## Facts

- W.C. and Mary Phillips, doing business as Ambusher, Inc., manufactured collapsible single-pole deer stands, including the “V-Lok” model.
- Phillips developed the product line over many years and claimed the protectable secret was the V-Lok manufacturing process and related know-how, not merely the product’s visible features.
- In 1990, Ambusher discussed a possible sale of the business to John Collins and his associates, Claude Frey, Jr. and Gary Arnold.
- During the purchase discussions, and in reliance on defendants’ representations as prospective buyers, Phillips disclosed manufacturing information, including through a video demonstration and a shop tour showing how to make the V-Lok and exposing tooling and methods.
- The defendants did not complete the purchase and did not obtain financing; instead, they manufactured and sold a stand described at trial as an exact copy of the V-Lok through Buck-Pro, Inc.
- Ambusher sued in federal court in Texas for misappropriation of trade secrets and related claims; a jury found misappropriation of a trade secret connected with the manufacture and/or marketing of plaintiffs’ hunting stand.
- The district court awarded damages and entered a permanent injunction barring defendants from manufacturing or selling the copying stands.

## Issues

1. Whether the V-Lok manufacturing process and related know-how constituted a protectable trade secret under Texas law.
2. Whether sufficient evidence supported a finding that defendants misappropriated the trade secret through acquisition and use in breach of a confidential relationship arising from sale negotiations.
3. Whether defendants preserved a sufficiency-of-the-evidence challenge for appeal despite failing to make the required trial motions for judgment as a matter of law.

## Decision

- The Fifth Circuit affirmed the judgment for plaintiffs.
- The court upheld the jury’s finding that the manufacturing process and techniques for producing the V-Lok constituted a trade secret.
- The court held the evidence supported misappropriation based on defendants’ acquisition and use of the information obtained during negotiations under an implied duty of confidentiality.
- The court concluded defendants waived ordinary appellate review of evidentiary sufficiency by failing to properly move for judgment as a matter of law in the district court.
- The damages award and permanent injunction were affirmed.

## Legal Principles

- A manufacturing process or production know-how can qualify as a trade secret even when the finished product is visible in the marketplace, if the process provides a competitive advantage and is not readily ascertainable by proper means.
- Reasonable measures to protect secrecy may be shown when disclosure is limited to a controlled context, such as due diligence in a contemplated business sale.
- A confidential relationship and duty limiting use of disclosed information may be implied from the circumstances of negotiations for a potential purchase of a business.
- Use of confidentially obtained production information to create and sell a competing copy supports a finding of trade secret misappropriation.
- A party that fails to make the necessary motions for judgment as a matter of law at trial waives a conventional sufficiency-of-the-evidence challenge on appeal.

## Conclusion

The court affirmed liability and injunctive relief for trade secret misappropriation where defendants obtained manufacturing know-how during business-sale discussions subject to an implied duty of confidentiality and then used it to produce a copying product, and it held defendants’ failure to seek judgment as a matter of law at trial waived a full sufficiency challenge on appeal.


Phillips v. Frey, 20 F.3d 623 (5th Cir. 1994)