Amalgamated Industries Ltd. v. Tressa, Inc.

69 F. App'x 255
CourtCourt of Appeals for the Sixth Circuit
DecidedJune 13, 2003
DocketNo. 01-5708
StatusPublished
Cited by10 cases

This text of 69 F. App'x 255 (Amalgamated Industries Ltd. v. Tressa, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Amalgamated Industries Ltd. v. Tressa, Inc., 69 F. App'x 255 (6th Cir. 2003).

Opinion

PER CURIAM.

Tressa, Inc. (Tressa), a manufacturer and distributor of hair care products, appeals a district court judgment in favor of Amalgamated Industries Ltd. (AIL), a developer of hair care products, stemming irom the breach of a 1989 Licensing Agreement between the two parties. The district court, following a three-day bench trial in December 2000, found in AIL’s favor on claims of breach of contract and of misappropriation of trade secrets. Tressa claims that the district court judg[256]*256ment must be vacated on the grounds that it cannot be held to have breached a contract previously breached by AIL, as determined by the district court in a prior suit between the parties, and furthermore that the action is barred by the doctrine of res judicata or, alternatively, collateral estoppel. Tressa also argues that AIL’s claim for misappropriation of trade secrets is barred by the statute of limitations.

For the reasons that follow, we agree that the Licensing Agreement between the parties was effectively terminated in the prior suit. Nevertheless, we affirm the district court’s award of damages to AIL on the basis of Kentucky’s Uniform Trade Secrets Act (the Act), Ky.Rev.Stat. Ann. §§ 365.880 to 365.900, which provides civil remedies for the misappropriation of trade secrets outside of a contractual relationship. Furthermore, we view AIL’s current complaint of new acts of misappropriation by Tressa as part of a single claim under the Act that began with Tressa’s initial misappropriation of AIL’s trade secret litigated in the prior suit, since each act is a misappropriation of the same information obtained by Tressa when the parties entered into the Licencing Agreement in 1989. As a result we hold that AIL’s claim is not barred by the statute of limitations, since it was timely filed in the prior suit and these new claims should have remained within the context of that suit, instead of being filed as a separate suit.

I

Tressa and AIL entered into a Licensing Agreement (the Agreement) on July 5, 1989, in which AIL granted to Tressa the non-transferable right and exclusive license to manufacture and sell professional hair care products developed from AIL’s information, technical data, processes, formulas and other data relating to the products (the Information). The contract states in relevant part:

2. License. Subject to the terms of this agreement, licensor grants to licensee the nontransferable right and exclusive license to use “the information” to manufacture “the products” and to sell “the products” throughout the world. No license, express or implied, is granted to employ the information for any other purposes whatsoever.
3. Representations. Licensor represents, warrants and agrees that “the products” and “the information” will provide to licensee a complete line of permanent haircolor products satisfactory in performance and shade range to compete in the professional (salon) hair care industry and will include a powdered bleach.

The Agreement further stipulated that Tressa would pay AIL a “nonrefundable technical development fee” of $100,000 and a licensing fee of four percent of the net sales collected by Tressa on each product sold, to continue “for as long as the formulas, “the products” and “the information” from [AIL] is being used.” In essence, AIL was to give Tressa a formula consisting of a “base” and a “shade,” which Tressa would then use to manufacture a line of hair-coloring products in exchange for a development fee and a licensing fee.

Tressa paid the development fee, but it is undisputed that the base part of the formula given by AIL to Tressa under the Agreement was unstable. Tressa modified the formula in order to remedy the problem and additionally claims to have changed certain shade formulas to provide coverage for gray hair, which it claims AIL’s formulas could not do. Tressa marketed this modified product as a line of 35 hair-coloring shades under the name Co[257]*257lourage, 21 of which were determined by the district court to be derived from AIL shade formulas “without substantial alteration” and 14 of which were blends of the original 21. Tressa did not pay AIL the royalties due under the Agreement for any of the shades of hair color it was producing, stating that it believed it had developed the formulas for Colourage without any assistance from AIL.

Tressa filed a complaint against AIL alleging breach of contract on August 10, 1990, commencing what the parties now refer to as the “prior litigation.” AIL counterclaimed for misappropriation of trade secrets. At the conclusion of a five-day bench trial in 1992, a judgment was issued holding that AIL had breached the Agreement by providing an unstable base formula and that Tressa had misappropriated AIL’s trade secrets, in violation of the Act, by using AIL’s shade formulas in the development of its Colourage line. There was no issue with regard to the statute of limitations, since AIL’s counterclaim was filed well within the three-year limitation period.

There was considerable confusion over the awarding of damages as calculated by the district court in the prior litigation. Although the court initially stated that its intention was to measure the damages for AIL’s breach in terms of expectation damages, thereby placing the injured party in the same position it would have been in had the contract been performed, the court ultimately awarded damages for restitution, placing the party in breach in its position before the contract, and then disgorging any unjust enrichment.1 The court simultaneously ruled on the counterclaim for misappropriation of trade secrets brought by AIL, holding that “Tressa in developing its own color shades, used and benefited from [AIL’s] color shades to the extent that Tressa misappropriated a trade secret owned by Amalgamated.” Accordingly, the district court awarded AIL a “judgment against Tressa in the form of a licensing fee amounting to 1.68% of the net annual sales of Colourage,” or 42% of the original license fee of 4% assessed in the contract.2 In sum, the court effectively rescinded the contract and assessed damages resulting from Tressa’s use of AIL’s trade secret pursuant to the Act.

Directly after the final judgment was rendered in this prior litigation, cross motions for reconsideration were filed disputing whether or not Tressa should pay the newly assessed 1.68% licensing fee on the net sales of eight “new” shades, which were developed by Tressa subsequent to this first trial. AIL complained of this omission and Tressa claimed, as it similarly claimed in the prior litigation with regard to the original Colourage shades, that it had developed these eight new shades independently, from scratch, and without any use or benefit from AIL’s shade formulas. The court held that it could not resolve this matter since additional proof would be needed in order to determine whether Tressa had used AIL’s Information in developing the eight new shades, and thus it would be necessary to reopen the case. On July 26, 1998, Tressa tendered payment to AIL for the royalty [258]*258payments due and owing on Colourage from 1990 through 1992, but did not include in its calculations the sales of the eight new Colourage shades.

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Bluebook (online)
69 F. App'x 255, Counsel Stack Legal Research, https://law.counselstack.com/opinion/amalgamated-industries-ltd-v-tressa-inc-ca6-2003.