Electro-Craft Corp. v. Controlled Motion, Inc.

ECC did not identify with sufficient precision the alleged secrets in its IBM brushless motor. It did not introduce the motor's dimensions, tolerances, or comparable technical data, while the trial court referred generally to secret “design procedures” but enjoined only copying of dimensions. That mismatch made it impossible to determine what information was supposedly secret or to craft an injunction that protected ECC without unduly restricting legitimate competition.

ECC's moving-coil claim was sufficiently specific. ECC identified the 1125-03-003's particular combination of dimensions, tolerances, adhesives, and manufacturing processes as the claimed secret information. The claim was not an impermissibly broad assertion of ownership over general engineering skill, the entire 1125 product line, or the general process of adapting a motor to a customer's needs.

Under Minn. Stat. § 325C.01, subdivision 5, information is a trade secret only if it derives independent economic value from not being generally known or readily ascertainable and is subject to reasonable efforts to preserve its secrecy. The statute carries forward much of Minnesota common law, but its express reasonable-efforts requirement controls.

The record supported the trial court's conclusion that the specific combination of features in the 1125-03-003 was not generally known or readily ascertainable. The motor's detailed dimensions, tolerances, and production combination were unique, and the evidence conflicted over how long reverse engineering would take. The fact that individual features were known in the industry did not prevent the particular combination from potentially qualifying.

The record also supported the conclusion that secrecy gave ECC economic value. ECC did not have to be the only company capable of making a comparable motor. It was enough that a competitor could gain a valuable market position by acquiring the information without incurring the substantial time and expense otherwise needed to develop a comparable product.

But ECC did not take reasonable measures to keep the information secret. Its facilities had lax access controls, discarded technical materials were not destroyed, and drawings and documents were generally not secured. Physical security alone was not necessarily decisive, but ECC's confidentiality practices were likewise inadequate.

ECC did not mark technical documents confidential, restrict employee access to drawings, identify specific secrets in a policy statement, or warn visitors during informal tours. It sent drawings, dimensions, and parts to customers and vendors without special protection, and it held public open houses at manufacturing plants. In an industry where employees commonly moved between competing motor manufacturers, ECC particularly needed to give clear notice that this nonobvious technical information was confidential.

The employees' broad confidentiality agreements and the exit interviews did not cure ECC's failures. The agreements did not identify what information ECC actually regarded as secret, and the exit interviews occurred only after the employees were preparing to join Mahoney's venture. Trade-secret protection requires an ongoing course of conduct showing that the employer consistently treats the information as secret, not a last-minute effort to prevent former employees from competing.

Misappropriation under the Act requires acquisition, disclosure, or use of a trade secret by improper means, including a breach of a duty to maintain secrecy. Without a proven trade secret, wrongful conduct alone cannot support a statutory misappropriation claim; otherwise, trade-secret law would become a general catchall for industrial wrongdoing.

In the employment setting, a duty of confidentiality extends only to information the employer has actually treated as secret and clearly communicated as confidential. ECC's failure to take reasonable secrecy measures meant that its employees lacked fair notice of a duty not to use the particular motor dimensions, materials, and processes at issue.

The general confidentiality agreements did not establish the required duty because they merely prohibited disclosure of unspecified “secret or confidential” information. Since ECC never consistently identified or treated the relevant information as secret, the agreements could not transform the employees' general skill, experience, and state-of-the-art knowledge into protected trade-secret information.

The temporary injunction barred CMI from selling a D.C. servo motor containing a non-market component with dimensions within 10 percent of ECC's 1125 motor. CMI argued that its components were available on the open market because Magnedyne had quoted a price to manufacture a CMI armature. The court rejected that reading because it would make the injunction meaningless: any copied component would become “available” merely by finding a manufacturer willing to reproduce it.

CMI's interpretation was an unreasonable pretext for continuing to sell motors that plainly fell within the injunction. Although the injunction was broad and may have made CMI's continuing operations difficult, CMI was required to seek modification or appellate review rather than disregard a court order.

The trial court properly rescinded the unsupported $50-per-motor damages award but retained CMI's liability for ECC's bond premiums. CMI's violation rendered the bond ineffective as protection for ECC, so reimbursement of the premiums was an appropriate civil-contempt remedy.