Court Opinion

ID: 4556126
Source: CourtListenerOpinion
Date Created: 2020-08-17 16:00:21.482324+00
Date Added: 2024-06-11T09:37:38.640189
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 18-2900
                        ___________________________

      Farmers Edge Inc.; Farmers Edge (US) Inc.; Farmers Edge (US) LLC

                      lllllllllllllllllllllPlaintiffs - Appellants

                                          v.

 Farmobile, LLC; Jason G. Tatge; Heath Garrett Gerlock; Randall Thomas Nuss

                      lllllllllllllllllllllDefendants - Appellees
                                       ____________

                    Appeal from United States District Court
                      for the District of Nebraska - Omaha
                                  ____________

                          Submitted: February 11, 2020
                            Filed: August 17, 2020
                                ____________

Before LOKEN, BENTON, and KELLY, Circuit Judges.
                           ____________

KELLY, Circuit Judge.

       This case arose after Jason Tatge, Heath Gerlock, and Randy Nuss (the
individual defendants) left a company called Crop Ventures to co-found Farmobile
(the corporate defendant). Farmers Edge (FEI) is Crop Ventures’s successor-in-
interest. Both FEI and Farmobile are agriculture technology companies that work on
“precision agriculture” and the use of specialized data in farming. Believing the
individual defendants took proprietary information they developed at Crop Ventures,
FEI sued. As relevant here, FEI alleges the individual defendants’s behavior
constituted a breach of explicit or implicit contracts with the company; that the
defendants were obligated to assign to their employer the ownership rights of
products they worked to develop; that the individual defendants breached their duty
of loyalty to their employer; and that the individual defendants misappropriated trade
secrets. The individual defendants filed counterclaims. On cross-motions for
summary judgment, the district court1 denied in full FEI’s motion, and granted in part
and denied in part Farmobile’s motion. Only FEI appeals, and we affirm.

                                          I.

      We review the district court’s grant of summary judgment de novo. See
Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). We
view all facts in the light most favorable to the non-moving party. Id. We affirm if
the “movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

       Each of the individual defendants previously worked for Crop Ventures. Tatge
was president of Crop Ventures from April to July 2013. He is a co-founder and CEO
of Farmobile. Gerlock was an executive vice president of Crop Ventures, and also
worked for Crop Ventures as an independent contractor. Gerlock is Farmobile’s
Director of Products. Nuss worked for Crop Ventures as an independent contractor
from April 2012 to August 2012. Later, he was a full-time employee of Crop
Ventures from October 2012 to July 2013. Nuss is also a co-founder of Farmobile
and its Director of Engineering.

      1
       The Honorable Joseph F. Battalion, United States District Judge for the
District of Nebraska.

                                         -2-
       All three individual defendants left Crop Ventures in July 2013. By September
2013, they had founded Farmobile. They also filed two U.S. Provisional Patent
Applications that month. In April 2015, they filed a Canadian Patent Application.
In June 2016, FEI filed the operative First Amended Complaint in federal district
court. As relevant here, the court denied FEI’s motion for summary judgment, and
in this appeal, FEI alleges a series of errors by the district court. We address each in
turn.

                                 A. Contract Claims

       We first address FEI’s argument that the district court erred by concluding that
none of the individual defendants breached an express or implied contract. FEI
asserts that Nuss had an express contract with Crop Ventures. In the alternative, FEI
contends that Nuss, Gerlock and Tatge had implied contracts with Crop Ventures.
FEI alleges that each defendant breached his contract by failing to keep confidential
Crop Ventures’s allegedly proprietary information. The individual defendants
counter that their relationships with Crop Ventures were not governed by any
contract, express or implied.

                                1. Express Contract

      Before Nuss joined Crop Ventures as an independent contractor in April 2012,
he signed an agreement with the company (the April 2012 Agreement). The April
2012 Agreement is titled, “Confidentiality and Non-Competition Agreement,” and the
introductory clause states, “THE AGREEMENT is made as of Monday, April 30,
2012 between Crop Ventures, Inc. (‘Company’) and Randy Nuss (‘Contractor.’).”
Nuss did not sign another agreement when he rejoined Crop Ventures as a full-time
employee in October 2012. The April 2012 Agreement has clauses concerning

                                          -3-
intellectual property, nonsolicitation, and nondisclosure of confidential information.
Another clause states the agreement is not intended to operate as an employment
contract.

       FEI argues the April 2012 Agreement continued to bind Nuss after his time as
an independent contractor ended in August 2012, and that Nuss breached it by using
at Farmobile certain information that FEI says is their confidential, proprietary
information. But FEI presented no evidence indicating the April 2012 Agreement
continued to apply after Nuss left the company for the first time in August 2012. The
April 2012 Agreement specifically refers to Nuss as a “contractor,” and FEI concedes
that Nuss had no role at the company after his term as an independent contractor and
before he returned two months later as a full-time employee. There is nothing in the
April 2012 Agreement stating it would come back into effect if Nuss rejoined the
company. Nor is there evidence the parties intended for the April 2012 Agreement
to govern Nuss’s later employment. Without any textual support in the April 2012
Agreement, or evidence that the parties intended for the April 2012 Agreement to
apply when Nuss returned to Crop Ventures as an employee in October 2012, FEI’s
argument fails. Because no contract bound the parties during Nuss’s term of
employment, Nuss was not in breach of an explicit contract.

                                2. Implied Contract

       In the alternative, FEI argues that Gerlock and Tatge worked under an implied
contract while at Crop Ventures, and that an implied contract also governed Nuss’s
employment at Crop Ventures after October 2012. FEI alleges all three individual
defendants breached their implied contracts by failing to assign to FEI the ownership
rights of the products they later sought to patent at Farmobile.

      An implied contract is “an agreement ‘implied in fact,’ founded upon a meeting
of minds, which, although not embodied in an express contract, is inferred, as a fact,

                                         -4-
from conduct of the parties showing, in light of the surrounding circumstances, their
tacit understanding.” Baltimore & O.R. Co. v. United States, 261 U.S. 592, 597
(1923). We apply state-law principles of contract formation to determine whether an
implied contract existed. See Teets v. Chromalloy Gas Turbine Corp., 83 F.3d 403,
407 (Fed. Cir. 1996) (citing Erie R.R. v. Tompkins, 304 U.S. 64 (1938)). In
Nebraska, an implied contract arises “where the intention of the parties is not
expressed in writing but where the circumstances are such as to show a mutual intent
to contract.” Armstrong v. Clarkson Coll., 901 N.W.2d 1, 17 (Neb. 2017).

       Generally, “an individual owns the patent rights to the subject matter of which
he is an inventor, even though he conceived it or reduced it to practice in the course
of his employment.” Banks v. Unisys Corp., 228 F.3d 1357, 1359 (Fed. Cir. 2000).
However, there are two exceptions that might assign ownership to the employer
instead. First, “an employer owns an employee’s invention if the employee is a party
to an express contract to that effect.” Id. However, as discussed, Nuss was not
working under an express contract, and FEI does not appeal the district court’s
determination that Gerlock and Tatge also did not have express employment
contracts.

       The second exception is that when an employee is “hired to invent something
or solve a particular problem, the property of the invention related to this effort may
belong to the employer.” Id. FEI argues each individual defendant was hired to
invent the products they worked on, which created an implied contract to assign
ownership of the products to the employer. In the hired-to-invent context, courts
“must examine the employment relationship at the time of the inventive work to
determine if the parties entered an implied-in-fact contract to assign patent rights.”
Teets, 83 F.3d at 407. The specific question is “whether the employee received an
assignment on this occasion to invent.” Id. at 409.

                                         -5-
       To prevail on its hired-to-invent theory based on an implied contract, FEI must
show that the employees were given a certain amount of specific direction from their
employer. See, e.g., Shook v. United States, 238 F.2d 952, 954 (6th Cir. 1956)
(“When an employee is hired to devote his efforts to a particular problem, to conduct
experiments for a specifically assigned purpose, and an invention results from the
results of that work, it belongs to the employer.”); Skycam LLC v. Bennett, 900 F.
Supp. 2d 1264, 1276 (N.D. Okla. 2012) (“The primary factor courts consider in
determining whether an employed to invent agreement exists is the specificity of the
task assigned to the employee.”).

       FEI has not pointed to evidence in the record that Nuss, Gerlock, and Tatge
“received an assignment on this occasion to invent.” See Teets, 83 F.3d at 409. And
FEI has not shown there was a meeting of the minds sufficient to form an implied
contract. Teets, on which FEI relies, is inapposite. There, Teets was “specifically
directed” to develop a particular product. Id. at 408. The court concluded that,
“[h]aving directed Teets to that task, compensated him for his efforts, paid for the
refinement of the process, and paid for the patent protection, [the employer] owns the
patent rights in the [product].” Id. FEI has not shown that any of the individual
defendants was similarly “specifically directed” during their product-development
process, so no implied contracts were created under the hired-to-invent doctrine.

                                B. Duty of Loyalty

      FEI next argues the district court erred by concluding the individual defendants
did not breach their duty of loyalty to their employer. Under Nebraska law, an
employee has a duty of loyalty to their employer whether or not they have signed a
covenant not to compete or a non-solicitation agreement. West Plains, LLC v.
Retzlaff Grain Co., 870 F.3d 774, 786 (8th Cir. 2017). An employee owes this duty
during the course of employment. Id. To be liable for a breach of this duty, the
employee’s “disloyal conduct must be so harmful as to substantially hinder the

                                         -6-
employer in the continuation of his business.” Id. (cleaned up). “Such conduct might
include soliciting customers of the employer or forming one’s own competing
business while still working for the employer.” Id.

       But an employee has a right to “make preparations to enter into competition
with” their former employer. Cudahy Co. v. Am. Labs., Inc., 313 F. Supp. 1339,
1346 (D. Neb. 1970). The law generally favors competition, and so requires
“something more than preparation” on the part of the employee. Id. Courts consider
whether the employee’s actions “substantially hinder the employer in the continuation
of his business.” Id.

       FEI relies on West Plains to support its argument that the individual defendants
breached their duty of loyalty. In that case, we upheld a jury verdict for breach of the
duty of loyalty where the employees offered insider information to a competitor of
their employer, and then resigned en masse to ensure their customers would follow
them from their employer to the competitor. West Plains, 870 F.3d at 786–87. Seven
employees were in breach of an agreement with their employer governing
confidentiality and consulting, and four were paid for their work with the competitor
while still employed by West Plains. Id.

       FEI does not point to any evidence showing the individual defendants breached
their duty of loyalty to Crop Ventures. Although FEI relies on West Plains, Nuss,
Gerlock, and Tatge’s actions do not compare to the behavior of the defendants in that
case. For example, FEI does not argue Tatge, Gerlock, or Nuss solicited Crop
Ventures’s competitors with insider information. Farmobile did not even exist when
the three left Crop Ventures, so unlike the West Plains defendants, the individual
defendants here could not have been paid by both companies at the same time. We
agree with the district court that FEI failed to show the individual defendants
breached their duty of loyalty to their employer.

                                          -7-
                                   C. Trade Secrets

       FEI argues that the district court erred by concluding the defendants did not
misappropriate trade secrets within the meaning of the Nebraska Trade Secrets Act
(NTSA) or the federal Defend Trade Secrets Act (DTSA). The individual defendants
argue that FEI cannot maintain a claim for misappropriation because the alleged trade
secret was not protectable within the meaning of these statutes.

      The NTSA defines a “trade secret” as

      information, including, but not limited to, a drawing, formula, pattern,
      compilation, program, device, method, technique, code, or process that:
         (a) Derives independent economic value, actual or potential, from
         not being known to, and not being ascertainable by proper means
         by, other persons who can obtain economic value from its
         disclosure or use; and
         (b) Is the subject of efforts that are reasonable under the
         circumstances to maintain its secrecy.

Neb. Rev. Stat. § 87-502(4). The DTSA uses a similar definition of trade secrets,
identifying “all forms and types of financial, business, scientific, technical, economic,
or engineering information . . . .” 18 U.S.C. § 1839(3). Similar to the NTSA, the
DTSA provides that “such information only qualifies as a trade secret if the owner has
‘taken reasonable measures to keep such information secret’ and the information has
economic value.” CMI Roadbuilding, Inc. v. Iowa Parts, Inc., 920 F.3d 560, 564 (8th
Cir. 2019) (quoting 18 U.S.C. § 1839(3)).

       The district court concluded Crop Ventures did not take reasonable efforts to
maintain the secrecy of the information it alleges was a trade secret. Crop Ventures
shared the information with a third-party contractor without a confidentiality
agreement and without other policies or practices for safeguarding secrets. The
district court concluded this information was therefore not protected under the NTSA
or DTSA.

                                          -8-
       On appeal, FEI has not challenged the finding that it shared the relevant
information with a third-party who had no obligation to keep it confidential. As a
result, we agree with the district court that Crop Ventures did not take reasonable
steps to safeguard its trade secrets. Without such reasonable efforts or measures,
there is no secret to protect, and FEI cannot maintain a claim under the NTSA or
DTSA.

                               D. Remaining Claims

       FEI mentions in passing three other arguments, but none is persuasive. First,
FEI argues the district court erred by concluding the individual defendants did not
breach a duty of good faith and fair dealing. Next, FEI alleges the district court erred
by denying FEI declaratory judgment on the question of ownership because such a
declaration “follows straightforwardly from the substantive rights to relief under the
basis of implied-in-fact contracts, also known as the hired-to-invent doctrine.”
Because FEI did not develop either argument in its opening brief, we decline to
address them and consider them waived. See Sturgis Motorcycle Rally, Inc. v.
Rushmore Photo & Gifts, Inc., 908 F.3d 313, 324 (8th Cir. 2018) (noting “a litigant
may not advert perfunctorily to an argument, hoping that we will do its work for it by
developing the argument and putting flesh on its bones”); Ahlberg v. Chrysler Corp.,
481 F.3d 630, 634 (8th Cir. 2007) (stating “points not meaningfully argued in an
opening brief are waived”). Finally, because FEI has presented no argument on
appeal in support of its claim to the Canadian patent, we can find no error in the
district court’s decision not to declare ownership of that patent.

                                          II.

     For the foregoing reasons, the judgment of the district court is affirmed.
                      ______________________________

                                          -9-