## Facts

- PlayWood Toys, a small Canadian toy company, developed a wooden toy railroad track concept designed to produce a realistic “clickety-clack” sound through specific grooves cut into the track surface.
- PlayWood worked with a third-party woodworking facility under a written confidentiality agreement for prototype manufacture.
- Learning Curve Toys, a U.S. toy company selling wooden Thomas the Tank Engine trains and track, visited PlayWood at a toy fair and later met with PlayWood in Toronto.
- At the Toronto meeting, the parties toured the manufacturing facility and then discussed Learning Curve’s need for new track ideas; testimony indicated both sides agreed their discussions would remain confidential, though no written NDA was signed for that meeting.
- PlayWood’s designer demonstrated the grooved-track concept using a Learning Curve sample, proposed the name “Clickety-Clack Track,” and provided the modified sample to Learning Curve.
- PlayWood did not receive a manufacturing contract.
- Nearly two years later, PlayWood learned Learning Curve was selling a grooved wooden track marketed as “Clickety-Clack Track,” generating over $20 million in sales over the first six years.
- PlayWood alleged Learning Curve used confidential information disclosed at the meeting to create and sell the competing product without compensation.

## Issues

1. Whether PlayWood’s noise-producing wooden track concept and specific groove configuration constituted a protectable trade secret under the Illinois Trade Secrets Act (ITSA).
2. Whether sufficient evidence supported the jury’s finding that Learning Curve misappropriated that trade secret.
3. Whether the district court properly granted judgment as a matter of law (Rule 50) setting aside the jury’s verdict.

## Decision

- The Seventh Circuit reversed the district court’s grant of judgment as a matter of law and reinstated the jury’s verdict for PlayWood.
- The court held that, viewing the evidence in PlayWood’s favor, a reasonable jury could find (a) the existence of a trade secret and (b) misappropriation under the ITSA.
- The case was remanded for a jury trial on exemplary damages and for consideration of PlayWood’s request for attorneys’ fees.
- The reinstated verdict included an ongoing royalty of 8% as the license rate the parties would have negotiated absent misappropriation, for the lifetime of the product.

## Legal Principles

- Under the ITSA, information qualifies as a trade secret if it derives economic value from not being generally known and is subject to reasonable efforts under the circumstances to maintain secrecy.
- Trade-secret status is commonly a fact-intensive determination suited for the jury; a court may not displace a properly instructed jury’s findings unless no rational jury could reach them.
- A “concept” or product-design combination can constitute a trade secret when the protectable information lies in the particular configuration and implementation, even if some elements are individually known.
- Reasonable secrecy measures do not require absolute secrecy or a written NDA in every instance; an oral confidentiality understanding, combined with other protective practices, can be sufficient depending on context.
- Misappropriation may be inferred from access obtained in a confidential setting plus subsequent commercial use of substantially the same features, including evidence of the defendant’s prior inability to develop the solution independently.

## Conclusion

The Seventh Circuit held that the jury could reasonably find PlayWood’s grooved “clickety-clack” track design and implementation to be a protectable trade secret and that Learning Curve misappropriated it after a confidential disclosure, requiring reinstatement of the royalty award and further proceedings on exemplary damages and attorneys’ fees.


Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714 (7th Cir. 2003)