Court Opinion

ID: 3042848
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:10:00.250524+00
Date Added: 2024-06-11T11:49:01.099050
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 06-2539
                                    ___________

SL Montevideo Technology, Inc.,          *
                                         *
      Plaintiff - Appellant,             *
                                         * Appeal from the United States
      v.                                 * District Court for the
                                         * District of Minnesota.
Eaton Aerospace, LLC,                    *
                                         *
      Defendant - Appellee.              *
                                    ___________

                               Submitted: January 11, 2007
                                  Filed: July 12, 2007
                                   ___________

Before LOKEN, Chief Judge, BYE and SHEPHERD, Circuit Judges.
                              ___________

LOKEN, Chief Judge.

       Eaton Aerospace contracted to supply stabilizer trim motors for Boeing 737
airplanes. Stabilizer trim motors are powered by brushless direct current (DC) motors.
Eaton subcontracted with SL Montevideo Technology, Inc. (SLM), to supply a
customized brushless DC motor meeting Eaton’s specifications for this application.
After developing and supplying two versions of that motor for several years, SLM
refused to bid on a redesigned model and then commenced this diversity action
accusing Eaton of misappropriating SLM’s trade secrets and breaching a Proprietary
Information Agreement (PIA) by the manner in which Eaton obtained a redesigned
motor from another supplier. After trial but before submitting the case to the jury, the
district court1 granted Eaton judgment as a matter of law on both claims. Applying
Minnesota law, the court concluded that SLM “has not presented any testimony or
exhibits establishing with particularity what its claimed trade secrets are” and “has not
presented sufficient evidence from which a reasonable jury could conclude that Eaton
breached the PIA.” SLM appeals only the dismissal of its breach of contract claim.
We affirm.

                                           I.

       After Eaton contracted to supply Boeing stabilizer trim motors for the 737
airplane, SLM with input from Eaton and Boeing designed and began supplying
Eaton with a customized brushless DC motor for this application, referred to as the -01
motor. SLM was Eaton’s sole source for this brushless DC motor. As SLM did not
have an exclusive supply contract, Eaton explored developing a second source through
another supplier, Astromec, Inc., or Eaton’s own production facilities. But nothing
came of these efforts.

       In 1999, Boeing complained of -01 motor failures. In response, SLM, Eaton,
and Boeing modified the -01 brushless DC motor design. The modified product,
referred to as the -02 motor, had larger bearings than the -01 motor and incorporated
other changes. In 2000 and 2001, SLM supplied -02 motors which Eaton then
installed in its stabilizer trim motors. Boeing had no further complaints.

       In January 2000, SLM proposed a Proprietary Information Agreement relating
to the -01 and -02 brushless DC motors. Eaton responded that it was willing to enter
into a PIA; however, because the parties had worked on this project for many years
without such an agreement, Eaton proposed that SLM attach to the PIA “a list that

      1
        The HONORABLE RICHARD H. KYLE, United States district judge for the
District of Minnesota

                                          -2-
outlines the documents that [Eaton] has in its possession that [SLM] believes are
confidential.” SLM proposed instead that the agreement be limited to documents
stamped confidential by SLM. Eaton agreed, and the parties signed the PIA on
January 27, 2000. The PIA required that each party “keep in confidence and not
disclose to any person . . . the other Party’s Proprietary Information.” The PIA
defined “Proprietary Information” as including:

      recorded information . . . of a scientific or technical nature . . . which has
      been marked as proprietary . . . by a stamp or other written or recorded
      identification by the originating party prior to disclosure or after
      disclosure if the Proprietary Information was inadvertently not marked
      prior to disclosure.

The PIA excluded from protection Proprietary Information “in the public domain,”
already known or independently developed by the receiving party, or made public to
others by the party claiming proprietary rights.

      In March 2001, Eaton notified SLM that it was redesigning its stabilizer trim
motor for the Boeing 737 and that the changes would require modest redesign of the
brushless DC motor component. Eaton invited SLM to redesign its -02 motor. SLM
declined. Forced to find a new supplier, Eaton contracted with Astromec to develop
and supply a brushless DC motor for the redesigned stabilizer trim motor.

       Astromec’s design process for this brushless DC motor was long and difficult.
Deadlines were missed, and Boeing expressed concerns to Eaton that Astromec could
not produce a quality motor. At one point, Eaton asked SLM to reconsider its refusal
to redesign the -02 motor. Again, SLM declined. Astromec’s struggle to design a
motor “from scratch” threatened Eaton’s contract commitments to Boeing. Not
surprisingly, Eaton’s engineers provided guidance and technical support and critiqued
Astromec’s design proposals. SLM claims that Eaton breached the PIA by disclosing

                                           -3-
SLM’s proprietary information to Astromec during this design and development
process.

       SLM commenced this action in May 2003, before Astromec was able to supply
Eaton with production quantities of its brushless DC motor. SLM claims no lost
profits or other direct damages, conceding that its -01 and -02 motors could only be
used in Eaton stabilizer trim motors for the 737 airplane and that SLM was unwilling
to continue this relationship by supplying Eaton with a redesigned brushless DC motor
suitable for use in Eaton’s new stabilizer trim motor. Thus, there is no element of
unfair competition here. Rather, SLM’s contract claim is for “unjust enrichment”
measured by the monetary advantage to Eaton of allegedly using SLM’s proprietary
information to accelerate Astromec’s development of an alternative brushless DC
motor so that Eaton could meet its contract commitments to Boeing.

       Abandoning its trade secret claim on appeal, SLM argues that the district court
erred in granting judgment as a matter of law on the contract claim because “the entire
design” of SLM’s motor is Proprietary Information protected by the PIA. The breadth
of this claim is significant. SLM witnesses conceded that SLM was contractually
obligated to provide its engineering drawings to Eaton, along with the customized
motors Eaton purchased, and that the initial design parameters were specified by
Eaton. Yet SLM asserts the right to bar Eaton from using “the entire design” of a
customized product which it designed to Eaton’s specifications, with guidance from
Eaton and Boeing, and which Eaton purchased outright from SLM. If upheld, this
claim would preclude Eaton from obtaining this critical component from another
source (including Eaton itself) after SLM ended their relationship. This type of
restraint is normally found in exclusive supply contracts. Of course, the parties were
free to enter into a PIA putting Eaton in this extraordinary straightjacket. See, e.g.,
Universal Gym Equip., Inc. v. ERWA Exercise Equip. Ltd., 827 F.2d 1542, 1550 (7th
Cir. 1987). The question is whether SLM proved they did so.

                                         -4-
                                         II.

       SLM’s vice president of quality assurance testified that the components of
brushless DC motors are well known but “the real proprietary nature is how these
things are all put together and how the tradeoffs are made during the design effort
such that the [customer’s] spec is met.” SLM presented evidence that it shipped Eaton
six copies of “Green Packages” containing comprehensive engineering specifications
and drawings for the -02 motor, and that it was SLM’s practice to stamp such
documents proprietary. SLM also presented evidence that Eaton’s initial
specifications to SLM in 1996 called for design of a brushless DC motor meeting
general performance parameters (such as rotor inertia, breakaway torque, and
resistance), whereas the specifications Eaton provided Astromec for a redesigned
motor in 2002 called for the precise performance parameters achieved by SLM’s -02
motor and disclosed by SLM in the proprietary Green Packages. SLM’s design
engineer testified that “internally, my motor and [Astromec’s] motor are the same.
The guts of that motor is the same. . . . They have to be because [Eaton] specified my
design parameters.”2 SLM argues this is sufficient evidence for a reasonable jury to
conclude that Eaton breached the PIA. Like the district court, we disagree.

        The PIA protected proprietary information (i) contained in SLM documents
stamped proprietary and (ii) not falling within one of the PIA’s exclusions. As to the
first element, the voluminous trial record contains not one SLM document stamped
“proprietary.” SLM argues that it should survive judgment as a matter of law on this
ground because SLM witnesses testified that Green Packages are always stamped
proprietary and Eaton witnesses recalled seeing SLM documents marked proprietary,

      2
       This witness admitted the Astromec motor was not identical to the SLM motor.
Eaton fashioned the redesign of its stabilizer trim motor so as to require only modest
redesign of the brushless DC motor component. Thus, it is not surprising that the
redesigned motor eventually purchased from Astromec had many similarities to the
SLM motor.

                                         -5-
so a reasonable juror could infer that at least one of the Green Packages sent to three
different Eaton addresses was so marked. That argument is sound, but the second
element required proof that Eaton misappropriated proprietary information not falling
within one of the PIA’s four exclusions -- information in the public domain,
information already known or independently developed by Eaton, and information
disclosed to others by SLM. SLM elected not to offer the Green Package into
evidence. Without that evidence, the jury could not find this element satisfied.3

       In a trade secret case, “[s]imply to assert a trade secret resides in some
combination of otherwise known data is not sufficient, as the combination itself must
be delineated with some particularity in establishing its trade secret status.” Jostens,
Inc. v. Nat’l Computer Sys., 318 N.W.2d 691, 699 (Minn. 1982); see Electro-Craft
Corp. v. Controlled Motion, Inc., 332 N.W.2d 890, 898 (Minn. 1983) (failure to
specify trade secrets doomed brushless motor manufacturer’s claim of
misappropriation by a competitor). To be sure, agreements such as the PIA may
protect broader categories of information than trade secrets. But the PIA’s exclusions
limited its protection to information having the same characteristics of secrecy and
novelty as trade secrets. Compare Minn. Stat. § 325C.01, subd. 3, 5. A claim that a
confidentiality agreement was breached by disclosure of a proprietary combination of
data should require the same precision of proof as a comparable trade secret claim.
This is especially true when the alleged breach was committed, not by a free-riding
competitor, but by the very customer who defined the product’s customized
specifications and then purchased the product. Absent misuse of protected proprietary
information, the PIA did not bar Eaton from using the SLM motors it purchased, from

      3
        Proof that Eaton disclosed protected proprietary information to Astromec was
fraught with difficulty for SLM. For example, SLM’s amended complaint alleged that
Boeing employees were given extensive access to SLM’s facilities and design
drawings in November 1999, before the PIA was signed. As Boeing was not a party
to the PIA, this disclosure would likely trigger two of the PIA’s exclusions.

                                          -6-
modifying those products, or from seeking a replacement vendor when SLM walked
away from their on-going relationship.

       We review the grant of judgment as a matter of law de novo to determine
whether the losing party submitted sufficient evidence to support a jury verdict in its
favor, giving that party the benefit of all inferences “which may be drawn from the
evidence without resort to speculation.” Sip-Top, Inc. v. Ekco Group, Inc., 86 F.3d
827, 830 (8th Cir. 1996) (quotation omitted); see Fed. R. Civ. P. 50(a)(1). After
careful review of the trial record, we conclude that, lacking evidence that specific data
contained within documents marked proprietary was both protected by the PIA and
disclosed to Astromec, the district court properly granted judgment as a matter of law
on the ground that SLM failed to present evidence from which a reasonable jury could
find that Eaton breached the PIA.

      The judgment of the district court is affirmed.
                     ______________________________

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