Hawg Tools, LLC v. Newsco International Energy Services, Inc ( 2016 )

COLORADO COURT OF APPEALS 2016COA176
Court of Appeals No. 14CA1321
City and County of Denver District Court No. 13CV31457
Honorable Karen L. Brody, Judge
Hawg Tools, LLC,
Plaintiff-Appellee,
v.
Newsco International Energy Services, Inc.; Newsco International Energy
Services USA, Inc.; Newsco Directional & Horizontal Services, Inc.; and Joe
Ficken,
Defendants-Appellants.
JUDGMENT AFFIRMED IN PART, REVERSED
IN PART, AND CASE REMANDED WITH DIRECTIONS
Division II
Opinion by JUDGE BERNARD
J. Jones and Harris, JJ., concur
Announced December 1, 2016
Robinson Waters & O’Dorisio, P.C., Anthony L. Leffert, Laura J. Ellenberger,
Denver, Colorado, for Plaintiff-Appellee
Gordon & Rees LLP, John R. Mann, Thomas B. Quinn, Tamara A. Hoffbuhr
Seelman, Denver, Colorado, for Defendants-Appellants
¶1 What is a trade secret? According to a Colorado statute, it is,
as is pertinent to this case, “the whole or any portion . . . of any . . .
design . . . which is secret and of value.” § 7-74-102(4), C.R.S.
2016. We conclude in this appeal that the act of keeping a design
secret does not necessarily mean that it is a trade secret. Rather,
the design itself must be secret; focusing on the act of protecting
the design’s secrecy skips the first and fundamental step in the
analytical process.
¶2 In this appeal, defendants, Newsco International Energy
Services, Inc.; Newsco International Energy Services USA, Inc.;
Newsco Directional & Horizontal Services, Inc.; and Joe Ficken,
appeal the trial court’s judgment in favor of plaintiff, Hawg Tools,
LLC, on Hawg’s claims for misappropriation of a trade secret and
conversion. Mr. Ficken appeals the judgment against him on
Hawg’s claim for breach of contract. We reverse the judgment as far
as Hawg’s claim for misappropriation of a trade secret is concerned,
but we affirm the judgment on Hawg’s claims for conversion and
breach of contract.
1
I. Background
A. Mud Motors
¶3 We have learned from the record that drilling operations
typically employ a tool called a mud motor to drill for oil. (Drilling
fluid is commonly referred to as “mud.”) During a drilling
operation, a mud motor is inserted into a well hole. When fluid is
pumped through the mud motor, the motor drives a drill bit, and
the drill bit drills a hole.
¶4 A mud motor consists of a power section and a transmission.
The power section contains a stator and rotor. (A stator is a static
part; a rotor is a moving part.) Drilling fluid is pumped through the
stator to turn the rotor.
¶5 The transmission consists of three parts:
(1) a mandrel, or a tubular shaft around which other parts
are assembled, which is attached to the rotor to drive the
drill bit;
(2) a bearing pack that allows the mandrel to turn the drill
bit without friction; and
(3) a bit box that contains the drill bit.
2
¶6 Bearing packs come in two types: wash bearing packs and
sealed bearing packs. A wash bearing pack leaves the bearings
exposed to the surrounding mud. In a sealed bearing pack, the
bearings are lubricated by an oil bath. The oil bath is enclosed by
seals to prevent mud from leaking in. This case involves an alleged
trade secret concerning the design of a sealed bearing pack.
¶7 The following diagram, Figure 1, shows a typical mud motor
with a sealed bearing pack.
Figure 1: Schematic of a Typical Oilfield Downhole Drilling Mud Motor
(Mud Motor Seals, Kalsi Engineering, https://perma.cc/K2JQ-M7TD)
¶8 As seen in Figure 1, a sealed bearing pack includes a pressure
compensating piston. As drilling fluid pressure increases during
drilling, the piston slides to compress the lubricant reservoir.
Similarly, as the oil bath heats up when the drill is withdrawn, the
piston slides back to expand the reservoir. In this way, the piston
maintains equal pressure between the drilling fluid and the oil bath.
3
¶9 Sealed bearing packs protect components called thrust
bearings longer than wash bearing packs. When using a wash
bearing pack, thrust bearings last a few hours before they break
and then have to be replaced. But, when using a sealed bearing
pack, the seals break first instead of the thrust bearings, and the
seals can last days instead of hours. So the obvious advantage of a
sealed bearing pack is that the drill runs longer before it has to be
stopped to perform maintenance.
¶ 10 This kind of sealed bearing pack was invented in 1971.
B. This Case
¶ 11 Hawg rents mud motors to oil and gas drilling companies.
Newsco uses mud motors to provide drilling services.
¶ 12 Daniel Gallagher owned Hawg. Before he formed this
company, he operated a similar business called New Venture. In
2008, he asked a machinist to manufacture sealed bearing packs
for use in New Venture’s mud motors. The machinist arranged for a
designer, Joe Ficken, who is one of the defendants in this case, to
design the sealed bearing packs.
¶ 13 The designer did not receive compensation for the design. He
testified that he created it as a favor to help the machinist, a friend
4
who was having financial difficulties. The design was “simple,” and
it took him only two days to do it. Neither Mr. Gallagher nor the
machinist asked him to incorporate any specific features or
customizations into the design.
¶ 14 The designer assigned his rights in the design to the
machinist. The machinist assigned those rights to Mr. Gallagher in
exchange for $350,000, some of which was allocated to
manufacture a number of sealed bearing packs for Mr. Gallagher
using the design. Mr. Gallagher later assigned his rights in the
design to Hawg.
¶ 15 The designer continued to make changes to the design
through June of 2011. During this time — in February 2011 — he
accepted a job at Newsco, and he began designing a sealed bearing
pack for his new employer.
¶ 16 Mr. Gallagher learned in 2013 that the designer had designed
a sealed bearing pack for Newsco. After determining that the
Newsco design was similar to the Hawg design, Mr. Gallagher filed
this lawsuit.
5
II. Analysis
A. Hawg Did Not Establish That Defendants
Misappropriated a Trade Secret
¶ 17 Defendants contend that the trial court erred when it denied
their motions for directed verdict and judgment notwithstanding the
verdict on Hawg’s claim for misappropriation of a trade secret. We
agree because, for the reasons that we discuss below, the evidence
did not prove that the design of the sealed bearing pack in question
was a secret.
¶ 18 We review a trial court’s rulings on motions for directed verdict
and for judgment notwithstanding the verdict de novo. Vaccaro v.
Am. Family Ins. Grp., 2012 COA 9M, ¶ 40.
¶ 19 The determination of whether a trade secret exists is a
question of fact. Colo. Supply Co. v. Stewart, 797 P.2d 1303, 1307
(Colo. App. 1990). In reviewing a trial court’s rulings when these
sorts of motions concern a question of fact, “[w]e consider all the
evidence in the light most favorable to the nonmoving party and
indulge every reasonable inference that can be drawn from the
evidence in that party’s favor.” Hall v. Frankel, 190 P.3d 852, 862
(Colo. App. 2008). A motion for directed verdict or judgment
6
notwithstanding the verdict should be granted only if “no
reasonable person would conclude that any evidence, or any
reasonable inference arising therefrom, has been presented on
which the jury’s verdict against the moving party could be
sustained.” Id.; see also Boulders at Escalante LLC v. Otten Johnson
Robinson Neff & Ragonetti PC, 2015 COA 85, ¶ 19.
¶ 20 As we noted above, and as is relevant to our analysis in this
case, “‘[t]rade secret’ means the whole or any portion . . . of any . . .
design . . . which is secret and of value.” § 7-74-102(4). To
determine whether a trade secret exists, the fact finder considers,
among other things, the extent to which the information is known
outside the business. Colo. Supply Co., 797 P.2d at 1306. “The
subject of a trade secret must be secret, and must not be of public
knowledge or of a general knowledge in the trade or business.”
Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 475 (1974); see also
In re S & D Foods, Inc., 144 B.R. 121, 168 (Bankr. D. Colo.
1992)(matters commonly known in a trade or business cannot be
considered trade secrets).
¶ 21 Trade secrets can consist of a combination of elements that
are in the public domain if the combination is unique and the
7
unified process, design, and operation of these elements afford the
claimant a competitive advantage. Electrology Lab., Inc. v. Kunze,
169 F. Supp. 3d 1119, 1153 (D. Colo. 2016); cf. Colo. Supply Co.,
797 P.2d at 1306 (product formulas were not trade secrets because
they “were not unique to plaintiff and were versions of formulas
from products not created by or unique to the plaintiff”).
¶ 22 In this case, the general verdict form indicates only the jury’s
conclusion that defendants misappropriated a trade secret. But the
trial court instructed the jury on the definition of the term “trade
secret” in accordance with section 7-7-102(4) and relevant case law.
So the verdict demonstrates that the jury found, at least implicitly,
that the sealed bearing pack design was secret.
¶ 23 However, our review of the record reveals that “no reasonable
person would conclude that any evidence, or any reasonable
inference arising therefrom, [was] presented on which the jury’s
verdict against [defendants] could be sustained.” Hall, 190 P.3d at
862.
¶ 24 Hawg presented ample evidence to establish that its design
and the Newsco design were essentially the same. But we conclude
that Hawg did not present sufficient evidence to distinguish its
8
design from other designs that were publicly available at the same
time. In other words, the evidence in the record showed that the
design of Hawg’s sealed bearing pack was “of public knowledge or of
a general knowledge” in the mud motor manufacturing business,
Kewanee Oil Co., 416 U.S. at 475, and that the design was
commonly known in that business, see In re S & D Foods, Inc., 144
B.R. at 168. In light of such evidence, which we now discuss, the
record does not support a finding that Hawg’s design was secret.
¶ 25 First, Mr. Gallagher testified that the “special or unique”
aspect of the design he commissioned was “[t]hat, if it didn’t run,
[the designer] would be there to fix it.” This testimony indicates
that the “secret” was that the designer was familiar with the design
and technically competent to repair it if it broke. And Mr. Gallagher
testified that he had not asked the designer to include any
particular feature or customization in the design.
¶ 26 Second, Hawg’s expert witness testified at length to show the
sealed bearing packs in the Hawg design and the Newsco design
were the same. They had the same eight components:
(1) An outer bearing housing.
(2) A mandrel to mount a drill bit.
9
(3) A thrust bearing assembly to support the drill bit and to
allow the mandrel to rotate inside the housing. The
thrust bearings were lubricated by an oil bath contained
in a lubricant reservoir. The expert testified that the
Hawg device used a different thrust bearing assembly
than the Newsco device. In particular, one of them used
more rows of roller bearing elements than the other. But,
he continued, “thrust bearings are thrust bearings are
thrust bearings,” and using different thrust bearings did
not change the design because they performed the same
function.
(4) A piston that slid along the mandrel to maintain balance
between pressure outside and pressure inside the
lubricant reservoir. The expert testified that the pistons
in the two designs performed the same function. He
stated that, although the two designs had different
dimensions, different spacing between seals, and
different depths of seal grooves, there was “no functional
difference between the two.”
10
(5) A split ring assembly to clamp the thrust bearings in
place. The expert testified that the differences in the two
designs were immaterial because both types of split rings
perform the same function. He stated that “[s]plit rings
are split rings. They all serve the same function.”
(6) A lower seal carrier to seal the oil bath inside the sealed
bearing assembly and provide radial support for the
mandrel.
(7) A flow restrictor. The expert testified that the two
designs used different flow restrictors that were not
interchangeable because they were different sizes. But
this did not change the design because both components
performed the same function.
(8) A dump plug, or opening, in the outer bearing housing.
The opening served as an exit port for drilling mud
flowing through the device.
¶ 27 Figure 2 compares the Hawg sealed bearing pack (Figure 2a)
and the Newsco sealed bearing pack (Figure 2b).
11
Figure 2: Comparison of Hawg and Newsco Designs
¶ 28 In evaluating whether the two designs were the same, the
expert focused on the pressure balancing piston. But he did not
identify any feature of the pressure balancing piston that was
unique to the Hawg and Newsco designs. Instead, he only
described the basic function of a pressure balancing piston:
They both utilize the same method of
containing oil between the lower seal carrier
and the sliding piston and that is the key
point, for me, that when I see how that seal
carrier, mandrel and piston was executed in
the design, this is why I’m saying it’s the same
design.
....
12
The criteria that I used [to determine whether
the designs were the same] rests on the fact
that the piston is sliding along the mandrel to
create a balanced pressure between the
lubricating oil and the drilling mud. I’ve based
my decision that the designs are similar on
that mechanical aspect of the design.
¶ 29 Third, the expert testified that the Hawg design was different
from designs that were publicly available in 2008 for the following
reasons:
 Not all sealed bearing packs had the same eight
components in the same configuration. But the expert did
not give any examples. And he did not testify that only the
Hawg and Newsco designs used these eight components in
this configuration.
 Although some patented sealed bearing packs had a
balanced seal arrangement like the Hawg and Newsco
designs, some of their design elements were different. But
he did not specify which elements were different.
 The patents in his report showed designs that were different
from the Hawg and Newsco designs in the following ways:
13
 There were differences in how they were organized. But
he did not specify what those differences were or why
they were significant.
 Some of the designs had extra thrust bearings. But he
had testified earlier that the Hawg design and the Newsco
design were the same even though they had different
thrust bearings.
 Some designs had radial bearings. But the fact that
some designs had a different type of bearing than the
Hawg design does not establish that all of them were
different.
 Some had a mandrel with a different geometry. But he
did not explain how this made the design different. And
again, the fact that some designs were different does not
establish that all of them were different.
¶ 30 The expert also asserted that the patented designs must have
been different from the Hawg design because the United States
Patent and Trademark Office had issued patents on those designs.
But such reasoning is not convincing because the Patent and
14
Trademark Office had not reviewed the Hawg design or compared it
to patented designs.
¶ 31 Fourth, when asked what would be the smallest change
necessary to produce a different design of a sealed bearing pack,
the expert testified:
That’s a tough question. As the designs are
fairly well evolved, there’s not a whole lot of
room in the tool to, to change the design.
You’re very limited. It wouldn’t be unusual for
different designers to come up with the same
ideas, except not quite dimensionally the
same. That does not constitute a different
design. The designers may try to do things like
change the . . . seals, change some
dimensions, all with a view to improving sealed
bearing longevity down hole. I’ve done similar
things myself. I’ve tried different seals, I’ve
tried seal vents, things of that sort, but the
overall design didn’t change. So, as to the
smallest element that would change the
design, . . . they would have to get rid of the
piston, the mandrel, and the flow restrictor and
try something else to make it totally different.
(Emphasis added.) Defense counsel asked if a sealed bearing pack
without those elements would be operable. The expert responded,
“[I]t’s conceivable that somebody could come up with something to
change those elements. And, yes, they could conceivably come up
with a different sealed bearing pack design. I haven’t seen it.”
15
¶ 32 So, although the expert said that the Hawg design and the
Newsco design were the same, he did not provide evidence of
sufficient probative force to support a conclusion that the Hawg
design of a sealed bearing pack was different from publicly available
designs that existed before the designer had designed it. To the
contrary, the expert’s testimony supported a conclusion that drastic
changes would be required to create a different sealed bearing pack
design.
¶ 33 Fifth, a defense expert compared the Hawg design to designs
that had been publicly available at that time. One of these was
illustrated by U.S. Patent Application Pub. No. 2003/0015352 fig.1
(filed July 17, 2001), which we compare to the Hawg design in
Figure 3.
16
Figure 3: Comparison of Hawg Design and Illustrative Design
¶ 34 We can see that the illustrative design includes the same eight
components in substantially the same configuration as the Hawg
design. Hawg did not present any evidence to show what
variations, if any, between its design and the illustrative design
were sufficient to establish that the designs were different according
to the standard set by its own expert.
¶ 35 Sixth, the designer testified that he created the Hawg design
based on an example that he had found in a handbook published
by Kalsi Engineering. That design, shown earlier in this opinion as
Figure 1, also appears to have the same basic components as the
Hawg design.
17
¶ 36 In summary, Hawg did not establish that its design, in whole
or in part, was substantially different from designs that were
publicly available at the time of its creation. We therefore conclude
that the record lacks evidence of sufficient probative force to
support a conclusion that the Hawg design was secret. See
Kewanee Oil Co., 416 U.S. at 475; Hall, 190 P.3d at 862.
¶ 37 Hawg points to a lot of evidence in the record that supports its
assertion that it took careful steps to keep its design a secret. See
§ 7-74-102(4) (“To be a ‘trade secret’ the owner thereof must have
taken measures to prevent the secret from becoming available to
persons other than those selected by the owner to have access
thereto for limited purposes.”); Ruckelshaus v. Monsanto Co., 467
U.S. 986, 1002 (1984)(“Because of the intangible nature of a trade
secret, the extent of the property right therein is defined by the
extent to which the owner of the secret protects his interest from
disclosure to others.”); cf. Saturn Systems, Inc. v. Militare, 252 P.3d
516, 521-22 (Colo. App. 2011)(in a trade secret case dealing with
sensitive information, as opposed to a design, extensive efforts by
the holder of the information to maintain its secrecy can be a
18
relevant factor to determining whether the information is a trade
secret).
¶ 38 But that is not the first question that we needed to answer in
this appeal. We had to decide instead whether sufficient evidence
showed that the design was a secret in the first place, and we have
concluded that the evidence on that issue was insufficient. See
Kewanee Oil Co., 416 U.S. at 475; accord Restatement (First) of
Torts § 757 cmt. b (Am. Law Inst. 1939)(“The subject matter of a
trade secret must be secret.”). In other words, Hawg’s efforts to
protect the secrecy of its design did not bear on our analysis
because the design was not a secret in the first place. See Kewanee
Oil Co., 416 U.S. at 475; accord Restatement (First) of Torts § 757
cmt. b (“Matters of public knowledge or of general knowledge in an
industry cannot be appropriated by one as his secret.”).
¶ 39 So, after reviewing all the evidence in the light most favorable
to Hawg and after indulging every reasonable inference that can be
drawn from that evidence in Hawg’s favor, we conclude that the
record does not contain sufficient evidence to support the trial
court’s decision to deny defendants’ motions for a directed verdict
and for judgment notwithstanding the verdict on Hawg’s claim for
19
misappropriation of a trade secret. See Hall, 190 P.3d at 862. We
therefore additionally conclude that the court should have granted
those motions because no reasonable person would conclude that
any evidence, or any reasonable inference arising from that
evidence, had been presented that could sustain the jury’s verdict.
See id. We therefore reverse the judgment in favor of Hawg on that
claim.
B. Defendants Waived the Defense of Preemption
¶ 40 Defendants contend that the trial court erred when it denied
their motion for judgment notwithstanding the verdict on Hawg’s
conversion claim, which alleges that they “committed unauthorized
acts of dominion, control, and ownership over the [sealed bearing
pack] designs for their financial benefit.” Defendants assert that
the Uniform Trade Secrets Act preempts claims for conversion of
trade secrets. See § 7-74-108, C.R.S. 2016. We disagree, although
we apply different reasoning than the trial court used. Negron v.
Golder, 111 P.3d 538, 542 (Colo. App. 2004)(court of appeals may
affirm on different grounds than those relied upon by trial court).
¶ 41 Under C.R.C.P. 8(c), a defendant waives all affirmative
defenses and avoidances that do not appear in his or her answer.
20
Town of Carbondale v. GSS Props., LLC, 169 P.3d 675, 681 (Colo.
2007); Duke v. Pickett, 168 Colo. 215, 218, 451 P.2d 288, 290
(1969). But “an opposing party who fails to object to an untimely
affirmative defense and instead chooses to litigate the merits of the
defense in a summary judgment proceeding cannot raise a
timeliness objection after the trial court has ruled on the summary
judgment motion.” GSS Props., LLC, 169 P.3d at 679-80.
¶ 42 If a preemption defense concerns the choice of law to be
applied by the trial court, and not whether the trial court has
jurisdiction to hear the parties’ dispute, the defense can be waived.
“If, as in most cases, the alleged preemption would simply alter the
applicable substantive law governing the case, then preemption is
waivable.” Id. at 682. Or, to put it another way, “where preemption
changes only the law to be applied, rather than the forum applying
it, preemption is an affirmative defense which will be waived unless
timely raised.” Id.
¶ 43 In this case, defendants did not assert that the trial court was
an improper forum for their defense. Instead, they simply
contended that the substance of Hawg’s conversion claim was
preempted by state statute. This was a preemption defense based
21
on choice of law. So we conclude that, not only could this defense
be waived, but defendants waived it because they raised it for the
first time in their motion for judgment notwithstanding the verdict.
See C.R.C.P. 8(c); GSS Props., LLC, 169 P.3d at 681; Duke, 168
Colo. at 218, 451 P.2d at 290; see also Fid. Nat’l Title Co. v. First
Am. Title Ins. Co., 2013 COA 80, ¶ 51 (raising an issue for the first
time in a post-trial motion is insufficient to preserve it for appeal);
Miller v. Rowtech, LLC, 3 P.3d 492, 495 (Colo. App. 2000)(party
waives defense that it first raises in a post-trial motion);
Levy-Wegrzyn v. Ediger, 899 P.2d 230, 232 (Colo. App. 1994).
¶ 44 We recognize that, in the response to defendants’ motion for
judgment notwithstanding the verdict, Hawg addressed defendants’
preemption claim on the merits. But Hawg bracketed that
two-paragraph discussion with two sentences. The first sentence
stated that “[a]fter more than a year of litigation, extensive briefing
on every topic imaginable, and motions for directed verdicts,
[d]efendants for the first time claim that Hawg’s conversion claim is
preempted by the Colorado Uniform Trade Secrets Act.” The last
sentence said, “[h]owever, never before this juncture did . . .
22
[d]efendants raise any issue regarding the preemption or
displacement of the conversion claim.”
¶ 45 We conclude that the first and last sentences of the discussion
of the preemption claim preserved Hawg’s objection to the court
considering that claim at such a late date in the proceedings. See
GSS Props., LLC, 169 P.3d at 679-80. The substantive discussion of
the issue was not Hawg’s only argument; it was simply an
alternative argument.
C. Hawg Has Standing to Bring Its Claim Against
the Designer for Breach of Contract
¶ 46 The designer contends that the trial court erred when it
rejected his assertion that Hawg lacks standing to bring suit against
him for breach of contract based on his violation of a confidentiality
agreement. He asserts that he executed the agreement with
Mr. Gallagher and that Mr. Gallagher did not properly assign his
rights under the agreement to Hawg. We disagree.
¶ 47 Standing is a question of law that we review de novo.
Ainscough v. Owens, 90 P.3d 851, 856 (Colo. 2004). Contract
interpretation and the validity of an assignment also present
questions of law that we review de novo. Regency Realty Inv’rs, LLC
23
v. Cleary Fire Prot., Inc., 260 P.3d 1, 4 (Colo. App.
2009)(assignment); Roberts v. Adams, 47 P.3d 690, 694 (Colo. App.
2001)(contract interpretation).
¶ 48 C.R.C.P. 17(a) requires that every action “be prosecuted in the
name of the real party in interest.” A plaintiff whose standing
depends upon its status as an assignee must prove “a full and
complete assignment of the claim from an assignor who was a real
party in interest with respect to the claim.” Alpine Assocs., Inc. v.
KP & R, Inc., 802 P.2d 1119, 1121 (Colo. App. 1990).
[A]bsent some express reservation or limitation
upon the interest transferred, or some other
evidence of a contrary intent to be found
within the transferring document, an
assignment of all of an owner’s right, title, and
interest in intangible personal property
includes an assignment of any agreement
respecting that property to the extent that
such agreement benefits the transferee
because of his or her ownership of the
property.
Thistle, Inc. v. Tenneco, Inc., 872 P.2d 1302, 1306 (Colo. App. 1993).
¶ 49 In Thistle, the plaintiff acquired ownership of certain
proprietary data. The predecessor in title to the data had entered
into agreements with the defendant that prohibited the defendant
from transferring the data or making it available to any third
24
person. Id. at 1303. The division held that “[t]he right to control
the persons who have access to . . . data is necessarily an incidental
attribute of the right of ownership of that data. Indeed, without the
right to such control, the right of ownership would be meaningless.”
Id. at 1307.
¶ 50 In this case, the designer and the machinist entered into an
Assignment Agreement with Mr. Gallagher in 2010. As is relevant
to our analysis, the agreement read:
Assignment. [The machinist] hereby transfers,
assigns and conveys to Assignee, its
successors and assigns, all of his right, title
and interest in and to the [sealed bearing pack]
[d]esigns, including prints, elaborations,
explanations, illustrations and other
instructional or directive material, inventions,
improvements, techniques and any other
materials possessed, developed, conceived or
invented by [the designer] necessary to the
design and operation of the [sealed bearing
packs] (the “Protected Material”).
....
Confidentiality. [The designer] shall not at any
time use for [his] own benefit, or disclose to
any person or entity any of the Protected
Materials or any information related thereto
(the “Confidential Information”).
....
25
General. . . . This Agreement will inure to the
benefit of, and be binding upon the parties and
their respective heirs, successors and assigns.
¶ 51 Mr. Gallagher entered into an Assignment and Contribution
Agreement with Hawg in 2012. That agreement assigned “all of
[Mr. Gallagher’s] right, title, and interest in and to the [s]eal[ed]
[b]earing [p]ack [d]esign[]” to Hawg. The agreement did not
specifically refer to the 2010 Assignment Agreement between
Mr. Gallagher and the designer.
¶ 52 But the 2010 Assignment Agreement conveyed both the rights
to the sealed bearing pack design and the right to control the
designer’s disclosure of the design. The confidentiality clause
benefited Mr. Gallagher because of his ownership of the design. So
the right to control the designer’s disclosure of the design was
necessarily an incidental attribute of the right of ownership. As a
result, the assignment of all of Mr. Gallagher’s right, title, and
interest in the design included an assignment of the confidentiality
agreement. Id. at 1306.
¶ 53 We reject the designer’s contention that the confidentiality
clause cannot be assigned. Cf. People v. Adams, 243 P.3d 256, 261
(Colo. 2010)(Colorado law “disallows assignments involving matters
26
of personal trust and confidence”; a claim to treble damages under
the Trust Fund Statute was not assignable because it was in the
nature of a penalty); but see Matson v. White, 122 Colo. 79, 84, 220
P.2d 864, 866 (1950)(contracts not involving personal skill, trust, or
confidence are generally assignable without consent). The
confidentiality clause did not involve matters of personal trust or
confidence; it merely constrained the designer’s disclosure of
information. And the 2010 Assignment Agreement expressly stated
that it would “inure to the benefit of . . . the parties . . . and [their]
assigns.”
¶ 54 We therefore conclude that Mr. Gallagher fully assigned his
rights under the 2010 Assignment Agreement to Hawg. So Hawg
had standing as the real party in interest with respect to its claim
for breach of that agreement.
¶ 55 The judgment is reversed as to Hawg’s claim for
misappropriation of a trade secret. We remand the case to the trial
court to enter judgment in favor of defendants on that claim and to
vacate the award of damages on that claim. The judgment is
otherwise affirmed.
JUDGE J. JONES and JUDGE HARRIS concur.
27