CO Court of Appeals: Protecting a ‘Trade Secret’ Doesn’t Make It One

by Law Week

‘Unusual’ trade secrets case yields lessons for companies on secret status and agreements

By Doug Chartier

LAW WEEK COLORADO

When taking steps to protect a trade secret, companies should make sure it’s a secret to begin with, according to a new opinion by the Colorado Court of Appeals. But the analysis in Hawg Tools v. Newsco International Energy Services touches on other lessons for Colorado companies navigating trade secrets law.

In an opinion published Dec. 1, the appeals court reversed the trial court’s verdict finding that energy company Newsco misappropriated what Hawg Tools claimed was its trade secret drill design. Seeing evidence that the component in question was widely adopted in the industry, the appellate court found it couldn’t be considered a trade secret even though Hawg Tools took steps to protect it.

In 2008, plaintiff Hawg Tools’ owner Daniel Gallagher paid a machinist $350,000 for the rights to a design for a part used in a type of oil drill known as a mud motor. The machinist himself didn’t invent or develop the mud motor part’s schematics, but rather got them from designer and friend Joe Ficken, who drew up the design and assigned the machinist the rights for free as a favor. When Ficken was hired thereafter by Newsco in 2011, and after he and the machinist assigned  the rights to Gallagher, he used a similar design for his new employer.

The court noted, however, that the design in question was invented back in 1971. Ficken adopted the design from an example he’d found in an engineering handbook.

To read this story and other complete articles featured in the December 12, 2016 print edition of Law Week Colorado, copies are available for purchase online.

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