Opinion ID: 757263
Heading Depth: 2
Heading Rank: 1

Heading: Summary Judgment on Imax's Trade Secrets Claim

Text: 19 The heart of Imax's appeal is the propriety of the district court's ruling that the failure of Imax to identify the precise numerical dimensions and tolerances of its projector, of which its trade secrets consist, defeats the trade secrets claim. Imax's various assignments of error presuppose a ruling that it need not identify the precise numerical dimensions and tolerances of its projector in its interrogatory responses. 20 1. Did Imax Identify the Numerical Dimensions and Tolerances as Trade Secrets with Sufficient Particularity? 21 Imax first contends that it identified in its Fourth Supplemental Responses the precise numerical dimensions and tolerances as trade secrets with sufficient particularity. We disagree. 22 A plaintiff seeking relief for misappropriation of trade secrets must identify the trade secrets and carry the burden of showing that they exist. MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 522 (9th Cir.1993). The plaintiff should describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons ... skilled in the trade. Universal Analytics v. MacNeal-Schwendler Corp., 707 F.Supp. 1170, 1177 (C.D.Cal.1989) (citation omitted) (emphasis added), aff'd, 914 F.2d 1256 (9th Cir.1990). 23 California law defines a trade secret as follows: 24 Trade secret means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: 25 (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and 26 (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Cal. Civ.Code § 3426.1(d) (West 1997). 4 27 To understand this issue, some background pertaining to the discovery process is necessary. CTI's Interrogatory Nos. 1 and 2 asked Imax to identify the entire content of each and every trade secret allegedly misappropriated by CTI. Imax initially answered Interrogatory Nos. 1 and 2 by referring CTI to 469 documents pursuant to Fed.R.Civ.P. 33(d). 5 Thereupon CTI twice moved to compel complete responses to Interrogatory Nos. 1 and 2. On June 12, 1995, Magistrate Judge Infante granted CTI's motion, and ordered Imax to supply complete, written responses to CTI's Interrogatory Nos. 1 and 2. Imax was further ordered not [to] employ the option provided by Federal Rule of Civil Procedure 33(d). 28 Imax moved for reconsideration, arguing that it had already identified its trade secrets with reasonable particularity and that CTI was not entitled to a written description of its trade secrets to the level of 'x feet, y inches.'  Imax pointed out that the deposition of its expert, William Shaw, had provided CTI with a complete identification of all its trade secrets. Imax contended that it should not have to provide written descriptions of trade secrets that had already been the subject of deposition testimony or that were directly reflected in previously produced documents. Imax's motion for reconsideration was denied without comment. 29 Imax filed Second and Third Supplemental Responses, identifying 138 and 136 trade secrets respectively. Along with its response, Imax interposed the following objections to CTI's Interrogatory Nos. 1 and 2: 30 Imax objects to this interrogatory on the ground that it is premature in that Imax's discovery and investigation in this action are continuing. Accordingly, Imax does not yet know the identification of each trade secret that has been misappropriated by Johnson ... and Imax reserves its right to supplement or amend its response as more information becomes available from defendants. 31 Imax further objects to this interrogatory on the ground that, to the extent it calls for the identification of the entire content of Imax's trade secrets, it is vague, ambiguous, overly broad and unduly burdensome. 32 (emphasis added). 33 CTI responded by moving to compel Imax to comply with the magistrate's June 12, 1995 order to compel. On August 16, 1995, Magistrate Judge Infante denied CTI's motion to compel, but additionally overruled Imax's objections and ordered it to comply with Fed. R. Civ. Proc. 26(e) 6 by supplementing its interrogatory responses to CTI's Interrogatory Nos. 1 and 2 on or before August 31, 1995. 34 Pursuant to the magistrate's August 16, 1995 order, Imax filed its Fourth Supplemental Responses--this time identifying 80 trade secrets allegedly misappropriated by CTI. Imax identified its trade secrets, enumerated as items (a)-(cb), in the following manner: 35 Imax believes that CTI has misappropriated all or part of the following Imax trade secrets embodied in Imax's ... projector system: 36    37 bb. the design of the cam unit, including every dimension and tolerance that defines or reflects that design; 38    39 bd. the manner of operation of the cam unit; 40 be. the manner in which the cam unit is lubricated; 41 bf. the design of the film arms, including every dimension and tolerance that defines or reflects that design; 42    43 (emphasis added). 44 At summary judgment, Imax, while conceding that its patents revealed the existence and manner of operation of the projector's various components, nevertheless argued that summary judgment was improper because the patents did not reveal the components' precise dimensions and tolerances. The following exchange occurred: 45 Imax: We're arguing as a level of specificity and they're arguing a level of generality. They're saying the patent discloses the film arm and we're saying, yes, but not the dimensions and the tolerance. Yes, the patent shows the existence of a film arm, but it doesn't say it's 6.222 millimeters. And we're talking about something that has to be precise within thousandths of an inch. 46    47 Court: So if I read Exhibit U, I can't find out from that what the trade secret is. I have to go someplace else. I have to get something that tells me what the dimension is. 7 48 Imax: Well, reading Exhibit U will tell you what the trade secret is. It tells you it's the dimension. If you want more detail about that, you can look at the Velinsky Report, you can look at the Shaw Deposition 49 .... 50 Court: Exhibit U doesn't give me the trade secret. Exhibit U gives me something that leads me to the trade secret, where I go someplace else. 51 Imax: If--Exhibit U tells you the trade secret. It does not give you the detail of the trade secret of 6.22. That's an accurate statement. 52 Court: You have to say 6.22 or it's not a trade secret. 53 The district court ruled that because Imax did not identify the precise numerical dimensions and tolerances in its Fourth Supplemental Responses, Imax failed to carry its burden of identifying for the court exactly what dimensions and tolerances it claimed as trade secrets. Thus, the issue turns on whether Imax identified the precise numerical dimensions and tolerances of its projector as trade secrets with sufficient particularity. 54 Imax argues that its level of specificity was approved by this court in Forro Precision, Inc. v. Intern. Business Machines, 673 F.2d 1045, 1057 (9th Cir.1982). We disagree. Forro involved the misappropriation of engineering drawings and blueprints encompassing the dimensions and tolerances of IBM's Merlin and Winchester disc devices. IBM put on a wealth of evidence which established that before it had placed the Merlin and Winchester devices on the market, Forro wrongfully acquired IBM's trade secret information in the form of engineering drawings and blueprints. See id. This evidence strongly rebutted Forro's assertion that it had not misappropriated any trade secrets but had lawfully reverse engineered material that had been placed on the market. 55 Although we held that IBM's reference to dimensions and tolerances was sufficient to claim trade secrets in engineering drawings and blueprints, to repeat, our holding did not suggest that the incantation of dimensions and tolerances was sufficient to identify trade secrets in precise numerical dimensions and tolerances. See id. We found IBM's identification of its trade secret sufficient because it clearly referred to trade secret material, i.e., engineering drawings and blueprints. 56 In Imax's case, however, the catchall phrase including every dimension and tolerance that defines or reflects that design does not parallel Forro 's degree of specificity because it does not clearly refer to tangible trade secret material. Rather, it refers to a patented projector system which potentially qualifies for trade secret protection. See Henry Hope X-Ray Prods., Inc. v. Marron Carrel, Inc., 674 F.2d 1336, 1342 (9th Cir.1982) (where patented apparatus contained features that were not disclosed in patent, the undisclosed features qualified for protection as trade secrets). 57 We further note that because Imax's trade secrets claim involves a sophisticated and highly complex projector system, it is unlikely that the district court or any trier of fact would have expertise in discerning exactly which of the projector system's many dimensions and tolerances were trade secrets. Moreover, CTI could not be expected to prepare its rebuttal to Imax's trade secrets claim without some concrete identification of exactly which dimensions and tolerances Imax alleged were incorporated into CTI's own projector system. 58 We therefore hold that Imax's Fourth Supplemental Responses failed to indicate precisely which dimensions and tolerances were trade secrets. Under these facts, reasonable specificity could only be achieved by identifying the precise numerical dimensions and tolerances as trade secrets. We reject Imax's contention that use of the catchall phrase including every dimension and tolerance that defines or reflects that design achieved the level of specificity necessary to identify the numerical dimensions and tolerances as trade secrets. See Forro Precision, Inc., 673 F.2d at 1057; see also Universal Analytics, 707 F.Supp. at 1177. 59 2. Did the District Court Misapply Fed.R.Civ.P. 26(e)? 60 Imax contends that the district court misapplied Fed.R.Civ.P. 26(e) by refusing to consider any trade secret material that was not specifically listed in haec verba in Imax's Fourth Supplemental Responses. Imax argues that the deposition of its expert, William Shaw, as well as the deposition of CTI's expert, Robert H. Gurr, sufficiently identified the precise numerical dimensions and tolerances as trade secrets. This argument, however, conveniently ignores the fact that both depositions were taken several months before Magistrate Judge Infante ordered Imax to supplement complete responses to Interrogatory Nos. 1 and 2. Without regard to whether certain precise numerical dimensions and tolerances were revealed in those depositions, Imax was under court order to identify the entire content of its trade secrets through supplemental responses. 61 We view Imax's argument as an attempt to have this court modify Magistrate Judge Infante's discovery orders. The motion by Imax for reconsideration of the magistrate's order to compel complete responses used the very same arguments made here. 8 We reject these arguments. Imax should have accepted the magistrate's denial of its motion for reconsideration and should have heeded the magistrate's August 16, 1995 order rejecting its contention that Interrogatory Nos. 1 and 2 were vague, ambiguous, overly broad and unduly burdensome. Any confusion on the part of Imax as to the level of specificity required to [i]dentify the entire content of each and every alleged trade secret should have been resolved by requesting further clarification of the June 1995 and August 1995 discovery orders. By failing to do so, Imax knowingly incurred the risk that its Fourth Supplemental Responses would not meet the reasonable particularity requirement. Moreover the parties' stipulated protective order removed the possibility that Imax's resistance was properly based on a fear of surrendering its secrets to CTI. 9 It follows that Imax incurred the risk of violating a proper discovery order. 62 Although Imax submitted the precise numerical dimensions and tolerances in its Fifth Supplemental Responses, the district court found those responses to be a violation of the discovery orders of Magistrate Judge Infante. However, because the exclusion of the dimensions and tolerances evidence by the district court did not amount to a dismissal of Imax's trade secrets claim, we need not decide whether Imax's actions were willful or in bad faith. See United States v. Sumitomo Marine & Fire Ins. Co., 617 F.2d 1365, 1369 (9th Cir.1980) (dismissal of action or preclusion of evidence that is tantamount to dismissal may be imposed only where offending party has acted willfully or in bad faith). 63 3. The District Court Properly Applied Fed.R.Civ.P. 56 64 Imax argues that the district court failed to consider all of the evidence that it was required to consider under Fed. R. Civ. Proc. 56(c), and failed to draw all reasonable inferences in its favor. For example, Imax argues that the district court improperly ignored the Velinsky Report, the Gurr Report, the Shaw deposition, and the Kerr deposition--all of which allegedly demonstrated that the dimensions and tolerances of various parts of the Imax projector were not in the public domain. We have rejected this contention, however. Therefore, the district court properly excluded such evidence due to Imax's failure to allege trade secrets in the precise numerical dimensions and tolerances with sufficient particularity. See MAI Sys. Corp., 991 F.2d at 522. 65 4. The District Court's Application of California Trade Secret Law 66 Imax next contends that the district court misapplied California trade secret law, embodied in Cal. Civ.Code § 3426.1(d)(1) (West 1997), by concluding that the 80 attributes identified in its Fourth Supplemental Responses were all available through public means. 10 Imax, however, does not argue on appeal that the 80 attributes identified in its Fourth Supplemental Responses--minus their dimensions and tolerances--qualify as trade secrets. Rather, the argument presupposes that the precise numerical dimensions and tolerances were sufficiently identified as trade secrets. Because we hold that they were not, we need not address the issue. 11 B. Summary Judgment on Imax's Unfair Competition Claim 67 Imax contends that the district court incorrectly applied California law when it held that Imax's failure to establish a legally protectable trade secret necessarily defeated its unfair competition claim. Imax argues that it is entitled to maintain an unfair competition claim based on common law misappropriation. 12 68 Under California law a plaintiff can maintain a common law unfair competition claim regardless of whether it demonstrates a legally protectable trade secret. In Self Directed Placement Corp. v. Control Data Corp., 908 F.2d 462, 466-67 (9th Cir.1990) we recognized this principle and held that a plaintiff could state an unfair competition claim based upon the two separate traditional tort causes of action, breach of confidential relationship and common law misappropriation. 69 The district court disposed of Imax's unfair competition claims in a cursory fashion. First, the district court found that because Imax had failed to rebut CTI's evidence to the effect that it could have gained the information from public domain sources, Imax had failed to establish any legally protectable trade secrets. Second, the district court held that because CTI demonstrated that the information was available through public means, the fact that Johnson and CTI may have actually acquired Imax's information by improper means was of no legal consequence. The district court granted summary judgment on Imax's unfair competition claim without further comment. 70 To repeat, the unfair competition claim of Imax rests on a fusing of the separate torts of common law misappropriation and breach of confidentiality. Its common law misappropriation claim seeks to hold Johnson and CTI liable for Johnson's allegedly improper actions during his two-week inspection at Great America. 13 At summary judgment, Imax also submitted evidence indicating that each of its customers is bound by a confidentiality agreement. Imax, in support of its unfair competition claim, argued that its evidence raised genuine issues of material fact as to whether [d]efendants knew or should have known that they acquired Imax's trade secrets by improper means, including through misrepresentation and inducement of a breach of a duty to maintain secrecy. Imax pointed out that Johnson admitted that shortly after leaving NJ Engineering, he learned that the confidentiality restriction in the Imax lease agreements covered projectors even beyond the term of the lease. 14 71 Imax also insists that even after Johnson and CTI became aware of the confidentiality restrictions, they nevertheless used information acquired at Great America in order to create the CTI projector. In support, Imax submitted the Velinsky Report wherein Imax's expert witness outlined significant similarities between the two projectors. That report also states that the design, development and production of a rolling loop projector required a significant investment of time and that the time it took Johnson to develop the CTI projector--ten months--strongly supports the conclusion that Johnson and CTI used Imax's trade secrets in designing the CTI projector. We hold that Imax submitted substantial evidence indicating that Johnson and CTI did not create the CTI projector by fair and honest means such as by independent invention, accidental disclosure or by so-called reverse engineering. Chicago Lock Co. v. Fanberg, 676 F.2d 400, 404 (9th Cir.1982) (citation omitted). 72 CTI attempts to minimize this evidence of its improper conduct by arguing that every access by Johnson was properly authorized by Imax's customers. We reject this contention. 15 In doing so we express our agreement with a California court that held that a competitor becomes a party to a breach of confidential relationship where the competitor accepts information from one who is under a duty not to disclose it and the information is received either with actual knowledge of such facts or under circumstances giving rise to a duty to inquire further. See Ralph Andrews Productions, Inc. v. Paramount Pictures Corp., 222 Cal.App.3d 676, 682-83, 271 Cal.Rptr. 797 (Cal.Ct.App.1990). Imax rests its unfair competition claim in part on the contention that both Johnson and CTI were a party to the breach of trust arising out of Great America's senior manager's breach of the confidentiality agreement with Imax. See Chicago Lock Co., 676 F.2d at 405 (party liable if they intentionally procured one under a duty of confidentiality to disclose secret in breach of that duty). 16 73 Construing the relevant evidence in the light most favorable to Imax, we hold that genuine issues of fact remain as to whether Johnson had constructive knowledge that Great America's senior manager did not have the right to permit unlimited access to the Imax projector--much less the photographing, measuring, and taking apart of the Imax projector. At the very least, Imax raised facts which a jury could determine would have made a reasonable person suspicious. See Ralph Andrews Productions, Inc., 222 Cal.App.3d at 684, 271 Cal.Rptr. 797. Although Johnson's declaration asserted that none of the information he obtained at Great America was used in the construction of the CTI projector, we believe Imax submitted significant evidence from which a jury could find that he had. Accordingly, we reverse the district court's grant of summary judgment for CTI on Imax's unfair competition claim and remand for further proceedings. 17 IV.