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Miller UK Ltd. v. Caterpillar Inc.

United States District Court, N.D. Illinois, Eastern Division

March 31, 2017

MILLER UK LTD. and MILLER INTERNATIONAL LTD., Plaintiffs,
v.
CATERPILLAR INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          Andrea R. Wood United States District Judge.

         At the conclusion of a trial that extended for nearly eight weeks, a jury returned a verdict in favor of Plaintiff Miller UK Ltd. on its claims against Defendant Caterpillar Inc. for breach of contract and statutory trade secret misappropriation, and awarded Miller compensatory damages of $24.9 million and exemplary damages of $49.7 million on the statutory claim and $16 million on the contract claim. The jury also returned a verdict in favor of Caterpillar on its counterclaims against Miller for statutory commercial disparagement and common law defamation. Now before the Court are two post-trial motions: (1) Caterpillar's motion for judgment as a matter of law or, in the alternative, for a new trial or for remittitur of a substantial amount of the damages award (Dkt. No. 1032); and (2) Miller's motion for judgment on Caterpillar's counterclaims or for a reduction of the damage award (Dkt. No 1034). Miller's motion also seeks a clarification of the Court's judgment order to provide detail of the relationship between the jury's damages awards and the judgments in its favor. For the reasons detailed below, Caterpillar's motion is denied and Miller's motion is granted as to the requested clarification of the judgment award but otherwise denied.

         BACKGROUND

         Miller's predecessor entity[1] made a coupler that allowed earthmover and excavator vehicles to attach shovels, buckets, and other attachments to their mechanical arms quickly without requiring the vehicle operator to leave its cab. That entity was party to a March 31, 1999 “Supply Agreement” with Caterpillar Inc. to manufacture a product based upon a Miller-developed coupler called “the Bug” that Caterpillar would sell under its own name. (Supply Agreement at Definitions, § (b); §§ 3(a), 3(c), Dkt. No. 667-6.) The Supply Agreement included a “Confidential Information” provision that stated in pertinent part:

In order to accomplish the purposes of this Agreement, it is expected that each party will disclose Proprietary Information, including technical and business information, to the other; but the transfer of Proprietary Information shall not be considered a publication of such information. A party may use the Proprietary Information of the other party only for the purposes of this Agreement, and shall not disclose such Proprietary Information to any third party except pursuant to this Agreement or with the consent in writing of the other party. For the purposes of this Agreement, “Proprietary Information” shall include all confidential information and know-how, business, technical or otherwise, disclosed by a party to the other, but shall not include the information or know-how which is (i) available to the public or later becomes available to the public through no act or omission of the recipient party, or (ii) rightfully disclosed to the recipient by a person or entity not a party to this Agreement.

(Id. § 17(a).)

         Miller brought the present action against Caterpillar, alleging that Caterpillar breached the Supply Agreement's confidentiality provisions by using proprietary information about the Bug to make its own coupler, the “Center-Lock, ” and then terminating the agreement. (Second Am. Compl. ¶¶ 45, 67-69, Dkt. No. 564.)[2]

         Miller also alleged that Caterpillar's actions violated the Illinois Trade Secrets Act (“ITSA”), 765 ILCS 1065, which allows an aggrieved party to recover damages for “misappropriation.” 765 ILCS 1065/4(a). In the provisions relevant to Miller's claims here, the statute defines misappropriation as disclosure or use of a trade secret of a person without express or implied consent by another person who, at the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use. 765 ILCS 1065/2(b). ITSA defines “trade secret” as:

[I]nformation, including but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers that: (1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.

765 ILCS 1065/2(d). ITSA permits damages including both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss. 765 ILCS 1065/4(a). The statute also provides that if “willful and malicious appropriation exists, ” exemplary damages may be awarded in an amount not exceeding twice the compensatory damage award. 765 ILCS 1065/4(b).

         In response to Miller's complaint, Caterpillar both denied liability and asserted counterclaims against Miller. In a supplemental counterclaim filed after its initial response to the original complaint, Caterpillar alleged that in January 2011, Miller sent to Caterpillar dealers a package of false, misleading, and defamatory statements about the performance and safety of the Center-Lock coupler. (Supplemental Countercl. ¶¶ 7-8, Dkt. No. 569.) Caterpillar asserted claims for damages and for injunctive relief for the allegedly false statements under the Lanham Act, 15 U.S.C. § 1125; for statutory commercial disparagement under the Illinois Deceptive Trade Practices Act, 815 ILCS 510/3; under the Illinois Consumer Fraud Act, 815 ILCS 505/2; and under the common law of defamation and commercial disparagement.

         The parties tried their claims to a jury. Over 23 days of evidence presentation, the parties together examined eleven fact witnesses and six expert witnesses, and introduced the deposition testimony of at least seven additional witnesses. The jury returned a verdict for Miller on its trade secret misappropriation and breach of contract claims. The jury had been instructed that it could award compensatory damages on the ITSA claim in an amount that reflected either the amount of profit Miller lost from the misappropriation or Caterpillar's unjust enrichment, and could award exemplary damages of not more than twice the compensatory amount. The jury had also been instructed that the measure of Miller's breach of contract damages were the profits it lost as a result of the breach. In accordance with the testimony of Miller's damages expert about the extent of the profit Caterpillar made from the misappropriation and the profit Miller lost from the breach of the Supply Agreement, the jury awarded Miller $24.9 million in compensatory damages and $49.7 million in exemplary damages on the ITSA claim and $16 million on the breach of contract claim. Because the ITSA and breach of contract claims were based upon the same conduct, the Court entered judgment only on the larger award. (Dkt. No. 1018.)

         The jury returned a verdict for Caterpillar on the statutory commercial disparagement and common law defamation counterclaims; it found against Caterpillar on the Lanham Act, Illinois Consumer Fraud Act, and common law commercial disparagement claims. The jury awarded Caterpillar $1 million in damages on its defamation counterclaim.

         Now before the Court are the parties' post-trial motions. Caterpillar seeks judgment on Miller's claims as a matter of law, a new trial, or remittitur of the majority of the damages award against it. Miller similarly requests a judgment in its favor on Caterpillar's counterclaims and a reduction of the jury's damage award. Miller also asks that the judgment on its claims be modified to detail the jury's awards in its favor and their relationship to the final judgment.

         DISCUSSION

         I. Caterpillar's Motion for Judgment as a Matter of Law

         Caterpillar contends that it is entitled to judgment as a matter of law because Miller failed to present sufficient evidence to permit the jury to find that (1) the information on which Miller based its claims of breach of contract and misappropriation was confidential; (2) Caterpillar knowingly used Miller's information to design the Center-Lock coupler; and (3) Miller suffered compensable harm. For purposes of both motions for judgment as a matter of law, all reasonable inferences are drawn in favor of the non-moving party and the jury's verdict must stand unless no rational jury could have returned a verdict in its favor. Thomas v. Cook Cty. Sheriff's Dep't, 604 F.3d 293, 301 (7th Cir. 2010).

         A. Confidentiality of the Miller Models

         Caterpillar contends that any Miller information it used to design the Center-Lock coupler was not confidential and thus was not protected by the Supply Agreement or ITSA. As described above, status as “confidential information” under the agreement and as a “trade secret” under ITSA was a necessary component of Miller's claims. The information identified by Miller as its “confidential” and “trade secret” intellectual property were three-dimensional coupler models it created on computer design software known as “Pro-Engineer” or “Pro-E” and sent to Caterpillar. (Pl.'s Resp. at 1, Dkt. No. 1036.)

         Caterpillar argues that the models it received were neither designated by Miller as confidential nor accompanied by any warning of any restrictions on their use. Although Miller, in response, argues that drawings it derived from the models contained confidentiality notices, it does not identify any evidence that the models themselves contained or were accompanied by any such restriction. Caterpillar argues that this failure to identify the models as confidential precluded as a matter of law a jury finding that they were confidential information or trade secrets that could serve as the basis for Miller's contractual and statutory claims.

         No provision of the Supply Agreement or ITSA imposes any requirement that protected information be marked or otherwise denoted in any specific manner, however. This Court, in ruling on the parties' summary judgment motions, commented that “[t]o the extent that Caterpillar received information that was not identified as confidential, such information does not appear to be covered by the agreement's restrictions.” (Oct. 21, 2015 Op. at 8, Dkt. No. 871.) But this language merely anticipated the likely course of the parties' litigation of the issue; it did not determine any necessary method or standard of identification.

         Miller asserts that all of the Pro-E models of the Bug/Pin Grabber Plus coupler that it sent to Caterpillar were confidential information and trade secrets. Miller further asserts that this confidentiality was established in the first instance by an August 1998 oral agreement between the companies. Two of Miller's three principals, Keith and Gary Miller, both testified at trial that the companies met on August 5 and 6, 1998, to confirm the parameters of Miller's provision of couplers for Caterpillar. They testified that the companies discussed sharing technical information and that Fred Grafton, a Caterpillar marketing manager, assured them that it would be okay to begin the information exchange, that everything shared would remain confidential, and that he was working on a final coupler supply agreement that would supersede any of the prior agreements between the companies. (Tr. 820-21, 2376.) Gary Miller testified that Miller shared its Bug/Pin Grabber Plus models with Caterpillar only after this oral agreement, and that this agreement established the parties' understanding of what was confidential for purposes of the Supply Agreement and ITSA claims at issue here. (Tr. 2376-77.)

         Caterpillar raises several arguments in opposition to Miller's assertion that the oral agreement established the confidentiality of the models. First, it contends that the companies were parties to a prior written agreement, signed in February 1998, in which Miller agreed that it would “not disclose to Caterpillar any confidential or proprietary information unless our two companies otherwise first agree in writing.” (CTX0040.) Caterpillar construes this provision as a bar to any determination that Miller disclosures were afforded confidentiality treatment by an oral agreement. However, Illinois law allows the terms of a written contract to be modified by a subsequent oral agreement notwithstanding contractual language to the contrary. U.S. Neurosurgical, Inc. v. City of Chicago, 572 F.3d 325, 332 (7th Cir. 2009) (citing Tadros v. Kuzmak, 660 N.E.2d 162, 170 (Ill.App.Ct. 1995)).

         Next, Caterpillar asserts that the February 1998 agreement is governed by a Uniform Commercial Code provision, 810 ILCS 5/2-209(2), that precludes oral amendment of contracts whose terms permit only written modification. But the cited provision is a subsection of UCC Article 2, whose application is limited to transactions in goods and may be extended only to contracts that are predominantly for the sale of goods. Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 770 N.E.2d 177, 195 (Ill. 2002). The February 1998 agreement refers only to the exchange of confidential information and does not reference the sale of any items in any way; Caterpillar argues only that it “relates to” the purchase of couplers from Miller. (Def.'s Mem. at 6-7, Dkt. No. 1033.) It is thus not governed by the UCC Article 2 provision on which Caterpillar relies and was subject to oral modification under the Illinois common law principle noted above.

         Caterpillar contends that a September 1998 “Proprietary Agreement” between the parties defeats Millers claims of confidentiality. That agreement defined “Proprietary Information” to include only items identified by Miller in writing, imposed restrictions on the treatment of such information for only a limited time, and provided that there were no restrictions on the handling of items not considered Proprietary Information. The Proprietary Agreement, by its own terms, applied only to a coupler component rather than a coupler itself, however. The agreement's preamble identifies its subject as “information about [Miller's] invention relating to a latching device for a quick coupler (Invention) to the extent disclosed in [Miller's] pending patent application on such Invention.” (CTX0041.) “Proprietary Information” was limited to “written information about said Invention.” This agreement cannot be construed to apply to information regarding the Miller coupler as a whole. Nor does the agreement determine the confidentiality to be afforded the coupler models or defeat Miller's claim that the August 1998 oral agreement reflected the parties' understanding about the models' confidentiality.

         Caterpillar also invokes the Supply Agreement as support for its claim that the models could not have been considered confidential information. As Caterpillar correctly emphasizes, the Supply Agreement contained an integration clause providing that it superseded all prior understandings and agreements. (Supply Agreement, § 20, MTX1.) Section 3(a) of the Supply Agreement obliged Miller to give Caterpillar “all dimensions, tolerances and technical assembly information necessary for the production of Caterpillar support material” in a form compatible with either Pro-E or a second computer-design file type, IGES. At trial, Gary Miller conceded that the information in Caterpillar's Pin Grabber Plus parts manuals and instruction books would be public, and Caterpillar construes that concession to be an admission that all of the information in the models would be public and thus could not have been considered confidential. But Section 3(a)'s explicit restriction to the model information required for Caterpillar's production of support materials is inconsistent with an interpretation that all coupler details sent in models would be subject to public disclosure and thus ineligible for confidential treatment.

         Citing evidence that Miller disclosed coupler models before the March 31, 1999 effective date of the Supply Agreement, Caterpillar contends that no such information could be considered confidential for purposes of that agreement. But the confidential nature of information is not destroyed by its disclosure to potential licensees to the extent necessary to negotiate and facilitate permitted uses. Tax Track Sys. Corp. v. New Inv'r World, Inc., 478 F.3d 783, 787 (7th Cir. 2007); Rockwell Graphic Sys., Inc. v. DEV Indus., Inc., 925 F.2d 174, 177 (7th Cir. 1991) (citing Jones v. Ulrich, 95 N.E.2d 113, 117 (Ill.App.Ct. 1950)).

         The Supply Agreement defines “Proprietary Information” to include all information disclosed by one party to the other but excludes from that definition information that is available to the public or disclosed to the recipient by a non-party. Immediately following its acknowledgement of the parties' expectation that they will disclose Proprietary Information, the agreement explicitly provides that “the transfer of Proprietary Information shall not be considered a publication of such information.” It is thus apparent that Miller's disclosure of the models to Caterpillar did not preclude as a matter of law confidential treatment under the Supply Agreement. Similarly, Miller's disclosure of the models to Caterpillar in the absence of a valid confidentiality agreement did not as a matter of law preclude their protection as trade secrets under ITSA. Nilssen v. Motorola, Inc., 963 F.Supp. 664, 679-80 (N.D. Ill. 1997); Hexacomb Corp. v. GTW Enters., Inc., 875 F.Supp. 457, 464 (N.D. Ill. 1993).

         Caterpillar next contends that Miller's coupler models cannot be considered confidential because they contained information that originated with Caterpillar, was disclosed in Miller patents, or was readily ascertainable by examination of the product itself. But even if the individual elements of a product are in the public domain, the combination of those elements still can be a trade secret under Illinois law. Fast Food Gourmet, Inc. v. Little Lady Foods, Inc., 542 F.Supp.2d 849, 862 (N.D. Ill. 2008); RRK Holding Co. v. Sears, Roebuck & Co., No. 04 C 3944, 2007 WL 495254, at *3 (N.D. Ill. Feb. 14, 2007); Nilssen, 963 F.Supp. at 677; see also Syntex Ophthalmics, Inc. v. Tsuetaki,701 F.2d 677, 684 (7th Cir. 1983). The Court accordingly rejects Caterpillar's contention that the presence of non-confidential elements in Miller's ...


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