Background
Masimo Corporation develops advanced pulse oximeters — medical devices that measure blood oxygen levels and other vital signs non-invasively. As part of this work, Masimo (through its subsidiary Ceracor) developed what it calls the TSS algorithm, a computer program that calculates optimal weighting coefficients for more accurately determining hemoglobin concentrations from sensor data. Masimo treated the TSS algorithm as a trade secret and never publicly disclosed it.
Dr. Marcelo Lamego was an engineer at Ceracor who worked on the TSS algorithm during his employment. After leaving, he founded True Wearables, a competing medical device company, and filed a patent application (the “’158 Application”) disclosing a variation of the TSS algorithm. When Masimo learned that the patent application was pending and would soon be published by the USPTO, it filed suit for trade secret misappropriation under the federal Defend Trade Secrets Act (DTSA) and sought a preliminary injunction to prevent publication of the application, which would publicly disclose the algorithm.
The district court granted the injunction. True Wearables appealed, arguing that the TSS algorithm could not be a protectable trade secret because an equivalent mathematical algorithm had been published in an IEEE conference paper that had been cited more than 1,200 times — and was therefore already publicly known.
The Court’s Holding
The Federal Circuit affirmed the preliminary injunction. The court focused on the threshold requirement for trade secret protection: that the information not be “generally known to or readily ascertainable” by persons who can obtain economic value from its disclosure. The court rejected True Wearables’ argument that widespread publication in the statistics literature automatically destroyed trade secret status in the medical device field.
The key question, the court explained, is not whether the information is known somewhere in the world, but whether it is generally known to the relevant class of persons — specifically, those who could derive economic value from using it. Even if statistics researchers knew the underlying mathematical principles, that did not mean medical device engineers or competitors knew how to apply those principles to the specific problem of optimizing pulse oximeter sensor readings. Masimo presented evidence that there was no showing that the IEEE paper was known in the medical device sector or a field closely related to it. That was enough to sustain the preliminary injunction and the finding that Masimo had established a likelihood of success on the trade secret claim.
Key Takeaways
- A trade secret is not destroyed simply because equivalent information has been published in a scientific or technical journal outside the relevant industry — the publication must be accessible to and actually known by persons who could economically exploit the information in that specific field.
- Courts assess trade secret status from the perspective of those who could gain economic value from the disclosure, not from the perspective of the scientific community at large.
- Companies whose departing employees file patent applications that disclose proprietary information can seek injunctive relief to block publication under the DTSA before the patent application publishes.
- The decision reinforces that trade secret protection extends to algorithms and software where the relevant field is distinct from fields in which equivalent mathematical techniques may be academically published.
Why It Matters
In an era where foundational mathematical and algorithmic techniques are frequently published in academic literature, companies often face the argument that their proprietary implementations are “already known” and therefore not protectable as trade secrets. Masimo gives trade secret holders a meaningful defense: general academic publication of equivalent methods does not automatically defeat trade secret status if the publication is not known to or readily accessible by competitors in the specific commercial field where the trade secret has economic value.
This case is also a reminder of the risks companies face when key engineers depart and file patent applications. Patent applications automatically publish 18 months after filing, and once published, the information is public — potentially destroying trade secret protection permanently. Masimo’s strategy of seeking a preliminary injunction to halt publication before it occurred is a practical tool for any company facing this situation, and this decision confirms courts can properly grant such relief under the DTSA.