MN Mining v. Pribyl, Ronald ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 00-3021 & 00-2972
Minnesota Mining & Manufacturing Company,
Plaintiff-Appellee, Cross-Appellant,
v.
Ronald Pribyl, James Harvey, Thomas Skrtic,
and Accu-Tech Plastics, Incorporated,
Defendants-Appellants, Cross-Appellees.
Appeals from the United States District Court
for the Western District of Wisconsin.
No. 99 C-0265-S--John C. Shabaz, Judge.
Argued May 11, 2001--Decided July 25, 2001
Before Flaum, Chief Judge, and Bauer and
Evans, Circuit Judges.
Flaum, Chief Judge. The Minnesota Mining
and Manufacturing Company ("3M") produces
and markets a product known as carrier
tape. When the company discovered that
three of its employees had formed Accu-
Tech Plastics ("Accu-Tech") to
manufacture and market resin sheeting,
the essential component of carrier tape,
3M brought suit. After dismissing certain
3M claims pursuant to Accu-Tech’s summary
judgment motion, the case proceeded to
trial. The jury ultimately determined
that Accu-Tech had misappropriated trade
secrets from 3M and that Accu-Tech’s
founders had breached duties of loyalty
owed to 3M. Following trial, the district
court overturned some of the jury’s find
ings of liability, upheld other findings,
and granted 3M’s request for a permanent
injunction barring the disclosure (but
not the use) of the trade secrets which
the jury found Accu-Tech had
misappropriated. When final judgment was
entered below, the parties filed cross-
appeals challenging decisions made by the
district court throughout the litigation.
For the reasons stated herein, we affirm
the district court’s decisions as they
pertain to Accu-Tech’s issues on appeal.
As for 3M’s claims of error, we affirm in
part, and reverse and remand in part the
decisions of the district court.
I. BACKGROUND
Since 1986, 3M has manufactured and sold
carrier tape through its Surface Mount
Supplies Division. Carrier tape, which is
used to transport sensitive electronic
components, is made principally from a
thin layer of plastic called resin
sheeting into which pockets are molded to
fit the components to be transferred. 3M
also manufactures the resin sheeting
necessary to produce carrier tape.
However, 3M, preferring the higher profit
margins that attend to the sale of
carrier tape, does not vend resin
sheeting in the open market (except to
its foreign subsidiaries).
Three individuals who were integral to
3M’s development and production of resin
sheeting and carrier tape were Ronald
Pribyl, Thomas Skrtic, and James Harvey.
Pribyl, who began working for 3M in 1989
as its Manager of Manufacturing for North
America, supervised the production of all
of 3M’s resin sheeting and carrier tape
in North America. Skrtic, an employee of
3M’s Surface Mount Supplies Division from
1986, was the primary developer of 3M’s
resin sheeting manufacturing process.
Finally, Harvey, who worked as 3M’s
quality supervisor, was the principal
author of a series of 3M manuals
documenting the operating, training, and
quality control procedures for producing
resin sheeting and carrier tape.
In 1996, 3M announced that it was moving
its carrier tape business from Menominee,
Wisconsin to Hutchinson, Minnesota. For a
variety of reasons, Pribyl, Skrtic, and
Harvey did not wish to relocate to
Minnesota. Thus, in 1997, the trio, while
still under the employ of 3M, formed
Accu-Tech. Accu-Tech manufactures and
sells resin sheeting to various
companies, including those who use the
product to manufacture carrier tape.
However, Accu-Tech itself does not
produce any carrier tape. For
approximately two years, Pribyl, Skrtic,
and Harvey operated Accu-Tech while still
working for 3M. It was not until March of
1999 that their clandestine operation was
discovered by 3M. Upon learning of Accu-
Tech’s existence, 3M terminated all three
individuals.
On April 23, 1999, 3M brought a
diversity suit against Pribyl, Skrtic,
Harvey, and Accu-Tech, in the District
Court for the Western District of
Wisconsin. 3M asserted a litany of claims
against Accu-Tech’s founders, including
breach of fiduciary duty, breach of
employment contracts, and
misappropriation of trade secrets. The
complaint also alleged that Accu-Tech, as
a corporate entity, had misappropriated
trade secrets, engaged in unfair
competition, tortiously interfered with
prospective contractual relationships,
and tortiously induced Skrtic to breach
his employment contract with 3M.
Following discovery, the parties filed
cross-motions for summary judgment. On
November 12, 1999, the district court
granted summary judgment in favor of
Accu-Tech and its founders on the breach
of contract and tortious interference
with contract claims. Additionally, the
court granted summary judgment to the
defendants on the claim for breach of
fiduciary duty to the extent that it was
based on alleged improper competition
with 3M by Accu-Tech’s founders. Finally,
the district court held that 3M’s unfair
competition claim was indistinguishable
from its claims for trade secrets
misappropriation and tortious
interference with contract. Thereafter,
on December 7, 1999, the court granted
summary judgment in favor of Accu-Tech
and its founders on 3M’s claim for
tortious interference with prospective
contractual relations.
The case proceeded to a bifurcated
trial, which commenced on December 13,
1999. On December 16, the jury returned a
verdict on liability, finding that: (1)
Accu-Tech’s founders had each breached a
duty of loyalty to 3M, (2) 3M owned four
trade secrets, and (3) Accu-Tech and its
founders had misappropriated or
threatened to misappropriate two of those
four trade secrets. The two trade secrets
which the jury determined the defendants
had misappropriated were (1) the
operating procedures, quality manuals,
training manuals, process standards, and
operator notes for using plaintiff’s
equipment that makes resin sheeting ("op
erating procedures and manuals"), and (2)
customized resin formulations that
enhance the sheeting and thermoforming
capability of resin and give it
properties needed in the electronic
industry./1 The following day, the jury
returned its findings on damages. On 3M’s
claim for breach of the duty of loyalty,
the jury determined that Pribyl was
liable in the amount of $126,875, while
Harvey and Skrtic each owed 3M $46,000.
The jury additionally awarded damages
against Accu-Tech and its founders in the
amounts of $83,000 for misappropriation
of 3M’s trade secret in customized resin
formulations and $187,500 for
misappropriation of 3M’s trade secret in
the operating procedures and manuals.
Shortly thereafter, the defendants
filed a motion for judgment as a matter
of law or for a new trial. While that
motion was pending, 3M moved for the
entry of a permanent injunction. On
February 9, 2000, the district court par
tially granted 3M’s motion, permanently
enjoining the defendants from disclosing
any of the four trade secrets found by
the jury, and from using the two trade
secrets which the jury had not found use
or disclosure of. However, the court
denied 3M’s request for a permanent
injunction against the use of 3M’s
customized resin formulations and
operating procedures and manuals.
On March 2, 2000, the district court
granted, in part, defendants’ motion for
judgment as a matter of law. The court
partially overturned the jury’s verdict,
ruling that the defendants were not
liable for misappropriating 3M’s trade
secret in its customized resin
formulations. The court also ordered a
new trial on the issue of damages for
3M’s breach of loyalty claim, unless 3M
accepted a remittitur. Rather than face a
new trial on damages, 3M accepted the
remittitur. On July 20, 2000, the
district court entered its final
judgment.
Discontented with various decisions
below, the parties have now filed cross-
appeals in this court. For their part,
defendants argue three points of error.
First, they assert that 3M failed to
offer any evidence that any specific
information within the scope of 3M’s
trade secret in the operating procedures
and manuals was actually secret to 3M or
used or disclosed by the defendants.
Thus, defendants argue that the district
court erred in not granting them judgment
as a matter of law on 3M’s
misappropriation claim regarding those
items. Secondly, defendants argue that
the district court’s order permanently
enjoining them from disclosing to any
third party 3M’s operating procedures and
manuals is overly vague, and thus
violates Fed. R. Civ. P. 65(d). Finally,
they put forth that the district court
erred in admitting excerpts from 3M’s
business conduct manual dealing with an
employee’s operation of a business that
is in competition with any 3M business.
For its part, 3M suggests four points of
error. First, 3M argues that the district
court erred in granting Accu-Tech summary
judgment on 3M’s claim that Accu-Tech had
tortiously interfered with defendant
Skrtic’s employment contract. Second, 3M
contends that the court similarly erred
in granting Accu-Tech summary judgment on
3M’s unfair competition claim against the
company. Third, 3M asserts that the
district court erred in overturning the
jury’s finding that the defendants had
misappropriated 3M’s trade secret in its
customized resin formulations. Finally,
3M claims that the district court erred
in denying the company a permanent
injunction against defendants’ use of
3M’s trade secrets that the jury found
had been misappropriated.
II. DISCUSSION
A. Accu-Tech’s Issues On Appeal
1. Misappropriation of 3M’s Trade
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.
2. Specificity of the Permanent
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.
3. Admissibility of Evidence
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.
B. 3M’s Issues On Appeal
1. Summary Judgment
On November 12, 1999, the district court
granted summary judgment in favor of the
defendants on 3M’s claims that (1) Accu-
Tech had tortiously interfered with
defendant Skrtic’s employment contract
with 3M, and (2) Accu-Tech had engaged in
unfair competition with 3M. On appeal, 3M
asserts that the district court committed
error in granting the defendants summary
judgment, and thereby dismissing these
counts.
A district court may only grant summary
judgment when there are no genuine issues
of material fact and the movant is
entitled to judgment as a matter of law.
See Fed. R. Civ. P. 56. We review the
district court’s decision on summary
judgment de novo, viewing all of the
facts, and drawing all reasonable
inferences from those facts, in favor of
the nonmoving party. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255
(1986); Garvin v. Armstrong, 236 F.3d
896, 898 (7th Cir. 2001). With this
standard in mind, we turn to examine the
two decisions of the district court on
summary judgment.
a. Tortious Interference With Skrtic’s
Employment Contract
In disposing of 3M’s tortious
interference claim, the district court
stated that "assuming that Skrtic had
breached his employment contract with 3M
by his actions in operating Accu-Tech, to
suggest that he was induced to do so by
the very corporation he created surely
cannot follow." The court noted that
Skrtic, as an officer and owner of Accu-
Tech, was so intertwined with the
company, that "arguing the corporation
induced his breach is like arguing that
he induced himself to breach." Relying on
the Wisconsin Court of Appeals’ decision
in Wausau Medical Center, S.C. v.
Asplund, 514 N.W.2d 34 (Wis. Ct. App.
1994), the court resolved that "[t]he
corporate fiction [could not] be
stretched that far."
3M asserts that the district court’s
reliance on Wausau was misplaced. While
3M acknowledges that a party to a
contract cannot be held liable for
tortiously inducing his or her own
breach, see, e.g., Rao v. Rao, 718 F.2d
219, 225 (7th Cir. 1983), here, the
company asserts that Accu-Tech is a legal
entity separate and distinct from Skrtic
the individual. Thus, according to 3M, it
is possible that Accu-Tech, through
Pribyl and Harvey, tortiously interfered
with Skrtic’s 3M employment contract.
Hence, it propounds, the district court
erred in granting the defendants summary
judgment on this claim.
Whether it is possible for a corporate
entity to have tortiously interfered with
the employment contract of one of its
founders may at times become an
interesting inquiry./4 Tortious
interference with a contract occurs when
someone intentionally and improperly
interferes with the performance of a
contract between another and a third
person by inducing or otherwise causing
the third person not to perform the
contract. See Wausau, 514 N.W.2d at 44.
Certainly, one could envision a scenario
where, when a limited number of
individuals form a corporate entity, that
one of the individuals, while taking part
in the formation, was still distinct from
the entity formed (and ambivalent) so
that a tortious interference claim could
be viable. However, we need not dwell on
such abstract inquiries at this time.
While the district did hold that the
corporate fiction could not be stretched
as to allow a finding of distinctness be
tween Skrtic and Accu-Tech, the court
also provided an alternative basis for
granting Accu-Tech summary judgment on
the claim. As the court stated in
addressing the suggestion that Accu-Tech
had induced Skrtic to breach his contract
with 3M, "[t]his allegation is belied by
the undisputed facts surrounding the
formation of Accu-Tech. Skrtic and Pribyl
conceived, created and own Accu-Tech for
the purpose of conducting its present
business with Skrtic as an officer and
fiduciary . . . . The undisputed facts
establish that Skrtic initiated his own
actions and was not induced to do
anything by the corporation he created."
Though 3M argues that a tortious
interference claim could legally have
been maintained, it has not presented any
evidence to suggest a disputed issue of
material fact as to whether Accu-Tech
actually caused Skrtic to breach his
contract with 3M. Thus, even if such a
cause of action could be viable against
Accu-Tech, in this instance there was no
evidence presented that would have
properly allowed the claim to survive de
fendants’ motion for summary judgment. We
therefore affirm the district court’s
dismissal of 3M’s tortious interference
with contract claim.
b. Unfair Competition Claim
In its complaint, 3M alleged that Accu-
Tech competes with 3M’s products and
processes, and that Accu-Tech unfairly
competed with 3M by hiring 3M employees
with knowledge of confidential
information and trade secrets, inducing
those employees to breach their
employment agreements with 3M and to use
3M’s trade secrets against it. In its
November 12 order, the district court
granted summary judgment in favor of
Accu-Tech, dismissing 3M’s unfair
competition claim. According to the
district court, because Wisconsin law
would not interpret "competition" so
broadly as to encompass the relationship
between Accu-Tech and 3M, 3M’s unfair
competition claim could not be grounded
in that theory. After examining other
possible bases for the unfair competition
claim, the district court determined that
"[t]o the extent that there is a claim
for unfair competition [the] issues are
identical to the trade secret and
tortious interference claims." Thus, the
court dismissed the unfair competition
claim as being repetitive. On appeal, 3M
challenges the decision of the district
court. First, it asserts that the issue
of competition was inappropriately
decided on summary judgment. Second, the
company contends that even if its unfair
competition claim was duplicative, that
is no reason to dismiss the claim at the
summary judgment stage.
In determining that 3M and Accu-Tech
were not competitors, the district court
focused on the fact that 3M did not lose
a single sale or customer to Accu-Tech
during the course of defendants’
employment with 3M. The court also noted
that there existed a market for resin
sheeting which Accu-Tech was free to
enter into, and which 3M chose not to
penetrate. While the court acknowledged
that there was some customer overlap
between the two companies, the court
believed that "the companies were not
offering competing products, except in a
most indirect sense."
After reviewing the record in this
matter, we conclude that the issue of
competition was improperly resolved on
summary judgment. The district court,
relying on Zimmermann v. Brennan, 254
N.W.2d 719, 721 (Wis. 1977), stated that
Wisconsin narrowly construes what
constitutes competition by an employee.
In Zimmermann, the trial court had been
faced with the question of whether a
public relations firm which performed
limited services in commercial arts and
graphics should be considered a
"competitive business" to a commercial
art studio. The trial court determined
that the operations were not in
competition with one another, and the
Supreme Court of Wisconsin affirmed. We
must note, however, that the decision in
Zimmermann was grounded to a large extent
in the standard of review. The court
acknowledged that whether two employers
are engaged in competition is an issue of
fact, such that if the trier of fact’s
conclusion is not contrary to the great
weight and clear preponderance of the
evidence, it must be affirmed. See id. at
720. According to the court, "[t]he
evidence was in dispute, and the finding
that Barkin-Herman was not a ’competitive
business’ was not the only possible
finding in light of the facts adduced at
trial, but we are satisfied that the
finding made was sufficient under the
standard of review." Id. at 721.
Had the issue of competition been
decided by the jury at trial, the
evidence relied upon by the district
court here would no doubt be sufficient
to withstand a motion for judgment as a
matter of law. However, we are presented
with this issue on appeal from a grant of
summary judgment, where we review de
novo, viewing the evidence in the light
most favorable to 3M, whether there
exists a genuine issue of material fact.
In such a setting, we must conclude that
there is such an issue. As an initial
matter, the record contains facts which
suggest that these companies were
somewhat intertwined. As the court noted,
there did exist some customer overlap
between 3M and Accu-Tech. As a result of
Accu-Tech marketing to 3M customers,
companies that required carrier tape were
presented with two options: (1) those
companies could simply purchase the
finished product from 3M, or (2) those
companies could purchase resin sheeting
from Accu-Tech and process their own
carrier tape. Furthermore, 3M presented
evidence that Accu-Tech was working in
concert with another company which sold
machinery to convert resin sheeting into
carrier tape, and that Accu-Tech offered
its customers advice on how to form
pockets in their resin sheeting. Such
evidence seems to suggest cross-
elasticity of demand, and contradict the
finding that these entities were not in
competition--thus creating a disputed
issue of material fact.
Even assuming that the facts presented
by the district court were not in
dispute, we do not believe that those
facts dictate that Accu-Tech was entitled
to judgment as a matter of law. See Fed
R. Civ. P. 56. For example, we find that
whether there are distinct markets for
resin sheeting and carrier tape is of
little consequence to this
competitiondetermination. While we do not
dispute that there may be a submarket for
resin sheeting, that does not preclude
the fact that resin sheeting may be part
of a larger market which includes carrier
tape. As the Supreme Court has stated
"within [a] broad market, well-defined
submarkets may exist which, in
themselves, constitute product markets
for antitrust purposes." Brown Shoe Co.
v. United States, 370 U.S. 294, 325
(1962) (internal citation omitted). For
instance, while there may be a distinct
market for cellophane, in which there are
many competitors, that does not rule out
cellophane from being part of a larger
market which consists of cellophane and
other flexible packaging material. See
United States v. E. I. du Pont de Nemours
& Co., 351 U.S. 377, 394-95 (1956). "In
considering what is the relevant market
for determining . . . competition, no
more definite rule can be declared than
that commodities reasonably
interchangeable by the consumers for the
same purposes make up that ’part of the
trade or commerce’, monopolization of
which may be illegal." Id. at 395; see
also Brown Shoe, 370 U.S. at 325 ("[t]he
outer boundaries of a product market are
determined by the reasonable
interchangeability of use or the
cross-elasticity of demand between the
product itself and substitutes for it").
Morever, that determination of whether
two products are reasonably
interchangeable must be made in reference
to price, as "[a]t a high enough price
even poor substitutes look good to the
consumer." Richard A. Posner, Antitrust
Law: An Economic Perspective 128 (1976).
While Accu-Tech is correct in its
assertion that resin sheeting is not a
perfect substitute for carrier tape, if
the cost of purchasing Accu-Tech’s
product and transforming it into carrier
tape is comparable to the cost of
purchasing 3M’s finished product, then an
argument that the products are reasonably
interchangeable may be viable. However,
in the absence of an analysis of the
relevant market, and a more thorough
inquiry into the relationship between the
products, we cannot find that the issue
of competition was properly dismissed on
summary judgment.
The district court predicated its grant
of summary judgment on the duplicative
nature of 3M’s unfair competition claim.
We have determined that the issue of
whether 3M’s carrier tape and Accu-Tech’s
resin sheeting are competing products is
a disputed factual inquiry, not
appropriate for resolution via summary
judgment. Thus, the possible competition
between Accu-Tech and 3M provides a
distinct, independent basis for 3M’s
unfair competition claim. Hence, assuming
arguendo that it is appropriate to
dismiss a cause of action on summary
judgment as being duplicative-- an issue
we will not weigh in on--here, there are
no duplicative claims which warrant such
a dismissal. As such, we must reinstate
3M’s unfair competition claim, and remand
the issue to the district court.
2. Misappropriation of 3M’s Customized
Resin Formulations
As noted above, the jury concluded that
3M had a trade secret in the "customized
resin formulations that enhance the
sheeting and thermoforming capability of
resin and give it properties needed in
the electronic industry." The jury also
determined that the defendants had
improperly used or disclosed or
threatened to use or disclose that trade
secret, and awarded 3M $83,000 in
damages. In its motion for judgment as a
matter of law, Accu-Tech and its founders
renewed an argument that there was no
basis for a rational jury to find that
the defendants misappropriated any
customized resin formulations. The
district court, while resolving that the
jury had a basis for finding a trade
secret in the customized resin
formulations, also held that there was no
basis for finding misappropriation of any
customized resin formulation.
In order to understand the basis for the
district court’s finding, a brief
explanation of the resin sheeting
manufacturing process is necessary. The
process for making resin sheeting begins
with a raw material called a resin
pellet. Resin pellets are widely
available in a myriad of different
formulations. In perfecting its resin
sheeting manufacturing process for making
carrier tape, 3M expended significant
resources in analyzing and experimenting
with different types of resin pellets.
Besides using these commercially
available resin formulations, 3M
independently developed one type of resin
formulation--a formula for polystyrene
resin. Polystyrene resins are
general-purpose, high-impact and
ignition-resistant resins that meet
application needs across a broad range of
market segments including the packing
industry. In granting the defendants
judgment as a matter of law, the district
court determined that the only resin
formula which could be considered a
customized resin formulation was the
polystyrene resin. However, the court
noted that while the defendants did use a
polystyrene resin for making resin
sheeting, they used a commercially avail
able polystyrene resin rather than
plaintiff’s customized formula. Thus, the
court found that there was no rational
basis for concluding that Accu-Tech had
misappropriated 3M’s customized resin
formulation.
We review a district court’s grant of
judgment as a matter of law de novo. See
Massey v. Blue Cross-Blue Shield of Ill.,
226 F.3d 922, 924 (7th Cir. 2000). Under
Rule 50, a court should render judgment
as a matter of law when "a party has been
fully heard on an issue and there is no
legally sufficient evidentiary basis for
a reasonable jury to find for that party
on that issue." Fed R. Civ. P. 50(a).
Especially after a jury has evaluated a
case, we bear in mind that the question
is not whether the jury believed the
right people, but only whether it was
presented with a legally sufficient
amount of evidence from which it could
reasonably derive its verdict. See
Massey, 226 F.3d at 924. But there must
have been more than a "mere scintilla" of
evidence to support the verdict. When
examining the record, we look at the
totality of the evidence, and we view
that evidence and the inferences which
may be taken from it in the light most
favorable to the party against whom the
judgment was granted. See id.
3M asserts that the district court erred
in granting the defendants judgment as a
matter of law. First, 3M notes that the
defendants were operating Accu-Tech at
the time that 3M was developing its
polystyrene resin. Because Skrtic was
responsible for the manufacturing of the
polystyrene resin and admittedly had some
knowledge of this customized resin
formulation, 3M posits that the district
court ignored evidence that permits a
reasonable inference that the defendants
used 3M’s customized resin formulation.
Second, 3M argues that the district
court’s decision ignores the fact that
the jury’s verdict could have been based
on defendants’ threat to use or disclose
3M’s trade secret. Third, 3M suggests
that the district court’s decision that
there could be no customized resin
formulations simply because 3M bought its
resin on the open market was in error.
We agree with the district court that no
rational juror could have found that
defendants used or disclosed 3M’s formula
for producing polystyrene resin. There is
no dispute that Accu-Tech operated in
secret while its founders were employed
by 3M. There is also no disagreement that
at that time, 3M was developing its own
polystyrene resin formula, which Skrtic
had some access to. Finally, it cannot be
contested that the defendants did in fact
use a polystyrene resin formulation in
making their resin sheeting. Yet, we
cannot draw from these facts a reasonable
inference that Accu-Tech was using 3M’s
polystyrene resin formulation. First,
while he did have access, there is no
evidence that proves that Skrtic had
knowledge of 3M’s polystyrene resin
formula. Furthermore, as the district
court noted, the evidence at trial
specifically established that Accu-Tech
was not using 3M’s polystyrene resin. The
testimony presented explicitly revealed
that while defendants were engaged in
producing resin sheeting from a
polystyrene resin, that they used a
commercially available resin formula
rather than 3M’s customized formula.
Against these undisputed facts, 3M’s
facts and the reasonable inferences that
may be drawn from them do not amount to
a scintilla of evidence.
However, 3M is correct to point out that
the district court did not address in its
grant of judgment as a matter of law
whether the defendants had threatened to
use or disclose 3M’s customized resin
formulation. Yet, the district court’s
silence on this matter is of little
import. While vacating the jury award for
misappropriation, the district court left
intact a permanent injunction prohibiting
the defendants from disclosing 3M’s
customized resin formulations. Thus, even
assuming that the defendants knew 3M’s
customized resin formulations, 3M is
sufficiently protected against the threat
of disclosure by the district court’s
injunction. See e.g., PepsiCo, Inc. v.
Redmond, 54 F.3d 1262, 1268 (7th Cir.
1995); American Can, 742 F.2d at 329. In
fact, 3M acknowledges that the company
would only be entitled to injunctive
relief to prevent the future disclosure
of the misappropriated secrets. As such,
the fact that the jury may have based its
finding of liability on the threat of
disclosure of 3M’s trade secrets--a
questionable assumption given the jury’s
award of monetary damages--would not
mandate a reversal of the district
court’s decision.
Finally, we agree with the district
court that 3M does not have a claim for
misappropriation of a trade secret
incustomized resin formulations for
commercially available resin products.
Simply because 3M expended
significantresources in selecting from
the market the proper resin formula for
making its sheeting does not constitute
that selection as a customized resin
formulation. As the district court
correctly noted, "[t]esting many products
on the market to choose the one that
meets particular needs does not make that
product ’customized’ in any reasonable
sense of the word." To the extent that 3M
now argues that it modifies the
commercially purchased resin pellets by
blending them in carbon, we find that
fact does not assist 3M’s claim. The
purpose of blending carbon into a
commercially purchased resin is to create
a conductive polycarbonate resin.
However, testimony at trial revealed that
3M does not make the conductive
polycarbonate resin that it uses, but
rather that it purchases it from an
outside source. More importantly, there
is not even a scintilla of evidence to
suggest that the defendants
misappropriated 3M’s blending method./5
Overturning a jury verdict is not
something that should be done lightly.
According to our civil justice system, as
enshrined in the Seventh Amendment to the
Constitution, the jury is the body best
equipped to judge the facts, weigh the
evidence, determine credibility, and use
its common sense to arrive at a reasoned
decision. As a reviewing court, we must
be "particularly careful . . . to avoid
supplanting [our] view of the credibility
or the weight of the evidence for that .
. . of the jury." Massey, 226 F.3d at
925. Here, even taking that generous
standard of review into account, we agree
with the district court that this claim
flounders for lack of evidence. Thus, we
affirm the district court’s grant of
judgment as a matter of law.
3. District Court’s Failure to Enjoin
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
III. CONCLUSION
For the foregoing reasons, we Affirm the
decisions of the district court on all
counts, except that we Reverse and Remand
the district court’s grant of summary
judgment to Accu-Tech on 3M’s claim for
unlawful competition.
FOOTNOTES
/1 The jury also determined that 3M had a trade
secret in its slitting technology and experiment
results including the design and setup of slit-
ters, and in its winding methods used to compen-
sate for variations in film calipher. However,
the jury did not find that any of the defendants
had improperly used or disclosed, or threatened
to use or disclose either of these trade secrets.
/2 Because the purpose of trade secret law is to
encourage innovation and development, protection
should not extend beyond the limits needed to
protect genuine trade secrets. See American Can
Co. v. Mansukhani, 742 F.2d 314, 329 (7th Cir.
1984). The umbrella of trade secret classifica-
tion should not be deployed to suppress legiti-
mate competition. Id. As such, the plaintiff must
do more than direct the court to a broad area of
technology and assert that something there must
have been secret and misappropriated. The plain-
tiff must point to concrete secrets. See Compos-
ite Marine Propellers, Inc. v. Van Der Woude, 962
F.2d 1263, 1266 (7th Cir. 1992).
/3 As for the plaintiff’s trade secrets in slitting
technology and winding methods, the district
court permanently enjoined the defendants from
making use of those secrets.
/4 While not crucial to the disposition of this
matter, we note that under Wisconsin law, the
elements of a tortious interference with contract
claim are: (1) the plaintiff had a contract or
prospective contractual relationship with a third
party, (2) the defendant interfered with that
relationship, (3) the interference was intention-
al, (4) a causal connection exists between the
interference and the damages, and (5) the defen-
dant was not justified or privileged to inter-
fere. See Dorr v. Sacred Heart Hosp., 597 N.W.2d
462, 478 (Wis. Ct. App. 1999).
/5 3M urges this Court that the jury’s verdict
should not be overturned on insufficiency of
evidence grounds, given the fact that the dis-
trict court determined that the defendants had
engaged in spoliation of evidence. At the heart
of 3M’s claim lies the fact that the evening
before Pribyl was to turn over his computer
pursuant to a discovery request, six gigabytes of
music was downloaded onto his hard drive. This
enormous volume of data consisted of the same
songs being recorded multiple times in a short
time span. While defendants argued that the
spoliation was conducted by Pribyl’s children who
use the computer, the district court instructed
the jury that they could draw a negative infer-
ence from the act of destruction. 3M maintains
that by overturning the jury verdict on the basis
of lack of evidence, the court below negated its
instruction and rewarded defendants for their
spoliation.
We find the downloading of six gigabytes of
music files onto Pribyl’s hard drive on the eve
that it was to be turned over for examination
troubling, and his proposed justifications diffi-
cult to accept. Discovery is a meaningful part of
our adversarial system, and were parties to
circumvent discovery requests by selectively
destroying potentially damaging information, the
process would become ineffectual. There is no
doubt that the district court was correct in
giving a negative inference instruction, and that
it could have rightly imposed sanctions on Pri-
byl. However, the fact that hard drive space was
destroyed on Pribyl’s computer does not relieve
3M of having to prove the elements of its claims.
3M has not suggested how the evidence it believed
it would have received from the computer would
have impacted its misappropriation claim. Without
at least some suggestion that the computer con-
tained information which would have assisted 3M’s
claim, we cannot allow 3M to prevail on any claim
for which there was insufficient evidence. Fur-
thermore, we recognize that the district court
was in a unique position to examine the impact
that any spoliation may have had on 3M’s claims.
The court, while aware of the spoliation, was
still comfortable in determining that there was
insufficient evidence to support 3M’s claim.
Sitting as a court of review, we do not dispute
that determination.
/6 Originally, the district court had not enjoined
Accu-Tech from using 3M’s customized resin formu-
lations. However, in light of the district
court’s decision on motion for judgment as a
matter of law that the defendants had not misap-
propriated 3M’s trade secret is customized resin
formulations, the district court, as part of its
April 3 order, added customized resin formula-
tions to the list of trade secrets which Accu-
Tech was forbidden to use (as well as disclose).
Thus, the only 3M trade secret which Accu-Tech
can use as a result of the district court’s
orders is the company’s trade secret in the
operating procedures and manuals.
/7 Such a system would encourage parties to bypass
the market and misappropriate trade secrets,
knowing that if caught, the party would merely
have to pay the amount it would have had to
negotiate for in the first instance. Though we do
not read the decision in Next Level Communica-
tions to establish such a regime, to the extent
that the opinion can be interpreted to do so, we
reject that logic.
/8 We note in closing that, contrary to 3M’s asser-
tion, Accu-Tech, as a result of the district
court’s decision, has not simply bought the trade
secret that it misappropriated. By its malfea-
sance, Accu-Tech was surely able to acquire 3M’s
trade secret with greater rapidity than it other-
wise would have. But as a result, not only has
Accu-Tech been forced to repay 3M the cost of
development, but it has been permanently forbid-
den from acquiring complete ownership over those
trade secrets. Within the bundle of rights com-
monly characterized as ownership of property also
lies the right to transfer ownership. That stick
in the bundle is no less essential than the right
to exclude others. Yet, as a result of the
district court’s order, which Accu-Tech has not
challenged on appeal, Accu-Tech is forbidden from
disclosing 3M’s trade secret to any third party,
despite the court’s finding that the company
could have independently developed 3M’s trade
secret. Thus, far from leaving 3M with no protec-
tion against the future harm caused by Accu-
Tech’s misappropriation, the district court’s
decision has provided 3M with a blanket of pro-
tection that it would not have received other-
wise.