# Learning Curve Toys v. PlayWood: Reasonable Secrecy Is a Jury Question

> The Seventh Circuit reinstated a jury's trade-secret verdict for a two-man toy startup, holding that economic value and reasonable secrecy measures are fact questions and that an oral confidentiality agreement can suffice.

Topic: Trade Secrets  |  Author: Lidiia Levitska  |  Source: Intellectual Property Law (outsideipcounsel.com)
Canonical: https://outsideipcounsel.com/blog/learning-curve-toys-v-playwood-reasonable-measures/


*Learning Curve Toys, Inc. v. PlayWood Toys, Inc.*, 342 F.3d 714 (7th Cir. 2003), is a leading modern statement of two of the most litigated elements of trade-secret law: whether a claimed secret has independent economic value, and whether its owner took *reasonable measures* to keep it secret. The dispute pitted a two-man startup, PlayWood Toys, against the far larger Learning Curve, and it turned on a deceptively simple product — a grooved wooden train track that produced a realistic "clickety-clack" sound. A jury found that Learning Curve had misappropriated PlayWood's concept, but the trial judge threw out the verdict, ruling that PlayWood had no protectable trade secret at all. Writing for the Seventh Circuit, Judge Ripple reversed, reinstated the jury's verdict, and delivered an influential lesson: reasonableness of secrecy precautions is a fact-intensive question that usually belongs to the jury, and even an oral confidentiality agreement can do the job.

## At a glance

- **Case:** *Learning Curve Toys, Inc. v. PlayWood Toys, Inc.*, 342 F.3d 714 (7th Cir. 2003)
- **Court:** U.S. Court of Appeals for the Seventh Circuit, on appeal from the Northern District of Illinois
- **Decided:** August 18, 2003
- **Opinion:** Judge Ripple, applying the Illinois Trade Secrets Act
- **Subject matter:** Whether a concept for a grooved, noise-making wooden toy track qualified as a trade secret — its economic value and the reasonableness of the owner's secrecy efforts
- **Holding:** Economic value and reasonable secrecy measures are ordinarily questions of fact; a rational jury could find PlayWood's concept protectable and its precautions reasonable, so the verdict was reinstated

## A toy fair, an oral promise, and a clickety-clack track

PlayWood Toys was, in the court's words, essentially a two-man operation — Robert Clausi and his brother-in-law Scott Moore — that designed wooden children's toys. Learning Curve, a substantial maker of wooden train sets, met with PlayWood's principals to explore a possible relationship. According to PlayWood, the parties agreed orally that the discussions were confidential. During a meeting, Learning Curve's representatives lamented that they could not make their wooden train track stand out from competitors. Clausi took one of Learning Curve's sample tracks, cut grooves into it, and ran a train across it; the grooves produced a realistic railroad "clickety-clack" sound. PlayWood disclosed the concept in confidence, expecting to negotiate a manufacturing arrangement.

No deal materialized. Roughly two years later, PlayWood discovered that Learning Curve was selling grooved wooden track under the name "Clickety-Clack Track," a product that generated more than $20 million in sales over its first several years. PlayWood sued for trade-secret misappropriation under the Illinois Trade Secrets Act, and a jury agreed that its concept had been stolen. The district court, however, granted judgment as a matter of law to Learning Curve, holding that PlayWood's concept was not a protectable trade secret — both because it purportedly lacked economic value and because a single disclosure at a meeting, secured only by an oral understanding, was not a reasonable effort to maintain secrecy.

## Economic value does not require prior exploitation

The Seventh Circuit first addressed economic value. The Illinois statute, tracking the Uniform Trade Secrets Act, requires that the information be "sufficiently secret to derive economic value, actual or potential, from not being generally known." The district court had discounted PlayWood's concept partly because PlayWood, a tiny firm, had never manufactured or sold the track itself. The court of appeals rejected the premise that a trade secret must be in continuous or actual commercial use to have value. What matters is whether the information confers a competitive advantage — actual or potential — by virtue of not being generally known.

On that measure, the evidence readily supported the jury. Learning Curve's own runaway success with Clickety-Clack Track demonstrated the concept's commercial value, and PlayWood could have realized that value by licensing or selling the idea to a manufacturer. The court also emphasized the concept's novelty: the record permitted a finding that the specific grooved design producing the realistic sound was not generally known in the industry and was not obvious. A small company's failure to commercialize an idea itself, the court held, says nothing about whether the idea has the economic value the statute requires. This portion of the opinion is frequently cited for the proposition that *potential* value suffices and that continuous use is not an element of trade-secret protection.

## Reasonable secrecy is measured by the jury, and perfection is not required

The opinion's most enduring contribution concerns reasonable efforts to maintain secrecy. The Act, the court explained, "requires the trade secret owner to take actions that are reasonable under the circumstances to maintain the secrecy or confidentiality of its trade secret; it does not require perfection." Whether particular measures clear that bar is "ordinarily a question of fact for the jury." As the court put it, "only in an extreme case can what is a reasonable precaution be determined as a matter of law, because the answer depends on a balancing of costs and benefits that will vary from case to case" — a balancing informed by the size and sophistication of the parties and the nature of the disclosure.

Measured against that standard, PlayWood's precautions could reasonably be found adequate. PlayWood had disclosed the concept to only a limited number of Learning Curve representatives, and it had done so under an oral agreement that the discussions were confidential. The court declined to hold, as a matter of law, that an oral confidentiality agreement plus limited disclosure was insufficient; a jury could find those steps reasonable for a two-person startup dealing with a prospective business partner. The proper appellate inquiry, the court stressed, was not whether the judges themselves would have taken more precautions, but whether PlayWood's "failure to do more was so plain a breach" of a trade-secret owner's obligations "as to justify" overturning the jury's verdict. It was not. The court reversed, reinstated the verdict, and remanded for proceedings on exemplary damages and PlayWood's request for attorney's fees.

## Open questions

Because reasonableness is so fact-bound, *Learning Curve* supplies a standard rather than a bright line, and it leaves practitioners to guess how much protection a court will demand in any given transaction. When does reliance on an oral understanding become unreasonable? How does the analysis shift when the disclosing party is a sophisticated company rather than a garage startup, or when the number of recipients grows? And how should courts weigh the absence of routine safeguards — written NDAs, document markings, access controls — that larger firms are expected to use? The opinion signals that context is everything, which is precisely what makes the reasonable-measures inquiry so difficult to litigate in advance.

## Implications

- **Reasonableness usually goes to the jury.** Except in extreme cases, whether an owner's secrecy precautions were adequate is a fact question, so summary disposition against a trade-secret plaintiff on this element is hard to sustain.
- **Oral confidentiality can be enough — but is risky.** An oral agreement plus limited, confidential disclosure may satisfy the reasonable-efforts requirement, yet relying on it invites exactly the fact fight PlayWood had to win. A signed NDA remains the prudent course.
- **Potential value counts.** A concept can be a trade secret even if its owner never sold or used it; the ability to license or exploit the idea, and a competitor's later success with it, are strong evidence of economic value.
- **Perfection is not the standard.** Courts ask for reasonable efforts under the circumstances, weighing the costs and benefits of additional precautions against the size and posture of the parties.

## Frequently asked questions

**What did Learning Curve Toys v. PlayWood decide about reasonable secrecy?** The Seventh Circuit held that whether a trade-secret owner took reasonable measures to protect secrecy is ordinarily a question of fact for the jury, not a question of law for the judge. It reinstated a jury verdict for PlayWood, finding that an oral confidentiality agreement and limited disclosure to a few company representatives could reasonably be found sufficient.

**Does a trade secret have to be in actual use to be protectable?** No. The court rejected any requirement of continuous commercial use. A concept can have the requisite economic value from not being generally known even if the owner has not yet exploited it — potential value, including the ability to license the idea, is enough.

**Is a written NDA required to protect a trade secret?** Not necessarily. The court accepted that an oral confidentiality agreement, together with disclosure to only a limited number of people in a confidential setting, could satisfy the reasonable-efforts requirement. The law demands reasonableness under the circumstances, not perfection.

## Authorities and sources

- *Learning Curve Toys, Inc. v. PlayWood Toys, Inc.*, 342 F.3d 714 (7th Cir. 2003) (decided August 18, 2003). [Justia](https://law.justia.com/cases/federal/appellate-courts/F3/342/714/515566/); [OpenJurist](https://openjurist.org/342/f3d/714/learning-curve-toys-incorporated-v-playwood-toys-incorporated).
- Teaching materials and case summary via the [University of Iowa Introduction to Intellectual Property Law](https://pressbooks.uiowa.edu/intro-ip/chapter/learning-curve-v-playwood-4/).
- The Illinois Trade Secrets Act, which the court applied, is codified at [765 ILCS 1065 (Illinois General Assembly)](https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2140).