Moore v. Kulicke & Soffa Industries, Inc.

• Decision Date: 03 February 2003
• Docket Number: No. 02-1466.,02-1466.
• Citation: 318 F.3d 561
• Parties: Larry R. MOORE, Appellant v. KULICKE & SOFFA INDUSTRIES, INC.
• Court: U.S. Court of Appeals — Third Circuit

318 F.3d 561

Larry R. MOORE, Appellant v. KULICKE & SOFFA INDUSTRIES, INC.

No. 02-1466.

United States Court of Appeals, Third Circuit.

February 3, 2003.

COPYRIGHT MATERIAL OMITTED

William A. Miller, Phoenix, for Appellant.

William J. Lehane, Wilson M. Brown, III, Lori A. Jackson, Amy B. Miner, Drinker Biddle & Reath, LLP, Philadelphia, for Appellee.

Before BECKER, Chief Judge, McKEE and HILL^* Circuit Judges.

OPINION OF THE COURT

BECKER, Chief Judge.

This is a trade secret misappropriation case arising under our diversity jurisdiction and governed by Pennsylvania law. At trial, the defense to the misappropriation claim was the "independent development" of the allegedly misappropriated technique. This appeal by plaintiff appellant Larry R. Moore ("Moore") from a judgment entered on a jury verdict in favor of the defendant Kulicke & Soffa Industries, Inc. ("K&S") presents the vexing question whether, in Pennsylvania trade secret law, independent development is an affirmative defense so that the proponent (here K&S) bears not only the burden of production but also the risk of non-persuasion, or whether raising the defense only shifts onto the proponent the burden of going forward, with the risk of non-persuasion remaining with the plaintiff. Although the question is close and difficult, we believe that Pennsylvania would conclude that only the burden of production is shifted when the defendant raises independent development, and that the ultimate burden of persuasion remains on the plaintiff to prove that the defendant did not arrive at a technique similar to the trade secret through its own independent development. Since Moore's appeal challenges the jury instruction, and this is what the District Court charged, we will affirm the judgment.

I.

K&S is a manufacturer and marketer of wire bonding equipment to companies involved in making computer chips for use in connecting the extremely small wires from semiconductor terminals to other components of computer chips. In 1981, Moore, an engineer, submitted a technical paper to a K&S consultant discussing a specific design approach and methodology for achieving greater speed and accuracy for the type of wire bonding machines that K&S manufactured. After reviewing the paper, K&S informed Moore that it had no interest in the information contained in his proposal. However, some time later, Moore learned that K&S was using in its equipment a wire-bonding technique that he believed was similar to the technique and information contained in the paper he had submitted. Moreover, Moore asserted that K&S had also obtained a patent using information similar to that contained in the proposal he had submitted to K&S.

Moore thereupon brought an action against K&S in the District Court for the Eastern District of Pennsylvania, setting forth a claim for trade secret misappropriation under Pennsylvania state law and a federal claim for copyright infringement. At the conclusion of the trial, the District Court instructed the jury:

If you find that the plaintiff has proven by a fair preponderance of the evidence that the defendant used the plaintiff's trade secret, and that the defendant did not arrive at the relevant wire bonding technique through independent invention, then you should find in favor of the plaintiff. On the other hand, if you determine that the wire bonding technique used by the defendant was developed through defendant's own independent efforts and invention, then you must find in favor of the defendant.

Perhaps responding to the statement of counsel for K&S that "[b]urden of proof is a little slippery here," the District Court had vocalized some concern about where to place the burden of proving independent development, representing that it had adopted the jury instruction proposed by K&S but "without the burden of proof on there." However, the language of the jury charge placed the burden of proving independent development on the plaintiff: As noted above, the District Court asked the jury, in the charge, to consider whether "the plaintiff has proven by a fair preponderance of the evidence that the defendant used the plaintiff's trade secret, and that the defendant did not arrive at the relevant wire bonding technique through independent invention." (emphasis added). Moreover, the Court, in the generalized portion of the charge, placed the burden of proof on Moore.¹ Thus, under the Court's trial procedure, the burden of production shifted to K&S to present some evidence of independent development, but Moore, under the charge, retained the burden of proving independent development by a preponderance of the evidence.

Ultimately, the jury answered "no" to the following interrogatory:

Do you find that Plaintiff has proven by a preponderance of the evidence that he owned a trade secret which was disclosed in confidence to Defendant which Defendant was not entitled to use or disclose without Plaintiff's permission?

Although the interrogatory did not specifically mention independent development, the District Court had instructed the jury in the charge, set forth supra, to consider whether K&S independently developed the technique as part of its determination of whether the defendant "used" the plaintiff's trade secret. By answering "no" to this interrogatory, the jury thus rendered a verdict for K&S on the trade secret misappropriation claim. Moore moved for a new trial under Rule 59 of the Federal Rules of Civil Procedure, which the District Court denied. This appeal followed.²

The District Court had jurisdiction pursuant to 28 U.S.C. § 1332 and 28 U.S.C. § 1338. We have appellate jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary review where the District Court erred in formulating or applying the proper legal precept regarding the burden of proof in a jury instruction. See Hook v. Ernst & Young, 28 F.3d 366, 370 (3d Cir. 1994) ("Where a jury charge is attacked for legal error we must determine whether `the charge[taken] as a whole fairly and adequately submits the issues in the case to the jury.' We will reverse `only if the instruction was capable of confusing and thereby misleading the jury.'" (quoting Bennis v. Gable, 823 F.2d 723, 727 (3d Cir.1987)) (alteration in original) (citation omitted)).

II.

A.

At the risk of carrying coals to Newcastle, we discuss briefly the dual meaning of the term "burden of proof." We note that "[t]he two distinct concepts [embodied in the term `burden of proof'] may be referred to as (1) the risk of nonpersuasion, sometimes called the `burden of persuasion,' and (2) the duty of producing evidence (or the burden of production), sometimes called the burden of going forward with the evidence." Fleming James, Jr. & Geoffrey C. Hazard, et al., Civil Procedure § 7.12 (5th ed.2001). These two concepts can be distinguished by the fact that "[u]nlike the burden of persuasion, the burden of production can shift back and forth between parties during the trial." Larry L. Teply & Ralph U. Whitten, Civil Procedure 855 (2d ed.2000).

At the outset of a trial, the plaintiff has both the burden of production and the burden of persuasion for each element of the prima facie case. Once the plaintiff has met this burden, the defendant may proceed with an affirmative defense. At this point, the defendant has both the burden of production and the burden of persuasion for the affirmative defense. Often, "courts have confused the ideas of affirmative defense and negation by affirmative proof." Fleming James, Jr. & Geoffrey C. Hazard, et al., Civil Procedure § 4.5 (5th ed.2001). A denial, as opposed to an affirmative defense, will simply shift the burden of production to the defendant to present evidence that would tend to rebut the plaintiff's case, while the burden of persuasion remains with the plaintiff. If the defendant cannot meet its burden of going forward by presenting some evidence, the plaintiff has met its burden of persuasion. But if the defendant presents some evidence to support the denial, the fact-finder weighs the evidence, bearing in mind that the plaintiff retains the ultimate burden of persuasion. K&S asserts that alleging independent development is a denial which shifts the burden of production but not the burden of persuasion to the defendant. In contrast, Moore would have us conclude that independent development is an affirmative defense and K&S has both the burden of production and persuasion.

B.

1.

Under Pennsylvania law, the prima facie elements of the tort of misappropriation of a trade secret are derived from the Restatement (First) of Torts § 757. Van Products Co. v. General Welding & Fabricating Co., 419 Pa. 248, 258, 213 A.2d 769, 774 (1965).³ Those elements are as follows: (1) the existence of a trade secret; (2) communication of the trade secret pursuant to a confidential relationship; (3) use of the trade secret, in violation of that confidence; and (4) harm to the plaintiff.⁴

K&S contends that evidence of independent development rebuts the third element of the prima facie case: that the defendant "used" the plaintiff's trade secret. It bases this contention on the meaning of "use" within the context of trade secret law. The tort of trade secret misappropriation provides inventors and owners with a state law based alternative to the patent system. See Van Products, 213 A.2d at 778 ("The inventor is put to his election; he can keep his secret hidden and run the risk of independent discovery by others, or he can disclose his secret to the world ... and receive in return from the government a monopoly for 17 years."). Thus, unlike the patent system, which provides a remedy for any use of a technique similar to the patented technique, trade secret misappropriation protects against the wrongful use of the trade secret itself; it is the defendant's theft of the plaintiff's idea that this tort attempts to prevent. In other words, the element of "use" refers to improper use.

Independent development...