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Cemen Tech, Inc. v. Three D Industries, LLC (Iowa 5/2/08)
CTI sued Three, Longnecker, Jones, Luhrs, Yelton, Dorman, and others for misappropriation of trade secrets and related claims. The trial court granted Three's motion for summary judgment on virtually all of CTI's claims and the Supreme Court of Iowa affirmed in part, reversed in part, and remanded.
CTI is a manufacturer of mobile volumetric concrete mixers. Defendants Longnecker and Enos, through their business, Three, were interested in purchasing CTI. In 1999, Three sent a letter of intent to CTI requesting information regarding the business. CTI eventually provided Three with various documents, including strategic plans, financial statements, customer and supplier lists, and organizational charts. By 2001, it became clear that the purchase was not going to happen and CTI terminated Three's latest letter of intent, though discussions continued regarding the possible purchase of a portion of CTI business. In September 2001, Longnecker and Enos, through a third-party entity, submitted a letter of intent to CTI to purchase its "sludge" division. CTI apparently ignored this letter. By the end of 2001, the remaining employee defendants resigned from CTI and began working for Three developing volumetric concrete mixers. In 2002, Three exhibited a prototype cement mixer at a trade show closely resembling CTI's mixer.
CTI argued that its mixer, component parts, manufacturing processes, and customer and supplier information constituted trade secrets. CTI identified numerous processes and design features developed by it that were unique. The evidence was sufficient to raise a fact issue regarding the economic value of the information that CTI identified as its trade secrets. The evidence also showed that CTI took steps to keep such information confidential. CTI required its employees to acknowledge receipt of an employee handbook, which included a nondisclosure agreement. In addition, employees were required to sign a patent agreement. Three argued that information regarding CTI's mixer was not a trade secret because it was readily ascertainable. This argument was based, in part, on the concept of reverse engineering. The fact that information could be obtained by lawful means, including reverse engineering, was not necessarily dispositive. While CTI conceded that Three, if given enough time, could produce a similar machine via reverse engineering, a fact-finder could reasonably conclude that the delay in production would give CTI a temporal advantage. Moreover, a jury could reasonably find that the employee defendants took advantage of their positions at CTI to obtain proprietary information that was then used for Three's benefit. A jury could also reasonably find that Three and its principals improperly used their positions as potential buyers to obtain CTI's proprietary information for their own benefit.
