M. Bryce & Associates, Inc. v. Gladstone, 80-1935

• Decision Date: 26 March 1982
• Docket Number: No. 80-1935,80-1935
• Citation: 107 Wis.2d 241,319 N.W.2d 907
• Parties: , 215 U.S.P.Q. 81, 1982 Copr.L.Dec. P 25,418 M. BRYCE & ASSOCIATES, INC., a foreign corporation, Plaintiff-Respondent, v. William GLADSTONE and Rodney Lang, d/b/a Arthur Young & Co., and Harley- Davidson Motor Co., Inc.--Subsidiary AMF Incorporated, Defendants-Appellants, Harry D. Mayo, III, and John E. Chapel, Defendants.
• Court: Wisconsin Court of Appeals

Page 907

319 N.W.2d 907

107 Wis.2d 241, 215 U.S.P.Q. 81, 1982

Copr.L.Dec. P 25,418

M. BRYCE & ASSOCIATES, INC., a foreign corporation Plaintiff-Respondent, v. William GLADSTONE and Rodney Lang, d/b/a Arthur Young & Co. and Harley- Davidson Motor Co., Inc.--Subsidiary AMF Incorporated, Defendants-Appellants Harry D. Mayo, III, and John E. Chapel, Defendants.

No. 80-1935.

Court of Appeals of Wisconsin.

Argued Dec. 15, 1981.

Opinion Released March 26, 1982.

Opinion Filed March 26, 1982.

Thomas O. Kloehn and Patricia K. Ballman of Quarles & Brady, Milwaukee, for defendants-appellants.

Eugene R. Erbstoesser, New York City, argued, for defendant-appellant Arthur Young & Co.; by Carl D. Liggio and John Matson, New York City, on brief.

Andrew O. Riteris, Milwaukee, argued for plaintiff-respondent; John L. Beard and Kevin P. Reak of Michael, Best & Friedrich and Jack L. Goodsitt of Goodsitt & Goodsitt, Milwaukee, on brief and of counsel.

Before DECKER, C. J., MOSER, P. J., and RANDA, J.

RANDA, Judge.

The plaintiff, M. Bryce & Associates, Inc. (MBA), contends that the defendants, Arthur Young & Co. (Young) and Harley-Davidson Motor Co., Inc. (Harley-Davidson), took and used for their own benefit MBA's "trade secret" contained in a methodology for the design of management information systems--PRIDE (PRofitable Information by DEsign). The jury returned a verdict in favor of MBA and the trial court entered judgment against Young and Harley-Davidson. We affirm.

In May, 1974, Young agreed to assist Harley-Davidson in revamping its internal operating systems. One of the projects was to design a management information systems standards manual (MIS). Harry Mayo (Mayo), Young's employee, and John Chapel (Chapel), Harley-Davidson's employee, were assigned to this project. Both were experienced in MIS design. They began their work in May, 1974.

In June, 1974, Gerald Myers (Myers), a Harley-Davidson employee, suggested that one of the commercially available MIS methodologies, PRIDE, marketed by MBA, be considered. On June 19, 1974, Mayo called Milton Bryce, MBA's president, and arranged for a sales presentation at Harley-Davidson on July 2, 1974.

The demonstration of PRIDE lasted approximately one full day. During the morning session, Bryce explained in general terms what PRIDE could accomplish and how it could benefit the business. Before going into the details of PRIDE at the afternoon session, Bryce required all participants to sign a non-disclosure form. Present at this time were Mayo of Young, and Chapel, Myers, Beach and Bryan of Harley-Davidson. Only Mayo, Bryan and Chapel signed this form. Nonetheless, Bryce continued with the afternoon session with the non-signers present.

After the afternoon presentation, employees of both Young and Harley-Davidson were impressed with the PRIDE system. During the next week Young and Harley-Davidson discussed whether Harley-Davidson should purchase PRIDE or stay with the work of Chapel and Mayo. A decision was made not to purchase PRIDE. The reason given for this decision was that PRIDE was not an economical choice in light of the time and effort already invested by Mayo for which Harley-Davidson still would have to reimburse Young.

Mayo and Chapel continued their work on MIS. The final version of their draft manual was submitted in August, 1974. Certain Harley-Davidson personnel were unhappy with the draft and requested changes that were needed to be made. The project was concluded in mid-October, 1974.

Subsequent to the submission of their draft, Mayo and Chapel learned that an independent standards drafting team had been set up at Harley-Davidson and was headed by Stuart Moebus (Moebus). In October, 1974, the Mayo and Chapel version of the manual was given to Moebus who revised it based on his team's independent work. The Harley-Davidson manual was issued in final draft form on January 10, 1975.

MBA filed its complaint in 1975 contending that Young and Harley-Davidson through their agents and employees, Mayo and Chapel, used the information disclosed on July 2, 1974, to duplicate, copy, appropriate and reproduce PRIDE without authorization, license or right, in substantially the same or identical form. MBA requested a permanent injunction and an award of compensatory damages.

Young filed a supplemental counterclaim for declaratory relief alleging there was no trade secret in PRIDE and that MBA did not own its supposed secret because MBA copied the methodology of Bryce's prior employer, Tek-Fax. MBA denied the allegations and asserted the affirmative defense that Young was estopped to attack PRIDE's trade secret status because its employee had signed a non-disclosure form for PRIDE.

Young and Harley-Davidson's motion for summary judgment on the ground that MBA's voluntary election of a federal copyright in the PRIDE manuals precluded any trade secret claim was denied. Young and Harley-Davidson's motion for summary judgment on the ground that the admissions of MBA and its expert witness indisputedly showed that the PRIDE "secret" was not taken or used by Young or Harley-Davidson was also denied. Young and Harley-Davidson successfully moved to strike MBA's affirmative defense of estoppel concerning the supplemental counterclaim. Before the trial court instructed the jury, Young and Harley-Davidson agreed to assume responsibility for all the acts of Chapel and Mayo, and the action against Chapel and Mayo was dismissed.

At the close of the evidence, the case was submitted to the jury on a nine-question special verdict. ¹ Questions 1, 2, 3, and 8 pertained to the "alleged" trade secret and questions 4, 5, 6, and 9 pertained to the non-disclosure agreement. In summary, the jury concluded that (i) MBA had a trade secret; (ii) the trade secret was disclosed in a confidential relationship; (iii) the trade secret was used by both Young and Harley-Davidson; and (iv) the trade secret had not been appropriated by MBA from Tek-Fax. The trial court entered judgment for MBA.

Motions after verdict by Young and Harley-Davidson were filed, briefed, and denied in a 35-page opinion by the trial court. This appeal by Young and Harley-Davidson followed. The following issues are raised on appeal:

1. Did MBA have a trade secret in the three volumes of PRIDE together with Bryce's presentation of July 2, 1974, and the Data Management Section of "PRIDE"?

2. Is there credible evidence to support the jury's finding that Young and Harley-Davidson used MBA's trade secret?

3. Did MBA's voluntary use of a copyright notice on the PRIDE manual prevent the state of Wisconsin from applying its trade secret law to bar use by others of the information contained in the work?

4. Is there credible evidence to support the jury's finding that MBA's trade secret was not developed by Tek-Fax and appropriated by MBA?

5. When employees Chapel and Mayo were dismissed from the case pursuant to an agreement between counsel and the trial court that employers Young and Harley-Davidson were responsible for their employees' acts, were the employers discharged by operation of law?

I. EXISTENCE OF A TRADE SECRET

In Abbott Laboratories v. Norse Chemical Corp., 33 Wis.2d 445, 147 N.W.2d 529 (1967), our supreme court considered the following six factors as being relevant in determining whether the material sought to be protected is a trade secret:

"... Some factors to be considered in determining whether given information is one's trade secret are: (1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others." Id. at 463-64, 147 N.W.2d at 538-39 (quoting Restatement (First) of Torts § 757, comment b (1939)).

The question of whether the evidence in this case fulfills the criteria necessary to constitute a trade secret is a question of law. Department of Revenue v. Exxon Corp., 90 Wis.2d 700, 713, 281 N.W.2d 94, 101 (1979), aff'd, 447 U.S. 207, 100 S.Ct. 2109, 65 L.Ed.2d 66 (1980). As to questions of law, this court need not give special deference to the trial court's determination. First National Leasing Corp. v. City of Madison, 81 Wis.2d 205, 208, 260 N.W.2d 251, 253 (1977).

After the jury returned their verdict, the trial court reviewed the evidence and stated its reasons for sustaining the jury's verdict. As to the six factors enumerated in Abbott, the trial court found the following facts in support of those six factors:

1) The extent to which the information is known outside of the plaintiff's business is supported by the following evidence:

The people involved in the afternoon session and those involved in the preparation of the standards manual for Harley-Davidson all were impressed with the "PRIDE" material and the information given at the afternoon session to such a degree that one of the defendants himself, "an expert," was willing to pay the $10,000.00 for information. This, inferentially, attests to the fact that the concept was not known; the testimony of Bryce concerning the method in which he protected the confidentiality from getting outside his business; the fact that the product is never sold without the expressed agreement to maintain confidentiality.

The defendants have in a very thorough manner gone over the material presented in the sale literature and the "state of the art" at the time of the misappropriation and argue that all or any trade secret was known or spelled out by the plaintiff in a public advertisement (Plaintiff's Exhibit 201 and 219). This evidence was presented to the jury. The evidence the jury could have believed was that demonstrated...