Fail-Safe, LLC v. A.O. Smith Corp.

By volunteering information without broaching the topic of confidentiality, it is unreasonable to expect a confidential relationship.

Opinion (Cudahy): Fail Safe, LLC (“FS”) and A.O. Smith Corporation (“AOS”), both manufacturers of pool pump motors and other pool devices, collaborated together to develop a pump motor for pool suction entrapment protection technology. FS repeatedly shared descriptions of the project, along with test results from previous designs without discussing confidentiality with AOS. No formal relationship was established between FS and AOS, and correspondence ceased by October 2006. AOS introduced two pump motors FS claimed incorporated its trade secrets in 2006, and FS sued in May 2008 for misappropriation of trade secrets. AOS motioned for summary judgment, which the district court granted, finding FS’s claim time-barred, and that FS failed to take reasonable steps to protect the secrecy of its claimed trade secrets. FS appealed, arguing that it reasonably believed it had entered into a joint venture with AOS, creating a duty of confidentiality. The Court of Appeals held the parties’ collaborations insufficiently evidenced a reciprocally confidential relationship. Furthermore, by effectively volunteering the information without broaching the topic of confidentiality with AOS, FS’s actions were unreasonable, and AOS had no duty of confidentiality. The Court of Appeals AFFIRMED summary judgment.