Minnesota Mining & Manufacturing Company

The Minnesota Mining
and Manufacturing Company ("3M") produces
and markets a product known as carrier
tape. When the company discovered that
three of its employees had formed Accu-
Tech Plastics ("Accu-Tech") to
manufacture and market resin sheeting,
the essential component of carrier tape,
3M brought suit. After dismissing certain
3M claims pursuant to Accu-Tech's summary
judgment motion, the case proceeded to
trial. The jury ultimately determined
that Accu-Tech had misappropriated trade
secrets from 3M and that Accu-Tech's
founders had breached duties of loyalty
owed to 3M. Following trial, the district
court overturned some of the jury's find
ings of liability, upheld other findings,
and granted 3M's request for a permanent
injunction barring the disclosure (but
not the use) of the trade secrets which
the jury found Accu-Tech had
misappropriated. When final judgment was
entered below, the parties filed cross-
appeals challenging decisions made by the
district court throughout the litigation.
For the reasons stated herein, we affirm
the district court's decisions as they
pertain to Accu-Tech's issues on appeal.
As for 3M's claims of error, we affirm in
part, and reverse and remand in part the
decisions of the district court.

I. BACKGROUND

Since 1986, 3M has manufactured and sold
carrier tape through its Surface Mount
Supplies Division. Carrier tape, which is
used to transport sensitive electronic
components, is made principally from a
thin layer of plastic called resin
sheeting into which pockets are molded to
fit the components to be transferred. 3M
also manufactures the resin sheeting
necessary to produce carrier tape.
However, 3M, preferring the higher profit
margins that attend to the sale of
carrier tape, does not vend resin
sheeting in the open market (except to
its foreign subsidiaries).

Three individuals who were integral to
3M's development and production of resin
sheeting and carrier tape were Ronald
Pribyl, Thomas Skrtic, and James Harvey.
Pribyl, who began working for 3M in 1989
as its Manager of Manufacturing for North
America, supervised the production of all
of 3M's resin sheeting and carrier tape
in North America. Skrtic, an employee of
3M's Surface Mount Supplies Division from
1986, was the primary developer of 3M's
resin sheeting manufacturing process.
Finally, Harvey, who worked as 3M's
quality supervisor, was the principal
author of a series of 3M manuals
documenting the operating, training, and
quality control procedures for producing
resin sheeting and carrier tape.

In 1996, 3M announced that it was moving
its carrier tape business from Menominee,
Wisconsin to Hutchinson, Minnesota. For a
variety of reasons, Pribyl, Skrtic, and
Harvey did not wish to relocate to
Minnesota. Thus, in 1997, the trio, while
still under the employ of 3M, formed
Accu-Tech. Accu-Tech manufactures and
sells resin sheeting to various
companies, including those who use the
product to manufacture carrier tape.
However, Accu-Tech itself does not
produce any carrier tape. For
approximately two years, Pribyl, Skrtic,
and Harvey operated Accu-Tech while still
working for 3M. It was not until March of
1999 that their clandestine operation was
discovered by 3M. Upon learning of Accu-
Tech's existence, 3M terminated all three
individuals.

On April 23, 1999, 3M brought a
diversity suit against Pribyl, Skrtic,
Harvey, and Accu-Tech, in the District
Court for the Western District of
Wisconsin. 3M asserted a litany of claims
against Accu-Tech's founders, including
breach of fiduciary duty, breach of
employment contracts, and
misappropriation of trade secrets. The
complaint also alleged that Accu-Tech, as
a corporate entity, had misappropriated
trade secrets, engaged in unfair
competition, tortiously interfered with
prospective contractual relationships,
and tortiously induced Skrtic to breach
his employment contract with 3M.

Following discovery, the parties filed
cross-motions for summary judgment. On
November 12, 1999, the district court
granted summary judgment in favor of
Accu-Tech and its founders on the breach
of contract and tortious interference
with contract claims. Additionally, the
court granted summary judgment to the
defendants on the claim for breach of
fiduciary duty to the extent that it was
based on alleged improper competition
with 3M by Accu-Tech's founders. Finally,
the district court held that 3M's unfair
competition claim was indistinguishable
from its claims for trade secrets
misappropriation and tortious
interference with contract. Thereafter,
on December 7, 1999, the court granted
summary judgment in favor of Accu-Tech
and its founders on 3M's claim for
tortious interference with prospective
contractual relations.

The case proceeded to a bifurcated
trial, which commenced on December 13,
1999. On December 16, the jury returned a
verdict on liability, finding that: (1)
Accu-Tech's founders had each breached a
duty of loyalty to 3M, (2) 3M owned four
trade secrets, and (3) Accu-Tech and its
founders had misappropriated or
threatened to misappropriate two of those
four trade secrets. The two trade secrets
which the jury determined the defendants
had misappropriated were (1) the
operating procedures, quality manuals,
training manuals, process standards, and
operator notes for using plaintiff's
equipment that makes resin sheeting ("op
erating procedures and manuals"), and (2)
customized resin formulations that
enhance the sheeting and thermoforming
capability of resin and give it
properties needed in the electronic
industry./1 The following day, the jury
returned its findings on damages. On 3M's
claim for breach of the duty of loyalty,
the jury determined that Pribyl was
liable in the amount of $126,875, while
Harvey and Skrtic each owed 3M $46,000.
The jury additionally awarded damages
against Accu-Tech and its founders in the
amounts of $83,000 for misappropriation
of 3M's trade secret in customized resin
formulations and $187,500 for
misappropriation of 3M's trade secret in
the operating procedures and manuals.

Shortly thereafter, the defendants
filed a motion for judgment as a matter
of law or for a new trial. While that
motion was pending, 3M moved for the
entry of a permanent injunction. On
February 9, 2000, the district court par
tially granted 3M's motion, permanently
enjoining the defendants from disclosing
any of the four trade secrets found by
the jury, and from using the two trade
secrets which the jury had not found use
or disclosure of. However, the court
denied 3M's request for a permanent
injunction against the use of 3M's
customized resin formulations and
operating procedures and manuals.

On March 2, 2000, the district court
granted, in part, defendants' motion for
judgment as a matter of law. The court
partially overturned the jury's verdict,
ruling that the defendants were not
liable for misappropriating 3M's trade
secret in its customized resin
formulations. The court also ordered a
new trial on the issue of damages for
3M's breach of loyalty claim, unless 3M
accepted a remittitur. Rather than face a
new trial on damages, 3M accepted the
remittitur. On July 20, 2000, the
district court entered its final
judgment.

Discontented with various decisions
below, the parties have now filed cross-
appeals in this court. For their part,
defendants argue three points of error.
First, they assert that 3M failed to
offer any evidence that any specific
information within the scope of 3M's
trade secret in the operating procedures
and manuals was actually secret to 3M or
used or disclosed by the defendants.
Thus, defendants argue that the district
court erred in not granting them judgment
as a matter of law on 3M's
misappropriation claim regarding those
items. Secondly, defendants argue that
the district court's order permanently
enjoining them from disclosing to any
third party 3M's operating procedures and
manuals is overly vague, and thus
violates Fed. R. Civ. P. 65(d). Finally,
they put forth that the district court
erred in admitting excerpts from 3M's
business conduct manual dealing with an
employee's operation of a business that
is in competition with any 3M business.

For its part, 3M suggests four points of
error. First, 3M argues that the district
court erred in granting Accu-Tech summary
judgment on 3M's claim that Accu-Tech had
tortiously interfered with defendant
Skrtic's employment contract. Second, 3M
contends that the court similarly erred
in granting Accu-Tech summary judgment on
3M's unfair competition claim against the
company. Third, 3M asserts that the
district court erred in overturning the
jury's finding that the defendants had
misappropriated 3M's trade secret in its
customized resin formulations. Finally,
3M claims that the district court erred
in denying the company a permanent
injunction against defendants' use of
3M's trade secrets that the jury found
had been misappropriated.

* * *

Click the case caption above for the full text of the
Court's opinion.

Affirmed in part, reversed and remanded in part.

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Reported by Kent Morlan