Ashley Chan

ECON 369

Prof. Scott Shane

October 18, 2017

CASE 8: CVD VS. A.S. MARKHAM CORPORATION

What are the critical legal issues in this case?

The two founders of CVD Inc. sued their former employer, Markham, for relief from

what they believed was an onerous licensing contract. Markham sued the small company

for alleged infractions including a breach of employment contracts, misuse of confidential

information, and misappropriation of trade secrets. The founders of CVD Inc. wondered if

they can dispute the case with Markham before the verdict to potentially do more in their

favor.

Donadio’s idea for CVD Inc. was to use his knowledge of chemical vapor deposition

manufacturing process and become a supplier of infrared materials. He had suggested

commercial applications to Markham, but they were uninterested. Donadio and Connolly

were told they needed to meet with Markham’s lawyers if they wanted to start a cvd

processing company, claiming they were planning to steal and use its “proprietary

information,” despite not specifying what was a trade secret and not having any patents.

CVD Inc. decided to continue with their company after making a licensing agreement with

Markham, but they realize that Markham’s share in their revenues hindered the growth of

the company. When they tried to negotiate, Markham refused to negotiate.

As a juror, what decision would you reach on each of these issues? On what facts do

your decisions hinge?

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 As a juror, I would be in favor for CVD Inc. Markham’s claims were either exaggerated or

false and they did not specify their claims. Without this clarification, their claims are not

grounded and cannot be used against CVD Inc. because there is no specific trade secret or

“proprietary” information to use against them. Markham is filing suit against CVD Inc. for

what it did not protect itself.

Markham's cvd research was funded under government contract, and it was a part of

public domain. They did not have a patent to protect their process. Both Donadio and

Connolly had expertise on the cvd process to start a company that avoided what Markham

claimed as “proprietary” or a “trade secret.” They were not even told what was considered

a trade secret, and instead that everything was proprietary. When CVD Inc. tried to

negotiate its license with Markham, they refused to do so. Markham disputed the case

claiming they did have trade secrets and Donadio and Connolly had used proprietary

information, however what this information was was never specified. Markham’s claim of

proprietary had no legal grounding. Markham did not seek a patent on their products

because they believed there were no commercial applications. Markham’s patent attorney

admitted that Markham had a computer system that listed what the company protected as

trade secrets, but CVD Inc. showed that the cvd process was not listed in the system.

Markham’s witnesses testified that its alleged trade secrets were known in the industry and

that a competent engineer cna construct its manufacturing process from the information

disclosed in government reports. A trade secret is kept secret and provides the company

with a competitive advantage but it does not protect a monopoly right and others can do

the same thing. Although they do not need to be disclosed, the information about

Markham’s trade secrets was information that any undergraduate or good engineer would

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 know.

With the benefit of hindsight, what could A.S. Markham have done to prevent this

case from occurring?

Markham could have tried to get a patent to protect their process so that it could not be

exactly copied. Markham never specified what they claimed as trade secrets. If they had

done so, employees would know what information could not be used. Markham’s

employment contracts did not contain noncompete clauses, but they could have added that.

Instead of having trade secrets, they could have pursued a patent, but they did not because

they did not see a commercial use of it, which is their own error. Secrecy only works best

there there are few sources of information which their cvd process was not. The process of

creating it was not poorly understood because it was stated that it was well known

information in the industry and any engineer with an undergraduate degree could have

done the same; there was not a limited number of people capable of understanding the

secret.

-----Notes 10/18

Employer agreement: non disclosure, non-compete

Non-disclosure: General knowledge is not covered. Proprietary knowledge belonging to

employer is covered

C says no trade secrets taken, not listed as prop info, no non-compete clause

Marham:

D+C stole prop proprietary knowledge, hurt us by starting company

What should Markham have done better to protect intellectual property?

● Make process a real trade secret (laid on the secrecy side. Better secrecy protocols)
● Have a non-compete clause

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 ● Patent their process
● Could have invested in CVD
● Zero sum approach:
● CVD - less risk, more incentive, less hierarchy

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