IP Law Daily, TRADE SECRETS—Fed. Cir.: Penile implant developer’s $17M trade secret verdict against competitors reversed on appeal, (Apr 17, 2026)

By Ravindra Kumar Singh, B.L.

The appellate court found that the alleged trade secrets were either publicly disclosed or not protectable, precluding misappropriation, contract, and patent-inventorship claims.

The U.S. Court of Appeals for the Federal Circuit reversed a $17 million trade secret and contract judgment in favor of Penuma implant developer International Medical Devices, Inc. (IMD) against urologist Dr. Cornell and his affiliated entities, holding that the asserted information was either publicly disclosed in prior art or not maintained as confidential. The court vacated the jury’s findings of trade secret misappropriation and breach of contract, along with the associated reasonable royalty, exemplary damages, and permanent injunction. It further reversed the district court’s invalidation of two competing implant patents for improper inventorship, concluding that the alleged contributions were already known in the prior art. However, it affirmed liability for counterfeiting based on unauthorized use of the Penuma mark (International Medical Devices, Inc. v. Cornell, No. 25-1580 (Fed. Cir. Apr. 17, 2026)).

Background. The plaintiffs-appellees, International Medical Devices, Inc. (IMD), Menova International, Inc., and their principal, Dr. Elist, developed and marketed the Penuma cosmetic penile implant. The defendants-appellants, Dr. Cornell, his medical practice, and a network of affiliated physicians and entities, were engaged in developing a competing cosmetic implant product.

The dispute arose from a professional engagement that turned adversarial. Dr. Cornell attended a Penuma surgical training session conducted by Dr. Elist and executed a non-disclosure agreement. The parties later became direct competitors, with IMD alleging that Cornell and his collaborators used confidential information obtained during the training to develop a rival implant and related intellectual property.

In the lawsuit, IMD asserted four trade secrets: (i) the incorporation of internal cavities within silicone implants to enhance flexibility; (ii) the use of mesh tabs near the distal tip to promote tissue ingrowth; (iii) the use of absorbable sutures in conjunction with those mesh tabs; and (iv) a proprietary surgical instrument and supply list used in the Penuma procedure. The case also involved U.S. Patent Nos. 10,413,413 (the ’413 patent) and 10,980,639 (the ’639 patent), covering cosmetic penile implant technologies developed by the defendants. IMD sought invalidation of these patents, alleging that Dr. Elist was an omitted inventor whose contributions formed the basis of the claimed inventions.

IMD filed suit in the Central District of California, asserting trade secret misappropriation, breach of the NDA, and counterfeiting under the Lanham Act. It alleged that Cornell and his collaborators used confidential disclosures from the training session to develop a competing implant and to file patent applications without naming Dr. Elist as an inventor.

Following a jury trial, the district court entered judgment for IMD on all major claims. The jury found that all four asserted trade secrets were protectable and misappropriated, that Dr. Cornell breached the NDA, and that the ’413 and ’639 patents were invalid for improper inventorship. The court awarded $5.77 million in reasonable royalties and $11.54 million in exemplary damages for trade secret misappropriation, along with $1 million in statutory damages for counterfeiting, and imposed a five-year permanent injunction. The defendants appealed the denial of judgment as a matter of law (JMOL), challenging liability on all claims. IMD cross-appealed on certain post-judgment issues, including attorney fees.

Public domain and “generally known” doctrine. The Federal Circuit held that IMD failed to establish that any of the four asserted trade secrets met the statutory definition under the California Uniform Trade Secrets Act. Central to its analysis was the principle that information disclosed in patents or otherwise generally known cannot qualify as a trade secret.

Citing Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974), the court reiterated that although trade secret and patent law may coexist, federal policy prohibits removing publicly disclosed ideas from the public domain. It further relied on Ultimax Cement Mfg. Corp. v. CTS Cement Mfg. Corp., 587 F.3d 1339 (Fed. Cir. 2009), to confirm that patent disclosures render information “generally known.”

Applying these principles, the court found that three of the asserted trade secrets—internal cavities, mesh tabs, and absorbable sutures—were disclosed in prior art patents or constituted routine applications of well-known techniques. The court rejected IMD’s expert testimony as conclusory and inconsistent with the intrinsic disclosures of the prior art.

Failure of secrecy measures. The court separately held that the instrument list did not qualify as a trade secret because IMD failed to maintain its confidentiality. Relying on Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984), the court emphasized that disclosure to third parties without adequate confidentiality protections extinguishes trade secret status. The evidence showed that IMD shared the instrument list via email without confidentiality designations and disclosed it to third parties without non-disclosure agreements. These facts precluded any finding that the information derived independent economic value from secrecy.

Breach of contract. The Federal Circuit reversed the breach-of-contract finding, concluding that the NDA claim was coextensive with the asserted trade secrets. Because the alleged confidential information was either publicly known or not protected, it fell outside the scope of “Confidential Information” under the agreement.

Counterfeiting. The appellate court affirmed the jury’s finding that Dr. Cornell and his practice engaged in counterfeiting by using the Penuma mark without authorization. It rejected the argument that the mark, registered for goods, could not support liability based on services. Citing 15 U.S.C. § 1117(b)(1), the court held that counterfeiting liability extends to use of a mark “in connection with the sale, offering for sale, or distribution of goods or services.” The record supported the conclusion that the defendants advertised Penuma implants on their website, constituting an actionable offer for sale.

Patent invalidity. The Federal Circuit reversed the invalidation of the ’413 and ’639 patents, holding that Dr. Elist was not a joint inventor. Citing Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352 (Fed. Cir. 2004), the court reiterated that inventorship requires a significant contribution to the conception of the claimed invention. It also relied on Board of Education ex rel. Board of Trustees of Florida State University v. American Bioscience, Inc., 333 F.3d 1330 (Fed. Cir. 2003), to hold that contributions limited to prior art concepts cannot support inventorship.

Because IMD’s asserted contributions were already known in the prior art, they could not sustain a claim of joint inventorship. The court also noted that the patent examiner allowed the claims only after amendments introducing additional limitations not attributed to Dr. Elist.

Costs and attorney fees. In a companion decision, the Federal Circuit vacated the district court’s award of $589,343 in costs and remanded for recalculation in light of the altered merits outcome. Citing Farrar v. Hobby, 506 U.S. 103 (1992), and Shum v. Intel Corp., 629 F.3d 1360 (Fed. Cir. 2010), the court held that prevailing-party status must be reassessed when the balance of success shifts across claims. It also dismissed IMD’s cross-appeal for attorney fees as moot, as the reversal of trade secret liability eliminated any basis for such an award (International Medical Devices, Inc. v. Cornell, Nos. 2025-1843, 2025-1863, and 2025-1844 (Fed. Cir. Apr. 17, 2026)).

Judge: Dyk, T.

Attorneys: Nathan S. Mammen (Reichman Jorgensen Lehman & Feldberg LLP) for International Medical Devices, Inc. Russell Stanley Post (Beck Redden LLP) for Dr. Cornell.

Companies: International Medical Devices, Inc.

Cases: TradeSecrets FedCirNews GCNNews