Rivendell Forest Products v. Georgia-Pacific

• Decision Date: 22 February 1993
• Docket Number: Civ. A. No. 92-F-489.
• Citation: 824 F. Supp. 961
• Parties: RIVENDELL FOREST PRODUCTS, LTD., Plaintiff, v. GEORGIA-PACIFIC CORPORATION and Timothy L. Cornwell, Defendants.
• Court: U.S. District Court — District of Colorado

824 F. Supp. 961

RIVENDELL FOREST PRODUCTS, LTD., Plaintiff, v. GEORGIA-PACIFIC CORPORATION and Timothy L. Cornwell, Defendants.

Civ. A. No. 92-F-489.

United States District Court, D. Colorado.

February 22, 1993.

COPYRIGHT MATERIAL OMITTED

Brice A. Tondre, Strate and Tondre, P.C., Wheat Ridge, CO, for plaintiff.

Gregg I. Anderson, Scott S. Havlick, Holland and Hart, Denver, CO, for defendants.

ORDER REGARDING MOTION FOR SUMMARY JUDGMENT

SHERMAN G. FINESILVER, Chief Judge.

This is a case involving alleged misappropriations of trade secrets. This matter comes before the Court on the motion for summary judgment filed by the defendants, Georgia-Pacific Corporation and Timothy L. Cornwell (collectively, "Georgia-Pacific") and the subsequent cross-motion for summary judgment by the plaintiff, Rivendell Forest Products, Ltd. ("Rivendell"). Jurisdiction is based on 28 U.S.C.A. § 1332 (West 1992). The parties have fully briefed the matter. For the reasons stated below, Georgia-Pacific's motion is GRANTED and Rivendell's is DENIED.

I. Background

Plaintiff Rivendell, now out of business, was a reload wholesaler in the lumber industry.¹ It purchased milled lumber from Canadian mills and had that lumber shipped to and unloaded at any of about ten lumber yards it leased. Defendant Timothy Cornwell went to work for Rivendell in January 1987 and worked there until March 1990. While at Rivendell, Cornwell supervised employees using Rivendell's price quoting screen (the "Quote Screen") to quote prices to customers. He had no involvement in the development of the Quote Screen program's software. By using the Quote Screen, Rivendell was able to instantaneously quote to customers lumber prices, including freight, thereby allowing Rivendell to become more efficient in handling customer inquiries and eliminating the need for time-consuming manual calculations. Rivendell claims the "Quote Screen" system allowed it to be 20 to 30 times faster and to generate two to three times more sales, giving it a huge advantage over competitors, like Georgia-Pacific, who were still using much slower manual systems. Apparently in part to protect the Quote Screen system, Rivendell asked all employees to sign a confidentiality agreement in 1988 and Rivendell claims all employees did so. Rivendell further advised its employees that the business practices of Rivendell were trade secrets.

Defendant Georgia-Pacific is a supplier and wholesaler of lumber and lumber products. After Cornwell left Rivendell in March 1990, Georgia-Pacific hired Cornwell as marketing manager of Canadian lumber for Georgia-Pacific's distribution division. Rivendell alleges that soon after Cornwell arrived at Georgia-Pacific, he helped them to develop a "Quick Quote" system that borrowed heavily from trade secrets embodied in Rivendell's own Quote Screen. Rivendell alleges that shortly after Cornwell began work at Georgia-Pacific, he received an orientation from Georgia-Pacific employees Ken Porter and Dean Johnson. During the orientation, Cornwell was shown a demonstration of Georgia-Pacific's Noranda computer program. He allegedly stated he had a much better program, went to his office, and returned with a far more sophisticated program. Porter recalled in his deposition that the name "Rivendell" was mentioned in connection with the program. Rivendell cites this as both a clear violation of the confidentiality agreement Cornwell signed with Rivendell and evidence of a misappropriation of trade secrets.

Rivendell brought this suit two years after Cornwell left its employment, alleging tortious interference with contract, breach of contract, and theft of trade secrets. Rivendell alleges that while Cornwell worked for Rivendell, he had access to and gained knowledge of its highly sophisticated and customized computer software system. After reading a description of Georgia-Pacific's "Quick Quote" system, L.G. Broderick, Rivendell's former owner and chief executive officer, claimed the two systems were "virtually identical."

II. Summary Judgment Standard

Granting summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c); Ash Creek Mining Co. v. Lujan, 934 F.2d 240, 242 (10th Cir.1991); Metz v. United States, 933 F.2d 802, 804 (10th Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 416, 116 L.Ed.2d 436 (1991); Continental Casualty Co. v. P.D.C., Inc., 931 F.2d 1429, 1430 (10th Cir.1991). A genuine issue of material fact exists only where "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Merrick v. Northern Natural Gas Co., 911 F.2d 426, 429 (10th Cir.1990). Only disputes over facts that might affect the outcome of the case will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Allen v. Dayco Prods., Inc., 758 F.Supp. 630, 631 (D.Colo. 1990).

In reviewing a motion for summary judgment, the court must view the evidence in the light most favorable to the party opposing the motion. Newport Steel Corp. v. Thompson, 757 F.Supp. 1152, 1155 (D.Colo. 1990). All doubts must be resolved in favor of the existence of triable issues of fact. Boren v. Southwestern Bell Tel. Co., 933 F.2d 891, 892 (10th Cir.1991); Mountain Fuel Supply v. Reliance Ins. Co., 933 F.2d 882, 889 (10th Cir.1991).

In a motion for summary judgment, the moving party's initial burden is slight. In Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986), the Supreme Court held that the language of rule 56(c) does not require the moving party to show an absence of issues of material fact in order to be awarded summary judgment. Rule 56 does not require the movant to negate the opponent's claim. Id. at 323, 106 S.Ct. at 2553. The moving party must allege an absence of evidence to support the opposing party's case and identify supporting portions of the record. Id.

Once the movant has made an initial showing, the burden of going forward shifts to the opposing party. The nonmovant must establish that there are issues of material fact to be determined. Id. at 322-23, 106 S.Ct. at 2552. The nonmovant must go beyond the pleadings and designate specific facts showing genuine issues for trial on every element challenged by the motion. Tillett v. Lujan, 931 F.2d 636, 639 (10th Cir. 1991). Conclusory allegations will not establish issues of fact sufficient to defeat summary judgment. McVay v. Western Plains Serv. Corp., 823 F.2d 1395, 1398 (10th Cir. 1987).

In reviewing the evidence submitted, the court should grant summary judgment only when there is clearly no issue of material fact remaining. In Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2510-11, the Court held that summary judgment should be granted if the pretrial evidence is merely colorable or is not significantly probative. In Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), the Court held that summary judgment is appropriate when the trial judge can conclude that no reasonable trier of fact could find for the nonmovant on the basis of evidence presented in the motion and the response. Id. at 587, 106 S.Ct. at 1356.

III. Misappropriation of Trade Secrets

Georgia-Pacific does not dispute that trade secrets may exist in the implementation or expression, that is, in the computer source code, of Rivendell's Quote Screen software. The questions we must address, then, are whether either Georgia-Pacific copied Rivendell's source code, or Rivendell's Quote Screen contained a protectible combination of concepts or ideas used by Georgia-Pacific. Rivendell has adduced no facts tending to show that Georgia-Pacific copied its source code. Rather, Rivendell relies on the inference that Georgia-Pacific must have misappropriated the trade secret it defines as the Quote Screen's unique method of integrating various concepts and ideas, even though those concepts and ideas were already in existence in the computerization of the lumber industry.

In order to establish its claim that Georgia-Pacific misappropriated trade secrets, Rivendell must prove: (1) a trade secret existed; (2) Georgia-Pacific and Cornwell misappropriated the trade secret through a confidential relationship; and (3) Georgia-Pacific and Cornwell used the trade secret without authorization from Rivendell. See Black, Sivalis & Bryson, Inc. v. Keystone Steel Fabricators, 584 F.2d 946, 951 (10th Cir.1978). Georgia-Pacific claims that the second element of proof is irrelevant if the first and third are not satisfied and so does not challenge whether there occurred any misappropriation of a trade secret through a confidential relationship. The elements of existence and use are closely entwined and to some extent will be addressed together.

A. Existence of a Trade Secret

Colorado's Uniform Trade Secret Act ("the Act") defines a trade secret as:

the whole or any portion or phrase of any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value. To 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.

C.R.S. § 7-74-102(4) (emphases added).

Colorado courts interpreting the Act apply several factors in determining whether a trade secret exists, including: (1) the extent to which the information is known outside the plaintiff company; (2) the extent to which the information is known to persons inside the plaintiff company; (3) the reasonable precautions taken by the holder of the trade secret to guard the secrecy of the...