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Faiveley Transport v. Wabtec Corp. (2nd Cir 3/9/09)

Faiveley sued Wabtec for misappropriation of trade secrets and related claims. The trial court granted in part and denied in part Faiveley's motion for a preliminary injunction; the 2nd Circuit vacated and remanded. During the 1970s, Faiveley's predecessor developed a unique air brake system designed to stop trains quickly and smoothly. The brakes in question are known as brake friction cylinder tread break units ("BFC TBU"). In 1993, Faiveley's predecessor entered into a license agreement with Wabco, then a sister company. Pursuant to the agreement, Wabco was authorized to use the predecessor's know how, including manufacturing data, specifications, designs, plans, and trade secrets to produce and market BFC TBU. In 2004, Faiveley acquired the licensor and assumed ownership of the intellectual property related to BFC TBU. At the time, Wabtec, Wabco's successor, was still producing BFC TBU parts and components pursuant to the agreement. Thereafter, Faiveley notified Wabtec that the agreement would not be renewed. Wabtec then began development of its own line of BFC TBU products through reverse engineering. In 2007, the New York City Transit Authority awarded a sole source contract to Wabtec. Faiveley alleges that Wabtec used its trade secrets to produce BFC TBU products for this contract. Because the evidence did not support the conclusion (and the trial court did not find) that Faiveley would suffer irreparable harm in the absence of this relief, a preliminary injunction was not warranted. There was no error in the trial court's conclusion that the manufacturing drawings contained trade secrets under New York law. That this information was not widely known was evidenced by the fact that no company other than Faiveley (and Wabtec pursuant to the license agreement) had produced a complete BFC TBU. Faiveley had strictly limited the access of its own employees to the information and did not permit customers to view it. There was also ample support for the trial court's conclusion that Wabtec's reverse engineering process made important use of Faiveley's trade secrets. This process was fatally tainted by the involvement of Moore, a Wabtec employee who had frequent contact with Faiveley's drawings during the course of the license agreement. However, the trial court further found that Wabtec appeared to be treating Faiveley's trade secrets with the same confidentiality that Wabtec used for its own proprietary information. There was no indication that Wabtec had disclosed Faiveley's trade secrets to any third-party during the life of the license agreement or after it expired. There was little or no risk that Wabtec would further disclose or otherwise irreparably impair Faiveley's trade secrets.

Full post as published by The Trade Secrets Vault on April 10, 2009 (boomark / email).