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Nucap Industries Inc. v. Robert Bosch LLC

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

September 7, 2019

NUCAP INDUSTRIES, INC., et al., Plaintiffs,
v.
ROBERT BOSCH LLC, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Edmond E. Chang Judge

         Plaintiffs Nucap Industries, Inc. and Nucap U.S. Inc. (Nucap) brought this suit against Robert Bosch LLC; Bosch Brake Components LLC; and Robert Bosch GmbH (Bosch) after the dissolution of their five-year commercial relationship.[1] Nucap brought both federal and state law claims, all of which relate to Bosch's use of Nucap's allegedly proprietary drawings of after-market brake pad components, which Nucap had originally allowed Bosch to access as part of their relationship. In turn, Bosch levelled counter-claims against Nucap, challenging Bosch's ownership of the drawings, as well as Nucap's decision to stop acting as a supplier for Bosch. The parties now cross-move for summary judgment. For the reasons discussed below, both motions are granted in part and denied in part.

         I. Background

         In deciding cross-motions for summary judgment, the Court views the facts in the light most favorable to the respective non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). So, when the Court evaluates Bosch's summary judgment motion, Nucap gets the benefit of reasonable inferences; conversely, when evaluating Nucap's cross-motion, the Court gives Bosch the benefit of the doubt.

         A. Aftermarket Brake Pads

         Both parties in this suit operate in the industry of aftermarket brake pads. R. 1140.16, Khokhar Dec. ¶¶ 9, 10; R. 1116.8, Wilkes Dec. ¶¶ 8-10. Bosch buys component parts from suppliers to construct a final aftermarket brake system, which it then sells to auto-parts retailers like Autozone and O'Reilly's. Wilkes Dec. ¶ 8; R. 1159.2, Pls.' Resp. DSOF ¶¶ 1, 13. Nucap manufactures and sells aftermarket brake components. Pls.' Resp. DSOF ¶ 10. Bosch buys various parts-backing plates, shims, and brake hardware-from suppliers, such as Nucap, and then constructs the final product using its own proprietary friction material. Id. ¶ 912. It is undisputed that in order to design and create aftermarket brake components, suppliers need to reverse engineer original equipment (known as “OE” in the industry) brake pads. Pls.' Resp. DSOF ¶ 7. Nucap outlined its reverse-engineering process in an email to a Bosch employee, in which Nucap explained that it measures OE brake parts and then creates component drawings based on those measurements. Wilkes Dec. ¶¶ 18, 19; id. at Ex. 1, 11/5/12 Khokhar Email. Nucap uses the drawings to create the component parts its sells to customers, like Bosch. Wilkes Dec. ¶ 18.

         When Bosch sources a particular brake component from a supplier, Bosch typically requests either a drawing of the component part or a physical sample. Wilkes Dec. ¶ 10. Bosch then performs an initial evaluation to determine if the potential supplier's parts conform and fit with Bosch's existing tooling. Id. ¶ 11. “If the new component is an alternative or replacement, Bosch may compare the new suppliers' part drawings to the part already being provided [by the original supplier] to assure that they are close in shape and dimensions.” Id. To be clear, Bosch does not request drawings from its suppliers, including Nucap, in order to develop its own competing parts. Instead, Bosch uses the drawings to determine if the components would work with its existing brake components, or so that it could develop its own mold tool to work with the new components. Id. at ¶ 13.

         B. Bosch-Nucap Relationship

         The parties dispute when exactly Bosch began purchasing aftermarket brake components from Nucap, but it was no later than 2009. Pls.' Resp. DSOF ¶ 14. Bosch ordered its parts by submitting purchase orders to Nucap; the purchase orders initially went to Nucap customer-service representatives. R. 1140.10, Barruch Emails. Although Nucap's internal process of fulfilling the purchase orders is somewhat opaque, it is undisputed that Bosch's purchase orders were also sent to Nucap's senior-level executives at least 11 times after July 2011. Pls.' Resp. DSOF ¶ 27. Once Nucap received and processed the purchase orders, Nucap would ship the goods to Bosch, along with invoices, packing lists, and bills of lading that referenced specific Bosch purchase-order numbers. Id. ¶¶ 15, 18. The invoices included some written text that addressed the calculation of interest charges, while the packing lists specified the time in which Bosch could report quantity discrepancies. Id. ¶ 21.

         As is Prologue in countless commercial cases, the parties never executed a formal supply agreement outside of the purchase orders. R. 1166, Defs.' Resp. PSOF ¶ 15. In April 2010, however, the parties traded drafts of a Purchase and Supply Agreement. R. 1142.35, 4/9/10 Butera Email. At one point, Vince Butera, Nucap's Chief Executive Officer, sent Chris Thornton, Bosch's Purchasing Manager, a draft agreement in which Butera deleted a paragraph that Bosch had proposed. Id. at 5. There is no evidence that the parties ever executed this agreement. Nonetheless, between September 1, 2010 and November 10, 2014, Nucap filled thousands of Bosch purchase orders and, in exchange, received more than $170, 000, 000 from Bosch. Pls.' Resp. DSOF ¶¶ 20, 43. Throughout this time, Nucap also gave Bosch access to its drawings of the component parts that Bosch was purchasing. Id. ¶ 25.

         Although the parties dispute the exact date, no later than September 2010, Bosch began including the following language in its purchase orders, referring to an online set of terms and conditions (the eye-numbing capitalization is in the original):

THE TERMS AND CONDITIONS OF PURCHASE ARE AVAILABLE AT WWW.BOSCHNASUPPLIERS.COM AND INCORPORATED HEREIN BY REFERENCE, SHALL BECOME A BINDING AGREEMENT UPON SELLER COMMENCING PERFORMANCE OF THIS PURCHASE ORDER, OR UPON SELLER OTHERWISE ACKNOWLEDGING ACCEPTANCE, WHICHEVER OCCURS FIRST.

Pls.' Resp. DSOF ¶ 17. Also, backing up a few months, in February 2010, Bosch sent Nucap a letter stating that it expects their “suppliers to understand and comply with the requirements in the Bosch Supplier Manual. The contents of the Supplier Manual are accessible via www.boschnasuppliers.com.” Id. ¶ 19.

         Bosch's terms and conditions of purchase (which the parties call “POTCs”) purported to set out the terms that governed the parties' relationship, including warranties, customs, and remedies for incomplete or delayed deliveries. R. 1121, Bosch POTCs. The POTCs also included provisions that would preclude Nucap from suing Bosch for any alleged misuse of its component part drawings or other intellectual property. See, e.g. Id. §§ 23.1, 23.4 (prohibiting Seller from asserting claims against Buyer “with respect to any technical information that Seller has disclosed … except to the extent expressly covered by a separate written confidentiality and/or license agreement”); id. §§ 22.4, 23.3 (establishing all intellectual property provided to Buyer and relating to the manufacture of the parts as the “sole and exclusive property of” the Buyer and assigning all “copyrights and moral rights” in the IP to the Buyer). According to Thornton (Bosch's Purchasing Manager), Bosch “would never eliminate the Bosch terms and conditions of purchase from the agreements that we have with suppliers. We just wouldn't do business with a company that would not agree to our terms and conditions of purchase.” R. 1118.12, Thornton 30(b)(6) Dep. at 250:17-21.

         On March 2, 2011, Bosch sent Nucap a draft “Purchase and Sale Agreement” and a “Corporate Agreement, ” both of which incorporated the POTCs. Pls.' Resp. DSOF ¶¶ 28, 29. Bill Murray, Nucap's Vice President of Global Sales, discussed both agreements with other Nucap executives and Nucap's in-house legal counsel, but did not sign it. Id. ¶ 30. A few months later, on May 17, 2011, Murray sent Thornton an email listing ten “Talking Points for Contract, ” and specifically stated that Nucap “cannot have any blind acceptance of Bosch standard terms and conditions.” Id. ¶ 33. The parties later met in person that same day to discuss a variety of matters, including Bosch's proposed contracts. Id. ¶ 34. Following the meeting, Nucap's Greg Andes prepared a summary email in which he stated, “[h]ave agreed on all of our issues on the contract, but [Bosch] wants us to tell them what issues we have with their standard terms and conditions on their PO's. They will then address with their legal department.” Id. ¶ 35.

         The parties dispute what happened next. Bosch contends that it did not hear any objections to the POTCs from Nucap following the May 17, 2011 meeting. R. 1116, DSOF ¶ 37; Thornton 30(b)(6) Dep. at 248:22-249:4, 253:6-8, 270:24-271:8. Nucap asserts that Butera told Thornton that Nucap “rejected” the POTCs and that it “would not go through the provisions one-by-one in multiple conversations between March and June 2011.” Pls.' Resp. DSOF ¶ 37; R. 1143.8, Butera Dep. at 97:18-25, 180:23-181:15, 244:25-246:12. The parties met again on May 31, 2011, but no one raised the POTCs. Pls.' Resp. DSOF ¶ 39. Nucap also continued to fulfill Bosch's purchase orders without objection. Id. ¶ 40.

         There appears to have been no meaningful correspondence between the parties about additional agreements for a couple of years. Then, in 2013, discussions on confidentiality and disclosure ramped up. First, in March 2013, Don Garrett, Bosch's Purchasing Director, and Robert Wilkes, Bosch's Director of Product Development, alerted other Bosch employees that their practice of using supplier drawings needed to be adjusted to avoid misusing the suppliers' intellectual property. R. 1141.4, 4/3/13 Wilkes Email. Wilkes shared this discussion with Murray (Nucap's Vice President of Global Sales). R. 1141.9, 3/22/13 Wilkes Email. Wilkes then sent a follow up email to Murray and Metu Khokhar, Nucap's Chief Operating Officer, explaining “what [Bosch was] doing to preserve the supplier drawings, ” which included embedding the supplier drawings within Bosch drawings, “thus preserving supplier information while fulfilling [Bosch's] needs for additional information outside of the original.” R. 1141.12, 3/26/13 Wilkes Email. Bosch alleges that Wilkes's email clarified that “Bosch would maintain Nucap drawings together with other suppliers' drawings for the same parts.” DSOF ¶ 65. The “Guideline” that Wilkes attached to the email implies that Bosch would maintain separate “sheets” for each vendor, but that multiple sheets were used to make up one drawing:

         (Image Omitted)

         R. 1122.9, 3/26/13 Wilkes Email at 7. Nucap's Murray testified that he allowed Bosch continued access to Nucap's drawings based on Wilkes's promises in those emails. R. 1146.4, Murray Dep. at 575:7-17 (“Q. Why did Nucap allow these Bosch engineers to access its drawings if it hadn't signed-if they hadn't signed the terms of use agreement? A. Because we had repeated assurances by Bob Wilkes how they were going to handle our drawings, our IP, our proprietary information. Q. Did you rely on that in allowing Bosch the access to the drawing? A. It is what we relied on.”).

         Next, in June 2013, Murray and Garrett discussed a draft “Mutual NonDisclosure Agreement, ” although it was never finalized nor executed. Pls.' Resp. DSOF ¶ 60. Garrett testified that Bosch sent the draft agreement to Murray in “an attempt to solve the issue of gaining access to [Nucap's] design information.” R. 1144.4, Garrett Dep. at 128:15-25. That same month, Khokhar emailed several other Nucap employees and Wilkes to explain (1) “Bosch would not be able to sign the confidentiality contract, ” but (2) “Wilkes has sent us numerous emails showing us how Bosch intends to control print distribution internally.” R. 1141.7, Khokhar Emails at 4. Khokhar also stated that Nucap should provide Nucap's drawings to Bosch moving forward. Id. In his response, Wilkes copied additional Bosch employees and called the development “a major breakthrough in cooperation between Nucap and Bosch.” Id. at 3. Wilkes also specified the Bosch engineers who were authorized to request Nucap drawings. Id. Bosch employee Christian Wecker later forwarded the email chain to additional Bosch employees and explained the steps they should take to “respect [Nucap's] intellectual property (IP) rights.” Id. at 2. He told the other Bosch employees not to forward Nucap's documents to anyone outside of Bosch and explained that if a drawing “is based on Nucap's input it is still the IP of Nucap.” Id. Over a year later, in August 2014, Murray prepared another draft supply agreement-“Bosch-Nucap Supply Agreement Contract”-which incorporated Bosch's POTCs. Pls.' Resp. DSOF ¶ 48. The draft agreement also laid out the parties' mutual confidentiality obligations, specifically, each party was to use the other's intellectual property “only for the purpose of [Nucap] supplying Materials to [Bosch], ” and that neither would disclose that IP to third parties. Id. It also specified that each party “remains the owner of any drawings, models, patterns, tools, dies, jigs, specifications of delivery or other documents” that the particular party provides. Id.; R. 1120.13, 8/5/14 Murray Email. But this document too was never executed.

         C. Dissolution of Bosch-Nucap Relationship

         By October 2014, the parties' relationship was fraying, as Bosch began to search for alternative cheaper suppliers. Pls. Resp. DSOF ¶ 55; Defs.' Resp. PSOF ¶ 61. The next month, in November 2014, Thornton sent another draft “Purchase and Supply Agreement” to several Nucap employees, including Murray and Khokhar. Pls.' Resp. DSOF ¶ 49. Khokhar responded a few days later, explaining that “the current situation [had] resulted in a devastating impact on Nucap's business.” R. 1120.17, 11/10/14 Khokhar Email. He also told Thornton that Nucap was placing Bosch on “a complete business pause.” Id. At the time, Bosch sourced 90 percent of its components from Nucap. R. 1143.5, PI Hearing Tr., Chavda Testimony at 477:7-9. Nucap's refusal to fill orders put Bosch at serious risk of losing customers and shutting down its plant. Id. at 477:10-17.

         To avoid this, Bosch reached out to alternate suppliers for the components it originally sourced by Nucap. R. 1122.10, Chavda 30(b)(6) Dep. at 100:21-101:4. As part of that outreach, Bosch asked for preexisting product samples from all of its suppliers in an attempt to quickly find replacement components that worked with its product. Chavda 30(b)(6) Dep. at 101:5-15 (“[B]ecause we were in survival mode, we requested samples from all our suppliers.”). Bosch determined whether the components were compatible by performing physical fit tests on them. Pls.' Resp. DOSF ¶¶ 66, 67. At the same time, Bosch also requested drawings of the potential replacement components, which were quicker to obtain than the sample parts. Chavda 30(b)(6) Dep. at 311:3-8; PI Hearing Tr., Chavda Testimony at 478:1-8 (“We had to evaluate the critical features, okay, and we did drawing overlays to do that to expedite… We did not have component samples of every vendor.”). Bosch engineers “overlayed” these drawings with drawings of the Nucap components in order to compare the two and determine if the replacement components were likely to pass a fit test and be compatible with the Bosch products. R. 1116.8, Wilkes Dec. ¶ 33; Chavda 30(b)(6) Dep. at 98:6-9, 101:16-102:2; 121:3-10, 123:5-8; 129:17-22; R. 1116.9, Bouwma Rpt. ¶ 88 (“While waiting for each supplier's physical samples to arrive at Bosch's facilities for completion of physical fit testing, I understand that Bosch conducted overlays of potential replacement supplier parts with Nucap parts.”); R. 1143.4, PI Hearing Tr., Wilkes Testimony at 412:21-414:17.

         The overlay process was conducted on a computer and was done to compare the product “profile” of the Nucap component to the product “profile” of the component from the alternate vendor. PI Hearing Tr., Chavda Testimony at 479:14-25. Beyond that, the parties describe the overlay process in different terms. For its part, Bosch asserts that the only supplier information used during the overlay process is the manufacturing perimeter-or perimeter outline of the component part-taken from Computer Aided Design (CAD) drawings, and that it simply laid the alternate supplier's manufacturing perimeter on top of Nucap's manufacturing perimeter to compare the two. DSOF ¶ 70; Wilkes Dec. ¶ 23; Chavda 30(b)(6) Dep. at 120:3-121:15. In contrast, Nucap asserts that Bosch “copied Nucap's full and complete drawings of backing plates and shims from Nucap's CAD files and then overlaid Nucap's manufacturing perimeter drawing and competitor manufacturing perimeter drawing.” Pls.' Resp. DSOF ¶ 70. Nucap's cited evidence does not directly support that proposition, but it tends to show that each manufacturing perimeter was more than just a mechanically traced outline of a component's measurements. PI Hearing Tr., Wilkes Testimony at 367:15-22; R. 1143.2, PI Hearing Tr., Khokhar Testimony at 60:8-61:11; R. 1148.3, Bouwma Dep. at 178:3-180:15; R. 1148.4, Lange Dep. at 103:8-104:24, 162:23-163:7, 313:17-314:7. According to Nucap, the drawings were based on “Nucap's engineers' experience, knowledge, and creative and expressive design choices.” Pls.' Resp. DSOF ¶ 70; PI Hearing Tr., Khokhar Testimony at 125:15-126:24; R. 1142.31, Stoloff Rpt. ¶¶ 81-91, 116-125.

         Either way, because Bosch was “in survival mode, ” it decided to place “production quantity” orders of replacement supplier components- rather than first ordering samples of the components-as soon as the drawing of the component passed the overlay process. PI Hearing Tr., Chavda Testimony at 483:6-9. Bosch's witnesses testified, though, that each component was required to pass a fit test, in addition to the overlay process, before it would be placed into production. Id. at 483:8-19 (“So what I'm trying to clarify is that if it passed an overlay, we ordered production quantities. That did not mean that those parts went right into production. The parts still had to get fit tested.”); PI Hearing Tr., Wilkes Testimony at 413:8-414:17.

         The parties also dispute whether Bosch limited its distribution of the overlay comparisons-which incorporated Nucap's manufacturing perimeters-for internal use only. Pls.' Resp. DOSF ¶ 72; Defs.' Resp. PSOF ¶ 67. According to Wilkes, Bosch never sent original supplier's component drawings to replacement suppliers, Wilkes Dec. ¶¶ 36, 37, and Chavda testified that Bosch never intended to share the comparisons with anyone outside of Bosch, Chavda 30(b)(6) Dep. at 327:24-328:7. Nucap, on the other hand, asserts that Bosch disclosed the overlay comparisons to third-party competitors in order to communicate proposed drawing changes. Pls.' Resp. DSOF ¶ 72. Although Bosch disputes that it sent its overlays to third parties so that the parties could “conform [their drawings] to Nucap's drawings, ” Defs.' Resp. PSOF ¶ 67, Bosch does concede that it disclosed Nucap information to third parties on nine occasions, id.

         II. Procedural Background

         Nucap filed suit against Bosch in March 2015. R. 1, Compl. In January 2016, it moved for a preliminary injunction, which the previously assigned judge granted in part in August 2016. R. 609, PI Order. Amid the briefing on that motion, Nucap amended its complaint and now brings claims for trade secret misappropriation, copyright infringement, violations of the Digital Millennium Copyright Act (DMCA), tortious interference with contract, tortious interference with prospective economic advantage, unfair competition, and unjust enrichment. R. 239, First Am. Compl., ¶¶ 100-158. In response to Nucap's amended complaint, Bosch filed counterclaims for federal and state antitrust violations, breach of contract, violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), unjust enrichment, tortious interference with business expectancy, and breach of implied-in-fact contract and covenant of good faith and fair dealing. R. 329, Answer and Counterclaims to First Am. Compl., ¶¶ 92-167. In March 2017, the previously assigned judge granted Nucap's motion to dismiss Bosch's antitrust counterclaims but denied the parties' first round of cross-motions for summary judgment on the remaining claims. R. 713, SJ Order. After more discovery, the parties again cross-move for summary judgment on the remaining claims.

         III. ...


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