REXA v. Chester: Trade Secrets | Outside IP Counsel

The Seventh Circuit backed an engineer, holding an abandoned 2002 actuator prototype was too broad to be a concrete secret and its later use unreasonable.

Employees change jobs, and industries are small; an engineer may spend a career in one narrow field, touching many projects along the way. When does a long-past, shelved project become a trade secret an employer can sue over years later? In REXA, Inc. v. Chester, 42 F.4th 652 (7th Cir. 2022), decided July 28, 2022, the United States Court of Appeals for the Seventh Circuit answered: not on these facts. It affirmed summary judgment for an engineer accused of using an abandoned 2002 actuator prototype in a product he designed more than a decade later, holding that REXA had failed to identify a concrete trade secret and that the inference the engineer had used the old design was unreasonable.

The decision is a modern limit on suing former employees over stale, abandoned work. It pairs the demand for trade-secret particularity with the practical reality that engineers accumulate general knowledge over long careers, and it refuses to let a plaintiff convert a broad technology area or a discarded prototype into an enforceable secret through hindsight.

At a glance

Case: REXA, Inc. v. Chester, 42 F.4th 652, Nos. 20-2953, 20-3213 & 21-2033 (7th Cir. 2022).
Decided: July 28, 2022, on appeal from the Northern District of Illinois, Eastern Division; opinion by Judge Brennan, joined by Judges Wood and Hamilton.
Holding: REXA failed to identify a concrete trade secret, because broad technology areas are not protectable secrets, and no reasonable jury could infer that the engineer used a shelved 2002 prototype in a product built more than a decade later.
Status: Affirmed in part, vacated in part, and remanded. Summary judgment for the defendants was affirmed on both the trade-secret and implied-contract claims, but the separate award of attorneys’ fees to the defendants as a sanction was vacated and sent back for recalculation.

The doctrinal frame: concreteness and the inference of use

A trade-secret plaintiff must clear two hurdles that REXA placed front and center. First, it must identify the trade secret with sufficient particularity, describing concrete protected information rather than a general field of technology. Courts require a high level of specificity precisely so that the claim can be tested and so that a defendant is not barred from an entire area of engineering it is entitled to work in. Second, the plaintiff must show misappropriation, which usually means proving use, and use often depends on a circumstantial inference that the defendant drew on the secret. When the claimed secret is old, abandoned, and broadly described, both hurdles rise.

The two requirements interact. A vaguely defined “secret” invites a loose inference of use, because almost any later product might be said to fall within a broad technology area. The specificity requirement guards against that slippage by forcing the plaintiff to point to particular protected information and then to show that the defendant used that particular thing. REXA enforced both halves.

The facts and posture

Mark Chester was an engineer at Koso America, where in 2002 he worked on a project to develop a new valve for an actuator, a component that produces controlled mechanical motion. The project generated an experimental prototype of another actuator, which Koso shelved because commercial success looked improbable. Chester later left the company. More than a decade afterward, Chester and his new employer, MEA, developed a commercially successful actuator and filed a related patent application.

REXA, a company affiliated with Koso, sued Chester and MEA, alleging that the successful later actuator misappropriated the “2002 Designs,” including the shelved prototype, which REXA characterized as its trade secrets. REXA also asserted that Chester had breached an implied-in-fact obligation to assign patent rights. The district court granted summary judgment to the defendants and, after finding that REXA had engaged in discovery misconduct, awarded the defendants roughly $2.36 million in attorneys’ fees as a sanction. The Seventh Circuit affirmed the summary judgment but vacated the fee award and remanded for the district court to recalculate it.

The court’s reasoning

The panel held that REXA had not identified a concrete trade secret. Its description swept in broad technology areas and an abandoned prototype, but breadth is fatal: general categories of technology are not protectable secrets, and a plaintiff must pin down the specific protected information with a high level of specificity. Because REXA could not point to a particular, concrete secret that the later actuator embodied, its claim failed at the identification stage.

The court reinforced that conclusion by examining the inference of use, and found it wanting. The theory required a jury to believe that Chester carried forward his knowledge of a 2002 prototype and deployed it in a product he designed roughly eleven years later. The court described that inference as barely conceivable and exceptionally unreasonable given the passage of time, the abandonment of the original project, and the ordinary reality that an engineer’s later work reflects accumulated general knowledge rather than a specific decade-old design. No reasonable jury, the court concluded, could find misappropriation on that record.

The implied-contract theory failed on its own terms. An employer owns an employee’s invention under an implied-in-fact contract only where it specifically directed the employee to make that invention, and the 2002 project request on its face sought a replacement flow-matching valve so that Koso could stop paying royalties, not a new actuator. Because Koso never directed Chester to invent anything resembling the prototype or the later product, REXA had no claim to the patent rights.

What it changed

REXA is now a leading citation for two propositions that employers must confront before suing a departed engineer over old work. First, a trade-secret claim cannot rest on a broad technology area or a general design approach; the plaintiff must identify concrete, particular protected information. Second, the age and abandonment of the claimed secret bear directly on whether a factfinder may reasonably infer that the defendant used it. A shelved prototype, dropped because it looked commercially hopeless and revived only in the plaintiff’s hindsight, is a weak foundation for liability.

The decision fits within the broader modern insistence on trade-secret particularity seen in cases across the circuits. It applies that insistence to the specific and sympathetic setting of long careers in narrow fields, where an engineer who spends decades on actuators will inevitably design more actuators. REXA signals that trade-secret law will not be used to trap such workers by equating general expertise, or a discarded old project, with a concrete protectable secret.

Open questions

The opinion does not draw a precise line for how old or how abandoned a project must be before the inference of use becomes unreasonable as a matter of law; eleven years and a shelved prototype sufficed here, but shorter gaps and more concrete carryover present harder cases. It does not specify exactly how much particularity rescues a claim built around a formerly promising design that the plaintiff continued to develop. And because the court resolved the case on the concreteness and inference grounds, it did not need to explore how reasonable secrecy measures around an abandoned project should be assessed, or whether an employer that discards a design retains protectable rights in it at all. Those questions remain for future disputes.

Implications for inventors and businesses

Identify a concrete secret, not a field. A claim built on broad technology areas or a general design approach will fail. Pin down the specific protected information with precision before suing.
Old and abandoned undercuts the inference of use. The more time has passed and the more clearly a project was shelved, the harder it is to persuade a jury that a former employee actually used it. Weigh that before filing.
Engineers accumulate general knowledge. Courts recognize that long careers in narrow fields produce overlapping later work. Do not mistake an employee’s accumulated expertise for misappropriation of a specific secret.
Preserve and document living trade secrets. If a design remains valuable, keep developing and protecting it with active secrecy measures rather than resurrecting a discarded prototype only for litigation.

Frequently asked questions

Why did REXA lose its trade-secret claim against its former engineer? The Seventh Circuit held that REXA had not identified a concrete trade secret. Its claimed secret was an abandoned 2002 actuator prototype and broad technology areas, and the court found no reasonable jury could infer that the engineer used that shelved design in a product he developed more than a decade later.

Does trade-secret law protect broad technology areas or general design approaches? No. The court required a high level of specificity, holding that broad categories of technology are not concrete trade secrets. A plaintiff must identify the particular protected information with precision, not gesture at a general field or an abandoned research direction.

How does the age of a claimed trade secret affect a misappropriation case? Age matters to the reasonableness of the inference of use. In REXA the court found the inference that the engineer used knowledge of a prototype from eleven years earlier was barely conceivable and exceptionally unreasonable, which helped defeat the claim on summary judgment.