Stolle Machinery Company, LLC v. Ram Precision Industries

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 15a0212n.06
Case No. 13-4103 FILED
Mar 16, 2015
UNITED STATES COURT OF APPEALS DEBORAH S. HUNT, Clerk
FOR THE SIXTH CIRCUIT
STOLLE MACHINERY COMPANY, LLC, )
)
Plaintiff-Appellant, ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
v. ) COURT FOR THE SOUTHERN
) DISTRICT OF OHIO
RAM PRECISION INDUSTRIES, et al., )
) OPINION
Defendants-Appellees. )
BEFORE: GIBBONS and STRANCH, Circuit Judges; REEVES, District Judge.*
JULIA SMITH GIBBONS, Circuit Judge. Stolle Machinery Company’s former
employee, Shu An, left the company in late 2002, moved back to China, and in early 2004
started a competitor company, Suzhou SLAC Precision Equipment. Stolle alleges that An stole
its trade secrets, including technical drawings, in order to launch his business. Although Stolle
became aware starting in 2003 that An was doing business in China and had obtained some
drawings, Stolle did not bring suit against An until 2010, when Stolle brought numerous claims
against An and SLAC for, inter alia, trade secret misappropriation, copyright infringement,
deceptive trade practices, and tortious interference with business relationships. Finding that
Stolle’s trade-secret-misappropriation claims were time-barred, that Stolle had presented no
evidence of copyright infringement by SLAC, and that Stolle’s other claims were preempted by
the Ohio Uniform Trade Secrets Act, the district court granted summary judgment to defendants
*
The Honorable Pamela L. Reeves, United States District Judge for the Eastern District of
Tennessee, sitting by designation.
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
on everything except the claim against An for copyright infringement. Stolle appeals. We
affirm the district court’s judgment in all respects but one: SLAC was not entitled to summary
judgment on Stolle’s claim of trade secret misappropriation because there was a genuine issue of
material fact about when the statute of limitations began to run against SLAC. On that claim we
reverse and remand to the district court for further proceedings.
I.
Stolle Machinery Company manufactures and services machinery used to produce food
and beverage cans. The worldwide market for can-making equipment is relatively small and is
dominated by only four firms, of which Stolle is the largest. Founded in 1961, Stolle is a
Delaware corporation with its headquarters and principal place of business in Centennial,
Colorado, and additional facilities in Sidney, Dayton, and Canton, Ohio. Stolle has customers
around the globe, including in China.
Shu An, a native of China, came to the United States in early 1990 to study for a graduate
degree in engineering at the University of Cincinnati. In late 1992, An began working at Stolle
as a project engineer in the feed equipment department; feed equipment involves some of the
company’s most important and sensitive proprietary information. This information includes
trade-secret design drawings as well as non-trade-secret “wear tool drawings.” At that time, An
signed an employment contract in which he agreed not to use or disclose Stolle’s confidential
information, including trade secrets, without Stolle’s written consent. An later became manager
of the feed equipment department, and in 2000, he attained U.S. citizenship. In 2001 and 2002,
Stolle management noted that An was exhibiting several performance problems, including
technical errors and sleeping on the job, and his supervisor put together a plan to help him
improve. At the end of 2002, An asked for leave to go to China to take care of his sick father. In
-2-
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
early 2003, after failing to return to Stolle or contact the company about his absence, An was
fired.
In late 2003, Robert Gary, a Stolle sales representative in China, learned from existing
and potential customers that An was approaching them and offering to sell them can-making
equipment identical to Stolle’s at a much cheaper price. On November 14, 2003, Gary sent Greg
Butcher, who at the time was the president of Stolle Machinery, the following email, with the
subject “Shu An”:
. . . This guy is really screwing things up over here. Three people besides Qiong
have said he can sell them the conversion systems and PostOp. “He was the
designer of the PostOP and can sell anything for atleast [sic] 40% less than you.”
I would bet I will hear more next week at the show. Sounds like he has all the
drawings. I am having Qiong get his address over here for possibility of legal
action. We sure do not want him running aroung [sic] say [sic] he can do it
cheaper. People over here will take him up on it. I think you may want to stop it
before it gets rolling in this market. . .
Butcher testified in January 2013 that when he received Gary’s email in November 2003, he
understood Gary to be concerned about a “major breach in security,” namely that An “had stolen
our technology.” Butcher further testified that at the time he received the email, he understood
Gary’s statement that “[An] has all the drawings” to mean that “Bob’s concern was that [An] had
more than wear tool drawings.”
On December 4, 2003, Butcher sent a letter to Stolle’s suppliers alerting them to Stolle’s
concerns about An’s behavior:
. . . Stolle has learned through reliable sources that Mr. An is using,
manufacturing, and selling Stolle post-repair, conversion equipment, tab, and lane
die tooling in China. It would be remarkable for Mr. An to have developed his
own line of machinery which we have heard is identical to Stolle’s machinery in
six (6) months since leaving the employment of Stolle without utilizing Stolle’s
trade secret and confidential information. . . . Stolle views Mr. An’s activities as a
situation that needs to be carefully scrutinized for any developments that might
indicate a potential problem. . . . We have been given examples, by one of our
local tooling suppliers, that Mr. An has taken Stolle tooling drawings, and had
-3-
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
removed both the Stolle part number, and company name, in hopes to disguise his
criminal actions. . . .
We request for you to require a press serial number, and for all such inquiries to
be reviewed by Stolle, prior to your company accepting conversion tooling orders
from any Chinese concern. This would prevent your company from knowingly
aiding and abetting Mr. Shu An in a criminal act. . . .
In response, An retained counsel in the United States, who sent a letter to Stolle in February
2004 demanding an explanation of “the specifics of Stolle Machinery’s position and the basis for
said position,” suggesting that Stolle was “using defamatory, or at best, very aggressive tactics,
to prevent Mr. An from earning a livelihood,” and stating that Stolle should “cease these tactics
immediately.” On March 2, 2004, Stolle’s counsel sent a reply to An’s counsel, stating that
although “Stolle Machinery does not agree with your characterization of communications Stolle
had, or is alleged to have had, with various companies regarding your client[,] . . . Stolle does not
anticipate having any communication with other companies regarding your client in the future.”
In his January 2013 deposition, Butcher explained why Stolle did not take further action against
An in 2003:
How do you secure drawings from a Chinese nationalist who is hiding in China?
I don’t know. That was the question I have. If he was an American living in the
U.S., I probably would have done something more. That’s my point. But I didn’t
know what to do when a Chinese person stole my drawings potentially. How do I
go after him in Jiangsu, wherever he is hiding.
Also in 2004, one of Stolle’s suppliers gave the company what appeared to Stolle at the
time to be two virtually identical copies of Stolle’s wear tool drawings, except that the Stolle
label had been replaced with the name of a Chinese company, Suzhou Anchor. Butcher followed
up with Stolle’s agent in China, a woman named Liu Qiong, who informed him that Suzhou
Anchor was An’s company.1 At some point in 2005 and 2006, Butcher asked Liu Qiong to
1
An denied ever creating a company called Suzhou Anchor or presently holding an
ownership interest in any company called Suzhou Anchor.
-4-
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
conduct “further investigation on [An’s] company to find out what he was claiming in the
marketplace.” She informed Butcher that An “was going to customers that we interacted with
claiming he had taken drawings and that he was the Stolle of China.” Butcher contacted the FBI
at some point after 2004 because of his concerns that An had committed corporate espionage, but
“stepped back from it because [he] didn’t have enough evidence.” Stolle also did not pursue
legal action against An at that time.
Meanwhile, An was conducting business in China. In early 2004, An founded Suzhou
SLAC Precision Equipment. According to An, SLAC sold its first conversion press—a used
system that SLAC had refurbished—in late 2005. In 2006, SLAC provided a full conversion
system—indirectly, by way of a company called Alfons-Haar, according to An—to Simmons Pet
Food in the United States. Upon learning of this, Stolle obtained sample can ends produced by
the machine at Simmons Pet Food and concluded that they were identical in every material
respect to can ends produced by a Stolle machine. Stolle concluded at this point, based on its
analysis of the can ends, that An and SLAC “had the capability of a full conversion system” and
necessarily had “detailed drawings and drawings that were not publicly given out from [Stolle].”2
Later, other Stolle employees reviewed pictures of machinery on the publicly-accessible SLAC
website and found that it distinctly resembled Stolle machinery. And in February 2007, an
employee of another can-making equipment company sent Stolle copies of drawings that were
labeled with SLAC’s title but that the employee believed were actually Stolle drawings. Even
so, Stolle did not then bring suit against An or SLAC.
In late 2009, Kenneth Fultz, Stolle’s director of sales, left the company and accepted a
job at RAM Precision Industries, a firm that had been one of Stolle’s parts suppliers. In
2
According to An, however, the conversion system at Simmons Pet Food in 2006 was a
used Stolle press that SLAC had refurbished.
-5-
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
February 2010, Stolle learned from its agent in China that Fultz and An had jointly met with
customers in China during the previous month. Stolle became concerned that Fultz was violating
his nondisclosure and noncompete agreements. At this point the wheels of this litigation finally
began to turn.
On April 22, 2010, Stolle filed suit against RAM Precision Industries, Kenneth Fultz, Shu
An, and Suzhou SLAC Precision Equipment. Stolle brought the following claims: (1) copyright
infringement, against all defendants; (2) misappropriation of trade secrets, under the Ohio
Uniform Trade Secrets Act (OUTSA), against Fultz and RAM;3 (3) conspiracy to misappropriate
trade secrets, under OUTSA, against Shu An and SLAC; (4) breach of employment agreement,
against Fultz; (5) breach of nondisclosure and limited use agreement, against RAM; (6) tortious
interference with prospective business relations, against all defendants; (7) unfair competition,
against all defendants; (8) deceptive trade practices, under the federal Lanham Act and the Ohio
Deceptive Trade Practices Act, against all defendants; and (9) conversion, against all defendants.
Stolle requested injunctive relief against all defendants.
Stolle settled all of its claims with RAM and Fultz in November 2010. The remaining
defendants, An and SLAC, moved to dismiss Stolle’s complaint for lack of personal jurisdiction,
under Fed. R. Civ. P. 12(b)(2), and for failure to state a claim upon which relief can be granted,
under Fed. R. Civ. P. 12(b)(6). The district court concluded that it had personal jurisdiction over
An and SLAC, but granted An and SLAC’s motion to dismiss with respect to Stolle’s claims of
unfair competition and conversion.
After discovery, the parties filed cross-motions for summary judgment on the remaining
claims. The district court denied Stolle’s motion in its entirety and granted summary judgment
3
The district court later construed this—correctly, we think—as a complaint against An
and SLAC as well.
-6-
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
to the defendants on all claims except Stolle’s copyright infringement claim against An. The
district court found that Stolle’s trade-secret misappropriation claim was time-barred: no
reasonable jury could conclude that the OUTSA four-year statute of limitations had begun to run
any later than December 2003, but Stolle did not file suit until April 2010. The district court
further concluded that Stolle’s claims of conspiracy to misappropriate trade secrets and tortious
interference with prospective business relations were preempted by the OUTSA, because proof
of those claims would necessarily also establish a claim for misappropriation of trade secrets.
The district court ruled that Stolle’s federal and state claims for deceptive trade practices failed
on the merits. Stolle could not, as a matter of law, show that SLAC had passed off Stolle’s
goods as its own, because while taking tangible goods and reselling them as one’s own
constitutes illegal “reverse passing off,” taking intellectual property and incorporating it into
one’s own goods does not. Furthermore, Stolle had not presented evidence of any literally false
statement or actual deception. Finally, the district court found that SLAC was entitled to
summary judgment on the copyright infringement claim because the allegedly infringing conduct
took place before SLAC was founded.
Pursuant to Fed. R. Civ. P. 54(b), Stolle moved the district court to certify partial final
judgment and stay the remaining proceedings (namely, the copyright infringement claim against
An) pending Stolle’s appeal to this court. The district court granted certification on August 20,
2014, and on September 16, 2013, Stolle timely filed its appeal of the district court’s partial grant
of summary judgment to An and SLAC.4
4
At this point, An and SLAC filed a notice of cross appeal of the district court’s order
overruling in part defendants’ motion to dismiss and the district court’s order denying summary
judgment to An on the copyright infringement claim. This court granted Stolle’s motion to
dismiss defendants’ cross appeal for lack of jurisdiction.
-7-
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
II.
This court reviews de novo the district court’s grant of summary judgment. Yellowbook
Inc. v. Brandeberry, 708 F.3d 837, 843 (6th Cir. 2013). Summary judgment is appropriate if the
record, viewed in the light most favorable to the nonmoving party, “shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986). “The mere existence of a scintilla of evidence in support of the plaintiff’s position
will be insufficient” for the court to deny defendant’s motion for summary judgment; “there must
be evidence on which the jury could reasonably find for the plaintiff.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 252 (1986).
III.
Defendants An and SLAC moved the district court to dismiss Stolle’s claims on the basis
that the court lacked personal jurisdiction over An and SLAC. The district court concluded that
it did have personal jurisdiction over An and SLAC in this case. Now, in response to Stolle’s
appeal of the district court’s partial grant of summary judgment, defendants reiterate that the
district court did not have personal jurisdiction. We are obliged to consider this argument before
proceeding to the merits of Stolle’s appeal. See Steel Co. v. Citizens for a Better Environment,
523 U.S. 83, 93–94 (1998). Where, as here, the district court ruled on the defendant’s
jurisdictional motion to dismiss solely on the basis of written submissions without conducting an
evidentiary hearing, the plaintiff’s burden is solely to make a prima facie showing that
jurisdiction exists.5 See Schneider v. Hardesty, 669 F.3d 693, 697–99 (6th Cir. 2012). In
5
As noted in Schneider, 669 F.3d at 698–99, even when the court does not conduct an
evidentiary hearing, plaintiffs may (although this remains a somewhat unsettled issue) be
required to prove jurisdiction by the preponderance of the evidence if the reason for not having
an evidentiary hearing is that “no ‘real dispute’” exists “as to the facts or to the extent of
-8-
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
assessing whether Stolle has carried that burden, we must conduct the state long-arm and federal
constitutional inquiries separately because the Ohio long-arm statute, Ohio Rev. Code
§ 2307.382, does not extend to the federal constitutional limits of the Due Process Clause.
Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir. 2000) (citing Goldstein v.
Christiansen, 638 N.E.2d 541, 545 n. 1 (Ohio 1994) (per curiam)). Furthermore, “[p]ersonal
jurisdiction must be analyzed and established over each defendant independently.” Days Inns
Worldwide, Inc. v. Patel, 445 F.3d 899, 904 (6th Cir. 2006) (citing Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 475 (1985)).
The first question, then, is whether An and SLAC were within the reach of the Ohio long-
arm statute. Ohio Rev. Code § 2307.382 provides, in relevant part, as follows:
(A) A court may exercise personal jurisdiction over a person who acts directly or
by an agent, as to a cause of action arising from the person’s:
(1) Transacting any business in this state; . . .
(3) Causing tortious injury by an act or omission in this state; . . .
(6) Causing tortious injury in this state to any person by an act outside this state
committed with the purpose of injuring persons, when he might reasonably have
expected that some person would be injured thereby in this state [.]
Stolle has made a prima facie showing that An caused tortious injury by an act in Ohio, pursuant
to subsection (3), and that An caused tortious injury in Ohio by an act outside Ohio with the
purpose and reasonable expectation of injuring persons in Ohio, pursuant to subsection (6)—a
provision that courts in this circuit have generally interpreted broadly. Schneider, 669 F.3d at
700. As outlined above, Stolle has alleged and can point to facts in the record suggesting that An
misappropriated technical and customer information while he was still employed by Stolle in
discovery.” Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir. 1998). Here,
regardless of whether any dispute exists over the extent of discovery, the facts are sufficiently in
dispute to warrant application of the lighter prima-facie-showing standard. See Schneider, 669
F.3d at 698–99.
-9-
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
Ohio and that An used information that he wrongly took from Stolle to found his competitor
firm, SLAC, and to solicit customers. In committing these acts outside Ohio (in China), An
necessarily would have had the purpose and reasonable expectation of enhancing his own
business at the expense of Stolle’s business in Ohio. For the same reasons, SLAC also fell
within the reach of subsection (6) of the Ohio long-arm statute. Furthermore, Stolle has made a
prima facie showing that SLAC is also covered by subsection (1) of the long-arm statute,
because SLAC had transacted business with RAM Precision Industries, an Ohio firm, and SLAC
and An’s later business relationship with RAM formed the basis for some of the claims brought
by Stolle against An and SLAC.
The second question is whether the exercise of personal jurisdiction over An and SLAC
comported with federal due process. Because neither An nor SLAC were “essentially at home
in” Ohio, we assess whether the district court had specific jurisdiction over them for this
particular controversy. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846,
2851 (2011). Our court has distilled a three-part test for specific jurisdiction:
First, the defendant must purposefully avail himself of the privilege of acting in
the forum state or causing a consequence in the forum state. Second, the cause of
action must arise from the defendant’s activities there. Finally, the acts of the
defendant or consequences caused by the defendant must have a substantial
enough connection with the forum state to make the exercise of jurisdiction over
the defendant reasonable.
Bird v. Parsons, 289 F.3d 865, 874 (6th Cir. 2002) (quoting S. Machine Co. v. Mohasco Indus.,
Inc., 401 F.2d 374, 381 (6th Cir. 1968)).
Applying this test, we conclude that the district court’s exercise of jurisdiction over An
and SLAC comported with due process. Stolle has made a prima facie showing that An
purposefully availed himself of the privilege of employment in Ohio and that he took drawings
and other information from Stolle while he was there. Stolle has also made a prima facie
- 10 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
showing that An caused a consequence in Ohio by his subsequent actions in China—founding
SLAC, allegedly with the aid of confidential information that he took from Stolle, and soliciting
Stolle’s customers. Furthermore, Stolle’s entire cause of action arises from An’s actions while
he was in Ohio. And on both of the first two prongs of this jurisdictional analysis, the contacts
that An, the agent, had with Ohio can be imputed to SLAC, the principal that has subsequently
ratified his conduct in Ohio. See McFadin v. Gerber, 587 F.3d 753, 761 (5th Cir. 2009). Finally,
“an inference of reasonableness arises where the first two criteria are met and . . . ‘only the
unusual case will not meet this third criterion.’” Theunissen v. Matthews, 935 F.2d 1454, 1461
(6th Cir. 1991) (quoting Am. Greetings Corp. v. Cohn, 839 F.2d 1164, 1170 (6th Cir. 1988)).
Notwithstanding the burden that is placed on An and SLAC if they must litigate in Ohio, Stolle
and the State of Ohio have interests in this dispute that are sufficiently great as to make the
exercise of jurisdiction over An and SLAC reasonable. See Asahi Metal Indus. Co. v. Superior
Court of Calif., 480 U.S. 102, 113–116 (1987). They were and are therefore subject to the
jurisdiction of the district court in Ohio.
IV.
Having established jurisdiction, we turn to the merits and first consider whether the
district court erred in granting summary judgment to An and SLAC on Stolle’s claims for
misappropriation of trade secrets. The Ohio Uniform Trade Secrets Act (OUTSA) provides for
damages and injunctive relief to a plaintiff whose trade secrets have been misappropriated. Ohio
Rev. Code § 1333.61–69. Under OUTSA, “misappropriation” is defined as follows:
(1) Acquisition of a trade secret of another by a person who knows or has reason
to know that the trade secret was acquired by improper means;
(2) Disclosure or use of a trade secret of another without the express or implied
consent of the other person by a person who did any of the following:
(a) Used improper means to acquire knowledge of the trade secret;
- 11 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
(b) At the time of disclosure or use, knew or had reason to know that the
knowledge of the trade secret that the person acquired was derived from or
through a person who had utilized improper means to acquire it, was acquired
under circumstances giving rise to a duty to maintain its secrecy or limit its use, or
was derived from or through a person who owed a duty to the person seeking
relief to maintain its secrecy or limit its use;
(c) Before a material change of their position, knew or had reason to know that it
was a trade secret and that knowledge of it had been acquired by accident or
mistake.
Id. § 1333.61(B). “Trade secrets” are
information, including the whole or any portion or phase of any scientific or
technical information, design, process, procedure, formula, pattern, compilation,
program, device, method, technique, or improvement, or any business information
or plans, financial information, or listing of names, addresses, or telephone
numbers, that satisfies both of the following:
(1) It 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.
(2) It is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
Id. § 1333.61(D). Under the OUTSA statute of limitations, a plaintiff must bring suit “within
four years after the misappropriation is discovered or by the exercise of reasonable diligence
should have been discovered.” Id. § 1333.66. “[A] continuing misappropriation constitutes a
single claim” for purposes of the limitations provision. Id.
This court has previously endorsed the “confidential relationship” approach to the UTSA,
under which “the first discovered (or discoverable) misappropriation of a trade secret
commences the limitation period, placing the focus . . . on the breach of the relationship between
the parties at the time the secret is disclosed.” Amalgamated Indus. Ltd. v. Tressa, Inc., 69 F.
App’x 255, 261 (6th Cir. 2003) (discussing Kentucky’s version of the UTSA). “[T]he discovery
rule requires the owner of a trade secret to conduct a timely and reasonable investigation after
- 12 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
learning of possible misappropriation, not to file prematurely.” Adcor Indus., Inc. v. Bevcorp,
LLC, 252 F. App’x 55, 62 (6th Cir. 2007) (emphasis omitted).
Applying this standard, we must conclude that the district court was correct in granting
summary judgment to An because Stolle’s claim against him was time-barred. Stolle argues that
it did not discover and should not reasonably have discovered An’s alleged trade secret
misappropriation until 2006, when it received can end samples from the machine at Simmons Pet
Food. Even viewed in the light most favorable to Stolle, however, Gary’s email to Butcher on
November 14, 2003, shows that Stolle was aware of the breach of the relationship between the
parties at that time: “This guy [An] is really screwing things up over here. Three people besides
Qiong have said he can sell them the conversion systems and PostOp. ‘He was the designer of
the PostOP and can sell anything for atleast [sic] 40% less than you.’” Although Stolle
maintains on appeal that it did not know that An had trade secret drawings at that time, this
assertion is belied by Gary’s statement to Butcher that An probably had “all the drawings.”
Moreover, Butcher has testified that he understood Gary’s statement to mean that Gary was
concerned “that [An] had more than wear tool drawings” and that An “had stolen our
technology.” Indeed, Stolle’s email to its suppliers on December 4, 2003, stated that Stolle
found it improbable that An could have “developed his own line of machinery which we have
heard is identical to Stolle’s machinery in six (6) months since leaving the employment of Stolle
without utilizing Stolle’s trade secret and confidential information.” Butcher himself
acknowledged that Stolle would have pursued An more vigorously in December 2003 if An had
not been in China. No reasonable jury could find that Stolle knew of the breach of its
relationship with An, and thus reasonably should have discovered An’s alleged trade secret
misappropriation, any later than December 2003—but Stolle did not file suit until 2010.
- 13 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
Raytheon Co. v. Indigo Sys. Corp., 688 F.3d 1311 (Fed. Cir. 2012), upon which Stolle
relies heavily, is distinguishable. In that case, Raytheon suspected in 1997 that Indigo, a
Raytheon contractor, was “recruiting Raytheon personnel to gain access to Raytheon trade
secrets.” Id. at 1313. The parties reached an agreement in 1997 that satisfied Raytheon’s
concerns, and the relationship between Raytheon and Indigo ended in 2000. Id. Then, in March
2004, Raytheon acquired an Indigo camera, apparently as part of its normal practice to learn
about what its competitors were doing. Id. Months later, in August, Raytheon finally got around
to taking the Indigo camera apart and only at that time discovered evidence of trade secret
misappropriation. Id. The Federal Circuit concluded that Raytheon had presented sufficient
evidence that it had bought the camera without any particular suspicion of trade secret
misappropriation—an assertion that was bolstered by the fact that Raytheon waited from March
until August to disassemble it. Id. at 1317. This was enough to raise a genuine issue of material
fact about when the statute of limitations began to run. Id. at 1318–19. Here, however, Stolle’s
initial concerns were never resolved through an agreement, as in Raytheon. Stolle simply wrote
to An’s attorney and unilaterally decided that it would not continue contacting customers about
its concerns about An. And Butcher himself acknowledges that the main reason Stolle declined
to pursue further its concerns about An in 2003 was his location in China. Further distinguishing
this case from Raytheon, where Raytheon presented evidence that it purchased the Indigo camera
and then took it apart months later as part of a routine business practice, the main reason that
Stolle chose to investigate the SLAC machine at Simmons Pet Food in 2006 was because of its
continuing concerns about An’s actions beginning in 2003.
Although the district court was correct to find that Stolle’s trade-secret-misappropration
claim against An was time-barred, we are unable to reach the same conclusion as to SLAC.
- 14 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
Simply put, SLAC did not exist in 2003 when Stolle was put on notice as to the potential trade
secret misappropriation by An. The statute of limitations cannot have begun running as to SLAC
in 2003 when, according to the evidence in the record, SLAC was not founded until 2004. The
district court treated the statute-of-limitations analysis identically as to both An and SLAC, but
this was a mistake. We are unable to identify evidence in the record that conclusively
demonstrates that Stolle should reasonably have discovered SLAC’s alleged trade secret
misappropriation before late 2006, when it investigated the machine at Simmons Pet Food.
Although such evidence may emerge at trial, at this point we hold that a genuine question of
material fact exists about when the OUTSA statute of limitations began to run with respect to
Stolle’s claim against SLAC. We therefore reverse the district court’s grant of summary
judgment to SLAC on Stolle’s claim for trade secret misappropriation and remand for further
proceedings.
V.
The district court found that Stolle’s state-law claims for conspiracy to misappropriate
trade secrets and tortious interference with prospective business relationships were preempted by
the OUTSA; the district court therefore granted summary judgment to defendants on these
claims without reaching the merits. Stolle challenges these rulings.
The OUTSA incorporates the Uniform Trade Secrets Act’s displacement of “conflicting
tort, restitutionary, and other laws of this state providing civil remedies for misappropriation of a
trade secret.” Ohio Rev. Code § 1333.67(A). “Other civil remedies that are not based on
misappropriation of a trade secret” are not preempted by the OUTSA. Id. § 1333.67(B)(2). The
precise scope of the preemption clause has not been interpreted uniformly across UTSA
jurisdictions. See generally John T. Cross, UTSA Displacement of Other State Law Claims, 33
Hamline L. Rev. 445 (2010); Warrington S. Parker, III & Daniel D. Justice, The Differing
- 15 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
Approaches to Preemption under the Uniform Trade Secrets Act, 49 Tort Trial & Ins. Prac. L.J.
645 (2014). And, unfortunately, “[t]he Ohio Supreme Court has yet to speak to the scope of the
OUTSA’s preemption clause.” Office Depot, Inc. v. Impact Office Prods., LLC, 821 F. Supp. 2d
912, 919 (N.D. Ohio 2011).
Uncertainty about the scope of the UTSA’s preemption clause runs along at least two
axes. First, courts are divided about whether the UTSA preemption clause should be read
literally, to displace “only civil non-contract remedies for misappropriation of a trade secret,” or
whether it should be interpreted more broadly so as “to abolish all other causes of action for
theft, misuse, or misappropriation of any confidential or secret information.” Parker & Justice,
supra, at 648 (emphasis in original); see also Office Depot, 821 F. Supp. 2d at 918 (stating that
“courts have disagreed regarding whether claims based on misappropriation of information not
rising to the level of ‘trade secret’ status are nevertheless preempted under the UTSA,” and citing
federal district court cases from Arizona and Virginia to illustrate this point). The majority of
UTSA jurisdictions have taken the latter approach, Parker & Justice, supra, at 648, and courts
applying the OUTSA generally seem to have subscribed to the (broader) majority rule. Office
Depot, 821 F. Supp. 2d at 918–19 (citing Allied Erecting and Dismantling Co. v. Genesis Equip.
& Mfg., 649 F. Supp. 2d 702, 720 (N.D. Ohio 2009)); Rogers Indus. Prods. Inc. v. HF Rubber
Mach., Inc., 936 N.E.2d 122, 130 (Ohio Ct. App. 2010) (“This language was intended to prevent
inconsistent theories of relief for the same underlying harm and has been interpreted to bar
claims that are based solely on allegations of misappropriation of trade secrets or other
confidential information.”).
Having established that the OUTSA should be understood to preempt not only causes of
action for misappropriation of trade secrets but also causes of action that are based in some way
- 16 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
on misappropriation of trade secrets, we are still left with the second axis of interpretive
uncertainty: how to analyze whether a cause of action is based on the misappropriation of trade
secrets. Parker & Justice, supra, at 655. Here, courts have two primary approaches: (1) compare
the elements of the state law claim to the elements of a UTSA claim, or (2) determine whether
the state law claim arises out of the same core of facts that would underlie a potential UTSA
claim. Cross, supra, at 456–60. Courts interpreting the OUTSA seem generally to have
followed something closer to the second approach, focusing on commonality of the operative
facts. “The test to determine whether a state law claim is displaced by OUTSA is to determine
whether ‘the claims are no more than a restatement of the same operative facts’ that formed the
basis of the plaintiff’s statutory claim for trade secret misappropriation.” Thermodyn Corp. v.
3M Co., 593 F. Supp. 2d 972, 989 (N.D. Ohio 2008) (quoting Glasstech, Inc. v. TGL Tempering
Sys., Inc., 50 F. Supp. 2d 722, 730 (N.D. Ohio 1999)). Where the state-law claim has a factual
basis independent from the facts establishing the OUTSA claim, “the portion of the claim
supported by an independent factual basis survives preemption.” Miami Valley Mobile Health
Services, Inc. v. ExamOne Worldwide, Inc., 852 F. Supp. 2d 925, 940 (S.D. Ohio 2012) (quoting
Office Depot, 821 F. Supp. 2d at 921).
Applying this standard, we conclude that the district court was correct to find that Stolle’s
claim for tortious interference with business relationships was preempted by OUTSA. To
recover on a claim for tortious interference with business relationships, a plaintiff must show
(1) the existence of a business relationship, (2) the wrongdoer’s knowledge of the relationship,
(3) the wrongdoer’s intentional and material interference with the business relationship, (4) lack
of justification, and (5) damages. Georgia-Pacific Consumer Prods. LP v. Four-U-Packaging,
Inc., 701 F.3d 1093, 1102 (6th Cir. 2012). Stolle alleged in its complaint that defendants
- 17 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
“solicit[ed] . . . customers and represent[ed] themselves as having knowledge and technical
know-how to use in providing a directly competing product to Stolle at a reduced price.” 6 As the
district court correctly noted, the core of Stolle’s tortious interference claim—and the only part
of it that is truly in dispute—is that defendants’ solicitation of customers lacked justification, and
the question of whether defendants lacked justification hinges on whether they were using
“wrongful means.” In turn, whether the defendants were using wrongful means depends on
whether they had used Stolle’s customer lists and technical information without Stolle’s
consent7—and this is, under OUTSA, squarely a matter of whether trade secrets have been
misappropriated. See Ohio Rev. Code § 1333.67. Stolle’s claim for tortious interference with
business relationships therefore essentially restates the operative facts of its claim for trade secret
misappropriation under OUTSA, and it is preempted.
The district court was also correct to find that Stolle’s claim for conspiracy to
misappropriate trade secrets is preempted by the OUTSA. Even though proof of conspiracy
requires proving additional facts—a malicious combination of two or more persons causing
6
In its memorandum in opposition to defendants’ motion for summary judgment, Stolle
also contended, for the first time, that An and SLAC had tortiously interfered with Stolle’s
business relationships by arranging to have the Chinese customs service block the delivery of a
Stolle machine to a Stolle customer in China. In a deposition, An acknowledged that SLAC had
done so but said that it was because Stolle was shipping the machine in violation of a patent held
by SLAC in China. The district court declined to address Stolle’s claim because Stolle had not
previously raised it and had “done nothing to flesh this out as a separate basis for a tortious
interference claim.” On appeal, Stolle throws this claim into the mix again, although this time
around Stolle spins it as a claim for tortious interference with existing contractual relations. We
decline to consider this claim that was never pled, was never fleshed out below, and was raised
for the first time in opposition to defendants’ motion for summary judgment. See Tucker v.
Union of Needletrades, Industrial and Textile Employees, 407 F.3d 784, 789 (6th Cir. 2005).
Even if Stolle’s claim for tortious interference with contractual relations were colorable, that
“claim is not before us.” Id.
7
Stolle all but acknowledges as much in its reply brief, where it emphasizes that
defendants’ actions lacked justification because they were based on defendants’ misappropriation
of trade secrets.
- 18 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
injury, see Williams v. Aetna Fin. Co., 700 N.E.2d 859, 868 (Ohio 1998)—beyond the
underlying unlawful act, the conspiracy claim is dependent on proof of the underlying act—here,
misappropriation of trade secrets. Stolle’s conspiracy claim similarly restates the operative facts
that would establish Stolle’s claim for misappropriation of trade secrets. Stolle argues on appeal,
however, that its “conspiracy claim is not limited to Defendants’ misappropriation of trade
secrets, but includes Defendants’ intent to interfere with Stolle’s existing customer relations with
the aid of RAM and Fultz.” Not only is this portrayal plainly inconsistent with Stolle’s
complaint, which frames Stolle’s conspiracy claim only as a claim for conspiracy to
misappropriate trade secrets, but it also presents a conspiracy claim predicated on the underlying
wrongful act of tortious interference with Stolle’s business relations that would itself be
preempted, per the discussion above.
VI.
Stolle also challenges the district court’s grant of summary judgment to defendants on its
claims brought under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); the Ohio Deceptive Trade
Practices Act (DTPA), Ohio Rev. Code § 4165.02; and Ohio common law. In its complaint
Stolle raised two arguments: (1) “Defendants are passing off Stolle’s technical know-how,
design drawings, trade secrets and proprietary information as their own,” and (2) “Defendants
have falsely represented that the products and services they are manufacturing and/or selling—all
of which incorporate Stolle’s misappropriated trade secrets—originate with the Defendants,” and
“that the products they are manufacturing and/or selling have sponsorship, approval,
characteristics, ingredients, uses, benefits, or qualities that they do not have.”
Stolle’s claims under the DTPA and Ohio common law are coextensive with Stolle’s
Lanham Act claim and are analyzed the same way. See, e.g., Groeneveld Trans. Efficiency, Inc.
v. Lubecore Int’l, Inc., 730 F.3d 494, 520 (6th Cir. 2013) (citing Daddy’s Junky Music Stores,
- 19 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
Inc. v. Big Daddy’s Family Music Ctr., 109 F.3d 275, 288 (6th Cir. 1997)). Section 43(a) of the
Lanham Act provides as follows:
(1) Any person who, on or in connection with any goods or services, or any
container for goods, uses in commerce any word, term, name, symbol, or device,
or any combination thereof, or any false designation of origin, false or misleading
description of fact, or false or misleading representation of fact, which—
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the
affiliation, connection, or association of such person with another person, or as to
the origin, sponsorship, or approval of his or her goods, services, or commercial
activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature,
characteristics, qualities, or geographic origin of his or her or another person’s
goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is or is
likely to be damaged by such act.
Under the Lanham Act, “passing off . . . occurs when a producer misrepresents his own goods or
services as someone else’s”; “reverse passing off” occurs when a “producer misrepresents
someone else’s goods or services as his own.” Dastar Corp. v. Twentieth Century Fox Film
Corp., 539 U.S. 23, 27 n.1 (2003).
Stolle’s first claim is for reverse passing off: Stolle alleges that An and SLAC were
incorporating Stolle’s trade secrets into their own machine and passing it off as their own. But
this reverse passing off claim fails as a matter of law under Dastar, which held that the concept
of “origin of goods” in the Lanham Act protects only “the producer of the tangible goods that are
offered for sale, and not . . . the author of any idea, concept, or communication embodied in
those goods.” 539 U.S. at 37. Thus, “[t]aking tangible goods and reselling them as your own
constitutes a Lanham Act violation; taking the intellectual property contained in those goods and
incorporating it into your own goods does not.” Nat’l Bus. Dev. Servs., Inc. v. Am. Credit Educ.
& Consulting, Inc., 299 F. App’x 509, 511 (6th Cir. 2008).
- 20 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
In its reply brief, Stolle for the first time makes the argument that in its sale to Simmons
Pet Food, SLAC was passing off a refurbished Stolle machine as a new SLAC machine. On its
face this would appear to constitute a cognizable Lanham Act violation. And Stolle’s argument
on this point appears to have some factual support: defendants say that the machine sold to
Simmons was a refurbished Stolle machine, while Stolle has introduced evidence that the
machine at Simmons bore a SLAC nameplate. But the rule is well established that “[a]n
argument raised for the first time in a reply brief will not be considered by this Court.”
Overstreet v. Lexington-Fayette Urban Cnty. Gov’t, 305 F.3d 566, 578 (6th Cir. 2002) (citing
Wright v. Holbrook, 794 F.2d 1152, 1156 (6th Cir. 1986)). Moreover, “application of this rule is
particularly appropriate when the issue raised for the first time in reply is based largely on the
facts and circumstances of the case,” as it is here. Wright, 794 F.3d at 1156. We therefore
affirm the district court’s dismissal of Stolle’s reverse passing off claim.
Stolle’s second claim, for false advertising, arises out of a single fact upon which the
parties generally agree: SLAC’s website contained a photograph of a piece of Stolle machinery
that had been refurbished by SLAC. Stolle argues that the display of this photograph constituted
a false statement because, they allege, SLAC was depicting Stolle equipment bearing Stolle’s
trademark as SLAC’s own equipment. In order to obtain damages on a false advertising claim
under the Lanham Act, plaintiffs must be able to point to a literally false statement or, by
showing “proof of actual deception,” demonstrate that the statement was misleading. Am.
Council of Certified Podiatric Physicians & Surgeons v. Am. Bd. of Podiatric Surgery, Inc., 185
F.3d 606, 614 (6th Cir. 1999). For injunctive relief, the plaintiff must show that the purportedly
misleading representations “have a tendency to deceive customers.” Id. at 618. But Stolle has
not introduced any additional evidence to demonstrate that defendants were doing anything other
- 21 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
than what they say they were doing—posting the picture on their website to illustrate that they
were in the business of refurbishing Stolle machines. Without further context, we see no
evidence that defendants made a literally false statement. And Stolle has not introduced any
“proof of actual deception,” which requires “evidence that individual consumers perceived the
advertisement in a way that misled them about the plaintiff’s product” or evidence that the
picture would tend to mislead consumers. Id. We therefore affirm the district court’s judgment
as to this claim as well.
VII.
Finally, Stolle challenges the district court’s grant of summary judgment to SLAC on
Stolle’s claim that SLAC committed copyright infringement under the Copyright Act, 17 U.S.C.
§ 101 et seq., by copying two of Stolle’s tooling drawings (the drawings labeled “Suzhou
Anchor” to which Stolle was alerted in 2004 by one of its suppliers). “‘To succeed in a
copyright infringement action, a plaintiff must establish that he or she owns the copyrighted
creation, and that the defendant copied it.’” Murray Hill Publications, Inc. v. Twentieth Century
Fox Film Corp., 361 F.3d 312, 316 (6th Cir. 2004) (quoting Kohus v. Mariol, 328 F.3d 848, 853
(6th Cir. 2003)). “Where there is no direct evidence of copying, a plaintiff may establish an
inference of copying by showing (1) access to the allegedly-infringed work by the defendant(s)
and (2) a substantial similarity between the two works at issue.” Id. (internal alterations and
quotation marks omitted).
Although Stolle has presented evidence suggesting that An copied the tooling drawings,
Stolle has not presented evidence that SLAC copied the tooling drawings. An, the alleged point
of access to Stolle’s drawings, left Stolle by the end of 2002, and the allegedly infringing
drawings are labeled February 13, 2003. But SLAC was not formed until 2004, and Stolle has
provided no evidence of any copying after the time SLAC was formed. The use of copies to
- 22 -
No. 13-4103
Stolle Machinery Company, LLC v. Ram Precision Industries, et al.
manufacture a product does not, by itself, constitute copyright infringement: to hold otherwise
would transform a copyright into a patent. See Robert R. Jones Associates, Inc. v. Nino Homes,
858 F.2d 274, 280–81 (6th Cir. 1988). Furthermore, the allegedly infringing drawings are
labeled “Suzhou Anchor,” but Stolle has provided no evidence of any connection between
Suzhou Anchor and SLAC outside of An’s alleged ownership in both companies. The district
court therefore was correct to grant summary judgment to SLAC on Stolle’s copyright
infringement claim.
VIII.
For the reasons explained above, we affirm the judgment of the district court in all
respects except its grant of summary judgment to SLAC on Stolle’s claim for misappropriation
of trade secrets. Because a genuine issue of material fact exists as to when the OUTSA statute of
limitations began to run with respect to SLAC, we reverse the judgment of the district court on
that claim only and remand it for further proceedings.
- 23 -