ECT International, Inc. v. Zwerlein

• Decision Date: 19 May 1999
• Docket Number: No. 98-2041.,98-2041.
• Citation: 228 Wis.2d 343,597 N.W.2d 479
• Parties: ECT INTERNATIONAL, INC., a Wisconsin corporation, Plaintiff-Appellant, v. John ZWERLEIN, Defendant-Respondent.
• Court: Wisconsin Court of Appeals

228 Wis.2d 343

597 N.W.2d 479

ECT INTERNATIONAL, INC., a Wisconsin corporation, Plaintiff-Appellant, v. John ZWERLEIN, Defendant-Respondent.

No. 98-2041.

Court of Appeals of Wisconsin.

Submitted on briefs April 26, 1999.

Decided May 19, 1999.

On behalf of the plaintiff-appellant, the cause was submitted on the briefs of John A. Busch and Katherine W. Schill of Michael Best & Friedrich LLP of Milwaukee.

On behalf of the defendant-respondent, the cause was submitted on the brief of Victor E. Plantinga of Blumenfeld, Rose & De Jong, S.C. of Brookfield.

Before Snyder, P.J., Nettesheim and Anderson, JJ.

ANDERSON, J.

ECT International, Inc. (ECTI) challenges the circuit court's grant of summary judgment to its former product manager, John Zwerlein. ECTI contends that Zwerlein misappropriated trade secrets, including knowledge of the workings of "promis.e" software and its customer and prospects lists. We affirm. We hold that a party asserting a protectible trade secret must describe it with sufficient particularity to identify the specific trade secret at risk and ECTI failed to do so. We also hold that in imposing a one-year period, after termination of employment, during which an employee could not divulge trade secrets, ECTI manifested an intent that after the expiration of that period a former employee is under no restrictions. Zwerlein's demonstration of a program that could translate or convert files came more than thirteen months after he left ECTI.

ECTI is the exclusive North American distributor for "promis.e" software used in the design and documentation of electrical control systems. "[P]romis.e" is marketed as software that allows the user to generate control system schematics, panel layouts, bills of material, wire lists, terminal plans, etc. At the same time, the software completes other necessary tasks, including ID assignment, cross-referencing, wire numbering and list generation. ECTI also offers complete technical training and support for "promis.e," including the development of specialized or custom program applications, internal "promis.e" modifications and/or the development of external "add-on" modules.

As the sole North American distributor, ECTI has a proprietary interest in "promis.e." In order to use a fully functioning copy of the software, a user must have an "ADS key" supplied by ECTI. The "ADS key" is a piece of hardware, no bigger than a coaster, that is attached to a computer's parallel port. Without the "ADS key" the "promis.e" software can only be used in a limited demonstration mode.

Zwerlein started working for ECTI as an application specialist in October 1990. He was promoted to product manager in 1994 and was responsible for training the users, answering technical questions, and customizing and enhancing the software. On June 23, 1996, Zwerlein left ECTI and went to work as the "promis.e" administrator for Quad Tech, a customer of ECTI. In August 1997, Zwerlein left Quad Tech and founded a consulting firm called Synergy Solutions, Inc.

As a consultant, Zwerlein would investigate a customer's needs and present the best software to fulfill those needs. For some customers, "promis.e" was the solution; for other customers, a rival product, Toolbox WD, was the solution. Zwerlein had an arrangement with the developer of Toolbox WD to receive a commission on all sales of the software. Toolbox WD used a different process but reached the same result as "promis.e," the design of electrical control systems. The two programs were incompatible—a file created in "promis.e" could not be opened in Toolbox WD.

In the summer of 1997, Zwerlein invited James Baker to see Zwerlein's home office. Baker, at one time a product manager at ECTI and familiar with "promis.e," was then a manager at Rockwell Software, assisting with the management of electrical control system design software called RSWire Designer. Prior to Baker's visit to his home, Zwerlein had solicited Rockwell's business. During Baker's visit, Zwerlein demonstrated "promis.e" and Toolbox WD by performing the equivalent function in both programs. Baker observed the "ADS key" attached to the parallel port of Zwerlein's home computer. During the demonstration, Zwerlein converted an existing "promis.e" file to a Toolbox WD file. He told Baker that all of the "promis.e" schematics and intelligence could be imported into Toolbox WD and converted. Because Baker had never seen anyone convert a "promis.e" file to another format, he reported the demonstration to Art Sawall, President of ECTI.

ECTI filed this action against Zwerlein seeking unspecified damages for his misappropriation of trade secrets. ECTI alleged that the software file system for "promis.e" and its customer and prospects lists are trade secrets. ECTI alleged that Zwerlein developed or assisted in the development of a program that can translate "promis.e" files into Toolbox WD files. Further, it was alleged that Zwerlein was making sales calls on companies appearing on ECTI's prospects list. Zwerlein filed a general denial and, after limited discovery, moved for summary judgment. The circuit court granted Zwerlein's motion, ruling that any translator or conversion program was created by Zwerlein from his own intelligence, knowledge and experience and not from the misappropriation of a trade secret. As to the customer and prospects lists, the circuit court noted that there was no evidence that either list had any value eighteen months after Zwerlein left ECTI and that there was no evidence that Zwerlein was using either list. Finally, the court concluded that there was a lack of evidence that Zwerlein had an "ADS key" in his possession. ECTI appeals.

[1]

We review a motion for summary judgment using the same methodology as the trial court. See M & I First Nat'l Bank v. Episcopal Homes Management, Inc., 195 Wis. 2d 485, 496, 536 N.W.2d 175, 182 (Ct. App. 1995)

. That methodology is well known, and we will not repeat it here except to observe that we may affirm a circuit court's decision for reasons other than those either presented to, or relied upon by, the circuit court. See Liberty Trucking Co. v. DILHR, 57 Wis. 2d 331, 342, 204 N.W.2d 457, 463-64 (1973). This is especially true on summary judgment where the requisite methodology requires de novo review. See Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816, 820 (1987).

We begin our analysis by deciding whether ECTI has established the existence of a protectible trade secret. The definition of "trade secret" is found in § 134.90(1)(c), STATS.,¹ which states:

"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique or process to which all of the following apply:

1. The information 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.

2. The information is the subject of efforts to maintain its secrecy that are reasonable under the circumstances.

[2]

From the statute, we derive three attributes of a protectible trade secret. To qualify as a protectible trade secret, the "promis.e" software, customer list and prospects list: (1) must be information such as a formula, pattern, compilation, program, device, method, technique or process; (2) that has independent economic value, available from only one source; and (3) is the subject of reasonable efforts to maintain its secrecy. See Leske v. Leske, 197 Wis. 2d 92, 98, 539 N.W.2d 719, 721-22 (Ct. App. 1995)

.

The first attribute requires that the item or material ECTI asserts qualifies as a protectible trade secret must be "information" in a substantive form that is generally not known to others in the particular trade. In its complaint and submissions in opposition to the motion for summary judgment, ECTI alleges that "[t]he software file system for `promis.e' is a trade secret in that it is a program which derives independent economic value from not being generally known or ascertainable by proper means and is the subject of efforts by ECTI to maintain its secrecy." ECTI also alleges that "customer lists and lead lists are also trade secrets in that each derives independent economic value from not being generally known or ascertainable by proper means and each is the subject of efforts by E CTI to maintain each's secrecy."

These allegations echo § 134.90, STATS., and are nothing more than legal conclusions. The allegations fail to allege the ultimate facts showing the existence of a trade secret. See Diodes, Inc. v. H.D. Franzen, 67 Cal. Rptr. 19, 23 (Cal. Ct. App. 1968). Diodes is a good example of what is required from one who seeks to protect trade secrets. In Diodes, an employer was attempting to prevent former employees from using a "secret process" they developed while employed with Diodes. In affirming a dismissal for failure to state a claim, the California Court of Appeals excused the party asserting a trade secret from having to "spell out the details of the trade secret" because it would destroy what was trying to be protected. See id. at 24. However, the Diodes court did require

the complainant [to] describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and to permit the defendant [and the court] to ascertain at least the boundaries within which the secret lies.

Id.

Because ECTI's complaint repeats statutory language we cannot separate what is a trade secret from what is general knowledge in this niche of the CAD (computer aided design) software industry or what is the special knowledge of CAD software programmers and product managers like Zwerlein. Further, none of ECTI's submissions in opposition to the summary judgment motion go beyond the...