Wilson v. Electro Marine Systems, Inc.

• Decision Date: 18 October 1990
• Docket Number: No. 89-2612,89-2612
• Parties: 1991 Copr.L.Dec. P 26,661, 16 U.S.P.Q.2d 1605 John B. WILSON, d/b/a Pelican Trolling Speedometer, Plaintiff-Appellant, v. ELECTRO MARINE SYSTEMS, INCORPORATED, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1110

915 F.2d 1110

1991 Copr.L.Dec. P 26,661, 16 U.S.P.Q.2d 1605

John B. WILSON, d/b/a Pelican Trolling Speedometer Plaintiff-Appellant, v. ELECTRO MARINE SYSTEMS, INCORPORATED, et al., Defendants-Appellees.

No. 89-2612.

United States Court of Appeals Seventh Circuit.

Argued Jan. 9, 1990.

Decided Oct. 4, 1990.

As Amended Oct. 11 and Oct. 18, 1990.

Edward W. Osann, Jr., Chicago, Ill., John Nesbitt, Michael D. O'Neal, Rensselaer, Ind., for plaintiff-appellant.

William O'Connor, Barry Feinberg, Zukowski, Rogers, Flood, McArdle & O'Connor, Roger J. Kelly, Chicago, Ill., for defendants-appellees.

Before COFFEY, FLAUM, and MANION, Circuit Judges.

MANION, Circuit Judge.

John B. Wilson sued Electro Marine Systems, Inc. (EMS) on six counts relating to the marketing of a boat speedometer, and EMS counterclaimed. The district court granted summary judgment for EMS on Wilson's misappropriation of trade secret, breach of contract and antitrust counts. At the close of Wilson's evidence, the district court granted directed verdicts for EMS on a copyright infringement count, and on the EMS counterclaim. At the conclusion of all evidence, after the jury returned a $185,000 verdict for Wilson on an unfair competition claim, the district court directed a verdict for EMS on that count and on Wilson's claim for punitive damages. Wilson appeals all of the adverse district court rulings, except the court's grant of summary judgment on the antitrust claim and the directed verdict on the counterclaim. We affirm.

I. Background

The conflict between plaintiff John Wilson and defendant Ronald Overs concerned the proprietary interest over a boat speedometer used for fishing. But their independent interest in electronics and fishing existed long before their encounter in the speedometer business. An overview of the business history of the two main adversaries should be helpful.

Ronald Overs, Sr., grew up along the Niagara River in New York. As a boy his two primary interests were boating and electronics. After attending college Overs worked for Jafco, a company that sold boats and marine equipment along the Niagara River. His duties at first included servicing and selling fishing boats, sailboats and boating equipment. He later became a manufacturer's representative for a company selling electrical equipment, including switches, relays, transformers and high-tech rotary switches. Overs lacked formal training in engineering, but studied periodicals and manuals from the engineering school at the University of Buffalo until he was proficient in understanding the operation of limit switches.

In 1959 Overs went into business for himself as a manufacturer's representative, acquiring product lines from companies selling limit switches and timing devices. He continued to keep up with the latest technological discoveries of the electronics age. After purchasing a sailboat, Overs in 1970 began to experiment with making a speedometer that would be accurate at low speeds. He believed existing boat speedometers were too expensive, and thought he could create one on his own because the technical expertise required was "somewhat akin" to what he had been doing for many years. He developed a water tachometer that measured water speed by means of a propeller that counted revolutions; as the boat traveled, water turned a paddle wheel, causing a signal to be sent along a wire to a meter head that measured speed. Overs first tested the unit in a washtub, then on a small fishing boat in a harbor. But because his first unit only measured speeds up to two miles per hour, he considered it a failure.

Overs kept experimenting. Eventually he came up with a "turbine type system" that provided more accurate speed measurement. He also developed a housing that enclosed the propeller so it could pass through seaweed and debris without becoming tangled. Overs protected his invention by obtaining a patent from the U.S. Patent Office, and with a small business association loan formed his own company, Electro-Marine. He subcontracted the parts needed to manufacture boat speedometers and assembled those parts in his basement with help from his wife and children. In 1971 he began selling the speedometers to distributors; he expanded his market by attending boat shows and advertising in magazines throughout the United States. EMS, a company that started in Overs' basement, continued to grow, to employ more workers, and to build electronic boat speedometers used by customers for many purposes.

For 13 years, plaintiff John B. Wilson worked full-time for a company that manufactured heavy-duty trailers for hauling construction equipment. But his passion was fishing. He especially loved trolling, which involves towing live or artificial bait on a fishing line behind a slow-moving boat. Even a slight increase or decrease in the speed of the boat affects the action of the lure, making accurate measurement at low speeds essential for successful trolling. In 1978 Wilson purchased a speedometer from EMS that measured speed in tenths of a knot and ranged from zero to 12 knots. Wilson decided that speedometer was ineffective for trolling because it did not register minute changes in speed. He called EMS in the summer of 1979 and spoke with a plant engineer about modifying the unit; the engineer showed no interest in Wilson's inquiry. Wilson called back in the spring of 1980, speaking this time to plant manager Jonathan Sentz.

Wilson told Sentz he was using an EMS unit that measured speed from zero to 12 knots. He asked if EMS had anything that measured speed in miles per hour and was extremely reliable at low speeds. Sentz said EMS had nothing like that "off the shelf," but that he would modify an existing speedometer to Wilson's specifications. Sentz then sent Wilson a speedometer calibrated 1 to 6 miles per hour and segmented in thirds of a mile per hour. Wilson was not satisfied; this speedometer was too accurate--it measured the slightest changes in speed, including when the boat hit a wave. Wilson asked Sentz if he could change the way the unit reacted, and Sentz told Wilson EMS could "dampen" the speedometer to deaden its reaction to waves and other tiny changes in speed. Wilson thought this change brought him "closer to the solution," but requested that EMS send him three or four units with different adjustments to be tested on the water. Sentz complied, and Wilson in April 1980 selected the one he liked most.

In May of 1980 Wilson wrote Sentz a letter requesting a unit to be built with a face showing zero to 6 miles per hour and segmented in thirds of a mile per hour. Wilson, apparently contemplating marketing the speedometers by himself, asked that the word "ACCU-TROL" be painted on the face of the unit, and told Sentz this would be used for advertising purposes. Around this same time he asked Sentz about exploring "the possibility of marketing a trolling speedometer." Sentz told him he would have to speak with Ronald Overs, Sr. Wilson remembers calling Overs and telling him: "I believe there is a real good market for trolling speedometers, especially in the Great Lakes area, and I would encourage you to enter that market and sell trolling speedometers. And I would like some consideration, maybe in the form of a royalty." Overs said he was not planning to undertake marketing of a trolling speedometer. However, Overs offered to provide Wilson with the product. Wilson agreed and decided to market the trolling speedometers as his own under the name "Pelican Trolling Speedometer." Wilson added no technical expertise to the development of the trolling speedometers. The changes Wilson requested were fairly simple--listing the speed in miles per hour instead of knots, calibrating the instrument in thirds of a mile per hour, color-coding the dials, and listing the speed from zero to 6 miles per hour--methods EMS had previously employed for other products. EMS provided all the technical expertise necessary for adjustments to the speedometers.

In the meantime (presumably sometime in 1980 during the initial negotiations between Wilson and EMS) Overs and Sentz discussed the possibility of marketing their own trolling speedometers, in particular a combination low-speed/high-speed speedometer similar to those ordered by Wilson. Sentz told Overs that he and Wilson had discussed that speedometer as part of a line Wilson hoped to market through Pelican. Overs told Sentz to go ahead with development, and that if anyone asked he should tell them it was only for saltwater use. Pursuant to Overs' request, Sentz developed and tested a prototype of such a unit in Florida over the winter of 1980-81. In July of 1981, while EMS was developing its "Kingfish" trolling speedometer, Wilson and his family visited the EMS plant. Overs instructed Sentz to be sure no dial faces or literature about the Kingfish were "laying around the plant" when Sentz gave the Wilson family a tour.

On September 7, 1980, Wilson ordered 1,000 speedometers from EMS at $75 each. Wilson intended to market the speedometers on his own. During the spring of 1982, after a year or more of timely deliveries, Wilson had fallen behind on payments to EMS. Consistent with its policy of not shipping to customers with overdue invoices, EMS delayed shipments. Despite slow payment and Wilson's occasional refusal to accept delivery of all units ordered, Overs considered Wilson a good customer and usually kept up deliveries unless Wilson was substantially behind in payment.

Wilson's speedometers were encased in pods supplied by a company known as Du-Bro products. In 1982 Ron Overs Jr., Ron Sr.'s son and a salesman for EMS, asked Wilson if EMS could use some pods and bracket assemblies to display an EMS product at a boat show. Wilson supplied approximately a dozen pods which EMS used to display its "Kingfish" trolling speedometer at boat shows. Overs Jr. later called Wilson and indicated that EMS would like to buy more...