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Telex Corp. v. IBM Corp., 367 F. Supp. 258, 179 U.S.P.Q. (BNA) 777 (N.D. Okla. 1973) (full-text), rev’d, 510 F.2d 894, 184 U.S.P.Q. (BNA) 521 (10th Cir.) (full-text), cert. denied, 423 U.S. 802 (1975).

Factual Background[]

IBM had its employees sign an "Employee Confidential Information and Invention Agreement" at the commencement of their employment with IBM and, at least as to the employees that were subsequently hired by IBM's competitor, Telex, that IBM had reminded them prior to their departure that they had had access to proprietary, confidential and trade secret information and were contractually prohibited from disclosing this information to others.

In addition, IBM used magnetic locks on building doors to allow access only to authorized personnel, as well as document control procedures, guards, television cameras, sensors, locks, safes and computer-controlled access systems; it even manufactured sensitive hardware components in-house rather than having them contracted to outside vendors.

Trial Court Proceedings[]

The court held that hardware features which in themselves were neither "new, novel, secret nor innovative" could in combination constitute a trade secret since they allowed IBM to "achieve its goals of the 38309 in terms of cost and performance.”

The trial court not only found that IBM had taken sufficient precautions to protect its trade secrets, but assigned part of the cost of those measures as damages attributable to Telex's unlawful attempt to penetrate the secrets.

Appellate Court Proceedings[]

The Tenth Circuit, while agreeing that IBM's security measures were sufficient, disallowed the damage award with respect to the cost of such measures to IBM for lack of proximate cause.