Opinion ID: 2995202
Heading Depth: 2
Heading Rank: 1

Heading: Accu-Tech’s Issues On Appeal

Text: Secret As noted above, the jury determined that 3M had a valid trade secret in its operating procedures and manuals, which in the course of forming and operating Accu-Tech, the defendants had misappropriated. Appellants’ primary assertion on appeal is that the evidence produced at trial was insufficient to support either of those findings by the jury, and that thus the district court erred in not granting judgment as a matter of law. Though we review the denial of a motion for judgment as a matter of law de novo, see Emmel v. Coca-Cola Bottling Co. of Chicago, 95 F.3d 627, 629 (7th Cir. 1996), our inquiry is limited to determining whether the evidence presented, combined with all reasonable inferences permissibly drawn therefrom, is sufficient to support the jury’s verdict when viewed in the light most favorable to the nonmoving party, see Goodwin v. MTD Products, Inc., 232 F.3d 600, 606 (7th Cir. 2000); see also Mangren Research and Dev. Corp. v. National Chem. Co., Inc., 87 F.3d 937, 941 (7th Cir. 1996) (in a diversity case we apply the federal standard for judgment as a matter of law). We begin by examining whether, under Wisconsin law, 3M’s operating procedures and manuals constitute a valid trade secret. According to the Wisconsin Uniform Trade Secrets Act, a trade secret is defined as information, including a formula, pattern, compilation, program, device, method, technique or process . . . [which] derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use . . . [and which] is the subject of efforts to maintain its secrecy that are reasonable under the circumstances. Wis. Stat. sec. 134.90(1)(c); see also ECT Int’l, Inc. v. Zwerlein, 597 N.W.2d 479, 482 (Wis. Ct. App. 1999). The defendants do not dispute that 3M has instituted elaborate security measures designed to maintain the secrecy of the material at issue. Rather, the crux of their argument is that the operating procedures and manuals encompass a broad category of items that are either of public knowledge, or relate solely to the manufacturing of carrier tape./2 Throughout the course of their argument, defendants press 3M to divulge what specific information contained within the more than 500 hundred pages of materials could be considered secret. In doing so, defendants seem to suggest that if 3M cannot point to specific items within its manuals that are not known by the industry, then 3M cannot claim a trade secret in the combined product. We disagree. In order to be considered a trade secret, a pattern, technique, or process need not reach the level of invention necessary to warrant patent protection. A trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process, design and operation of which, in unique combination, affords a competitive advantage and is a protectable secret. See Synthex Ophthalmics Inc. v. Tsuetaki, 701 F.2d 677, 683 (7th Cir. 1983). There is no doubt that within the 500- plus pages of manuals at issue, there are a host of materials which would fall within the public domain. For example, 3M’s instructions on how to clean the area around its machines, and how to properly assemble a cardboard box, surely cannot be considered independent trade secrets. Were 3M to bring Accu-Tech to court, claiming misappropriation on the basis that Accu-Tech was assembling ordinary cardboard boxes in a similar manner to 3M, we would not look favorably on such a claim. Yet, when all the cleaning procedures, temperature settings, safety protocols, and equipment calibrations are collected and set out as a unified process, that compilation, if it meets the other qualifications, may be considered a trade secret. Contrary to defendants’ suggestion, 3M is not attempting to preclude Accu-Tech from folding cardboard boxes. Rather, the company is seeking to prevent Accu-Tech from using and disclosing a process which it took the company six years and considerable income to perfect. These manuals and processes, even if comprised solely of materials available in the public domain, have been created by combining those materials into a unified system which is not readily ascertainable by other means. Thus, viewing the evidence in the light most favorable to 3M, we believe there was sufficient evidence to support the jury’s finding that 3M has a trade secret in the operating procedures, quality manuals, trade manuals, process standards and operator notes for using 3M’s equipment that makes resin sheeting. Turning to the issue of misappropriation, we agree with the district court that there was sufficient evidence to support a powerful inference that defendants used 3M’s operating procedures and manuals in establishing Accu-Tech’s operations. While it took 3M six years and countless resources in order to make its carrier tape operation efficient and profitable, Accu-Tech was able to almost immediately operate its resin sheeting line effectively. Furthermore, evidence adduced at trial established that there are significant similarities between 3M’s carrier tape line and Accu-Tech’s resin sheeting line, including the use of the same or similar equipment and materials. Moreover, testimony at trial suggested that Accu- Tech was disclosing to 3M customers and competitors processes detailed in 3M’s manuals. As the district court stated, [t]he inference is virtually inescapable that defendants gained a significant head start in their operation by using the trade secret knowledge they learned from plaintiff concerning the operation and standards for the line. We agree that when this evidence, along with all the reasonable inferences that may be drawn from it, is viewed in the light most favorable to 3M, it constitutes sufficient support for the jury’s verdict. As such, we affirm the district court’s denial of Accu-Tech’s motion for judgment as a matter of law on the issue.
Injunction On February 9, 2000, the district court partially granted 3M’s request for a permanent injunction. The court ordered that Accu-Tech and its founders were permanently enjoined from disclosing to any third party (1) the operating procedures, quality manuals, process standards, and operator notes for using plaintiff’s equipment that makes resin sheeting; (2) plaintiff’s customized resin formulations that enhance the sheeting and thermoforming capability of resin and give it properties needed in the electronic industry; (3) plaintiff’s slitting technology and experiment results including the design and setup of slitters; and (4) plaintiff’s winding methods used to compensate for variations in film calipher. However, contrary to 3M’s request, the district court did not enter an order permanently enjoining the defendants from using 3M’s operating procedures and manuals or customized resin formulation. Rather, the court decreed that once the defendants had paid the plaintiff $270,500 in partial satisfaction of the jury verdict (or provided security in an amount sufficient to assure full payment and subsequent costs), defendants were free to use the two aforementioned trade secrets./3 On appeal, both parties assert that the district court committed error in its February 9 order. Accu-Tech and its founders, focusing on the court’s injunction against disclosure of 3M’s operating procedures and manuals, contend that the court’s order is too vague, and thus does not comply with Fed. R. Civ. P. 65(d). For its part, 3M maintains that the court incorrectly relied upon defendants’ payment of damages as justification for not permanently enjoining the defendants from using 3M’s misappropriated trade secret--an argument we will address in Part B3. We review the district court’s grant or denial of a permanent injunction for abuse of discretion. Knapp v. Northwestern Univ., 101 F.3d 473, 478 (7th Cir. 1996). Factual determinations are reviewed for clear error and legal conclusions are given de novo review. A factual or legal error may be sufficient to establish an abuse of discretion. Id. The requirements for a valid injunction are found in Fed. R. Civ. P. 65(d), which provides, so far as pertinent here, that [e]very order granting an injunction . . . shall set forth the reasons for its issuance; shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained. As the Supreme Court has noted, the specificity provisions of Rule 65(d) are no mere technical require ments. The Rule was designed to prevent uncertainty and confusion on the part of those faced with injunctive orders, and to avoid the possible founding of a contempt citation on a decree too vague to be understood. Schmidt v. Lessard, 414 U.S. 473, 476 (1974). Thus, district courts must endeavor to strike a balance, framing orders that provide plaintiffs with the appropriate level of protection while still placing defendants on notice of the prohibited conduct. See American Can Co., 742 F.2d at 333. The defendants here contend that the injunction against disclosure entered by the district court must be vacated because, as a matter of law, the terms are too vague to give them fair notice of the prohibited conduct. In so arguing, Accu-Tech and its founders propound that 3M has not identified what information within the 500-plus pages of manuals it considers to be secret, and that much of the information contained in those pages is either generalized business information or information relating to the manufacture of carrier tape, rather than resin sheeting. The problem of framing an appropriate order may be particularly acute in trade secrets cases, see id. at 332, and it for that reason that courts have often set aside trade secrets injunctions as failing to comply with Rule 65(d)’s specificity requirements, see, e.g., E.W. Bliss Co. v. Struthers-Dunn, Inc., 408 F.2d 1108, 1113-17 (8th Cir. 1969) (reversing, as too vague, an order enjoining defendants from using or disclosing trade secrets and confidential technical information of plaintiff); Brumby Metals, Inc. v. Bargen, 275 F.2d 46, 49 (7th Cir. 1960) (finding language in injunction that prohibited defendant from selling furniture incorporating plaintiff’s design feature as offered in the current sales literature of Schoolco, Inc., or any variation thereof to be overly vague); cf. PMC, Inc. v. Sherwin- Williams Co., 151 F.3d 610, 619 (7th Cir. 1998) (district court’s injunction ordering Sherwin-Williams to take full responsibility for the future remediation of the PMC facility remanded for redrafting because the term full responsibility was hopelessly vague). However, the challenges to the injunctions in those cases are very different from the challenge raised by the defendants here. In this instance, the defendants do not truly find error in the scope of the injunction as protecting disclosure of items beyond that which has previously been determined to be the applicable trade secret. Rather, to the extent that defendants find fault with the district court’s order, it is because they argue that 3M cannot have a valid trade secret in the operating procedures and manuals. We found that argument unpersuasive above, and simply because defendants have refitted it as a challenge to the district court’s permanent injunction does not add any merit to it. Here, the district court’s order does nothing more than prohibit the defendants from disclosing the trade secret. In its memorandum, the district court acknowledged that defendants had sought a more narrow injunction, identifying specific secrets not to be used. However, the court determined that, in part to curb the misconduct and evasive action of defendant Pribyl, no opportunity for loopholes should be allowed. We agree with the district court’s decision that more specificity in the injunction is not mandated. Rule 65(d) does not require the impossible. There is a limit to what words can convey. The more specific the order, the more opportunities for evasion. Scandia Down Corp. v. Euroquilt, 772 F.2d 1423, 1431 (7th Cir. 1985). If narrow literalism is the rule of interpretation, injunctions will spring loopholes, and parties in whose favor injunctions run will be inundating courts with requests for modification in an effort to plug loopholes. Schering Corp. v. Illinois Antibiotics Co., 62 F.3d 903, 906 (7th Cir. 1995) (internal citation omitted). Further, Rule 65(d)’s specificity requirement does not demand that the court issuing the injunctiondisclose the trade secrets in its order. See Synthex Ophthalmics, 701 F.2d at 683. We are aware that certain materials falling within the trade secret are public information. However, we believe it sufficient protection against the fear of unfair surprise embodied in the cases discussing Rule 65(d)’s specificity requirement that injunctions are construed narrowly, with close questions of interpretation being resolved in the defendant’s favor. See Schering, 62 F.3d at 906. As such, we cannot hold that the district court abused its discretion in granting this permanent injunction against disclosure.
Subsequent to the conclusion of the liability phase of the trial, the parties debated whether certain exhibits would be provided to the jury to consider during deliberations. Specifically, Accu-Tech and its founders quarreled over two sections of 3M’s business conduct manuals, exhibits 114 and 115, which 3M sought to introduce in support of its breach of loyalty claims. Exhibit 114, entitled Conflict of Interest Policy states that 3M employees should not engage in activities that give rise to a conflict of interest or the appearance of a conflict of interest, without prior management approval. The policy defines a conflict of interest as any activity by a 3M employee that (1) is inconsistent with 3M’s activities or business interests, or (2) could cause a reasonable person to believe that the employee’s judgment might be adversely influenced. Furthermore, the policy provides examples of real and potential conflicts, which include operating a business outside of the employee’s 3M responsibilities which is in conflict with any 3M business. Exhibit 115 likewise lists 3M’s conflict of interest policy, and provides similar language to that contained in exhibit 114. The district court, over defendants’ objection, found that the exhibits were relevant; a decision which Accu-Tech now challenges. We review a district court’s ruling on the admissibility of evidence for abuse of discretion. Aetna Life Ins. Co. v. Wise, 184 F.3d 660, 665 (7th Cir. 1999). However, a finding that a district court’s admission of evidence did, in fact, constitute an abuse of its discretion does not automatically necessitate an altering of the district court’s judgment. See United States v. Wimberly, 60 F.3d 281, 286 (7th Cir. 1995). Indeed, [n]o error in either the admission or the exclusion of evidence . . . is ground for granting a new trial or for setting aside a verdict or for vacating, modifying, or otherwise disturbing a judgment or order, unless refusal to take such action appears to the court inconsistent with substantial justice. Fed. R.Civ. P. 61; see Old Republic Ins. Co. v. Employers Reinsurance Corp., 144 F.3d 1077, 1082 (7th Cir. 1998). A trial judge’s evidentiary errors satisfy this standard only if a significant chance exists that they affected the outcome of the trial. See Hasham v. California State Bd. of Equalization, 200 F.3d 1035, 1048 (7th Cir. 2000). Accu-Tech and its founders argue that the admission of the provisions in 3M’s business conduct manuals regarding operation of a business in competition with 3M constitutes reversible error. Specifically, they asseverate that theadmitted portions were inadmissible as irrelevant, see Fed. R. Evid. 401, 402, and as unduly prejudicial and confusing to the jury, see Fed. R. Evid. 403. In granting the defendants summary judgment on 3M’s claim of breach of loyalty based on improper competition, the district court determined that the defendants did not breach their duty of loyalty with 3M merely by operating Accu- Tech, as Accu-Tech’s sale of resin sheeting was not in direct competition with 3M’s business (a ruling which 3M disputes). Thus, at trial 3M’s breach of loyalty claim was limited to being predicated upon the misappropriation of 3M’s time and resources by Accu-Tech’s founders in the process of starting Accu- Tech while still working for 3M. Given that the district court did not permit 3M to introduce evidence to the jury suggesting that Accu-Tech had competed with 3M, Accu-Tech asserts that the sections of 3M’s manuals dealing with the operation of a business in competition with 3M were irrelevant. Furthermore, Accu-Tech maintains that the admission of those manuals may have unduly prejudiced or confused the jury into ignoring the relevant standard of law, and instead finding the defendants guilty of breach simply because they had violated 3M’s conflict of interest policy. We disagree with defendants that the district court erred in admitting 3M’s conflict of interest policies. Certainly, given the court’s decision that Accu- Tech’s founders did not breach a duty of loyalty to 3M by forming their company, the manuals were not relevant (at that juncture) towards proving any theory of liability based on improper competition by the defendants. However, 3M did not offer those manuals in order to prove that Pribyl, Skrtic, and Harvey had improperly competed with 3M. Rather, the company sought introduction of those materials to assist in proving that Accu- Tech’s founders, who had used 3M’s time and resources, had read 3M’s policies and thus knew that their actions were not permitted. Hence, the introduction of 3M’s manuals was necessary, and therefore relevant, in establishing the mens rea for the plaintiff’s remaining breach of loyalty claim. However, not all relevant evidence is admissible, and we recognize that the jury may have been confused by the conflict of interest standard articulated in 3M’s manuals. In this instance, a strong argument can be made that the probative value of exhibits 114 and 115 was substantially outweighed by the prejudicial effect their admission might have had on the defense. Yet ultimately, Accu-Tech’s Rule 403 argument cannot prevail. In suggesting evidentiary error, the defendants become entrenched in a Catch-22 from which they cannot extricate themselves. The basis for the defendants’ claim here is that the admission of the exhibits was inconsistent with the court’s instruction that the defendants did not breach a duty of loyalty by starting and operating Accu-Tech. However, it is that very instruction which precludes the defendants from establishing that any error actually resulted in harm. This is because, absent evidence to the contrary, we assume that juries follow a court’s instructions. See United States v. Jones, 248 F.3d 671, 676 (7th Cir. 2001); Rodriguez v. Peters, 63 F.3d 546, 559 (7th Cir. 1995). Ergo, we must presume that despite any alternate standard of liability which the jury may have gleaned from examining exhibits 114 and 115, the district court’s instruction that defendants did not breach their duty of loyalty by forming and running Accu- Tech operated to cure those misconceptions. Defendants have not presented any evidence which would justify abandoning the presumption that this jury has followed instructions, and our examination of the record has likewise failed to adduce any basis for doing so. Accordingly, we find that the district court’s decision to submit exhibits 114 and 115 to the jury during their deliberations does not constitute reversible error.