Petition for Writ of Certiorari — Cook Group, Inc. v. Wilson

Bupreme Court, U.S.

a. i oe

991248 Jan 25 2000

No. 99-

2 0 5 os ere oom wn omen ererene es eed =

IN THE

Supreme Court of the United States

COOK GROUP INCORPORATED, WILSON-COOK MEDICAL

INC., COOK INCORPORATED, VANCE PRODUCTS

INCORPORATED and SABIN CORPORATION,

Petitioners,

v.

JON S. WILSON and WILTEK MEDICAL, INC.,

Respondents.

On PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

AARON J. KRAMER

Counsel of Record

RONALD WILDER

CATHERINE M. MASTERS

ROBERT UNIKEL

ScuiFF HARDIN & WAITE

Attorneys for Petitioners

6600 Sears Tower

Chicago, illinois 60606

(312) 258-5500

157455 @ Counsel! Press LLC

(800) 274-3321 + (800) 359-6859

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QUESTION PRESENTED

The “doctrine of equivalents” is an intellectual property

doctrine, holding that infringement of a protected idea occurs

when one modifies an element of the protected idea merely

by substituting an equivalent element inspired by the

protected original. The court below refused to apply the

doctrine of equivalents in analyzing whether the respondents,

who had previously been held to be willful and malicious

infringers of the petitioners’ trade secret rights and were

enjoined from further infringement, vioiated the injunction

when they substituted equivalent elements of the trade secrets

and continued to use them. In considering petitioners’ motion

for contempt of the injunction, did the court below err in

treating trade secrets differently from other intellectual

property and in refusing to apply the doctrine of equivalents?

il

STATEMENT PURSUANT TO RULE 29.6

Petitioner Cook Group, Incorporated is the parent

corporation of the other petitioners herein. Cook Group,

Incorporated has no parent corporation and there is no

publicly held company owning ten percent or more of any

of the petitioners’ stock.

ill

TABLE OF CONTENTS

Page

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Statement Pursuant to Rule 29.6 ............... ll

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PII, oa ecb auc cccecesbetcoetees Vill

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Statutory Provision and Rule Involved .......... 3

EE as ase wine 6 dew 5.06 ob cnt anes 4

Reasons for Granting the Writ ................. 8

The Fourth Circuit’s Opinion Conflicts With

Decisions Of The Third, Seventh, Tenth,

Eleventh And Federal Circuits, Which

Recognize The Importance Of Applying The

Doctrine Of Equivalents To Remedy

Contempt Of Federal Court Injunctions

Protecting Valuable Intellectual Property

Rights, Including Trade Secrets And Patents.

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iv

TABLE OF CITED AUTHORITIES

Page

Cases: 6

Becher v. Contoure Laboratories, Inc., 279 U.S. 388

fo '. PMNE aprile Bir oem ace Ee eS erie pple iN pains 17

Board of Trade of Chicago v. Christi Grain & Stock

Ca, Se ee STEED otis ceee ee veeee bon 17

Dr. Miles Medical Co. v. John D. Park & Sons,

Be OTe EP EE K bc cee ca bewes casein 11,17

E.J. DuPont de Nemours Powder Co. v. Masland,

BD hs POP REOETE 44s 200K ESS 10, 17

Eskay Drugs v. Smith, Kline & French Laboratories,

LSS F649 CEC, URGE) occ execccsicsesss 16

Forest Laboratories, Inc., v. The Pillsbury Co.,

ee Loge, FS A. 2s > eee 12

Fowle v. Park, 131 U.S. 88 (1889) ............. 17

General Electric Co. v. Sung, 843 F. Supp. 776

tS PERRET UEP CTT CET Te Cee Tee 15

Graver Tank & Mfg. Co., Inc. v. Lini Air Products

Ce., 559 US: GOS CFE) oe ev ecsckss 8, 9, 11, 17, 19

Hoeltke v. C.M. Kemp Mfg. Co., 80 F.2d 912

Gat See 65s ih dhwacesaseaderpar ors 15

Cited Authorities

Page

In re Innovative Construction Systems, Inc., 793 F.2d

eB, Le ML | Rpg ron: beers Cope pr arene 13

In re Jon S. Wilson, 233 B.R. 915 (M.D.N.C. 1998)

Pe PE Py ee ee EN rc ey Oe EE 2

In re Jon S. Wilson, 165 F.3d 913, 1998 WL 671658

PS RAD 5 aa ees Sr ona ee 5

Interdynamics, Inc. v. Firma Wolf, 698 F.2d 157

ee Ala PE a oa 00. iGo wad da kd Maes Oe 17

International Industries, Inc. v. Warren Petroleum

Corp., 99 F. Supp. 907 (D.C. Del. 1951) ...... 16

Kewanee Oil Co. v. Bicron Corporation, 416 U.S.

he. | perewens Serer ey pena pe were as 18

KSM Fastening Systems, Inc. v. H.A. Jones Co.,

770 Fiat 1902 Gree. CA. FI) oi 6 once e ee 17

Mangren Research and Dev. Corp. v. National

Chem. Co., 87 F.3d 937 (7th Cir. 1996) ....... 12

McCullough Tool Co. v. Well Surveys, Inc., 395 F.2d

APO CT Gs ED a8. 5b eR ie Fi es 17

Motorola, Inc. v. Computer Displays Int'l, Inc.,

739 F.2d 1149 (7th Cir. 1984) ........ 13, 14, 16, 17

vi

Cited Authorities

Page

Pennwalt Corporation v. Durand-Wayland, Inc.,

$33 F.26 931 (P08. CW. ISBT) sce cdeavescens 9

Sure Plus Manufacturing Co. v. Kobrin, 719 F.2d

1136 CEA: Se 6a ee ee eins see 17

Thermodyne Food Service Products, Inc., and

AFTEC, Inc., v. McDonald's Corporation, et al.,

940 F. Supp. 1300 (N.D. Ill. 1996) ........... 13

Tower Mfg. Co. v. Monsanto Chemical Works,

20 F .26 S06 (GE PRET kee hh eh en ck 10

United States v. City of Miami, 664 F.2d 435

(FU CA. TIED 6 0 60h cextaerke score eee 14

United States v. Dubilier Condenser Corp., 289 U.S.

LTR CIs) 6s oben csanaciegeeeeeteen 18

Universal Motor Oils Co., Inc. v. Amoco Oil Co.,

743 F. Supp. 1484 (D. Kan. 1990) ............ 16

USM Corp. v. Marson Fastener Corp., 392 Mass.

534, 407 NEG TET) CE 6 kine ie Nae eee 15, 16

Vermont Microsystems, Inc. v. Autodesk, Inc.,

OS FSG FSS Cee ee BOR ce vec ccweneeeeness 12

Warner-Jenkinson Co. v. Hilton Davis Chemical Co.,

Fo gee Bees 6g Beep rem a en yn sa 9, 10

Winans v. Denmead, 15 How. 330 (1853) ........ 9

3

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8

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Cited Authorities

Page

Statutes:

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Rule:

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Other Authorities:

4 D. Chisum Patents § 18.04[1], at 18-32.3 ...... 9

Section 757 of the Restatement (First) of Torts,

snc nS Ee Pa PRD EO 11, 12,14

vill

TABLE OF APPENDICES

Page

Appendix A — Opinion Of The United States Court

Of Appeals For The Fourth Circuit Dated And

Breas CICONT ZI, 1S oc ce wewscviiacess la

Appendix B — Order Of The United States District

Court For The Middle District Of North Carolina

Dated And Filed December 2, 1998 .......... 8a

]

Petitioners, the Cook Companies, respectfully request

that a writ of certiorari be issued to review the judgment and

opinion of the United States Court of Appeals for the Fourth

Circuit in this case entered on October 27, 1999.

OPINIONS BELOW

This is an intellectual property case, involving trade

secrets and proprietary processes. Accordingly, certain of

the proceedings and opinions below were sealed and

unpublished. !

1. In order to protect the petitioners’ secret equipment and

processes from unintended public disclosure, this Petition describes

the trade secrets at issue (“Trade Secrets 3 and 14”) in general terms,

and the petitioners have filed separately, in a sealed appendix whose

pages are numbered by the designation “SA,” the following

confidential materials:

(1) Excerpts from the Bankruptcy Court’s May 22,

1995 sealed Injunction and Memorandum Opinion,

finding willful and malicious infringement of Trade

Secrets 3 and 14 (SA1 to SA45);

(2) The Bankruptcy Court’s December 8, 1997 sealed

Second Memorandum Opinion, refusing to find

violation of the Injunction as to Trade Secrets 3

and 14 after a surprise inspection of the

respondents’ plant in 1997 (SA46 to SA 84); and

(3) A nine-minute VHS videotape (the “Videotape”),

showing both the petitioners’ trade secret processes

in operation at their plant, and the respondents’

equivalent operations at their plant, shown side-

by-side on a split screen (petitioners’ on the right,

respondents’ on the left). The Videotape includes

(Cont’d)

2

The United States Bankruptcy Court for the Middle

District of North Carolina entered its Memorandum Opinion,

Findings of Fact and Conclusions of Law on May 22, 1995,

finding that the respondents willfully and maliciously

infringed certain of the petitioners’ trade secrets, and entered

a permanent Injunction and Judgment (the “Injunction’’) on

the same date. These documents were sealed by the court,

and pertinent excerpts have been tendered to this Court for

filing under seal.

The Bankruptcy Court entered a Second Memorandum

Opinion and judgment on December 8, 1997, refusing to hold

that the respondents violated the Injunction. These

documents, also sealed by the court, have also been tendered

to this Court for filing under seal.

The United States District Court for the Middle District

of North Carolina affirmed the Second Memorandum

Opinion and judgment by opinion dated December 2, 1998,

published as Jn re Jon S. Wilson, 233 B.R. 915 (M.D.N.C.

1998). A copy of that decision is annexed as Appendix B.

The United States Court of Appeals for the Fourth Circuit

affirmed, in an unpublished decision available at 1999 WL

976491 (4th Cir. Oct. 27, 1999), a copy of which is annexed

as Appendix A.

(Cont'd)

footage both from before the 1994 trial and at the

1997 surprise inspection, as well as the catalog

pages of both companies offering identical products

for sale. The Videotape, based entirely on evidence

of record, was accepted by each of the reviewing

courts below.

3

STATEMENT OF JURISDICTION

The judgment of the United States Court of Appeals for

the Fourth Circuit was entered on October 27, 1999. This

petition was filed within 90 days of that date.

The jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1).

STATUTORY PROVISION AND RULE INVOLVED

Rule 65(d) Fed. R. Civ. P., which provides:

(d) Form and Scope of Injunction or Restraining

Order. Every order granting an injunction and

every restraining order shall set forth the reasons

for its issuance; shall be specific in terms; [and]

shall describe in reasonable detail, and not by

reference to the complaint or other document, the

act or acts sought to be restrained. ...

18 U.S.C. § 401 which provides:

A court of the United States shall have power to

punish by fine or imprisonment, at its discretion,

such contempt of its authority, and none other,

as — m3

(3) Disobedience or resistance to its lawful writ,

process, order, rule, decree, or command.

4

STATEMENT OF THE CASE

This case involves the willful and malicious

misappropriation of intellectual property. The petitioners, Cook

Group, Inc., Wilson-Cook Medical, Inc. (“Wilson-Cook”’), Cook

Inc., Vance Products, Inc., and Sabin Corp. (collectively,

“Cook” or the “Cook Companies”), manufacture and sell

medical devices worldwide. They employ a variety of trade

secret processes, developed at great expense of time and money

during the companies’ 37-year history, and scrupulously

guarded by them from disclosure to outsiders. Their products

include catheters and catheter wireguides, made for use in the

human body, that must be made in compliance with exacting

FDA regulations. Among Cook’s trade secrets recognized in

this case are methods for rounding the tips of wireguides and

other wire products to make them safe for use in the human

body (Trade Secret 3) and for forming permanent curves in

polymer catheters (Trade Secret 14).

The respondents are Jon S. Wilson (“Wilson’’) and his

company, Wiltek Medical, Inc. (“Wiltek’’) (collectively, the

Defendants”). Wilson is a former Cook employee who received

all his training and experience in the medical device field from

Cook. He was hired as a salesman in 1978, when he was a high

school graduate with no medical device manufacturing

experience or qualification, by Cook Canada, a company owned

by Cook and run by Wilson’s father. In 1981, at his father’s

suggestion, he was named president of a new Cook company,

Wilson-Cook, which was formed to expand Cook’s existing

manufacture of specialty gastroenterological medical devices.

In assuming this position, Wilson expressly agreed to keep secret

Cook’s confidential processes and equipment. In 1989, Wilson

was asked to resign, following certain repeated financial abuses

and failures to comply with critical FDA regulations.

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Immediately after his resignation, Wilson formed a new

venture, Wiltek, to compete directly with Wilson-Cook.

Because Wilson copied Wilsoii-Cook’s key product line and

its confidential manufacturing processes, Cook sued for

misappropriation of trade secrets. There is no question that

Cook has genuine trade secrets, and that the Defendants

misappropriated them. After a two-month trial (held before

the Bankruptcy Court because Wilson filed a petition for

protection under Chapter 11 of the Bankruptcy Code) in May

of 1995, the Bankruptcy Court held that Wilson and Wiltek

had willfully and maliciously misappropriated a number of

Cook’s trade secrets, including Trade Secrets 3 and 14, and

issued the permanent Injunction, prohibiting further use,

licensing, marketing, or disclosure of the trade secrets.”

The Bankruptcy Court’s disposition allowed Cook to

make one surprise inspection of Wiltek’s facilities to monitor

the Defendants’ compliance with the Injunction. At the

inspection in October 1997, Cook found that the Defendants

continued to manufacture wire products with rounded tips

and catheters with formed curves, using Trade Secrets 3 and

14 with minor modifications: for forming the rounded tips

of the wires, they used the identical Cook Trade Secret 3

process, but shortened the duration of the application of the

process by a fraction of a second, so that the tip of the wire

was rounded but not ball-tipped;’ and for forming curves in

2. The Bankruptcy Court’s judgment of willful and malicious

misappropriation was affirmed on appeal. See Jn re Jon S. Wilson,

165 F.3d 913, 1998 WL 671658 (4th Cir. N.C.) (unpublished).

3. Catheter wireguides can have approximately the thickness

of a human hair and must pass through delicate body passageways

like blood vessels and organs. Symmetrically rounding the tip of

the wire, as Cook’s secret process accomplishes, to create the

smoothest possible interface with the body passageway, is of critical

importance. (See Videotape.) Cook uses this trade secret process

some 3,000,000 times each year.

6

catheters they substituted for the Trade Secret 14 secret

medium a medium with similar physical properties, expressly

chosen to mimic Cook’s secret medium in every critical

respect.* The Defendants were able to replicate these

manufacturing processes, identical to Cook’s processes

except for the insubstantial substitutions, only because of

their knowledge of Cook’s processes.

Cook filed a motion seeking to hold the Defendants in

contempt of the Injunction (the “Contempt Motion”).

The Bankruptcy Court denied the Contempt Motion as to

Trade Secrets 3 and 14, and the district court affirmed.

SA 46-58, 75-82; App. 8a-10a. The Fourth Circuit affirmed.

App. la-7a. The Fourth Circuit refused to apply the “doctrine

of equivalents” — an intellectual property doctrine holding

that a minor modification or substitution in one’s use of a

protected idea does not defeat a claim of infringement,

because in these circumstances the use is “equivalent,”

though not “identical.” The Fourth Circuit explained its

refusal to apply the doctrine as follows:

4. The Bankruptcy Court viewed the Defendants’ choice of a

substitute medium as an “independent development.” SA80. But,

as they admitted below, Defendants’ choice of a substitute medium

was “obvious” only to someone who already knew the unique and

publicly unknown characteristics and advantages of Cook’s secret

medium. The advantages of the Cook process and secret heating

medium over publicly known methods for forming curves in polymer

catheters include: (1) uniformity of the process applied to all angles

of the catheter; (2) consistency in the formation of the catheters,

achieved by formation at a uniform temperature; (3) the ability to

manufacture multiple curved catheters at one time; (4) lack of danger

to the workers; (5) excellent biocompatibility; and (6) quickness,

simplicity, and inexpensiveness. (See SA77-78; Videotape.)

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The doctrine of equivalents is primarily a patent

law doctrine and its application in the trade secret

context has been quite limited. Almost all of the

cases Cook relies on are appeals to determine

whether or not something was a trade secret [but

here] the bankruptcy court had already determined

the scope of the trade secrets. .. . Cook cites to

only one circuit court case where the doctrine of

equivalents was applied in a trade secret contempt

context. See Motorola, Inc. v. Computer Displays

Int'l, Inc., 739 F.2d 1149 (7th Cir. 1984). But even

Motorola can be distinguished because it involved

a consent decree and not an injunction. Nothing

in this circuit would suggest that the doctrine of

equivalents is invariably applied in the trade secret

contempt context, much less that it would

somehow trump the governing standards of

review.

(App. 4a-5a n.*)

8

REASONS FOR GRANTING THE WRIT

THE FOURTH CIRCUIT’S OPINION CONFLICTS

WITH DECISIONS OF THE THIRD, SEVENTH,

TENTH, ELEVENTH AND FEDERAL CIRCUITS,

WHICH RECOGNIZE THE IMPORTANCE OF

APPLYING THE DOCTRINE OF EQUIVALENTS TO

REMEDY CONTEMPT OF FEDERAL COURT

INJUNCTIONS PROTECTING VALUABLE

INTELLECTUAL PROPERTY RIGHTS, INCLUDING

TRADE SECRETS AND PATENTS.

This Court mapped out the vital importance of the

doctrine of equivalents in protecting intellectual property

rights in Graver Tank & Mfg. Co. v. Lini Air Products Co.,

339 U.S. 605 (1950). The Court recognized that to permit a

close but non-literal imitation of a patented invention would

be to convert the protection of the patent grant into a “hollow

and useless thing” and would encourage the unscrupulous

copyist to make “unimportant and insubstantial changes and

substitutions” which, while adding nothing of substance,

would be enough to take the copied matter outside both the

claim and the protection of the law. Jd. Justice Jackson wrote

for the Court that one who seeks to pirate an invention, a

book or a play may be expected to introduce minor variations

to conceal and shelter the piracy since outright duplication

is a “dull and very rare type of infringement.” Jd.

The key issue in Graver Tank was whether the

substitution of a nonalkaline earth metal (manganese) for

the alkaline earth metal (magnesium) claimed in the patent

was, under the circumstances of the case, a sufficiently

insubstantial change which justified application of the

doctrine of equivalents. Just as the substitution in Graver

Parnes

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9

Tank was found sufficient to invoke the doctrine there, so

too it should have been applied to the insubstantial

substitutions or deviations in the present case, but the Fourth

Circuit refused erroneously even to apply the doctrine.

To prohibit form prevailing over substance, the doctrine

of equivalents has evolved and regularly been observed, by

this Court and other federal courts, for the last 150 years in

the area of intellectual property rights, to prevent an infringer

from stealing the benefits of someone else’s creation.

See Winans v. Denmead, 15 How. 330 (1853); Pennwalt

Corp. v. Durand-Wayland, Inc., 833 F.2d 931 , 946 (Fed. Cir.

1987), cert. denied, 485 U.S. 961 (Bennett dissenting)

(in 130 years of jurisprudence, in the interests of justice,

judicial interpretations of claims beyond their bounds have

been made under the doctrine of equivalents), citing 4 D.

Chisum Patents § 18.04[1], at 18-32.3 (“While contrary to

the general principle that claims measure the scope of the

patent monopoly, the doctrine [of equivalents] is retained in

order to prevent persons from practicing fraud on patents.”).

Thus, a patentee may proceed against the producer of a device

that “performs substantially the same function in

substantially the same way to obtain the same result,” under

the theory that “if two devices do the same work in

substantially the same way and accomplish substantially the

same result, they are the same, even though they differ in

name, form or shape.” Graver Tank, 339 U.S. at 608

(citations omitted). Most recently, in Warner-Jenkinson Co.

v. Hilton Davis Chem. Co., 520 U.S. 17, 40 (1997), Justice

Thomas reaffirmed this Court’s “adher[ence] to the doctrine

of equivalents” and its benefits in “the prevention of copying

and piracy.” /d.

10

Although the doctrine of equivalents was initially born

as a patent law doctrine, as early as 1927, Judge Augustus

N. Hand found the doctrine eminently suitable for application

in the field of trade secrets:

[T]he novel question [is] whether there can be

anything applicable to a secret process like the

doctrine of equivalents familiar to the patent law.

There seems to be no authority upon this subject,

but I cannot think that the fiduciary obligation of

one bound not to disclose a secret process, or not

to use such a process that has been improperly

disclosed, is not violated, where the process

employed is used to produce an identical result

in ways directly suggested by the disclosure,

though slightly differing from it in detail.

The question is one of the real scope of the secret

process and the closeness of approximation of the

variation. ...

Tower Mfg. Co. v. Monsanto Chem. Works, 20 F.2d 386,

387 (S.D.N.Y. 1927).

In contrast to infringement via the doctrine of equivalents

under the patent law, which does not necessarily require proof

of a wrongful intent, Warner-Jenkinson, 520 U.S. at 35, trade

secret misappropriations invariably involve a breach of a

trust.

As recognized by Justice Oliver Wendell Holmes in

E.I. DuPont de Nemours Powder Co. v. Masland, 244 U:S.

100, 102 (1917), trade secret laws are not those of property,

but of the equitable principles of good faith applicable to

PAN Pres A ee RL he EAS EL

1]

confidential relationships. The employer who has discovered

or developed trade secrets is protected against unauthorized

disclosure or use, not because he has a property interest in

the trade secrets, but because the trade secrets were made

known to the employee in a confidential relationship. Again

in Dr. Miles Medical Co. v. John D. Park & Sons, 220 U.S.

373, 402 (1911), this Court recognized that a trade secret

complainant “is entitled to be protected against invasion of

its rights in the [secret] process by fraud or by breach of

trust or contract.”

Because trade secret misappropriation is always the

product of wrongful conduct akin to the piracy concern

addressed in Graver Tank, the need for the doctrine of

equivalents is generally stronger in the case of trade secrets

than in the case of patents. Under the Restatement (First) of

Torts and the numerous cases applying the doctrine of

equivalents in the trade secrets context, a defendant enjoined

from trade secret misappropriation may be held in contempt

even if he does not use a protected trade secret in exactly the

form prohibited by the injunction. As stated in Section 757

of the Restatement (First) of Torts, comment c:

Modification or improvement of the secret by the

actor. To subject a person to liability, under the

rule stated in this Section, for the use of another’s

trade secret, there is no requirement that he use

it in exactly the form in which he received it. He

may be liable even if he uses it with modifications

or improvements upon it effected by his own

efforts. Differences in detail do not preclude

liability if, substantially, the process used by the

actor is derived from the other’s Secret in the

manner stated in this Section. The liability is

12

avoided only when the contribution by the

other’s secret is so slight that the actor’s process

can be said to be derived from other sources;

although even in such a case the actor is still

subject to liability for harm caused by his

disclosure or possession of the secret, under the

rules stated in Secs. 757-759.

(Emphasis added.)

This Restatement doctrine of equivalents for trade secrets

has been recognized and applied in numerous

misappropriation cases in federal courts of appeals. For

example, in Vermont Microsystems, Inc., v. Autodesk, Inc.,

88 F.3d 142, 147 (2nd Cir. 1996), where the plaintiff

established that the defendant’s display list driver was

substantially derived from the architecture of the plaintiff's

list driver, the court held that the plaintiff did not have to

prove that the display list drivers were identical. Substantial

derivation was all that was necessary to establish trade secret

misappropriation. See also Mangren Research & Devel.

Corp. v. National Chem. Co., 87 F.3d 937, 943 (7th Cir.

1996) (where defendants’ formula contained ingredients

different from the plaintiff's formula, but the essential

characteristics of both were identical, the court found

misappropriation because defendants used the plaintiff's

secret to develop their product); Forest Laboratories, Inc.

v. The Pillsbury Co., 452 F.2d 621, 624-25 (7th Cir. 1971)

(court dismissed difference between plaintiff’s and

defendant’s processes — one using open containers and the

other using closed — stating, “the user of another’s trade

secret is liable even if he uses it with modifications or

improvements upon it effected by his own efforts, as long as

the substance of the process used by the actor is derived from

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13

the other’s secret”); Jn re Innovative Construction Systems,

Inc., 793 F.2d 875, 886 (7th Cir. 1986) (“Were the law of

trade secrets not flexible enough to reach the modifications

in the instant case, when it is evident that the formulas were

substantially derived from Innovative’s, [the law] would

indeed be hollow.”).

Thus, although a process or equipment is slightly

modified or different from a trade secret process or

equipment, a trade secret misappropriation occurs if the

modified or different process or equipment is “substantially

derived” from the trade secret. See 7) hermodyne Food Service

Products, Inc. v. McDonald’s Corp., 940 F. Supp. 1300,

1307-08 (N.D. Ill. 1996) (applying doctrine of equivalents

to find misappropriation, for slightly different or modified

component parts were “connected” or “interrelated” in a

manner derived improperly from the plaintiff's technology).

The same rule applies in the contempt context. Where

(as here) an injunction has forbidden a defendant from using

a trade secret, that defendant cannot escape contempt by

arguing that he “modified” or changed the trade secret, where

the modification is substantially equivalent to, and derived

from, the original. See Motorola, Inc. y. Computer Displays

Int'l, Inc., 739 F.2d 1149, 1156-57 (7th Cir. 1984) (trade

secret defendant held in contempt for utilizing the substantial

equivalent of the plaintiff's trade secret). As stated by the

Seventh Circuit:

To say that the consent decree prohibited only the

sale of a display monitor series identical to the

[plaintiff's] in all respects or with only minimal

changes would make the injunction meaningless.

Even [the defendant] recognized that more than a

14

trivial change would be required to comply with

the [trade secret consent] decree [prohibiting the

infringing competitor from performing certain

acts].... Moreover, this interpretation is in

accord with trade secret law, which protects the

holder of a trade secret from uses substantially

derived from that secret.

Id. at 1156. See Restatement (First) of Torts § 757,

comment c.°

The “substantially derived” element of the doctrine of

equivalents in trade secrets cases is both fundamental and

critical to the protection of trade secret rights, which depend

upon the continued observance of ethical obligations by a

person (such as an employee) toward those from whom he

learned the secrets in trust (such as an employer who has

developed the trade secrets for use in its business). Given

the impossibility of wiping a misappropriator’s mind clean

of stolen trade secret information, it is all too easy for the

misappropriator to devise a process only slightly different

5. The Fourth Circuit’s attempt to “distinguish” Motorola in the

opinion below on the ground that Motorola “involved a consent decree

and not an injunction,” as in the instant case (App. 5a n.*), is erroneous:

A consent decree, although founded on the agreement of

the parties, is a judgment. United States v. Kellum, 523

F.2d 1284, 1287 (Sth Cir. 1975). It has the force of res

judicata, protecting the parties from future litigation. It thus

has greater finality than a compact. As a judgment, it may

be enforced by judicial sanctions, including citation for

contempt if it is violated.

United States v. City of Miami, 664 F.2d 435, 439-40 (Sth Cir. 1981)

(emphasis added and footnotes citing supporting authorities omitted).

15

from, but having the same essential characteristics as, the

protected trade secret process, Without the information which

the misappropriator learned and received as a part of his trust

relationship with the real trade secret owner (here Cook), it

would be considerably more difficult, if not impossible, for

the misappropriator (here Defendants) to start from scratch

and truly “discover” the equivalent process.

It is for precisely this reason that a “compelling

inference” of substantial derivation is applied where

modifications and/or improvements are made by

misappropriators or their privies. As explained by the court

in General Electric Co. y. Sung, 843 F. Supp. 776 (D. Mass.

1994):

[Defendant] himself was intimately familiar with

the GE trade secret technology and supervised the

development of the [accused] design. Under

Massachusetts trade secret law, these facts give

rise to a compelling inference that the [accused

design] was substantially derived from GE trade

secrets. “Where modifications in the process are

made by persons cognizant of the trade secret . =

proof of the independent derivation of the

differing process is more difficult than would be

the case if an apparent ‘modification’ were made

by a person untainted with knowledge of the trade

secret.”

Id. at 778 (quoting USM Corp. v. Marson Fastener Corp.,

392 Mass. 334, 352, 467 N.E.2d 1271, 1284 (1984)); Hoeltke

v. C.M. Kemp Mfg. Co., 80 F.2d 912, 923-24 (4th Cir. 1936)

(similarity of a defendant’s device, after he has received a

confidential disclosure from an inventor, is Strong evidence

16

of copying); /nternational Industries, Inc. v. Warren

Petroleum Corp., 99 F. Supp. 907, 914 (D.C. Del. 1951)

(injunctive relief granted where defendants had designed and

built a cargo vessel after receiving confidential disclosure

of plaintiff's tanker plans).

In fact, as is true of trademark infringers who attempt to

alter their designs to avoid further infringement, it is, and

should be, incumbent upon an adjudged trade secret

misappropriator — particularly those like Defendants who

are found liable for willful and malicious misappropriation

— to “keep a safe distance away from the dividing line

between violation of and compliance with the injunction.

The infringer ‘must do more than see how close [it] can come

with safety to that which [it was] enjoined from doing.’ ”

Universal Motor Oils Co. v. Amoco Oil Co., 743 F. Supp.

1484, 1488 (D. Kan. 1990) (quoting Eskay Drugs v. Smith,

Kline & French Laboratories, 188 F.2d 430, 432 (Sth Cir.

1951)); see also USM Corp., 392 Mass. at 351, 467 N.E.2d

at 1284 (“Modifications in the process do not relieve a

defendant of responsibility if the defendant’s process is

substantially derived from the trade secret.’’).

Petitioners respectfully submit that the Fourth Circuit’s

complete refusal to consider the doctrine of equivalents or, much

less, to apply it to the particularly apt facts at bar should be

reviewed by this Court to resolve the split between the Fourth

Circuit on the one hand and the Third, Seventh, Tenth, Eleventh

and Federal Circuits on the other. All of the latter circuits hold

that the doctrine of equivalents must be considered to determine

whether contempt of a federal court injunction exists on the

part of a “copyist” whose modifications either: (a) are

“substantially derived from” trade secret rights protected by an

injunction, Motorola Inc. vy. Computer Displays Int’l, Inc.,

17

supra; or (b) are not “colorably different from” patent rights

protected under an injunction. /nterdynamics, Inc. v. Firma Wolf,

698 F.2d 157 (3rd Cir. 1983) (rear window defroster held merely

a colorable variation from earlier defroster found to infringe

patent and its manufacture resulted in contempt under the

doctrine of equivalents); Sure Plus Manufacturing Co. v.

Kobrin, 719 F.2d 1114, 1118 (11th Cir. 1983) (under doctrine

of equivalents if enjoined defendant’s modifications of its mirror

assembly were not more than colorably different from plaintiffs

mirror assembly covered by patent infringement injunction, then

defendant was in contempt); McCullough Tool Co. v. Well

Surveys, Inc., 395 F.2d 230, 234 (10th Cir. 1968) (infringer’s

modified device for making radioactivity measurements was

properly found, under doctrine of equivalents, to be merely a

colorable variation of the original enjoined structure, making it

proper for trial court to proceed with contempt citation);

KSM Fastening Systems, Inc. v. H.A. Jones Co., 776 F.2d 1522,

1526 (Fed. Cir. 1985) (an enjoined party’s attempt to design

around the claims of a patent “bears the risk that the enjoining

court may find changes too insubstantial to avoid contempt,”

noting applicability of the “universal rule” of doctrine of

equivalents under Graver Tank).

From the early decision of this Court in Fowle v. Park,

131 U.S. 88, 97 (1889), recognizing that the policy of trade

secret law “is to encourage useful discoveries by securing

their fruits to those who make them”; through Board of Trade

of Chicago v. Christi Grain & Stock Co., 198 U.S. 236, 250

(1905), recognizing the trade secret owner’s right to be

safeguarded against theft of his work; through the

admonitions in 1911 and 1917 in Dr. Miles, supra, and

Masland, supra, protecting the trade secret owner against

breach of trust and fraud; to the recognition in Becher v.

Contoure Laboratories, Inc., 279 U.S. 388, 391 (1929), ofa

cause of action against an employee for the “wrongful

18

disregard of confidential relations”; followed shortly by the

teaching in United States v. Dubilier Condenser Corp., 289

U.S. 178, 186 (1933), that an inventor “may keep his

invention secret and reap its fruits indefinitely”; down to

the more recent proclamation in Kewanee Oil Co. v. Bicron

Corp., 416 U.S. 470, 481-82 (1974), that

the maintenance of standards of commercial ethics

and encouragement of invention are the broadly

stated policies behind trade secret law

[necessitating] good faith and honest, fair dealing,

[which] is the very life and spirit of the

commercial world ... [and] not[ing] the

importance of trade secret protection to the

subsidization of research and development ...

[and] increased economic efficiency within large

companies through the dispersion of

responsibilities for creative developments,

this Court has cast a broad protective net safeguarding owners

and developers of trade secrets from those who would

dishonestly usurp intellectual property which is not theirs

for the taking.

This Court’s historically high level of protection

accorded to trade secret rights together with the federal

courts’ 150 years of adherence to the doctrine of equivalents

(including the express recognition by nearly half of the

federal Circuits, noted above, that the doctrine of equivalents

must be considered in cases asserting contempt of federal

court injunctions protecting intellectual property rights, be

they trade secrets or patents), counsels heavily toward

granting this Petition.

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19

The Fourth Circuit’s statement that “[nJothing in this

circuit would suggest that the doctrine of equivalents is

invariably applied in a trade secret contempt context”

(App. 5a n.*) leaves the Fourth Circuit severely out of step

with the rest of the courts in the federal system. Moreover,

the Fourth Circuit’s refusal to “invariably apply” the doctrine

of equivalents in the trade secret contempt context unfairly

and improperly leaves trade secrets far more exposed in the

Fourth Circuit to the machinations of the unscrupulous

copyist who (as in the case of the Defendants at bar) has

already once been enjoined and who, to paraphrase Justice

Jackson in Graver Tank, is very rarely a dull fellow but rather

one who may always be expected to adopt clever variations

in attempting to conceal and shelter his piracy. As the

Videotape submitted to this Court graphically establishes,

had the Fourth Circuit properly invoked the doctrine of

equivalents it surely would have held that the Defendants’

current processes to round off the end of wire and to form

curves in polymer catheters were substantially derived from

Cook’s Trade Secrets 3 and 14 in violation of the Injunction.

In this technologically driven age, patents and trade

secrets, and equitable decrees safeguarding them, are

increasingly focused im the federal courts. Indeed, patent

infringement is a realm exclusively policed by the federal

judiciary. As the growing global economy steadily transcends

state and national boundaries, such fundamental rights should

not be rendered uncertain or illusory by being subject to the

new form of elective doctrine of equivalents erroneously

adopted by the Fourth Circuit. Such a change would unjustly

transform trade secret injunctions entered in the Fourth

Circuit into “hollow and useless” remedies, i.e., as here,

courts erroneously could “elect” not to apply the time-tested

and critical docirine of equivalents to protect invaluable

intellectual property interests.

20

CONCLUSION

For the foregoing reasons, this Petition for a Writ of

Certiorari should be granted to review the decision of the

Court of Appeals for the Fourth Circuit.

Respectfully submitted,

AARON J. KRAMER

Counsel of Record

RONALD WILDER

CATHERINE M. MASTERS

ROBERT UNIKEL

SCHIFF HARDIN & WAITE

Attorneys for Petitioners

6600 Sears Tower

Chicago, Illinois 60606

(312) 258-5500

APPENDIX

la

APPENDIX A — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE FOURTH CIRCUIT

DATED AND DECIDED OCTOBER 27, 1999

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 98-2831

In Re: JON S. WILSON,

Debtor.

COOK GROUP INCORPORATED; WILSON-COOK

MEDICAL, INCORPORATED; COOK INCORPORATED;

VANCE PRODUCTS INCORPORATED;

SABIN CORPORATION,

Plaintiffs-Appellants,

v.

JON S. WILSON; WILTEK MEDICAL, INCORPORATED,

Defendants-Appellees.

Appeal from the United States District Court

for the Middle District of North Carolina, at Greensboro.

N. Carlton Tilley, Jr., Chief District Judge.

(CA-96-657-2, BK-93-50034C-11W, AP-94-6010W)

Argued: September 24, 1999

Decided: October 27, 1999

2a

Appendix A

Before WILKINSON, Chief Judge, and HAMILTON and

WILLIAMS, Circuit Judges.

a * *

OPINION

PER CURIAM:

Appellants Cook Companies argue that appellees Jon

Wilson and Wiltek Medical should be held in contempt for

violating an injunction that prohibited the continued use of

Cook’s Trade Secrets 3 and 14. The bankruptcy court denied

the motion to hold appellees in contempt for violating these

secrets and the district court affirmed. Because the

bankruptcy court did not abuse its discretion in declining to

hold Wilson and Wiltek in contempt, we now affirm the

judgment.

Z

This case arises from a longstanding dispute concerning

the alleged misappropriation of various trade secrets

developed by appellant Cook for the manufacture of medical

devices. Jon Wilson is a former president of Wilson-Cook,

one of the Cook Companies. Upon resigning from Wilson-

Cook, Wilson founded Wiltek Medical. In May 1995, the

United States Bankruptcy Court for the Middle District of

North Carolina found that appellees Wilson and Wiltek

(collectively Wiltek) wilfully and maliciously appropriated

trade secrets of Cook. The bankruptcy court entered a

permanent injunction prohibiting Wiltek from using,

3a

Appendix A

licensing, marketing, or otherwise displaying or disclosing

the Cook trade secrets. Several months later, the bankruptcy

court granted Cook the right to conduct one surprise

inspection of Wiltek’s plant.

The surprise inspection occurred on October 1, 1997.

As a result of information uncovered during the inspection,

Cook claimed that Wiltek was continuing to use five Cook

trade secrets, including Trade Secrets 3 and 14. Cook filed a

contempt motion with the bankruptcy court asserting that

Wiltek was violating the injunction. Cook alleged that Wiltek

either violated the trade secrets directly or used processes

and techniques that were substantially derived from the trade

secrets. In December 1997, the bankruptcy court denied

Cook’s contempt motion as to Trade Secrets 3 and 14. The

district court summarily affirmed. Cook appeals.

II.

A.

The district court sits as an appellate court in bankruptcy.

See First Nat'l Bank of Md. v. Stanley (In re Stanley),

66 F.3d 664, 667 (4th Cir. 1995). Therefore, we apply the

same standard of review as the district court in reviewing

the bankruptcy court’s judgment. The denial of a contempt

motion can be overturned only for an abuse of discretion.

See, e.g., Langton v. Johnston, 928 F.2d 1206, 1220 (\st

Cir. 1991); Davis v. Bowen, 894 F.2d 271, 272 (8th Cir.

1989). To obtain a contempt citation, the complaining party

must prove a violation of a court order by clear and

convincing evidence. See In re General Motors Corp.,

4a

Appendix A

61 F.3d 256, 258 (4th Cir. 1995). The bankruptcy judge

denied the contempt motion because he found that Cook did

not meet this high burden with regard to Trade Secrets 3 and

14. The bankruptcy court’s denial of the contempt motion

likewise turned on findings of fact. We apply a clearly

erroneous standard to these findings. See /n re Stanley, 66

F.3d at 667. Here, the same bankruptcy judge defined the

scope of the trade secrets and denied Cook’s subsequent

contempt motion. His interpretation of his own order and

injunction must thus be given substantial deference. See

Colonial Auto Center v. Tomlin (In re Tomlin), 105 F.3d

933, 941 (4th Cir. 1997) (bankruptcy court involved with

earlier proceeding has a “better vantage point” from which

to assess the order’s meaning (internal quotation marks

omitted)). These standards of review coupled with Cook’s

burden of proof underscore the daunting nature of Cook’s

appeal.*

* Cook concedes that the deferential standard of review applies

to findings of fact, but argues that it does not apply to a lower court’s

failure to apply the doctrine of equivalents, which should be reviewed

de novo. See In re Stanley, 66 F.3d at 667 (application of law is

reviewed de novo). Cook contends that application of the doctrine

of equivalents might have led to the conclusion that Wiltek’s

procedures and equipment were substantially derived from or were

substantially equivalent to those protected by Cook’s trade secrets.

Such a finding would prove a violation of the injunction and provide

a basis for the contempt motion.

We are unpersuaded. The doctrine of equivalents is primarily a

patent law doctrine and its application in the trade secret context

has been quite limited. Almost all of the cases that Cook relies on

are appeals to determine whether or not something was a trade secret.

(Cont'd)

Sa

Appendix A

B.

We thus proceed to review the rulings of the bankruptcy

court. Trade Secret 3 involves a process for making a

traumatic wire guides used for a variety of medical purposes.

Cook argues that in its 1997 ruling the bankruptcy court

mistakenly found that Trade Secret 3 was limited to forming

balls on the tips of wires and did not include rounding-off

wires. Cook maintains that identical equipment, processes,

and techniques are used either to form a ball on the end of

wire or to round-off the end of a wire. Yet it was Cook who

emphasized in its 1994 proposed findings of fact that Trade

Secret 3 involves forming a jointless ball on the end of wire.

Wiltek stopped this process after the injunction, but it

continued the rounding-off process. Despite Cook’s

arguments to the contrary, we hold that the bankruptcy court

did not err in finding that Trade Secret 3 was limited to

forming balls on the tips of wires.

(Cont'd)

See, e.g., Vermont Microsystems, Inc. v. Autodesk, Inc., 88 F.3d

142 (2d Cir. 1996); Mangren Research and Dev. Corp. v. National

Chem. Co., 87 F.3d 937 (7th Cir. 1996). In this case, however, the

bankruptcy court had already determined the scope of the trade

secrets. We must decide only whether it abused its discretion in

denying Cook’s contempt motion. Cook cites to only one circuit

court case where the doctrine of equivalents was applied in a trade

secret contempt context. See Motorola, Inc. v. Computer Displays

Int'l, Inc., 739 F.2d 1149 (7th Cir. 1984). But even Motorola can be

distinguished because it involved a consent decree and not an

injunction. Nothing in this circuit would suggest that the doctrine

of equivalents is invariably applied in a trade secret contempt

context, much less that it would somehow trump the governing

standards of review.

6a

Appendix A

Cook also claims that Wiltek continued to violate Trade

Secret 14 by using the same process to form catheters with

only one minor modification — substituting the heating

liquid Cook used with a similar substance. Again, it was

Cook who in its proposed findings claimed that Trade Secret

14 depended on the particular qualities of a specific liquid.

The heated liquid Wiltek uses has similar properties, but an

entirely different chemical composition from Cook’s liquid.

The bankruptcy court found that Wiltek’s process was

independently developed and was not substantially derived

from Trade Secret 14. The bankruptcy court’s finding that

Trade Secret 14 was limited to a particular type of heating

liquid was not clearly erroneous. Under Cook’s

interpretation, Trade Secret 14 could prevent Wiltek from

using any substance that is more effective than water for

forming catheters. This position has no logical stopping

point. The protection of trade secrets serves important goals,

but the extension of a trade secret to cover any conceivable

modification would stifle innovation and competition.

Contempt is a weighty penalty and should not be casually

imposed. In this case, Wiltek officers testified that they did

not think rounding-off was a violation of Trade Secret 3

because of the injunction’s emphasis on forming balls on

the ends of wires. Fairness dictates giving a party clear notice

of what it is violating before holding that party in contempt.

See In re General Motors, 61 F.3d at 258 (civil contempt is

an appropriate sanction only where a party has violated an

order that sets forth “in specific detail an unequivocal

command” (internal quotation marks omitted)); Project

B.A.S.I.C. v. Kemp, 947 F.2d 11, 16 (1st Cir. 1991) (“[C]ivil

7a

Appendix A

contempt will lie only if the putative contemnor has violated

an order that is clear and unambiguous.”).

Ii.

In this case the trade secrets at issue were defined and

later interpreted by the same bankruptcy judge. Because his

interpretation of the scope of his earlier injunction warrants

deference and because his findings reveal no clear error, there

was no abuse of discretion in denying Cook’s contempt

motion. For the foregoing reasons, the judgment of the

district court is

AFFIRMED.

8a

APPENDIX B — ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE MIDDLE DISTRICT OF

NORTH CAROLINA DATED AND

FILED DECEMBER 2, 1998

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

No. 1:98CV01019

No. B-93-50034 C-11W

In re:

. JON S. WILSON,

Debtor.

No. A-94-6010W

COOK GROUP INCORPORATED, WILSON-COOK

MEDICAL INC., COOK INCORPORATED,

VANCE PRODUCTS INCORPORATED,

and SABIN CORPORATION,

Plaintiffs,

VS.

JON S. WILSON,

Defendant.

9a

Appendix B

No. 6:90CV00206

WILSON-COOK MEDICAL INC.,

Plaintiff,

VS.

WILTEK MEDICAL INC.,

Defendant.

ORDER

TILLEY, District Judge

It is hereby ORDERED that the Bankruptcy Court’s

Second Memorandum Opinion of December 8, 1997 be

AFFIRMED, to the extent that it finds Defendants Jon S.

Wilson and his company, Wiltek Medical, Inc. (collectively,

“Wiltek” (not in contempt for alleged misappropriations of

trade secrets 3 and 14. The holding of the Bankruptcy Court

in its Second Memorandum Opinion regarding trade secrets

5, 6, and 8, and the Bankruptcy Court’s Reconsideration of

those holdings in its May 7, 1998 Order and Amendment to

the Second Memorandum Opinion, are not affected by this

Order. The Plaintiffs’ appeal of the Bankruptcy Court’s

decisions regarding trade secrets 5, 6, and 8 should continue

as scheduled by the Court.

Because of Wiltek’s Motion to Dissolve Partial Stay in

Case No. 2:96CV00657, the Court requested expedited

10a

Appendix B

briefing and oral argument regarding trade secrets 3 and 14.

After hearing oral argument and examining the record and

the parties’ briefs, it is clear upon a de novo review that the

Bankruptcy Court correctly interpreted the scope of trade

secrets 3 and 14, and that it was not clearly erroneous in its

factual findings regarding the processes that Wiltek was

using at the time of the inspection. The Bankruptcy Court

was correct in concluding that the processes Wiltek was using

at the time of the inspection were not the same as — or

substantially similar to — trade secrets 3 and 14. Therefore,

for the reasons stated in the Bankruptcy Court’s December

8, 1997 Second Memorandum Opinion, the Bankruptcy

Court’s holding that Wiltek was not in contempt for allegedly

misappropriating trade secrets 3 and 14 is AFFIRMED.

This the 2nd day of December, 1998.

s/ [illegible]

United States District Judge