Underwater Storage, Inc. v. United States Rubber Co.

• Decision Date: 21 September 1966
• Docket Number: No. 19949.,19949.
• Citation: Underwater Storage, Inc. v. United States Rubber Co., 371 F.2d 950, 125 U.S.App.D.C. 297 (D.C. Cir. 1966)
• Parties: UNDERWATER STORAGE, INC., Appellant, v. UNITED STATES RUBBER COMPANY, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

371 F.2d 950 (1966)

UNDERWATER STORAGE, INC., Appellant, v.UNITED STATES RUBBER COMPANY, Appellee.

No. 19949.

United States Court of Appeals District of Columbia Circuit.

Argued May 23, 1966.

Decided September 21, 1966.

Petition for Rehearing Denied October 27, 1966.

Certiorari Denied February 13, 1967.

Mr. Robert E. Sher, Washington, D. C., with whom Mr. Abraham J. Harris, Washington, D. C., was on the brief, for appellant.

Mr. Robert F. Conrad, Washington, D. C., with whom Mr. Kurt Shaffert, New York City, was on the brief, for appellee.

Before EDGERTON, Senior Circuit Judge, and FAHY and TAMM, Circuit Judges.

Certiorari Denied February 13, 1967.See87 S.Ct. 859.

TAMM, Circuit Judge:

This is a trade secret case.Appellant's complaint contends that prior to 1958 one Harold G. Quase developed an underwater system for the storage of strategic materials; that on January 12, 1959he filed an application for a patent on this system, which patent was granted on December 17, 1963; that during various times beginning in 1958the appellee wrongfully appropriated this system and used it as its own.Specifically the complaint alleged that appellee had wrongfully appropriated and utilized "certain systems, methods, technical know-how and inventions relating to an underwater storage system" developed by Dr. Quase.The complaint further alleged that appellee entered into a contract to develop an underwater fuel storage system for the Navy and, in December of 1960, rendered a report to the Navy setting forth its experience and findings in connection with the project.Thereafter appellee and its subcontractor allegedly published and advertised that the technical know-how or trade secrets (which appellant alleges were wrongfully acquired from him) had been conceived and/or developed by them.The complaint further alleged that in June of 1960 Dr. Quase assigned to appellant, Underwater Storage, Inc., all of his rights in or arising out of the system, including any rights, claims or causes of action that he then had arising out of the aforesaid actions of appellee.The complaint also rather vaguely alleges continuing wrongful appropriation and utilization of the systems "during various times beginning in 1958."

Appellee's answer was, in effect, a general denial of the allegations of the complaint; in addition, the appellee raised the statute of limitations of three years as a complete bar to any of appellant's claims.

Appellant filed its complaint on March 27, 1964.On April 22, 1964, appellee took the deposition of Dr. Quase.In that deposition Dr. Quase stated that a United States Navy publication issued in December of 1960 entitled "Development of a 50,000 Gallon Submersible Fuel Cache,"(which describes the work performed by appellee under an Office of Naval Research contract), disclosed the information allegedly appropriated from Dr. Quase.Dr. Quase further testified that he obtained a copy of this report in January or February, 1961, and that this report convinced him, more than three years before this action was brought that defendant had appropriated and used his trade secrets in the performance of the contract.Dr. Quase further stated that, while he did not know how appellee obtained his secrets, the only way in which appellee could have obtained them was through a third party who, in turn, might have been a person or persons in the Office of Naval Research of the United States Navy to whom Dr. Quase alleges he entrusted this information in confidence.

Based upon this information, appellee moved for summary judgment pursuant to Rule 56, FED.R.CIV.PRO., alleging that appellant's claims were barred by the three-year statute of limitations on tort actions.In a memorandum opinion, the District Court sustained appellee's motion finding that "the misappropriation in this case dates back to and beyond the rendition of the report by the defendant to the Navy — more than 3 years prior to the filing of the complaint."In deciding this question, the District Court had characterized the issue in the case in these words:

"The sole issue accordingly is whether a misappropriation and possible use of a trade secret constitutes a continuing tort or whether the tort is complete at the time of the original taking of the secret."

The District Court answered the issue with the statement that

"the authorities make it clear that the tort lies in the wrongful acquisition as such and once that acquisition has been completed the tort does not continue. * * * Sachs v. Cluett, Peabody &Co., Inc., 265 App.Div.(N.Y.)497 39 N.Y.S.2d 853(1943);seeAktiebolaget Bofors v. U. S., 93 F. Supp. 131(1950), aff\'d194 F.2d 145, 90 U.S.App.D.C. 92(1951);A.L.I. Restatement of Torts, Sec. 757."

Appellant attacks the District Court determination in this court, alleging that the misappropriation and continuing use of a trade secret is a continuing tort with respect to which the statute of limitations is not a bar, at least as to the statutory period prior to the commencement of the action.It further alleges that the fact that the initial misappropriation may have occurred more than three years prior to commencement of the action is immaterial.Each use of the trade secret thereafter by appellee, appellant contends, constituted a new wrong that started the limitations period running anew.It alleges that the rule it argues for is found in the law of contracts and in the law of torts, in trade marks and antitrust, and in cases of personal injuries and nuisances resulting from continuing torts, and that there is no good reason for treating trade secret cases any differently from these other classes of cases.

Appellee, on the other hand, argues that because of the peculiar nature of the tort of misappropriation of a trade secret, it is by its very nature a tort completed at the time of misappropriation.This because, once the secret has been misappropriated, it is no longer in fact a trade "secret" since it has been published to persons not privy to the secret and therefore (theoretically at least) the whole world has access to it.Recovery for the misappropriation of a trade secret is based upon the use of improper means to obtain the secret, not upon the use of any particular information.Since any given information can only be wrongfully acquired once from its owner, misappropriation of a trade secret cannot be a continuing tort.Finally, appellee vigorously contends that "if it were held that the use of the published information constituted a continuing tort, the statute of limitations would never run, and an action would lie one hundred years for appellee's use of information which has long since entered the public domain."

Summary judgment is properly granted when the record establishes that there is no genuine issue as to any material fact concerning a dispositive issue in a case and that the moving party is entitled to judgment as a matter of law.Rule 56(c) FED.R.CIV.PRO.The general rule that guides the District Court in the disposition of motions for summary judgment is that the moving party has the burden of showing the absence of any genuine issues as to all the material facts applicable under his theory of law.Evers v. Buxbaum, 102 U.S.App.D.C. 334, 253 F.2d 356(1958).Moreover,

"one who moves for summary judgment has the burden of demonstrating clearly the absence of any genuine issue of fact, and that any doubt as to the existence of such an issue is resolved against the movant.The courts are quite critical of the papers presented by the moving party, but not of the opposing papers."Wittlin v. Giacalone, 81 U.S.App.D.C. 20, 21, 154 F.2d 20, 21(1946).See6 Moore\'s Federal Prac. (2d Ed.), pp. 2123, 2124, 2125-26.

While it is true that the ultimate question presented for our consideration and determination in this case is one of law, the foregoing principles have been set down because they are necessary predicates to several assumptions which must be made in this case before the question of law is reached.The first of these assumptions is that appellant's claim of indirect misappropriation of wrongdoing vis-a-visappellee...