Opinion ID: 2995202
Heading Depth: 3
Heading Rank: 3

Heading: District Court’s Failure to Enjoin

Text: 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