MPC Containment Sys., Ltd. v. Moreland, No. 05 C 6973, 2008 WL 2875007 (N.D. Ill. Jul. 23, 2008) (Aspen, Sen. J.).*
Judge Aspen granted in part and denied in part defendants’ summary judgment motion regarding plaintiffs’ copyright, Lanham Act, trade secret and related state law claims.** Plaintiffs and defendants both design, manufacture and sell flexible fuel storage tanks. Corporate defendant MIL was formed by at least individual defendants John and Lawrence, both of whom previously worked for plaintiffs in various capacities and later worked for MIL in direct competition with plaintiffs over, at least, a United States Air Force contract.
Trade Secret Misappropriation
The Court held that plaintiffs’ pricing and warranty provisions were not trade secrets and, therefore, granted summary judgment in defendants’ favor. But the Court held that there was a question of fact as to whether plaintiffs’ tank designs were trade secrets. Additionally, the Court noted that the question of whether sufficient efforts were used to maintain secrecy of the alleged trade secrets was a question of fact for jurors in all, but the most extreme cases. Because plaintiffs identified several precautions taken to protect their trade secrets, the Court denied summary judgment. The fact that tank designs were provided to plaintiffs’ independent contractors without confidentiality did not warrant summary judgment for defendants. There are circumstances where independent contractors have independent, professional duties of confidentiality regardless of whether agreements were signed.
Copyright Infringement
Defendants argued that plaintiffs’ copyrighted fuel tank drawings were not original, as required for copyright ownership, because defendant John authored the drawings, not plaintiffs. The Court held that there was a question of fact as to the ownership because the parties disputed John’s employment status when he made the drawings. If John was an employee, plaintiffs owned the copyrights based upon the work for hire doctrine.
The Court also found a question of fact as to the degree of creativity employed in making plaintiffs’ drawings. A comparison of plaintiffs’ drawings and defendants’ drawings, which defendants alleged plaintiffs copied, left a question of fact as to whether plaintiffs’ drawings showed sufficient differences to rise to the level of creativity.
Compute Fraud and Abuse Act (“CFAA”)
The Court granted defendants summary judgment as to CFAA § 1030(a)(4) because plaintiffs did not respond to defendants’ claims and, therefore, waived their defenses. But the Court found questions of fact as to the two other charged sections of the CFAA, §§ 1030 (a)(2)(c) and (a)(5). First, there was a question of fact as to whether defendant John was authorized to access the documents he allegedly misappropriated. While John may have received the documents at issue during the normal course of his employment with plaintiffs, there was a dispute as to whether John exceeded his authorization by allegedly breaching his duty of loyalty to plaintiffs.
Additionally, there was a question of fact as to whether John passively received all accused documents by email or “accessed” the documents pursuant to the CFAA actively by email or otherwise.
Illinois Deceptive Trade Practices Act (“IDTPA”)
The IDTPA only provides for injunctive relief, not monetary damages. As a result, the IDTPA only addresses ongoing harms. The Court, therefore, granted defendants’ summary judgment as to defendants’ past acts. The Court also explained that it would not grant an IDTPA injunction to eliminate an existing commercial advantage, as courts sometimes do in trade secrets cases.
* Click here for more on this case in the Blog’s archives.
** This post does not cover some of the non-IP specific state law claims.

Continue Reading Pricing and Warranty Agreement Provisions Were Not Trade Secret

RRK Holding Co. v. Sears, Roebuck & Co., No. 04 C 3944, Slip Op (N.D. Ill. May 27, 2007) (Coar, J.).
Judge Coar denied defendant Sears, Roebuck & Co.’s (“Sears”) Fed. R. Civ. P. 50(b) motion for judgment as a matter of law and Fed. R. Civ. P. 59(a) motion for a new trial or a remittitur. And the Court granted plaintiff RRK Holding Co.’s (“RRK”) motion for pre-judgment and post-judgment interest. A jury previously returned a verdict finding Sears liable for breach of a nondisclosure agreement and misappropriation of RRK’s trade secret related to its spiral saw – click here for much more on this case in the Blog’s archives. The jury awarded RRK approximately $21M, including $11.6M in actual damages, $1.6M for unjust enrichment and $8M in punitive damages.
First, Sears argued that RRK offered insufficient evidence showing that Sears’ alleged misappropriation caused RRK’s damages. But the Court held that there was sufficient evidence to support the jury’s verdict. The fact that Sears’s price for its spiral saw was lower than RRK’s explained why customers purchased Sears’s saws over RRK’s, but the trade secret causation was shown by the fact that Sears sold the combination tool instead of selling the components separately.
Second, Sears argued that RRK’s damages should be limited to the traditional “head start” period (an estimate of the time it would take for defendant to develop the trade secret on its own). But the Court held that Illinois law limits injunctive relief to a head start period, but not monetary relief.
Third, the Court held that RRK’s damages expert was sufficiently credible and held that Sears had sufficient opportunity to challenge the expert’s methodologies during cross examination.
Fourth, Sears argued that the jury’s award was in error because it awarded damages based on the entire sales price of the spiral saws, instead of apportioning just that portion of the sales price related to RRK’s trade secrets. But the Court held that a rational jury could have determined that the reason the spiral saw was a success was because of the trade secret and that, therefore, apportionment was not required.
Fifth, Sears argued that RRK’s lost profits damages should have been cut-off when third party competitor Dremel entered the market with a competing spiral saw. But the Court held that it was unclear whether Dremel’s tool was similar enough to RRK’s trade secret to be a substitute for it.
The Court also held that the jury’s award was not excessive. But the Court did find that the jury erred in by using the wrong figure from RRK’s expert for actual lost profits. RRK also conceded that the jury used the wrong number. The Court, therefore, reduced the jury’s actual damages award from $11.6M (the incorrect figure) to $11.2M (the correct figure).
Finally, the Court awarded RRK both pre-judgment and post-judgment interest. Pre-judgment interest, which is awarded on equitable grounds, was appropriate because of the intentional nature of trade secret misappropriation. Additionally, the Court held that pre-judgment interest was appropriate even though RRK was also awarded punitive damages. The Court did, however, suggest that had the punitive damages award been multiples of the actual damages, pre-judgment interest might not have been appropriate. Sears did not challenge RRK’s motion for post-judgment interest.
The Court added $3.7M in pre-judgment interest to the $21M award and assessed post-judgment interest of $1,931.50 per day until the award was paid.

Continue Reading RRK v. Sears: Judge Adds Interest to Jury Award

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.

Continue Reading Jurisdiction: Amount in Controversy Must be Tied to Alleged Wrongs

United Image Print Group, LLC v. Mullen, No. 07 C 6720, 2008 WL 62205 (N.D. Ill. Jan. 4, 2008) (Kocoras, J.).
Judge Kocoras held that the Court lacked sufficient information to rule on preemption of plaintiff’s Illinois Computer Tampering Act and breach of fiduciary duty claims by the Illinois Trade Secret Act. Both claims were based upon defendant’s alleged misappropriation of allegedly confidential information before defendant resigned and took a position with a competitor. The Court reasoned that confidential information could include both trade secrets and protected information that did not rise to the level of trade secrets. Because information outside of the complaint was required to decide the scope of the claims, preemption could not be resolved in defendant’s Fed. R. Civ. P. 12(b)(6) motion to dismiss.

Continue Reading Confidential Information is Potentially Broader Trade Secret Information

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.

Continue Reading RRK v. Sears: Jury Instructions

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.

Continue Reading Jury Returns $21.5M Trade Secret Verdict

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. 


Continue Reading Conflicting Testimony Creates Questions of Fact in Trade Secrets Case