The case of AMS Sensors USA Inc. v. Renesas Elec. Am. Inc., Civil Action No. 4:08-cv-00451, 2022 WL 2918893 (E.D. Tex. July 25, 2022) considered whether a breach of confidential information agreement could be based products that did not incorporate the plaintiff’s trade secret into the products design. Ultimately, the court concluded that “use” of a trade secret was not limited to directly implementing a trade secret into a product. Rather, use included “any exploitation of the trade secret that is likely to result in [the] [p]laintiff’s injury or [d]efendant’s enrichment.” Additionally, the court concluded that a defendant’s alleged use of a plaintiff’s trade secret includes “relying on the trade secret to assist or accelerate research or development.”
In 2004, AMS sensors USA Inc (AMS) and Renesas Electronics America Inc. (Renesas) entered into a confidentiality agreement in which the parties sought to explore a potential business relationship. Under the confidentiality agreement, the parties shared confidential information. The parties ultimately could not reach an agreement. After the parties failed to reach an agreement, AMS learned that Renesas had used AMS’s confidential information to create its own, competing line of digital ambient light sensors. In 2008, AMS sued Renesas for patent infringement, breach of contract, trade secret misappropriation, and tortious interference with prospective business relations.
The current proceedings followed a lengthy procedural history. Here, Renesas moved for a judgment as a matter law, or in the alternative, a new trial, regarding the sufficiency of the evidence on AMS’s breach of confidentiality agreement claim. Specifically, in relevant part, Renesas challenged the sufficiency of the evidence regarding the scope and use of AMS’s confidential information.
Renesas argued that there was insufficient evidence to support AMS’s breach of confidentiality agreement because “the Derivative Products and one of the Primary Products do not incorporate the trade secret, and any product which does not contain the trade secret cannot be the basis for breach.” In rejecting this argument, the court noted that the “incorporation” standard put forth by Renesas does not comport with the court’s interpretation of the term use. The court defined use as “any exploitation of the trade secret that is likely to result in Plaintiff’s injury or Defendant’s enrichment.” The court further noted that the term use also included “relying on the trade secret to assist or accelerate research or development.”
The court ultimately concluded that there was ample evidence that Renesas had used AMS’s confidential information. In reaching this conclusion, the court noted that the trial court applied the same standards it applied in this case and concluded that there was ample evidence that Renesas “used [AMS’s] confidential information—including the trade secret—to revamp [its] designs for its ambient light sensor and develop a new line of light sensors to compete with [AMS].”
The primary takeaway from this case is that use of a trade secret under a confidentiality agreement may not be limited to directly incorporating the trade secret into your product or service. Rather, use may include any use that injures the plaintiff or enriches the defendant.