Vention Med. Advanced Components, Inc. v. Pappas

• Decision Date: 08 June 2018
• Docket Number: No. 2016–0696,2016–0696
• Citation: 188 A.3d 261,171 N.H. 13
• Parties: VENTION MEDICAL ADVANCED COMPONENTS, INC. d/b/a Advanced Polymers, a Vention Medical Company v. Nikolaos D. PAPPAS & a.
• Court: New Hampshire Supreme Court

171 N.H. 13

188 A.3d 261

VENTION MEDICAL ADVANCED COMPONENTS, INC. d/b/a Advanced Polymers, a Vention Medical Company

v.Nikolaos D. PAPPAS & a.

No. 2016–0696

Supreme Court of New Hampshire.

Argued: October 25, 2017

Opinion Issued: June 8, 2018

As Amended October 23, 2018

Welts, White & Fontaine, P.C., of Nashua (Jack S. White on the brief), and Cook, Little, Rosenblatt & Manson, PLLC, of Manchester (Arnold Rosenblatt and Kathleen Mahan on the brief, and Mr. Rosenblatt orally), for the plaintiff.

Devine, Millimet & Branch, Professional Association, of Manchester (Steven E. Grill on the brief and orally), for the defendants.

LYNN, C.J.

The defendants, Nikolaos D. Pappas (Pappas) and Ascend Medical, Inc. (Ascend), appeal multiple orders of the Superior Court (McNamara, J.) ruling that they misappropriated trade secrets of the plaintiff, Vention Medical Advanced Components, Inc. d/b/a Advanced Polymers, a Vention Medical Company (Vention), in violation of the New Hampshire Uniform Trade Secrets Act, RSA chapter 350–B (2009) (UTSA). Vention cross-appeals the trial court's denial of its request for attorney's fees. We affirm.

I

The pertinent facts follow. Vention is a medical components manufacturer in the medical device industry. Vention makes medical balloons, medical tubing, and heat shrink tubing (HST). Vention's current chief technology officer, Mark Saab, co-founded the company Advanced Polymers in 1989. KRG Capital Management (KRG), a majority shareholder of Vention, acquired Advanced Polymers in 2010 for a substantial purchase price. A KRG officer testified that, at that time, a core consideration of KRG's decision to purchase Advanced Polymers was its belief that the company's "proprietary [HST] capabilities offer high margin component business with significant trade secret protection." (Quotation omitted.) After the acquisition, Advanced Polymers became part of Vention, which conducted a financial analysis and attributed more than a third of the purchase price to the value of Advanced Polymers' unpatented technology.

Pappas began working at Vention after he graduated from the University of Massachusetts Lowell with a bachelor of science degree in plastics engineering and a master's degree in innovative and technological entrepreneurship. Prior to working at Vention, Pappas had neither specifically studied HST nor had any experience working with HST. In December 2013, after working for Vention for about ten years, Pappas resigned from the company.

During his employment, Pappas signed an "Employee Invention Assignment and Confidentiality Agreement" (confidentiality agreement). The confidentiality agreement provides:

At all times, both during my employment and after its termination, I will keep and hold all such Proprietary Information in strict confidence and trust, and I will not use or disclose any of such Proprietary Information without the prior written consent of the Company, except as may be necessary to perform my duties as an employee of the Company.

The confidentiality agreement defined proprietary information to mean "information of a confidential or secret nature," including but not limited to "Inventions, Intellectual Property Rights, Moral Rights, marketing plans, product plans, business strategies, financial information, forecasts, personnel information and customer lists."

During his employment, Pappas was exposed to Vention's confidential HST technology and information. He also had knowledge of Vention's business and marketing information and strategies, including the sales volumes for Vention's various products. At the time he resigned, he was serving as the engineering manager of the HST department. At some point before Pappas resigned, he consulted with an attorney about his obligations under the confidentiality agreement.

Almost immediately after leaving Vention, Pappas established Ascend. In late December 2013 and January 2014, the defendants began working with a website developer, communicated with one equipment vendor, and provided an initial machine design to a second equipment vendor. This design included extensive detail and critical specifications of the equipment they wanted built. By August 2014, the defendants began actively marketing HST. After the defendants launched their HST line, Vention requested information about the products. The defendants sent Vention samples of their HST in August and September 2014.

Vention petitioned the trial court for injunctive and other relief under the UTSA in October 2014. On November 4, 2014, counsel for the defendants filed appearances, in which they requested a jury trial. On November 14, 2014, the defendants filed an answer, but they did not request a jury trial in the answer. See Super. Ct. Civ. R. 9(c) (requiring a defendant to request a jury trial in his or her answer to preserve the right to a jury trial). The defendants included several paragraphs in their answer under the heading "counterclaims."

Subsequently, on January 7, 2015, the defendants filed a motion to amend their answer. In the motion, the defendants asserted that the original answer "contains a single counterclaim for unfair business practices, based on the New Hampshire Consumer Protection Act, RSA [chapter] 358–A." The defendants further asserted that they "wish to amend the counterclaim by adding allegations of additional conduct which they believe support the unfair trade practices counterclaim" and that "because some of the conduct alleged, if proven, would amount to defamation, they also wish to add a cause of action for defamation." The defendants also sought to "add a jury demand to the pleading."

After a four-day hearing conducted between November and December, the trial court granted a preliminary injunction in January 2015 that, among other relief, enjoined the defendants from "directly or indirectly designing, manufacturing, producing and/or selling" certain HST products. In February 2016, the trial court issued another order, ruling that the defendants had waived their right to a jury trial by failing to assert it in their answer and ordered that the case proceed by bench trial.

During discovery, Vention filed a trade secret disclosure and an amended "Trade Secret/Confidential Information Disclosure" with the trial court. Sometime thereafter, Vention moved to compel responses to certain interrogatories and production requests from the defendants. The defendants objected, arguing that they should not be required to provide discovery until Vention produced an adequate description of its trade secrets, and they moved to compel an adequate trade secret designation and responses to interrogatories that would require Vention to specify its trade secrets. The trial court denied the defendants' motion to compel and granted Vention's motion to compel, ruling that Vention had adequately disclosed its trade secrets.

The trial court held an eight-day bench trial in June 2016. During the trial, Vention presented expert testimony from Dr. Chris Rauwendaal, who had worked for 43 years in plastics extrusion. Rauwendaal testified that the technology Vention used to create HST was proprietary, as were a number of features in Vention's process for making HST. Rauwendaal testified that these features were all trade secrets, and that the defendants' process for making HST utilized all of these features. Rauwendaal further testified that Vention's process for making HST was distinguishable from several other industry and competitor processes. Additionally, Rauwendaal reviewed the defendants' design and experimentation records and concluded that they could not have duplicated Vention's technology without copying it, based upon the timeframe in question and the lack of documentation of experimentation.

Vention also presented expert testimony from Dr. Amad Tayebi, a retired professor in mechanical and plastics engineering. Tayebi testified regarding a certain part of Vention's equipment, which he concluded was a trade secret. He testified that he had never seen a design like that used by Vention, and he identified four specific component features of the part. He testified that Vention designed and fabricated each of these components and that the components were not available on the open market. Tayebi compared Vention's part to a part that the defendants used, and he opined that the two parts were "substantially identical." Tayebi distinguished Vention's part from those used by three other companies. Additionally, Tayebi reviewed the defendants' design and experimentation records and concluded that the defendants could not have duplicated Vention's part without copying it, based upon the timeframe in question and the lack of documentation of experimentation.

In September 2016, the trial court issued an order ruling that the defendants had misappropriated Vention's trade secret technology for producing certain HST. The trial court further ruled that Vention was entitled to equitable relief on its breach of contract claim, but it denied Vention's request for attorney's fees. The trial court ruled that the defendants were not entitled to judgment on their counterclaims for violation of RSA chapter 358–A and business disparagement.

The trial court issued five injunctions against the defendants:

1. The Defendants are hereby permanently enjoined and restrained from directly or indirectly disclosing or utilizing in any way any confidential or proprietary information, trade secrets, designs, inventions, intellectual property, and moral rights or processes of the Plaintiff.

2. The Defendants are hereby permanently enjoined and restrained from directly or indirectly designing, manufacturing, producing, selling, or consulting on polyester heat shrink tubing with a [specified] wall thickness ...;

3. The Defendants are hereby enjoined and restrained for ten years from directly or indirectly designing, manufacturing, producing, selling, or consulting on heat shrink tubing made with materials other than polyester

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