Opinion ID: 2995202
Heading Depth: 2
Heading Rank: 2

Heading: 3M’s Issues On Appeal

Text: On November 12, 1999, the district court granted summary judgment in favor of the defendants on 3M’s claims that (1) Accu- Tech had tortiously interfered with defendant Skrtic’s employment contract with 3M, and (2) Accu-Tech had engaged in unfair competition with 3M. On appeal, 3M asserts that the district court committed error in granting the defendants summary judgment, and thereby dismissing these counts. A district court may only grant summary judgment when there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56. We review the district court’s decision on summary judgment de novo, viewing all of the facts, and drawing all reasonable inferences from those facts, in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Garvin v. Armstrong, 236 F.3d 896, 898 (7th Cir. 2001). With this standard in mind, we turn to examine the two decisions of the district court on summary judgment.
Employment Contract In disposing of 3M’s tortious interference claim, the district court stated that assuming that Skrtic had breached his employment contract with 3M by his actions in operating Accu-Tech, to suggest that he was induced to do so by the very corporation he created surely cannot follow. The court noted that Skrtic, as an officer and owner of Accu- Tech, was so intertwined with the company, that arguing the corporation induced his breach is like arguing that he induced himself to breach. Relying on the Wisconsin Court of Appeals’ decision in Wausau Medical Center, S.C. v. Asplund, 514 N.W.2d 34 (Wis. Ct. App. 1994), the court resolved that [t]he corporate fiction [could not] be stretched that far. 3M asserts that the district court’s reliance on Wausau was misplaced. While 3M acknowledges that a party to a contract cannot be held liable for tortiously inducing his or her own breach, see, e.g., Rao v. Rao, 718 F.2d 219, 225 (7th Cir. 1983), here, the company asserts that Accu-Tech is a legal entity separate and distinct from Skrtic the individual. Thus, according to 3M, it is possible that Accu-Tech, through Pribyl and Harvey, tortiously interfered with Skrtic’s 3M employment contract. Hence, it propounds, the district court erred in granting the defendants summary judgment on this claim. Whether it is possible for a corporate entity to have tortiously interfered with the employment contract of one of its founders may at times become an interesting inquiry./4 Tortious interference with a contract occurs when someone intentionally and improperly interferes with the performance of a contract between another and a third person by inducing or otherwise causing the third person not to perform the contract. See Wausau, 514 N.W.2d at 44. Certainly, one could envision a scenario where, when a limited number of individuals form a corporate entity, that one of the individuals, while taking part in the formation, was still distinct from the entity formed (and ambivalent) so that a tortious interference claim could be viable. However, we need not dwell on such abstract inquiries at this time. While the district did hold that the corporate fiction could not be stretched as to allow a finding of distinctness be tween Skrtic and Accu-Tech, the court also provided an alternative basis for granting Accu-Tech summary judgment on the claim. As the court stated in addressing the suggestion that Accu-Tech had induced Skrtic to breach his contract with 3M, [t]his allegation is belied by the undisputed facts surrounding the formation of Accu-Tech. Skrtic and Pribyl conceived, created and own Accu-Tech for the purpose of conducting its present business with Skrtic as an officer and fiduciary . . . . The undisputed facts establish that Skrtic initiated his own actions and was not induced to do anything by the corporation he created. Though 3M argues that a tortious interference claim could legally have been maintained, it has not presented any evidence to suggest a disputed issue of material fact as to whether Accu-Tech actually caused Skrtic to breach his contract with 3M. Thus, even if such a cause of action could be viable against Accu-Tech, in this instance there was no evidence presented that would have properly allowed the claim to survive de fendants’ motion for summary judgment. We therefore affirm the district court’s dismissal of 3M’s tortious interference with contract claim.
In its complaint, 3M alleged that Accu- Tech competes with 3M’s products and processes, and that Accu-Tech unfairly competed with 3M by hiring 3M employees with knowledge of confidential information and trade secrets, inducing those employees to breach their employment agreements with 3M and to use 3M’s trade secrets against it. In its November 12 order, the district court granted summary judgment in favor of Accu-Tech, dismissing 3M’s unfair competition claim. According to the district court, because Wisconsin law would not interpret competition so broadly as to encompass the relationship between Accu-Tech and 3M, 3M’s unfair competition claim could not be grounded in that theory. After examining other possible bases for the unfair competition claim, the district court determined that [t]o the extent that there is a claim for unfair competition [the] issues are identical to the trade secret and tortious interference claims. Thus, the court dismissed the unfair competition claim as being repetitive. On appeal, 3M challenges the decision of the district court. First, it asserts that the issue of competition was inappropriately decided on summary judgment. Second, the company contends that even if its unfair competition claim was duplicative, that is no reason to dismiss the claim at the summary judgment stage. In determining that 3M and Accu-Tech were not competitors, the district court focused on the fact that 3M did not lose a single sale or customer to Accu-Tech during the course of defendants’ employment with 3M. The court also noted that there existed a market for resin sheeting which Accu-Tech was free to enter into, and which 3M chose not to penetrate. While the court acknowledged that there was some customer overlap between the two companies, the court believed that the companies were not offering competing products, except in a most indirect sense. After reviewing the record in this matter, we conclude that the issue of competition was improperly resolved on summary judgment. The district court, relying on Zimmermann v. Brennan, 254 N.W.2d 719, 721 (Wis. 1977), stated that Wisconsin narrowly construes what constitutes competition by an employee. In Zimmermann, the trial court had been faced with the question of whether a public relations firm which performed limited services in commercial arts and graphics should be considered a competitive business to a commercial art studio. The trial court determined that the operations were not in competition with one another, and the Supreme Court of Wisconsin affirmed. We must note, however, that the decision in Zimmermann was grounded to a large extent in the standard of review. The court acknowledged that whether two employers are engaged in competition is an issue of fact, such that if the trier of fact’s conclusion is not contrary to the great weight and clear preponderance of the evidence, it must be affirmed. See id. at 720. According to the court, [t]he evidence was in dispute, and the finding that Barkin-Herman was not a ’competitive business’ was not the only possible finding in light of the facts adduced at trial, but we are satisfied that the finding made was sufficient under the standard of review. Id. at 721. Had the issue of competition been decided by the jury at trial, the evidence relied upon by the district court here would no doubt be sufficient to withstand a motion for judgment as a matter of law. However, we are presented with this issue on appeal from a grant of summary judgment, where we review de novo, viewing the evidence in the light most favorable to 3M, whether there exists a genuine issue of material fact. In such a setting, we must conclude that there is such an issue. As an initial matter, the record contains facts which suggest that these companies were somewhat intertwined. As the court noted, there did exist some customer overlap between 3M and Accu-Tech. As a result of Accu-Tech marketing to 3M customers, companies that required carrier tape were presented with two options: (1) those companies could simply purchase the finished product from 3M, or (2) those companies could purchase resin sheeting from Accu-Tech and process their own carrier tape. Furthermore, 3M presented evidence that Accu-Tech was working in concert with another company which sold machinery to convert resin sheeting into carrier tape, and that Accu-Tech offered its customers advice on how to form pockets in their resin sheeting. Such evidence seems to suggest cross- elasticity of demand, and contradict the finding that these entities were not in competition--thus creating a disputed issue of material fact. Even assuming that the facts presented by the district court were not in dispute, we do not believe that those facts dictate that Accu-Tech was entitled to judgment as a matter of law. See Fed R. Civ. P. 56. For example, we find that whether there are distinct markets for resin sheeting and carrier tape is of little consequence to this competitiondetermination. While we do not dispute that there may be a submarket for resin sheeting, that does not preclude the fact that resin sheeting may be part of a larger market which includes carrier tape. As the Supreme Court has stated within [a] broad market, well-defined submarkets may exist which, in themselves, constitute product markets for antitrust purposes. Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962) (internal citation omitted). For instance, while there may be a distinct market for cellophane, in which there are many competitors, that does not rule out cellophane from being part of a larger market which consists of cellophane and other flexible packaging material. See United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377, 394-95 (1956). In considering what is the relevant market for determining . . . competition, no more definite rule can be declared than that commodities reasonably interchangeable by the consumers for the same purposes make up that ’part of the trade or commerce’, monopolization of which may be illegal. Id. at 395; see also Brown Shoe, 370 U.S. at 325 ([t]he outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it). Morever, that determination of whether two products are reasonably interchangeable must be made in reference to price, as [a]t a high enough price even poor substitutes look good to the consumer. Richard A. Posner, Antitrust Law: An Economic Perspective 128 (1976). While Accu-Tech is correct in its assertion that resin sheeting is not a perfect substitute for carrier tape, if the cost of purchasing Accu-Tech’s product and transforming it into carrier tape is comparable to the cost of purchasing 3M’s finished product, then an argument that the products are reasonably interchangeable may be viable. However, in the absence of an analysis of the relevant market, and a more thorough inquiry into the relationship between the products, we cannot find that the issue of competition was properly dismissed on summary judgment. The district court predicated its grant of summary judgment on the duplicative nature of 3M’s unfair competition claim. We have determined that the issue of whether 3M’s carrier tape and Accu-Tech’s resin sheeting are competing products is a disputed factual inquiry, not appropriate for resolution via summary judgment. Thus, the possible competition between Accu-Tech and 3M provides a distinct, independent basis for 3M’s unfair competition claim. Hence, assuming arguendo that it is appropriate to dismiss a cause of action on summary judgment as being duplicative-- an issue we will not weigh in on--here, there are no duplicative claims which warrant such a dismissal. As such, we must reinstate 3M’s unfair competition claim, and remand the issue to the district court.
Resin Formulations As noted above, the jury concluded that 3M had a trade secret in the customized resin formulations that enhance the sheeting and thermoforming capability of resin and give it properties needed in the electronic industry. The jury also determined that the defendants had improperly used or disclosed or threatened to use or disclose that trade secret, and awarded 3M $83,000 in damages. In its motion for judgment as a matter of law, Accu-Tech and its founders renewed an argument that there was no basis for a rational jury to find that the defendants misappropriated any customized resin formulations. The district court, while resolving that the jury had a basis for finding a trade secret in the customized resin formulations, also held that there was no basis for finding misappropriation of any customized resin formulation. In order to understand the basis for the district court’s finding, a brief explanation of the resin sheeting manufacturing process is necessary. The process for making resin sheeting begins with a raw material called a resin pellet. Resin pellets are widely available in a myriad of different formulations. In perfecting its resin sheeting manufacturing process for making carrier tape, 3M expended significant resources in analyzing and experimenting with different types of resin pellets. Besides using these commercially available resin formulations, 3M independently developed one type of resin formulation--a formula for polystyrene resin. Polystyrene resins are general-purpose, high-impact and ignition-resistant resins that meet application needs across a broad range of market segments including the packing industry. In granting the defendants judgment as a matter of law, the district court determined that the only resin formula which could be considered a customized resin formulation was the polystyrene resin. However, the court noted that while the defendants did use a polystyrene resin for making resin sheeting, they used a commercially avail able polystyrene resin rather than plaintiff’s customized formula. Thus, the court found that there was no rational basis for concluding that Accu-Tech had misappropriated 3M’s customized resin formulation. We review a district court’s grant of judgment as a matter of law de novo. See Massey v. Blue Cross-Blue Shield of Ill., 226 F.3d 922, 924 (7th Cir. 2000). Under Rule 50, a court should render judgment as a matter of law when a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue. Fed R. Civ. P. 50(a). Especially after a jury has evaluated a case, we bear in mind that the question is not whether the jury believed the right people, but only whether it was presented with a legally sufficient amount of evidence from which it could reasonably derive its verdict. See Massey, 226 F.3d at 924. But there must have been more than a mere scintilla of evidence to support the verdict. When examining the record, we look at the totality of the evidence, and we view that evidence and the inferences which may be taken from it in the light most favorable to the party against whom the judgment was granted. See id. 3M asserts that the district court erred in granting the defendants judgment as a matter of law. First, 3M notes that the defendants were operating Accu-Tech at the time that 3M was developing its polystyrene resin. Because Skrtic was responsible for the manufacturing of the polystyrene resin and admittedly had some knowledge of this customized resin formulation, 3M posits that the district court ignored evidence that permits a reasonable inference that the defendants used 3M’s customized resin formulation. Second, 3M argues that the district court’s decision ignores the fact that the jury’s verdict could have been based on defendants’ threat to use or disclose 3M’s trade secret. Third, 3M suggests that the district court’s decision that there could be no customized resin formulations simply because 3M bought its resin on the open market was in error. We agree with the district court that no rational juror could have found that defendants used or disclosed 3M’s formula for producing polystyrene resin. There is no dispute that Accu-Tech operated in secret while its founders were employed by 3M. There is also no disagreement that at that time, 3M was developing its own polystyrene resin formula, which Skrtic had some access to. Finally, it cannot be contested that the defendants did in fact use a polystyrene resin formulation in making their resin sheeting. Yet, we cannot draw from these facts a reasonable inference that Accu-Tech was using 3M’s polystyrene resin formulation. First, while he did have access, there is no evidence that proves that Skrtic had knowledge of 3M’s polystyrene resin formula. Furthermore, as the district court noted, the evidence at trial specifically established that Accu-Tech was not using 3M’s polystyrene resin. The testimony presented explicitly revealed that while defendants were engaged in producing resin sheeting from a polystyrene resin, that they used a commercially available resin formula rather than 3M’s customized formula. Against these undisputed facts, 3M’s facts and the reasonable inferences that may be drawn from them do not amount to a scintilla of evidence. However, 3M is correct to point out that the district court did not address in its grant of judgment as a matter of law whether the defendants had threatened to use or disclose 3M’s customized resin formulation. Yet, the district court’s silence on this matter is of little import. While vacating the jury award for misappropriation, the district court left intact a permanent injunction prohibiting the defendants from disclosing 3M’s customized resin formulations. Thus, even assuming that the defendants knew 3M’s customized resin formulations, 3M is sufficiently protected against the threat of disclosure by the district court’s injunction. See e.g., PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1268 (7th Cir. 1995); American Can, 742 F.2d at 329. In fact, 3M acknowledges that the company would only be entitled to injunctive relief to prevent the future disclosure of the misappropriated secrets. As such, the fact that the jury may have based its finding of liability on the threat of disclosure of 3M’s trade secrets--a questionable assumption given the jury’s award of monetary damages--would not mandate a reversal of the district court’s decision. Finally, we agree with the district court that 3M does not have a claim for misappropriation of a trade secret incustomized resin formulations for commercially available resin products. Simply because 3M expended significantresources in selecting from the market the proper resin formula for making its sheeting does not constitute that selection as a customized resin formulation. As the district court correctly noted, [t]esting many products on the market to choose the one that meets particular needs does not make that product ’customized’ in any reasonable sense of the word. To the extent that 3M now argues that it modifies the commercially purchased resin pellets by blending them in carbon, we find that fact does not assist 3M’s claim. The purpose of blending carbon into a commercially purchased resin is to create a conductive polycarbonate resin. However, testimony at trial revealed that 3M does not make the conductive polycarbonate resin that it uses, but rather that it purchases it from an outside source. More importantly, there is not even a scintilla of evidence to suggest that the defendants misappropriated 3M’s blending method./5 Overturning a jury verdict is not something that should be done lightly. According to our civil justice system, as enshrined in the Seventh Amendment to the Constitution, the jury is the body best equipped to judge the facts, weigh the evidence, determine credibility, and use its common sense to arrive at a reasoned decision. As a reviewing court, we must be particularly careful . . . to avoid supplanting [our] view of the credibility or the weight of the evidence for that . . . of the jury. Massey, 226 F.3d at 925. Here, even taking that generous standard of review into account, we agree with the district court that this claim flounders for lack of evidence. Thus, we affirm the district court’s grant of judgment as a matter of law.
Future Use of 3M’s Trade Secrets Lastly, we return to the district court’s February 9 decision, which partially granted 3M’s request for a permanent injunction. As noted above, the district court, in rendering its decision, relied upon the Fifth Circuit decision in Next Level Communications LP v. DSC Communications Corporation, 179 F.3d 244 (5th Cir. 1999), which held that when a plaintiff has been compensated for lost future damages, an injunction against future use would amount to imper missible double recovery. Here, the court resolved that the jury had assessed damages based on what it would have cost the defendants to independently develop the trade secrets at issue. Because, according to the district court, payment for the full cost of development of the secrets deprives defendants of any unjust enrichment that may have accrued from their misappropriation, it decreed that once the defendants had made (or guaranteed) such a payment, they were free to use the secret they had misappropriated./6 On appeal, 3M contends that the district court’s ruling has ipso facto forced the company to sell its trade secrets to those who stole them from it. 3M argues that without an injunction against use, the company is not protected from the future ongoing harm that may be caused by Accu-Tech’s use of 3M’s trade secrets. Further, to the extent that the district court based its decision on Next Level Communications, 3M asserts that the decision was incorrect. Thus, it requests that we remand this matter and direct the district court to modify the permanent injunction so as to forbid Accu-Tech’s use of 3M’s trade secret. Once again, we review the district court’s grant or denial of a permanent injunction for abuse of discretion, analyzing conclusions of law under a de novo standard and factual determination for clear error. See Knapp, 101 F.3d at 478. Notwithstanding the above, we note that modification of a permanent injunction is extraordinary relief, and requires a showing of extraordinary circumstances. See Protectoseal Co. v. Barancik, 23 F.3d 1184, 1186 (7th Cir. 1994). The purpose of a permanent injunction is to protect trade secret owners from the ongoing damages caused by the future use of trade secrets, rather than to compensate for those damages. See Gillen v. City of Neenah, 580 N.W.2d 628, 633 (Wis. 1998); Simenstad v. Hagen, 126 N.W.2d 529, 535 (Wis. 1964). As such, it would appear that 3M is correct that Accu-Tech’s payment of monetary damages should have no impact on the court’s decision to grant a permanent injunction against use. Cost of development damages assessed against a defendant do not address the future harm caused by continued use of misappropriated trade secrets. Yet, in presenting its argument, 3M has overstated the importance of the district court’s analogy to Next Level Communications, and understated the factual conclusions which truly propelled the court’s determination. In Next Level Communications, the jury had awarded the plaintiff exorbitant damages for lost future profits on sales of switched digital video products containing trade secrets which the defendant had misappropriated. See 179 F.3d at 247. After trial, when the plaintiff moved for a permanent injunction against the defendant’s future transfer or disclosure of the plaintiff’s trade secrets, the district court denied the request, finding that the recovered monetary damages rendered any such injunction a duplicative remedy. See id. 3M suggests that Next Level Communications is inapplicable to these proceedings, as the jury awarded damages compensating 3M for the cost of development of its misappropriated trade secret, rather than for future lost profits. Hence, the company maintains, the imposition of an injunction against use would not be a duplicative remedy, and that the district court has created a rule of law whereby companies can gain ownership of misappropriated trade secrets simply by paying the cost of development in damages. We agree with 3M that the jury’s cost of development award does not render the granting of a permanent injunction against use in this instance as a duplicative remedy. Unfortunately for 3M, the district court did as well. The court’s reference to Next Level Communications was not included in order to suggest that the payment of any damages for misappropriation gives the misappropriator ownership of the trade secret./7 In fact, the payment of damages in this instance was largely irrelevant to the court’s decision to deny the injunction against use. The court reliance on Next Level Communications was simply for an unexceptional analogy: that just as a plaintiff who has been compensated for lost future damages should not receive an injunction against permanent use, [s]imilarly, when a plaintiff has demonstrated no actual damages nor a likelihood of future damages a permanent injunction enjoining use is inappropriate. In fact, had the court not mentioned Next Level Communications, the assertion that an injunction is inappropriate when there is no likelihood of future harm would have carried no less weight. It is apparent that the district court’s determination was not based on a legal rule established in the Fifth Circuit. Rather, the court denied 3M the permanent injunction it endeavored because the company had not established the likelihood of any future damages. That is a factual determination which 3M has not sufficiently disputed, and which, under our clearly erroneous standard of review, we cannot find to be in error. See Knapp, 101 F.3d at 478. Yet, the above should not suggest that if monetary damages for lost profits are not sought or quantified, that a permanent injunction against future use cannot be entered. The loss of a trade secret cannot, in some instances, be measured in monetary damages. See, e.g., FMC Corp. v. Taiwan Tainan Giant Indus. Co., Ltd., 730 F.2d 61, 63 (2d Cir. 1984). Oftentimes, this is because the greatest loss that results from a misappropriation is the loss of the right not to divulge a trade secret, regardless of price. As the Supreme Court has stated: [t]he right to exclude others is generally one of the most essential sticks in the bundle of rights that are commonly characterized as property . . . [and] [w]ith respect to a trade secret . . . central to the very definition of the property interest. Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data. Ruckelhaus v. Monsanto Co., 467 U.S. 986, 1011 (1984) (internal citations omitted). Here, 3M contends that an injunction should attach because it was deprived of its right not to sell its trade secret to the defendants. Without an injunction against use, 3M declares that Accu-Tech receives a benefit that it would not have absent its wrongdoing. Once again, 3M has ignored the factual predicate of the district court’s determination. Instead, 3M suggests that when a party has been found guilty of misappropriation, that party should be enjoined in perpetuity from using the misappropriated trade secret. However, to impose such a draconian rule would be to fundamentally alter the purpose behind the permanent injunction. An injunction is not a punitive tool, but rather a vehicle for preventing injury. See Gillen, 580 N.W.2d at 633. According to Wisconsin law, though a court may grant injunctive relief against a person who misappropriated a trade secret, the court should continue that injunction only for a period of time reasonable to eliminate commercial advantage which the person who misappropriated a trade secret would otherwise derive from the violation. See Wis. Stat. sec. 134.90. Once the defendant has discovered, or would have discovered, the trade secret without the misappropriation, any lost profits from that time forward are not caused by the defendant’s wrongful act. Sokol Crystal Products, Inc. v. DSC Communications Corp., 15 F.3d 1427, 1433 (7th Cir 1994). In this instance, the district court made a factual determination that Accu- Tech would have been able to independently develop 3M’s trade secret in a period of less than two years--a conclusion which 3M does not dispute. Given that Accu-Tech’s founders were the individuals responsible for creating the materials for 3M in the first place, it would be nonsensical to suggest that they would not have been able to duplicate the materials on their own. As such, by the time the district court was faced with determining whether to enjoin Accu-Tech’s use of 3M’s trade secret, the court believed that Accu-Tech would have discovered 3M’s trade secret. Hence, the district court properly determined that once payment to 3M had been made to alleviate any commercial advantage, there would be nothing further gained by enjoining Accu-Tech from using the trade secret which they would have by that time developed. While 3M is correct that Accu- Tech was able to develop its resin sheet ing line with more celerity as a result of its misappropriation, we believe, as the district court did, that the juryfactored in that monetary benefit in its award to 3M, thereby negating (as best as possible) any commercial advantage which Accu-Tech’s iniquity parented. Giving the appropriate deference to the conclusions of fact made by the district court, we do not believe that the court abused its discretion in not granting 3M a permanent injunction against use./8