NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION

F ile Nam e: 13a0338n.06

No. 12-3258

UNITED STAT ES COURT OF AP P EALS

F OR THE S IXTH CIRCUIT

KENDA L L HOL DI

NGS, L TD., )

d/b/a PHPK TECHNOL OGI ES, )

) ON APPEALFROM THE U NI TED

Plaintiff-Appellant, ) STATES DI STRI CT COURT FOR

) THE SOUTHERN D I STRI CT OF

v. ) OHI O

)

EDEN CRYOGEN I CS, L L C, et al., )

)

Def endants-A

ppellees. )

Be fore : COOK and WHI TE, Circuit J udg es; SHARP, Dist rict Judge. *

SHARP, District J udg e. This app ea l ar i ses from a dis pute between competing cry og enics

companies over the use of purported trade secr ets. Plaintiff-Appellant Kenda ll Holdings, L td., d/b/a

PHPK Tec hnolo gi es (“PHPK”) appea ls the district court’s g rant of summary judgme nt to

Def endants-A

ppellees on its misappropriation of trade secr ets claim under the Ohio Uniform Trade

Secre ts Act (O UTSA). F or the following rea sons, we R EVERSE the di strict court’s decision and

REMAND for

further proce eding s consistent with this opi nion.

T he Ho nor abl e K evin H. S har p, Uni te d St at es Dis tr ic t J udge fo r t he M idd le Dis tr ic t o f *

T enn ess ee, si tt ing by des ignat ion

.

1No. 12-3258

Kendall Holdings v. Eden Cryogenic s, et al.

I

PHP K b rought this suit ag ainst Eden Cry og enics, L L C (“Ede n”), Eden’s founder an d

president Steven L

. Hensle y (“ Hensley ”), and J im Mitchell ( “ M i t c h e l l ” )

, an Eden employ ee,

a l l e g i n g c o p y r i g h t infring ement, misappropr iation of trade secr ets, dec eptive t r a d e prac tices, and

unfair competition. 1

Hensley has worke d i n the cry og enics industry

– w h i c h u s e s e n g i n e e r e d p r o d u c t s t o

s t o r e a n d m a n i p u l a t e g a s e s a n d l i q u i f i e d g a s e s k e p t a t e x t r e m e l y l o w t e m p e r a t u r e s

–

s i n c e 1967, when he beg an his employ ment with CVI

, I nc. (“CVI ”), a cry og enic s co m p an y

.

Eventually

, he beca

me CVI ’s Vice President of Standard Products

. Mitchell beg an working for CVI

as a draf tsman in 1988. The next y ear

, Mitchell left CVI and took a position as a firef ighte r with the

Columbus Divi sion of Fire . He maintaine d that job but came ba ck to work for CVI as a pa

rt-time

independe nt contra ctor in 1991; his j o b wa s t o draf t desig n and eng ineer ing draw ings (“shop

draw ings” ) for CVI ’s standard products and c ry og enic sy stems.

CVI ’s founder retire d from CVI in 19 9 1 and founded PHPK Tec hnologie s, In c

. (“O ld

PHPK”). Old P HP K initially opera ted as an en gi n ee ri n g consulting firm. During that time,

Hensley and Mitchell rema ined at CVI

, which was acquir ed by Chart I n d u s t ri es

, I nc. (“Char t”), in

I n 1995, Old PHPK moved into the business of cry og enic products manufa cturing and hired 1 9 9 4

.

T he f

act ual bac kg rou nd p re sen te d he re is ada pte d f rom the di st ri ct cou rt ’s re ci ta ti on o f t he 1

fa ct s.

2No. 12-3258

Kendall Holdings v. Eden Cryogenic s, et al.

He n s l ey awa

y from Chart/CVI to cre ate a standard product line. Old PHPK then hired Mitchell

as an i n d ep en d en t contra ctor in April 1995. He perf ormed simil ar part-time desig n and d ra fting

duties a t O l d P H P K a s h e h a d a t C V I, a l l w h i l e c o n t i n u i n g t o w o r k f o r t h e C o l u m b u s f

i r e

d e p a r t m e n t

.

H e n s l e y b e c a m e p r e s i d e n t o f O l d P H P K s o m e t i m e b e t w e e n 1 9 9 8 a n d 2 0 0 0

. M i t c h e l l 2

t e s t i f i e d t h a t

, a t Hensley ’s reque st, he maintained a backup set of shop draw ings on compac t disc

and in hard copy while working at PHPK. Be cause he often worke d fr o m h o m e, he had shop

draw ings on his home computer, and he kept the b ac k u p co p y of the shop draw ings at home.

Mitchell and Hensley both testified that these copies wer e made for safe keeping in the event of fire

or a simil ar catastrophic event. Hensley testified t hat he authorized Mitchell to cre ate t h e b ackup

shop drawing s and store the m at his home.

I n Dec ember 1999, Mitchell’s independe nt-contra ctor rela tionship with Old PHPK ended.

He did not return or destroy any of the a pproxi mately

2000 elec tronic shop dra wing files from his

time at Old PHPK, nor was he asked to. Hensley testified that at the time he terminated Mitchell’s

contra ct, he knew Mitchell had the draw ings and had no objection t o h i s continued possession of

His dep osi ti on t est imony and dec la ra ti on c onf

li ct on t he p re ci se dat e. 2

3No. 12-3258

Kendall Holdings v. Eden Cryogenic s, et al.

them. Mitchell resumed working as an independe nt contra ctor at Chart (for mer l y C VI), a 3

competitor of Old PHPK’s, and c ontinued in that role until May 2002.

I n M ar ch 2004, Kenda ll Holdings, L td., purcha sed all of Old PHPK’s assets, i ncluding it s

shop draw ings, desig ns, cata l o g, cust omer lists, and pricing information and beca me Kenda ll

Holdings, L td., d/b/a PHPK Tec hnologie s (“PHPK”)

. PHPK reta ined Hensley as its presi d e n t, and

he continued in the same role that he had at Old PHPK. PHPK used Old PHPK’s shop draw ings and

independe nt contra ctor. I n that role, he ag ain cre ated desig ns. I n J uly 2004, it hired Mitchell as an

desig ns and shop dra

wing s for PHPK standar d products.

PHPK terminated He nsley in N o v e mb e r

2 0 0 4 b e c a

u s e Ri c h a r d Co le ma n

, o w n e r o f K endall

Holdings, L td., decide d to run the company on his own. Mitchell left PHPK in Dec ember 2004.

After leaving PHPK, Hensley was unemploy ed for near ly a y ear and then worke d as a consultant in

the cr y og enics industry

befor e co- founding a new cry og enics company

, Br ehon Cry og enics, L L C,

in J anuar y 2006. This company later beca me defe ndant-a

ppell ee E d en Cry og enics, L L C. Eden

desig ns and manufa cture s cry og enic equipment such as valves, bay onets, and piping, and is in direc t

competition with PHP K. Hensle y hired Mitchell to help desig n Eden’s standard product line, a nd

Mitchell desig ned these products by ref err ing to h i s ex p er i en ce in the i ndustry and the desig ns he

cre ated while at CVI

and Old PHPK.

Pre viousl y, Hensl ey tes ti fi ed t hat he had no a war ene ss or knowled ge tha t M it che ll had re ta ine d 3

the dr awi ngs unt il th is la wsui t wa s f il ed.

4No. 12-3258

Kendall Holdings v. Eden Cryogenic s, et al.

I n late 2007, PHPK noticed that some of its long standing customers wer e purcha sing from

Eden and that Eden was underbidding PHPK on projec ts. PHPK beg an an in v es t i gati on, and

conclude d that Hensley and Mitchell had improperly acquir ed s h o p draw ings, customer lists, and

pricing information, and wer e using that information t o b u i ld Eden’s business. PHPK also

conclude d that defe ndants had copied PHPK’s products cata log. L itigation eventua lly ensued, with

PHPK bring ing a host of claim s : c o p y r ig h t in f r in g e me n t; mi s a

p p r o p r ia ti o n o f tr a d e secr ets; dece ptive

trade prac tices; unfair competition; brea ch of fiduciar y duty

, du t y o f loy alty

, and im plied contra ct

of confide ntiality ; conver sion; tortious in te r f e r e n c e w it h b u s in e s s r e la

ti o n s h ip s ; a

n d c iv il c o n s p ir a c y

.

Def endants counter claimed alleg ing defa mation, tortious interfe renc e, and abuse of proce ss. Crossmotions for summary judgme nt w ere filed, and PHPK voluntarily dismiss ed sever al of its c laims.

On J anuar

y 17, 2012, the district court enter ed an order g ranting in part and deny ing in par t b oth

parties’ motions.

Subsequently

, the parties voluntarily di s missed with prejudice all rema ining claims and

counter claims except for PHPK’s misappropr iation of trade secr ets claim. Thus, the sole issue on

appea l is whether the di strict co u rt proper ly enter ed sum mary judgme nt in favor of all defe ndants

on the misappropria tion claim. 4

T he d is tr ic t c our t h ad s ubj ect m at te r j uri sdi ct ion over t his ac ti on p urs uan t t o 28 U.S.C. § § 13 31 4

& 1367 . Our j uri sdi ct ion ar is es unde r § 129 1. “ [S] uppl emental j uri sdi ct ion doe s no t d is app ear when th e

fe der al cl ai m

th at gav e r is e t o or igina l j uri sdi ct ion in th e f ir st pl ace is di smisse d.” Ort on v . Jo hnny 's

Lunc h Fr anc his e, LL C, 668 F.3d 843 , 850 (6 th Cir . 201 2).

5No. 12-3258

Kendall Holdings v. Eden Cryogenic s, et al.

I I

W e r e v i e w a d i s t r i c t c o u r t ’ s a w a r d o f s u m m a r y j u d g m e n t d e n o v o

. D o n a l d v

. S y b r a

, I n c

. ,

6 6 7 F

. 3 d 7 5 7

, 7 6 0 ( 6 t h C i r

. 2 0 1 2 )

. S u m m a r y j u d g m e n t i s a p p r o p r i a t e i f t h e p l e a d i n g s a n d

e v i d e n c e s h o w t h a t t h e r e i s n o g e n u i n e i s s u e o f m a t e r i a l f a c t

, a n d t h e m o v i n g p a r t y i s e n t i t l e d

t o j u d g m e n t a s a m a t t e r o f l a w

. F e d

. R

. C i v

. P

. 5 6 ( a )

. T h e c o u r t d o e s n o t “ w e i g h t h e e v i d e n c e

a n d d e t e r m i n e t h e t r u t h o f t h e m a t t e r b u t

. . . d e t e r m i n e [ s ] w h e t h e r t h e r e i s a g e n u i n e i s s u e f o r

t r i a l

. ” B l a c k

m o r e v

. K a l a m a z o o C n t

y

. , 3 9 0 F

. 3 d 8 9 0

, 8 9 5 ( 6 t h C i r

. 2 0 0 4 ) ( q u o t i n g A n d e r s o n v

.

L i b e r t y L o b b y

, 4 7 7 U

. S

. 2 4 2

, 2 4 9 (1 9 8 6 ) )

. O n a m o t i o n f o r s u m m a r y j u d g m e n t

, t h e c o u r t v i e w s

t h e f a c t u a l evidenc e and draw s all rea sonable infer ence s in favor o f t h e n o n

- m o v i n g p a r t y

. S e e

M a t s u s h i t a E l e c

. I

n d u s

. C o

. v

. Ze n i t h R a d i o C o r p

. , 4 7 5 U

. S 5 7 4

, 5 8 7 ( 1 9 8 6 ) ; M c L e a n v

. 9 8 8 0 1 1

O n t a r i o

, L t d

. , 2 2 4 F

. 3 d 7 9 7

, 8 0 0 ( 6 t h C i r

. 2 0 0 0 )

.

I I I

P H P K u r g e s u s t o r e v e r s e t h e d i s t r i c t c o u r t b e c a u s e M i t c h e l l c o u l d n o t h a v e

“ m i s a p p r o p r i a t e d ” O l d P H P K ’ s t r a d e s e c r e t s i n 1 9 9 9 w h e n h e r e t a i n e d t h e s h o p d r a w i n g s w i t h

a u t h o r i z a t i o n

, a c c o r d i n g t o e v i d e n c e s u b m i t t e d b y d e f e n d a n t s a t s u m m a r y j u d g m e n t

. T h u s

,

P H P K c o n t e n d s

, i t w a s e r r o r f o r t h e d i s t r i c t c o u r t t o h o l d t h a t O U T S A ’ s f o u r

- y e a r s t a t u t e o f

l i m i t a t i o n s b a r r e d t h i s a c t i o n

.

6No. 12-3258

Kendall Holdings v. Eden Cryogenic s, et al.

D e f e n d a n t s a r g u e t h a t t h e d i s t r i c t c o u r t b a s e d i t s h o l d i n g o n P H P K ’ s o r i g i n a l a r g u m e n t

b e l o w

– t h a t M i t c h e l l w a s n o t a u t h o r i z e d t o t a k e t h e s h o p d r a w i n g s w h e n h e l e f t O l d P H P K i n

1 9 9 9

– a n d t h a t t h e c o u r t p r o p e r l y i m p u t e d t o O l d P H P K H e n s l e y ’ s a w a r e n e s s t h a t M i t c h e l l

r e t a i n e d t h e d r a w i n g s

, p r o m p t i n g t h e l i m i t a t i o n s p e r i o d t o r u n

. A l t e r n a t i v e l y

, t h e y a s s e r t t h a t

“ t h e r e w a s n o m i s a p p r o p r i a t i o n t o a n i m a t e t h i s c a s e

, ” e i t h e r b e c a u s e M i t c h e l l w a s p e r m i t t e d t o

p o s s e s s a n d u s e t h e d r a w i n g s

, b e c a u s e t h e d r a w i n g s w e r e n o t “ t r a d e s e c r e t s ” a s a m a t t e r o f l a w

,

o r b e c a u s e M i t c h e l l r e t a i n e d a c o p y r i g h t i n t e r e s t i n t h e d r a w i n g s

.

A

U n d e r O U T S A

, a p l a i n t i f f m a y r e c o v e r d a m a g e s f r o m a p a r t y t h a t m i s a p p r o p r i a t e d t h e

p l a i n t i f f ’ s t r a d e s e c r e t s

. O h i o R e v

. C o d e § 1 3 3 3

. 6 3 ( A )

. “ M i s a p p r o p r i a t i o n ” i s d e f i n e d i n t h e

s t a t u t e a s t h e “ [ a ] c q u i s i t i o n o f a t r a d e s e c r e t o f a n o t h e r b y a p e r s o n w h o k n o w s o r h a s r e a s o n t o

k n o w t h a t t h e t r a d e s e c r e t w a s a c q u i r e d b y i m p r o p e r m e a n s ” ; o r t h e d i s c l o s u r e o r u s e o f

a n o t h e r ’ s t r a d e s e c r e t w i t h o u t t h e o t h e r ’ s c o n s e n t

, i f t h e d i s c l o s e r / u s e r a c q u i r e d i t b y i m p r o p e r

m e a n s

, i n b r e a c h o f

a d u t y o f s e c r e c y

, o r w i t h t h e k n o w l e d g e t h a t i t w a s a t r a d e s e c r e t a n d h a d

b e e n a c q u i r e d b y a c c i d e n t o r m i s t a k e

. O h i o R e v

. C o d e § 1 3 3 3

. 6 1 ( B )

. “ Im p r o p e r m e a n s ” 5

i n c l u d e “ t h e f

t

, b r i b e r y

, m i s r e p r e s e n t a t i o n

, b r e a c h o r i n d u c e m e n t o f a b r e a c h o f a d u t y t o

m a i n t a i n s e c r e c y

, o r e s p i o n a g e t h r o u g h e l e c t r o n i c o r o t h e r m e a n s

. ” O h i o R e v

. C o d e §

“T ra de s ecr et ” i s a ls o de fi ned in th e s ta tut e. See Ohi o Rev. Code § 13 33.6 1(D) . W e di scu ss it 5

inf ra at § I I I (B)

.

7No. 12-3258

Kendall Holdings v. Eden Cryogenic s, et al.

1 3 3 3

. 6 1 ( A )

. A n a c t i o n m u s t b e b r o u g h t “ w i t h i n f o u r y e a r s a f

t e r t h e m i s a p p r o p r i a t i o n i s

d i s c o v e r e d o r b y t h e e x e r c i s e o f r e a s o n a b l e d i l i g e n c e s h o u l d h a v e b e e n d i s c o v e r e d

. ” O h i o R e v

.

C o d e § 1 3 3 3

. 6 6

. 6

“ G e n e r a l l y

, a c a u s e o f a c t i o n a c c r u e s a n d t h e s t a t u t e o f l i m i t a t i o n s b e g i n s t o r u n a t t h e

t i m e t h e w r o n g f

u l a c t w a s c o m m i t t e d

. ” N o r g a r d v

. B r u s h We l l m a n

, I

n c

. , 7 6 6 N

. E

. 2 d 9 7 7

, 9 7 9

( O h i o 2 0 0 2 )

. H o w e v e r

, O U T S A i n c o r p o r a t e s t h e d i s c o v e r y r u l e

, w h i c h p r o v i d e s t h a t a c a u s e

o f a c t i o n d o e s n o t a r i s e u n t i l t h e p l a i n t i f f d i s c o v e r s

, o r b y

t h e e x e r c i s e o f

r e a s o n a b l e d i l i g e n c e

s h o u l d h a v e d i s c o v e r e d

, t h a t h e o r s h e w a s i n j u r e d b y t h e w r o n g f

u l c o n d u c t o f

t h e d e f e n d a n t

.

A d c o r I n d u s

. , I n c

. v

. B e v c o r

p

, L L C

, 2 5 2 F

. A p p ’ x 5 5

, 6 0 ( 6 t h C i r

. 2 0 0 7 ) ( c i t i n g O ’ S t r i c k e r v

.

J i m Wa l t e r C o r

p

. , 4 4 7 N

. E

. 2 d 7 2 7

, 7 3 0 ( O h i o 1 9 8 3 ) ) ; s e e O h i o R e v

. C o d e § 1 3 3 3

. 6 6

. B u t i n

a n y e v e n t

, t h e e x i s t e n c e o f a c o g n i z a b l e i n j u r y i s a c o n d i t i o n p r e c e d e n t t o t h e d i s c o v e r y r u l e : i t

c a n n o t o p e r a t e t o s t a r t a s t a t u t e o f l i m i t a t i o n s b e f o r e a n i n j u r y h a s o c c u r r e d

. S e e C a d a v

. B a x t e r

H e a l t h c a r e C o r

p

. , 9 2 0 F

. 2 d 4 4 6

, 4 5 0 ( 7 t h C i r

. 1 9 9 0 ) ( d i s c o v e r y r u l e “ p o s t p o n e s t h e b e g i n n i n g

o f t h e l i m i t a t i o n s p e r i o d f r o m t h e d a t e w h e n t h e p l a i n t i f f i s w r o n g e d t o t h e d a t e w h e n h e

T his ci rc uit has re cognized t hat , “[ i] n or der to pr evail on a m is app rop ri at ion

- of-trad e- sec re t 6

cl ai m , a p la int if

f must s how by a p re pond er anc e of th e e videnc e: (1 ) t he e xis te nce of a t ra de s ecr et ; ( 2)

the ac qui si ti on o f a tr ade se cr et as a r esu lt of a c onf ide nti al re la ti ons hip ; a nd ( 3) the una uth ori zed use of a

tr ade se cr et .” Hear tl and Home Fi n., I nc. v. Al li ed Ho me M

ort g. Cap it al Corp

. , 258 F. App ’x 860, 861

(6t h Ci r. 2 008) . Howe ver, t his fo rmulat ion of th e pr ima fac ie ca se is li kely outd at ed i n l ight o f t he

Unif orm Tr ade Sec re ts Act (UT SA). See Res ta te m ent (T hir d) of Unfa ir Com pet it ion § 40 cmt. b ( 1995 )

(e xpl ai nin g that UT SA impose s l ia bil it y not j ust fo r t he wr ongful use or di scl osu re of

a t ra de s ecr et , as

cas e l aw of

te n r eci te s, b ut al so f

or it s a cqu is it ion by im

pro per m ean s) ; see al

so Sta te ex re l. B ess er v.

Ohio St ate Uni v. , 732 N.E.2d 373 , 378 (Oh io 2000 ) ( not ing th at br oad er def ini ti on o f “ tr ade se cr et ” i n

OUT SA “e xte nds pr ote ct ion to a p la int if f wh o ha s no t yet had an oppo rt uni ty or acq uir ed t he means to

put a t ra de s ecr et to use ” ( ci ta ti on o m it te d))

.

8No. 12-3258

Kendall Holdings v. Eden Cryogenic s, et al.

d i s c o v e r s h e h a s b e e n i n

j u r e d ” ) ( P o s n e r

, J

. )

. N o a m o u n t o f r e a s o n a b l e d i l i g e n c e w o u l d e n a b l e

a p l a i n t i f f t o d i s c o v e r a n i n

j u r y t h a t h a s n o t y e t o c c u r r e d

. M A R O i l C o

. v

. K

o r p a n

, N o

. 3 : 1 1

- c v

1 2 6 1

, 2 0 1 1 W L 5 0 2 3 2 6 3

, a t * 3 ( N

. D

. O h i o O c t

. 2 0

, 2 0 1 1 ) ( “ T h e s t a t u t e o f l i m i t a t i o n s f o r a

[ t r a d e s e c r e t ] m i s a p p r o p r i a t i o n c l a i m c a n n o t b e g i n r u n n i n g u n t i l a t l e a s t t h e e a r l i e s t p o s s i b l e

p o i n t a t w h i c h m i s a p p r o p r i a t i o n c o u l d h a v e t a k e n p l a c e

. ” )

.

T h e d i s t r i c t c o u r t

, i n h o l d i n g t h a t P H P K ’ s m i s a p p r o p r i a t i o n c l a i m w a s b a r r e d b y

O U T S A ’ s f

o u r

- y e a r s t at u t e o f l i m i t at i o n s

, wr o t e t h at t h e “ d e c i s i v e i s s u e ” w a s t h e “ d e t e r m i n a t i o n

o f t h e t i m e w h e n O l d P H P K o r P H P K k n e w o r s h o u l d h a v e r e a s o n a b l y k n o w n t h a t M i t c h e l l

u n l a w f u l l y a c q u i r e d

, d i s c l o s e d

, o r u s e d i t s t r a d e s e c r e t i n f o r m a t i o n

. ” It d e t e r m i n e d t h a t t h e r e

w a s “ n o d i s p u t e t h a t H e n s l e y ”

– t h e n t h e p r e s i d e n t o f O l d P H P K

– “ k n e w t h a t M i t c h e l l r e t a i n e d

t h e s h o p d r a w i n g s w h e n h e t e r m i n a t e d M i t c h e l l ” i n 1 9 9 9

, y e t H e n s l e y d i d n o t h i n g t o s t o p h i m

f r o m k e e p i n g t h e d r a w i n g s

, e v e n t h o u g h M i t c h e l l w e n t t o w o r k f o r a c o m p e t i t o r o f O l d P H P K

.

A f t e r r e j e c t i n g P H P K ’ s s u g g e s t i o n t h a t M i t c h e l l a n d H e n s l e y s o m e h o w c o n s p i r e d t o s t e a l t h e

s h o p d r a w i n g s a n d u s e t h e m s i x y e a r s l a t e r

, t h e d i s t r i c t c o u r t f o u n d t h a t “ O l d P H P K k n e w o r

s h o u l d h a v e k n o w n t h a t M i t c h e l l m i s a p p r o p r i a t e d t r a d e s e c r e t s i n 1 9 9 9

, ” a p p r o x i m a t e l y e i g h t

y e a r s b e f o r e t h e i n s t a n t l a w s u i t w a s f i l e d

, a n d t h u s i t s m i s a p p r o p r i a t i o n c l a i m w a s t i m e b a r r e d

.

T h e d i s t r i c t c o u r t s e e m e d t o c h a r g e O l d P H P K w i t h i n q u i r y n o t i c e o f m i s a p p r o p r i a t i o n

b e c a u s e H e n s l e y d i d n o t h i n g d e s p i t e k n o w i n g t h a t M i t c h e l l r e t a i n e d t h e d r a w i n g s w h e n h e w a s

t e r m i n a t e d i n 1 9 9 9

. H o w e v e r

, “ m i s a p p r o p r i a t i o n ” u n d e r t h e s t a t u t e r e q u i r e s “ a c q u i s i t i o n ” b y

9No. 12-3258

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“ i m p r o p e r m e a n s

. ” O h i o R e v

. C o d e § 1 3 3 3

. 6 1 ( B )

. A t s u m m a r y j u d g m e n t

, d e f e n d a n t s

t h e m s e l v e s a r g u e d t h a t M i t c h e l l ’ s “ u s e o f [ t h e d r a w i n g s ] c o u l d n o t b e d e e m e d a

m i s a p p r o p r i a t i o n b e c a u s e h e d i d n o t a c q u i r e t h e d r a w i n g s b y i m p r o p e r m e a n s a n d b e c a u s e h e

h a d O l d P H P K ’ s c o n s e n t t o p o s s e s s a n d u s e ” t h e m

. T h e y s u b m i t t e d e v i d e n c e t h a t M i t c h e l l w a s

a u t h o r i z e d b y H e n s l e y

, a n o f f i c e r o f Ol d P HP K, t o re t a i n t h e s h o p d r a w i n g s u p o n h i s t e r m i n a t i o n

i n 1 9 9 9

. S e e H e n s l e y

D e c l

. , S e a l e d A p p ’ x a t 2 7 0

- 7 1 ( s t a t i n g t h a t M i t c h e l l h a d h i s p e r m i s s i o n

t o p o s s e s s h a r d c o p i e s a n d C D s o f d r a w i n g s a n d t h a t

, d e s p i t e H e n s l e y ’ s a w a r e n e s s t h a t M i t c h e l l

r e t a i n e d t h e m

, h e d i d n o t a s k h i m t o r e t u r n t h e m u p o n t e r m i n a t i o n i n 1 9 9 9 ) ; M i t c h e l l D e c l

. ,

S e a l e d A p p ’ x a t 2 8 8

- 8 9 ( c o r r o b o r a t i n g H e n s l e y ’ s a c c o u n t ) ; A p p e l l e e s ’ B r i e f a t 1 9

- 2 0

.

In o t h e r w o r d s

, i n a n a t t e m p t t o d e m o n s t r a t e t h a t P H P K ’ s s u b s t a n t i v e c l a i m o f t r a d e

s e c r e t m i s a p p r o p r i a t i o n l a c k e d m e r i t

, d e f e n d a n t s i n t r o d u c e d e v i d e n c e t h a t f a t a l l y u n d e r m i n e d

t h e i r s t a t u t e o f l i m i t a t i o n s a r g u m e n t

.

It i s t h u s n o t u n d i s p u t e d t h a t i n 1 9 9 9 M i t c h e l l r e t a i n e d t h e d r a w i n g s t h r o u g h “ t h e f t

,

b r i b e r y

, m i s r e p r e s e n t a t i o n

, b r e a c h o r i n d u c e m e n t o f a b r e a c h o f

a d u t y t o m a i n t a i n s e c r e c y

, o r

e s p i o n a g e t h r o u g h e l e c t r o n i c o r o t h e r m e a n s

. ” S e e O h i o R e v

. C o d e § 1 3 3 3

. 6 1 ( A )

. In r e j e c t i n g

P H P K ’ s o r i g i n a l t h e o r y “ t h a t M i t c h e l l a n d H e n s l e y c o n s p i r e d t o s t e a l t r a d e s e c r e t s s o a s t o

c o m p e t e w i t h P H P K ” s i x ye a r s l a t e r

, t h e d i s t r i c t c o u r t s i m p l y a s s u m e d M i t c h e l l h a d

“ m i s a p p r o p r i a t e d ” t h e m

. H o w e v e r

, d e f e n d a n t s t h e m s e l v e s c r e a t e d a f a c t i s s u e o n t h i s p o i n t

.

A c c o r d i n g l y

, t h e d i s t r i c t c o u r t e r r e d i n h o l d i n g t h a t t h e s t a t u t e o f l i m i t a t i o n s b a r r e d P H P K ’ s

10No. 12-3258

Kendall Holdings v. Eden Cryogenic s, et al.

t r a d e s e c r e t m i s a p p r o p r i a t i o n c l a i m

. H a d i t v i e w e d t h e e v i d e n c e i n t h e l i g h t m o s t f a v o r a b l e t o

P H P K

– e v i d e n c e i n t r o d u c e d

, i r o n i c a l l y e n o u g h

, b y P H P K ’ s a d v e r s a r y

– n o c a u s e o f a c t i o n f o r

m i s a p p r o p r i a t i o n c o u l d h a v e a r i s e n i n 1 9 9 9 b e c a u s e e v i d e n c e i n t h e r e c o r d s u p p o r t s a f i n d i n g

t h a t M i t c h e l l d i d n o t a c q u i r e t h e s h o p d r a w i n g s i n b r e a c h o f a n y d u t y o r b y o t h e r i m p r o p e r

m e a n s

. S e e O h i o R e v

. C o d e § 1 3 3 3

. 6 1 ( A ) a n d ( B ) ( 1 )

.

B

S t i l l

, d e f e n d a n t s w o u l d h a v e u s u p h o l d t h e d i s t r i c t c o u r t ’ s g r a n t o f s u m m a r y j u d g m e n t

e i t h e r b e c a u s e n o m i s a p p r o p r i a t i o n e v e r o c c u r r e d

, b e c a u s e t h e s h o p d r a w i n g s w e r e n o t t r a d e

s e c r e t s

, o r b e c a u s e M i t c h e l l h e l d a c o p y r i g h t i n t e r e s t i n t h e m

. H o w e v e r

, m a t e r i a l f a c t u a l

d i s p u t e s p r e c l u d e t h e s e f i n d i n g s a s a m a t t e r o f l a w

.

F i r s t

, a g e n u i n e i s s u e o f m a t e r i a l f a c t e x i s t s c o n c e r n i n g t h e s c o p e o f P H P K ’ s c o n s e n t

.

D i d i t p e r m i t M i t c h e l l t o r e t a i n t h e d r a w i n g s ( i f a t a l l ) i n 1 9 9 9

, o r d i d i t p e r m i t h i m t o r e t a i n a n d

u s e t h e m ? W h i l e d e f

e n d a n t s a s s e r t t h a t “ P H P K h a s c o m e f o r w a r d w i t h n o e v i d e n c e ” t o r e b u t

t h e p r o p o s i t i o n t h a t “ [ t ] h e r e w e r e n o r e s t r i c t i o n s w h a t s o e v e r o n M i t c h e l l ’ s p o s s e s s i o n o r u s e o f

t h e d r a w i n g s w h e n h e s t o p p e d w o r k i n g w i t h O l d P H P K

, ” t h e r e c o r d i n d i c a t e s o t h e r w i s e

.

P H P K i n t r o d u c e d e v i d e n c e t h a t t h e s h o p d r a w i n g s w e r e p r o m i n e n t l y s t a m p e d w i t h t h e

l ege n d “ IN F O R M A T IO N S H O W N O N T H IS D R A W IN G IS P R O P R IE T A R Y A N D T HE S OLE

P R O P E R T Y O F P H P K A N D IS N O T T O B E D IS C LO S E D O R T R A N S M IT T E D T O

11No. 12-3258

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U N A U T H O R IZE D P A R T IE S ” ; i t i n t r o d u c e d a c o p y o f a c o n s u l t i n g a g r e e m e n t d a t e d A p r i l 1

,

1 9 9 5

, b e a r i n g M i t c h e l l ’ s n a m e ( b u t n o t h i s s i g n a t u r e ; h e a v e r s t h a t h e h a d n o e m p l o y m e n t

c o n t r a c t w i t h O l d P H P K ) a n d i n c l u d i n g a c o n f i d e n t i a l i t y

c l a u s e ; a n d i t i n t r o d u c e d e v i d e n c e o f

o t h e r c o m p a n y p o l i c i e s t h a t a t t e s t t o t h e c o m p a n y ’ s d e s i r e t o p r o t e c t c o n f i d e n t i a l i t y a n d

s a f e g u a r d p r o p r i e t a r y i n f

o r m a t i o n

. F r o m t h a t e v i d e n c e a n d c o r r o b o r a t i n g t e s t i m o n y i n t h e

r e c o r d

, a r e a s o n a b l e f

a c t f i n d e r c o u l d c o n c l u d e t h a t i f a n y m i s a p p r o p r i a t i o n o c c u r r e d i t o c c u r r e d

i n 2 0 0 6

, w h e n M i t c h e l l u s e d t h e d r a w i n g s w h i l e d e s i g n i n g p r o d u c t s f o r B r e h o n ( n o w E d e n )

.

N e x t

, d e f e n d a n t s a r g u e t h a t t h e d r a w i n g s c a n n o t c o n s t i t u t e “ t r a d e s e c r e t s ” a s a m a t t e r o f

l a w b e c a u s e t h e y

a r e n o t “ t h e s u b

j e c t o f e f f o r t s t h a t a r e r e a s o n a b l e u n d e r t h e c i r c u m s t a n c e s t o

m a i n t a i n [ t h e i r ] s e c r e c y

. ” S e e O h i o R e v

. C o d e § 1 3 3 3

. 6 1 ( D )

. T h e d i s t r i c t c o u r t m a d e p a s s i n g 7

r e f e r e n c e t o d e f

e n d a n t s ’ a l t e r n a t i v e a r g u m e n t i n i t s o r d e r

, b u t d o e s n o t a p p e a r t o h a v e b a s e d i t s

h o l d i n g o n a f

i n d i n g t h a t t h e d r a w i n g s w e r e n o t t r a d e s e c r e t s

. It s e e m e d t o a s s u m e

, f o r t h e

p u r p o s e s o f i t s a n a l y s i s

, t h a t t h e d r a w i n g s w e r e t r a d e s e c r e t s

. S e e D i s t

. C t

. O p

. a t 1 8 ( r e f e r r i n g

t o t h e d r a w i n g s a s “ a l l e g e d t r a d e s e c r e t s ” )

.

Def ini ng “tr ade se cr et ” a s “ inf ormati on, i ncl udi ng the whol e or any por ti on o r p has e of any 7

sci ent if ic or te chn ic al in for m at ion , de si gn, proc ess , pr oce dur e, f ormula, pat te rn, compil at ion , pr ogram,

device , m et hod, te chn iqu e, o r i m pro vem ent , or any bus ine ss inf ormati on o r p la ns, fi nan ci al in for m at ion

,

or li st ing of

names, a ddr ess es, or te le phon e nu m ber s, t hat sa ti sf

ie s bo th of the fo ll owin g:

(1) I t d er ives i nde pen den t e con om ic value , ac tua l o r p ote nti al , fr om not bei ng g ene ra ll y k

nown

to, and not bei ng rea dil y asce rt ai nab le by prop er m ean s by, ot her per son s who ca n ob ta in

eco nomic value fr om

it s di scl osu re or use

. (2) I t i s t he s ubj ect of

ef for ts th at ar e r eas ona ble und er th e c ir cumstan ces to m ai nta in it s

sec re cy.”

12No. 12-3258

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S i x f a c t o r s a r e u s e d t o d e t e r m i n e w h e t h e r i n f o r m a t i o n i s a t r a d e s e c r e t u n d e r O h i o R e v

.

C o d e § 1 3 3 3

. 6 1 ( D ) :

( 1 ) T h e e x t e n t t o w h i c h t h e i n f o r m a t i o n i s k n o w n o u t s i d e t h e b u s i n e s s ; ( 2 ) t h e

e x t e n t t o w h i c h i t i s k n o w n t o t h o s e i n s i d e t h e b u s i n e s s

, i

. e

. , b y t h e e m p l o y e e s ;

( 3 ) t h e p r e c a u t i o n s t a k e n b y t h e h o l d e r o f t h e t r a d e s e c r e t t o g u a r d t h e s e c r e c y o f

t h e i n f o r m a t i o n ; ( 4 ) t h e s a v i n g s e f f e c t e d a n d t h e v a l u e t o t h e h o l d e r i n h a v i n g t h e

i n f o r m a t i o n a s a g a i n s t c o m p e t i t o r s ; ( 5 ) t h e a m o u n t o f e f f o r t o r m o n e y e x p e n d e d

i n o b t a i n i n g a n d d e v e l o p i n g t h e i n f o r m a t i o n ; a n d ( 6 ) t h e a m o u n t o f t i m e a n d

e x p e n s e i t w o u l d t a k e f

o r o t h e r s t o a c q u i r e a n d d u p l i c a t e t h e i n f o r m a t i o n

.

S t a t e e x r e l

. T h e P l a i n D e a l e r v

. O h i o D e p ’ t o f I n s

. , 6 8 7 N

. E

. 2 d 6 6 1

, 6 7 2 ( O h i o 1 9 9 7 )

.

“ O h i o l a w r e c o g n i z e s t h a t a p a r t y c l a i m i n g t r a d e s e c r e t s t a t u s h a s t h e b u r d e n o f

d e m o n s t ra t i n g t h at i t t o o k re as o n ab l e s t ep s t o m ai n t ai n t h e s ec re cy o f t h e p r o t e c t e d i n f o r m a t i o n

. ”

N i e m i v

. N H K S p r i n g C o

. , L t d

. , 5 4 3 F

. 3 d 2 9 4

, 3 0 2 ( 6 t h C i r

. 2 0 0 8 ) ( c i t i n g S t a t e e x r e l

. C a r rv

.

A k r o n

, 8 5 9 N

. E

. 2 d 9 4 8

, 9 5 5 ( O h i o 2 0 0 6 ) )

. H o w e v e r

, “ e x c e p t w h e r e t h e e v i d e n t i a r y s h o w i n g

o f r e a s o n a b l e e f

f o r t s c o u l d n o t c o n c e i v a b l y s u p p o r t a j u d g m e n t i n f a v o r o f t h e p l a i n t i f

f

, t h e

r e a s o n a b l e n e s s o f t h e e f

f o r t s i s a q u e s t i o n f

o r t h e t r i e r o f f

a c t

. ” N i e m i

, 5 3 3 F

. 3 d a t 3 0 3 ; a c c o r d

H o o v e r T r a n s p

. S e r v s

. , I

n c

. v

. F r y e

, 7 7 F

. A p p ’ x 7 7 6

, 7 8 2 ( 6 t h C i r

. 2 0 0 3 ) ( “ T h e q u e s t i o n o f

w h e t h e r s o m e t h i n g i s a t r a d e s e c r e t i s a q u e s t i o n o f f a c t t o b e d e t e r m i n e d b y t h e t r i e r o f f a c t

u p o n t h e g r e a t e r w e i g h t o f t h e e v i d e n c e

. ” ) ( c i t i n g V a l c o C i n c i n n a t i

, I

n c

. v

. N & D M

a c h i n i n g

S e r v

. , I n c

. , 4 9 2 N

. E

. 2 d 8 1 4

, 8 1 9 ( O h i o 1 9 8 6 ) ) ; s e e a l s o R o c k w e l l G r a p h i c S y s

. , I n c

. v

. D E V

13No. 12-3258

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I n d u s

. , I n c

. , 9 2 5 F

. 2 d 1 7 4

, 1 7 9 ( 7 t h C i r

. 1 9 9 1 ) ( “ [ O ] n l y i n a n e x t r e m e c a s e c a n w h a t i s a

‘ r e a s o n a b l e ’ p r e c a u t i o n [ t o m a i n t a i n t h e s e c r e c y o f a t r a d e s e c r e t ] b e d e t e r m i n e d o n a m o t i o n

f o r s u m m a r y j u d g m e n t

, b e c a u s e t h e a n s w e r d e p e n d s o n a b a l a n c i n g o f c o s t s a n d b e n e f i t s t h a t

w i l l v a r y f

r o m c a s e t o c a s e a n d s o r e q u i r e e s t i m a t i o n a n d m e a s u r e m e n t b y p e r s o n s

k n o w l e d g e a b l e i n t h e p a r t i c u l a r f i e l d o f e n d e a v o r i n v o l v e d

. ” )

.

B e c a u s e t h e l e g e n d

, c o n s u l t i n g a g r e e m e n t w i t h c o n f i d e n t i a l i t y c l a u s e

, a n d o t h e r p o l i c i e s

d i s c u s s e d a b o v e c o u l d c o n c e i v a b l y s u p p o r t a j u d g m e n t i n f a v o r o f P H P K

, t h e r e a s o n a b l e n e s s

o f O l d P H P K ’ s e f

f o r t s t o m a i n t a i n i t s s h o p d r a w i n g s ’ s e c r e c y m u s t b e d e t e r m i n e d b y t h e f a c t

f i n d e r

. S e e V

a l c o

, 4 9 2 N

. E

. 2 d a t 8 1 9 ( “ A r e v i e w i n g c o u r t s h o u l d n o t s u b s t i t u t e i t s j u d g m e n t f o r

t h a t o f t h e t r i a l c o u r t ” o n t h e “ f a c t u a l ” i s s u e w h e t h e r a p a r t i c u l a r k n o w l e d g e o r p r o c e s s i s a t r a d e

s e c r e t

. )

.

F i n a l l y

, d e f

e n d a n t s a s k u s t o a f

f i r m t h e d i s t r i c t c o u r t ’ s r u l i n g o n t h e a l t e r n a t i v e g r o u n d

t h a t

, b e c a u s e M i t ch el l h e l d a n o w n e r s h i p i n t e r e s t i n t h e s h o p d r a w i n g s p u r s u a n t t o t h e C o p y r i g h t

A c t

, 1 7 U

. S

. C

. § 2 0 1 ( a )

, h e c o u l d n o t b e f o u n d t o h a v e m i s a p p r o p r i a t e d t h e m

. C e n t r a l t o t h i s

a r g u m e n t i s d e f

e n d a n t s ’ c l a i m t h a t M i t c h e l l h a d n o “ w o r k

- m a d e

- f o r

- h i r e ” a g r e e m e n t w i t h O l d

P H P K

. H o w e v e r

, t h e r e i s a t l e a s t s o m e e v i d e n c e i n t h e r e c o r d t h a t M i t c h e l l s i g n e d a c o n s u l t i n g

a g r e e m e n t g i v i n g P H P K o w n e r s h i p o f h i s “i d ea s

, i n v en t i o n s

, i m p ro v em en t s

, an d d ev el o p m en t s

, ”

a s w e l l a s s i g n i n g s h o p d r a w i n g s b e a r i n g t h e “ s o l e p r o p e r t y o f P H P K ” l e g e n d

. “ S o l o n g a s t h e

p a r t i e s ’ i n t e n t i s c l e a r

, a t r a n s f e r o f c o p y r i g h t n e e d n o t i n c l u d e a n y p a r t i c u l a r l a n g u a g e

. . . . ‘ It

14No. 12-3258

Kendall Holdings v. Eden Cryogenic s, et al.

d o e s n ’ t h a v e t o b e t h e M a g n a C a r t a ; a o n e

- l i n e p r o f o r m a s t a t e m e n t w i l l d o

. ’ ” G i l l e l a n d v

.

S c h a n h a l s

, 5 5 F

. A p p ’ x 2 5 7

, 2 6 0 ( 6 t h C i r

. 2 0 0 3 ) ( q u o t i n g R a d i o T e l e v i s i o n E

s p a n o l a S

. A

. v

.

N e w Wo r l d E n t m ’ t

, L t d

. , 1 8 3 F

. 3 d 9 2 2

, 9 2 7 ( 9 t h C i r

. 1 9 9 9 ) )

. A c c o r d i n g l y

, a g e n u i n e i s s u e o f

m a t e r i a l f

a c t p r e c l u d e s a f

f i r m i n g t h e d i s t r i c t c o u r t ’ s g r a n t o f s u m m a r y j u d g m e n t o n t h i s

a l t e r n a t i v e g r o u n d

.

T h e d i s t r i c t c o u r t ’ s e n t r y o f s u m m a r y j u d g m e n t c a n n o t b e u p h e l d o n a n y a l t e r n a t i v e

g r o u n d

. B e c a u s e w e r e v e r s e

, w e n e e d n o t r e a c h P H P K ’ s o t h e r a r g u m e n t s

.

I V

F o r t h e s e r e a s o n s

, w e R E V E R S E t h e j u d g m e n t o f t h e d i s t r i c t c o u r t a n d R E M A N D t h e

c a s e f o r f u r t h e r p r o c e e d i n g s c o n s i s t e n t w i t h t h i s o p i n i o n

.

15