US Court issues compulsory license for know-how protected as trade secret

In “Compulsory License as a Remedy for Trade Secret Misappropriation, Dennis Crouch writes* about a July 1, 2014 decision in Sabatino Bianco, M.D. v. Globus Medical, 2:12-cv-00147 (E.D. Tex 2014). The decision by Judge Bryson, a U.S. Circuit Judge in the Eastern District of Texas, concerns trade secrets which:

“consisted of ideas for the design of a medical device known as an adjustable intervertebral spacer or implant. Intervertebral spacers are used in spinal surgery to replace damaged discs in patients’ spines.”

A copy of the decision is attached here.

In a nutshell, Judge Bryson has denied an injunction to prevent Globus Medical from selling a medical device which was based upon trade secret misappropriation, but has granted an ongoing royalty of 5 percent to Sabation Bianco, the doctor whose ideas were misappropriated, for a period of 15 years.

“In conclusion, the Court finds that Dr. Bianco is entitled to an ongoing royalty rate equal to that determined by the jury for past damages. In the final judgment, to be entered separately, the Court will therefore order that Globus pay Dr. Bianco 5% of the future “net sales” (as defined in the exemplary Globus royalty agreements considered by the damages experts in this case) of Globus’s Caliber, Caliber–L, and Rise products, or products not colorably different from those products, with the royalty payment period terminating 15 years after July 1, 2007.”

Crouch seems skeptical of the decision, on the grounds the judge did not cite cases where “ongoing royalties have been awarded for trade secret misappropriation under Texas law.”

The eight page opinion provides a detailed analysis of the rationale for denying the injunction and setting the royalty at 5 percent for a period of 15 years.

This decision may be an important precedent, and is worth watching. Public interest groups should be considering briefs if there is an appeal. The decision to permit Globus to continue to sell the devices will clearly benefit patients with damaged spines.

The decision is consistent with the WTO TRIPS Agreement’s Section 7 on Protection of Undisclosed Information, and the remedies and enforcement provisions of the TRIPS, set out in Article 42, 44 and 45.

The decision also reminds us of the significance of new measures that may be proposed in secret trade agreements, such as the TTIP negotiations, that would change global norms on flexibility over confidential information, or enforcement of intellectual property rights.

*July 10,0 2010, Dennis Crouch, “Compulsory License as a Remedy for Trade Secret Misappropriation,