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NILSSEN v. MOTOROLA

April 25, 1997

OLE K. NILSSEN, Plaintiff,
v.
MOTOROLA, INC., et al., Defendants.



The opinion of the court was delivered by: SHADUR

 Ole Nilssen ("Nilssen") has brought suit against Motorola, Inc. and its subsidiary Motorola Lighting, Inc. ("Lighting") (collectively "Motorola," treated as a singular noun to avoid awkwardness) in connection with Motorola's alleged theft of Nilssen's trade secrets before Motorola's 1989 entry into the electronic ballast industry. Nilssen asserts claims for (1) breach of confidential relationship, (2) theft of trade secrets under the Illinois Trade Secrets Act ("Act" or "Illinois Act," 765 ILCS 1065/1 to /9) *fn1" and (3) quantum meruit/implied contract/unjust enrichment. *fn2"

 Both sides have now filed summary judgment motions under Rule 56, with Nilssen seeking partial summary judgment only as to liability (and not as to damages) and with Motorola asking for a total victory as a matter of law. At this point the cross-motions are fully briefed, with both sides having complied with this District Court's GR 12(M) and 12(N). *fn3" For the reasons stated in this memorandum opinion and order, Motorola's motion is granted in part and denied in part, while Nilssen's motion is denied.

 Summary Judgment Standards

 Familiar Rule 56 principles impose on a party seeking summary judgment the burden of establishing the lack of a genuine issue of material fact ( Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). For that purpose this Court is "not required to draw every conceivable inference from the record--only those that are reasonable"--in the light most favorable to the non-moving party ( Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991) and cases cited there). Where as here cross-motions are involved, it is necessary to adopt a dual perspective--one that this Court has often described as Janus-like--that sometimes involves the denial of both motions. And as the discussion in the body of this opinion will show, that is unfortunately true here in spades. *fn4"

 What follows in the Background section is limited to an undisputed version of events. Other facts that fit better into the substantive legal discussion will be included later in this opinion.

 Background

 Motorola is a leading manufacturer of electronic components and devices. Robert Galvin ("Galvin") was its Chief Executive Officer from 1959 to 1990. Galvin first learned of electronic ballast technology in the 1960s *fn5" --at a time when that technology was not yet mature--and looked into the possibility of developing electronic ballasts as a new Motorola business every few years thereafter (M. 12(M) PP16-17).

 Nilssen, a former Motorola employee who was fired in 1972, was president and owner of Innovation Center, Inc. at all times relevant to this dispute (Nilssen Dep. 7, 33-40). In a July 12, 1982 letter to Galvin, Nilssen first approached Motorola about possible business opportunities in the electronic ballast business in which Nilssen and Motorola might join forces (M. 12(M) P21). Galvin, interested in evaluating whether Nilssen had developed a technology that might finally allow Motorola to enter that industry, forwarded Nilssen's letter to Levy Katzir ("Katzir")--then Vice President and General Manager of Motorola's New Enterprises Group (M. 12(M) PP22-23). Katzir and Nilssen then met on October 25, 1982, but that meeting was unproductive and the parties took no further action on any of Nilssen's proposals (M. 12(M) P24).

 On February 7, 1986 Nilssen made a second pitch to Motorola, writing Gerhard Schulmeyer ("Schulmeyer")--then General Manager of Motorola's Automotive and Industrial Electronics Group ("Group")--to suggest that he had "available for exclusive licensing proprietary technology that permits the development of electronic ballasts of substantially reduced cost as compared with the least costly of presently available electronic ballasts" (N. 12(N) P25). Nilssen met with several Motorola representatives on March 18 (M. 12(M) P26; N. 12(N) P26), and on March 22 he followed up with a letter to Wallace Leyshon at Motorola, reiterating several of the key issues discussed at the March 18 meeting. That letter disclosed (1) Nilssen's understanding of the key accounts in the electronic ballast industry, (2) a bill of materials for Nilssen's prototype ballast, (3) Nilssen's figures regarding the expected cost savings and profitability from use of his ballast and (4) Nilssen's analysis of the energy savings to result from his technology (M. 12(M) P28).

 Nilssen and Motorola officials met several more times in 1986, but ultimately Motorola again decided not to pursue the electronic ballast business (M. 12(M) PP29-30). Nilssen wrote Galvin on November 17, 1986 criticizing that decision, and Galvin responded in a December 2 letter to Nilssen (M. 12(M) PP31-33; N. 12(N) P33):

 
We have been giving attention to this business opportunity for more than a score of years. We have evaluated many technologies. We recognize that the trend in the application of electronics in the ballast has been one that has grown very slowly. We do not interpret that your technology is of the nature that it will hasten this very extensively, and therefore we conclude that as a business strategy, it is not a good business for us to go into at this time, or for that matter at any time in the near future.
 
So we just plain have a difference of opinion with regard to business opportunity. Clearly, one such as yourself could prove our judgment wrong, but we have nevertheless made, I believe, a very objective judgment and we do not intend to enter this business.

 Nilssen then wrote Galvin a December 6 letter, emphasizing that Motorola had not yet seen Nilssen's circuits and was thus not competent to judge the adequacy of his technology (M. 12(M) P34; N. 12(N) P34).

 In mid-1987 Motorola's Group began another review of Nilssen's technology. Schulmeyer gave Phil Gunderson ("Gunderson")--then a Group Vice-President--one of Nilssen's earlier communications about electronic ballasts and asked him to "look into it" (N. 12(N) P35). Gunderson found Nilssen's ideas worthy of a closer look, and on September 4, 1987 Nilssen and Motorola executed a Non-Disclosure Agreement (the "1987 Agreement") to establish the terms under which Nilssen would provide additional confidential information to Motorola (N. 12(N) P36). Essential provisions of the 1987 Agreement included these:

 
* "Confidential Information" was defined as "any device, graphics, written information or information in other tangible forms that is disclosed, for evaluation purposes, to Motorola by [Nilssen] relating to [electronic ballasts] and that is marked at the time of disclosure as being 'Confidential' or 'Proprietary.'"
 
* Information disclosed orally or visually and identified at the time of such disclosure as "Confidential" was to be considered as "Confidential Information" only if reduced to tangible form, marked "Confidential" and transmitted to Motorola within 30 days of such oral or visual disclosure.
 
* "Confidential Information" was explicitly defined to exclude "any information which: (a) Is or becomes publicly known through no wrongful act on Motorola's part; or (b) Is, at the time of disclosure under this Agreement, already known to Motorola without restriction on disclosure; or (c) Is, or subsequently becomes, rightfully and without breach of this Agreement, in Motorola's possession without an obligation restricting disclosure; or (d) Is independently developed by Motorola without breach of this Agreement; or (e) Is furnished to a third party by [Nilssen] without a similar restriction on the third party's rights; or (f) Is explicitly approved for release by written authorization of [Nilssen]."
 
* Motorola was not to "disclose the 'Confidential Information' to any third party" nor to "use the 'Confidential Information' for any purpose" other than "evaluation purposes, which evaluation is to be completed within two months from [September 1, 1987]." *fn6"

 From September 1987 to May 1988 Gunderson and other Motorola personnel evaluated its possible entry into the electronic business industry (M. 12(M) PP44-45; N. 12(N) P45). During that period Nilssen "relayed a lot of information" to Motorola employees--including Galvin--on the subject of electronic ballasts in the form of both documents and oral discussions (M. 12(N) PP24, 31). That information comprised both business information--including projections of market size, potential marketing opportunities and estimated manufacturing costs--and technical information as to the design of Nilssen's electronic ballast (M. 12(M) P44). Among other disclosures Nilssen made in that second category, Nilssen provided Motorola with a prototype ballast containing many of his designs, and he later designed and built an additional prototype based on a set of performance specifications identified by Gunderson (M. 12(N) PP27-28).

 During that same September 1987 to May 1988 period, Gunderson also had Bob Elliott ("Elliott")--a Motorola product manager and engineer--and David Bergemann ("Bergemann")--a marketing specialist--take an independent look into the electronic ballast industry (M. 12(M) P46; Gunderson Dep. 79, 110-11; Alling Dep. 37-38). Bergemann conducted a market study and prepared a 150-page report based on information from the United States Department of Commerce and on interviews with over 27 individuals, including Motorola employees, Nilssen and outside consultant William Alling ("Alling") (M. 12(M) P46; M. Ex. Tab 19). In April 1988 Bergemann and Elliott prepared a "Presentation on Electronic Ballasts for Fluorescent Lamps" for the Group, detailing financial and technical objectives for Motorola's potential entry into the electronic ballast industry (M. 12(M) P47; M. Ex. Tab 21).

 On May 6, 1988 Fred Tucker ("Tucker")--then Group's Vice-President and General Manager--decided that it still would not pursue that business. Tucker instructed Gunderson to stop work on the project (M. 12(M) P48). On May 20 Gunderson wrote to Nilssen to confirm that Group had decided not to enter the business, explaining that it would be "too great a departure from our core business plans" (M. 12(M) P49). Gunderson returned to Nilssen all documents that Nilssen had marked "confidential" pursuant to the 1987 Agreement, although Nilssen now testifies that he did not then receive all of those documents (M. 12(M) P50; N. 12(N) P50).

 In May 1988 Nilssen wrote to Galvin and again asked him to reconsider Group's decision (M. 12(M) P54). Galvin, Gunderson and other Motorola employees then proceeded with a series of meetings to discuss Group's analysis and the Nilssen technology (M. 12(M) P55; M. 12(N) P55). In August 1988 Galvin assigned Katzir--still with the New Enterprises Group--to evaluate the electronic ballast business once again. Katzir asked that Gunderson assist him in that task, and one of the latter's first assignments was to detail to Katzir all that he knew of the industry (M. 12(M) P57; N. 12(N) P57; Gunderson Dep. 222). *fn7" Katzir and Gunderson proceeded to conduct a further evaluation of the industry's market, although both the scope of their research and the degree to which their review was independent of Nilssen contributions are matters of dispute (M. 12(M) PP58-62; N. 12(N) PP58-62).

 After expressing concerns to Nilssen about his history of sending Motorola unsolicited material and as to his possible litigiousness, Motorola sought to modify the confidentiality agreement governing Nilssen's disclosures (M. 12(M) P63; Nilssen Dep. 347; M. Ex. Tab 30). On September 27, 1988 Nilssen, Gunderson (on behalf of Motorola) and Alling (as an outside consultant to Motorola) executed a new Non-Disclosure Agreement (the "1988 Agreement" *fn8" ) that provided in pertinent part (M. 12(M) PP68-71; M. Ex. Tab 31):

 
* Nilssen agreed to disclose to Alling on a confidential basis his pending patent applications covering inventions embodied in the prototype ballasts that Nilssen sent to Motorola. All other information disclosed to Alling was "on a non-confidential basis and without obligation of any kind."
 
* Any future confidential disclosures by Nilssen to Motorola were limited to pending patent applications, which Motorola agreed to receive in confidence. "Any other information" that Nilssen disclosed was to be "on a non-confidential basis and without obligation of any kind, unless Motorola agreed, in writing to make an exception." *fn9"
 
* Motorola had no obligation to maintain the confidentiality of any information that became publicly available.
 
* Motorola and Nilssen "agreed to discuss the confidentiality of information that Motorola has previously received from [Nilssen] in regard to electronic ballasts," the stated goal being "to more specifically identify what it is that should be treated as confidential."

 Alling then completed a "Solid State Ballast Report" for Motorola on October 15, 1988. That report evaluated both technical and business issues involved in Motorola's possible entry into the electronic ballast business, and it concluded with a recommendation that Motorola should go forward with the business using Nilssen's technology (M. 12(M) P78; M. Ex. Tab 33).

 Meanwhile, in September 1988 Nilssen met with Katzir, Gunderson and Motorola attorneys to discuss possible compensation for Nilssen's work. Katzir asked Nilssen to propose a royalty on a per ballast basis (M. 12(M) PP74-75). When Nilssen refused to do so, Katzir warned that if the parties could not agree on compensation Motorola would "go ahead without [him]" (M. 12(M) P76). Gunderson followed up on that meeting with an October 3 letter to Nilssen that outlined three possibilities for Motorola's entry into the electronic ballast industry: (1) entry without Nilssen's participation and without his technology, (2) entry using only a limited amount of Nilssen's technology or (3) entry with Nilssen's participation and using substantially all of his technology (M. 12(M) P77). Importantly, Gunderson's letter also confirmed the parties' agreement, based on a meeting that they had held the next day after signing the 1988 Agreement, as to identifying whether any of Nilssen's previous disclosures were to be treated as confidential (M. Ex. Tab 32):

 
This is to confirm the various "to-do's" that resulted from our meeting with you last Wednesday, and also to confirm some of the conclusions we reached.
 
Ole's [Nilssen's] "to-do's":
 
* * *
 
2. Review your previously-submitted documents and determine whether any of them should have been stamped as "confidential". Our intent is to more specifically identify the information that your regard as confidential.

 On October 18 Nilssen wrote to Galvin, criticizing Katzir's preference for an "arm's length relationship whereby Motorola would merely license from [Nilssen] a few specific patents." Nilssen argued that Katzir's position "effectively prevents the formation of what I believe would be by far the best arrangement for Motorola as well as myself: namely, the establishment of a partnership-like relationship...." (M. Ex. Tab 34). On November 2 Galvin responded (M. Ex. Tab 35):

 
While we have not yet completed our business evaluation, and we do not plan to decide prior to year end, it is important that I communicate to you at this time Motorola's position, so that we can jointly determine, as soon as possible, whether there is a good foundation for a mutually acceptable relationship, should we decide to pursue the Electronic Ballast business.
 
It is important to make this determination at this time since it seems that there is a significant gap between our respective positions regarding the nature of the relationship, and the compensation level for your patents and know-how.

 Galvin proposed a "framework" for "final negotiations" in which Nilssen's compensation would be a royalty of "around 0.5% on Sales" plus "a certain minimum" for technical assistance. Finally, Galvin offered to continue discussions "if there is a positive determination that a financial relationship with you appears doable" (id.).

 Nilssen responded to Galvin with a November 8 letter suggesting that Motorola's "compensation proposed" was "unreasonably low" (M. Ex. Tab 36). Nilssen's position was that he be paid "one third of the total value clearly attributable to [his] contribution" (id.). *fn10" In light of that "significant gap" between Nilssen and Motorola, Galvin sent Nilssen a November 22 letter terminating their discussions. Galvin relatedly directed Gunderson to return to Nilssen any confidential documents that Motorola had received (M. 12(M) P 84; M. Ex. Tab 38). Although Gunderson sent Nilssen a December 19 letter returning those confidential documents, Gunderson kept one "archive copy" for Motorola's files (N. 12(N) P84; M. Ex. Tab 39). Nilssen was never compensated for any of his disclosures to or his work with Motorola (N. R. Mem. 12).

 Once discussions with Nilssen were terminated, Alling recommended that Motorola communicate with Stevens about his electronic ballast technology. In mid-November 1988 Stevens made a two-day presentation to Motorola executives and engineers in which he demonstrated his own "Super Ballast"--a design that had earlier been licensed to Calmont Technology Industries (M. 12(M) PP91-92). Motorola decided to enter the electronic ballast industry in February 1989, and it incorporated Lighting for that purpose on March 1, 1989 (M. 12(M) P94; N. 12(N) P94; M. 12(M) R. P16). Lighting hired Stevens and executed a Licensing Agreement for the exclusive use of his electronic ballast technology on April 7, 1989 (M. 12(M) P96; M. Ex. Tab 41). Stevens and other Motorola engineers participated in the improvement of electronic ballast design until December 1990, at which time Lighting completed its final design so that it could proceed to production (M. 12(M) P105).

 Nilssen's Illinois Act Claim

 Nilssen's Illinois Act claim against Motorola for theft of trade secrets requires that he demonstrate (1) the existence of a protectable "trade secret" (as defined in Act § 2(d)) and (2) Motorola's "misappropriation" (as defined in Act § 2(b)) of that trade secret ( Mangren Research & Dev. Corp. v. National Chem. Co., 87 F.3d 937, 942-43 (7th Cir. 1996)). Nilssen suggests that he has proved each of those elements as a matter of law, while Motorola correspondingly argues that Nilssen's claim fails as a matter of law with respect to each element. This opinion addresses the two elements in turn.

 Existence of a "Trade Secret"

 Act § 2(d) defines a potentially actionable "trade secret" as:

 
information, including but not limited to, technical or nontechnical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of ...

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