Court Opinion

ID: 9496114
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:18:27.977298+00
Date Added: 2024-06-11T17:57:22.721842
License: Public Domain

PAULINE NEWMAN, Circuit Judge,
dissenting.
I respectfully part company with my colleagues on this panel as to the issues of infringement and unjust enrichment.
I
On the question of infringement, after a thorough trial the jury found infringement and awarded a 12% royalty, upon the district court’s construction of the claim to mean that the flange could be made in the fender liner during installation. Although the question is close, the judge correctly construed the claim and a reasonable jury could have found it infringed. With the requisite deference to the trial court and the verdict of the jury, I would affirm the judgment. See, e.g., Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1235, 9 USPQ2d 1913, 1919 (Fed.Cir.1989) (“When the judgment arises from a jury verdict, the reviewing court applies the reasonable jury/substantial evidence standard....”)
II
Upon the panel majority’s reversal of the judgment of infringement, it neeessarily reaches the issue of unjust enrichment. However, the majority improperly converts the claim for unjust enrichment into one for theft of trade secrets, and then finds that Waner’s proprietary design was not a trade secret. Indeed it was not, for it had been demonstrated publicly. However, it was still proprietary to Waner, and had been shown to Ford for the purpose of interesting Ford in buying it. Waner here asserts equitable rights against Ford, arising from Ford’s unjust enrichment through their course of dealing.
A claim for unjust enrichment requires that one party is enriched at the expense of another and that it would be inequitable to permit the party that is enriched, through wrongdoing or breach of commercial ethics, to retain that benefit. See, e.g., Mack v. Mack, 613 N.W.2d 64, 69 (S.D.2000) (“In order to establish unjust enrichment, three elements must be proven: (1) a benefit was received; (2) the recipient was cognizant of that benefit; and (3) the retention of the benefit without reimbursement would unjustly enrich the recipient.”); B & M Die Co. v. Ford Motor Co., 167 Mich.App. 176, 421 N.W.2d 620, 622 (1988) (“The essential elements of such a claim [for unjust enrichment] are (1) receipt of a benefit by the defendant from the plaintiff, and (2) which benefit it is inequitable that the defendant retain.”)3 Under these circumstances, the plaintiffs right to compensation is based on a contract implied in law, not the infringement of intellectual property rights. See Mack, 613 N.W.2d at 69 (‘When unjust enrich*859ment is found, the law implies a contract, which requires the defendant to compensate the plaintiff for the value of the benefit conferred.”)
Waner’s complaint included a count for unjust enrichment, based on the actions of Ford in receiving his idea and his samples, telling him that they weren’t interested, and then making and selling the product he offered them. It is irrelevant whether the fender liner can be classified as a trade secret, for it is undisputed that Ford’s knowledge of it was only through Waner and the sample fender liners he left with them for evaluation. On the facts set forth in the complaint, the premises of a case of unjust enrichment have been made out. Thus summary judgment in favor of Ford was improperly granted. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (“The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.”) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970)); Stark v. Advanced Magnetics, Inc., 29 F.3d 1570, 1575-76, 31 USPQ2d 1290, 1294 (Fed.Cir.1994) (in granting a motion for summary judgment, the non-movant’s version of disputed facts must be accepted).
The rules of commerce, indeed the rule of law, are designed both to foster and to require good faith dealings. The courts are not obliged to condone facially unethical relationships by finding technicalities of law that favor the wrongdoer. United States v. Milligan, 17 F.3d 177, 184 (6th Cir.1994) (“This court, however, can not condone defrauding hospitals with policies sympathetic toward the uninsured.”); Save Barton Creek Assn. v. Federal Highway Admin., 950 F.2d 1129, 1144 (5th Cir.1992) (“This Court does not ‘condone any form of subterfuge.’ ”); In re Franklin, 922 F.2d 536, 539 (9th Cir.1991) (“It would be wrong to apply a bar of recovery against plaintiff based upon a statute relating to a transaction that was fraudulently induced. To do so would be to condone the fraud. The law cannot condone such a result and it doesn’t.”); United States v. State of California, 932 F.2d 1346, 1350 (9th Cir.1991) (“At the heart of an action based on quasi-contract lies a claim of unjust enrichment and such quasi-contract liability is dictated by the needs of justice and fairness.”)
An industrial society can remain healthy only with rigorous enforcement of business ethics; and indeed this is the foundation of the common law of commerce. Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 481-82, 94 S.Ct. 1879, 40 L.Ed.2d 315 (1974) (“‘The necessity of good faith and honest, fair dealing, is the very life and spirit of the commercial world.’”) (quoting National Tube Co. v. Eastern Tube Co., 3 Ohio C.C. (N.S.) 459, 462 1902 WL 874(Ohio 5th Cir.1902)); Burten v. Milton Bradley Co., 763 F.2d 461, 467, 226 USPQ 605, 610 (1st Cir.1985) (“Fundamental to this, we believe, is the expectation by the parties that, absent an explicit waiver, the exchange of ideas will take place in trust and confidence. Were this not the case, we are hard pressed to understand why experienced and informed inventors would submit their ideas for consideration and thereby waive all rights to compensation for their labor.”)
The facts as set forth in the majority opinion do not reflect well on the Ford Motor Company. Mr. Waner offered to sell them his idea for fender liners; they were interested; they then told him they were not interested, and proceeded to take his idea and place its embodiment on their vehicles. These facts must be accepted as true for the purposes of summary judgment. Any exculpatory circumstances have not been developed, for the record before us shows simply that Ford took *860Waner’s idea for fender liners, after receiving and evaluating his sample products, and refused to pay for this benefit. If there are mitigating facts favoring Ford (for example, if Ford had already designed and was planning to introduce a similar fender liner, or if Waner had signed a disclaimer of all rights other than patent rights) they do not show on this record. It may be that there are exculpatory circumstances, but that is not the question before us, where the cause was summarily dismissed. This is not a case of simply copying an item in the public domain, as in Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989), on which the panel majority inaptly relies.
A cause of action for unjust enrichment does not require that the thing taken was a trade secret. See Restatement, Restitution § 1 cmt. b (“A person confers a benefit upon another if he gives to the other possession or some other interest in money, land, chattels, or chooses in action, performs services beneficial to or at the request of the other, satisfies a debt or a duty of the other, or in any way adds to the other’s security or advantage.”) For example, in B & M Die Co. the technical information upon which the unjust enrichment claim was based was not a trade secret under Michigan law, yet the trial court permitted the unjust enrichment claim to go forward and the appellate court described the two causes of action as separate and distinct. B & M Die Co., 421 N.W.2d at 623 (“As Ford indicates, plaintiffs technical information was not a ‘trade secret’ under Michigan law. However, the jury could properly consider under a claim of unjust enrichment the value of the benefit received by Ford as a result of having this technical information.”) (citing Manos v. Melton, 358 Mich. 500, 100 N.W.2d 235 (1960)).
The issue before us is not who would prevail when all the evidence is presented. The issue is whether Waner’s complaint for unjust enrichment should be thrown out on the pleadings. The majority achieves this result by first recasting the complaint as one for theft of trade secrets, and then holding that since this idea was not guarded as a trade secret (because the fender liners were publicly demonstrated by Waner, and because he told Ford about them in order to interest Ford in buying them) Waner cannot recover on trade secret theory. On this threshold premise the majority errs, for, as I have stated, the cause of unjust enrichment is not limited to theft of a trade secret.

. These actions are governed by state law, and although I have not considered whether the law of Michigan or South Dakota applies, the requirements for establishing unjust enrichment appear to be essentially the same in both states. Certainly the panel majority's assertion that Mr. Waner might have a cause of action under Michigan law, but not South Dakota law, is hard to square with its reliance on Bonito Boats, 489 U.S. 141, 109 S.Ct. 971, 103 L.Ed.2d 118, which should control equally in both states. Ford did not take this idea from “the public domain;" it took it from Mr. Waner, over a lengthy course of personal dealings that, on Mr. Waner’s statement of the facts, were characterized by subterfuge and deception. South Dakota is not more tolerant of injustice than is Michigan.