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RRK Holding Co. v. Sears

February 14, 2007

RRK HOLDING COMPANY, PLAINTIFF,
v.
SEARS, ROEBUCK AND CO., DEFENDANTS.



The opinion of the court was delivered by: Honorable David H. Coar

MEMORANDUM OPINION AND ORDER

Before this Court is defendant Sears, Roebuck and Co.'s ("Defendant" or "Sears") motion for summary judgment against plaintiff RRK Holding Company ("Plaintiff"). For the reasons set forth below, Defendant's motion for summary judgment is GRANTED in part and DENIED in part.

I. FACTS

Plaintiff RRK Holding Company was known as Roto Zip Tool Corporation ("Roto Zip") prior to July 2003, and sold a cutting tool called the rotary saw ("spiral saw") and its attachments prior to 2003. Defendant is a major U.S. retailer. Sears Canada Inc. is a separate, publicly-held Canadian corporation. At all relevant times in this suit, Defendant owned approximately 55% of the common shares of Sears Canada. Choon Nang Electrical Appliance Manufacturing Ltd. ("Choon Nang") is a Chinese company that manufactures a variety of power tools. Manufacturers Sales Associates ("MSA") is a sales representative for several foreign companies, and sells tools to retail outlets. During the relevant time, MSA represented Choon Nang in North America.

On March 2, 1999, Robert Kopras and Michael Clancy from Roto Zip met with Ray Holbrook and Brenda Coffee from Sears. At the March 2, 1999 meeting, Roto Zip showed its concept of a spiral saw converted into a plunge router (the combination tool) to Sears. Kopras and Clancy brought a confidentiality agreement to the March 2, 1999 meeting, and everyone agreed that the disclosure would be confidential. Defendant wanted to prepare its own nondisclosure statement. On March 11, 1999, Defendant signed a Non-Disclosure Agreement ("NDA") with Roto Zip. Among other things, the NDA provided that "the receiving party shall have no obligation to preserve the confidential nature of any Confidential Information which...is or becomes available to any member of the public by other than unauthorized disclosure, or...was or is independently developed by the receiving party or any of its Sources or Affiliates." Discussions between Roto Zip and Defendant with respect to the proposed combination tool broke down over the price point issue, and Roto Zip never manufactured the proposed product to Defendant.

In 1999 and 2000, Ralph Jones was a power tool buyer for Sears Canada. In that capacity, Jones had contact with Steve Fong of Choon Nang. In late 1999, Jones and Fong discussed a Choon Nang-manufactured cutting tool similar to the Roto Zip Spiral Saw for sale in North America. Choon Nang decided to design a tool that combined the spiral saw and plunge base router. On June 30, 2000, Choon Nang applied for a design patent from the British Patent Office. Defendant claims that the application showed its cutting tool with the plunge base router attachment. Plaintiff claims that the application did not show a combination tool where a spiral saw having a handle or depth guide permitted the tool to be used with one hand or depth guide.

In December 2000, MSA, on behalf of Choon Nang, met with Holbrook, and Holbrook was impressed with Choon Nang's spiral saw development. In October 2001, Defendant began selling the Choon Nang tool, which was named the Sears Craftsman All-in-One Cutting Tool. Some versions of the All-in-One Cutting Tool included, among other accessories, a plunge base router attachment. In August 2001, about two months prior to Defendant's first sale of the Allin-One Cutting Tool, Roto Zip displayed a Roto Zip Spiral Saw with a plunge base router attachment at the National Hardware Show in Chicago.

Plaintiff alleges that Holbrook of Sears disclosed the combination tool concept, a trade secret, to Jones of Sears Canada subsequent to the March 2, 1999 meeting in violation of the NDA. Jones then discussed the concept with Choon Nang, who designed what became the Sears Craftsman All-in-One Cutting Tool. The trade secret alleged by Plaintiff in this lawsuit is the concept of a combination product consisting of a spiral saw and an attachable plunge base to permit the product to be also used as a plunge-base router. Plaintiff's and Defendant's deponents give varying accounts as to whether it was common knowledge that plunge base router attachments could also be attached to cutting tools prior to March 2, 1999. Plaintiff claims that because Holbrook disclosed the combination tool trade secret to Jones, who disclosed to Choon Nang, Plaintiff suffered excessive economic loss from reduced sales of the combination tool.

On June 10, 2004, and amended on May 26, 2005, Plaintiff filed its complaint with this court against Defendant, alleging Breach of Contract, Trade Secret Misappropriation, and Unjust Enrichment. Defendant moves for summary judgment on all three counts.

II. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, along with any affidavits, show there is no genuine issue of fact. Such a showing entitles the moving party to judgment as a matter of law. Fed. R. Civ. P. 56; Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Lucas v. Chicago Transit Authority, 367 F.3d 714, 720 (7th Cir. 2004). A genuine issue of material fact exists only when a reasonable factfinder could find for the nonmoving party, based on the record as a whole. The court does not weigh the evidence and it does not make credibility determinations. Instead, the court makes all reasonable inferences in favor of the nonmoving party. Reeves v. Sanderson Plumbing Prod., Inc., 530 U.S. 133 (2000); EEOC v. Sears, Roebuck & Co., 233 F.3d 432, 436 (7th Cir. 2000). If a party fails to present proof on an essential element of his or her case, then all other facts become necessarily immaterial. Ribando v. United Airlines, Inc., 200 F.3d 507, 509 (7th Cir. 1999).

III. ANALYSIS

A. Trade Secret Misappropriation

The Illinois Trade Secret Act ("ITSA"), 765 ILCS 1065/1, under which this dispute is governed, requires that the plaintiff of a trade secret misappropriation claim demonstrate: (1) the information at issue was a trade secret, and (2) that it was misappropriated and used in the defendant's business. Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, ...


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