nClosures Inc. v. Block and Company, Inc.
770 F.3d 598
7th Cir.2014Background
- nClosures designed tablet enclosures; Block manufactured them under confidentiality and later developed its own Atrio enclosure.
- They signed a confidentiality agreement at the outset; nClosures disclosed Rhino/Rhino Elite designs to Block.
- Attempts to negotiate a written contract failed; parties reached an oral agreement for Block to manufacture Rhino Elite and for nClosures to resell or back-sell units.
- Post-launch, Block engineers assisted redesigns; Block developed Atrio, a competing enclosure.
- nClosures sued in November 2012 for fraud, trade secret misappropriation, breach of fiduciary duty, and breach of contract; district court granted Block summary judgment on all four claims, then denied Block’s fee motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of confidentiality | nClosures argues confidentiality was enforceable given its protective steps. | Block contends information was not reasonably protected and thus confidentiality unenforceable. | Confidentiality unenforceable; no reasonable protective steps. |
| Existence of fiduciary duty via partnership | nClosures contends profits implied a partnership or joint venture. | Block contends no partnership or fiduciary duty existed. | No partnership; no fiduciary duty breach. |
| Attorney’s fees | nClosures opposes fee-shifting under ITSA/28 U.S.C. § 1927/inherent authority. | Block seeks fees for bad-faith or improper conduct. | District court’s denial of fees affirmed; not an abuse of discretion. |
Key Cases Cited
- Tax Track Sys. Corp. v. New Investor World, Inc., 478 F.3d 783 (7th Cir. 2007) (enforce confidentiality only when information is confidential and protected)
- Rockwell Graphic Sys., Inc. v. DEV Indus., Inc., 925 F.2d 174 (7th Cir. 1991) (substantial steps can preclude summary judgment in trade secrets cases)
- Argianas v. Chestler, 631 N.E.2d 1359 (Ill. App. Ct. 1994) (profit-sharing alone does not prove partnership)
- Autotech Tech. Ltd. P’ship v. Automationdirect.com, 471 F.3d 745 (7th Cir. 2006) (no fiduciary duty where no partnership/joint venture and explicit lack of joint control)
- Snyder v. Dunn, 638 N.E.2d 744 (Ill. App. Ct. 1994) (consider intent when no written partnership exists)
- IDS Life Insurance Co. v. Royal Alliance Assocs., Inc., 266 F.3d 645 (7th Cir. 2001) (district court discretion in sanctions under 28 U.S.C. § 1927; distinctions apply)