Ahlert v. Hasbro, Inc., Civil Action No. 02-1986 (JEI).

• Citation: 325 F.Supp.2d 509
• Decision Date: 15 July 2004
• Docket Number: Civil Action No. 02-1986 (JEI).
• Parties: Gary AHLERT, d/b/a Creative Group Marketing, Plaintiff, v. HASBRO, INC. and Larami Ltd., Defendants.
• Court: U.S. District Court — District of New Jersey

325 F.Supp.2d 509

Gary AHLERT, d/b/a Creative Group Marketing, Plaintiff, v. HASBRO, INC. and Larami Ltd., Defendants.

Civil Action No. 02-1986 (JEI).

United States District Court, D. New Jersey.

July 15, 2004.

Horowitz, Greener & Stengel, by Barry W. Horowitz, Monroe Township, NJ, for Plaintiff.

By Gary Rosen, Patrick Madamba, Jr., Philadelphia, PA, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

IRENAS, Senior District Judge.

This matter having appeared before the Court upon Defendants' Motion for Summary Judgment, the Court having reviewed the submissions of the parties, and it appearing that:

1. Plaintiff Gary Ahlert ("Plaintiff"), d/b/a Creative Group Marketing, filed a complaint with this Court alleging that Defendants Hasbro, Inc. ("Hasbro") and Larami Ltd. ("Larami")¹ (collectively, the "Defendants"), improperly appropriated his trade secret, a design concept for a water gun, called the "Water Rat," which Plaintiff was marketing for his client and the gun's inventor, Gary Ross. Plaintiff claims that Defendants rejected Ross' Water Rat design and then subsequently incorporated it into a new line of water guns.

2. In the early 1990s, Larami enjoyed great commercial success with a line of pump action water guns called Super Soakers. The original Super Soaker guns required users to manually pump air into the gun's water tank, allowing the firing of a pressurized stream of water. Bruce D'Andrade ("D'Andrade") was a co-inventor of the original Super Soaker and owner of Professional Prototypes, an independent design and development firm which had been working with Larami since 1986.²

3. In early 1996, D'Andrade and the design team at Professional Prototypes began work on the next generation of water gun technology. Through a system of rubber tubing inside the gun's water tank (a "bladder" system), the team was able to achieve a continuous pressurized stream of water without manually pumping air into the tank. Beginning in 1997, Larami used the bladders designed by Professional Prototypes in a new line of Constant Pressure System ("CPS") water guns. The CPS guns were marketed and sold in 1997, 1998 and 1999. Beginning on June 2, 1998, the United States Patent and Trademark Office issued several patents to D'Andrade for various components of the new CPS water guns.

4. Plaintiff Gary Ahlert is an agent for inventors of toy and game products. On or about September 6, 1994, he entered into a written Representation Agreement with Gary Ross, an Oklahoma resident and recreational inventor. One of the products which Plaintiff agreed to market for Ross was the Water Rat, a water gun which employed a bladder system similar to that subsequently developed in Larami's CPS water guns.

5. On or about September 28, 1994, three years before Larami first marketed the CPS water guns, Plaintiff met with representatives of Larami at their Mount Laurel, New Jersey offices. At the meeting, Plaintiff presented the Water Rat water gun to the Larami representatives and its technology was discussed. The prototype remained with Larami and Plaintiff subsequently sent several more prototypes and a technical drawing of the Water Rat to Larami offices.

6. In November 1994, Larami rejected the Water Rat. The prototypes, some disassembled, were returned to Plaintiff in December 1994 or January 1995. Following this rejection by Larami, Plaintiff reassigned marketing responsibilities for the Water Rat to U.S. Consumer Products Corporation ("USCPC"). USCPC made several more unsuccessful attempts to interest Hasbro and Larami in the Water Rat. Following the final submission in March of 1997, Larami rejected the concept in writing, stating that the Water Rat was too similar to its CPS system which was already being marketed.

7. On April 25, 2002, four years after Larami first began marketing their CPS water guns, Plaintiff filed a complaint with this Court. Plaintiff alleges that Defendants have: (1) stolen his trade secret (the Water Rat); (2) breached a contract regarding the disclosure of his trade secret; and (3) practiced unfair competition. Plaintiff further requests that the Court: (1) issue a declaratory judgment as to the ownership of certain patents allegedly relating to the trade secret; (2) order Defendants to disgorge any profit gained from use of his trade secret; and (3) issue an injunction against Defendants' further use of the disputed patents.

8. On March 23, 2004, Defendants moved for summary judgment. They argue: (1) that Plaintiff's claims are barred by laches; (2) that Plaintiff's claims are barred due to spoliation of evidence; and (3) that there is no evidence that Defendants used the Water Rat concept in the development of their CPS line.³

9. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331. Plaintiff is a New York resident whose company is based in Connecticut. Larami is a New Jersey corporation and a wholly-owned subsidiary of Hasbro, a Rhode Island corporation. The Court will grant Defendants' motion for summary judgment.

10. "[S]ummary judgment is proper `if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265, (1986) (quoting Fed.R.Civ.P. 56(c)). In deciding a motion for summary judgment, the Court must construe the facts and inferences in a light most favorable to the non-moving party. Pollock v. Am. Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir.1986). The role of the court is not "to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202, (1986).

11. Initially, there is a choice of law question to be resolved in this case. Connecticut, as the headquarters of Plaintiff's business, Oklahoma, as the original home of the Water Rat, and New Jersey, where Larami is located, all have significant contact with the present dispute. As a federal court sitting in diversity in the State of New Jersey, this Court must apply New Jersey's choice of law rules. Klaxon Co. v. Stentor Elec. Mfr., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Where there is an actual conflict between the applicable laws of potential states, New Jersey utilizes a governmental interest test. The governmental interest test requires that the Court first identify the policies underlying the laws of each interested jurisdiction, and then consider the contacts that each jurisdiction has with the parties. The determinative law is that of the state with the greatest interest in governing the particular issues. Henry v. Richardson-Merrell, Inc., 508 F.2d 28, 30 (3d Cir.1975).

12. The interested jurisdictions would apply different laws to the present dispute. Connecticut and Oklahoma have each adopted the Uniform Trade Secret Act ("UTSA") while New Jersey still relies on the common law.⁴ Therefore, the Court must consider the contacts that each state has with the parties. On this basis, although Plaintiff's business is based in Connecticut and the Water Rat originated in Oklahoma, New Jersey clearly has the strongest connection to the case. Larami is not only located in New Jersey, but Plaintiff's idea was submitted in New Jersey, and any alleged wrongdoing would have taken place there as well. On balance, therefore, New Jersey has the greatest interest in governing the outcome of this case and the Court will apply its law.

13. Although the parties have characterized this litigation as involving a trade secret (the Water Rat design), it appears that this dispute does not, in fact, involve a trade secret. New Jersey looks to the 1939 Restatement of Torts for the definition of a trade secret. See Sun Dial Corp. v. Rideout, 29 N.J.Super. 361, 102 A.2d 90, 92 (1954); Nat'l. Tile Bd. Corp. v. Panelboard Mfg. Co., 27 N.J.Super. 348, 99 A.2d 440, 441 (1953). The Restatement defines a trade secret as, "any formula pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it." Restatement of Torts 757, comment b (1939).

14. Plaintiff's Water Rat does not fall under this definition. While the Water Rat was an innovative device, Plaintiff did not actually use it in his business. Plaintiff facilitates the submission of ideas from inventors to toy manufacturers — he is not engaged in the business of water gun manufacture or sale. When trade secret claims do not meet the Restatement's "use in business" requirement, they are treated as submission-of-idea cases.⁵ 1 ROGER R. MILGRIM, MILGRIM ON TRADE SECRETS 9.05, n. 1 (2004). As such, Plaintiff's trade secret misappropriation claim is properly re-characterized as a submission-of-idea claim.

15. In New Jersey, trade secret claims and submission-of-idea claims involve different circumstances requiring different legal analyses. Trade secret misappropriation cases commonly feature a discharged employee as the vehicle transporting a disputed idea from one company to another. New Jersey courts apply a five-part test to those cases. See Rohm & Haas Co. v. Adco Chem. Co., 689 F.2d 424 (3d Cir.1982); Rycoline Prod., Inc. v. Walsh, 334 N.J.Super. 62, 756 A.2d 1047 (2000). Submission-of-idea cases, as in the instant case, generally feature independent inventors accusing a potential producer or manufacturer of idea theft. New Jersey courts offer the following analytical framework for such cases:

It has been held that where a person communicates a novel idea to another [in confidence] with the intention that the latter may use the idea and compensate him for such use, the other party is liable for such use and must pay...