Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Okla.: Aerial camera system manufacturer awarded damages and royalties from competitor, (Sep 24, 2013)

By Jody Coultas, J.D.

A jury that returned a verdict in favor of Skycam, LLC on its misappropriation of trade secret, breach of separation agreement, and false advertising claims under state and federal law did not err, the federal district court in Tulsa has held (Skycam, LLC v. Bennett, September 20, 2013, Frizzell, G.). Therefore, the defendants, Actioncam, LLC and a former Skycam employee, were denied a new trial.

Skycam and Actioncam manufacture aerial camera systems for use in the broadcast of sporting events. A former Skycam employee allegedly breached a separation agreement that prohibited him from using or disclosing Skycam’s trade secrets and confidential or proprietary information during his employment with Actioncam.

A jury found that the former employee breached the contract, and that Actioncam and the former employee misappropriated Skycam’s trade secrets and engaged in unfair competition. The court entered an injunction requiring Actioncam and the former employee to pay Skycam royalties per event for each paid event covered by Actioncam. Actioncam and the former employee sought a new trial.

Royalties. The trial court did not err in granting Skycam royalties, according to the court. Actioncam argued that the royalty injunction was improper and that the court used an improper royalty award calculation. The Oklahoma Uniform Trade Secret Act (OUTSA) expressly permits imposition of a reasonable royalty. Based on testimony by Skycam’s experts, the court determined the former employee had a 42-month head start on development of Actioncam by using Skycam’s technology. Actioncam’s argument that the entire 42-month head start expired before the jury verdict date and, therefore, no royalty injunction was warranted was based on an erroneous construction of the testimony of Skycam’s expert’s testimony.

Trade secret claims. Skycam presented sufficient evidence to support the jury’s holding in its favor on the trade secret claim, according to the court. Actioncam’s own employee testified that after using Skycam’s field guide to draft Actioncam’s field guide, he threw the Skycam field guide away because he did not believe he should have it. The testimony at trial was sufficient to allow the jury to find that the information at issue was confidential and proprietary, and that Actioncam used that information. The jury was also properly instructed Skycam was required to prove that defendants misappropriated one or more trade secrets, and the term “trade secret” was defined.

Violation of separation agreement claim. The jury did not err in finding that the former employee violated the separation agreement, according to the court. The defendants contended that Skycam offered insufficient evidence that the former employee disclosed Skycam’s confidential information in violation of the separation agreement or that Skycam was damaged. Evidence supporting the misappropriation claim also supported the finding that the former employee breached the agreement. Skycam alleged lost profits based on Skycam’s loss of a contract with ESPN, that the defendants benefited from reduced development costs and time due to their access to Skycam’s confidential information, and the number of events defendants had covered, the price of such events, and how much Skycam would have charged for a license to use the technology at issue. The defendants argued that neither unjust enrichment nor a reasonable royalty could be considered actual damages, there was no evidence of actual damages, and the award for unjust enrichment was duplicative of the damage award for misappropriation. The court rejected each of these arguments and upheld the jury’s awards.

False advertising claims. The court also denied a new trial on the Oklahoma Deceptive Trade Practices Act (DTPA) and Lanham Act claims. Actioncam argued that Skycam failed to demonstrate a causal connection between its false advertising and harm to Skycam, and also failed to provide evidence of dissemination to customers, as required by the Lanham Act. Skycam’s testimony established harm by false advertising because it showed that ESPN’s October 2007 reversal on a business deal was the direct result of defendants’ false statements about the relative capabilities of the Skycam and Actioncam systems. Skycam also presented evidence that literally false statements were made to customers.

The court did not err in granting summary judgment in favor of Skycam on its Lanham Act and DTPA claims with respect to defendants’ Fifth Line statements, according to the court. The court determined that defendants made three statements about the Fifth Safety Line which were literally false. The former employee admitted that while the Fifth Line on the Actioncam system was capable of supporting the camera in the event other cables broke, it did not—at the time of the advertisements at issue—have the capability of reeling the camera up and out of the way.

The defendants argued the court’s jury instructions on the false advertising claims were erroneous because Skycam did not produce evidence of dissemination to customers and the combination of the Lanham Act and DTPA jury instructions rendered the instructions confusing. Skycam presented evidence that false and misleading statements were made to customers. The defendants also failed to object to the court’s combined instruction. Therefore, the court could only consider the alleged error if it affected substantial rights. The defendants did not establish that the instruction affected any substantial rights.

The court did not err in failing to instruct the jury on an employee’s right to use his experience to compete with his former employer, according to the court. The defendants submitted proposed jury instructions regarding an employee’s right to use his general skill, knowledge, training, and experience to compete with his former employer. However, the court instead gave an instruction explaining the elements of trade secret misappropriation under OUTSA and an instruction that “a person has the right to use ideas generally known to all and may combine with such general knowledge his own abilities and his knowledge of the customs of the market, as long as he does not make use of or disclose another’s trade secrets.” Jury instructions need not be faultless in every particular, but must correctly state the governing law and provide the jury with an understanding of the issues and applicable standards. The instructions concerning trade secret misappropriation correctly stated Oklahoma law governing trade secrets.

The case is No. 09-CV-294-GKF-FHM.

Attorneys: John A Kenney and Rachel Blue (McAfee & Taft) for Skycam LLC. Cori Dawn Powell and David Andrew Sturdivant (Barrow & Grimm PC) for Actioncam LLC.

Companies: Skycam, LLC; Actioncam, LLC

Cases: Advertising StateUnfairTradePractices OklahomaNews