Opinion ID: 2403365
Heading Depth: 1
Heading Rank: 21

Heading: District court's choice-of-law decision

Text: The WideBand defendants contend the district court erred in concluding that Utah law, rather than Massachusetts law, applied to ClearOne's misappropriation of trade secrets claims. Generally speaking, [w]e review [a] district court's choice-of-law determination de novo. Emp'rs Mut. Cas. Co., 618 F.3d at 1170. However, as we discuss in greater detail below, the WideBand defendants' choice-of-law arguments are barred by the invited error doctrine. On August 13, 2007, ClearOne filed a motion for a temporary restraining order and preliminary injunction. In its motion, ClearOne cited exclusively to Utah law, specifically the UUTSA, in discussing the likelihood of success on the merits of its misappropriation claims. JA at D2558. The WideBand defendants filed an objection to ClearOne's motion. In addressing the likelihood of success issue, the WideBand defendants made a number of related arguments, including the following: Also, because Plaintiff [ClearOne] admittedly withdrew the Honeybee [C]ode and the Speaker Phone technology from the market by 2002, years before the alleged misappropriation, the Honeybee [C]ode was abandoned in that it was not in continued use at the time of the alleged misappropriation. Schwartz [ Swartz ] v. Schering-Plough Corp., 53 F.Supp.2d 95, 101 (D.Mass.1999). JA at D3251. The WideBand defendants further argued, again citing Swartz, that ClearOne could make no showing that any part of the Honeybee [C]ode ha[d] been in `continuous use' by [ClearOne] as required by Massachusetts law. Id. at D3274. ClearOne subsequently filed a pleading entitled Bench Memorandum Responding to WideBand Defendants' Choice of Law Arguments. Id. at D4425. In that pleading, ClearOne argued that Massachusetts law did not apply to its claims. Instead, ClearOne argued, Utah law applied to its claims because (a) the choice-of-law provisions in both the asset purchase agreement between itself and Old ClearOne and the non-compete agreement signed by Yang provided for the application of Utah law, and (b) Utah had the most significant relationship to ClearOne's claims. Id. at D4426. Consequently, ClearOne argued, the modern approach in the [UUTSA] (as stated in the Restatement (Third) of Unfair Competition), govern[ed] the definition of what constitute[d] a `trade secret' in this casenot the first Restatement of Torts, which might be the law in Massachusetts. Id. The WideBand defendants in turn filed a response to ClearOne's bench memorandum. Id. at D4472. Therein, the WideBand defendants argued that a choice of law analysis required the application of Massachusetts law. Id. at D4474. In support, the WideBand defendants argued that [a]t all relevant times, they were employed in the Commonwealth of Massachusetts, and that WideBand was a Massachusetts corporation with an office in Massachusetts. Id. at D4477. More importantly, the WideBand defendants argued, the bulk of the work performed on the subject algorithms was performed in Massachusetts, and the alleged malfeasance purportedly occurred in Massachusetts. Id. Thus, the WideBand defendants argued, Massachusetts clearly ha[d] the most significant relationship to the underlying facts of th[e] case, and to the alleged conduct about which [ClearOne] [was] complain[ing]. Id. On October 30, 2007, the district court issued an order and memorandum decision granting ClearOne's motion for a preliminary injunction. In doing so, the district court determined that ClearOne ha[d] a substantial likelihood of success on [its] breach of contract claims against ... Yang, and thus did not address the likelihood of success on ClearOne's claims of misappropriation of trade secrets.... Id. at D4972. Consequently, the district court did not resolve the choice-of-law issue argued by the parties in their respective pleadings. The WideBand defendants subsequently filed motions for summary judgment. In those motions, the WideBand defendants did not renew their choice-of-law arguments or otherwise argue that Massachusetts law was controlling as to ClearOne's misappropriation claims. Instead, they asserted that the UUTSA governed ClearOne's misappropriation claims, JA at D6751, D6758-59, and preempted all of ClearOne's state law claims based on unauthorized use of the Honeybee Code, id. at D6764-65. On the same date that they filed their motions for summary judgment, the WideBand defendants also filed a motion to join Biamp's motion for summary judgment. Id. at D6845-46. Biamp, in its motion for summary judgment, argued, in pertinent part, that because the Honeybee Code resided in Massachusetts at the time that... Yang had access to it and [allegedly] misappropriated it, Massachusetts law [thus] control[led] whether the Honeybee Code [wa]s a trade secret. Id. at D6671. According to the record on appeal, the district court never ruled on the WideBand defendants' motion to join Biamp's motion. In any event, on August 20, 2008, the district court issued an order and memorandum decision denying Biamp's motion for summary judgment. Id. at D8302. In doing so, the district court did not definitively rule on the issue of whether Utah or Massachusetts state law applied to ClearOne's misappropriation claims. Instead, the district court stated as follows: Finally, Biamp asserts that ClearOne's discontinuance of the phone that used the Honeybee Code undisputedly establishes that ClearOne had abandoned the Honeybee Code itself. Biamp then argues that under Massachusetts law, a trade secret must be in continuous use. Even assuming arguendo that Massachusetts law applied on this point, Biamp does not give the court enough law or facts to conclude that the Honeybee Code could not have been considered in use. The record reflects that ClearOne did not consider the Honeybee Code obsolete, even though ClearOne stopped using that code in its phones. Because ClearOne is in the business of making phones run by code, a jury could conclude that ClearOne retained the Honeybee Code for future use or further development for use in its phones. Id. at D8304-05. At trial, the WideBand defendants again asserted that Utah law applied to ClearOne's misappropriation of trade secrets claims. For example, in their motion for judgment as a matter of law, the WideBand defendants argued, in pertinent part, that Utah law was controlling as to those claims. Id. at D12024. On appeal, the WideBand defendants now complain that, [i]n spite of the profound impact a ruling on the choice of law issue would have had on the case, the [district court] never issued a ruling of any kind on the matter. Aplt. Reply Br. at 21-22. As a result, the WideBand defendants argue, they were forced to proceed under the auspices of Utah law. Id. at 22. And, they further argue, the district court's oversight in this regard undoubtedly led in large part to not only the denial of [their] summary judgment motions, but also resulted in the return of a jury verdict in ClearOne's favor. Id. More specifically, the WideBand defendants argue that, had the district court correctly applied Massachusetts law, it would have been required to conclude, under the uncontroverted facts, that the Honeybee Code did not constitute a valid trade secret because ClearOne had, prior to the alleged misappropriation, ceased using the Honeybee Code and declared that it had no value. We conclude that these arguments are barred by the invited error doctrine. The invited-error doctrine precludes a party from arguing that the district court erred in adopting a proposition that the party had urged the district court to adopt. FTC v. Accusearch Inc., 570 F.3d 1187, 1204 (10th Cir.2009) (internal quotation marks omitted). In other words, the invited error doctrine prevents a [party] or counsel from lying in wait for potential mistakes, and then seeking to reverse the outcome of trial. United States v. Oldbear, 568 F.3d 814, 826 (10th Cir.2009). Invited error is a form of waiver, i.e., `the intentional relinquishment or abandonment of a known right.' United States v. Teague, 443 F.3d 1310, 1314 (10th Cir.2006) (quoting United States v. Olano, 507 U.S. 725, 733, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993)). As we have outlined, although the WideBand defendants initially asserted that Massachusetts law applied to Clear-One's misappropriation claims, they subsequently abandoned that position and argued, both in their summary judgment motions [10] and in their motion for judgment as a matter of law, that the UUTSA applied to ClearOne's misappropriation claims. In short, the WideBand defendants intentionally relinquished or abandoned their argument that Massachusetts law applied to ClearOne's misappropriation claims. Richison v. Ernest Grp., Inc., 634 F.3d 1123, 1127 (10th Cir.2011) (discussing difference between waiver and forfeiture in civil proceedings).