## Facts

- A design firm and its partners developed a concept for fashion-oriented school supplies marketed through coordinated designs and fashion-magazine advertising.
- In February 1965, the firm presented the concept to a major school-supply manufacturer, which authorized the firm to produce tentative designs and samples for review and suggested developing interchangeable binder covers.
- The parties discussed compensation and reached an understanding that the firm would receive a 5% royalty on the manufacturer’s sale price for specific designs submitted by the firm and used by the manufacturer, not for the general concept of fashion design.
- The firm created designs and prototypes under a “Fashion Goes To School” theme; the manufacturer declined to use them, citing cost and pricing concerns, and reimbursed expenses.
- The manufacturer later developed and sold its own fashion-oriented, coordinated school-supply products.
- In 1971, the designers sued seeking royalties on all coordinated fashion-line school supplies sold, alleging breach of contract and misappropriation of a trade secret.
- The case was tried to the court on diversity jurisdiction with Ohio law governing; the district court entered judgment for the manufacturer and its parent company.

## Issues

1. Whether the parties’ royalty agreement required payment for the manufacturer’s later use of the broader fashion-oriented marketing concept, even if none of the plaintiffs’ specific designs were used.
2. Whether the plaintiffs’ coordinated fashion-oriented product-and-marketing concept constituted a protectable trade secret or property right under Ohio law.

## Decision

- The Sixth Circuit affirmed the judgment for the defendants.
- The court upheld the finding that the agreement provided royalties only for specific submitted designs that the manufacturer used, and did not provide royalties for the concept itself.
- Because the manufacturer did not use the plaintiffs’ specific designs, no royalty obligation arose.
- The court agreed that the plaintiffs’ general marketing concept did not qualify as a trade secret under Ohio law.

## Legal Principles

- Contract liability for royalties depends on the scope of the parties’ actual agreement; an agreement to pay for specific designs used does not, without more, extend to payment for a general concept.
- Under Ohio law, a general business or marketing idea is not a trade secret absent sufficiently concrete secret information and reasonable efforts to maintain secrecy.
- Abstract ideas are not exclusive property merely because they are conceived; absent patent, copyright, or a qualifying trade secret, they may be used in competition.
- Appellate review of bench-trial fact findings is limited; findings supported by the record are affirmed unless clearly erroneous.

## Conclusion

The court held that the defendants owed no royalties because the parties agreed to pay only for specific designs the defendants actually used, and the plaintiffs’ broader fashion-oriented marketing concept was not a protectable trade secret under Ohio law.


Richter v. Westab, Inc., 529 F.2d 896 (6th Cir. 1976)