Charles R. Christianson and International Trade Services Inc. v. Colt Industries Operating Corp.

870 F.2d 1292, 10 U.S.P.Q. 2d (BNA) 1352, 1989 U.S. App. LEXIS 4459, 1989 WL 30090
CourtCourt of Appeals for the Seventh Circuit
DecidedMarch 22, 1989
Docket88-2492
StatusPublished
Cited by40 cases

This text of 870 F.2d 1292 (Charles R. Christianson and International Trade Services Inc. v. Colt Industries Operating Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Charles R. Christianson and International Trade Services Inc. v. Colt Industries Operating Corp., 870 F.2d 1292, 10 U.S.P.Q. 2d (BNA) 1352, 1989 U.S. App. LEXIS 4459, 1989 WL 30090 (7th Cir. 1989).

Opinion

FLAUM, Circuit Judge.

Charles Christianson and his company, International Trade Services (together hereinafter referred to as “Christianson”), filed a two-count complaint against Colt Industries Operating Corp. (“Colt”) alleging, in Count I, that Colt had illegally monopolized the market in M-16 parts and had successfully organized a group boycott of Christianson, an M-16 parts supplier, in violation of Sections 1 and 2 of the Sherman Act and Sections 4 and 16 of the Clayton Act. Count II alleged that Colt had tortiously interfered, under Illinois law, with Christianson’s business opportunities.

Colt has defended the suit by claiming that any actions it took were justified by its interest in not divulging the information which would permit the parts to be used commercially in connection with the M-16, information which it claims was subject to state trade secret law protection. Colt also counterclaimed against Christianson, who was a former Colt employee, alleging breach of contract and a variety of other state and federal law trade violations based on Colt’s proprietary interests in the parts. Christianson countered Colt’s defense, and its counterclaims, by alleging that Colt no longer had any proprietary interest in the parts at issue since the patents on the parts had expired and Colt had no protectible trade secrets in the parts. According to Christianson, Colt could not claim any trade secret protection relating to the parts because the information Colt claimed to be subject to trade secret protection should have been included in Colt’s patent disclosures for the parts. Specifically, Christian-son alleged that Colt should have included the specifications and tolerances that would permit those parts to be interchangeable with all of the other M-16s ever produced. 1 Alternatively, Christianson’s complaint alleges that Colt lost its proprietary interests in the parts when it granted Christianson permission to sell the parts in 1976.

Both sides filed motions for partial summary judgment. Christianson moved for a declaration that Colt’s trade secrets were invalid because those secrets — the specifications and tolerances for interchangeability-should have been disclosed in the patent applications and also moved for judgment in its favor on the tortious interference count. Colt asked for a declaration that its patent disclosures were adequate and also asked for dismissal of count II, the tortious interference count.

The district court agreed that the patents were invalid for nondisclosure. The court then found, based solely on its finding of patent invalidity, that Colt had no protecti-ble trade secrets in the parts and granted Christianson’s motion for partial summary judgment and denied Colt’s motion. The district court also, sua sponte, entered summary judgment for Christianson on both counts of the complaint.

*1295 Colt appealed the district court’s decision to the Court of Appeals for the Federal Circuit, touching off a jurisdictional exchange between the Federal Circuit and the Seventh Circuit. The Supreme Court eventually settled the jurisdictional dispute by holding that the Seventh Circuit is the proper forum for Colt’s appeal. Christianson v. Colt Industries Operating Corp., — U.S. -, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988). Finally reaching the merits of this appeal, we reverse the district court’s grant of summary judgment, find that summary judgment should be entered for Colt on the issue of the adequacy of Colt’s patent disclosures, and remand for further proceedings.

I.

The basic patents which protect the M-16 were first issued to the Armalite Division of Fairchild Hiller Corporation for its “AR-IO” and “AR-15” rifles. In 1959, Colt received a license from Fairchild to develop those patents and, by 1962, had successfully developed a mass-production rifle. Shortly thereafter, the United States Army adopted that rifle as its principal battlefield rifle and designated it the M-16.

Over time, Colt made improvements to various parts of the rifle and patented those improvements, although it did not always use the improvements in actual production of the rifle. Christianson contends that nine of those improvement patents, 2 five of which actually found their way into production, were invalid from conception because they failed to divulge the requisite information regarding their manufacture and use.

Charles Christianson, a former Colt employee, formed International Trade Services (“ITS”) and went into business selling replacement parts for the M-16. These parts were obtained from Colt’s suppliers, all of whom had previously agreed with Colt not to supply anyone other than Colt or Colt’s licensees. 3 In 1976, Christianson received permission from Colt to sell replacement parts, but the parties strongly disagree about whether that permission was of a continuing or a limited nature.

Springfield Armory (“Springfield”), an Illinois corporation, also entered into the business of selling M-16 replacement parts. Those replacement parts were manufactured within tolerances permitting interchangeability of the parts with existing M-16 rifles. Colt became aware of Springfield’s endeavors and, in August 1983, commenced an action based on misappropriation of trade secrets and patent infringement seeking to enjoin Springfield’s activities. Springfield denied that it had misappropriated Colt’s trade secrets in the specifications and tolerances necessary to make the replacement parts interchangeable with existing M-16 rifles claiming instead that it had “reverse engineered” 4 the parts. Colt contended that to reverse engineer the parts so as to make them interchangeable with every M-16 ever produced would be a “massive task” and thus the information *1296 had to have been taken from Colt’s proprietary drawings. The district court agreed with Colt and granted a preliminary injunction against Springfield. Colt sent letters to its suppliers informing them of the result and reminding them of their contractual obligation to refrain from selling M-16 parts to anyone other than Colt or Colt’s licensees.

In the course of discovery in the Springfield case, Colt learned that Christianson had been among those who supplied Springfield with M-16 parts. Colt joined Christianson and ITS as defendants in the case but, after failing to receive a preliminary injunction against them, voluntarily dismissed them from the case.

Shortly after that dismissal, on May 14, 1984, Christianson filed the instant suit against Colt claiming that Colt’s actions in protecting its alleged trade secrets violated Sections 1 and 2 of the Sherman Act and Sections 4 and 16 of the Clayton Act. Although the complaint was inartfully drawn, it apparently alleged that Colt — through its restrictive agreements with suppliers, the bad faith joinder of Christianson in the Springfield case, the letters Colt subsequently sent to suppliers informing them of the outcome of the Springfield case, and other specified and unspecified conduct— had monopolized the market for M-16 replacement parts and had organized a group boycott against Christianson.

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Bluebook (online)
870 F.2d 1292, 10 U.S.P.Q. 2d (BNA) 1352, 1989 U.S. App. LEXIS 4459, 1989 WL 30090, Counsel Stack Legal Research, https://law.counselstack.com/opinion/charles-r-christianson-and-international-trade-services-inc-v-colt-ca7-1989.