Modumetal, Inc. v. Xtalic Corp.

• Decision Date: 25 June 2018
• Docket Number: No. 76708-9-I,76708-9-I
• Citation: 425 P.3d 871
• Court: Washington Court of Appeals
• Parties: MODUMETAL, INC., Appellant, v. XTALIC CORPORATION, and John Hunter Martin, Respondents

425 P.3d 871

MODUMETAL, INC., Appellant,

v.XTALIC CORPORATION, and John Hunter Martin, Respondents

No. 76708-9-I

Court of Appeals of Washington, Division 1.

FILED: June 25, 2018

Lane Polozola, Attorney at Law, Ramsey M. Al-Salam, Perkins Coie LLP, 1201 3rd Ave. Ste. 4900, Seattle, WA, 98101-3099, for Appellant

Bradley S. Keller, Keith David Petrak, Byrnes Keller Cromwell LLP, 1000 2nd Ave. Fl. 38, Seattle, WA, 98104-1094, Howard Mark Goodfriend, Catherine Wright Smith, Ian Christopher Cairns, Smith Goodfriend PS, 1619 8th Ave. N, Seattle, WA, 98109-3007, for Respondent

PUBLISHED OPINION

Spearman, J.

¶ 1 John Hunter Martin left Modumetal Inc. to work for Xtalic Corp. Xtalic subsequently filed two patent applications describing processes in an area that both companies had been researching. Modumetal brought claims for trade secret misappropriation, breach of confidentiality obligations, and breach of contract against Martin and Xtalic. The trial court granted Xtalic's motion for summary judgment and denied Modumetal's CR 56(f) request for a continuance to pursue further discovery.¹ Because there is sufficient evidence to raise issues of material fact regarding Modumetal's claims, we reverse.

FACTS

¶ 2 Modumetal, Inc. and Xtalic Corporation are competitors in the field of research, development, and manufacture of materials and technology engineered at the nano-scale.² Modumetal is based in Washington, and Xtalic is based in Massachusetts. Both companies have worked with a process known as "electrodeposition." This process allows a coating of metal to be deposited onto a surface by submersing the item in a specially developed chemical bath and running an electrical current through it. The resulting metallic coating can be used to improve corrosion and wear resistance, and aesthetic qualities. This process can also be used to form freestanding metal by depositing material thickly and then detaching the substrate, a process known as electroforming. The electrodeposition process can be manipulated by altering various parameters, such as the metal or alloy being plated, the composition and temperature of the bath, bubbling various gases through the bath, and changing the frequency, magnitude, or duration of the current. The goal is to develop and identify valuable and unique "recipes" for effectively electrodepositing a particular metal or alloy onto a particular substrate on an industrial scale for commercial purposes.

¶ 3 In 2008, John Hunter Martin began working at Modumetal as a student intern. At that time, Modumetal was one of the few companies in the world actively working to develop a commercially viable system for electrodepositing aluminum coatings from ionic liquids. On June 13, 2008, Martin signed Modumetal's "Assignment of Inventions, Non-Disclosures and Non-Solicitation Agreement." Clerk's Papers (CP) at 4130-32. The agreement defined "Confidential Information" as:

[I]nformation (i) disclosed to or known by me as a consequence of my employment with the Company, (ii) not generally known to others outside the Company, and (iii) which relates to the trade secrets or otherwise to the research, development efforts and methodologies, testing engineering, manufacturing, marketing, sales, finances or operations (including without limitation any processes, formulae, methods, techniques, devices, know-how, manufacturing processes, customer lists, sales statistics, tactics and projections, marketing strategies and plans, and personnel information or data) of the Company or of any other party which has entrusted such information to the Company in confidence.

CP at 4130.

Martin agreed to "never disclose or use any of the Confidential Information for the benefit of myself or another, unless directed or authorized in writing by the Company to do so." CP at 4131. He further agreed that during his employment, he would avoid "financial or other interests or relationships with the Company's customers, suppliers or competitors which might impair my independence of judgment on behalf of the Company." Id. The agreement did not contain an express non-compete clause.

¶ 4 In 2009, following his graduation from the University of Washington, Modumetal hired Martin as a full time employee. In February 2010, Martin took the lead on a research project involving electrodeposition of aluminum onto various substrates from ionic liquid baths. The work was partially motivated by Apple's interest in developing a commercially viable process for electrodepositing aluminum onto iPhone cases to improve corrosion resistance and the surface finish. Modumetal considered its research into electrodeposition of aluminum using ionic liquids, as well as its relationship with Apple, to be highly confidential.

¶ 5 As part of this research, Modumetal procured several premixed ionic baths designed for the electrodeposition of aluminum from BASF, a large commercial chemical company. "AI01" contained a ratio of 1.5/1 AlCl₃ to 1-ethyl-3-methylimidazoium (EMIM); "AI02" consisted of Al01 plus an additive known as sodium dodecyl sulfate (SDS); and "Al03" consisted of Al01 plus an additive known as hexadecyltrimethylammonium chloride

(HDMAC). CP at 1799, 4004. At the time, BASF was not aware of any effective commercial scale process for using its liquids for electrodepositing aluminum, and it was very interested in Modumetal's research. Accordingly, Modumetal and BASF signed secrecy agreements to prevent each party from disclosing confidential information shared during the course of their dealings, including results from Modumetal's evaluation of BASF's ionic liquids.

¶ 6 Modumetal provided Martin with a textbook called "Electrodeposition From Ionic Liquids" to aid his work. CP at 1799. He used the premixed BASF ionic baths as a basis for his experiments, modifying them with additives and altering various parameters in an attempt to enhance the efficiency and effectiveness of the electrodeposition process. He experimented with various substrates, including flat steel, stainless steel, aluminum, and magnesium, as well as nickel-plated iPhone cases supplied by Apple. Martin also experimented with treating the substrates to enhance adhesion, a process known as "surface preparation." CP 4363. Despite these efforts, Martin claimed that he was "unable to get a satisfactory result on a repeatable basis." CP at 1799.

¶ 7 In July 2010, Martin's colleague Jesse Unger took over as lead researcher for the project. According to Modumetal's CEO, Christina Lomasney, Martin remained a member of Modumetal's "Corrosion Team" and would have been apprised of Unger's progress on the project via weekly team meetings. CP at 4003. Martin also expressly verified by signature (a practice known as "witnessing") some of Unger's lab notebooks regarding his continued research on electrodeposition of aluminum. CP at 1799, 3722.

¶ 8 In August 2010, Lomasney told Unger that Apple was pulling out of the project for reasons unknown at that time. Lomasney instructed Unger to continue the project, and the "[o]nly change is that we won't be focused on the iPhone substrates for now." CP at 2032. In September 2010, Unger submitted a report summarizing his experiments using "BASF Basionics EMIM Cl 1:1:5 AlCl₃ Ionic Liquid plating bath ... to determine the optimal conditions for aluminum deposition" and offering recommendations for future research. CP at 2096. According to Lomasney, "Modumetal was able to successfully plate aluminum onto different substrates while Mr. Martin was employed at Modumetal" and "made substantial progress on such research during that time." CP at 4004-05.

¶ 9 In late 2010, Martin applied for a position as an Engineering Project Manager at Xtalic. Martin's resume indicated that Modumetal was his only relevant experience after college. The resume also stated that Martin had multiple proprietary patents pending approval, including a "[d]eposition process for [a]luminum," and that his technical skills included "[m]etallic deposition with ... [m]olten [s]alt media."³ CP at 4127.

¶ 10 Dr. Alan Lund, co-founder and Chief Technology Officer of Xtalic, interviewed Martin by phone in December 2010. Martin and Lund then exchanged roughly a dozen emails, culminating with Martin interviewing at Xtalic's Massachusetts offices in January 2011. After the interview, Martin emailed Xtalic employee Dr. Shiyun Ruan, stating that "[i]onic liquids are one of my favorite topics and would be happy to share what I know outside the scope of my current company's intellectual property." CP at 4154.

¶ 11 Xtalic decided that Martin was not experienced enough for that position, but they thought he might be a good candidate to join a team Xtalic was assembling to conduct research on electrodeposition of an aluminum-manganese alloy. In February 2011, Lomasney verbally recommended to Martin that he seek employment elsewhere. Soon thereafter, Xtalic offered Martin a job as a research and development engineer. Martin informed Modumetal that he was leaving and gave two weeks' notice, without mentioning that he had already been hired by Xtalic.

¶ 12 In March 2011, after moving to Massachusetts and beginning his new job, Martin emailed Christina Lomasney and told her "since I left [Modumetal] I have accepted a position at Xtalic." Martin assured Lomasney that he would "maintain full compliance with the non-disclosure agreement I signed." CP at 3534. Lomasney responded "I expect that you've a fun future in plating and metallurgy ahead of you" and reminded Martin of his obligations regarding the agreements he signed. She did not specifically mention aluminum. A few months later, counsel for Modumetal wrote Xtalic to ask that it take proactive steps to prevent breach of the Confidentiality Agreement. In particular, "to prevent the inadvertent use or disclosure of Modumetal confidential information ... Mr. Martin should be walled off from any involvement in the design of electroplating baths as well as in the production and testing...