Carl Zeiss Meditec, Inc. v. Topcon Medical Systems, Inc.

Background

The corrected Fourth Amended Complaint asserted three claims for trade-secret misappropriation, two contract claims, and one copyright-infringement claim. During discovery, Zeiss disclosed trade secrets supporting its misappropriation claims and later reduced its list from 73 alleged trade secrets to five: Nos. 1, 31, 46, 64, and 72. Topcon did not dispute Nos. 1, 64, and 72 but disputed Nos. 31 and 46.

The dispute followed multiple rounds of disclosures and discussions about identifying the trade secrets clearly enough for the litigation. Zeiss served its Fifth Supplemental Disclosure of Trade Secrets on March 23, 2023, shortly before expert reports were due. After the parties could not resolve their disagreement, the court considered letter briefs concerning Trade Secrets Nos. 31 and 46.

Trade Secret No. 31

Zeiss described Trade Secret No. 31 as the proprietary and confidential requirements and processes for creating and verifying certain HFA reports. In its letter brief, Zeiss proposed further revisions and sought to incorporate references to documents created by a Topcon subcontractor and by Zeiss.

The court found the proposed trade secret unsupported for three reasons. First, the document Zeiss sought to incorporate was created by a Topcon subcontractor, not Zeiss. The court reasoned that a document created by a third party was not secret to Zeiss and therefore could not establish an actionable trade secret. Second, Zeiss’s expert identified a timing requirement for a data-extraction process that applied to Topcon, while acknowledging that Zeiss did not perform that extraction because it used the underlying raw data. The court therefore found that Zeiss had not identified a trade secret that it practiced or held. Third, the court found that Zeiss’s late attempt to add a cross-reference to its own specifications document did not cure the problem. That document concerned how Zeiss generated reports, while the proposed trade secret concerned how Topcon allegedly extracted data from resulting PDF files.

The court found that Trade Secret No. 31 failed to state an actionable trade secret and should be struck. The court did not reach the parties’ other arguments concerning that trade secret.

Trade Secret No. 46

Zeiss described Trade Secret No. 46 as proprietary and confidential exportable, encrypted optical-coherence-tomography data structures and formats. The court concluded that the proposal claimed the outputs and format produced by Zeiss’s algorithms, rather than the methods by which the algorithms operated.

Zeiss argued that Trade Secret No. 46 combined or revised earlier disclosures concerning Trade Secrets Nos. 72 and 73. The court rejected that argument, finding that the earlier disclosures concerned encryption and decryption processes, not the outputs of those processes. Because Zeiss identified no other earlier disclosure encompassing the proposed trade secret, the court determined that Trade Secret No. 46 was an attempt to claim a new trade secret.

The court also found the effort late and prejudicial because discovery had closed, dispositive motions were being prepared, and trial was approaching. The court noted an alternative basis for striking No. 46: Zeiss had not adequately explained how the algorithm outputs qualified as trade secrets and had previously stated that it did not claim those outputs as trade secrets. The court further observed that the outputs had been distributed widely to Zeiss customers and affiliated researchers, although the procedural ground was dispositive.

Ruling and effect

The court found that Zeiss’s identification of Trade Secret No. 31 lacked a legal basis and struck proposed Trade Secret No. 46 as an improper attempt to introduce a new trade secret after discovery closed. Trade Secrets Nos. 31 and 46 therefore could not form the basis of the trade-secret claims in the corrected Fourth Amended Complaint. Zeiss’s trade-secret claims were limited to Trade Secrets Nos. 1, 64, and 72.

This order addressed the scope and legal sufficiency of the identified trade secrets. It did not decide whether Topcon misappropriated Trade Secrets Nos. 1, 64, or 72, and it did not resolve Zeiss’s contract or copyright claims.