2016 COA 176
Colo. Ct. App.2016Background
- Hawg Tools, LLC (Hawg) owned a sealed bearing pack design used in downhole mud motors; the design originated with a designer (Ficken) who assigned rights to a machinist, then to Hawg’s predecessor and later to Hawg.
- Ficken later worked for Newsco and designed a sealed bearing pack for Newsco that Hawg alleged was essentially the same as Hawg’s design.
- Hawg sued Newsco entities and Ficken for misappropriation of trade secrets, conversion, and (against Ficken) breach of a confidentiality/assignment agreement. A jury found for Hawg on all claims; the trial court entered judgment accordingly.
- Defendants moved for directed verdict/JNOV on the trade-secret claim and for JNOV on conversion; the trial court denied those motions. Defendants appealed.
- The Court of Appeals reversed the trade-secret judgment (concluding Hawg failed to prove the design was secret) but affirmed the conversion and breach-of-contract rulings and held Hawg had standing as assignee of the confidentiality agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hawg’s sealed bearing pack design was a trade secret | Hawg: design was secret and valuable; Hawg took steps to keep it confidential | Defendants: design was not secret; similar designs were publicly available and in common industry use | Reversed: design not shown to be secret; trade-secret verdict vacated |
| Whether conversion claim was preempted by the Colorado Uniform Trade Secrets Act (CUTSA) | Hawg: conversion claim is distinct and not preempted | Defendants: CUTSA preempts conversion for trade-secret matters | Affirmed for Hawg: defendants waived preemption defense by raising it post-trial; claim not barred on that procedural basis |
| Whether Hawg had standing to sue Ficken for breach of the confidentiality/agreement | Hawg: received full assignment of rights (including incidental confidentiality rights) from Gallagher | Ficken: Hawg lacked standing because Gallagher didn’t assign confidentiality agreement specifically | Affirmed for Hawg: assignment of all rights to the design included the incidental confidentiality agreement; Hawg is real party in interest |
| Whether the trial court should have granted defendants’ directed verdict/JNOV on misappropriation | Hawg: evidence and expert testimony supported jury finding of secret, unique design and misappropriation | Defendants: evidence shows the design elements were common; expert testimony showed little distinction from public designs | Reversed on trade-secret claim: no reasonable juror could find the design was secret given public prior art and expert testimony |
Key Cases Cited
- Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974) (trade-secret subject must be secret; public or generally known information is not protectable)
- Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984) (scope of trade-secret rights defined by owner’s efforts to protect secrecy)
- Colo. Supply Co. v. Stewart, 797 P.2d 1303 (Colo. App. 1990) (factors for determining existence of trade secret; extent known outside business is relevant)
- Hall v. Frankel, 190 P.3d 852 (Colo. App. 2008) (standard for reviewing directed verdict and JNOV; view evidence favorably to nonmoving party)
- Town of Carbondale v. GSS Props., LLC, 169 P.3d 675 (Colo. 2007) (preemption as affirmative defense may be waived if not timely raised)
- Thistle, Inc. v. Tenneco, Inc., 872 P.2d 1302 (Colo. App. 1993) (assignment of ownership of proprietary data includes incidental rights to control access)
- Electrology Lab., Inc. v. Kunze, 169 F. Supp. 3d 1119 (D. Colo. 2016) (a protectable trade secret may be a unique combination of public-domain elements if the combination is novel and affords competitive advantage)