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Hadley v. Extreme Techs., Inc.

Court of Appeals of Oregon

June 24, 2015

Claude HADLEY, Plaintiff-Appellant,
v.
EXTREME TECHNOLOGIES, INC., a corporation doing business under the assumed business name of Bow Tech, Defendant-Respondent

Argued and Submitted April 10, 2014, Gold Beach High School, Gold Beach.

Page 133

Lane County Circuit Court 161103225. Charles D. Carlson, Judge.

Travis Eiva argued the cause and filed the briefs for appellant.

Todd R. Johnson argued the cause for respondent. With him on the brief was Hershner Hunter, LLP.

Before Duncan, Presiding Judge, and Lagesen, Judge, and Wollheim, Senior Judge.

OPINION

Page 134

[272 Or.App. 51] LAGESEN, J.

Defendant, Extreme Technologies, Inc., designs, manufactures, and sells archery equipment, including bows. When plaintiff, Claude Hadley, agreed to share with defendant his idea for a new bow design, which was unknown in the industry at the time, the parties entered into a nondisclosure agreement. Under the agreement, defendant agreed not to independently use or disclose the information provided to it by plaintiff for a period of two years; if defendant did independently use or disclose the information, plaintiff would be entitled to a broad range of remedies. Plaintiff ultimately sued defendant, alleging that defendant breached that agreement by using the information that plaintiff shared with it to develop its own new bow, which defendant put on the market just short of two years after its meeting with plaintiff. The case went to trial, and the jury determined that defendant breached the agreement but that the breach had not caused plaintiff to suffer any damages.

The issue on appeal is whether the trial court erred in instructing the jury that a portion of the agreement was ambiguous and that it was the jury's job to determine what the agreement meant and, if the trial court erred in doing so, whether that error " substantially affect[ed] the rights" of plaintiff, so as to require reversal under ORS 19.415. We conclude that the trial court erred. We also conclude that the error " substantially affect[ed]" plaintiff's rights, because there is some likelihood that it caused the jury to apply the wrong legal rule in determining whether defendant's breach of the agreement caused plaintiff to suffer damages. For that reason, we reverse and remand for a new trial.

FACTUAL AND PROCEDURAL BACKGROUND [1]

Plaintiff is an inventor from Alabama. Defendant is Extreme Technologies, Inc. (also known as " BowTech" ), a corporation that manufactures archery bow products. By early 2005, plaintiff had developed a prototype of a new compound archery bow. The prototype, described by plaintiff as [272 Or.App. 52] a " 'catapult' system" bow, used a " forked riser" that served as a " center point for the bow limb to pivot on" (the " Catapult Riser" ).

In February 2005, plaintiff contacted defendant and informed the corporation's president, Strasheim, that he had developed designs, including the prototype of the Catapult Riser, which might interest the company. Defendant provided, and both parties signed, what the parties titled a " Non-Disclosure Agreement." That agreement provided, in pertinent part:

" Claude Hadley (hereinafter Inventor) an individual inventor having a place of residency in Brewton, Alabama, plans to reveal certain proprietary information concerning a compound bow design or accessory for a compound bow, owned by Inventor, to BowTech and [Strasheim] (here[i]nafter Recipient) solely for the purpose of evaluating the information for prospective future negotiation between Inventor and Recipient and for no other reason.
" The information to be disclosed by Inventor to Recipient includes the design(s) of proprietary information. Recipient (on behalf of himself and on behalf of his company, officer[ s], directors, agents, employees, and affiliates and/or functional equivalents) acknowledges that such information is special, valuable and [a] unique asset of the Inventor. In consideration of receiving such information, Recipient agrees, by the duly authorized signature below, to use such information for the above Purposes only unless otherwise hereafter agreed to in writing by Inventor, and to use best efforts to maintain the confidentiality of the Information, which includes limiting[ ] access to the Information to those officers, directors and employees within Recipient's organization and/or within Recipient's control who reasonably require access in order

Page 135

to accomplish the purpose outlined in this Agreement, and who are under an obligation to keep said information confidential. Recipient shall be responsible for maintaining the confidentiality of the Information disclosed to others by Recipient and will be liable to the full extent of the law for any unauthorized disclosures arising out of Inventor's disclosure to Recipient.
" Recipient agrees not to reproduce or reverse engineer nor attempt to obtain additional knowledge beyond the scope of the Information for any purpose. Recipient agrees [272 Or.App. 53] not to independently develop concepts, ideas or designs or market [the] same which arise out of or are related to any features or characteristics of the Information.
" This commitment shall impose NO obligation upon Recipient with respect to any portion of the Information which:
" 1. is now, or which hereafter, through no act or failure to act on Recipient's part, becomes generally known or available to the public;
" 2. is known to Recipient at the time said information is received from [I]nventor;
" 3. is hereafter furnished to Recipient by a third party as a matter of right and without restriction o[n] disclosure;
" 4. is furnished to others by Inventor without restriction on disclosure;
" 5. is independently developed by Recipient provided that the person or persons developing [the] same have not had access to any part of the information as furnished by Inventor nor received any guidance, whether direct or indirect, from Recipient of the information; or
" 6. after two (2) years from receipt of the Information.
" * * * *
" Recipient and Inventor agree that the laws and courts of the State of Oregon, USA, will govern this Agreement and any disputes arising thereunder since the [B]reach of this Agreement will cause irreparable harm to Inventor, it is agreed that in such event Inventor will be entitled to attorney fees, equitable relief, and other remedies, in order to restrain and/or recover from any Breach."

( Emphasis added.)

After signing the agreement on February 23, 2005, plaintiff sent defendant two cam designs,[2] along with three photographs of each design. Plaintiff also provided two photographs of the Catapult Riser prototype. In a follow-up phone call with Strasheim and several of his colleagues shortly after the nondisclosure agreement was executed, plaintiff described the operation of this Catapult Riser design:

[272 Or.App. 54] " I told him how the rollers would allow the bow limb, when you bend it like this--[you've] seen some of their demonstrations where they would bend the bow limb, you know, and how they show you how it flexed back. You know, and that's the whole point of this thing, is that when you bend the bow limbs, it allows the bow limbs to flex from tip to tip."

Plaintiff then fielded questions about the prototype.

While plaintiff was explaining the Catapult Riser concept, Strasheim interjected: " I'm sorry. * * * This ain't going to work. * * * I don't think this idea is going to do what you think it's going to do." Strasheim then informed plaintiff that defendant was not going to be interested in the prototype. Plaintiff had no further contact with defendant after that conversation.[3]

Page 136

Approximately one year and eight months after plaintiff and defendant entered into the nondisclosure agreement, on November 1, 2006, an employee of defendant, Yehle, filed a provisional patent application with the United States Patent and Trademark Office (U.S. Patent Office) for " Center-Pivot Limbs for an Archery Bow." Yehle's " center-pivot" design resembled plaintiff's " Catapult Riser" design, and plaintiff believed that defendant had developed it from the Catapult Riser prototype that he had shared with defendant. In late 2006, defendant released two products that employed that center-pivot technology: the Guardian model (designed for bow hunters) and the Commander model (designed for target shooters). Over the next few years, defendant released revised models of its center-pivot bows; the design became one of defendant's flagship products. On November 16, 2010, the U.S. Patent Office granted Yehle's patent application; Yehle assigned that patent to defendant.

[272 Or.App. 55] In early 2011, plaintiff sued defendant, alleging claims for breach of the nondisclosure agreement, unjust enrichment, and injunctive relief. In his amended complaint, plaintiff alleged that defendant's 2007 line of archery bow products " contained many of the new design elements" of the Catapult Riser prototype and that the patent assigned to defendant " disclosed an archery bow design that uses concepts, ideas, or designs of [plaintiff]'s catapult technology that he disclosed to [defendant]." Plaintiff asserted that defendant breached the parties' nondisclosure agreement in one or more of the following ways:

" (a) Using the information disclosed by Claude Hadley to Extreme Technologies, Inc. for a purpose other than to evaluate the information for prospective negotiation between the parties;
" (b) Not using best efforts to maintain the confidentiality of the information disclosed by Claude Hadley and failing to properly limit the access to the information confidentially disclosed by Claude Hadley to Extreme Technologies, Inc.;
" (c) Failing to maintain the confidentiality of the information disclosed to it by Claude Hadley;
" (d) Developing and marketing concepts, ideas, and designs which arose out of and/or had the same features and characteristics of the catapult riser prototype, design, and information that Claude Hadley ...

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