United States District Court, D. Colorado
ORDER DENYING DEFENDANT'S MOTIONS FOR PARTIAL
SUMMARY JUDGMENT AND PLAINTIFF'S MOTION TO STRIKE AND
ORDERING ADDITIONAL BRIEFING
CHRISTINE M. ARGUELLO UNITED STATES DISTRICT JUDGE.
matter is before the Court on Defendant's Motions for
Partial Summary Judgment (Doc. ## 134, 176) and
Plaintiffs' Motion to Strike the rebuttal opinions of
Defendant's expert, James Bach (Doc. # 183). For the
following reasons, the motions are denied.
case arises over a dispute between Hewlett Packard Enterprise
Company (HPE) and TurnKey Solutions Corporation (TurnKey)
over the proprietary nature of features of TurnKey's core
product software, cFactory. (Doc. # 147, p. 3; Doc. # 1, p.
1-3.) cFactory is a program that tests on the functionality
of complex enterprise software. (Doc. # 1, p. 1, 3-4.) HPE
also offers software that assists in functional software
testing, including United Functional Testing and Business
Process Testing. (Doc. # 147, p. 2.) cFactory operates as an
add-on to those, and other, HPE products. (Doc. # 179, p. 2.)
16, 2012, HPE and TurnKey entered into a Software License and
Distribution Agreement for Third Party Branded Products (OEM
Agreement). (Doc. # 1, ¶ 25.) The OEM Agreement
authorized HPE to “use, reproduce, display, distribute,
import, and disclose” various TurnKey software
programs, in exchange for royalties and subject to certain
conditions, including confidentiality provisions.
(Id. at ¶ 26; Doc. # 136-1, p. 6-8, 14-15.)
October 2014, at HPE's request, TurnKey hosted two web
conferences wherein TurnKey provided HPE with detailed
information about the software portfolio underlying cFactory.
(Doc. # 1, ¶ 40; Doc. # 134, p. 3.) Later that year, HPE
hosted a conference in Spain where it presented its plans to
launch a new version of its BPT software - Version 12.5.
(Doc. # 1, ¶ 47.) Various TurnKey conference attendees
became concerned that Version 12.5 incorporated several
confidential features of cFactory. (Id., ¶ 48;
Doc. # 134, p. 3.) TurnKey expressed those concerns to HPE,
and on March 5, 2015, HPE provided TurnKey with a private web
demonstration of the proposed Version 12.5. (Doc. # 1, ¶
57; Doc. # 134, p. 3-4.) A TurnKey employee recorded that
demonstration. (Doc. # 134, p. 4; Doc. # 147, p. 15-18.)
thereafter, TurnKey initiated this lawsuit alleging that HPE,
in developing Version 12.5, misused TurnKey's
confidential software information. (Doc. # 1.) TurnKey also
contends that HPE fraudulently induced TurnKey into
disclosing that information at the October 2014 conferences
by falsely assuring TurnKey that HPE had no intention of
creating a product that competed with cFactory.
(Id.) Based primarily on these allegations, TurnKey
raises three claims for relief: (1) Misappropriation of Trade
Secrets; (2) Breach of the OEM Agreement; and (3) Fraud.
(Id., p. 13-15.)
denies TurnKey's allegations and requests that this Court
grant summary judgment in its favor on all three claims. HPE
also requests that the Court limit TurnKey's claims and
damage award based on patent preemption and a presumption
against the extraterritorial application of laws.
addition, both parties have disclosed expert reports
supporting their positions. Of import to this Order, TurnKey
asserts that HPE's rebuttal report by expert James Bach
is improper under Rule 26 and request that the Court strike
Court addresses each of the parties' contentions in turn.
MOTIONS FOR PARTIAL SUMMARY JUDGMENT
SUMMARY JUDGMENT STANDARD
judgment is warranted when “the movant shows that there
is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). A fact is “material” if it is
essential to the proper disposition of the claim under the
relevant substantive law. Wright v. Abbott Labs.,
Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). A dispute
is “genuine” if the evidence is such that it
might lead a reasonable jury to return a verdict for the
nonmoving party. Allen v. Muskogee, Okl., 119 F.3d
837, 839 (10th Cir. 1997). When reviewing motions for summary
judgment, a court must view the evidence in the light most
favorable to the non-moving party. Id. However,
conclusory statements based merely on conjecture,
speculation, or subjective belief do not constitute competent
summary judgment evidence. Bones v. Honeywell Int'l,
Inc., 366 F.3d 869, 875 (10th Cir. 2004).
moving party bears the initial burden of demonstrating the
absence of a genuine dispute of material fact and entitlement
to judgment as a matter of law. Id. In attempting to
meet this standard, a movant who does not bear the ultimate
burden of persuasion at trial does not need to disprove the
other party's claim; rather, the movant need simply point
out to the Court a lack of evidence for the other party on an
essential element of that party's claim. Adler v.
Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir.
1998) (citing Celotex Corp. v. Catrett, 477 U.S.
317, 325 (1986)).
the movant has met its initial burden, the burden then shifts
to the nonmoving party to “set forth specific facts
showing that there is a genuine issue for trial.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256
(1986). The nonmoving party may not simply rest upon its
pleadings to satisfy its burden. Id. Rather, the
nonmoving party must “set forth specific facts that
would be admissible in evidence in the event of trial from
which a rational trier of fact could find for the
nonmovant.” Adler, 144 F.3d at 671. “To
accomplish this, the facts must be identified by reference to
affidavits, deposition transcripts, or specific exhibits
incorporated therein.” Id.
MISAPPROPRIATION OF TRADE SECRETS
contends that TurnKey's misappropriation claim fails as a
matter of law because TurnKey has failed to identify any
secrets relating to its software that would be entitled to
elements of a trade secret misappropriation claim are:
“(i) that [TurnKey] possessed a valid trade secret,
(ii) that the trade secret was disclosed or used without
consent, and (iii) that [HPE] knew, or should have known,
that the trade secret was acquired by improper means.”
Gates Rubber Co. v. Bando Chem. Indus, Ltd., 9 F.3d
823, 847 (10th Cir. 1993). The Colorado Uniform Trade Secrets
Act (“CUTSA”) defines a trade secret as
scientific or technical information, design, process,
procedure, formula, improvement . . . 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.
Colo. Rev. Stat. § 7-74-102(4).
considered in determining the existence of a trade secret
include: (1) the extent to which the information is known
outside the business; (2) the extent to which it is known to
those inside the business; (3) the precautions taken by the
holder of the trade secret to guard the secrecy of the
information; (4) the savings effected and the value to the
holder in having the information as against competitors; (5)
the amount of effort or money expended in obtaining and
developing the information; and (6) the amount of time and
expense it would take for others to acquire and duplicate the
information. Colo. Supply Co. v. Stewart, 797 P.2d
1303, 1306 (Colo.App. 1990). “Indispensible to an
effective allegation of a trade secret is proof that the
matter is, more or less, secret.” Hertz v. Luzena
Grp., 576 F.3d 1103, 1109 (10th Cir. 2009).
status is a question of fact for determination by the trier
of fact. Network Telecommunications, Inc. v.
Boor-Crepeau, 790 P.2d 901, 902 (Colo.App. 1990);
see also Harvey Barnett, Inc. v. Shidler, 338 F.3d
1125, 1129 (10th Cir. 2003) (citing Colo. Supply
Co., 797 P.2d at 1306 (“Trade-secret status is a
question of fact.”); Dodson Int'l Parts, Inc.
v. Altendorf, 347 F.Supp.2d 997, 1011 (D. Kan. 2004)
(trade secret conclusion is made after a
“fact-intensive inquiry”); Defiance Button
Machine Co. v. C & C Metal Products Corp., 759 F.2d
1053, 1063 (2d Cir. 1985) (secrecy is a basic element of the
factual inquiry); Kodekey Electronics, Inc. v. Mechanex
Corp., 486 F.2d 449, 454 n. 4, 455 (10th Cir.1973) (what
constitutes a trade secret is a question of fact for the
trial court, not the appellate court); Public Systems,
Inc. v. Towry, 587 So.2d 969, 972 (Ala. 1991) (same);
All W. Pet Supply Co. v. Hill's Pet Prod. Div.,
Colgate-Palmolive Co., 840 F.Supp. 1433, 1437-38 (D.
Kan. 1993) (“The existence of a trade secret under the
Uniform Trade Secrets Act is a question of fact for
determination by the trier of fact.”).
reviewed the pertinent filings and exhibits, the Court
concludes that HPE has not met its burden of demonstrating
the absence of a genuine dispute as to material facts
governing TurnKey's trade secret misappropriation claim.
For starters, the parties vehemently dispute two interrelated
issues essential to the claim: (1) whether TurnKey has
adequately identified information that rises to the level of
a trade secret, and (2) whether TurnKey adequately protected
that information from public dissemination.
argues that TurnKey has not identified any
information about its software that it does not regularly
disclose to its users and the public. HPE states that
TurnKey's trade secret descriptions “offer
nothing more than the basic capabilities of cFactory,
information that is self-revealing to anyone using the
software for its intended purpose” and that is not,
therefore, secretive. (Doc. # 176 at 12.) TurnKey,
however, disagrees, stating that its “trade secrets are
cFactory's underlying methodologies: sequential tasks it
directs the computer running it to perform to produce the
capabilities” that are ultimately viewed by the user -
methodologies for which TurnKey has now received two U.S.
method patents. (Doc. # 179, p. 1.) TurnKey's trade
secrets are thus not cFactory's observable capabilities,
but rather the underlying architecture of the software - the
invisible tasks that the software performs to produce those
capabilities. In other words, in arguing that it has
identified trade secrets, TurnKey highlights the “how,
” not the “what” of cFactory. (Doc. # 179,
p. 10; Doc. # 172-2, p. 36).
contending, TurnKey does not dispute that elements of its
software are known to the public, such as the program's
result - its output. But, a plaintiff alleging
misappropriation of a trade secret need not prove that every
element of information in a compilation is unavailable
elsewhere. Boeing Co. v. Sierracin Corp., 108
Wash.2d 38, 738 P.2d 665, 675 (1987). In determining the
existence of trade secrets, courts do not look at individual
components of a process, but the entirety of the process, as
“a trade secret can include a system where the elements
are in the public domain, but there has been accomplished an
effective, successful and valuable integration of [those]
elements and the trade secret gave the claimant a competitive
advantage which is protected from misappropriation.”
Rivendell Forest Prods., Ltd. v. Georgia-Pacific
Corp., 28 F.3d 1042, 1046 (10th Cir. 1994);
Innovatier, Inc. v. CardXX, Inc., No.
08-CV-00273-PAB-KLM, 2011 WL 3293789, ...