What Are The Critical Legal Issues in This Case?

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

Prof. Scott Shane

October 18, 2017

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

What are the critical legal issues in this case?

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

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

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

your decisions hinge?

what it did not protect itself.

case from occurring?

Employer agreement: non disclosure, non-compete

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

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

What should Markham have done better to protect intellectual property?

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