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Federal Circuit Rules on Key Trade Secret Issues in Alifax v. Alcor Case

Trade Secret Issues

Synopsis

The U.S. Court of Appeals for the Federal Circuit recently issued a significant ruling in the long-running trade secret issues between Alifax and Alcor Scientific. The appellate decision provided clarity on several key issues surrounding the alleged misappropriation of Alifax’s trade secret issues related to its blood analysis technology.

Background

In 2014, Alifax, a maker of automated instruments for measuring erythrocyte sedimentation rates (ESR) in blood samples. They filed suit against Alcor Scientific, alleging misappropriation of two trade secrets. One was Alifax’s conversion algorithm source code with specific conversion constants. The other was an alleged signal acquisition trade secret involving the process of gathering raw ESR data.

After the initial trial, a jury found for Alifax on the conversion algorithm trade secret and awarded $6.5 million in damages. However, the district court excluded the signal acquisition trade secret claim and later overturned the jury verdict, ordering a new trial.

The Federal Circuit’s Rulings

On appeal, the Federal Circuit issued a mixed ruling, affirming some aspects of the lower court decisions while reversing others.

Signal Acquisition Trade Secret Properly Excluded

The appeals court affirmed the district court’s exclusion of the alleged signal acquisition trade secret claim. It agreed that Alifax failed to provide sufficient details to establish the existence and scope of this claimed trade secret under the relevant state law (Rhode Island Uniform Trade Secrets Act).

Conversion Algorithm Trade Secret Reinstated

However, the Federal Circuit reversed the district court’s grant of a new trial on liability for the conversion algorithm trade secret. It found the lower court applied an incorrect legal standard by requiring the trade secret to produce accurate results outside of Alifax’s systems.

Damages Issues

The appellate court affirmed the district court’s decision to exclude certain expert testimony on damages that went beyond summarizing facts. But it reversed the preclusion of Alifax from presenting any evidence of compensatory damages, allowing Alifax to re-litigate this issue.

Key Implications

The Federal Circuit’s ruling provided important guidance on the level of specificity required to prove a trade secret claim. Rejecting an overly narrow interpretation that a trade secret must be independently operable non-commercial contexts.

The decision also reinforced the precedent that a trade secret, if proven to be improperly acquired, meets the statutory definition regardless of its functional utility outside the owner’s products or processes.

As the case returns to the district court, Alifax will have an opportunity to present a new damages case. While being limited to the surviving conversion algorithm trade secret claim for liability purposes.

This ruling is being closely watched in trade secret litigation circles for its implications on the scope of protectable trade secrets. As well as the standards around damage calculations. The case highlights the complexity of these high-stakes intellectual property battles.

Next Steps

For further guidance on navigating the complexities of intellectual property law in the age of AI, please contact us at Stevens Law Group. Our team of experienced IP attorneys is here to help you protect your innovations and grow your business in an evolving legal landscape.

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The Protecting American Intellectual Property Act (PAIPA): A Powerful New Tool to Combat Trade Secret Theft

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