Harvey Barnett, Inc. v. Shidler

• Decision Date: 06 August 2003
• Docket Number: Docket No. 02-1047.
• Citation: 338 F.3d 1125
• Parties: HARVEY BARNETT, INC., a Florida corporation; Infant Swimming Research, Inc., a Florida corporation, Plaintiffs-Appellants, v. Ann SHIDLER, individually and d/b/a Infant Aquatic Survival; Judy Heumann, individually and d/b/a Infant Aquatic Survival; Alison Geerdes, individually and d/b/a Infant Aquatic Survival, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

338 F.3d 1125

HARVEY BARNETT, INC., a Florida corporation; Infant Swimming Research, Inc., a Florida corporation, Plaintiffs-Appellants, v. Ann SHIDLER, individually and d/b/a Infant Aquatic Survival; Judy Heumann, individually and d/b/a Infant Aquatic Survival; Alison Geerdes, individually and d/b/a Infant Aquatic Survival, Defendants-Appellees.

Docket No. 02-1047.

United States Court of Appeals, Tenth Circuit.

August 6, 2003.

COPYRIGHT MATERIAL OMITTED

Douglas Jaffe, of San Diego, CA, for the Plaintiffs-Appellants.

Mark W. Fischer (Kristin M. Berdan with him on the brief), Faegre & Benson, LLP, Boulder, CO, for the Defendants-Appellees.

Before SEYMOUR, McKAY, and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.

Plaintiffs Harvey Barnett, Inc. and Infant Swimming Research, Inc. (collectively, "ISR") filed a complaint against three former employees, alleging state-law claims of misappropriation of trade secrets, breach of contract, and unjust enrichment, as well as claims of unfair competition and deceptive trade practices under the Colorado Consumer Protection Act ("CCPA"), Colo.Rev.Stat. § 6-1-105. ISR further alleged federal claims of trademark infringement and misleading trade practices in violation of the Lanham Act, 15 U.S.C. §§ 1114 and 1125. Finding that ISR failed to produce sufficient evidence with respect to any of its claims, the district court granted summary judgment to the defendants. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm in part and reverse in part.

I

In 1966, Dr. Harvey Barnett, the founder and president of ISR, began to develop the Infant Swimming Research program ("ISR program"), which plaintiffs describe as a "scientific, behavioral approach to pediatric drowning prevention." (Appellants' Br. at 4.) ISR's program utilizes a method known as "swim, float, swim," and contains nearly two-thousand "prompts and procedures" for teaching infants as young as six-months old how to survive in the water. (Id.) In addition, the ISR program maintains safety protocols to keep children safe during instruction and provides a "BUDS" Record Sheet allowing parents to monitor children's bodily functions, diet, and sleep in order to evaluate physical responses to the ISR program.

In a five-week course, ISR trains and certifies instructors. ISR-certified instructors teach survival skills to infants in private lessons, ten minutes a day, five days a week for three to four weeks. Instructors receive a videotape entitled "Prompts and Procedures," which illustrates how to use behavioral conditioning in teaching infants and covers other water-safety issues. ISR's program also includes the ISR Master Instructor System, in which individuals become certified as Master Instructors to train other potential ISR instructors.

Dr. Barnett has written various books detailing some of the techniques and methods used in ISR's aquatic-survival program, including Precision Strokes for Little Folks, published in 1974. More than ten years later, he wrote, but never published, a manual entitled The Science of Infant Swimming, which is used to help instructors understand "the psychology of infants and young children, their anatomy, and the physics involved as their small bodies move through the water." (Appellants' Br. at 5.) In 1989, ISR began publishing the "Parent Resource Book," now in its ninth edition, an educational book distributed to parents regarding the dangers of infant drowning and the theory and processes used by ISR.

Judy Heumann, Ann Shidler, and Alison Geerdes, defendants in the instant case, are former ISR instructors who left the company in early 2000. ISR trained Heumann as an instructor and Master Instructor in 1984 and 1987, respectively. Shidler was trained as an instructor in 1990, and as a Master Instructor in 1993, and Geerdes was trained as an ISR instructor and worked for less than a year before leaving ISR. She is not a Master Instructor. Defendants paid fees ranging from $5,000 to $10,000 for the instruction.

While employed by ISR, Heumann, Shidler, and Geerdes each signed a "Nondisclosure and Confidentiality Agreement" and a license agreement containing a further "Confidentiality of Information" provision as well as a "Covenant Not to Compete."¹ (1 Appellants' App. at 60, 77-80, 81-85.) Notwithstanding these agreements, on leaving ISR in 2000, the three former employees started Infant Aquatic Survival ("IAS"), a new company devoted to teaching infant and child swimming in Colorado. It is this conduct that is the subject of this litigation. Defendants' program is allegedly similar to the ISR program in that it utilizes the same "swim, float, swim" method, implements some of the same safety protocols, uses a Daily Health Data Sheet similar to the BUDS sheet, uses a comparable registration form, and distributes a comparable parent resource book to parents of children enrolled in the IAS program. It is uncontested that defendant Shidler's husband sought to reserve the names Harvey Barnett, Inc. and Infant Swimming Research, Inc. with the Colorado Secretary of State. On more than one occasion, defendants falsely advertised that their program, IAS, had been in business since 1990.

ISR filed in district court a complaint against the defendants, alleging state-law claims of misappropriation of trade secrets, breach of contract, and unjust enrichment, as well as unfair competition and deceptive trade practices under the CCPA, along with federal claims of trademark infringement and misleading trade practices under the Lanham Act. ISR then sought a preliminary injunction to prevent the defendants from teaching the ISR program to other instructors. Following an evidentiary hearing, the district court denied ISR's request for a preliminary injunction as to Heumann and Shidler.² Subsequently, the defendants moved for summary judgment, which was granted. In its ruling, the district court concluded that the ISR program was not a trade secret as a matter of law and dismissed ISR's misappropriation-of-trade-secrets claim. The district court further concluded that both the covenant not to compete and the confidentiality provision in the license agreement were not enforceable, and dismissed ISR's breach-of-contract claim. As to ISR's remaining claims—trademark infringement and misleading trade practices under the Lanham Act, and violations of the CCPA — the court concluded that, because ISR failed to advance sufficient evidence on each element, those claims must be dismissed as well. ISR appeals the grant of summary judgment to defendants.³

II

We review the grant of summary judgment de novo, applying the same legal standard used by the district court. Perry v. Woodward, 199 F.3d 1126, 1131 (10th Cir.1999). Summary judgment is appropriate "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 judgment as a matter of law." Fed.R.Civ.P. 56(c). In our review, we examine the evidence and draw reasonable inferences therefrom in the light most favorable to the non-moving party. Simms v. Okla. ex rel. Dep't of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th Cir.1999). "Although the movant must show the absence of a genuine issue of material fact, he or she need not negate the nonmovant's claim." Id. Once the movant carries this burden, the nonmoving party must "bring forward specific facts showing a genuine issue for trial as to those dispositive matters for which he or she carries the burden of proof." Id. (quotation omitted). An issue of material fact is genuine if the nonmovant presents facts that would allow a reasonable jury to find in favor of the nonmovant. Id.

A

In evaluating the district court's decision regarding ISR's trade-secrets claim, we look to Colorado law. Colorado has adopted the Uniform Trade Secrets Act, which defines a trade secret as "any scientific or technical information, design, process, procedure, formula, [or] improvement... which is secret and of value." Colo.Rev.Stat. § 7-74-102. In order "[t]o be a `trade secret' the owner thereof must have taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access thereto for limited purposes." Id. Trade-secret status is a question of fact. Colo. Supply Co. v. Stewart, 797 P.2d 1303, 1306 (Colo.Ct.App. 1990); see also Rivendell Forest Prods., Ltd. v. Georgia-Pacific Corp., 28 F.3d 1042, 1045 (10th Cir.1994) (holding that in this context "doubts as to existence of triable issue of fact ... must be resolved in favor of the existence of triable issues").

Factors considered in determining whether a trade secret exists include:

(1) the extent to which the information is known outside the business; (2) the extent to which it is known to those inside the business, i.e., by the employees; (3) the precautions taken by the holder of the trade secret to guard the secrecy of the information; (4) the savings effected and the value to the holder in having the information as against competitors; (5) the amount of effort or money expended in obtaining and developing the information; and (6) the amount of time and expense it would take for others to acquire and duplicate the information.

Colo. Supply Co., 797 P.2d at 1306. In Rivendell, we held, consistent with Colorado law, that information can be a trade secret notwithstanding the fact that some of its components are well-known. 28 F.3d at 1045. "[A] trade secret can exist in a combination of characteristics and components each of which, by itself, is in the public domain, but the unified process, design and operation of which, in unique combination, affords a competitive advantage and is a protectable secret." Id. (quotation omitted).

In arriving at its conclusion that the ISR program is not a trade secret as a matter of law, the district...