PROGRESSIVE PRODUCTS, INC. v. Swartz
258 P.3d 969
Kan.2011Background
- PPI developed a secret ceramic coating (Ceram-Back) for elbow pipes and kept its formula, batching method, pricing program, and customer data as trade secrets.
- Defendants Swartz, Robarts, Bunney, and VIN Manufacturing began competing using knowledge gained at PPI; Robarts and Bunney used a cheaper thickener, and exposed materials were not safeguarded.
- PPI sought injunctive relief and royalties; the district court granted an injunction with a 3-year royalty while allowing continued operation of competing business.
- Court found Ceram-Back formula and the batching computer program to be protected trade secrets; mixing process and price lists were not protected.
- Court of Appeals reversed aspects of the remedy; this Court reverses in part and remands for specific factual-to-legal correlations regarding the royalty injunction.
- Case remanded for entry of an order tying legal conclusions to the trial record and explaining basis for royalty and short-term relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court properly found misappropriation of trade secrets. | PPI shows Ceram-Back formula and batching program were misappropriated. | Defs. contend evidence insufficient for secrecy and misappropriation. | Yes; the district court's findings supported misappropriation of Ceram-Back formula and batching program. |
| Whether mixing process and price lists were protected trade secrets. | PPI proved the mixing process and price program were secret and protected. | Open mixing and public price information negate secrecy. | Mixed process not protected; price lists not protected; mixing process not secret. |
| Whether the royalty injunction constitutes proper relief under the Act. | Exceptional circumstances justify a royalty injunction to compensate for misappropriation. | Remedy exceeded statutory scope or lacked explicit factual basis. | Remand required; insufficient explicit findings; need correlating factual findings to legal basis for royalty. |
| What standard governs review of royalty relief under the Act? | Legal conclusions should align with trial findings; de novo review of law. | Defer to trial court on discretionary relief. | Court reviews factual support for misappropriation de novo and remands for clearer findings on royalty basis. |
| Did the district court err by not clearly articulating exceptional circumstances or the statutory basis for relief? | Exceptional circumstances justified temporary royalty, beyond actual damages. | No explicit findings; relief speculative. | Remand; need explicit articulation of exceptional circumstances and statutory basis. |
Key Cases Cited
- Barzingus v. Wilheim, 306 F.3d 17 (10th Cir. 2010) (moots discussion on injunction standards in trade secrets)
- Electro-Craft Corp. v. Controlled Motion, 332 N.W.2d 890 (Minn. 1983) (signals required to mark confidential information to employees)
- State v. Sellers, 292 Kan. 117 (2011) (plain language of statute controls exceptional circumstances analysis)
- In re M.F., 290 Kan. 142 (2010) (case discussing review standards for trial-court findings on abuse of discretion)
- Hodges v. Johnson, 288 Kan. 56 (2009) (presumption about district court factual findings when record is silent)