Addressing the issue of standing of a non-exclusive licensee to bring a trade secret misappropriation claim, the U.S. Court of Appeals for the Second Circuit upheld denial of a motion for judgment as a matter of law (JMOL) by the defendant-appellants because the 2d Circuit law simply requires possession of the trade secret and does not require any exclusive rights to the trade secret. Faiveley Transport v. Wabtec Corp., Case No. 11-3518 (2d Cir., Feb. 6, 2013) (summary order).
Malmo AB, a Swedish company, owns proprietary technology pertaining to distinctive brakes used on the New York City subway cars. Faiveley Transportand its sister companies have enjoyed exclusive rights to manufacture, use and sell the products that use this subway car brake technology. Wabtec and its predecessors had a license to the technology and products pursuant to an agreement with Malmo's predecessors since 1993, which was terminated in 2004. Faiveley sued Wabtec for misappropriation of trade secrets, alleging Wabtec used knowledge of the brake technology to reverse engineer the propriety products and thus represent to customers that the products belonged to Wabtec. Faiveley alleged that this misappropriation caused it to lose several lucrative contracts with various municipal transit authorities.
In denying Wabtec's motion to dismiss during the proceeding, the district court relied on the consistent holding of the 2d Circuit that "possession of a trade secret is sufficient to confer standing on a party for a claim of trade secret misappropriation." The district court concluded that Faiveley had shown sufficiently concrete and particularized interest to establish standing in view of Faiveley's assertion of exclusive rights to manufacture use or sell the brake products in the United States. The court did not specifically address the matter of standing in its denial of defendant's JMOL following a jury verdict for the plaintiffs of over $18 million and prejudgment interest. Earlier, a Swedish arbitration tribunal, as per the terms of the 1993 agreement, had found for Malmo on the misappropriation claim but had expressly refused to award damages to Malmo for losses suffered by Faiveley. Malmo received a $3.9 million royalty award from the tribunal.
The 2d Circuit dismissed Wabtec's argument that Faiveley had no "express exclusive license" to the trade secret and, hence, no standing. The 2d Circuit, citing its 2009 decision on preliminary injunction matters in the same case, explained that the prima facie case for a misappropriation claim are "(1) that [Faiveley] possessed a trade secret, and (2) that [Wabtec] used that trade secret in breach of an agreement, confidential relationship or duty, or as a result of discovery by improper means." The 2d Circuit further noted that its case law does not require "exclusive" possession of the trade secret. Rather, Faiveley position as the only entity in rightful possession of the subway car brake trade secret in the United States was sufficient to give it standing to sue. However, the court reduced the damages award to $15 million because the jury had not considered in its calculations the royalties awarded to Malmo by the arbitration tribunal.
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