the patent is nevertheless invalid

under 35 U.S.C. § 112 ¶ 1............................14 D. Public policy also supports invalidation of the

‘321 patent in view of Smiley’s attempt to improperly extend its exclusive right to make

the nano-pump beyond the patent term................16

III. The District court erred as a matter of law in holding that Smiley’s knowledge of Drexlerian robot construction by means of SCFD is protectable as a trade

secret...................................................17

A. The Federal Circuit reviews the district court’s determination of state law de novo..................17 B. Knowledge of Drexlerian robot construction by

means of SCFD was readily ascertainable, and thus cannot qualify as a trade secret....................19 C. Smiley did not take reasonable measures under the

circumstances to maintain the secrecy of its knowledge of Drexlerian robot construction, which

thus does not qualify as a trade secret.............19 D. The district court’s holding of trade secret

protection for Drexlerian robot technology undermines the patent system because the information is necessary to practice Smiley’s ‘321

patent..............................................22 IV. The district court’s finding that Markley

misappropriated a trade secret from Smiley was clearly erroneous in view of the evidence on record..............23

iv

A. The district court’s holding of misappropriation

is clearly erroneous because Markley never used Smiley’s trade secret...............................24 B. Gross’ disclosure of a Drexlerian robot

construction method was not improper conduct on the part of Markley.................................25 C. Markley did not know or have reason to know that

Gross owed a duty to Smiley not to disclose information relating to Drexlerian robot

construction........................................26 D. A ruling that Markley’s and Gross’ conduct

constituted trade secret misappropriation would hinder the development of technology, undermining

a primary policy behind trade secret laws...........26 CONCLUSIONS AND RELIEF SOUGHT ................................29 PROOF OF SERVICE..............................................30 CERTIFICATE OF COMPLIANCE.....................................31 JOINT APPENDIX................................................32

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TABLE OF AUTHORITIES CASES Athletic Alternatives, Inc. v. Prince Mfg., Inc., 73 F.3d 1573, 1581 (Fed. Cir. 1996)................................9 Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 161 (1989)...........................................23 Burten v. Milton Bradley Co., 763 F.2d 461, 467 (1st Cir. 1985).....................................................28 Carboline Co. v. Lebeck, 990 F. Supp. 762, 767-68 (E.D. Mo. 1997).....................................................20 Clearstream Wastewater Sys., Inc. v. Hydro-Action, Inc., 206 F.3d 1440, 1444 (Fed. Cir. 2000)................................8 Corning Glass Works v. Sumitomo Elec. U.S.A., Inc., 868 F.2d 1251, 1259 (Fed. Cir. 1989).....................................8 CVD, Inc. v. Raytheon Co., 769 F.2d 842, 852 (1st Cir. 1985) cert. denied 475 U.S. 1016 (1986).........................27 Cybor Corp. v. FAS Tech., Inc., 138 F.3d 1448, 1454 (Fed. Cir. 1998) en banc.........................................9 Defiance Button Mach. Co. v. C & C Metal Prod. Corp., 759 F.2d 1053, 1063 (2d Cir. 1985)............................24 Del Monte Fresh Produce Co. v. Dole Food Co., 148 F. Supp. 2d 1326, 1339 (S.D. Fla. 2001)............................25 E.I. DuPont De Nemours & Co., Inc. v. Christopher, 431 F.2d 1012, 1014 (5th Cir. 1970)............................17, 25 Electro-Craft Corp. v. Controlled Motion, Inc., 332 N.W.2d 890, 901-02 (Minn. 1983)..................................20 Enzo Biochem, Inc. v. Calgene, Inc., 188 F.3d 1362, 1369-70 (Fed. Cir. 1999)..........................................13 Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938)..................17 Ferroline Corp. v. Gen. Aniline & Film Corp., 207 F.2d 912, 923 (7th Cir. 1953) cert. denied 347 U.S. 953 (1954)......25 Fields v. Conover, 443 F.2d 1386, 1391, 58 CCPA 1366, 1372 (1971)....................................................10

vi

Forest Labs., v. Pillsbury Co., 452 F.2d 621, 623 (7th Cir. 1971).....................................................17 Hupp v. Siroflex of America, Inc., 122 F.3d 1456, 1460 (Fed. Cir. 1997)................................................14 In re Barker, 559 F.2d 588, 591 (CCPA 1977)....................10 In re Donohue, 766 F.2d 531, 533 (Fed. Cir. 1985)..............12 In re Glass, 492 F.2d 1228, 1232 (CCPA 1974)...................15 In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1325 (Fed. Cir. 2000).....................................16 In re LeGrice, 301 F.2d 929, 939 (1962)........................12 Ingersoll-Rand Co. v. Ciavatta, 110 N.J. 609, 638 (N.J. 1988).....................................................28 Jotan, Inc. v. Barnett, 229 B.R. 218, 230-32 (Bankr. M.D. Fla. 1998)................................................21 Kennedy Bldg. Assocs. v. Viacom, Inc., 375 F.3d 731, 738 (8th Cir. 2004)...........................................17 Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 486-87 (U.S. 1974).............................................21, 22, 25 Kimberly-Clark Corp. v. Johnson & Johnson, 745 F.2d 1437, 1454 (Fed. Cir. 1984).....................................14 Maxwell v. Baker, Inc., 86 F.3d 1098 (Fed. Cir. 1996)..........11 Microbiological Research Corp. v. Muna, 625 P.2d 690, 697 (Utah 1981)...............................................27 Renishaw PLC v. Marposs Societa' per Azioni, 158 F.3d 1243, 1249 (Fed. Cir. 1998).....................................10 Salve Regina College v. Russell, 499 U.S. 225, 231 (U.S. 1991).....................................................17 Standard Oil Co. v. American Cyanamid Co., 774 F.2d 448, 452 (Fed. Cir. 1985)..........................................11 Sun Studs, Inc. v. ATA Equipment Leasing, Inc., 872 F.2d 978, 982 (Fed. Cir. 1989).................................15 U.S. v. Microsoft Corp., 253 F.3d 34, 63 (U.S. App. D.C. 2001).....................................................16 Unique Concepts, Inc. v. Brown, 939 F.2d 1558, 1562-63 (Fed.Cir. 1991)...........................................11

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United Rentals, Inc. v. Keizer, 355 F.3d 399, 412 (6th Cir. 2004).....................................................25 Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996)......................................10, 11 White Consol. Indus., Inc. v. Vega Servo-Control, Inc., 713 F.2d 788, 791 (Fed. Cir. 1983)........................15, 16 CONSTITUTIONAL PROVISIONS U.S. Const. art. I, § 8, cl. 8.................................16 STATUTES 28 U.S.C. § 271 (2004)..........................................1 28 U.S.C. § 1295(a)(1) (2004)...................................1 28 U.S.C. § 1338(a)(2004).......................................1 35 U.S.C. § 102 (2004)................1, 2, 6, 12, 13, 14, 15, 16 35 U.S.C. § 112 ¶ 1 (2004)............3, 6, 10, 13, 14, 15, 16, 22 35 U.S.C. § 282 (2004)..........................................7 Wis. Stat. § 134.90 (2004).....................................18 COURT RULES Fed. R. Civ. P. 18(a)...........................................1 Fed. R. App. P. 25(d)..........................................30 Fed. R. App. P. 25(d)(1)(B)....................................30 Fed. R. App. P. 32(a)(5)(A)....................................31 Fed. R. App. P. 32(a)(7)(B)....................................31 Fed. R. App. P. 32(a)(7)(C)....................................31 LAW REVIEWS Andrew Beckerman-Rodau, Trade Secrets - The New Risks to Trade Secrets Posed by Computerization, 28 Rutgers Computer & Tech. L.J. 227, 233 (2002).....................18

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Frank J. Cavico, Business Plans and Strategies as Legally Protected Trade Secrets: Florida and National Perspectives, 9 U. Miami Bus. L. Rev. 1, 60 (2001)....................................................21 Kenneth J. Vanko, “You're Fired! And Don't Forget Your Non- Compete ...”: The Enforceability of Restrictive Covenants in Involuntary Discharge Cases, 1 DePaul Bus. & Comm. L.J. 1, 44-47.....................................21 TREATISES AND OTHER MATERIALS 2 R. Callman, Unfair Competition, Trademarks & Monopolies, § 54.2(a) at 417 (3rd ed. 1967)...........................27 Grant & Hackh’s Chemical Dictionary 15 (5th ed. 1987)..........11 Restatements (First) of Torts § 757 (1939).................18, 19 Restatements (Third) of Unfair Competition § 42, cmt. d. (1985)....................................................27 Uniform Trade Secrets Act § 1(4) (1985).....7, 18, 19, 20, 22, 24

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STATEMENT OF RELATED CASES

Pursuant to Federal Circuit Rule 47.4, attorneys for defendant-

cross appellant MarkleyLabs, Inc. certify the following:

1. That no other appeal in or from the same civil action or

proceeding in the lower court or body was previously before

this or any other appellate court.

2. The following cases are known by counsel to be pending in

this or any other court that will directly affect or be

directly affected by this court’s decision in the pending

appeal:

a. No. 03-1269, 03-1286 Phillips v. AWH Corp.

February 7, 2005 _____________________________ James Lund LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123 (651) 555-4321

_____________________________ Paul Sherburne LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123 (651) 555-4321

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JURISDICTIONAL STATEMENT

Plaintiff SmileyVision, Inc. (“Smiley”), a Delaware

corporation with principal place of business in View Mountain,

Alifornia (A1 ¶ 1), filed suit in the United States District

Court for the Northern District of Alifornia (A1) alleging

literal infringement of U.S. Patent No. 7,654,321 (“‘321 patent”)

under 28 U.S.C. § 271 (2004), and trade secret misappropriation

by Defendant MarkleyLabs, Inc. (“Markley”) (A1). Markley, an

Alifornia corporation, denied infringement, asserted invalidity

of claim 2 under 35 U.S.C. § 102, and denied misappropriation.

Subject matter jurisdiction was proper in U.S. district

court, which has exclusive jurisdiction over patent suits. 28

U.S.C. § 1338(a) (2004). The trade secret misappropriation claim

was proper, as it arose out of the patent infringement claim.

Fed. R. Civ. P. 18(a). Smiley timely filed an appeal from final

judgment, and Markley cross appealed (A1). The Court of Appeals

for the Federal Circuit has exclusive jurisdiction over patent

appeals. 28 U.S.C. § 1295(a)(1) (2004).

ISSUES

1. Does Markley’s nano-pump literally infringe claim 2 of the ‘321 patent?

The district court correctly held that Markley’s nano-pump did not literally infringe claim 2 of Smiley’s ‘321 patent. (A6 ¶ 5.)

2. Is claim 2 of the ‘321 patent valid?

The district court correctly held that claim 2 of the ‘321 patent was invalid under 35 U.S.C. § 102. (A6 ¶ 7.)

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3. Did Smiley’s knowledge of Drexlerian robot construction constitute a trade secret?

The district court erred in its application of law and thus held incorrectly that Smiley’s Drexlerian robot construction method was a trade secret. (A7 ¶ 14.)

4. Did Markley misappropriate Smiley’s trade secret?

The district court committed clear error in finding that Markley’s conduct constituted trade secret misappropriation. (A7 ¶ 14.)

STATEMENT OF THE CASE

This case was tried in a bench trial after a Markman hearing

to determine the scope of claim 2 (A1). (See SmileyVision, Inc.

v. MarkleyLabs, Inc., No. 2332 (N.D. Alifornia).) The district

court held that Markley did not literally infringe claim 2 of

Smiley’s ‘321 patent. The court interpreted “adhesive protein”

to mean “proteins that are inherently adhesive,” which excludes

synthetic proteins used to attach parts through a “lock and key”

approach (A6 ¶ 5). The court also held claim 2 of the ‘321

patent invalid as anticipated under 35 U.S.C. § 102 by an article

published in January, 1999 in The Journal of Molecular

Engineering (“JME”). (A2 ¶ 5.)

The court also held that Smiley’s knowledge of Drexlerian

robot fabrication using SCFD was protectable as a trade secret

(A7 ¶ 14). The court further held that Markley misappropriated

Smiley’s trade secret because Markley would not have been able to

make a Drexlerian robot without wrongfully obtaining trade secret

information from Smiley’s former employee, Gross. (Id.)

FACTS

In 1998 while working for Markley, Dr. Markley filed a

patent application for a nano-pump. The nano-scale pump

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invention was a molecular machine made for pumping blood in the

arteries of a patient (A2 ¶ 3). The pump design had been

validated on a CAD system capable of validating the operating

characteristics of such small systems. (Id.) While the CAD

system takes into account various atomic and molecular forces and

has proven that such a machine would be stable and work as

intended if it were made, the technology to make the machine did

not actually exist in 1998. (Id.) Making such a machine would

require a Drexlerian robotic atomic assembler, as proposed by Dr.

Eric Drexler. (Id.) But the theoretical possibility of making

such an assembler was cast into doubt by such theorists as Dr.

Smiley, a Nobel laureate for his work in nanotechnology. (Id.)

Dr. Markley filed a patent application for the nano-pump, but the

patent examiner finally rejected the application under 35 U.S.C.

§ 112, as lacking enablement because the nano-pump had not been

reduced to practice (A2 ¶ 4). The examiner stated that because

the necessary Drexlerian robot could not be made at the time of

filing the patent application, the specification could not tell

one of ordinary skill how to make the claimed nano-pump. (Id.)

Dr. Markley appealed up through the Court of Appeals for the

Federal Circuit; all adjudications affirming the examiner’s

findings. (Id.)

In January 1999, Dr. Markley published the JME paper which

included a description of a nano-scale pump that was

substantially identical to the detailed description used in

Markley’s rejected patent application. (Id.) This paper stated

that the nano-pump could be made using a Drexlerian robot having

3

a computer based on carbon nanotubes controlling an articulated

robotic arm. (Id.)

In 2001, Smiley reduced a Drexlerian robot to practice by

combining two technologies that were available in January of 1999

(A2 ¶ 6). Specifically, the Drexlerian robot included a computer

based on carbon nanotubes that controlled an articulated robotic

arm, (id.), as disclosed in the JME paper (A2 ¶ 5). The robotic

arm was formed using super critical fluid deposition (“SCFD”),

(A2 ¶ 6). Jim Johnson, a Ph.D. in chemical engineering at

Smiley, testified that he and two technicians spent six months in

the laboratory to reduce the Drexlerian robot to practice, (A2 ¶

7). When this six-month period started, Johnson had about two

years of nanotechnology experience and fifteen years of

deposition experience in the semiconductor field. (Id.) Randy

Nader, a Ph.D. physicist and expert witness for Markley,

testified that it would have been obvious to combine a carbon

nanotube computer with a SCFD robotic arm (A2 ¶ 8). He further

testified that a team of two competent scientists should have

been able to reduce the Drexlerian robot to practice within a

month. (Id.) He noted that Jim Johnson did not have significant

formal training in nanotechnology, let alone carbon nanotube

computers or SCFD robotic arms. (Id.) Rich Cheney, a Ph.D.

physical chemist and expert witness for Smiley, conceded that it

would have been obvious to combine a carbon nanotube computer

with a deposited robotic arm, (A2 ¶ 9). Both parties to this

suit have stipulated that the level of ordinary skill in the art

at the time the JME paper was published was a Ph. D. in

4

nanotechnology or a related field, and four years of work

experience, (A5 ¶ 21(1)).

After making the Drexlerian robot, Smiley also made a nano-

pump, filing a patent application in January 2001, which issued

as the ’321 patent in 2002, (A2 ¶ 10). Claim 2 reads:

2. A nano-pumping system, comprising: a. a nano-pumping membrane, the nano-pumping membrane including:

i. a porous substrate comprising at least one noble metal; and ii. a plurality of nano-scale drive assemblies fused to the porous substrate by an adhesive protein, wherein each of the nano-scale drive assemblies comprises at least one driving element for moving a fluid through the porous substrate, the driving element comprising a metal oxide and being coupled to a bio-motor that rotates the driving element; and

b. a power supply electrically coupled to the nano- pumping membrane, wherein the power supply powers the bio-motor in each of the nano-scale drive assemblies.

(A4 ¶ 16.) The ‘321 patent’s preferred embodiment utilizes

bacteria which have been genetically modified to excrete an

“adhesive coat protein” to bind the biomotor to the porous

substrate. (‘321 pat. ¶ 4.) Other naturally adhesive proteins

produced by other organisms were also listed. (‘321 pat. ¶ 5.)

In February of 2003, John Gross started working for Markley

as director of sales. (A1 ¶ 13.) Smiley had fired Gross, an

employee who had knowledge of Smiley’s Drexlerian robot

construction methods. Markley had already been working on

several means for producing Drexlerian robots, including SCFD.

(Id.) During a sales meeting, Gary Edwards, director of

engineering for Markley, heard Gross make reference to a method

5

for making a Drexlerian robot. Markley later successfully made

and sold Drexlerian robots. (A1 ¶ 14.)

SUMMARY OF THE ARGUMENT

The district court correctly held that claim 2 of the ‘321

patent is not literally infringed by Markley’s nano-scale pump,

which uses synthetic “lock and key” proteins, not an “adhesive

protein” as required by the amended claim. (A6 ¶ 5.) The

district court properly looked first to the intrinsic evidence

and plain meaning of the claim language to construe “adhesive

protein” as meaning “proteins that are inherently adhesive.” The

only proteins recited in the specification are naturally

occurring, inherently sticky proteins. Markley’s synthetic “lock

and key” proteins are not inherently sticky, and are thus outside

the scope of the written description required of the patent

disclosure and the literal scope of claim 2.

The district court also properly held that claim 2 of the

‘321 patent is invalid under 35 U.S.C. §102, as the JME reference

is fully-enabled prior art that anticipates the claimed nano-

pump. The court properly looked to the high level of skill in

the art to determine that one skilled in the art could make and

use Smiley’s claimed nano-pump from the JME disclosure without

undue experimentation. In the alternative, if the district court

erred in determining that the JME reference is fully-enabled

anticipatory prior art, that error is harmless because the ‘321

patent is nevertheless invalid under 35 U.S.C. § 112 ¶ 1, as the

‘321 patent specification itself lacks an enabling disclosure

teaching one skilled in the art how to make and use the

6

Drexlerian robot required to assemble the nano-pump. Public

policy also supports invalidation of the ‘321 patent in view of

Smiley’s attempt to improperly extend its exclusive right to make

the nano-pump beyond the patent term by reserving as trade secret

its method of fabricating a Drexlerian robot, which is essential

to practice the patent.

The district court erred in holding that Smiley’s knowledge

of Drexlerian robot construction constituted a trade secret. (A7

¶ 14.) Although a matter of first impression in Alifornia, a

majority of states have adopted the Uniform Trade Secret Act.

Information fails to qualify as a trade secret under the Uniform

Trade Secret Act if, as in this case, insufficient effort under

the circumstances was made to keep the information a secret.

Furthermore, the information Smiley asserts as a trade secret is

necessary to practice Smiley’s ‘321 patent. Thus, trade secret

protection would undermine patent policy and improperly extend

the life of Smiley’s patent beyond 20 years. Also, the district

court’s conclusion that Markley misappropriated Smiley’s alleged

trade secret was clearly erroneous as the record contains no

evidence that Markley employed improper means to solicit Gross’

disclosure or that Markley even had reason to know Gross owed a

duty to Smiley not to disclose its trade secrets. (A7 ¶ 14.)

ARGUMENT

I. The district court properly construed claim 2 of Smiley’s ‘321 patent as being limited to “proteins which are inherently adhesive,” which are not literally infringed by Markley’s “lock and key” proteins.

Claim 2 of the ‘321 patent is not literally infringed by

Markley’s nano-pump. Patents are presumptively valid, 35 U.S.C.

7

§ 282; consequently, the district court properly determined the

infringement issue first, followed by the patent invalidity

issue. Patent infringement analysis involves two steps: claim

construction, in which the scope and meaning of the patent claims

are determined; and factual investigation of infringement, in

which the properly constructed claims are compared to the

allegedly infringing product. Clearstream Wastewater Sys., Inc.

v. Hydro-Action, Inc., 206 F.3d 1440, 1444 (Fed. Cir. 2000). To

find infringement, every limitation set forth in the patent claim

must be found in the accused product. Corning Glass Works v.

Sumitomo Elec. U.S.A., Inc., 868 F.2d 1251, 1259 (Fed. Cir.

1989). Infringement under the doctrine of equivalents was not

alleged by Smiley at trial. The district court correctly held

that claim 2 of the ‘321 patent is not literally infringed by

Markley’s nano-pump, (A6 ¶ 5), since it does not encompass every

limitation set forth in the claimed invention.

The district court correctly held that Markley’s nano-pump

device does not literally infringe Smiley’s ‘321 patent by

correctly construing the claimed “adhesive proteins” to exclude

Markley’s synthetic “lock and key” proteins. (A6 ¶ 4.) The

plain and ordinary meaning of the term, as well as the meaning

inferred form the intrinsic evidence provided by the

specification and prosecution history, all clearly show that

“adhesive protein” encompasses only naturally sticky proteins

that are “inherently adhesive,” and not synthetic “lock and key”

proteins. “[T]o the extent that the claim is ambiguous, a narrow

reading which excludes the ambiguously covered subject matter

8

must be adopted.” Athletic Alternatives, Inc. v. Prince Mfg.,

Inc., 73 F.3d 1573, 1581 (Fed. Cir. 1996). Even if technical

dictionaries are consulted, the definition of “adhesive protein”

is “sticky proteins derived from vegetable or animal matter,”

which is consistent with the district court’s construction of

claim 2. Thus, Markley’s nano-pump does not literally infringe

Smiley’s ‘321 patent.

A. The district court’s patent claim construction is a matter of law, subject to de novo review on appeal.

The trial court’s construction of the scope and meaning of

claim 2 is a purely legal issue and does not involve underlying

fact questions. The parties have stipulated that if the claim

construction of the district court is affirmed, all elements are

not present in the accused device and the accused device is not

infringing. The Court of Appeals reviews claim construction de

novo. See Cybor Corp. v. FAS Tech., Inc., 138 F.3d 1448, 1454

(Fed. Cir. 1998) en banc.

B. The district court correctly looked first to the plain meaning of the claim language, viewed in light of the intrinsic evidence provided by the written specification and prosecution history, in defining “adhesive proteins” to exclude “lock and key” proteins.

By construing “adhesive protein” to mean “inherently

adhesive protein,” the district court correctly gave the claim

scope that was within Smiley’s possession as of their filing

date. Consequently, Markley’s synthetic polypeptides lie outside

the scope of claim 2 of the ‘321 patent, and Markley’s nano-pump

does not literally infringe the ‘321 patent. In construing

claims, the court first looks to the plain meaning of claim

terms, then to the specification to determine if the inventor has

9

implied a definition of the claim term contrary to the term’s

ordinary meaning. Vitronics Corp. v. Conceptronic, Inc., 90 F.3d

1576, 1582 (Fed. Cir. 1996). If the specification implies a

definition of the claim term, i.e. if the inventor acted as his

own lexicographer, the implied definition takes precedence over

other definitions of the claim terms. Renishaw PLC v. Marposs

Societa' per Azioni, 158 F.3d 1243, 1249 (Fed. Cir. 1998).

The district court properly looked to the intrinsic evidence

provided by the claims, the specification, and the prosecution

history of the ‘321 patent. Smiley’s ‘321 patent specification

refers to various embodiments, all describing adhesive proteins

derived from natural materials such as excretions from cells,

mussels, and spiders. (‘321 pat. ¶¶ 4-5.) Smiley, by merely

stating that “[o]ther proteins can be used with this invention,

however,” (‘321 pat. ¶ 5), does not adequately meet the written

description requirement of 35 U.S.C. § 112 ¶ 1 to show possession

of any generic protein used to bond the E. coli cell to the

porous substrate.

“A specification may contain a disclosure that is sufficient

to enable one skilled in the art to make and use the invention

and yet fail to comply with the description of the invention

requirement.” In re Barker, 559 F.2d 588, 591 (CCPA 1977)

(citing Fields v. Conover, 443 F.2d 1386, 1391 (CCPA 1971)).

Furthermore, the prosecution history clearly reveals that Smiley

explicitly disclaimed all but naturally sticky “adhesive

proteins” in order to obtain their patent. (A4 ¶ 16-17.) “[T]he

prosecution history (or file wrapper) limits the interpretation

10

of claims so as to exclude any interpretation that may have been

disclaimed or disavowed during prosecution in order to obtain

allowance.” Standard Oil Co. v. American Cyanamid Co., 774 F.2d

448, 452 (Fed. Cir. 1985). Moreover, "subject matter disclosed

but not claimed in a patent application is dedicated to the

public.” Maxwell v. Baker, Inc., 86 F.3d 1098 (Fed. Cir. 1996)

(quoting Unique Concepts, Inc. v. Brown, 939 F.2d 1558, 1562-63

(Fed. Cir. 1991)). Therefore, the district court correctly

construed the scope of claim 2 based upon Smiley’s written

description of the invention less that which Smiley explicitly

disclaimed in order to secure the patent grant. Markley’s lock

and key device thus lies outside the scope of claim 2 and thus

does not literally infringe the ‘321 patent.

C. If this court considers dictionary definitions to define “adhesive proteins” as “sticky proteins derived from vegetable or animal matter,” Markley’s non-sticky, synthetic “lock and key” proteins remain outside the literal scope of claim 2.

“Adhesive proteins” do not encompass Markley’s non-sticky,

synthetic “lock and key” proteins even if dictionary definitions

are consulted in construing the claim 2. “The court may always

freely consult and rely on dictionary definitions when construing

claims, to the extent the dictionary definition does not

contradict the patent documents.” Vitronics, 90 F.3d at 1582.

“Adhesive” means “[a]ny substance that sticks or binds materials

together.” Grant & Hackh’s Chemical Dictionary 15 (5th ed.

1987). “Protein” means “[n]itrogenous organic compounds,

containing more than about 100 amino acid residues, mol. wt.

8,000 - 200,0000, in vegetable and animal matter.” Id. at 477.

11

Therefore, “adhesive protein” means “sticky proteins derived from

vegetable or animal matter.”

Such a definition is not inconsistent with the claims, the

specification, and the prosecution history. Moreover, to

construe “adhesive proteins” so broadly as to encompass “lock and

key” proteins would be inconsistent with both the specification

and the prosecution history. Consequently, Markley’s non-sticky,

synthetic polypeptide proteins lie outside the scope of “adhesive

proteins,” and Markley’s nano-pump device therefore does not

infringe Smiley’s ‘321 patent.

II. The district court properly held claim 2 of the‘321 patent invalid under 35 U.S.C. § 102 in view of the fully-enabled anticipatory JME reference.

The JME paper is an enabled anticipatory reference that

invalidates Smiley’s ‘321 patent. "It is not...necessary that an

invention disclosed in a publication shall have actually been

made in order to satisfy the enablement requirement." In re

Donohue, 766 F.2d 531, 533 (Fed. Cir. 1985). The proper standard

for the enablement of an anticipatory reference is “whether one

skilled in the art to which the invention pertains could take the

description of the invention in the printed publication and

combine it with his own knowledge of the particular art and from

this combination be put in possession of the invention on which a

patent is sought.” In re LeGrice, 301 F.2d 929, 939 (1962). One

skilled in the art, stipulated as a Ph.D. in nanotechnology or a

related field and four years of work experience, (A5 ¶ 21 (2)),

would have possessed such knowledge prior to the Smiley’s date of

12

invention. Consequently, the JME reference anticipates Smiley’s

‘321 patent, which is therefore invalid under 35 U.S.C. § 102.

A. The district court’s legal determination of patent invalidity is reviewed de novo, while the underlying fact determinations are reviewed for “clear error.”

The trial court correctly found the JME reference to be

enabled anticipatory prior art, since one skilled in the art

could make a nano-pump based on the JME disclosure without undue

experimentation at the time Smiley made their invention.

"Whether undue experimentation would have been required to make

and use an invention, and thus whether a disclosure is enabling

under 35 U.S.C. § 112, ¶ 1, is a question of law that we review

de novo, based on underlying factual inquiries that we review for

clear error. Enzo Biochem, Inc. v. Calgene, Inc., 188 F.3d

1362, 1369-70 (Fed. Cir. 1999).

B. The district court properly held claim 2 of the ‘321 patent invalid in view of the advanced state of the art, as the anticipatory JME reference enables one skilled in the art to make and use the claimed nano-pump without undue experimentation.

The JME paper is an enabling prior art reference since it

teaches one skilled in the art how to make and use the nano-pump

of Smiley’s ‘321 patent at the time of Smiley’s invention. The

evolution of technology in the field of nanotechnology occurred

at a rapid pace between publication of the JME paper and Smiley’s

filing date.

By combining the JME reference with a computer based on

carbon nanotubes and super critical fluid deposition (SCFD), two

technologies that became available in January 1999, (A2 ¶ 6), one

skilled in the art “should have been able to reduce the

13

Drexlerian robot to practice within a month,” according to

Markley’s expert, Ph.D. physicist Randy Nader, (A2 ¶ 8). A

reduction to practice within one month does not constitute undue

experimentation. Nader also testified that Smiley inventor Jim

Johnson, who took six months to reduce a working robot to

practice, (A2 ¶ 7), had little training in nanotechnology, let

alone carbon nanotube computers or SCFD robotic arms, and thus

was not skilled in the art. (A2-3 ¶ 8.) “It should be clear

that that hypothetical person is not the inventor, but an

imaginary being possessing ‘ordinary skill in the art’ created by

Congress to provide a standard of patentability.” Kimberly-

Clark Corp. v. Johnson & Johnson, 745 F.2d 1437, 1454 (Fed. Cir.

1984).

Further, Smiley expert witness, Ph.D. physical chemist Rich

Cheney, conceded that it would have been obvious to combine a

carbon nanotube computer with a deposited robotic arm. (A3 ¶ 9.)

Therefore since the stipulated level of skill in the art is at a

high level and nanotechnology was evolving at such a rapid pace,

the JME paper was a fully enabled 102 reference at the time of

Smiley’s nano-pump invention and the ‘321 patent is consequently

invalid under 35 U.S.C. §102.

C. Alternatively, if the district court erred in invalidating the ‘321 patent as anticipated by the JME reference, the patent is nevertheless invalid under 35 U.S.C. § 112 ¶ 1.

“The judgment of invalidity must be affirmed if there was

substantial evidence, on the record as a whole, to support the

findings of fact needed to sustain the jury verdict.” Hupp v.

Siroflex of America, Inc., 122 F.3d 1456, 1460 (Fed. Cir. 1997)

14

(citing Sun Studs, Inc. v. ATA Equipment Leasing, Inc., 872 F.2d

978, 982 (Fed. Cir. 1989)).

Smiley’s ‘321 patent was not enabled on the patent filing

date since the disclosure did not teach one skilled in the art

how to make and use the Drexlerian robot required to fabricate

the nano-pump. An enabling disclosure must exist as of the

application filing date; it is the basic quid pro quo for the

exclusive patent right. In re Glass, 492 F.2d 1228, 1232 (CCPA

1974). No evidence of record indicates that Drexlerian robots

were commercially available to the public at the time of the '321

application in January, 2001. Because Smiley elected to withhold

as trade secret it's knowledge of how to combine a carbon nano-

tube computer with SCFD to assemble a Drexlerian robot, the '321

patent did not disclose how to make a Drexlerian robot. Thus,

the '321 specification lacked an enabling disclosure teaching one

skilled in the art how to make a nano-pump using a Drexlerian

robot.

Moreover, even if Smiley can establish that they produced

Drexlerian robots commercially at the time of the patent

application, the enablement requirement is still not satisfied.

Enablement is not sufficient to satisfy 35 U.S.C. § 112 ¶ 1 where

a component required for enablement is kept as an underlying

trade secret, even if that component is commercially available

for purchase from the patentee. See White Consol. Indus., Inc.

v. Vega Servo-Control, Inc., 713 F.2d 788, 791 (Fed. Circ. 1983)

(the court reasoned that White could potentially extend the

monopoly right beyond the term of the patent, “a result

15

inconsistent with the patent system.” Id.) Similarly, by

exclusively controlling the Drexlerian robot, Smiley also may

potentially extend its exclusive right beyond the life of the

patent by controlling access to the Drexlerian robot, a result

inconsistent with the objectives of the patent system. In the

absence of disclosure of Drexlerian robot technology, Smiley’s

‘321 patent specification does not enable one to make a nano-pump

as of the filing date, and the ‘321 patent is invalid for lack of

enablement. 35 U.S.C. 112 ¶ 1. The district court thus did not

err in holding the '321 patent invalid, as the facts of record

establish invalidity. 35 U.S.C. 112 ¶ 1.

D. Public policy also supports invalidation of the ‘321 patent in view of Smiley’s attempt to improperly extend its exclusive right to make the nano-pump beyond the patent term.

By reserving exclusive control over the only means of

manufacturing nano-pumps, Smiley maintained an unfair monopoly in

the field which far exceeds that intended in the Constitutional

patent grant in both exclusivity and time. Our founding fathers

did not intent the exclusive patent right to be extended

indefinitely; they gave Congress the power “to promote the

progress of science and the useful arts, by securing for limited

times to authors and inventors the exclusive right to their

respective writings and discoveries.” U.S. Const. art. I, § 8,

cl. 8. "Intellectual property rights do not confer a privilege

to violate the antitrust laws." U.S. v. Microsoft Corp., 253

F.3d 34, 63 (D.C. Cir. 2001) (citing In re Indep. Serv. Orgs.

Antitrust Litig., 203 F.3d 1322, 1325 (Fed. Cir. 2000)). By

intentionally maintaining exclusive control over the only means

16

of producing nano-pumps through trade secret protection of

Drexlerian robot technology, Smiley has not met the quid pro quo

with the public in exchange for its exclusive patent right.

Consequently, Smiley’s attempt to improperly extend its exclusive

right supports invalidation of the ‘321 patent as a matter of

sound public policy.

III. The district court erred as a matter of law in holding that Smiley’s knowledge of Drexlerian robot construction by means of SCFD is protectable as a trade secret.

Smiley’s knowledge of Drexlerian robot construction by means

of SCFD fails to satisfy the requirements for protection under

Alifornia trade secret law. The district court must apply

Alifornia law. Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938).

In the absence of a precendential opinion from the Alifornia

Supreme Court, the district court applies analogous state law to

determine how the Alifornia Supreme Court would determine a state

law claim of trade misappropriation. Kennedy Bldg. Assocs. v.

Viacom, Inc., 375 F.3d 731, 738 (8th Cir. 2004).

A. The Federal Circuit reviews the district court’s determination of state law de novo. A court of appeals reviews de novo a district court's

determination of state law. Salve Regina College v. Russell, 499

U.S. 225, 231 (1991). When addressing trade secret

misappropriation the district court only cited Forest Labs., v.

Pillsbury Co. and E.I. DuPont De Nemours & Co., Inc. v.

Christopher, both of which rely on the Restatements (First) of

Torts § 757 (1939). Forest, 452 F.2d 621, 623 (7th Cir. 1971)

(applying Wisconsin law); Christopher, 431 F.2d 1012, 1014 (5th

Cir. 1970) (applying Texas law). However, Wisconsin has since

17

dropped the Restatements (First) of Tort § 757 (1939) in favor of

the Uniform Trade Secret Act (UTSA). See Wis. Stat. § 134.90

(2004). Thus, it is unclear which jurisdiction or set of laws

the district court was applying.

Forty-four jurisdictions have enacted, at least in part, the

UTSA. Andrew Beckerman-Rodau, Trade Secrets - The New Risks to

Trade Secrets Posed by Computerization, 28 Rutgers Computer &

Tech. L.J. 227, 233 (2002). Thus, the district court should have

applied the UTSA in this case.

The UTSA defines a trade secret as:

“information, including, but not limited to a formula, pattern, compilation, program, device, method, technique or process, that:

(A) Derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and (B)Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy”

Uniform Trade Secret Act § 1(4) (1985). Smiley’s knowledge of Drexlerian robot construction fails to

qualify as a trade secret under the UTSA, as this knowledge is

readily ascertainable and Smiley failed to take reasonable

measures to maintain its secrecy. Thus, the conclusion of the

district court that Smiley possessed a trade secret is incorrect,

as the district court failed to apply the proper law (UTSA),

under which Smiley’s knowledge of Drexlerian robot construction

fails to qualify as a trade secret.

18

B. Knowledge of Drexlerian robot construction by means of SCFD was readily ascertainable, and thus cannot qualify as a trade secret.

The district court abused its discretion in applying the

Restatements (First) of Torts (1939) instead of the UTSA. It is

clear that Smiley’s knowledge of Drexlerian robot construction

does not qualify as a trade secret under the UTSA. A trade

secret must “[d]erive independent economic value, actual or

potential, from . . . not being readily ascertainable by proper

means by other persons who can obtain economic value from its

disclosure or use.” Uniform Trade Secrets Act § 1(4) (1985).

Randy Nader, a Ph.D. physicist, testified that two competent

scientists should be able to reduce a Drexlerian robot to

practice within a month. (A1 ¶ 8). He also noted that Jim

Johnson, Smiley’s developer of Drexlerian robots, did not have

significant formal training in nanotechnology, which could

account for why it took him six months to develop a Drexlerian

robot. (A1 ¶ 7-8). As can be understood, knowledge of Drexlerian

robot construction was readily ascertainable and should not be

subject to trade secret protection. Thus, the district court’s

finding of a protectable trade secret is incorrect, as Smiley’s

knowledge of Drexlerian robot construction fails to satisfy the

requirements of the UTSA.

C. Smiley did not take reasonable measures under the circumstances to maintain the secrecy of its knowledge of Drexlerian robot construction, which consequently does not qualify as a trade secret.

The district failed to apply the UTSA and thus failed to

hold that the measures taken by Smiley were insufficient to

sustain protection of a trade secret. A trade secret must be

19

“the subject of efforts that are reasonable under the

circumstances to maintain its secrecy.” Uniform Trade Secret Act

§ 1(4) (1985). Smiley fails this standard because the only

precaution Smiley took to protect its knowledge of Drexlerian

robot construction was to have Gross sign a N.D.A. and later

remind him of the agreement, which under the circumstances is not

sufficient to qualify Smiley for trade secret protection.

Having employees sign a N.D.A. alone is not sufficient to

justify trade secret status. Carboline Co. v. Lebeck, 990 F.

Supp. 762, 767-68 (E.D. Mo. 1997) (finding that having employees

sign non-disclosure agreements, in addition to other measures,

was not sufficient to justify trade secret status); Electro-Craft

Corp. v. Controlled Motion, Inc., 332 N.W.2d 890, 901-02 (Minn.

1983) (finding that having employees sign confidentiality

agreements was not sufficient to justify trade secret status).

The only additional step Smiley took in protecting its

information was to remind Gross of the agreement. Additional

measures were reasonable and required under the circumstances to

justify trade secret protection, but Smiley relied almost

entirely on the N.D.A. to protect its information.

It would have been reasonable under the circumstances for

Smiley to specifically tell Gross which information it considered

to be confidential. See id. at 902 (suggesting the plaintiff

should warn outgoing employees which information it considered

confidential in order to qualify for trade secret status). It is

far easier for an employer to identify to an employee which

information it considers to be trade secrets than it is for the

20

employee to guess the same, especially considering the desire of

an ex-employee to maximize the usefulness of such knowledge in

his or her career. Such a measure would have cost Smiley

essentially nothing yet would have clearly established in Gross’

mind what information he had an obligation not to disclose.

It also would have been reasonable under the circumstances

for Smiley to offer Gross a severance package that would have

provided him with incentives contingent on keeping certain

information confidential or not competing with Smiley. See

Jotan, Inc. v. Barnett, 229 B.R. 218, 230-32 (Bankr. M.D. Fla.

1998) (featuring a contract with severance benefits contingent on

compliance with non-compete and disclosure terms); Kenneth J.

Vanko, “You're Fired! And Don't Forget Your Non-Compete ...”: The

Enforceability of Restrictive Covenants in Involuntary Discharge

Cases, 1 DePaul Bus. & Comm. L.J. 1, 44-47. Such measures have

been envisioned by the Supreme Court as a way to assure the

loyalty of the faithless. Kewanee Oil Co. v. Bicron Corp., 416

U.S. 470, 486-87 (1974). Smiley’s failure to take such a

reasonable and inexpensive precaution further demonstrates

Smiley’s lack of sufficient effort invested to protect the

information it now asserts as a trade secret.

Another reasonable precaution Smiley failed to take was to

alert Markley that one of its new employees had information that

Smiley considered confidential. See Frank J. Cavico, Business

Plans and Strategies as Legally Protected Trade Secrets: Florida

and National Perspectives, 9 U. Miami Bus. L. Rev. 1, 60 (2001)

(identifying such a step as a “prudent practical measure”). Such

21

a precaution would have cost Smiley very little and would have

placed Markley on notice of Gross’ non-disclosure obligations

under the N.D.A. Yet Smiley left it to the employee it just

fired to police himself instead of equipping Markley with the

kind of warning that could have prevented or mitigated Gross’

disclosure. The failure to take such a precaution further

demonstrates Smiley’s insufficient measures taken to protect the

information it now asserts as a trade secret.

In conclusion, the decision of the district court must be

vacated as the court erred as a matter of law. When the

appropriate trade secret law (UTSA) is applied it is clear that

Smiley’s knowledge of Drexlerian robot construction does not

qualify as a trade secret because Smiley failed to take adequate

measures to protect the secrecy of the information and the

information was readily ascertainable.

D. The district court’s holding of trade secret protection for a Drexlerian robot fabrication method undermines the patent system because the information is necessary to practice Smiley’s ‘321 patent.

The district court erred as a matter of law in extending

Smiley trade secret rights for knowledge that was required to

enable Smiley’s ‘321 patent. Patents require “a written

description . . . of the manner and process of making and using

it, in such full, clear, concise, and exact terms as to enable

any person skilled in the art to which it pertains.” 35 U.S.C. §

112 ¶ 1 (2004). This disclosure is part of the quid pro quo

exchange with the public that drives the patent system, trading

enabling knowledge with the public for a temporary monopoly.

Kewanee, 416 U.S. at 484. But recognition of enabling knowledge

22

as a trade secret for the patentee would undermine this quid pro

quo exchange by granting the patentee greater control over this

knowledge with respect to the public. In this case, Smiley has a

patent on nano-pumps, which requires Drexlerian robot’s to

fabricate. Recognition of trade secret rights for Smiley over

Drexlerian robot construction would frustrate the public’s

ability to practice the technology disclosed in the patent upon

expiration of the patent.

Trade secret and patent law may be used in complementary

ways to protect investments in innovation. Bonito Boats, Inc. v.

Thunder Craft Boats, Inc., 489 U.S. 141, 161 (1989) (stating that

state trade secret law complements patent law by protecting not

fully developed technologies before patenting). But recognition

of Smiley’s knowledge of Drexlerian robot construction as a trade

secret has a compounding effect rather than a complementary one.

The public would not be able to rely the on the ‘321 disclosure

to practice the patent even after the ‘321 patent has expired if

the court recognizes Smiley’s claimed trade secret rights. Thus,

the district court erred as a matter of law by awarding trade

secret protection to Smiley for what is necessary to practice its

patent, thereby undermining the policies behind patent law.

IV. The district court’s finding that Markley misappropriated a trade secret from Smiley was clearly erroneous in view of the evidence on record.

The district court’s holding that Markley misappropriated a

trade secret was clearly erroneous because no evidence was

presented at trial which would support that conclusion.

23

Furthermore, this conclusion must be overturned because its

effects work to undermine the policy behind trade secret laws.

Trade secret misappropriation is a question of fact and

determinations by the trier of fact will be overturned if clearly

erroneous. Defiance Button Mach. Co. v. C & C Metal Prod. Corp.,

759 F.2d 1053, 1063 (2d Cir. 1985).

Trade secret misappropriation is constituted by:

“[d]isclosure or use of a trade secret of another without express or implied consent by a person who:

(1) Used improper means to acquire knowledge of the trade secret; or (2) At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:

(iii) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use”

Uniform Trade Secret Act § 1(2) (1985). The district court’s holding was clearly erroneous

because Markley never knew or had reason to know of Gross’

obligation of non-disclosure nor did Markley employ improper

means.

A. The district court’s holding of misappropriation is clearly erroneous because Markley never used Smiley’s trade secret.

The District court’s finding that Markley used Smiley’s

trade secret is not supported by substantial evidence and is

clearly erroneous. The record does not contain any evidence that

Markley manufactures its Drexlerian robots by SCFD. Moreover,

the record does not contain any evidence that Markley relied on

Gross’ disclosure. Rather, Markley was already developing the

very method that Gross disclosed before Gross’ disclosure. (A3 ¶

13.) Independent development of another’s trade secret is not

24

misappropriation. Kewanee, 416 U.S. at 476. Thus, the district

court’s finding that Markley misappropriated Smiley’s trade

secret was clearly erroneous as use of Smiley’s trade secret is

essential for Smiley’s misappropriation claim.

B. Gross’ disclosure of a Drexlerian robot construction method was not improper conduct on the part of Markley.

The district court’s finding of trade secret

misappropriation was clearly erroneous as Markley never solicited

confidential information from Gross. See United Rentals, Inc. v.

Keizer, 355 F.3d 399, 412 (6th Cir. 2004) (finding no

misappropriation where a new employee brought in a customer list

from a former employer because the employer did not solicit or

condone this activity); Ferroline Corp. v. Gen. Aniline & Film

Corp., 207 F.2d 912, 923 (7th Cir. 1953) cert. denied 347 U.S.

953 (1954) (stating that the “plaintiff should [be] required to

prove affirmatively that [the] defendant acquired its knowledge

as a knowing participant in a breach of trust” in a trade secret

misappropriation claim). In contrast to E.I. DuPont DeNemours &

Co. v. Christopher, where the defendant deliberately flew a plane

over the Plaintiff’s land to acquire information, Markley took no

such deliberate action. 431 F.2d 1012 (5th Cir. 1970). Moreover,

Markley placed Gross in its sales department, minimizing his work

relating to technical issues. See Del Monte Fresh Produce Co. v.

Dole Food Co., 148 F. Supp. 2d 1326, 1339 (S.D. Fla. 2001)

(placing a new employee with a duty of confidentiality owed to a

previous employer in a position unrelated to his previous one

mitigated away from finding trade secret misappropriation).

Thus, acquisition of trade secret information by improper means

25

could not form the basis of Smiley’s trade secret

misappropriation claim, and the district court’s finding of

misappropriation was therefore clearly erroneous.

C. Markley did not know or have reason to know that Gross owed a duty to Smiley not to disclose information relating to Drexlerian robot construction.

It was clearly erroneous for the district court to conclude

that any duty owed by Gross was imputed to Markley. The record

does not state that Smiley or Gross informed Markley about Gross’

duty of confidentiality owed to Smiley. Furthermore, nothing on

the record would have given Markley notice of Gross’ duty of

confidentiality. It would be impractical for employers to

investigate the origin of all information their employees

disclose. Because of the nature of trade secrets it is far more

practical for those who believe that they have trade secret

rights to inform others of their rights when it appears that

confidential information could be disclosed. In this case

Markley did not know or have reason to know of Gross’ obligations

to Smiley and thus Markley should not be held accountable for

Smiley’s failure to inform Markley of Smiley’s rights. The

district court’s holding thus was clearly erroneous as nothing

from the record reflects a duty was imputed to Markley or a duty

was breached by Markley as Markley never used Smiley’s trade

secret.

D. A ruling that Markley’s and Gross’ conduct constituted trade secret misappropriation would hinder the development of technology, undermining a primary policy behind trade secret laws.

Gross’ disclosure of general knowledge must not be held to

breach a duty of confidentiality owed to Smiley, otherwise the

26

public interests of open competition and advancement of

technology suffers. Terminated employees are allowed to use

general knowledge gained in prior employment. CVD, Inc. v.

Raytheon Co., 769 F.2d 842, 852 (1st Cir. 1985) cert. denied 475

U.S. 1016 (1986) (such a “principle effectuates the public

interest in labor mobility, promotes the employee's freedom to

practice a profession, and freedom of competition”); See

Restatements (Third) of Unfair Competition § 42, cmt. d. (1985)

(“information that forms the general skill, knowledge, training

and experience of an employee cannot be claimed as a trade secret

by a former employer”).

“The distinction between general and special knowledge

[subject to confidentiality agreements] can only be resolved by a

balancing of the conflicting social and economic interests” of

fostering competition and discouraging unfair trade practices.

Microbiological Research Corp. v. Muna, 625 P.2d 690, 697 (Utah

1981) (citing 2 R. Callman, Unfair Competition, Trademarks &

Monopolies, § 54.2(a) at 417 (3rd ed. 1967).

In this case a balance of the interests clearly favors

finding that the subject matter of Gross’ disclosure was general

knowledge. This balance recognizes the social utility in

allowing Gross to exercise his knowledge and the innocence of

Markley and also potentially increases the number of Drexlerian

robot marketers while not unduly prejudicing Smiley who already

owns a patent in intertwined technology.

Preventing employees from using such general knowledge

under a non-disclosure agreement would stifle innovation by

27

blocking workers from working in positions where they might be

most productive and useful to society. Ingersoll-Rand Co. v.

Ciavatta, 110 N.J. 609, 638 (N.J. 1988) (stating that “such

[hold-over] agreements . . . probably interfere with an employee

securing a position in which he could most effectively use his

skills, at the same time depriving society of a more productive

worker”). Also, consider that trade secret doctrine is designed

to increase the pace of innovation. Burten v. Milton Bradley Co.,

763 F.2d 461, 467 (1st Cir. 1985) (“[t]he underlying goal of the

law which protects trade secrets . . . is to encourage the

formation and promulgation of ideas”). Thus, finding trade

secret misappropriation in this case would undermine one of the

main policy justifications for trade secret doctrine by

restricting the flow of skilled employees and their knowledge.

Thus, the district court erred in finding trade secret

misappropriation.

28

CONCLUSIONS AND RELIEF SOUGHT

Markley requests this Court to uphold as a matter of law the

district court’s holding that Markley’s nano-pump does not

literally infringe claim 2 of Smiley’s ‘321 patent, as well as

the finding that Smiley’s ‘321 patent is invalid. Markley also

requests the court to the district court’s clear error in holding

that Markley misappropriated Smiley’s trade secret.

Respectfully submitted, February 7th, 2005 _____________________________ James Lund LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123

_____________________________ Paul Sherburne LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123

29

PROOF OF SERVICE

Counsel for Defendant-Cross Appellants MarkleyLabs, Inc.

files the foregoing BRIEF OF DEFENDANT-CROSS APPELLANT

MARKLEYLABS, INC. pursuant to Rule 25(d) of the Federal Rules of

Appellate Procedure. I hereby certify that Defendant-CROSS

Appellant’s brief was served on the Court of Appeals for the

Federal Circuit and on opposing counsel in compliance with Rule

25(d)(1)(B) and submit the following proof of service:

(i) Service was made by depositing a copy of the brief with the United States Postal Service, first class postage prepaid, on February 7, 2005.

(ii) The following individuals were served:

Kevin E. Noonan

(iii) The following addresses were used to effect service:

McDonnell, Boehnen, Hulbert & Berghoff 300 South Wacker Drive, 32nd Floor Chicago, IL 60606

Respectfully submitted, February 7th, 2005 _____________________________ James Lund LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123

_____________________________ Paul Sherburne LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123

30

CERTIFICATE OF COMPLIANCE

Counsel for Defendant-Cross Appellants MarkleyLabs, Inc.

submits this brief in conformance with Rules 32(a)(5)(A) and

32(a)(7)(B) of the Federal Rules of Appellate Procedure. As

required by Rule 32(a)(7)(C), I hereby certify that Defendant-

Cross Appellant’s brief complies with the type-volume limitation

therein provided, and I further certify that the foregoing BRIEF

OF DEFENDANT- CROSS APPELLANT MARKLEYLABS, INC. contains 9,243

words as determined by Microsoft Word 2002, including headings,

footnotes and quotations.

Respectfully submitted, February 7th, 2005 _____________________________ James Lund LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123 _____________________________ Paul Sherburne LUND & SHERBURNE, P.A. 8910 Bucklemyshoe Ct. San Andreas, AF 32123

31

JOINT APPENDIX

Omitted pursuant to Competition Rule 10

All citations to the record refer to the problem statement as it

would appear in this Joint Appendix

32