Dismissal of Trade Secret Claims to Protect Government State Secrets Was Premature

Case: Crater Corp. v. Lucent Tech. , No. 04-1349 (Fed Cir. 9/7/05)

The One Sentence Summary: The district court erred in prematurely dismissing trade secret and breach of contract claims due to potential disclosure of privileged state secrets asserted by the United States government where the facts regarding the nature of the alleged trade secrets and breach of contract had not been developed.

What They Were Fighting About: Plaintiff Crater claimed that defendant Lucent had stolen trade secrets regarding Crater's underwater fiber optic coupler. The United States government intervened, asserting the state secrets privilege and claiming that discovery of Lucent's work for the government would disclosed state secrets. The district court accepted the United States' claim, and dismissed Crater's law suit against Lucent.

Federal Circuit Holdings:

• The government properly invoked the state secrets privilege even though the government department head did not personally review each document at issue, but instead relied on subordinates for that review.
• It was premature for the district court to dismiss Crater's trade secret and breach of contract claims on the grounds that the claims would require access to state secrets. The district court must first determine what the trade secrets were and whether there was a contract to determine if the litigation of those claims would require the disclosure of state secrets.