Celeritas Technologies v. Rockwell International

In July 1993, Michael Dolan applied to patent an apparatus that increased the rate of data transmission over analog cellular telephone networks by de-emphasizing the data signal before presenting the signal to a cellular network. Dolan worked for Celeritas Technologies, Ltd. (Celeritas) (plaintiff). In September 1993, Celeritas met with Rockwell International (Rockwell) (defendant), a modem manufacturer, to demonstrate Celeritas’s proprietary de-emphasis technology for potential use in chipsets for Rockwell’s modems. The parties signed a nondisclosure agreement (NDA) to protect the subject matter of the meeting. Under the NDA, Rockwell was prohibited from disclosing or using any of Celeritas’s proprietary information except to evaluate a business arrangement between the two companies. The definition of proprietary information excluded any information that was already in the public domain or that came to be in the public domain through no fault of Rockwell. Under the NDA, Celeritas disclosed implementation details and techniques relating to its de-emphasis technology. In March 1994, AT&T independently began selling a modem that incorporated de-emphasis technology. The incorporation of de-emphasis technology was not obvious to the public; an engineer would need a spectrum analyzer to inspect the modem, most engineers did not have spectrum analyzers, and an engineer with a spectrum analyzer would have to know what to look for. Thereafter, Rockwell declined to license Celeritas’s proprietary technology. Instead, Rockwell instructed its engineers, who had learned of the technology under the NDA, to develop de-emphasis technology for Rockwell’s modems. In January 1995, Rockwell began shipping prototype modem chipsets with the de-emphasis technology. The same month, a patent on Dolan’s application was issued (the ’590 patent). Celeritas sued Rockwell for breach of the NDA, among other claims. Following a trial, a jury returned a verdict for Celeritas. Rockwell appealed, arguing that the de-emphasis technology disclosed to Rockwell had entered the public domain by the time Rockwell used it, either through the introduction of AT&T’s modem or the issuance of the ’590 patent.