Preemption

Carolyn Kinder International, LLC, 2007 WL 1046911 (W.D. Tex. April 5, 2007), may represent both of these problems. Pursuant to a written agreement, the parties in the dispute agreed “to maintain any designs being considered as Designs and accepted in a timely manner, confidential except for the inclusion of Home Depot in deciding upon the selection of the Designs for Products and Families thereof.” There was a falling out, and litigation ensued. One of the claims was for “trade secret misappropriation.”

Plaintiff alleged:

Specifically, Uttermost and/or Mac Cooper, with the assistance of CKI and/or Carolyn Kinder, stole the designs for lighting products that Kinder and/or CKI had prepared for Spectrum. Plaintiff further states that every design contained in the excel spreadsheet titled ‘Copy of Spectrum all-collections composite 0223 06′ which Uttermost stole and produced only as recently as December 8, 2006 are Spectrum's trade secrets that Uttermost misappropriated.” Spectrum now asserts that the evidence shows that Uttermost misappropriated trade secrets including confidential product designs, information about Spectrum's relationship with CKI and Home Depot, and Spectrum's sales and contemplated business activities.

Defendant argued preemption, which plaintiff denied:

Spectrum argues that the Copyright Act does not preempt its trade secret misappropriation claims related to its product designs. In contrast, Spectrum argues, numerous cases have held that the Copyright Act does not preempt a claim for trade secret misappropriation whether or not the trade secret itself is copyrightable.
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Spectrum argues that copyright law does not preempt trade-secret law because, among other reasons, trade secret protection extends to subject matter that is not copyrightable, and provides protection in a manner that does not clash with the objectives of copyright laws. In addition, Spectrum contends that the “extra element” test is satisfied because proof of trade secret misappropriation has two extra elements-(1) proof of the confidential or secret nature of the information and (2) violation of a confidential or contractual relationship, acquisition through improper means, or use after notice of an improper disclosure.

The court held in a passage that is fairly circular:

With regard to the first prong, it appears undisputed that the product designs come within the subject matter of copyright. The preemption issue thus turns on whether the rights are determined to be equivalent. The court evaluates the equivalency of rights under the “extra element” test. Under this test, if the act or acts of the defendant about which the plaintiff complains would violate both misappropriation law and copyright law, then the state right is deemed “equivalent to copyright” and is preempted. If, however, one or more qualitatively different elements are required to constitute the state-created cause of action being asserted, then the right granted under state law does not lie “within the general scope of copyright” and there is no preemption. The Court agrees with Spectrum that its claim for trade secret misappropriation based on the misappropriation of its product designs is not preempted.

The holding seems correct as to the information, and perhaps as to product designs created by plaintiff that had not been disclosed, but as to the designs that defendant created for plaintiff, and which were embodied in publicly displayed lamps, any claim in the outward design is a copyright claim in disguise and preempted (to say nothing of not being a valid trade secret claim either).