ClearOne Communications, Inc. v. Bowers
2011 U.S. App. LEXIS 13089
| 10th Cir. | 2011Background
- ClearOne acquired Old ClearOne assets including Honeybee AEC trade secrets via Gentner/ClearOne asset purchase; Honeybee Code, Killerbee, and related confidential documentation were protected by confidentiality and invention-assignment agreements.
- Biamp licensed Gentner DEC algorithm from ClearOne in 2002 and later began internal development of its own AEC technology after negotiations with Echonology representatives who misrepresented their credentials.
- Yang, Chiang, and Lonny Bowers were linked to WideBand and Versatile, acquiring and developing AEC technologies including FC101 and WC301; WideBand licensed to Biamp and later sought to license or sell code at discounted rates.
- ClearOne filed suit in 2007 for misappropriation of trade secrets and related fiduciary duties; the case proceeded to trial where the jury found in ClearOne’s favor on all claims and awarded substantial damages across multiple defendants.
- The district court issued a permanent injunction broad in scope, prohibiting use/disclosure of Honeybee Code and related materials, extending to associated products and entities, and later expanded following contempt findings; multiple post-trial rulings and contempt proceedings followed, including additional injunctions and an amended order against Donald Bowers.
- The consolidated appeals challenge the injunctive scope, Rule 60(b) motions, damages, personal jurisdiction, choice-of-law, and related pre/post-judgment rulings; the Tenth Circuit affirmatively resolves all issues in favor of ClearOne.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of permanent injunction | Injunctive relief necessary to prevent continued misappropriation. | Injunction overly broad and perpetual, and inadequate remedy at law. | No abuse; injunction narrowly tailored, not unduly broad. |
| Rule 60(b) relief from judgment | N/A | Motions lacked merit; challenged evidence and delays. | No abuse of discretion; motions denied. |
| Excessiveness of damages | Damages appropriate given willful/malicious conduct and deterrence goals. | Exemplary damages excessive and unwarranted. | Exemplary damages not an abuse; double the compensatories upheld. |
| Personal jurisdiction over Lonny Bowers | Bowers purposefully availed Utah and caused injury there. | Lack of sufficient contacts; corporate shield concerns. | Jurisdiction proper; minimum contacts and fairness satisfied. |
| Choice of law governing trade secrets | Utah law applies per asset purchase/non-compete terms and most significant relationship. | Massachusetts law should apply due to work location and parties. | Invited error doctrine bars Massachusetts vs Utah dispute; Utah law applied. |
Key Cases Cited
- Rocky Mountain Christian Church v. Bd. of Cnty. Comm'rs, 613 F.3d 1229 (10th Cir. 2010) (abuse of discretion standard for permanent injunctions; narrowly tailored relief required)
- Garrison v. Baker Hughes Oilfield Operations, Inc., 287 F.3d 955 (10th Cir. 2002) (injunctions must be narrowly tailored to remedy harm)
- Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992) (factors for exemplary damages under patent law guidance)
- Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17 (Supreme Court 1997) (discussed in context of verdict form and evidentiary sufficiency)
- Ten Mile Industrial Park v. Western Plains Service Corp., 810 F.2d 1518 (10th Cir. 1987) (corporate shield doctrine context in personal jurisdiction)