International Medical Devices v. Cornell — Federal Circuit Reverses $17M Trade Secret Award, Holds Patent Disclosures Extinguish Trade Secret Rights

Background

Dr. James Elist is a Beverly Hills urologist and the creator of the Penuma®, the only commercially available cosmetic penile implant as of 2018. In March of that year, Dr. Robert Cornell — a Houston-based urologist — attended a Penuma surgical training session hosted by Dr. Elist and signed a non-disclosure agreement (NDA). At the session, Dr. Elist disclosed several planned improvements to the Penuma design, including the incorporation of internal air pockets to improve flexibility, mesh tabs at the distal tip to anchor the implant via tissue ingrowth, and the use of absorbable sutures paired with those tabs. He also later emailed Dr. Cornell the specific list of surgical instruments needed to perform the procedure.

Shortly afterward, Dr. Cornell and associates developed a competing cosmetic implant called Augmenta, filed two patent applications (issued as U.S. Patent Nos. 10,413,413 and 10,980,639) incorporating the design concepts shared by Dr. Elist, and began advertising his medical practice as offering “Penuma®-certified” surgery — a credential he did not hold. Dr. Elist and his companies sued in the Central District of California for misappropriation of four trade secrets, NDA breach, Lanham Act counterfeiting, and patent invalidity for failure to name Dr. Elist as co-inventor.

A jury found for Dr. Elist on all claims. After a bench trial on damages, the district court awarded $5,772,044 in reasonable royalties, $11,544,088 in exemplary damages, and $1,000,000 in statutory counterfeiting damages, and entered a permanent injunction barring defendants from using the four trade secrets. Defendants appealed.

The Court’s Holding

The Federal Circuit reversed nearly all of the trade-secret judgment. Writing for a panel of Judges Dyk, Reyna, and Taranto, Judge Dyk held that none of the four asserted trade secrets qualified for protection under California’s Uniform Trade Secrets Act (UTSA) because each was “generally known” — a fatal defect under Cal. Civ. Code § 3426.1(d).

Three of the four secrets — the internal pockets, mesh tabs, and absorbable-suture technique — had each been disclosed in prior patents covering penile implants (U.S. Patent No. 5,088,477 (Subrini) and No. 4,204,530 (Finney)). The court reinforced the principle that “that which is disclosed in a patent cannot be a trade secret” and specifically rejected plaintiffs’ argument that the prior patents didn’t count because their concepts had never been implemented in real-world products. Whether a concept has ever been commercialized is irrelevant: once information is in a patent, it enters the public domain. The court also rejected the argument that applying a therapeutic-implant concept to the cosmetic-implant context created a new protectable secret — translating a generally known solution from one environment to a closely analogous one does not create trade secret protection.

The fourth secret — the surgical instrument and supply list — failed for different reasons: plaintiffs had not maintained its secrecy. The company emailed the list to Dr. Cornell without any confidentiality markings and also shared it with a third party (SCA Surgery) with no NDA. Because the list was never properly protected, it could not derive independent economic value from secrecy, as the UTSA requires.

With the trade secret claims gone, the NDA breach claim fell too — plaintiffs identified no confidential information covered by the NDA beyond the four failed trade secrets. The court also reversed the patent-invalidity verdict: since the jury’s basis for finding Dr. Elist was the true inventor was his contributions of the same concepts (internal pockets, mesh tabs, absorbable sutures) the court had just found to be generally known, those contributions could not support an inventorship claim. A person who contributes only well-known concepts to a claimed invention is not a co-inventor.

The one claim to survive was Lanham Act counterfeiting. Dr. Cornell had advertised his practice as offering “Penuma®-certified” surgery while the mark was registered, before his certification lapsed. The jury correctly found this was use of a counterfeit mark in connection with the offering for sale of goods, and the $1 million statutory damages award was affirmed.

Key Takeaways

• Information disclosed in any patent — including one in a different product category — becomes “generally known” and loses trade secret protection permanently, regardless of whether the patent’s concepts were ever commercially exploited.
• Applying a publicly disclosed concept from one product category (therapeutic implants) to a closely related one (cosmetic implants) does not create a new, protectable trade secret.
• A supply list shared with third parties without confidentiality markings or agreements cannot qualify as a trade secret, even if the underlying procedure involves proprietary elements.
• NDA breach claims that are coextensive with failed trade secret claims will not survive independently — if the information is not a protectable trade secret, it likely is not “confidential information” under the NDA either.
• A person who contributes only generally known concepts to an invention is not a co-inventor under patent law, even if those concepts were useful to the other inventors.

Why It Matters

This case is a cautionary tale for anyone sharing technical know-how under NDA — particularly in training, licensing, or partnership settings. If a competitor can find your concept in any issued patent, even a decades-old one in a related field, that concept may be permanently unprotectable as a trade secret. An NDA alone is no substitute for actual trade secret status, and a jury verdict can be reversed on appeal if the underlying information was already in the public domain.

For medical device companies, design ideas shared at surgical training sessions may already be public through older patents covering therapeutic devices — a risk manageable through pre-disclosure prior art searches and by limiting shared disclosures to implementation-level details that are genuinely non-obvious and not covered by existing patents.