Daktronics, Inc. v. McAfee

• Decision Date: 24 February 1999
• Docket Number: No. 20620,20620
• Parties: DAKTRONICS, INC., Plaintiff and Appellee, v. Miles McAFEE, Personally and, d/b/a Speed Pitch Indicator, Golden Gate Sports and David E. Baker, Defendants and Appellants. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 358

599 N.W.2d 358

1999 SD 113

DAKTRONICS, INC., Plaintiff and Appellee, v. Miles McAFEE, Personally and, d/b/a Speed Pitch Indicator, Golden Gate Sports and David E. Baker, Defendants

and Appellants.

No. 20620.

Supreme Court of South Dakota.

Considered on Briefs Feb. 24, 1999.

Decided Aug. 18, 1999.

Roberto A. Lange of Davenport, Evans, Hurwitz & Smith, Sioux Falls, South Dakota, Attorneys for plaintiff and appellee.

Frank A. Bettmann and Tina M. Hogue of Finch Bettman Maks, Rapid City, South Dakota, Attorneys for defendants and appellants.

AMUNDSON, Justice.

¶1 Miles McAfee and David Baker appeal trial court's grant of summary judgment in favor of Daktronics for claims relating to development of a baseball pitch speed indicator. We affirm.

FACTS

¶2 In March 1988 Baker, a baseball coach at Bacone College in Oklahoma, contacted Daktronics by letter expressing he had an idea which Daktronics would be interested in, but was unable to provide further information without disclosing the idea in its entirety. In April 1988 Baker initiated a meeting with Daktronics, where Baker disclosed an idea of a pitch speed indicator that would display the type and speed of a pitched baseball to spectators at a baseball game. Baker requested Daktronics develop a prototype of such a pitch speed indicator.

¶3 Daktronics built a prototype for Baker by interfacing a radar gun with a console and digital display board. All of the materials necessary for the prototype were readily available on the market. The radar gun was purchased by Baker from MPH Industries and the console and display boards were manufactured by Daktronics.

¶4 After manufacture of the prototype, Miles McAfee became Baker's partner. Baker and McAfee contacted various major league ballparks for the sale of their product. They advertised the product, in conjunction with Daktronics, at the Major League Baseball Annual Conference in Atlanta, Georgia, and the NCAA Conference in Nashville, Tennessee. Between 1988 and 1992, McAfee and Baker ordered four pitch speed indicators from Daktronics.

¶5 In the fall of 1996 Daktronics began manufacturing pitch speed indicators for use in major league ballparks.

¶6 Baker and McAfee claim the speed pitch indicators Daktronics sold to major league baseball teams are essentially the same as the idea first discussed with Daktronics in early 1988. ^* Daktronics sued McAfee seeking a declaratory judgment. McAfee counterclaimed, bringing four causes of action: misappropriation of trade secret, unjust enrichment, conversion, and breach of fiduciary duty. The trial court granted summary judgment in favor of Daktronics.

¶7 McAfee and Baker appeal, raising the following issues:

1. Whether the trial court erred in granting summary judgment on Baker and McAfee's claim of misappropriation of trade secret.

2. Whether the trial court erred in determining no fiduciary duty existed as a matter of law between the parties.

3. Whether the trial court erred by concluding that all remaining counts of the counterclaim (conversion and unjust enrichment) also fail due to no "protectible property interest."

STANDARD OF REVIEW

¶8 Our standard of review for a grant or denial of summary judgment under SDCL 15-6-56(c) is well settled:

[W]hether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The non-moving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper.

Benson v. Goble, 1999 SD 38, p 9, 593 N.W.2d 402, 404; Lamp v. First Nat. Bank of Garretson, 496 N.W.2d 581, 583 (S.D.1993); Waddell v. Dewey Cty. Bank, 471 N.W.2d 591, 592 (S.D.1991). " '[S]ummary judgment is appropriate to dispose of legal, not factual questions.' " Benson, 1999 SD 38, p 9, 593 N.W.2d at 404-05 (quoting Harn v. Continental Lumber Co., 506 N.W.2d 91, 94 (S.D.1993) (citations omitted)). However, when " 'the facts are undisputed, the issue becomes one of law for this Court to decide.' " Id. (citing Harn, 506 N.W.2d at 94 (citing Taggart v. Ford Motor Credit Co., 462 N.W.2d 493, 498 (S.D.1990); Gasper v. Freidel, 450 N.W.2d 226, 229 (S.D.1990))).

DECISION

¶9 1. Trade secrets claim.

¶10 McAfee and Baker contend the trial court erred in granting summary judgment because genuine issues of material fact exist as to their claim for misappropriation of a trade secret.

¶11 We have previously addressed the question of what constitutes a trade secret in Weins v. Sporleder, 1997 SD 111, 569 N.W.2d 16. While the decision in Weins followed a jury trial and raised the issue of failure to grant judgment notwithstanding the verdict, the analysis provided in Weins is determinative of the present case.

¶12 McAfee and Baker bear the burden of establishing the existence of a trade secret. Weins, 1997 SD 111, p 18, 569 N.W.2d at 20 (citations omitted). "Without a proven trade secret, there can be no action for misappropriation, even if defendants' actions were wrongful." 10 Stuart M. Speiser, et al., The American Law of Torts, § 34:23 at 89 (1993). McAfee claims that the "trade secret" in this case is displaying for public viewing the speed and type of pitch thrown within a ballpark.

¶13 SDCL 37-29-1(4) defines "trade secret" as:

[I]nformation, including a formula, pattern, compilation, program, device, method, technique or process that:

(i) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

In Weins, this Court concluded the existence of a trade secret is a mixed question of law and fact. The legal question is, " 'whether the information in question could constitute a trade secret under the first part of the definition of trade secret' " under SDCL 37-29-1(4). Weins, 1997 SD 111, p 16, 569 N.W.2d at 20 (quoting Uncle B's Bakery, Inc. v. O'Rourke, 920 F.Supp. 1405, 1427 (N.D.Iowa 1996) (quoting Economy Roofing & Insulating Co. v. Zumaris, 538 N.W.2d 641, 648 (Iowa 1995)). SDCL 37-29-1(4) defines trade secret as: "information, including a formula, pattern, compilation, program, device, method, technique or process." The factual inquiry involves the remaining subsections of SDCL 37-29-1(4)(i) and (ii). Id. at p 16, 569 N.W.2d at 20.

¶14 McAfee and Baker claim a trade secret in the concept of displaying speed and type of pitch thrown for the public to view at a ballpark. However, " 'the commonly accepted definition of a trade secret does not include a marketing concept or new product idea submitted by one party to another.' " Hudson Hotels Corp. v. Choice Hotels Int'l, 995 F.2d 1173, 1176 (2ndCir.1993) (quoting 2 R. Milgrim, Milgrim on Trade Secrets § 8.03 at 8-31 (1992 & Supp.1992) (quoting Richter v. Westab, Inc. 529 F.2d 896, 900 (6thCir.1976))) (citations omitted). Therefore, simply possessing a non-novel idea or concept without more is generally, as a matter of law, insufficient to establish a trade secret. See Frink America, Inc. v. Champion Road Machinery Ltd., 48 F.Supp.2d 198, 206 (1999); Hudson Hotels, 995 F.2d at 1177.

¶15 Even if McAfee's product passed the legal inquiry of SDCL 37-39-1(4), it fails under the remaining subsections. The first subsection requires there to be economic value that is not readily ascertainable by other means. Weins, 1997 SD 111, p 20, 569 N.W.2d at 21 (citing SDCL 37-29-1(4)(i)). In Weins, we adopted the Seventh Circuit Court of Appeals definition that, " 'this requirement precludes trade secret protection for information generally known within an industry even if not to the public at large.' " Weins, 1997 SD 111, p 20, 569 N.W.2d at 21 (quoting Mangren Research & Dev. v. National Chem. Co., 87 F.3d 937, 942 (7thCir.1996)).

¶16 Baker and McAfee argue that the issue of whether information is generally known or readily ascertainable is a question of fact. See Weins, 1997 SD 111, p 17, 569 N.W.2d at 20. Ordinarily, this is true. Moss, Adams & Co. v. Shilling, 179 Cal.App.3d 124, 224 Cal.Rptr. 456, 458 (1986). However, a court may determine a question of fact by summary judgment if it appears to involve no genuine issues of material fact and the claim fails as a matter of law. Moore v. Marty Gilman, Inc., 965 F.Supp. 203, 217 (D.Mass.1997) (granting summary judgment where plaintiff's claim failed as a matter of law where information was already in the public domain and could not be a trade secret); Nordale, Inc. v. Samsco, Inc., 830 F.Supp. 1263, 1273 (D.Minn.1993) (granting summary judgment on trade secrets claim where no reasonable efforts to maintain secrecy), aff'd, 86 F.3d 1179, 1996 WL 283616 (1996); Aerospace America Inc. v. Abatement Techs., Inc., 738 F.Supp. 1061, 1070 (E.D.Mich.1990) (granting summary judgment because information openly advertised could not be trade secret and there was no confidential relationship); Moss, Adams & Co., 224 Cal.Rptr. at 458 (holding plaintiff's claim failed as a matter of law, the use of names on rolodex did not constitute trade secret).

¶17 Baker and McAfee's concept involved combining the use of a radar gun, a console, and a display. It is undisputed that all of these items were readily available on the market. "Combining these materials cannot be considered a trade secret if the formula was 'within the realm of general skills and knowledge' in the relevant industry." Weins, 1997 SD 111, p 21, 569 N.W.2d at 21 ...