## Facts

- Mangren Research and Development Corporation developed and sold mold release agents for rubber and plastics manufacturing.
- Mangren’s successful product relied on a specific highly degraded polytetrafluoroethylene (PTFE) with particular characteristics that improved performance and provided a competitive advantage.
- Mangren treated the identity and use of the degraded PTFE, and the related formula information, as confidential and used measures to maintain secrecy, including confidentiality agreements, restricted access, and coded labeling.
- Two former Mangren employees left and became associated with National Chemical Company and National Mold Release Company.
- Soon after, National Chemical developed and marketed a competing mold release agent aimed at Mangren’s customers, including a major customer, and Mangren alleged it used an essentially identical degraded PTFE ingredient.
- Mangren sued under the Illinois Trade Secrets Act (ITSA) for misappropriation of (i) the PTFE-based formula information and (ii) related customer/pricing and confidential business information used to solicit Mangren’s customers.
- A jury found for Mangren and awarded $252,684.69 in compensatory damages and $505,369.38 in exemplary damages; the district court entered judgment and awarded attorney’s fees and costs.
- National Chemical appealed, challenging trade secret status, misappropriation, compensatory damages, and the exemplary damages and fee awards.

## Issues

1. Whether Mangren’s mold release formula information, including its use of a specific highly degraded PTFE, qualified as a protectable trade secret under ITSA.
2. Whether the evidence supported the jury’s finding that National Chemical misappropriated Mangren’s trade secrets in developing and marketing its competing product.
3. Whether the compensatory damages award for lost sales and profits was supported by the evidence and was not excessive.
4. Whether exemplary damages and attorney’s fees were authorized and supported by evidence of willful and malicious misappropriation.

## Decision

- The Seventh Circuit affirmed the judgment in full.
- The court held that the PTFE-based formula information constituted a trade secret because it derived economic value from not being generally known and was subject to reasonable secrecy measures.
- The court held that sufficient evidence supported misappropriation, including the use of former employees with knowledge of the confidential formula, rapid development of a competing product, and targeted pursuit of Mangren’s customers.
- The court upheld the compensatory damages award, finding a reasonable evidentiary basis for the jury’s lost-profit and lost-sales calculations.
- The court upheld exemplary damages and attorney’s fees because the evidence supported a finding of willful and malicious misappropriation under ITSA.

## Legal Principles

- Under ITSA, information is a trade secret if it derives actual or potential economic value from not being generally known and is subject to reasonable efforts to maintain secrecy.
- A combination of elements (including a formula and the way ingredients are selected and used) may be protectable even if some individual components are publicly known.
- Misappropriation is not avoided by small changes to a secret; liability may exist where the defendant’s product or process is substantially derived from the protected secret.
- Once the fact of damage is shown, damages need not be calculated with mathematical precision if the evidence provides a reasonable basis to estimate loss.
- ITSA permits exemplary damages and attorney’s fees where misappropriation is willful and malicious, which may be inferred from deliberate use of confidential information to compete for the plaintiff’s customers.

## Conclusion

The Seventh Circuit sustained a jury verdict under ITSA, holding that Mangren’s degraded-PTFE formula information was protectable as a trade secret, that National Chemical’s competing product and customer-targeting conduct supported an inference of misappropriation despite alleged modifications, and that the evidence supported compensatory damages as well as exemplary damages and attorney’s fees for willful and malicious misappropriation.


Mangren Research & Dev. Corp. v. Nat’l Chem. Co., 87 F.3d 937 (7th Cir. 1996)