Contour Design Inc. v. Chance Mold Steel Co.

Decision Date12 May 2011
Docket NumberCivil No. 09–cv–451–JL.
Citation794 F.Supp.2d 315,2011 DNH 078
PartiesCONTOUR DESIGN, INC.v.CHANCE MOLD STEEL CO., Ltd. and EKTouch Co., Ltd.
CourtU.S. District Court — District of New Hampshire

OPINION TEXT STARTS HERE

Anne M. McLaughlin, Jonathan W. Woodard, Jordan L. Hirsch, Michael J. Summersgill, Wilmer Cutler Pickering Hale & Dorr LLP, Lawrence L. Blacker, Blacker Law Office, Boston, MA, Laura A. Sheridan, Robert J. Gunther, Wilmer Cutler Pickering Hale & Dorr LLP, New York, NY, for Plaintiff.Peter G. Callaghan, Preti Flaherty Beliveau Pachios PLLP, Concord, NH, Felix J. D'Ambrosio, John R. Schaefer, Thomas J. Moore, Bacon & Thomas, PLLC, Alexandria, VA, for Defendant.

MEMORANDUM ORDER

JOSEPH N. LAPLANTE, District Judge.

Before the court are several motions for rulings on the admissibility of certain evidence at trial. Plaintiff Contour Design, Inc. has sued defendants Chance Mold Steel Co., Ltd. and EKTouch Co., Ltd. Chance formerly manufactured products, including ergonomically friendly computer pointing devices, for Contour, but is now making those products for itself and EKTouch, a related company.1 Contour claims that certain of Chance's products amount to a misappropriation of Contour's trade secrets and a breach of the confidentiality and non-competition provisions of the parties' agreements.

This court has jurisdiction over this action between Contour, a Delaware corporation with its principal place of business in Windham, New Hampshire, and the defendants, Taiwanese corporations, under 28 U.S.C. § 1332(a)(2) (diversity). After oral argument, Contour's motions are granted and Chance's motions are denied, as fully set forth below.

I. Background

The underlying facts are set forth here in an abbreviated fashion, since they are laid out in detail in this court's prior orders, particularly the recent memorandum order denying the parties' motions for summary judgment. Contour Design, Inc. v. Chance Mold Steel Co., 2011 DNH 069, 2011 WL 1564612 (D.N.H. April 25, 2011). Contour designs and sells ergonomically friendly computer pointing devices, including the “Roller Mouse” series. The products from this line have a wide roller bar incorporated into a component placed centrally below the keyboard, as opposed to the configuration of a traditional computer mouse, which has a narrow trackball incorporated into a smaller component placed to one side of the keyboard.

In 1995, Contour engaged Chance as a manufacturer of mouse products. The parties executed a “Non–Disclosure Agreement” (the “NDA”) reciting that Contour “has certain inventions, designs, methods, samples, market information [,] concepts and ideas,” defined as the “Confidential Information,” that relates “to consumer mouse products,” defined as “the Product.” Chance agreed in the NDA to preserve the confidentiality of the Confidential Information and to make no use or disclosure of it. Chance further agreed not to “duplicate, produce, manufacture, or otherwise commercially exploit the Product, or develop any other product derived from or based on the Product.” Chance proceeded to serve as the exclusive contract manufacturer of Contour's computer pointing devices for the next 14 years.

These products included the “Roller Mouse Pro” and the “Roller Mouse Free.” To make these products, Chance used tooling (metal molds for the insertion of melted plastic) that it had built from designs provided by Contour. The Pro ran on firmware (the computer code programmed into a product that defines how it functions) developed for Contour by an outside engineering firm, while the Free ran on firmware developed by Contour itself and featuring a number of innovative improvements over the firmware for the Pro. Contour did not share the source code for the firmware with anyone, and shared the machine code for the firmware with no one but Chance.

Contour had originally envisioned the Free with a removable roller bar to allow for easier cleaning. But due to delays in engineering this feature, as well as staff turnover at Chance, Contour ultimately decided to defer including a removable roller until the next release in the Roller Mouse series. Contour told Chance of that decision in August 2008. Within a few months, however, Contour learned that Chance was marketing a mouse called the “Ergoroller,” which is similar to the Free, but with the elusive removable roller. Contour then commenced this action, seeking, among other relief, a temporary restraining order to prevent the defendants from marketing the Ergo in the United States. Following a hearing, at which both parties appeared through counsel, the court issued the restraining order. Contour Design, Inc. v. Chance Mold Steel Co., 2010 DNH 011, 25, 2010 WL 174315 (D.N.H. Jan. 14, 2010).

Contour later filed an amended complaint, asserting, inter alia, that: (a) the Ergo misappropriates Contour's trade secrets in the “concept, design and specifications” of the Free, in violation of New Hampshire's version of the Uniform Trade Secrets Act, N.H.Rev.Stat. Ann. § 350–B, (b) Chance has breached the NDA by marketing the Ergo, (c) Chance has misappropriated Contour's trade secrets, “including but not limited to design concepts, sketches, [and] drawings,” in violation of § 350–B, and (d) Chance has manufactured “products derived from or based on” Contour's mouse products, in breach of both the NDA and an oral agreement. The amended complaint alleged that Chance's breach of the NDA had damaged Contour in a number of ways, including that it would “have to expend large sums for tooling that it already effectively paid to Chance” during their relationship.

Contour then filed a motion for a preliminary injunction, seeking to prevent Chance from marketing “any product that is the same or similar” or “derived from or based on” any product manufactured for Contour by Chance. Contour argued, among other things, that Chance had been marketing two ergonomic mouse products, the “Professional” and the “Open,” that were “identical to” Contour's Pro and Free “in every way and description,” including their firmware and the tooling used to make them.

The motion was referred to Magistrate Judge McCafferty, who, after holding a day-long evidentiary hearing, recommended that the motion be granted in large part. Contour Design, Inc. v. Chance Mold Steel Co., No. 09–451, 2010 WL 4774283, at *13 (D.N.H. Oct. 22, 2010). Judge McCafferty found, in relevant part, that Contour had established a likelihood of success on its claim that the tooling and firmware for the Pro and the Free amounted to “confidential information” under the NDA, and that Chance had used that tooling and firmware to produce the Open and the Professional, despite agreeing in the NDA not to do so. Id. at *7–*10. In reaching this conclusion, Judge McCafferty rejected Chance's argument that the NDA applied only to confidential information in existence at the time it was executed. Id. at *5–*6. She also rejected Chance's argument that a licensing agreement between Contour and a Swedish company, Ergoption AB—which had hired Chance to produce the Open and the Professional—“absolved Chance from its own contractual obligation[s] to Contour.” Id. at *13.

This court adopted Judge McCafferty's report and recommendation over Chance's objection. Contour Design, Inc. v. Chance Mold Steel Co., No. 09–451, 2010 WL 4736428 (D.N.H. Nov. 12, 2010). Chance then appealed the preliminary injunction to the court of appeals, Contour Design, Inc. v. Chance Mold Steel Co., No. 10–2415 (1st Cir. Dec. 9, 2010), which heard oral argument on May 3, 2011.

II. AnalysisA. Contour's motion to exclude testimony by Frank G. McKenzie

Contour moves to preclude any testimony by one of Chance's designated expert witnesses, Frank G. McKenzie, arguing that it would constitute improper legal opinion. McKenzie concludes, among other things, that:

“the NDA applies only to information pertaining to the product that Contour had in its possession on the effective date of the NDA,” rather than information “that might have come into existence after the effective date”;

“the NDA fails to indicate the kind of computer mouse product it covers,” rendering it ambiguous;

“Contour's entering the NDA after having previously disclosed to Chance information about the product indicates that no confidential business relationship existed”;

• even though the NDA does not require that “confidential information be marked ‘Confidential’ by the disclosing party ... [a]ny information disclosed by Contour that was not marked ‘Confidential’ was not the subject of reasonable efforts to maintain its secrecy”;

• the Uniform Trade Secrets Act “does not recognize that a concept or mere idea, without more, qualifies as a trade secret”;

[c]ourts frequently refer to six common law factors in determining whether information reaches the standard of a trade secret”; and

“the mere idea that an ergonomic mouse should have a removably [ sic ] roller, without any information regarding how a mouse with a removably [ sic ] roller could be designed and integrated with a computer, appears inadequate relative to” certain factors from the common-law test for trade secrets and, furthermore, “may have hypothetical economic value, but not the actual or potential economic value the Act requires of a trade secret.”

(parenthetical and capitalization omitted).

There is little question that these opinions are inadmissable. “It is black-letter law that it is not for witnesses to instruct the jury as to applicable principles of law, but for the judge.” Nieves–Villanueva v. Soto–Rivera, 133 F.3d 92, 99 (1st Cir.1997) (quotation marks and bracketing omitted). McKenzie's proffered opinions as to the reach of the Uniform Trade Secrets Act, and how courts otherwise define trade secrets, run afoul of this rule. As this court has observed, [e]xpert testimony proffered solely to establish the meaning of a law is presumptively improper.’ Bartlett v. Mut. Pharm. Co., 742 F.Supp.2d...

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