Christianson v. Colt Industries

• Decision Date: 28 March 1991
• Docket Number: No. 84-4056.,84-4056.
• Court: U.S. District Court — Central District of Illinois
• Parties: Charles R. CHRISTIANSON and International Trade Services, Inc., Plaintiffs, v. COLT INDUSTRIES OPERATING CORP., a Delaware corporation, Defendant.

766 F. Supp. 670

Charles R. CHRISTIANSON and International Trade Services, Inc., Plaintiffs, v. COLT INDUSTRIES OPERATING CORP., a Delaware corporation, Defendant.

No. 84-4056.

United States District Court, C.D. Illinois.

March 28, 1991.

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Spiro Bereveskos, Indianapolis, Ind., Richard I. Fine, Los Angeles, Cal., Stuart R. Lefstein, Rock Island, Ill., John C. McNett, Indianapolis, Ind., for plaintiffs.

Anthony M. Radice, New York City, John V. Patton, Moline, Ill., Robert L. Harmon, Chicago, Ill., for defendant.

ORDER

MIHM, District Judge.

Before the Court is the Motion (# 92) by the Defendant Colt Industries for summary judgment on Counts I and II of the Plaintiff's Amended Complaint. The Court grants Colt's Motion for Summary Judgment in part and denies it in part.

BACKGROUND

In 1959, Colt obtained a license from the Armalite Division of Fairchild Hiller Corporation for the rights to Armalite's AR-10 and AR-15 rifles. Colt refined the AR-15 rifle, and by approximately 1962, created a mass-producible version. Colt had to modify Armalite specifications to insure that the mass-produced version of the rifle would maintain the parts interchangeability. Based on tolerance studies and other work by Colt's engineers, Colt set the dimensions and tolerance extremes for each part. Colt's engineers chose materials for each part, designed specialized tooling for manufacturing and testing the parts, and developed the manufacturing processes (such as heat and chemical treatment, milling, forging, stamping, and molding) to insure interchangeability and to minimize any changes in dimensional characteristics that might occur during use. Colt claims to have invested in excess of $50 million over a 25 year period in the development and continued improvement of its products.

In 1971, the United States Army adopted Colt's version of the AR-15 rifle as its standard infantry rifle. It renamed the rifle the "M16" and obtained a manufacturing license from Colt. This license enables the government to buy M16 rifles and spare parts from sources other than Colt on a competitive bid basis. In addition to the United States Government, Colt sells the M16 rifle to a number of foreign governments and to non-military customers, such as law enforcement agencies. Colt has also licensed several foreign governments to manufacture M16 rifles for their own use. Three out of four of these foreign licenses have expired.

Colt manufactures the M16 rifle and several variations, including a shortened carbine version and a non-automatic version that still carries the designation AR-15. The rifle has gone through a number of modifications, from the original M16 to the M16A1 and the current M16A2 (the term "M16" will be used to refer to all of these models). The M16A2, brought out in 1984, contains significant improvements over previous models, including an adjustable front sight, heavier barrel, round hand guard, three shot burst control, and a new buttstock. Colt asserts that it has continued to refine and change the rifle's engineering specifications.

Colt asserts that the results of Colt's engineering work relating to the M16 rifle are contained in tens of thousands of pages of detailed engineering drawings, specification sheets, studies, and tests. Colt maintains the secrecy of this material by a variety of measures. For one, Colt places proprietary legends on its drawings stating that all information therein is owned by Colt and shall not be disclosed to third parties. The drawings are kept in areas of limited access which are monitored by security personnel, and access to the drawings is restricted to authorized personnel. Colt restricts its employees by written agreements, even after their employment ends, from using or disclosing any of the confidential information which they had access to while in Colt's employ.

Colt also restricts its suppliers' use of its technical data. Like most manufacturers, Colt contracts with outside suppliers for the manufacture of component parts for the M16 rifle. Colt then assembles the finished product using these parts, along with parts Colt manufactures itself. Colt must of course provide drawings to these suppliers, but Colt has contractually obligated the suppliers not to use this information except in the manufacture of parts and accessories pursuant to their contracts with Colt. Similar restrictions on the use of Colt's technical data are placed on suppliers of parts to the United States Government, which has the right under its license from Colt to buy spare parts from outside suppliers. The contracts forbid outside suppliers from using Colt's technical data to make parts for anyone except Colt or the United States Government.

From 1970 through mid-1975, Charles Christianson was employed by Colt as an engineer. Christianson worked as a tool designer and project administrator in Colt's Singapore licensing program, and he acted as supervisor of project planning in Colt's Philippine program. As a condition of his employment, Christianson signed a confidentiality agreement prohibiting him from using or disclosing Colt proprietary information during and after the termination of his employment.

After leaving Colt in 1975, Christianson formed his own company, International Trade Services, Inc. ("ITS"). ITS obtained Colt's proprietary drawings from the Philippine government (which was a Colt licensee at that time), and ITS contracted to supply certain M16 parts to the Philippine government. Christianson contracted to have these parts made by two of Colt's vendors, Casting Engineers and Martin Marietta.

Colt claims that when it questioned the right of Christianson, Casting Engineers, Martin Marietta and the government of the Philippines to engage in this project, Christianson sought Colt's approval for the particular project (Christianson dep. 87-88, and Defendant's Exhibit 9 Radice affidavit). Colt asserts that it then gave Christianson a letter in March 1986 which waived Colt's objections to these contracts but preserved its rights for the future. Colt contends that later, without advising Colt, Christianson entered into new contracts to supply parts to Colt's licensee in the Philippines, to Colt's licensee in Singapore, and to customers in the United States.

HISTORY OF THE LAWSUIT

In about July of 1983, Colt learned that Springfield Armory, Inc. (Springfield), an Illinois corporation, was attempting to supply purported M16 rifles to the government of El Salvador. On September 2, 1983, Colt commenced an action in this Court against Springfield and a related corporation, Rock Island Armory, Inc. See, Colt v. Springfield, 83-4072 (C.D.Ill.1984) (Exhibits 1 and 2 attached to Radice affidavit). Although Springfield claimed that it had reverse engineered the entire rifle, Senior U.S. District Judge Robert Morgan found that the evidence indicated that Springfield had engaged in a scheme to misuse Colt's proprietary M16 parts drawings and had induced Colt's vendors and licensees to produce M16 parts in violation of their contractual restrictions. Id. (see, Exhibit 2 attached to Radice affidavit). On this basis, Judge Morgan entered a preliminary injunction against Springfield and Rock Island Armory, Inc. enjoining them from proceeding with their planned production of M16 rifles. The entry of the preliminary injunction against Springfield was upheld by the Federal Circuit. Colt Industries Operating Corp. v. Springfield Armory, Inc., 732 F.2d 168 (Fed.Cir.1984).

Colt asserts that during discovery before the preliminary injunction hearing in the Springfield case, it found that Christianson's company had supplied many of the parts Springfield used in its M16 rifles. (Gubbins dep. 50-51, Exhibit 10 attached to Radice affidavit, and Reese dep. 178-179, 359-364, Exhibit 12 attached to Radice affidavit). In the fall of 1983 Colt joined Christianson and ITS as additional defendants in the Springfield lawsuit and moved to include them in a similar preliminary injunction. At the same time, Colt directed its attorneys to send a number of letters to Colt suppliers and third parties to put them on notice that Colt considered dealing in unauthorized parts to be improper. (Gubbins dep. 51, Exhibit 10 attached to Radice affidavit).

Judge Morgan denied Colt's motion for a preliminary injunction against Christianson and ITS on April 19, 1984. Colt then decided to dismiss Christianson and ITS from the case, based on Christianson's testimony that his company had gone out of business. (Exhibit 10 attached to Radice affidavit at 52).

On May 14, 1984, Christianson commenced this lawsuit against Colt alleging that Colt had violated the antitrust laws by commencing litigation against him and by threatening his customers and suppliers that it would stop doing business with them if they did business with Christianson. Colt reasserted its breach of contract and other claims against Christianson as counterclaims in the new lawsuit. The case was consolidated with the Springfield case, so that the parties were then essentially in the same posture as they had been before Colt had voluntarily dismissed its claims against Christianson.

On September 5, 1984, the Springfield defendants entered into a consent judgment and permanent injunction with Colt. However, in the Christianson case, Christianson moved for partial summary judgment based on the fact that Colt's specifications for M16 rifle parts could not be maintained as valid trade secrets because they should have been disclosed in certain patent applications. Also, Christianson added a second count to his complaint alleging tortious interference with contractual relations. Colt then made a motion for partial summary judgment on both the patent law and tortious interference claims.

In May 1985, Judge Morgan granted Christianson's Motion for Summary Judgment on liability on the entire antitrust and tortious interference...