United States District Court, Central District of Illinois, Springfield Division
September 16, 1993
GLENAYRE ELECTRONICS, LTD., PLAINTIFF,
JOEL SANDAHL, INDIVIDUALLY, AND COMPLEX SYSTEMS, INC., AN ILLINOIS CORPORATION, DEFENDANTS.
The opinion of the court was delivered by: Richard Mills, District Judge:
A case of intellectual property.
The specific issue is whether trade secrets were
We conclude not.
In July of 1989, Glenayre Electronics, Ltd. (Glenayre)
purchased Quintron Corporation (Quintron) located in Quincy,
Illinois, which became known as Glenayre Quincy. Its primary
function was the development and manufacture of paging systems.
In fact, two years earlier, Quintron began negotiations with
SimulComm Partnership (SimulComm) for the acquisition or
license of technology related to paging systems known as SCS
During the negotiations in August of 1988, Joel Sandahl, the
managing director of SimulComm, left it and joined Quintron.
After Mr. Sandahl arrived at Quintron, a final licensing
agreement was executed whereby Quintron would be the exclusive
licensee of the SimulComm system. In January of 1990, Mr.
Sandahl left Quintron, along with two other engineers, and
formed Complex Systems (Complex). For approximately the next
six months, Mr. Sandahl, operating through Complex, continued
to provide consulting services to Glenayre.
Meanwhile, Glenayre claims that it was independently
developing a new paging system entitled "Omega Gold." The Omega
Gold system includes valuable trade secrets which are
Glenayre's exclusive property.
Consequently, it has determined that several patentable
inventions are present in the Omega Gold system and is
currently in the process of obtaining patent protection for
As part of this process, several technical documents,
including patent applications, have been prepared by Glenayre's
personnel and patent counsel. Glenayre maintains that it has
not published or otherwise disseminated these documents or
materials; nevertheless, it believes that Defendants obtained
Glenayre's proprietary and trade secret information which they
could use to acquire a competitive advantage.
In fact, Complex is developing a new paging system referred
to as C-NET. At the time these proceedings were initiated,
Complex's design of the C-NET system was the subject of an
arbitration proceeding in Quincy, Illinois, between Glenayre
and Complex regarding Complex's alleged violation of its
noncompete agreement with Glenayre.
During a pre-trial hearing in relation to the arbitration
proceedings, Mr. Sandahl stated that an atto had examined both
the Glenayre and C-NET patent applications and found that
Glenayre's application was a "clone" of Complex's. It is this
event that led Glenayre to the conclusion that Complex somehow
obtained a copy of its confidential and proprietary information
relating to Omega Gold.
On April 3, 1992, Glenayre filed a complaint: Count I alleges
common law misappropriation of trade secrets; Count II asserts
a claim for statutory misappropriation of trade secrets; and
Count III alleges that Defendants tortiously interfered with
contractual relations. The Court granted the motion for a
preliminary injunction; however, it allowed both parties to
continue to pursue patent applications on the technology at
issue. On May 24, 1993, the parties stipulated to a dismissal
of Counts I and III. This cause is before the Court on
Defendants' motion for summary judgment on Count II of the
complaint, pursuant to Fed. R.Civ.P. 56.
II. SUMMARY JUDGMENT
Under Fed.R.Civ.P. 56(c), summary judgment shall be granted
if the record shows that "there is no genuine issue as to any
material fact and that the moving party is entitled to a
judgment as a matter of law. Black v. Henry Pratt Co.,
778 F.2d 1278, 1281 (7th Cir. 1985). The moving party has the burden of
providing proper documentary evidence to show the absence of a
genuine issue of material fact. Celotex Corp. v. Catrett,
477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine
issue of material fact exists when "there is sufficient
evidence favoring the nonmoving party for a jury to return a
verdict for that party." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249, 106 S. Ct. 2505, 2511, 91 L. Ed.2d 202 (1986).
Unquestionably, in determining whether a genuine issue of
material fact exists, the evidence is to be taken in the light
most favorable to the nonmoving party. Adickes v. S.H. Kress &
Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Once
the moving party has met its burden, the opposing party must
come forward with specific evidence, not mere allegations or
denials of the pleadings, which demonstrates that there is a
genuine issue for trial. Howland v. Kilquist, 833 F.2d 639 (7th
Cir. 1987). "A scintilla of evidence in support of the
nonmovant's position is insufficient to successfully oppose
summary judgment; 'there must be evidence on which the jury
could reasonably find for the [nonmoving party].'" Brownell v.
Figel, 950 F.2d 1285 (7th Cir. 1991) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505,
2511-12, 91 L.Ed.2d 202 (1986)). Moreover, a party opposing a
motion for summary judgment cannot merely point to "some
circumstantial tidbits" showing that the moving party did the
act on which the complaint is based; rather, it "must 'do more
than show that there is some metaphysical doubt as to the
material facts.'" Price v. Rochford, 947 F.2d 829 (7th Cir.
1991) (quoting Matsushita Elec. Industrial Co., Ltd v. Zenith
Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89
L.Ed.2d 538 (1986)).
A. Defendants' Motion for Summary Judgment
Count II alleges that Defendants violated the Illinois Trade
Secrets Act, 765 ILCS
1065. Defendants contend that they are entitled to summary
judgment on this count because Glenayre has not produced any
facts demonstrating that Defendants "had access to, let alone
'misappropriated', its alleged trade secrets." Rather, Glenayre
has offered only "beliefs." Defendant's employees have denied
knowledge of Omega Gold's trade secrets.
Glenayre asserts that there is sufficient circumstantial
evidence showing the existence of genuine issues of material
fact. With the summary judgment standard in mind, Glenayre
requests that the Court also consider that in trade secret
Plaintiffs . . ., who must prove by a fair
preponderance of the evidence disclosure to third
parties and use of the trade secret by the third
parties, are confronted with an extraordinarily
difficult task. Misappropriation and misuse can
rarely be proved by convincing direct evidence. In
most cases, plaintiffs must construct a web of
perhaps ambiguous circumstantial evidence from
which the trier of fact may draw inferences which
convince him that it is more probable than not
that what plaintiffs allege happened did in fact
take place. Against this often delicate construct
of circumstantial evidence there frequently must
be balanced defendants and defendants' witnesses
who directly deny everything.
Greenberg v. Croydon Plastics Co., 378 F. Supp. 806, 814
1. Summary of submitted arguments and evidence
The principals of Complex Systems, conceived of C-NET in
April or May of 1990 and prepared brochures and displayed a
minimally functioning model at a September 1990 trade show.
C-NET was beta tested in March, 1991 and was ready to be
installed or delivered at that time. Nearly six months later,
Defendants had a brochure prepared in September 1991 describing
C-NET Platinum and began beta testing on part of the unit some
Glenayre states that Defendants' efficiency in developing the
C-NET System was the result of their incorporation of certain
technology which they had previously licensed to it. The Court
notes that this matter is presently being arbitrated in
Glenayre conceived of the Omega Gold system in September
1990. However, it was not due for a beta test or for the market
place until a later date.
Basically, Glenayre claims that the 7 employees which left it
for Complex must have supplied information appropriated from
its trade secrets in order for it to develop the C-NET Platinum
technology. Otherwise, Complex systems would not have been able
to develop its paging technology so rapidly. Glenayre asserts
that a review of the technical documents indicates that
Defendants appear to have developed the technology at issue
"out of thin air." Glenayre does not cite to any set of
documents or records or provide any affidavits in support of
Glenayre points to an incident involving its former employee,
Joel Sandahl, which occurred while the parties were attending
a pre-hearing conference for arbitration. During Complex's
attorney's argument, Sandahl blurted out that he had an
attorney review both the Omega Gold and C-NET patent
applications and that the attorney had concluded that Omega
Gold was a clone of C-NET. Sandahl identified the attorney that
had reached that conclusion after declining to represent
Sandahl due to a conflict of interest between him and Glenayre.
However, Glenayre obtained an affidavit from that attorney
stating that Glenayre was not his client, he had not previously
heard the name "Glenayre" or its predecessor "Quintron", and he
had never been shown a patent application from Glenayre.
Defendant states that Sandahl did send C-NET material to the
attorney, who declined representation because he was
prosecuting a similar patent application and therefore had a
conflict of interest. Sandahl subsequently spoke to Glenayre's
president, Jack Hurley, who informed him that Glenayre was
developing Omega Gold which was equivalent to C-NET. Due to
this revelation, Sandahl assumed that the attorney had declined
because he was processing Omega Gold's patent application.
Consequently, Sandahl's comment during the arbitration
procedure was the result of a misunderstanding, not
misappropriation. Moreover, Sandahl denied having any
knowledge, access to, or possession of Omega Gold information.
Also, Glenayre claims that Michael Tanner, one of its former
employees had access to Omega Gold trade secrets, because he
"was to be an integral part of the Omega Gold team." On January
16, 1991, Tanner accepted a higher paying position with
Complex. However, he did not submit his resignation to Glenayre
until five days later. Glenayre poses that this delay was for
the purpose of Tanner learning as much as possible about Omega
Gold. Glenayre also points to the fact that at Tanner's
deposition, he initially testified that he had never heard of
the Omega Gold project. Later, after examining a "to do list"
he had prepared in December of 1990, he remembered that he had
been assigned to perform some design work on the "brains" of
the system. After remembering that, Tanner stated that he could
not recall anything that he had done or seen regarding Omega
Gold. Plaintiff maintains that Tanner's deposition testimony
and the circumstances under which he left Glenayre imply that
he took trade secrets regarding Omega Gold with him.
Defendants state that the first mention of the technology at
issue appears in documents prepared months after Tanner's
departure. Also, when Tanner left, Glenayre's vice-president
sent him a letter stating that Glenayre believed that he had
trade secrets which should be kept confidential. Tanner replied
that he would respect the confidentiality of any valid trade
secrets he possessed and requested that Glenayre identify such
information which he possessed. Glenayre did not respond to
The Court notes that the evidence Glenayre provided shows
that Tanner was given a memo regarding the future development
of Omega Gold Technology in September of 1990. However,
Glenayre has not identified any trade secret regarding Omega
Gold which Tanner worked on prior to his departure. Tanner's
"to do list" was prepared merely one month prior to his
departure. In fact, Plaintiff states:
"Tanner was to be an integral part of the Omega
Gold team. In hindsight, including Tanner into the
inner sanctum of Omega Gold would be a disastrous
In addition, Glenayre points to an illustration generated by
Complex's employee, Steve Sandercock. The illustration has the
words "Omega Gold" with the sign "don't or no" superimposed
and, at the top of the page the phrase "Cloning Prohibited"
while at the bottom appears "C-NET Platinum". Glenayre contends
that a reasoned interpretation of this illustration "is that
Complex had obtained Omega Gold information and Sandercock
either believed that C-NET Platinum was a clone of Omega Gold"
and that Defendants "had detailed knowledge of Omega Gold and
concluded that C-NET Platinum was a 'clone' of Omega Gold."
Defendants contend that there is no evidence that Sandercock
actually obtained trade secrets. Defendants point to the
deposition of Glenayre's Rule 30(b)(6) designee, which states:
Q. Does Glenayre have any evidence suggesting that
any person from Glenayre leaked information to
A. I'm not aware of any such evidence.
Finally, Plaintiff asserts that Motorola has left a "smoking
gun" in the form of a memorandum from one of its attorneys to
Defendants. The memorandum discusses a draft of a proposed
settlement agreement between Glenayre and Complex and expresses
concerns over cloning products covered by trade secret
protection. Glenayre argues that the memo shows that as early
as October of 1991, Complex was concerned that C-NET Platinum's
"cloning" of Omega Gold would be discovered and that Glenayre
would file suit. The Court notes that Glenayre does not state
which action(s) the settlement memorandum addressed. Therefore,
pursuant to Fed. R.Evid. 408, the Court questions the
admissibility of the memorandum.
2. Law and analysis
To demonstrate a misappropriation of trade secrets, the
plaintiff must show that:
1) it has a trade secret; 2) the defendant obtained the secret
while in a confidential relationship with the plaintiff: 3) the
defendant disclosed the secret in breach of the confidential
relationship; and 4) the defendant profited from the
disclosure. Etri v. Nippon Miniature Bearing Corp., 1989 WL
99575 (N.D.Ill. Aug. 18, 1989). Illinois courts have recognized
that an employee whose employment has been terminated may not
take "'confidential and particularized plans or processes
developed by the employer', but may take 'generalized skills
and knowledge acquired during his tenure with the former
employer.'" Smith Oil Corp. v. Viking Chemical Co.,
127 Ill. App.3d 423, 82 Ill.Dec. 250, 253, 468 N.E.2d 797, 800 (2d
Dist. 1984) (quoting Schulenberg v. Signatrol, Inc., 33 Ill.2d 379,
212 N.E.2d 865 (1965)). One who has worked in a particular
field cannot be forced to delete from his mind all of the
knowledge and expertise gained through his or her experience.
Smith Oil Corp., 82 Ill. Dec. at 253, 468 N.E.2d at 800.
Accordingly, the question before the Court is whether
Glenayre has provided sufficient evidence, from which the jury
could reasonably find for it, that Defendants could not have
developed the C-NET Platinum technology so quickly on their own
after leaving Glenayre's employment, unless they
misappropriated its trade secrets. The Court concludes that
Plaintiff has not.
After examining the evidence in the light most favorable to
Plaintiff, the Court finds that there is nothing, other than
speculation and innuendo, indicating that Defendants had
possession of Glenayre's trade secrets. Glenayre has not
provided any direct evidence of misappropriation, and the
circumstantial evidence provided is too thin a reed to
withstand Defendants' motion. There is no doubt that the
gentlemen who left Glenayre's employment are highly
knowledgeable and experienced regarding paging system
technology. These former employees were not required to leave
their skills at Glenayre. Glenayre's evidence does not create
a question of material fact as to whether Defendants' product
development was the result of trade secret misappropriation
instead of the result of the Defendants' own expertise and
Ergo, Defendants' motion for summary judgment on Count II is
ALLOWED. Plaintiff's complaint is DISMISSED WITH PREJUDICE.
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