Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-02539/USCOURTS-ca8-06-02539-0/pdf.json

Parties Involved:
Astromec
Not Party
Eaton Aerospace
Appellee
SL Montevideo Technology
Appellant

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-2539

___________

SL Montevideo Technology, Inc., *

*

Plaintiff - Appellant, *

* Appeal from the United States

v. * District Court for the

* District of Minnesota.

Eaton Aerospace, LLC, *

*

Defendant - Appellee. *

___________

Submitted: January 11, 2007

Filed: July 12, 2007

___________

Before LOKEN, Chief Judge, BYE and SHEPHERD, Circuit Judges.

___________

LOKEN, Chief Judge.

Eaton Aerospace contracted to supply stabilizer trim motors for Boeing 737

airplanes. Stabilizer trim motors are powered by brushless direct current (DC) motors.

Eaton subcontracted with SL Montevideo Technology, Inc. (SLM), to supply a

customized brushless DC motor meeting Eaton’s specifications for this application.

After developing and supplying two versions of that motor for several years, SLM

refused to bid on a redesigned model and then commenced this diversity action

accusing Eaton of misappropriating SLM’s trade secrets and breaching a Proprietary

Information Agreement (PIA) by the manner in which Eaton obtained a redesigned

motor from another supplier. After trial but before submitting the case to the jury, the

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The HONORABLE RICHARD H. KYLE, United States district judge for the

District of Minnesota

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district court1

 granted Eaton judgment as a matter of law on both claims. Applying

Minnesota law, the court concluded that SLM “has not presented any testimony or

exhibits establishing with particularity what its claimed trade secrets are” and “has not

presented sufficient evidence from which a reasonable jury could conclude that Eaton

breached the PIA.” SLM appeals only the dismissal of its breach of contract claim.

We affirm. 

I.

After Eaton contracted to supply Boeing stabilizer trim motors for the 737

airplane, SLM with input from Eaton and Boeing designed and began supplying

Eaton with a customized brushless DC motor for this application, referred to as the -01

motor. SLM was Eaton’s sole source for this brushless DC motor. As SLM did not

have an exclusive supply contract, Eaton explored developing a second source through

another supplier, Astromec, Inc., or Eaton’s own production facilities. But nothing

came of these efforts. 

In 1999, Boeing complained of -01 motor failures. In response, SLM, Eaton,

and Boeing modified the -01 brushless DC motor design. The modified product,

referred to as the -02 motor, had larger bearings than the -01 motor and incorporated

other changes. In 2000 and 2001, SLM supplied -02 motors which Eaton then

installed in its stabilizer trim motors. Boeing had no further complaints. 

In January 2000, SLM proposed a Proprietary Information Agreement relating

to the -01 and -02 brushless DC motors. Eaton responded that it was willing to enter

into a PIA; however, because the parties had worked on this project for many years

without such an agreement, Eaton proposed that SLM attach to the PIA “a list that

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outlines the documents that [Eaton] has in its possession that [SLM] believes are

confidential.” SLM proposed instead that the agreement be limited to documents

stamped confidential by SLM. Eaton agreed, and the parties signed the PIA on

January 27, 2000. The PIA required that each party “keep in confidence and not

disclose to any person . . . the other Party’s Proprietary Information.” The PIA

defined “Proprietary Information” as including: 

recorded information . . . of a scientific or technical nature . . . which has

been marked as proprietary . . . by a stamp or other written or recorded

identification by the originating party prior to disclosure or after

disclosure if the Proprietary Information was inadvertently not marked

prior to disclosure.

The PIA excluded from protection Proprietary Information “in the public domain,”

already known or independently developed by the receiving party, or made public to

others by the party claiming proprietary rights. 

In March 2001, Eaton notified SLM that it was redesigning its stabilizer trim

motor for the Boeing 737 and that the changes would require modest redesign of the

brushless DC motor component. Eaton invited SLM to redesign its -02 motor. SLM

declined. Forced to find a new supplier, Eaton contracted with Astromec to develop

and supply a brushless DC motor for the redesigned stabilizer trim motor. 

Astromec’s design process for this brushless DC motor was long and difficult.

Deadlines were missed, and Boeing expressed concerns to Eaton that Astromec could

not produce a quality motor. At one point, Eaton asked SLM to reconsider its refusal

to redesign the -02 motor. Again, SLM declined. Astromec’s struggle to design a

motor “from scratch” threatened Eaton’s contract commitments to Boeing. Not

surprisingly, Eaton’s engineers provided guidance and technical support and critiqued

Astromec’s design proposals. SLM claims that Eaton breached the PIA by disclosing

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SLM’s proprietary information to Astromec during this design and development

process. 

SLM commenced this action in May 2003, before Astromec was able to supply

Eaton with production quantities of its brushless DC motor. SLM claims no lost

profits or other direct damages, conceding that its -01 and -02 motors could only be

used in Eaton stabilizer trim motors for the 737 airplane and that SLM was unwilling

to continue this relationship by supplying Eaton with a redesigned brushless DC motor

suitable for use in Eaton’s new stabilizer trim motor. Thus, there is no element of

unfair competition here. Rather, SLM’s contract claim is for “unjust enrichment”

measured by the monetary advantage to Eaton of allegedly using SLM’s proprietary

information to accelerate Astromec’s development of an alternative brushless DC

motor so that Eaton could meet its contract commitments to Boeing. 

Abandoning its trade secret claim on appeal, SLM argues that the district court

erred in granting judgment as a matter of law on the contract claim because “the entire

design” of SLM’s motor is Proprietary Information protected by the PIA. The breadth

of this claim is significant. SLM witnesses conceded that SLM was contractually

obligated to provide its engineering drawings to Eaton, along with the customized

motors Eaton purchased, and that the initial design parameters were specified by

Eaton. Yet SLM asserts the right to bar Eaton from using “the entire design” of a

customized product which it designed to Eaton’s specifications, with guidance from

Eaton and Boeing, and which Eaton purchased outright from SLM. If upheld, this

claim would preclude Eaton from obtaining this critical component from another

source (including Eaton itself) after SLM ended their relationship. This type of

restraint is normally found in exclusive supply contracts. Of course, the parties were

free to enter into a PIA putting Eaton in this extraordinary straightjacket. See, e.g.,

Universal Gym Equip., Inc. v. ERWA Exercise Equip. Ltd., 827 F.2d 1542, 1550 (7th

Cir. 1987). The question is whether SLM proved they did so. 

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This witness admitted the Astromec motor was not identical to the SLM motor.

Eaton fashioned the redesign of its stabilizer trim motor so as to require only modest

redesign of the brushless DC motor component. Thus, it is not surprising that the

redesigned motor eventually purchased from Astromec had many similarities to the

SLM motor. 

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II.

SLM’s vice president of quality assurance testified that the components of

brushless DC motors are well known but “the real proprietary nature is how these

things are all put together and how the tradeoffs are made during the design effort

such that the [customer’s] spec is met.” SLM presented evidence that it shipped Eaton

six copies of “Green Packages” containing comprehensive engineering specifications

and drawings for the -02 motor, and that it was SLM’s practice to stamp such

documents proprietary. SLM also presented evidence that Eaton’s initial

specifications to SLM in 1996 called for design of a brushless DC motor meeting

general performance parameters (such as rotor inertia, breakaway torque, and

resistance), whereas the specifications Eaton provided Astromec for a redesigned

motor in 2002 called for the precise performance parameters achieved by SLM’s -02

motor and disclosed by SLM in the proprietary Green Packages. SLM’s design

engineer testified that “internally, my motor and [Astromec’s] motor are the same.

The guts of that motor is the same. . . . They have to be because [Eaton] specified my

design parameters.”2

 SLM argues this is sufficient evidence for a reasonable jury to

conclude that Eaton breached the PIA. Like the district court, we disagree.

The PIA protected proprietary information (i) contained in SLM documents

stamped proprietary and (ii) not falling within one of the PIA’s exclusions. As to the

first element, the voluminous trial record contains not one SLM document stamped

“proprietary.” SLM argues that it should survive judgment as a matter of law on this

ground because SLM witnesses testified that Green Packages are always stamped

proprietary and Eaton witnesses recalled seeing SLM documents marked proprietary,

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Proof that Eaton disclosed protected proprietary information to Astromec was

fraught with difficulty for SLM. For example, SLM’s amended complaint alleged that

Boeing employees were given extensive access to SLM’s facilities and design

drawings in November 1999, before the PIA was signed. As Boeing was not a party

to the PIA, this disclosure would likely trigger two of the PIA’s exclusions.

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so a reasonable juror could infer that at least one of the Green Packages sent to three

different Eaton addresses was so marked. That argument is sound, but the second

element required proof that Eaton misappropriated proprietary information not falling

within one of the PIA’s four exclusions -- information in the public domain,

information already known or independently developed by Eaton, and information

disclosed to others by SLM. SLM elected not to offer the Green Package into

evidence. Without that evidence, the jury could not find this element satisfied.3

In a trade secret case, “[s]imply to assert a trade secret resides in some

combination of otherwise known data is not sufficient, as the combination itself must

be delineated with some particularity in establishing its trade secret status.” Jostens,

Inc. v. Nat’l Computer Sys., 318 N.W.2d 691, 699 (Minn. 1982); see Electro-Craft

Corp. v. Controlled Motion, Inc., 332 N.W.2d 890, 898 (Minn. 1983) (failure to

specify trade secrets doomed brushless motor manufacturer’s claim of

misappropriation by a competitor). To be sure, agreements such as the PIA may

protect broader categories of information than trade secrets. But the PIA’s exclusions

limited its protection to information having the same characteristics of secrecy and

novelty as trade secrets. Compare Minn. Stat. § 325C.01, subd. 3, 5. A claim that a

confidentiality agreement was breached by disclosure of a proprietary combination of

data should require the same precision of proof as a comparable trade secret claim.

This is especially true when the alleged breach was committed, not by a free-riding

competitor, but by the very customer who defined the product’s customized

specifications and then purchased the product. Absent misuse of protected proprietary

information, the PIA did not bar Eaton from using the SLM motors it purchased, from

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modifying those products, or from seeking a replacement vendor when SLM walked

away from their on-going relationship.

We review the grant of judgment as a matter of law de novo to determine

whether the losing party submitted sufficient evidence to support a jury verdict in its

favor, giving that party the benefit of all inferences “which may be drawn from the

evidence without resort to speculation.” Sip-Top, Inc. v. Ekco Group, Inc., 86 F.3d

827, 830 (8th Cir. 1996) (quotation omitted); see Fed. R. Civ. P. 50(a)(1). After

careful review of the trial record, we conclude that, lacking evidence that specific data

contained within documents marked proprietary was both protected by the PIA and

disclosed to Astromec, the district court properly granted judgment as a matter of law

on the ground that SLM failed to present evidence from which a reasonable jury could

find that Eaton breached the PIA.

The judgment of the district court is affirmed.

______________________________

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