Snead v. Redland Aggregates Ltd.

998 F.2d 1325 (1993)

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Nature of the Case

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Facts

Ps began designing and building a new type of railroad car that they called a 'dump train,' which consists of a group of open-topped railroad hopper cars joined together and to a transfer car. Material can be discharged easily from the cars onto the conveyer belt, which then carries the material to the transfer car; the transfer car unloads material onto either side of the tracks. Material can be unloaded without additional equipment or special facilities at the unloading site. The Patent Office rejected P's application because a German patent application filed ten years earlier had disclosed a similar invention. Snead obtained patents on several elements of the dump train but not on the general concept. D approached P and expressed interest in developing such a train for the European market. P met with D a number of times. Eventually, P presented Ds with a licensing agreement. Ds refused to sign a confidentiality agreement until the patent question was resolved. D returned with a 'Non-Disclosure Agreement.' Again, the representatives would not agree to the terms of the agreement. P returned with a third document entitled 'Non-Disclosure Agreement,' which the representatives finally agreed to sign. P promised to give Ds information about the dump train to allow them to study the feasibility of use in the United Kingdom. Ds agreed to keep confidential any information provided by P and to provide P with copies of all information generated in connection with the feasibility study. After this agreement was signed, P sent D a set of drawings of the dump train. British Rail determined that the dump train was not feasible, so Ds decided to design and build a train suitable for British Rail. Ds still believed that P had patent protection, and thus, licensing discussions continued. D decided that it would design around P's patent application and would make no further use of the drawings and data supplied by P. D then completed and sold its version of the dump train. P sued Ds for misappropriation of trade secrets and breach of a confidential relationship. P issued a press release, regarding the suit, that accuses Ds of 'international theft,' 'industrial espionage,' and 'international piracy.' Ds counterclaimed for libel. Ds got the judgment on P's claims and their counterclaims. Ds got the judgment on P's claims and on their counterclaims. The district court held that Snead and Georgetown had no trade secret rights in their dump train and that no confidential relationship ever existed. Because P never had patent protection for the dump train concept, the confidentiality agreement was void, as P had procured it fraudulently. On the libel counterclaim, the judge found Ps guilty of libel per se and held that P had acted with actual malice in issuing the press release. The court awarded Ds $1 each in compensatory damages and $500,000 each in punitive damages. Ps appealed.