Chicago IP Attorney & Lawyer : R. David Donoghue : Chicago IP Litigation Blog

LimitNone v. Google, Inc., (Cook County Ct. Jun. 24, 2008).

Last week, LimitNone, a Chicago company, sued Google for trade secret misappropriation seek $1B.  LimitNone alleged that Google entered a nondisclosure agreement with LimitNone to review LimitNone's gMove software -- software that helps Microsoft Outlook users migrate data to the Google platform.  Google allegedly assured LimitNone that it would not offer a competing product, but after receiving LimitNone's trade secrets and promoting the $19 gMove software, Google began offering a free, competing software package which allegedly used LimitNone's trade secrets.  LimitNone filed a speaking complaint, for example:

With gMove priced at $19 per copy and Google's prediction that there were potentially 50 million users, Google deprived LimitNone of a $950m opportunity by offering Google's competitive product for free as a part of its 'premier' Google Apps package

This appears to be an interesting and potentially significant case.  I will keep my eye on it and update you as opinions and events occur.  For more on the filing, check out:

• Chicago Tribune
  
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• ZDNet

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Single Source, Inc. v. Harvey, No. 07 C 1201, 2008 WL 927902 (N.D. Ill. Apr. 7, 2008) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan denied defendants' summary judgment motion. Defendant Harvey was employed by plaintiff Single Source (“SS”) as, among other things, its Sales Director. When Harvey was promoted to the Sales Director position he signed a confidentiality agreement which required that Harvey maintain the secrecy of SS's trade secrets and only use them for SS's benefit. SS alleged that Harvey became disgruntled and took a position with defendant Food Marketing Concepts (“FMC”). Before giving SS notice and leaving SS's employ, Harvey allegedly solicited SS's customers for FMC and used an SS expense account to pursue customers for FMC. Defendants argued that because Harvey was not an SS officer or director he did not owe SS a duty of loyalty. The Court, however, held that an employee owes it employer a duty not to compete with the employer or solicit the employer's customers before terminating the employment. The Court also held that the parties' competing evidence regarding whether Harvey had actually solicited SS's customers prior to ending his employment with SS created a material question of fact.

Practice Tip: You must respond to Local Rule 56.1 statements of material facts. The Court noted that defendants did not respond to SS's statement of additional facts. Because of that, the Court deemed each additional material fact admitted. The Court did not identify whether its decision turned on any of these admitted facts, but it is easy to imagine the circumstance in which the case could have turned on an inadvertently admitted fact.

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Integrated Genomics, Inc. Kyrsides, No. 06 C 6706, 2008 WL 63065 (N.D. Ill. Mar. 4, 2008) (Lefkow, J.).

Judge Lefkow dismissed defendant Ivanova for lack of subject matter jurisdiction, held that the Court had subject matter jurisdiction over defendant Kyrsides, and denied defendants' Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff's claims based upon preemption. Plaintiff alleged that defendants' breached their non-compete agreements and otherwise named plaintiff when defendants resigned from plaintiff, where they worked with genome software, and joined plaintiff's competitor in similar roles. Defendants each argued that plaintiff had not sufficiently pled diversity jurisdiction because plaintiff had not shown that $75,000 or more was in controversy. In response, plaintiff alleged that they lost customers to defendants' new employer after defendants resigned. But that was insufficient because plaintiff did not allege that defendants were responsible for, or the cause of, those lost customers. The Court, therefore, dismissed defendant Ivanova. But for Kyrisides, plaintiff also relied upon an email sent from Kyrsides to plaintiff's employees explaining Krysides's view that his resignation cost plaintiff a very large number of contracts. Kyrsides statements were sufficient proof that the amount in controversy exceeded $75,000.

The Court held that a motion to dismiss was not the appropriate vehicle for deciding the scope of the relevant non-compete agreements. The scope of a non-compete was fact-intensive and best determined after additional discovery.

Finally, the Court held that plaintiff's claims were not preempted by the Illinois Trade Secret Act ("ITSA"). While the claims could encompass trade secret information, they were based upon the broader category of confidential information. Because the claims were potentially broader than trade secrets, they were not preempted.

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CardioNet, Inc. v. LifeWatch Corp., No. 07 C 6625, 2008 WL 567031 (N.D. Ill. Feb. 27, 2008) (Conlon, J.).

Judge Conlon granted in part counter-defendant CardioNet’s Fed. R. Civ. P. 12(b)(6) motion to dismiss counter-plaintiffs’ (collectively, “LifeWatch”) Lanham Act false advertising and related Uniform Deceptive Trade Practices Act (“UDTPA”) and Consumer Fraud and Deceptive Trade Practices Act (“CFA”) claims. LifeWatch alleged that CardioNet improperly acquired one of LifeWatch’s prescription-only heart monitoring devices, the Life Star ACT. The device monitors a person’s heart rate and uses a cell phone to transmit irregular readings to a monitoring station. CardioNet allegedly inspected and tested the device. Then based on its tests, CardioNet allegedly misappropriated LifeWatch’s trade secrets and intentionally made false and misleading statements about the LifeStar ACT in its advertising. LifeWatch’s Lanham Act, UDTPA and CFA claims were all based upon CardioNet’s allegedly false advertising.

LifeWatch identified the allegedly false statements with specificity, but because LifeWatch did not plead who made them or when and where they were made, LifeWatch’s claims did not meet Rule 9(b) heightened pleading standards. The Court, therefore, dismissed the Lanham Act, UDTPA and CFA claims.

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RRK Holding Co. v. Sears, Roebuck & Co., No. 04 C 3944, Min. Order (N.D. Ill. Sep. 10, 2007) (Coar, J.).*

Judge Coar denied the parties’ damages motions in limine.* First, the Court held that defendant Sears, Roebuck & Co. (“Sears”) could have its damages expert Catherine Lawton testify regarding her analysis of a hypothetical September 2001 negotiation between the parties. Plaintiff RRK Holding (“RRK”) argued that the misappropriation began in March 2000, not when Sears began selling its product in September 2001. As a result, Sears contended that Lawton’s September 2001 hypothetical negotiation should not be allowed into evidence. But the Court held that the timing of the misappropriation was a question of fact for the jury and, therefore, allowed Lawton’s testimony.

Second, the Court held that Sears could introduce the 2003 sale of some of RRK’s assets for $17M as part of Sears’s damages case. The Court held that the value of the sale was relevant to RRK’s alleged injury based upon the alleged misappropriation.

Third, the Court held that RRK could introduce damages calculations including periods beyond the “head start” period (the time it would have taken for Sears to reverse engineer RRK’s combination tool). The head start period was disputed, preventing the Court from fixing a time for the period, and any alleged harm would be resolved by a jury instruction explaining how the jury should calculate damages relative to the head start period.

Finally, the Court denied RRK’s motion for sanctions pursuant to 28 U.S.C. § 1927. RRK argued that Sears’s March 2007 production, two years after fact discovery closed, of documents dated 1999 was “unreasonable and vexatious” and should be sanctioned. But the Court held that Sears’s explanation that the documents were found when it replaced its litigation counsel and new counsel ran additional searches rendered the delay “negligen[t] and reckless[],” but not in bad faith. The Court, therefore, did not impose sanctions.

* Click here for a copy of the opinion and click here for more about this case in the Blog's archives.

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RRK Holding Co. v. Sears, Roebuck & Co., No. 04 C 3944, 2007 WL 495254 (N.D. Ill. Feb. 14, 2007) (Coar, J.).

As promised last week, the jury instructions are now available -- click here for a copy.  Additionally, although the verdict form is not available electronically, the Court's minute order (click here for a copy) gave some additional detail.  The jury found for plaintiff RRK on each of eleven counts and awarded damages as follows:

Damages Award

RRK's Actual Losses	$11,664,105
Sears's Unjust Enrichment	$1,688,136
Punitive Damages	$8,011,344
Total Damages	$21,363,585

For more on this case, click here for the Blog's archives.

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RRK Holding Co. v. Sears, Roebuck & Co., No. 04 C 3944, 2007 WL 495254 (N.D. Ill. Feb. 14, 2007) (Coar, J.).

The Chicago Sun-Times is reporting that a jury returned a $21.5M verdict, including $8M in punitive damages, Monday for plaintiff RRK Holding Co. ("RRK") in its Illinois Trade Secret Act ("ITSA") suit against defendant Sears, Roebuck & Co. ("Sears").  RRK alleged that, pursuant to a nondisclosure agreement, it disclosed to Sears its plans for a next generation “combination tool” which consisted of a rotary saw, also called a spiral saw, which could be converted into a plunge router. But after negotiations broke down over price, Sears allegedly took RRK's plans and used them to make Sears's Craftsman "All-in-One" tool.  Sears has said it will appeal the verdict.  The Court's docket has not been updated yet with a verdict form or jury instructions, but I will post them when they become available, likely next week.

For more on this case, click here for the Blog's archives.

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Am Fam. Mutual Ins., Co. v. Roth, No. 05 C 3839, 2007 WL 2410074 (N.D. Ill. Aug. 16, 2007) (Cole, Mag. J.).

Judge Cole granted in part plaintiff’s motion to strike evidence and bar its use. The documents at issue were commission statements including plaintiff’s customer information. The Court previously ordered defendants to return to plaintiff all documents in its possession including plaintiff’s customer information in this trade secret matter. After that order, defendants filed the commission statements, including customer information, with the clerk as an exhibit to another document. The Court held that filing of the commission statements was public disclosure which violated the Court’s order that defendants not retain or disclose such information. But the Court held that plaintiff’s preferred sanction for retaining and filing the documents, barring their use as evidence at trial, was not proportional with defendants’ wrong in keeping the document and filing them publicly with the Court. 

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UTStarcom, Inc. v. Starent Networks, Corp., No. 07 C 2582, Min. Order (N.D. Ill. Aug. 16, 2007) (Lindberg, J.).

Judge Lindberg denied defendants' motion to dismiss plaintiff's state law claims and its claim seeking assignment of defendants' patents to plaintiffs.  The Court held that the claim seeking assignment of defendants patents to plaintiff was an invalidity contention.  Plaintiff claimed that it had invented defendants' patented inventions before defendants.  While plaintiff did not use the correct terms, it met the notice pleading standards.  Additionally, plaintiff's state law trade secret and tortious interference claims were sufficiently related to the patent claims to come within the Court's supplemental jurisdiction.

The Court refused to consider plaintiff's requests for additional discovery  because it was made orally in court and in plaintiff's responsive pleading, but never as a written motion as required by Fed. R. Civ. P. 7(b)(1).

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Fast Food Gourmet, Inc. v. Little Lady Foods, Inc., No. 05 C 6022, 2007 WL 2156665 (N.D. Ill. Jul. 26, 2007) (Cole, M.J.)

Judge Cole granted in part defendant Little Lady Foods’ (“LLF”) Fed. R. Civ. P. 37 motion to bar evidence of allegedly late–identified trade secrets. Plaintiff Fast Food Gourmet (“FFG”) originally identified four trade secret elements of its process for making thin crust frozen pizza (you can read more about this case in the Blog's archives). FFG’s Vice President of Operations Crause identified four additional elements during his deposition. And FFG later identified two additional elements. LLF argued that FFG should be limited to the first four elements because FFG never updated its interrogatory responses to include the six additional elements. The Court held that the four additional elements disclosed during the deposition had “otherwise been made known” pursuant to Fed. R. Civ. P. 26(e) and, therefore, were not required to be added to FFG’s interrogatory responses. The Court excluded the other two elements. FFG argued that it had identified the elements by identifying documents containing the elements in its interrogatory responses pursuant to Fed. R. Civ. P. 33(d). But the Court held that the documents FFG identified only identified the two elements sporadically, and in connection with elements that were not trade secrets. This, combined with Crause’s testimony that he had identified all of the trade secret elements, made FFG’s Rule 33(d) statements insufficient.

Practice Tip: Rule 33(d) is often seen as a simple escape from answering cumbersome or difficult interrogatories. Of course, it is also often warranted. But when you use Rule 33(d), make sure to identify the correct documents, and make sure the identified documents fully support your position.

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Fast Food Gourmet, Inc. v. Little Lady Foods, Inc., No. 05 C 6022, 2007 WL 1673563 (N.D. Ill. Jun. 8, 2007) (Cole, J.).

Judge Cole denied plaintiff Fast Food Gourmet, Inc.'s ("FFGI") motion to compel responses to interrogatories, in this trade secret case involving frozen pizzas (you can read more about this case in the Blog's archives).  FFGI served defendants with an interrogatory seeking information regarding which brands of frozen pizza (aside from the accused DiGiorno Thin Crispy Crust Pizza) defendants baked in the ovens which were allegedly part of FFGI's trade secret crust-making process for stone hearth oven, thin crust, frozen pizzas.  Defendants objected to the interrogatory, which led to a meet and confer between the parties on February 15, 2007, two weeks before the close of fact discovery on March 1.  The meet and confer did not resolve the dispute.  On April 1, FFGI submitted its expert reports and then, six weeks after the close of discovery, FFGI moved to compel responses to the interrogatories.  But FFGI failed to notice the motion until more than one month later on May 18.  The Court noted that, while it had discretion to grant the motion, motions to compel filed after the close of fact discovery are generally held to be untimely unless accompanied by a "reasonable and persuasive justification" for the delay.  FFGI, however, provided no justification for its delay. 

But the Court ultimately denied FFGI's motion not because it was untimely, but because the evidence lacked evidentiary value.  FFGI assured the Court that it would not seek any other discovery after receiving the interrogatory responses.  FFGI had also repeatedly taken the position that its trade secrets crust-making process involved the combination of various elements and processes including the ovens that were the focus of FFGI's interrogatories, but that the ovens alone were not a trade secret.  The interrogatory responses alone , therefore, were of no value.  They would necessarily require additional discovery to be relevant to the case.  For example, it was not enough to know which other pizzas were baked in the ovens.  FFGI would need to know how each pizza baked in the oven was prepared in order to determine whether the pizzas were made using the FFGI trade secrets.  That would require additional fact discovery, but fact discovery was already closed.  The Court, therefore, denied FFGI's motion to compel. 

Practice tip:  File your discovery motions on or before the close of discovery.  And always explain to the Court why you need documents or interrogatory responses, particularly if you are seeking them after the close of discovery.

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Am. Hardware Manufs. Assoc. v. Reed Elsevier Inc., No. 03 C 9421, 2007 WL 1521185 (N.D. Ill. May 14, 2007) (Moran, J.).

Judge Moran denied in part plaintiff's motion to strike defendants' confidentiality designations regarding the deposition of defendants' former CEO.  Defendants designated as "Highly Confidential," among other portions of the deposition, those portions in which one of defendants' customer contracts (the "Contract") was discussed.  Defendants argued that the terms of the Contract were trade secrets and, therefore, should be given the strongest confidentiality protection available pursuant to the parties' Protective Order.  Magistrate Judge Mason previously reviewed the designation, held that the Contract was not likely trade secret and reduced the related designations to "Confidential."  Judge Moran agreed with Judge Mason, rejecting the argument that the Contract was a trade secret as "conclusory and vague."  And Judge Moran agreed that the Contract warranted a "Confidential" designation.  Judge Moran also explained that while the deposition and related documents would be protected by the Protective Order during discovery, they would not when the Court ruled on dispositive motion or held trial, quoting the Seventh Circuit:

"Secrecy is fine at the discovery stage, before the material enters the judicial record" those documents that "influence or underpin the judicial decision are open to public inspection unless they meet the definition of trade secrets or other categories of bona fide long-term confidentiality."  Baxter Int'l, Inc. v. Abbott Labs., 297 F.3d 544, 545 (7th Cir. 2002).  Thus, at the summary judgment, trial or appellate stage, documents that have previously been deemed confidential may not retain such a designation.  See Little v. Mitsubishi Motor Mfg. of Am. Inc., 2006 WL 1554317, at *3 (C.D. Ill. 2006).

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Papa John's Int'l, Inc. v. Rezko, No. 04 C 3131, 2007 WL 1521472 (N.D. Ill. May 21, 2006) (Moran, J.).

Relying on its prior opinion, which included a detailed analysis of the Complaint and notice pleading standards (you can read discussion of that opinion in the Blog's archives), the Court denied defendants' various Fed. R. Civ. P. 12(b)(6) motions to dismiss plaintiff's trade secret and trademark infringement claims.  Defendants argued that plaintiff did not sufficiently which defendants were alleged to have performed the acts at issue.  But the Court reasoned that defendants had notice of plaintiff's claims and that notice is all the Federal Rules require.  The Court pointed out that it had "covered much of this same ground in much greater detail" in its prior opinion and cautioned that "this case will not go away for any defendant by a motion to dismiss . . . ."

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Stafford Trading, Inc. v. Lovely, No. 05 C 4868, 2007 WL 1512417 (N.D. Ill. May 21, 2007) (Coar, J.).

Judge Coar granted in part declaratory judgment plaintiffs' (collectively "Stafford") motion to dismiss and denied Stafford's summary judgment motion.  The Court dismissed defendants' fraud and unjust enrichment counterclaims after holding that they were preempted by the Illinois Trade Secret Act.  The Court also dismissed defendants' fraudulent concealment.  The material fact that Stafford allegedly failed to disclose was the opinion that Stafford owned the RIVAS electronic options trading platform outright.  But the Court held that an allegedly withheld opinion could not support a fraudulent concealment claim.

The Court's summary judgment decision turned largely upon whether RIVAS was a computer program protected by copyright or a "methodology" protected as a trade secret.  The Court held that it had insufficient evidence to make the determination.  Furthermore, neither party briefed the issue of what effect the copyright/methodology would have upon defendants' alleged oral contract between the parties which allegedly made the parties co-owners of RIVAS.  The Court denied summary judgment as to defendants' breach of contract counterclaim because the existence of an oral contracts and its terms were both disputed facts.  Finally, the Court denied summary judgment as to defendants' trade secret counterclaim because, whether RIVAS was determined to be protected by copyright or trade secret, the parties disputed whether defendants employed sufficient means to protect RIVAS's secrecy.

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RRK Holding Co. v. Sears, Roebuck & Co., No. 04 C 3944, 2007 WL 495254 (N.D. Ill. Feb. 14, 2007) (Coar, J.).

Judge Coar denied defendant summary judgment on plaintiff’s trade secret and breach of contract (nondisclosure agreement) claims. The Court also granted defendant summary judgment on plaintiff’s unjust enrichment claim holding that because it was based upon the trade secret misappropriation allegations it was preempted by the Illinois Trade Secret Act (“ITSA”). Plaintiff alleged that, pursuant to a nondisclosure agreement, it disclosed to defendant its plans for its “combination tool” which consisted of a rotary saw, also called a spiral saw, which could be converted into a plunge router. But after negotiations broke down over price, defendant allegedly disclosed the idea to its Canadian subsidiary, which then allegedly disclosed the idea to another party, Choon Nang Electrical Appliance Manufacturing Ltd. (“Choon Nang”), that obtained a British design patent on the combination tool and produced it for defendant. 

The Court held that there was at least a question of fact as to whether the combination tool was maintained as a trade secret because: 1) plaintiff only disclosed the idea to defendant after receiving verbal assurances of confidentiality followed by a nondisclosure agreement; 2) plaintiff marked documents regarding the combination tool confidential; and 3) plaintiff presented evidence that both plaintiff’s and defendant’s combination tools enjoyed substantial sales upon their respective introductions to the market.

The Court also held that there was at least a question of fact as to whether defendant misappropriated the combination tool. The parties put forth conflicting evidence as to whether defendant disclosed the combination tool to Choon Nang, and, if it was disclosed, whether the disclosure occurred before or after Choon Nang filed its British patent application.

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Papa John's Int'l, Inc. v. Rezko, __ F. Supp.2d __, 2006 WL 1843121 (N.D. Ill. June 29, 2006) (Moran, J.).

In partially granting Rezko's Motion to Dismiss, Judge Moran looked at notice pleading standards across a variety of intellectual property and addressed the individual defendant's personal liability for the acts of his company.

Judge Moran agreed with defendants that the complaint lacked factual support for its trademark infringement claims (specifically failing to explain the likelihood of confusion), but found that the complaint met the notice standard, citing Judge Easterbrook's recent Seventh Circuit opinion (Simpson v. Nickel, __ F.3d __, 2006 WL 1585445 (7th Cir. 2006)) reaffirming that complaints should not be dismissed because they are conclusory and that complaints need only allege the "bare minimum facts" necessary for notice. Accordingly, it was enough that plaintiff alleged that defendants used plaintiff's marks and other confusingly similar marks to continue operating a pizza business. Plaintiff's conclusory statements that defendants continued selling pizza using ingredients not supplied, and therefore not quality-controlled, by plaintiff was also sufficient for plaintiff's trademark dilution claim.

Judge Moran dismissed plaintiff's copyright claim, however, because it only alleged that defendants "ma[de] unauthorized use" of the marks, without any explanation of what those uses were. This conclusory statement did not allow Judge Moran to determine whether plaintiff was alleging that defendants made derivative works from plaintiff's copyrighted materials, used ideas from the materials, which would not be an infringement, or just kept possession of copyrighted materials, which would be a contract claim.

On the final notice pleading issue, Judge Moran discussed in detail the tension between notice pleading and the Seventh Circuit's requirement that plaintiff must identify "concrete secrets" in trade secret misappropriation claims. The court found that plaintiff's "vague and conclusory" allegations of the misappropriation of plaintiff's "Papa John's System" were sufficient, although it noted that plaintiff would need to specifically identify the secrets at issue eventually and encourage plaintiff, in a footnote, to amend the complaint to further identify the secrets.

Finally, Judge Moran refused to dismiss the individual defendant from the case. Although corporate officers are generally not personally liable for the actions of their employers, in this case the individual defendant had signed contracts which, among other things, included the individual defendant's personal guarantee of the company's debts.

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