by Dennis Crouch
Masimo Corp. v. True Wearables, Inc. (Fed. Cir. 2022) (nonprecedential)
This trade-secrecy decision includes a few interesting holdings:
- Published and Widely Distributed, but Still a Trade Secret: The fact that information was found in a prior publication “that has been cited over 1,200 times . . . does not necessarily compel a finding that the information cannot maintain its status as a trade secret for a party in an entirely different field.”
- Serious Questions: A preliminary injunction in trade secrecy cases require only a “fair chance of success on the merits or questions serious enough to require litigation.” Here, the plaintiff raised “a serious question” and that was enough.
- Order to Keep the Patent Filings Secret: The defendant has several patent applications pending at the USPTO which apparently include the trade secret algorithm within its specification. The district court ordered the defendant to “take all necessary steps to prevent publication” of those applications or resulting patents. On appeal, the Federal Circuit affirmed that preliminary injunction as warranted based upon California state trade secrecy law.
The companies here compete in the market for creating specialized finger-LED equipment and accompanying data analysis services. This case focuses on calculating total hemoglobin (“SpHb”) based upon light absorption readings from the finger-LED.
How does it work: The LED emitter sends out a pulse of light through the fingertip; a sensor on the other side then measures how much light passed through at various wavelengths. Hemoglobin has a particular light adsorption pattern, and so those results can be used to calculate a relative amount of Hemoglobin. They do this with a simple linear aggregation: “SpHb = Ax + By + Cz . . .,” where x, y, and
z are various absorption measurements from the monitoring device (such as different wavelength readouts) and A, B, and C are coefficients that reflect the relative importance of the different measurements.
Each product line will have a different equation because it will likely have a different LED configuration; have different sensors; and have a different physical form. So, a product developer needs to run a clinical trial of its product in order to estimate the most accurate coefficients. For each person in the trial, you do a blood test for SpHB level (the gold standard) and then also take measurements with the finger LED.
What is the Trade Secret: The trade secret at issue here is the optimization algorithm for determining all the equation coefficients. How do you take data from the clinical trials and turn that into an operational equation for measuring SpHB?
Answer, if you have studied linear algebra this is all straightforward and largely developed in the 1960s. Math and engineering students across the country take classes on linear programming and linear optimization and have done so for decades. These same models are a basis for most of the system we call “AI.”
The defendants pointed to a particular 2008 IEEE article that spells out the particular approach claimed to be a trade secret here — – the parties refer to this algorithm as “TSS.” We don’t know the title of this article (it is redacted), but we do know that this is a very well known article with 1,200+ citations. The description below comes from the appellate briefing:
The footnote explains: “[T]he complete citation for this publication is not reproduced in this brief as Masimo has asserted that the identity of the publication is confidential.”
Under California law, information that is “generally known” cannot be a trade secret. Here, however, the Federal Circuit affirmed the lower court ruling that the publication did not render the information “generally known” to folks in the particular field in question.
Under some circumstances, the publication of an alleged trade secret will clearly be sufficient to indicate that the information is generally known. However, the fact that the trade secret has been revealed in some publication somewhere [even if highly cited] does not necessarily compel a finding that the information cannot maintain its status as a trade secret for a party in an entirely different field from the one to which the publication was addressed.
Slip Op. The Federal Circuit previously wrote that disclosure in a patent renders information “generally known” for trade secrecy purposes, but endeavored to distinguish that conclusion here. Ultimax Cement Manufacturing Corp. v. CTS Cement Manufacturing Corp., 587 F.3d 1339, 1355–56 (Fed. Cir. 2009).
I’ll note here that there are some other factors at play – namely, the founder of True Wearables (Dr. Lamego) is a former Masimo employee. He is the one that mathematically derived implemented the TSS algorithm at Masimo. And, while there, labeled it a “trade secret.” These actions of the parties tend to make it look like a trade secret.
I have a Serious Question: On appeal, the Federal Circuit did conclude that the trade secret issue was questionable, but still found that the plaintiff had raised a “serious question as to the validity of the trade secret” which is apparently sufficient for a preliminary injunction. That appears to be a lower standard than the more traditional “likelihood of success.”
The Preliminary Injunction: Lamego has several patent applications pending, and the preliminary injunction orders Lamego to make sure that those applications do not become public. Here, the court found the remedy appropriate since “Once the information is in the public domain and the element of secrecy is gone, the trade secret is extinguished.” (Quoting Ultimax). In this portion of the opinion the court did not contend with its statement a few paragraphs before that publication does not necessarily extinguish a trade secret.