Cmi Roadbuilding, Inc. v. Iowa Parts, Inc.

          Submitted: November 14, 2018

          Appeal from United States District Court for the Northern District of Iowa - Cedar Rapids

          Before BENTON, BEAM, and ERICKSON, Circuit Judges.

          BEAM, Circuit Judge.

         CMI Roadbuilding appeals the district court's^[1] adverse grant of summary judgment in favor of Iowa Parts in this trademark secrets and intellectual property case. We affirm the district court.

         I. BACKGROUND

         CMI Roadbuilding owns assets related to the manufacturing of asphalt and concrete plants, as well as landfill and dirt compaction equipment. CMI Roadbuilding purchased these from a host of other companies, and after a series of mergers and acquisitions, the end result is that CMI Roadbuilding now^[2] holds assets, including intellectual property, from companies formerly called Terex Corporation; Cedarapids, Inc.; and Standard Havens; as well as the CMI Corporation's own line of asphalt plants (collectively CMI Roadbuilding). As noted, CMI Roadbuilding is in the business of manufacturing and selling asphalt plants, related equipment, and for a time, also sold replacement parts. Sometime around 1999, Terex significantly downsized its operation-from 1200 employees to 200-and stopped selling replacement and after-market parts for its products, and instead sought vendors to do so for them. CMI Roadbuilding sent the technical drawings, plans and specifications-"engineering documents" that are required to make an asphalt plant and its component parts-to the vendors who were in the business of making these replacement and after-market parts.

         In 2002, Iowa Parts got into the market of becoming a vendor of replacement parts that were previously designed and manufactured by Terex, Cedarapids, Standard Havens, and CMI. Iowa Parts was formed by the former head of Standard Havens' Parts Department, Michael Hawkins. Iowa Parts represents that its parts meet "original equipment manufacturer" (OEM) specifications. Several employees at Iowa Parts used to work at the various companies that merged into CMI Roadbuilding. Included in this group was Jay King, former parts manager at Terex; Rick Merritt, a draftsman for Cedarapids and Terex; and Timothy Franck, who worked in some capacity for Cedarapids and Terex. In order to build the parts, Iowa Parts approached other vendors who had been given engineering documents from CMI Roadbuilding and its predecessors, and asked if those vendors would manufacture parts for Iowa Parts. Some of the vendors additionally provided drawings to Iowa Parts that they had obtained from CMI Roadbuilding. Iowa Parts also "reverse engineered" other component parts by using a string line and a tape measure.

         On May 29, 2002, Terex sent a letter to King, reminding him of his duty of loyalty to his former company and that it would be "a crime" for him to disclose any of CMI Terex's trade secrets without authorization. The letter also stated that it knew Iowa Parts had been contacting and recruiting Cedarapids customers. Undeterred, Iowa Parts continued manufacturing component parts. As evidence of CMI Roadbuilding's knowledge of this, during deposition testimony, the parts manager for CMI Roadbuilding testified that Iowa Parts directly competed with CMI Roadbuilding from Iowa Parts' inception in 2002. The manager noted that during this time frame she was perplexed as to how Iowa Parts could quickly and easily provide customers with quotes for parts, while she at CMI Roadbuilding struggled to provide price information about component parts for its own products. Evidence in the summary judgment record also indicates that Iowa Parts advertised regularly in trade magazines between 2002 and 2014, and that Terex advertised in the same magazine. Iowa Parts also attended and advertised at prominent asphalt trade shows. Representatives of Terex attended at least one of these same trade shows. Further, Iowa Parts' current website, www.iowapartsusa.com, which began operating in July 2011, advertises its business model, the parts it manufactures for asphalt plants, and notes that its employees gained knowledge in the business while working for CMI Roadbuilding's predecessors.

         More recently, and what amounts to the real genesis of the current dispute, Iowa Parts transitioned from making smaller and cheaper ($50 to $250) parts to larger component parts, which cost more in the range of $300, 000 to $400, 000. Once CMI Roadbuilding found out about this turn of events, CMI Roadbuilding instituted the present action on February 22, 2016, alleging: (1) Iowa Parts violated the Defend Trade Secrets Act of 2016 (DTSA), 18 U.S.C. § 1836, by converting CMI Roadbuilding's trade secrets; (2) that Iowa Parts violated the similar Iowa trade secrets law, Iowa Uniform Trade Secrets Act (UTSA), Iowa Code § 550; (3) a common law claim that Iowa Parts converted its trade secrets; and (4) that Iowa Parts was unjustly enriched by taking CMI Roadbuilding's trade secrets.

         Ultimately, CMI Roadbuilding moved for summary judgment, and Iowa Parts filed a competing motion for summary judgment, alleging that the three-year statute of limitations on the statutory claims had run because CMI Roadbuilding knew much earlier than February 2013 what Iowa Parts was doing, and that CMI Roadbuilding did not keep the trade secrets "secret" because they distributed them to several vendors. The district court agreed with Iowa Parts on the statute of limitations argument, rejecting CMI Roadbuilding's theory that the "discovery" doctrine should toll the statute because CMI Roadbuilding knew, or should have known, well before February 2013 that its trade secrets were being used by Iowa Parts.

         With regard to the conversion claim, the court found that even if a longer five-year statute of limitations did not bar the conversion action, conversion is the "civil equivalent" to theft. The court determined that while conversion could be available in a trade secrets claim if the offending party actually interfered with the original owner's use of the secrets, in this case, Iowa Parts' use of the engineering documents has not actually deprived CMI Roadbuilding of any of its trade secrets. The court noted that CMI Roadbuilding has never lost the ability to control and utilize the documents it maintains, and it still retains all of the engineering documents. Finally, with regard to unjust enrichment, the court found that CMI Roadbuilding would have had an adequate remedy at law if it had timely brought suit, and thus, the equitable doctrine of unjust enrichment was unavailable. CMI Roadbuilding appeals.

         II. DISCUSSION

         Summary judgment is appropriate "if 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). "Summary judgment is proper 'if the pleadings, the discovery and disclosure materials on file, and any affidavits show'" an absence of a genuine dispute as to a material fact. Torgerson v. City of Rochester,643 F.3d ...