[¶ 1.] Raven Industries (Raven) sued Integra Plastics, Inc. (Integra), a business competitor, and Clark Lee (Lee), a former employee of Raven, by complaint for in-junctive relief, tortious interference with contract, and unfair competition. Raven alleged that Lee unfairly competed with Raven by using alleged secret, confidential, or proprietary information that he was contractually obligated not to disclose. Raven’s complaint sought only injunctive relief. A bench trial was held and the circuit court entered findings of fact, conclusions of law, and a permanent injunction in Raven’s favor. Integra and Lee appeal.
FACTS
[¶ 2.] Raven is a string-reinforced plastic film manufacturer in Sioux Falls, South Dakota. Integra is a manufacturing company in Madison, South Dakota. Lee was an engineer at Raven from 1991 until February 2006 when he was fired. In 1991, Lee signed an “Agreement for Execution by Employees of Raven Industries, Inc. Relating to Inventions, Secret Processes, Trademarks, Trade Names, Character Names and Other Similar Matters” (Proprietary Rights Agreement).
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After being
[¶ 3.] At Raven, Lee was on the engineering team that originally built Raven’s string-reinforced plastic line (Line) in 1993. 2 Lee was initially responsible for operating the Line and modifying it to improve product quality. Raven experienced many problems with the Line after production began. Lee, as the lead engineer, worked to develop solutions to these problems. As a result, Lee was intimately familiar with the assembly and operation of Raven’s Line. In sum, it took over thirteen years to perfect Raven’s Line.
[¶ 4.] At Integra, Lee was the director of business development and worked to develop a manufacturing line to produce string-reinforced plastic film almost identical to Raven’s. Although Integra considered building a production line for this product before Lee was hired, it did not. Once Integra employed Lee, Lee contacted an equipment manufacturer that built a component of Raven’s Line to have the same modified component made for Integ-ra. The modifications Lee requested were unique to Raven’s Line and were not used by any other manufacturer in the industry. Within one month of receiving the necessary equipment, Integra was able to produce a product that was commercially comparable to Raven’s.
[¶ 5.] Raven filed suit against Integra and Lee for injunctive relief, tortious interference with contract, and unfair competition. Raven alleged that Integra and Lee unfairly competed against Raven by using secret, confidential, or proprietary information — that Lee was contractually obligated not to disclose — to produce a product for Integra commercially comparable to Raven’s. Raven’s complaint sought only injunctive relief. A nine-day bench trial was held, and the circuit court found for Raven on all three claims. The circuit court subsequently entered findings of fact, conclusions of law, and a permanent injunction prohibiting Integra from operating its line for two years.
[¶ 6.] Integra and Lee appeal, raising the following issues: 3
1. Whether the circuit court erred in concluding that the Uniform Trade Secrets Act did not preempt Raven’s tort claims.
2. Whether the circuit court erred in concluding that Raven and Lee’s non-disclosure agreements were enforceable.
3. Whether the circuit court erred in concluding that Integra engaged in unfair competition.
4. Whether the circuit court erred in granting the permanent injunction.
ANALYSIS AND DECISION
[¶ 7.] 1. Whether the circuit court erred in concluding that the Uniform Trade Secrets Act did not preempt Raven’s tort claims. 4
[¶ 8.] Integra and Lee initially argued that the circuit court erred in concluding that the Uniform Trade Secrets Act (UTSA) did not preempt Raven’s claims for injunctive relief,
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tortious interference with contract, and unfair competition. Integra and Lee concede in their reply brief, however, that a breach of contract claim would not be preempted by the UTSA.
See
SDCL 37-29-7(b)(1) (specifically excluding from the UTSA “contractual remedies, whether or not based upon misappropriation of a trade secret”). In-tegra and Lee instead maintain that the non-disclosure agreements (or contracts) entered into by Lee were unenforceable. Integra and Lee therefore argue that the allegedly invalid and unenforceable nondisclosure agreements could neither sup
[¶ 9.] 2. Whether the circuit court erred in concluding that Raven and Lee’s non-disclosure agreements were enforceable.
[¶ 10.] Integra and Lee argue the circuit court erred in holding that Raven and Lee’s non-disclosure agreements were valid and enforceable. As noted above, if the non-disclosure agreements are unenforceable, Raven’s tortious interference with contract claim must also fail because that claim was premised on a valid and enforceable contract.
[¶ 11.] Non-disclosure agreements are unenforceable if: “(1) a trade secret or confidential relationship does not exist; (2) the employer discloses the information to others not in a confidential relationship; or, (3) it is legitimately discovered and openly used by others.”
1st Am. Sys., Inc. v. Rezatto,
Confidential Relationship
[¶ 12.] Integra and Lee contend that while “Raven and Lee may have been in a confidential relationship as employer and employee, Raven’s claimed secret process does not constitute a trade seeret[.]” The first requirement in assessing whether a non-disclosure agreement is enforceable is whether a trade secret
or
confidential relationship exists.
Id.
In this case, the circuit court found that Raven and Lee had a confidential relationship.
See Walling Chemical Co. v. Bigner,
Disclosure of Information
[¶ 13.] Integra and Lee next argue that the circuit court erred in concluding that Raven did not disclose secret, confidential, or proprietary information to others not in a confidential relationship. Integra and Lee cite
Rezatto
for the proposition that the test for whether secret, confidential, or proprietary information was disclosed, which would render the non-disclosure agreements unenforceable, requires determining if this information was disclosed to others “at all.”
See
[¶ 14.] In response, Raven argues
Re-zatto
does not stand for the proposition that
any
dissemination of information invalidates a non-disclosure agreement. Raven asserts that only reasonable efforts to maintain secrecy are required.
See Centrol, Inc. v. Morrow,
[¶ 15.] Here, the circuit court found that Raven “engaged in reasonable efforts to maintain the secrecy of its process for manufacturing string-reinforced plastic film” and that “Raven did not disclose its process for manufacturing string-reinforced plastic to persons outside a confidential relationship.” These findings were based on extensive testimony given at trial that Raven had policies that protected its Line from anyone not in a confidential relationship with Raven. Because the circuit court’s findings were supported by the record, they are not clearly erroneous. Therefore, the circuit court did not err in determining that the second Rezatto factor was not satisfied.
Legitimately Discovered and Openly Used
[¶ 16.] Integra and Lee finally contend that the circuit court erred in concluding that Raven’s Line was not legitimately discovered and openly used by others in the industry. The circuit court concluded that “Raven developed a unique process for manufacturing string-reinforced plastic film that has only been replicated by Integra with the assistance of Lee.” Integra and Lee take issue with this conclusion, asserting that “the circuit court ignored [ ] evidence to the contrary.” However, testimony at trial established that Raven’s Line was so unique that no other manufacturer, other than Integra with Lee’s assistance, could replicate it. Lee had even told his manager at Raven that the Line could not be replicated without his knowledge. Therefore, the record
[¶ 17.] Integra and Lee have failed to satisfy any of the Rezatto factors. As a result, Integra and Lee have failed to demonstrate that the circuit court erred in ruling that the non-disclosure agreements were enforceable. Thus, Raven’s contract claim baséd on these enforceable non-disclosure agreements survives, as well as the circuit court’s grant of injunctive relief as a remedy.
[¶ 18.] 3. Whether the circuit court erred in concluding that Integra engaged in unfair competition.
[¶ 19.] Integra and Lee argue that the circuit court’s conclusion that Integra engaged in unfair competition “was unfair” and “erroneous.” The circuit court found that Raven proved each element for tor-tious interference with contract. The circuit court then concluded that Integra’s tortious interference also constituted unfair competition. This conclusion was premised on Integra receiving a thirteen-year head start in manufacturing string-reinforced plastic film after it induced Lee to disclose Raven’s secret, confidential, or proprietary information.
[¶ 20.] The crux of Integra and Lee’s argument is that Raven’s unfair competition claim should have been rejected by the circuit court because Lee did not have a non-competition agreement with Raven. Thus, Integra and Lee conclude that not allowing Lee to work for Integra was anti-competitive. However, in
Rezatto,
this Court recognized that . non-disclosure agreements are not anti-competitive.
[¶ 21.] 4. Whether the circuit court erred in granting the permanent injunction.
[¶ 22.] Integra and Lee contend that the circuit court erred in “granting an overly broad injunction that was not specifically tailored to redress the harm alleged.” The circuit court granted Raven an injunction that prohibited Integra and Lee from “operating Integra’s [line], or any portion thereof, for a period of two years” and from “working on any project containing [a component of the Line] to manufacture string-reinforced plastic film for two years.” This Court reviews a circuit court’s decision to grant a permanent injunction under the abuse of discretion standard.
Halls v. White,
[¶ 23.] Permanent injunctions are authorized by SDCL 21-8-14, which provides:
Except where otherwise provided by this chapter, a permanent injunction may be granted to prevent the breach of an obligation existing in favor of the applicant:
(1) Where pecuniary compensation would not afford adequate relief;
(2) Where it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief;
(3) Where the restraint is necessary to prevent a multiplicity of judicial proceedings; or
(4) Where the obligation arises from a trust.
Four additional factors are considered in determining whether to award injunctive relief. These factors include: (1) whether the party to be enjoined caused the harm; (2) whether irreparable harm would be suffered if the injunction were not granted; (3) whether the party to be enjoined acted in bad faith or if the injury-causing behavior was an innocent mistake; and, (4) in balancing the equities, whether the hardship to be suffered by the enjoined party would be disproportionate to the benefit to be gained by the injured party.
Prairie Hills Water and Dev. Co. v. Gross,
[¶ 24.] The circuit court considered these factors and concluded that each had been met. The circuit court determined that: “Both Lee and Integra have caused and continue to cause harm to Raven by using Raven’s secret, confidential, or proprietary information”; Raven has experienced and will continue to experience irreparable harm as long as Lee and Integra use Raven’s secret, confidential, or proprietary information; Integra and Lee’s use of Raven’s secret, confidential, or proprietary information was not an innocent mistake; and, “the harm experienced by Lee and Integra if the permanent injunction [was] issued [wa]s not disproportionate to the harm incurred by Raven without the injunction.” Thus, the circuit court concluded that “it [wa]s appropriate to exercise its discretion and enter a permanent injunction in favor of Raven.” While Integra and Lee may disagree with the circuit court’s findings and conclusions on this issue, on this record, they cannot demonstrate that the issuance of the injunction was an abuse of discretion. 7
[¶ 25.] The circuit court is affirmed.
Notes
. The Proprietary Rights Agreement Lee signed stated:
Employee shall not directly or indirectly disclose or use at any time, either during or subsequent to the said employment, any secret or confidential information, knowledge, or data of Employer (whether or not obtained, acquired or developed by Employee) unless he shall first secure the written consent of Employer. Upon termination of his employment Employee shall turn over to Employer all notes, memoran-da, notebooks, drawings or other documents made, compiled by or delivered to him concerning any product, apparatus or process manufactured, used or developedor investigated by Employer during the period of his employment; it being agreed that the same and all information contained therein are at all times the property of the Employer.
. The Line is comprised of several integrated pieces of equipment that perform a process that produces string-reinforced plastic film. Specific details about the Line and the product it produces are not relevant to this appeal. Therefore, the specific details will not be disclosed or discussed because of the sensitive nature of this information.
. Raven argues "an issue exists about whether th[is] Court has jurisdiction to hear the appeal because [Integra] fail[ed] to appeal [a] modified permanent injunction” that was entered after the circuit court entered the original permanent injunction enjoining Integra’s operation of its line. Raven asserts that even if this Court reverses the original permanent injunction, the modified permanent injunction will remain as a final judgment. On this basis, Raven contends that this appeal is moot. However, after a thorough review of the record, Raven, Integra, and Lee were aware that the appeal from the original permanent injunction included the related modified permanent injunction.
See SEC v. Van Waeyenberghe,
. Raven argues Integra and Lee failed to preserve this issue for appeal because they did not raise it to the circuit court after their motion for summary judgment was denied. Raven suggests that "[b]y failing to raise preemption after the summary judgment hearing, [Integra and Lee] did not provide the [cjircuit [c]ourt the opportunity to correct any mistake made in denying summary judgment[.]” No prior South Dakota case has addressed this issue directly. Turning to other jurisdictions, it appears that after a circuit court denies a motion for summary judgment, there is no need to raise the same issue at trial to preserve it for appeal.
See Kahn v. CVS Pharmacy, Inc.,
. Raven asserts in its brief that "[although labeled as 'injunctive relief,’ the allegations in Count I sound in breach of contract.”
. If the contract claim survives, the tortious interference with contract claim must also survive. Although a separate cause of action, this tort is a protection of contractual rights, which this Court has long recognized.
See Hayes v. N. Hills Gen. Hosp.,
. Integra and Lee’s assertion that the injunction was overly broad rings hollow. Raven requested an injunction that was indefinite in duration, one which would last until another competitor discovered the specific process it used in its Line. The circuit court exercised its discretion, however, and issued an injunction that was for a period of two years, which was the amount of time Integra’s president testified would have been required to build its line without Lee. The circuit court's decision demonstrates that it tailored the injunction to the evidence and testimony presented at trial.