HIP, Inc. FKA Unitherm Food Sy v. Hormel Foods Corporation
888 F.3d 334
8th Cir.2018Background
- Hormel (Minnesota) and Unitherm (Oklahoma) executed a Mutual Confidential Disclosure Agreement (MCDA) in July 2007 and a Joint Development Agreement (JDA) in September 2007 to "develop the Project," described in the recital as developing an oven using near-100% superheated steam to cook bacon; Unitherm had its own preexisting "Unitherm Process."
- Under the JDA Hormel would define Project requirements and Unitherm would commit resources; paragraph 6.b allowed either party to terminate if, after reasonably adequate development and testing, a "commercially viable Project" had not resulted with 30 days' notice.
- Hormel terminated the JDA on April 1, 2010, later purchased the mini spiral test oven it had leased from Unitherm, and pursued a Hybrid Process (microwave preheat + superheated-steam spiral oven), contracting with JBT to develop a commercial oven and launching a Bacon1 product.
- Unitherm sued in 2014 for wrongful termination of the JDA, breach of the MCDA (disclosure and reverse engineering), misappropriation of trade secrets, unjust enrichment, and sought declarations of ownership; Hormel counterclaimed for breach and declaratory relief over ownership of the Unitherm Process patent.
- The district court granted summary judgment dismissing Unitherm’s contract and unjust-enrichment claims and dismissing Hormel’s contract and declaratory counterclaims; the Eighth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument (Unitherm) | Defendant's Argument (Hormel) | Held |
|---|---|---|---|
| Whether Hormel wrongfully terminated the JDA under §6.b (no "commercially viable Project") | The Project included development of cooking processes; Unitherm had delivered a commercially viable Unitherm Process and refinement/testing showed viability | The JDA’s Project meant development of a commercially viable oven (equipment); no evidence an oven capable of producing profitable commercial quantities existed | Court held termination was proper: no evidence of a commercially viable oven; "commercially viable" is objective/profitability-based and Unitherm gave no contrary evidence |
| Whether Hormel breached the MCDA by disclosing the Unitherm Process to JBT (and by enabling reverse engineering) | Hormel disclosed confidential Process info to JBT and forced Unitherm to file its patent, so disclosure isn’t excepted; reverse engineering of the purchased test oven violated confidentiality | The Unitherm Process was publicly disclosed via Unitherm’s 2008 patent application (an MCDA exception); the mini test oven was not confidential (marketed, shown at trade shows, and later purchased by Hormel) | Court held no breach: patent filing/public knowledge exempted disclosure; the mini oven was not confidential and Hormel owned it when JBT examined it |
| Whether Unitherm was entitled to discovery of Hormel’s Bacon1 profits | Needed to prove damages from MCDA breach | Hormel said no breach occurred, so profit discovery is irrelevant and unduly burdensome | Court upheld denial: because no MCDA breach, profit discovery was unnecessary and refusal was not abuse of discretion |
| Whether Hormel owns the Unitherm Process (JDA Inventions clause) | Joint development during the JDA made the Unitherm Process an "Invention" owned by Hormel (or at least jointly) once Hormel purchased the test oven | Unitherm had conceived and reduced the Process to practice before the JDA; any improvements did not produce a commercially viable application, so ownership remains with Unitherm per §5.a.(iv) | Court held Hormel did not prove ownership: the patented Unitherm Process was conceived and reduced to practice by Unitherm before the JDA and no factual showing tied ownership to Hormel under the JDA conditions |
Key Cases Cited
- Wayne v. Genesis Med. Ctr., 140 F.3d 1145 (8th Cir.) (summary-judgment review and contract interpretation principles)
- Park Nicollet Clinic v. Hamann, 808 N.W.2d 828 (Minn.) (elements of breach of contract under Minnesota law)
- Valspar Refinish, Inc. v. Gaylord's, Inc., 764 N.W.2d 359 (Minn.) (clear contract language should not be rewritten by courts)
- Olympus Ins. Co. v. AON Benfield, Inc., 711 F.3d 894 (8th Cir.) (reading contract language in context; defined-term interpretation)
- Beardslee v. Inflection Energy, L.L.C., 761 F.3d 221 (2d Cir.) ("commercially viable" read as "profitable")
- Tenkku v. Normandy Bank, 348 F.3d 737 (8th Cir.) (standard for reversing district court discovery rulings)