Scigrip, Inc. v. Osae

2018 NCBC 10

• Court: North Carolina Business Court
• Decided: January 30, 2018
• Docket: 13-CVS-2854
• Status: Published

Opinion

SciGrip, Inc. v. Osae, 2018 NCBC 10.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION DURHAM COUNTY 13 CVS 2854

SCIGRIP, INC. f/k/a IPS STRUCTURAL ADHESIVES HOLDINGS, INC. and IPS INTERMEDIATE HOLDINGS CORPORATION, (REDACTED) ORDER AND OPINION Plaintiffs, ON MOTIONS FOR SUMMARY JUDGMENT, MOTIONS TO v. EXCLUDE, AND MOTIONS TO FILE UNDER SEAL SAMUEL B. OSAE and SCOTT BADER, INC.,

Defendants.

1. THIS MATTER is before the Court on Plaintiffs’ motion for summary

judgment, Defendant Samuel B. Osae’s (“Osae”) motion for summary judgment,

Defendant Scott Bader, Inc.’s (“SBI”) motion for summary judgment, Osae’s motions

to exclude expert testimony, and the parties’ motions to file under seal. For the

reasons set forth below, the Court GRANTS in part and DENIES in part the

motions for summary judgment, DENIES as moot Osae’s motions to exclude, and

GRANTS the motions to file under seal.1

Wyrick Robbins Yates & Ponton LLP, by Benjamin N. Thompson and J. Blakely Kiefer, and Lynch, Cox, Gilman & Goodman P.S.C., by Donald L. Cox and William H. Mooney, for Plaintiffs.

1 To protect the alleged trade secret information of Plaintiffs, this Order and Opinion

is filed under seal and will be available, as necessary, for any appellate process. The Court will also file and publish a redacted version of this Order and Opinion for public inspection. Mast, Mast, Johnson, Wells & Trimyer, P.A., by George B. Mast, Charles D. Mast, and Lilly Van Patten Tuttle, for Defendant Samuel B. Osae.

Ogletree, Deakins, Nash, Smoak & Stewart, P.C., by Phillip J. Strach and Brodie D. Erwin, for Defendant Scott Bader, Inc.

Robinson, Judge.

I. INTRODUCTION

2. At the core of this litigation lies a dispute over whether the use of specific

ingredients, and combinations thereof, in a structural methyl methacrylate (“MMA”)

adhesive formulation is generally known, precluding their status as confidential

information or trade secrets. In July 2000, Plaintiffs SciGrip, Inc. and IPS

Intermediate Holdings Corporation (collectively, “Plaintiffs” or “IPS”) hired Osae to

formulate MMA adhesives. After eight years of formulating MMA adhesives at IPS,

Osae left IPS in 2008 and began working for SBI, a competitor of IPS. That same

year, IPS filed a lawsuit against Osae and SBI to enforce its non-competition and

confidentiality agreements with Osae, which was resolved by a Consent Order

prohibiting the disclosure or use of IPS’s confidential information. Just over two

years after entry of the Consent Order, in February 2011, SBI filed a patent

application in Europe to cover its MMA adhesives, which were developed by Osae.

Later in 2011, Osae left SBI, became a member of Engineered Bonding Solutions,

LLC (“EBS”), a non-party to this litigation, and filed a provisional patent application

regarding EBS’s MMA adhesives, which were developed by Osae.

3. Plaintiffs initiated this lawsuit, contending that certain components of their

MMA adhesive formulations constitute trade secrets and confidential information. Plaintiffs assert that Defendants misappropriated their trade secrets by using and

disclosing them in the SBI and EBS patents and their respective MMA adhesive

products. Further, Plaintiffs contend that such conduct was in breach of the Consent

Order. Defendants’ principal argument is that the components constitute neither

trade secrets nor confidential information because the components were generally

known.

II. FACTUAL BACKGROUND

4. The Court does not make findings of fact when ruling on motions for

summary judgment. E.g., In re Estate of Pope, 192 N.C. App. 321, 329, 666 S.E.2d

140, 147 (2008). The following factual background, taken from the evidence

submitted in support of and in opposition to the motions for summary judgment, is

intended solely to provide context for the Court’s analysis and ruling.

5. Plaintiffs are Delaware corporations with places of business in Durham

County, North Carolina. (Am. Verified Compl. ¶¶ 1−2, ECF No. 13; Def. Osae’s

Answer to Am. Verified Compl. ¶¶ 1−2, ECF No. 14 [“Osae’s Answer”]; Answer to Am.

Compl. by Def. SBI ¶¶ 1−2, ECF No. 30 [“SBI’s Answer”].)

6. SBI is an Ohio corporation that conducts business in North Carolina. (Am.

Verified Compl. ¶ 3; SBI’s Answer ¶ 3.)

7. Osae is a Florida resident who was formerly employed by IPS in, and a

resident of, North Carolina for at least eight years. (Am. Verified Compl. ¶ 4; Osae’s

Answer ¶ 4; SBI’s Answer ¶ 4.) 8. IPS owns, develops, and manufactures a special class of adhesives known

as structural MMA adhesives. (Def. SBI’s Mot. Summ. J. Ex. 23, ¶ 3, ECF No. 113

[“Briggs First Aff.”].) MMA adhesives are toughened polymeric systems used to bond

metals, composites, engineering plastics, and other materials. (Def. Osae’s Mot.

Summ. J. Ex. 1, ¶ 4, ECF No. 142 [“Petrie’s Expert Report”].) The science and

expertise of formulating MMA adhesives require a balance between [REDACTED],

as well as [REDACTED]. (Petrie’s Expert Report ¶ 34.) An MMA adhesive

formulation may contain as many as twenty to thirty components, with each

component having its own primary effect and interactions with other components.

(Petrie’s Expert Report ¶ 34.)

9. In July 2000, IPS hired Osae as an Applications and Development Manager

at IPS’s Durham facility. (Briggs First Aff. ¶ 4.) Osae was hired by IPS to formulate

products, primarily MMA adhesives. (Def. Osae’s Mot. Summ. J. Ex. 5, at 41:14−17,

53:11−54:10, ECF No. 145 [“Briggs 2014 Dep.”]; Def. SBI’s Mot. Summ. J. Ex. 13, at

8:20−9:3, ECF No. 114 [“Briggs 2017 Dep.”].) During his time at IPS, Osae was the

main formulator and developed numerous MMA adhesive products. (Def. Osae’s Mot.

Summ. J. Ex. 4, at 154:21−155:3, ECF No. 144 [“Osae 2014 Dep.”]; Def. Osae’s Mot.

Summ. J. Ex. 3, at 35:4−36:12, ECF No. 143 [“Osae 2016 Dep.”].)

10. Shortly after being hired, on July 31, 2000, Osae executed a Proprietary

Information and Inventions Agreement (the “PII Agreement”). (IPS’s Mot. Summ. J.

Ex. 6, at IPS 001735, ECF No. 118.) Pursuant to the PII Agreement, Osae agreed

“during the term of [his] employment and thereafter, to hold in strictest confidence, and not to use, except for the benefit of [IPS], or to disclose to any person or

entity . . . any ‘Proprietary Information.’” (IPS’s Mot. Summ. J. Ex. 6, at IPS 001733.)

11. Further, Osae executed two Nonqualified Stock Option Agreements (the

“Stock Agreements”) dated December 21, 2006 and January 4, 2008. (IPS’s Mot.

Summ. J. Ex. 6, at IPS 001745−58.) Pursuant to the Stock Agreements, IPS granted

Osae stock options, and Osae agreed to “maintain the confidentiality of all non-public

information relating to” Plaintiffs. (IPS’s Mot. Summ. J. Ex. 6, at IPS 001748,

001755.) The Stock Agreements also contained a non-competition provision

prohibiting Osae from working for a competitor of IPS at any time beginning on the

date of the grant and ending either one year (the 2008 agreement) or two years (the

2006 agreement) following Osae’s termination or resignation from IPS. (IPS’s Mot.

Summ. J. Ex. 6, at IPS 001748−49, 001755−56.)

12. In August 2008, Osae left IPS and, shortly thereafter, began working for

SBI, a competitor of IPS. (Osae 2014 Dep. 184:17−19; Osae 2016 Dep. 12:16−18;

Briggs First Aff. ¶ 6.) This caused IPS to bring a lawsuit in Durham County, North

Carolina Superior Court against Osae and SBI to enforce the PII Agreement and

Stock Agreements, IPS Structural Adhesives Holdings, Inc. v. Osae, Civil Action No.

08 CVS 6191. (Briggs First Aff. ¶ 7; IPS’s Mot. Summ. J. Ex. 11, ECF No. 108.)

13. On December 15, 2008, the parties entered into a Consent Order resolving

the prior litigation. (Am. Verified Compl. Ex. B.) The Consent Order prohibited Osae

from disclosing, and SBI from using, IPS’s confidential information. (Am. Verified

Compl. Ex. B, at 4.) The Consent Order permitted Osae to work for SBI on the condition that he perform any and all laboratory work in the United Kingdom until

January 1, 2010. (Am. Verified Compl. Ex. B, at 4.)

14. In April 2009, SBI began preparing a patent application to cover its MMA

adhesives—which it named its Crestabond products—that were being developed by

Osae. (IPS’s Mot. Summ. J. Ex. 8, at 154:3−10, ECF No. 119.) In February 2011, SBI

filed the patent application in Europe, which was published on September 1, 2011

(the “SBI Patent”). (Briggs First Aff. ¶ 11; IPS’s Mot. Summ. J. Ex. 20, ECF No. 108.)

The SBI Patent publicly disclosed various components used in SBI’s MMA products.

(Compare IPS’s Mot. Summ. J. Ex. 20, at [REDACTED], with Petrie’s Expert Report

18, 21, 23−24.)

15. In or around April 2011, Plaintiffs became concerned about the work Osae

may have been doing at SBI. (See Briggs 2017 Dep. 61:7−9, 63:1−13.) Plaintiffs

obtained a SBI product sample and hired Chemir Analytical Services (“Chemir”) to

perform a deformulation analysis of the sample in order to get a first read on the

product. (Briggs 2017 Dep. 61:7−13, 64:1−4, 65:3−7.) A deformulation analysis has

two objectives: one is to identify the various components present in the formulation,

and another is to determine how much of each component is present in the

formulation. (Def. Osae’s Mot. Summ. J. Ex. 2, at 121:1−12, ECF No. 143.) Chemir’s

deformulation of SBI’s product was documented in an analysis report dated April 28,

2011 (the “Chemir Report”). (Def. Osae’s Mot. Summ. J. Ex. 9, ECF No. 147.)

16. Around this same time, while Osae was still employed by SBI, Osae started

doing development work for EBS. (Osae 2016 Dep. 59:17−60:2.) EBS develops and sells MMA adhesive products that compete with Plaintiffs’ products. (Resp. Opp’n

Osae’s Mot. Summ. J. Ex. 20, Req. for Admis. 9, 11, ECF No. 241.14.) In July 2011,

Osae became a member of EBS, (Osae 2016 Dep. 60:23−25), and on August 26, 2011,

Osae resigned from SBI and became EBS’s Vice President of Technology, (Osae 2014

Dep. 10:19−11:7, 84:10−12). Within one month thereafter, on September 22, 2011,

EBS filed a provisional patent application with the United States Patent and

Trademark Office regarding its MMA adhesives—which EBS named its Acralock

products—that was published on June 21, 2016 (the “EBS Patent”). (IPS’s Mot.

Summ. J. Ex. 25, ECF No. 109.) Osae developed all of EBS’s Acralock products. (Osae

2014 Dep. 83:22−24.)

17. Over this same general timeframe, IPS was engaging in business

discussions with one of its competitors, [REDACTED], who was interested in

acquiring IPS. (Briggs 2014 Dep. 121:24−122:1.) During a meeting in or around

December 2011 or January 2012, [REDACTED] raised concerns about former

employees and disclosures of IPS’s product formulations. (Briggs 2014 Dep. 122:1−7,

122:24−25, 123:6−12.) [REDACTED] specifically mentioned Osae and asked Paul

Briggs (“Briggs”), the chief technology officer of IPS and Osae’s former boss, if he was

aware of the SBI Patent. (Briggs 2014 Dep. 26:6−11, 122:7−9; Osae 2014 Dep.

155:4−6.) Briggs was not aware of the SBI Patent until [REDACTED] brought it to

Briggs’s attention. (Briggs 2014 Dep. 122:16−23.) [REDACTED] expressed concern

that the SBI Patent would materially and negatively affect IPS’s value and, ultimately, [REDACTED] lost interest in acquiring IPS. (Briggs 2014 Dep.

123:15−18.)

18. Plaintiffs contend that certain components of their MMA adhesive

formulations are trade secrets. (Br. Supp. IPS’s Mot. Summ. J. 9−10, ECF No. 139.)

Plaintiffs assert that both Defendants misappropriated their trade secrets by

disclosing the components in the SBI Patent and that Osae misappropriated these

same trade secrets by disclosing the components in the EBS Patent and using the

components in developing and commercializing EBS’s MMA adhesives. (Br. Supp.

IPS’s Mot. Summ. J. 20; Reply to Osae’s Opp’n to IPS’s Mot. Summ. J. 12−13, ECF

No. 257.) Specifically, Plaintiffs contend that the following components constitute

their trade secrets:

 [REDACTED]

 [REDACTED]. (Br. Supp. IPS’s Mot. Summ. J. 9−10.)

Plaintiffs’ alleged trade secrets are collectively referred to herein as the

“Components.”

III. PROCEDURAL HISTORY

19. The Court sets forth here only those portions of the procedural history

relevant to its determination of the motions. 20. Plaintiffs filed their complaint on May 3, 2013 against Osae and their

amended complaint on December 1, 2014 against Osae and SBI. The amended

complaint asserts the following claims: (1) breach of contract; (2) a second count for

breach of contract against Osae; (3) misappropriation of trade secrets; (4) unfair or

deceptive trade practices in violation of N.C. Gen. Stat. § 75-1.1 (“UDTPA”); and (5)

punitive damages. (Am. Verified Compl. 9−13.)

21. Osae filed his answer to the amended complaint on January 5, 2015.

22. This action was designated as a mandatory complex business case by order

of the Chief Justice of the Supreme Court of North Carolina dated January 8, 2015,

and assigned to Judge Bledsoe by order of Chief Business Court Judge James L. Gale

dated January 9, 2015. This case was later reassigned to the undersigned by order

dated July 5, 2016.

23. SBI filed its answer to the amended complaint on March 9, 2015.

24. Following discovery, on May 31, 2017, the parties filed their motions for

summary judgment and Osae filed his motions to exclude. Plaintiffs move for

summary judgment in their favor on the issue of Defendants’ liability on all of

Plaintiffs’ claims, save and except for Plaintiffs’ request for punitive damages. SBI

moves for summary judgment requesting dismissal of all of Plaintiffs’ claims. Osae

moves for summary judgment on Plaintiffs’ misappropriation of trade secrets and

UDTPA claims, and Plaintiffs’ request for punitive damages. Osae’s motions to

exclude seek to exclude testimony of two of Plaintiffs’ experts, Michael A. Paschall

(“Paschall”) and Edward M. Petrie (“Petrie”). 25. Throughout briefing on the motions for summary judgment and motions to

exclude, the parties filed a significant number of documents under seal and numerous

motions to file under seal.

26. The motions have been fully briefed, and the Court held a hearing on the

motions on September 28, 2017. The motions are now ripe for resolution.

IV. SUMMARY JUDGMENT STANDARD

27. Summary judgment is appropriate “if the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that any party is entitled

to a judgment as a matter of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c). “A ‘genuine

issue’ is one that can be maintained by substantial evidence.” Dobson v. Harris, 352

N.C. 77, 83, 530 S.E.2d 829, 835 (2000). The moving party bears the burden of

showing that there is no genuine issue of material fact and that the movant is entitled

to judgment as a matter of law. Hensley v. Nat’l Freight Transp., Inc., 193 N.C. App.

561, 563, 668 S.E.2d 349, 351 (2008). The movant may make the required showing

by proving that “an essential element of the opposing party’s claim does not exist,

cannot be proven at trial, or would be barred by an affirmative defense, or by showing

through discovery that the opposing party cannot produce evidence to support an

essential element of her claim.” Dobson, 352 N.C. at 83, 530 S.E.2d at 835 (citations

omitted).

28. “Once the party seeking summary judgment makes the required showing,

the burden shifts to the nonmoving party to produce a forecast of evidence demonstrating specific facts, as opposed to allegations, showing that he can at least

establish a prima facie case at trial.” Gaunt v. Pittaway, 139 N.C. App. 778, 784−85,

534 S.E.2d 660, 664 (2000). The Court must view the evidence in the light most

favorable to the nonmovant. Dobson, 352 N.C. at 83, 530 S.E.2d at 835. However,

the nonmovant “may not rest upon the mere allegations or denials of his pleading,

but his response, by affidavits or as otherwise provided in this rule, must set forth

specific facts showing that there is a genuine issue for trial. If [the nonmovant] does

not so respond, summary judgment, if appropriate, shall be entered against [the

nonmovant].” N.C. Gen. Stat. § 1A-1, Rule 56(e).

V. MOTIONS FOR SUMMARY JUDGMENT

A. Misappropriation of Trade Secrets

29. Plaintiffs’ misappropriation of trade secrets claim is based on Defendants’

alleged misappropriation in the SBI Patent and SBI products, as well as Osae’s

alleged misappropriation in the EBS Patent and EBS products. The Court addresses

each in turn.

30. SBI argues that it is entitled to summary judgment on Plaintiffs’ trade

secrets claim because the alleged misappropriation occurred outside North Carolina

and, under the lex loci delicti test, the North Carolina Trade Secrets Protection Act

(“TSPA”) does not apply to misappropriation that occurred outside the State. (Def.

SBI’s Mem. Supp. Mot. Summ. J. 9−10, ECF No. 92.) Conversely, Plaintiffs argue

that, under the most significant relationship test, the TSPA applies because North Carolina has the most significant relationship to the events giving rise to Defendants’

misappropriation. (Resp. Opp’n Bader’s Mot. Summ. J. 18−20, ECF No. 243.)

31. Under North Carolina conflict of laws principles, matters affecting the

substantial rights of the parties are determined by lex loci, the law of the situs of the

claim, and remedial or procedural rights are determined by lex fori, the law of the

forum. E.g., Harco Nat’l Ins. Co. v. Grant Thornton LLP, 206 N.C. App. 687, 692, 698

S.E.2d 719, 722 (2010).

32. Plaintiffs argue that the most significant relationship test is the

appropriate choice of law rule to apply to their trade secrets claim. In support of this

argument, Plaintiffs rely on case law analyzing the appropriate choice of law rule

applicable to UDTPA claims, not TSPA claims. (Resp. Opp’n Bader’s Mot. Summ. J.

18−19.) As these decisions recognize, our Court of Appeals has applied either the lex

loci delicti test or the most significant relationship test to UDTPA claims, and which

test is the appropriate rule has not been resolved by our Supreme Court. See Window

World of Baton Rouge, LLC v. Window World, Inc., 2017 NCBC LEXIS 60, at *25−26

(N.C. Super. Ct. July 12, 2017); RoundPoint Mortg. Co. v. Florez, 2016 NCBC LEXIS

18, at *57 (N.C. Super. Ct. Feb. 18, 2016).

33. Nevertheless, even assuming arguendo that the conflict of laws analysis

applicable to UDTPA claims is also applicable to TSPA claims, “this Court recently

concluded that the Supreme Court of North Carolina will likely apply the lex[] loci

rule to [UDTPA] claims based on its rejection of the modern trend towards the ‘most

significant relationship’ test in the court’s Boudreau [v. Baughman, 322 N.C. 331, 368 S.E.2d 849 (1988)] decision and has applied the lex[] loci rule to such claims.” Window

World of Baton Rouge, LLC, 2017 NCBC LEXIS 60, at *26. Therefore, the Court

applies the lex loci test to Plaintiffs’ TSPA claim.

34. Misappropriation of trade secrets is an action sounding in tort and, thus,

lex loci delicti is the applicable choice of law test. See Harco Nat’l Ins. Co., 206 N.C.

App. at 692, 698 S.E.2d at 722. Under this test, the situs of the claim is the state

where the injury or harm was sustained or suffered—the state “where the last act

occurred giving rise to [the] injury.” Id. at 694, 698 S.E.2d at 724 (alteration in

original) (quoting United Virginia Bank v. Air-Lift Assocs., Inc., 79 N.C. App. 315,

321, 339 S.E.2d 90, 94 (1986)).

35. The last act that gives rise to plaintiffs’ injury will be different depending

on the claim alleged. Associated Packaging, Inc. v. Jackson Paper Mfg. Co., 2012

NCBC LEXIS 13, at *20 (N.C. Super. Ct. Mar. 1, 2012). The TSPA defines

“misappropriation” as “acquisition, disclosure, or use of a trade secret of another

without express or implied authority or consent, unless such trade secret was arrived

at by independent development, reverse engineering, or was obtained from another

person with a right to disclose the trade secret.” N.C. Gen. Stat. § 66-152(1).

Misappropriation occurs when defendant acquires, discloses, or uses another’s trade

secret without the owner’s consent or authority. Ge Betz, Inc. v. Conrad, 231 N.C.

App. 214, 233, 752 S.E.2d 634, 649 (2013). Although case law from our appellate

courts offers little guidance on application of the lex loci delicti test in the context of

a misappropriation of trade secrets claim, North Carolina federal courts applying North Carolina law, as well as other jurisdictions, have held that the lex loci delicti

“is not the place where the information was learned, but where the tortious act of

misappropriation and use of the trade secret occurred.” Domtar AI Inc. v. J.D. Irving,

Ltd., 43 F. Supp. 3d 635, 641 (E.D.N.C. 2014) (concluding that plaintiffs could not

bring a claim under North Carolina’s TSPA because defendants’ alleged

misappropriation occurred in Canada); 3A Composites USA, Inc. v. United Indus.,

Inc., No. 5:14-CV-5147, 2015 U.S. Dist. LEXIS 122745, at *10 (W.D. Ark. Sept. 15,

2015) (applying North Carolina conflict of laws rules and following the approach

taken in Domtar); Chattery Int’l, Inc. v. JoLida, Inc., No. WDQ-10-2236, 2012 U.S.

Dist. LEXIS 57512, at *12−13 (D. Md. Apr. 24, 2012) (applying the lex loci delicti rule

and stating that “[m]isappropriation occurs where the misappropriated information

is received and used, not necessarily where it was taken or where the economic harm

is felt”).

36. Here, Plaintiffs do not contend that Osae’s acquisition of the Components—

which undisputedly occurred in North Carolina within the authorized scope of his

employment—was wrongful. Instead, Plaintiffs argue that Defendants

misappropriated their trade secrets by using such trade secrets in the SBI Patent and

SBI products. (E.g., Br. Supp. IPS’s Mot. Summ. J. 23.) Assuming the Components

constitute trade secrets and that Defendants knew or should have known of the trade

secrets, unauthorized use thereof in the SBI Patent and SBI products constitutes

misappropriation in violation of the TSPA. It is undisputed, however, that the SBI

Patent application that allegedly used Plaintiffs’ trade secrets was filed in Europe. (Briggs First Aff. ¶ 11.) Further, SBI introduced substantial evidence that Osae did

all his product development work for SBI at its headquarters and lab facilities in the

United Kingdom, and that any lab work that Osae may have done in the United

States was done at SBI’s applications lab in Ohio. (Def. SBI’s Mot. Summ. J. Ex. 1,

at 19:17−25, 36:2−37:2, 37:19−38:9, 74:11−17, 88:2−25, ECF No. 103; Def. SBI’s Mot.

Summ. J. Ex. 2, at 21:3−9, ECF No. 103; Osae 2014 Dep. 33:15−21, 34:2−3, 136:9−10;

Osae 2016 Dep. 18:23−24, 20:17−23, 67:8−17, 93:9−16, 105:1−6, 117:11−23.)

37. Nevertheless, Plaintiffs argue that it is undisputed that Osae performed

work on behalf of SBI in North Carolina, pointing to evidence that Osae lived in North

Carolina until July 2011 and owned a home in North Carolina as of December 15,

2014 where his son resided. (Resp. Opp’n Bader’s Mot. Summ. J. 19.) The fact that

Osae’s residence was located in North Carolina, however, is not determinative of

whether any alleged misappropriation occurred in the State. The undisputed

evidence tends to show that Osae worked at SBI’s facilities in the United Kingdom

for three years from the end of 2008 to August 2011—the time period during which

the alleged misappropriation occurred. While Plaintiffs have come forward with

evidence that Osae frequently traveled back and forth between the United Kingdom

and the United States during that timeframe, Plaintiffs have failed to come forward

with sufficient evidence of misappropriation in North Carolina so as to create a

genuine issue of material fact.

38. Plaintiffs also argue that Osae misappropriated their trade secrets by using

the Components in the EBS Patent and EBS products. (Reply to Osae’s Opp’n to IPS’s Mot. Summ. J. 11−13.) Again, however, there is no evidence that this

misappropriation occurred in North Carolina. Plaintiffs’ evidence of Osae’s

misappropriation in the EBS Patent and EBS products is limited to the similarities

between the formulations disclosed in the EBS Patent and Plaintiffs’ formulations,

(Petrie’s Expert Report 12−13, 17), that the EBS Patent application was filed only

one month after Osae started working at EBS, (Osae 2014 Dep. 84:10−12; Osae 2016

Dep. 59:3−5; IPS’s Mot. Summ. J. Ex. 25), and that the first EBS Acralock product

was introduced to the market less than four months after Osae started working at

EBS, (Petrie’s Expert Report 14; Osae 2014 Dep. 84:13−14). Plaintiffs presented no

evidence tending to indicate that a misappropriation occurred in North Carolina. The

only evidence as to where this alleged misappropriation occurred tends to show that,

at the time the EBS Patent application was filed in September 2011, Osae resided in

Titusville, Florida, where he currently resides and where EBS’s lab is located. (Osae

2014 Dep. 10:9−11:1, 26:15−16.) The evidence indicates that EBS does not have a

laboratory or an office in North Carolina. (Osae 2014 Dep. 26:17−20.)

39. Therefore, because the undisputed evidence demonstrates that the alleged

misappropriation occurred outside the State of North Carolina, Plaintiffs cannot

bring a claim under the North Carolina TSPA and, accordingly, the Court grants

summary judgment in favor of Defendants on Plaintiffs’ misappropriation of trade

secrets claim and, as a necessary result, denies Plaintiffs’ motion for summary

judgment on this claim. B. Breach of Contract

40. Plaintiffs’ first count for breach of contract, brought against both SBI and

Osae, is based on Defendants’ disclosure and use of the Components in the SBI Patent

and SBI products. Plaintiffs’ second count for breach of contract, brought solely

against Osae, is based on Osae’s use of the Components in the EBS Patent and EBS

products. Plaintiffs seek summary judgment on the issue of Defendants’ liability on

both of their breach of contract claims, and SBI seeks summary judgment on

Plaintiffs’ first count for breach of contract against it. Osae does not seek summary

judgment on Plaintiffs’ breach of contract claims.

41. As an initial matter, the parties do not dispute that North Carolina law

applies to Plaintiffs’ breach of contract claims as the Consent Order was entered in

North Carolina. See Cable Tel Servs., Inc. v. Overland Contracting, Inc., 154 N.C.

App. 639, 642, 574 S.E.2d 31, 33 (2002) (“[T]he interpretation of a contract is governed

by the law of the place where the contract was made.”). In order to establish a claim

for breach of contract, Plaintiffs must prove that a valid contract existed between the

parties and that Defendants breached the terms of that contract. Poor v. Hill, 138

N.C. App. 19, 26, 530 S.E.2d 838, 843 (2000). Plaintiffs argue, and Defendants do not

dispute, that the Consent Order is a valid contract. Myers v. Myers, 213 N.C. App.

171, 175, 714 S.E.2d 194, 198 (2011) (“Our Court has previously held that, as a

consent order is merely a court-approved contract, it is subject to the rules of contract

interpretation.” (quotation marks omitted)). The Consent Order provides, in relevant

part, the following: Osae has not and will not, directly or indirectly, communicate with, disclose, reveal, or otherwise share any of Plaintiffs’ confidential information as described in the PII Agreement and to which he may have had access while employed by Plaintiffs, and [SBI] has agreed that it shall not solicit or accept, receive, gain access to, or use directly or indirectly any such confidential information.

(Am. Verified Compl. Ex. B, at 4.) “Confidential information,” referred to as

“Proprietary Information” in the PII Agreement, is defined in both the Consent Order

and the PII Agreement as

any information, technical or nontechnical, that derives independent economic value, actual or potential, from not being known to the public or other persons outside [IPS] who can obtain economic value from its disclosure or use, and includes information of [IPS], its customers, suppliers, licensors, licensees, distributors and other persons and entities with whom [IPS] does business.

(Am. Verified Compl. Ex. B, at 2 (alterations in original).)

1. Plaintiffs’ First Count for Breach of Contract Against Osae and SBI.

42. Plaintiffs argue that there is no genuine issue of material fact that Osae

disclosed and SBI used the Components in the SBI Patent in breach of the Consent

Order. (Br. Supp. IPS’s Mot. Summ. J. 26−27.) SBI argues that it is entitled to

summary judgment on Plaintiffs’ breach of contract claim against it on the grounds

that the Consent Order is overbroad and unenforceable as a matter of law, Plaintiffs

have failed to come forward with sufficient evidence of intentional and willful

conduct, and the claim is barred by the statute of limitations. (Def. SBI’s Mem. Supp.

Mot. Summ. J. 7−8, 20−21.) Osae argues that there are genuine issues of material

fact as to whether the Components constitute confidential information under the

Consent Order and, as such, Plaintiffs are not entitled to summary judgment. (Def. Osae’s Resp. Br. to Pls.’ Br. Supp. Pls.’ Mot. Summ. J. 23−24, ECF No. 249.) The

Court addresses each of these arguments in turn.

a. The Consent Order is enforceable as a matter of law.

43. SBI argues that the Consent Order is unenforceable because it incorporates

by reference the PII Agreement and its definition of confidential information in

violation of Rule 65(d). (Def. SBI’s Mem. Supp. Mot. Summ. J. 20.) Rule 65(d)

provides that “[e]very order granting an injunction and every restraining

order . . . shall describe in reasonable detail, and not by reference to the complaint or

other document, the act or acts enjoined or restrained[.]” N.C. Gen. Stat. § 1A-1, Rule

65(d). As an initial matter, Rule 65(d) applies to orders granting an injunction and

restraining orders, not a consent order resolving all claims between the parties.

Further, contrary to SBI’s contention, the Consent Order does not merely incorporate

by reference the PII Agreement’s definition of confidential information—the Consent

Order expressly recites the definition such that reference to the PII Agreement is not

necessary.

44. SBI next argues that the Consent Order is unenforceable because the

definition of confidential information is overbroad. (Def. SBI’s Mem. Supp. Mot.

Summ. J. 20−21.) Even assuming arguendo that the Consent Order is subject to the

same strictures that regulate an employer’s right to restrict an employee’s

competition, it is well settled that, while covenants not to compete are not favored by

the law, VisionAIR, Inc. v. James, 167 N.C. App. 504, 508, 606 S.E.2d 359, 362 (2004),

“[a]n agreement is not in restraint of trade . . . if it does not seek to prevent a party from engaging in a similar business in competition with the promisee, but instead

seeks to prevent the disclosure or use of confidential information[,]” Chemimetals

Processing, Inc. v. McEneny, 124 N.C. App. 194, 197, 476 S.E.2d 374, 376 (1996); see

also Syndicated Servs., Inc. v. Yarbrough, 2017 NCBC LEXIS 13, at *14 (N.C. Super.

Ct. Feb. 15, 2017) (“North Carolina courts have upheld agreements that merely

prevent an employee from disclosing or using the employer’s confidential information,

rather than prohibiting the employee from engaging in a competing business, as

protecting a legitimate business interest of the employer.”). A confidentiality

agreement is enforceable as long as it protects a legitimate business interest of the

employer. Chemimetals Processing, Inc., 124 N.C. App. at 197, 476 S.E.2d at 377;

Amerigas Propane, L.P. v. Coffey, 2015 NCBC LEXIS 98, at *19 (N.C. Super. Ct. Oct.

15, 2015). “[A] covenant is reasonably necessary for the protection of a legitimate

business interest ‘if the nature of the employment is such as will . . . enable [the

employee] to acquire valuable information as to the nature and character of the

business . . . .’” Medical Staffing Network, Inc. v. Ridgway, 194 N.C. App. 649, 656,

670 S.E.2d 321, 327 (2009) (quoting A.E.P. Indus. v. McClure, 308 N.C. 393, 408, 302

S.E.2d 754, 763 (1983)).

45. Here, the confidentiality provision seeks to prevent the disclosure of

Plaintiffs’ confidential information to the public, including necessarily Plaintiffs’

competitors. During Osae’s employment with IPS, as the main formulator of IPS’s

MMA adhesives, Osae was privy to valuable information about IPS’s business and MMA adhesive formulations. The confidentiality provision protects IPS’s legitimate

business interest in preventing disclosure and use of this information.

46. To the extent that SBI seeks summary judgment on the ground that the

Consent Order is overbroad and unenforceable, SBI’s motion is denied.

b. A showing of intentional or willful conduct is not required to establish breach.

47. SBI next argues that under the plain language of the Consent Order,

Plaintiffs must show that SBI engaged in intentional or willful conduct in order to

establish breach. (Def. SBI’s Mem. Supp. Mot. Summ. J. 21.) SBI argues that the

ordinary meaning of “solicit,” “accept,” and “receive” all require knowing, affirmative

action. (Def. SBI’s Mem. Supp. Mot. Summ. J. 21.)

48. The Court need not address whether these terms require knowing,

affirmative action because the Consent Order also prohibits SBI from using, directly

or indirectly, Plaintiffs’ confidential information. The undisputed evidence shows

that SBI used the Components in the SBI Patent. (IPS’s Mot. Summ. J. Ex. 20, at

[REDACTED]; Petrie’s Expert Report 16; Osae 2014 Dep. 105:8−15.) Thus, SBI’s

motion for summary judgment on the ground that a showing of intentional or willful

conduct is required to establish breach is denied. c. There are genuine issues of material fact as to whether Plaintiffs’ breach of contract claim against SBI is barred by the statute of limitations.

49. SBI argues that it is entitled to summary judgment on Plaintiffs’ breach of

contract claim because it was filed outside the applicable statute of limitations.2 (Def.

SBI’s Mem. Supp. Mot. Summ. J. 7−8.)

50. A claim for breach of contract is subject to a three-year statute of

limitations. N.C. Gen. Stat. § 1-52(1). A cause of action for breach of contract accrues

upon notice of the breach. N.C. Farm Bureau Mut. Ins. Co. v. Hull, 795 S.E.2d 420,

422 (N.C. Ct. App. 2016); Haigh v. Superior Ins. Mgmt. Grp., Inc., 2017 NCBC LEXIS

100, at *16 (N.C. Super. Ct. Oct. 24, 2017). “[W]hen the party moving for summary

judgment pleads the statute of limitations, ‘the burden is then placed upon the [non-

movant] to offer a forecast of evidence showing that the action was instituted within

the permissible period after the accrual of the cause of action.’” PharmaResearch

Corp. v. Mash, 163 N.C. App. 419, 424, 594 S.E.2d 148, 152 (2004) (second alteration

in original) (quoting Pembee Mfg. Corp. v. Cape Fear Constr. Co., 313 N.C. 488, 491,

329 S.E.2d 350, 353 (1985)). Whether a claim is barred by the statute of limitations

is a mixed question of law and fact. Stratton v. Royal Bank of Can., 211 N.C. App.

78, 81, 712 S.E.2d 221, 226 (2011). “If a plaintiff’s claim is barred by the running of

the applicable statute of limitations, summary judgment in favor of a defendant is

2 While Plaintiffs initially sued Osae on May 3, 2013, Plaintiffs did not bring their

claims against SBI until they filed their amended complaint on December 1, 2014. Thus, at issue is whether the statute of limitations bars Plaintiffs’ breach of contract claim only as to SBI, not Osae. appropriate.” Lockerman v. S. River Elec. Membership Corp., 794 S.E.2d 346, 354

(N.C. Ct. App. 2016). “When, however, the evidence is sufficient to support an

inference that the limitations period has not expired, the issue should be submitted

to the jury.” Baum v. John R. Poore Builder, Inc., 183 N.C. App. 75, 81, 643 S.E.2d

607, 611 (2007).

51. Here, SBI argues that Plaintiffs were aware, or should have been aware, of

SBI’s alleged breach when it received the Chemir Report dated April 28, 2011 and,

as such, the statute of limitations for Plaintiffs’ breach of contract action expired on

April 28, 2014, several months before Plaintiffs first asserted claims against SBI on

December 1, 2014. (Def. SBI’s Mem. Supp. Mot. Summ. J. 8.) Accordingly, if

Plaintiffs had notice of SBI’s breach upon receipt of the Chemir Report, then

Plaintiffs’ claim is time barred.

52. Conversely, Plaintiffs argue that the statute of limitations did not begin to

run until December 2011 or January 2012 when they first learned of the SBI Patent

during a meeting with [REDACTED] and, as such, the statute of limitations for

Plaintiffs’ breach of contract action did not expire until December 2014 or January

2015. (Resp. Opp’n Bader’s Mot. Summ. J. 21−23.)

53. The evidence indicates that in April 2011, Plaintiffs were concerned about

Osae’s work with SBI and hired Chemir to identify the components of an SBI

structural adhesive product that Plaintiffs obtained a sample of. (Briggs 2017 Dep.

61:7−13, 63:1−13, 64:1−4, 65:3−7.) The Chemir Report disclosed that SBI’s product

contained [REDACTED]. (Briggs 2017 Dep. 64:10−65:1; Petrie Dep. 89:2−8.) Briggs testified that Plaintiffs did not know from the Chemir Report which other materials

the product may have contained because it was only an analysis to get a first read on

the product to see if Plaintiffs “should be concerned about what [Osae] was doing, and

the answer was yes.” (Briggs 2017 Dep. 65:3−7.) The Chemir Report did not disclose

the presence of any of the Components which Plaintiffs contend constitutes their

confidential information. (See Def. Osae’s Mot. Summ. J. Ex. 9.) Plaintiffs point to

evidence tending to show that they did not learn of Defendants’ use of the

Components until it learned of the SBI Patent during a meeting with [REDACTED]

in December 2011 or January 2012. Briggs testified that during this meeting, a

[REDACTED] representative raised concerns about former employees and

disclosures of IPS’s products and specifically mentioned Osae and the SBI Patent.

(Briggs 2014 Dep. 122:1−9, 122:24−25, 123:6−12.) Briggs testified that he was not

aware of the SBI Patent until [REDACTED] brought it to his attention during this

meeting. (Briggs 2014 Dep. 122:16−23.)

54. The Court concludes that there are genuine issues of material fact as to

when Plaintiffs first had notice of Defendants’ use of Plaintiffs’ confidential

information. Although the evidence tends to show that the Chemir Report caused

Plaintiffs to be concerned about Osae’s work at SBI, the Chemir Report did not

indicate that Defendants were using Plaintiffs’ confidential information. Plaintiffs’

evidence is sufficient to support an inference that Defendants’ use of Plaintiffs’

confidential information was not reasonably apparent until Plaintiffs’ meeting with

[REDACTED]. The issue of whether Plaintiffs knew or should have known of their potential claim must be determined by a jury and, accordingly, SBI’s motion for

summary judgment on this ground is denied.

d. There is no genuine issue of material fact that the Components, save and except for [REDACTED], were not generally known prior to Defendants’ use and disclosure thereof.

55. Osae argues that there are genuine issues of material fact as to whether

the Components constitute confidential information, contending that there is

sufficient evidence that the information was known to the general public and the

structural adhesive industry to deny Plaintiffs’ motion for summary judgment as to

the breach of contract claims brought against him. (Def. Osae’s Resp. Br. to Pls.’ Br.

Supp. Pls.’ Mot. Summ. J. 24.)

56. As to the [REDACTED], the evidence demonstrates that there are

[REDACTED]. (Petrie’s Expert Report 21.) [REDACTED]. (Petrie’s Expert Report

21.) The undisputed evidence tends to show that the first public declaration of

[REDACTED] in an MMA adhesive was the SBI Patent. (Petrie’s Expert Report ¶

47; Def. Osae’s Mot. Summ. J. Ex. 12, at 52:6−8, 57:21−25, ECF No. 148 [“Petrie

Dep.”].)

57. Osae argues that the evidence shows that neoprene vendors advise

formulators to [REDACTED]. (Def. Osae’s Mem. Supp. Mot. Summ. J. 9, ECF No.

99.) Contrary to Osae’s contention, however, there is no evidence that vendors advise

formulators to [REDACTED] the [REDACTED] at issue here. At best, the evidence

shows that neoprene vendors in general advise formulators to [REDACTED]. (Osae

2016 Dep. 41:24−42:1; Def. Osae’s Mot. Summ. J. Ex. 2, at 57:12−16.) Osae further contends that literature published by DuPont, the original developer of neoprene,

discloses [REDACTED] regularly used in contact cements. (Def. SBI’s Mem. Supp.

Mot. Summ. J. Ex. 14, at Def.’s Ex. 172, ECF No. 151.) This literature pertains to

contact adhesives, not structural adhesives. (Def. SBI’s Mem. Supp. Mot. Summ. J.

Ex. 14, at Def.’s Ex. 172.) Further, the fact that DuPont disclosed the use of

[REDACTED] is irrelevant to whether a [REDACTED] was generally known.

58. As to the [REDACTED], the undisputed evidence tends to show that it was

not previously disclosed in the MMA adhesive patent or technical literature prior to

the SBI Patent. (Petrie’s Expert Report ¶ 61.) The record is devoid of any evidence

that use of the [REDACTED] in an MMA adhesive was known outside of IPS.

59. As to [REDACTED], the evidence tends to show that use of [REDACTED]

in an MMA adhesive was not disclosed in the patent or technical literature prior to

the SBI Patent. (Petrie’s Expert Report ¶ 55; Petrie Dep. 38:21−25, 64:16−18.) There

is other evidence, however, tending to show that [REDACTED], CD-9052, had been

publically disclosed in several patents—[REDACTED]. (Briggs 2014 Dep. 69:9−13;

Def. SBI’s Mot. Summ. J. Ex. 22, Req. for Admis. 25, ECF No. 113; Petrie’s Expert

Report ¶¶ 53, 55.) In light of the evidence [REDACTED], and use of [REDACTED]

was publically known, the Court concludes that there is no genuine issue of material

fact that the use of [REDACTED] in an MMA adhesive was known to others outside

of IPS prior to the SBI Patent.

60. In sum, the Court concludes that there is no genuine issue of material fact

that the Components, save and except for [REDACTED], were not known to the public or others outside IPS prior to Defendants’ use and disclosure thereof.

Accordingly, Osae breached the Consent Order by disclosing the Components, save

and except for [REDACTED], in the SBI Patent. Plaintiffs’ motion for summary

judgment on the issue of Osae’s liability for Plaintiffs’ first breach of contract claim

is granted. As to Plaintiffs’ breach of contract claim against SBI, the Court concludes

that genuine issues of material fact exist as to whether the claim is time barred and,

as such, Plaintiffs’ and SBI’s motions for summary judgment on this claim are denied.

2. Plaintiffs’ Second Count for Breach of Contract Against Osae.

61. Plaintiffs’ second count for breach of contract against Osae is based on

Osae’s alleged use of the Components in the EBS Patent and its Acralock products

covered thereby. The undisputed evidence shows that the EBS Patent does not

disclose [REDACTED], (Petrie’s Expert Report 17), and the Court has concluded that

there is no genuine issue of material fact that [REDACTED] was generally known

and thus does not constitute confidential information. As a result, in order to

maintain their claim arising out of Osae’s disclosure of Plaintiffs’ confidential

information in the EBS Patent, Plaintiffs must prove that the EBS Patent discloses

the [REDACTED].

62. The undisputed evidence shows that the EBS Patent discloses

[REDACTED]. (Petrie’s Expert Report 17.) The Court cannot conclude, as a matter

of law, that [REDACTED] is equivalent to Plaintiffs’ confidential [REDACTED]. The

evidence shows that, in or around 2007, DuPont announced that it was discontinuing

certain A-type Neoprenes, including Neoprene AG and [REDACTED]. (Def. SBI’s Mot. Summ. J. Ex. 18, Interrog. 12, ECF No. 113; Briggs 2014 Dep. 88:5−6, 89:1−7.)

At IPS, Osae conducted a number of experiments relating to the substitution of the

W-type Neoprenes for the A-type Neoprenes that had been discontinued. (Def. SBI’s

Mot. Summ. J. Ex. 18, Interrog. 12.) Plaintiffs ultimately selected [REDACTED] to

replace [REDACTED], and [REDACTED] to replace the [REDACTED]. (Def. SBI’s

Mot. Summ. J. Ex. 18, Interrog. 12.) Although the evidence tends to show that

[REDACTED] and [REDACTED] the evidence tends to show that [REDACTED] has

not been discontinued and is still on the market in addition to [REDACTED].

(Petrie’s Expert Report 19; Petrie Dep. 45:24−46:1.)

63. Based on the foregoing, and viewing the evidence in the light most favorable

to Osae as the non-movant, the Court cannot conclude as a matter of law that a

disclosure of a [REDACTED] a disclosure of Plaintiffs’ confidential [REDACTED].

Therefore, Plaintiffs’ motion for summary judgment on their second count for breach

of contract against Osae based on disclosure in the EBS Patent is denied.

C. UDTPA Claim

64. In order to establish a UDTPA claim, Plaintiffs must prove (1) an unfair or

deceptive act or practice, (2) in or affecting commerce, (3) which proximately caused

injury to Plaintiffs. Walker v. Fleetwood Homes of N.C., Inc., 362 N.C. 63, 71−72, 653

S.E.2d 393, 399 (2007).

65. Plaintiffs’ UDTPA claim is based on their trade secrets claim. Plaintiffs

argue that they are entitled to summary judgment on their UDTPA claim because

they are entitled to summary judgment on their trade secrets claim, and “Defendants’ violations of the TSPA constitute unfair acts under” section 75-1.1. (Br. Supp. IPS’s

Mot. Summ. J. 24.) Defendants argue that they are entitled to summary judgment

on Plaintiffs’ UDTPA claim because Plaintiffs have failed to produce evidence of

actual injury and because Defendants are entitled to summary judgment on

Plaintiffs’ trade secrets claim. (Def. Osae’s Mem. Supp. Mot. Summ. J. 16−17; Def.

SBI’s Mem. Supp. Mot. Summ. J. 22.)

66. The Court has concluded that Defendants are entitled to summary

judgment on Plaintiffs’ trade secrets claim and, therefore, a violation of the TSPA

cannot constitute the requisite unfair or deceptive act to support a UDTPA claim.

Plaintiffs’ sole remaining claims are for breach of contract, and a mere breach of

contract, even if intentional, is not sufficient to sustain a UDTPA claim. Mitchell v.

Linville, 148 N.C. App. 71, 74−75, 557 S.E.2d 620, 623 (2001). Although a breach of

contract may constitute an unfair or deceptive act if a party shows substantial

aggravating circumstances attending the breach, Griffith v. Glen Wood Co., 184 N.C.

App. 206, 217, 646 S.E.2d 550, 558 (2007), Plaintiffs neither alleged nor argued that

any substantial aggravating circumstances surrounded Defendants’ breach.

Therefore, even assuming that section 75-1.1 applies, Defendants are entitled to

summary judgment on Plaintiffs’ UDTPA claim because Plaintiffs have failed to come

forward with evidence of an unfair or deceptive act or practice.

D. Punitive Damages

67. Pursuant to N.C. Gen. Stat. § 1D-15(a), punitive damages may be awarded

only if Plaintiffs prove that Defendants are liable for compensatory damages and that either fraud, malice, or willful or wanton conduct was present and related to the

injury for which compensatory damages were awarded.

68. Plaintiffs argue that they are entitled to punitive damages based on both

their trade secrets claim and their breach of contract claims. (Reply to Osae’s Opp’n

to IPS’s Mot. Summ. J. 11; Resp. Opp’n Bader’s Mot. Summ. J. 24−25.) As the Court

has concluded that Defendants are entitled to summary judgment on Plaintiffs’ trade

secrets claim, the only remaining claims which may serve as a basis for punitive

damages are Plaintiffs’ breach of contract claims.

69. Punitive damages may not be awarded solely for breach of contract. N.C.

Gen. Stat. § 1D-15(d). “Punitive damages are not allowed even when the breach is

wilful [sic], malicious or oppressive.” Cash v. State Farm Mut. Auto. Ins. Co., 137

N.C. App. 192, 200, 528 S.E.2d 372, 377 (2000). “Nevertheless, where there is an

identifiable tort even though the tort also constitutes, or accompanies, a breach of

contract, the tort itself may give rise to a claim for punitive damages.” Newton v.

Standard Fire Ins. Co., 291 N.C. 105, 111, 229 S.E.2d 297, 301 (1976). “Mere

allegations of an identifiable tort are insufficient alone to support a claim for punitive

damages. Furthermore, in order to sustain a claim for punitive damages, there must

be an identifiable tort which is accompanied by or partakes of some element of

aggravation.” Cash, 137 N.C. App. at 200, 528 S.E.2d at 377 (quotation marks

70. Although Plaintiffs’ trade secrets and UDTPA claims are based on the same

conduct on which the breach of contract claims are based, the Court has concluded that these claims must fail, and Plaintiffs have not introduced evidence of any other

identifiable tort accompanying Defendants’ breach of contract. Plaintiffs merely

argue that Defendants’ conduct constituted an intentional violation of the Consent

Order. (Reply to Osae’s Opp’n to IPS’s Mot. Summ. J. 11.) This is insufficient as a

matter of law to support an award of punitive damages. Therefore, Defendants’

motions for summary judgment on Plaintiffs’ request for punitive damages are

granted.

VI. MOTIONS TO EXCLUDE

71. Osae filed motions to exclude expert testimony of two of Plaintiffs’ experts,

Petrie and Paschall.3 As to Petrie, Osae moves to exclude Petrie’s testimony

regarding (1) Osae’s ability to independently develop MMA structural adhesives; (2)

Osae’s alleged misappropriation of Plaintiffs’ trade secrets at EBS; and (3) whether

the Components are readily ascertainable through reverse engineering. (Def. Osae’s

Mot. to Exclude Expert Test. of Michael Petrie4 3, 6−7, ECF No. 101.) This testimony

is relevant solely to Plaintiffs’ misappropriation of trade secrets claim, and the Court

has concluded that Defendants are entitled to judgment as a matter of law on such

3 Osae filed two documents, each entitled a motion to exclude; however, Osae’s two

motions also contain Osae’s arguments in support thereof and are unaccompanied by a separate brief, in violation of the General Rules of Practice and Procedure for the North Carolina Business Court (“BCR”). BCR 7.2 (“All motions must be made in electronic form and must be accompanied by a brief . . . . Each motion must be set out in a separate document.”). Plaintiffs did not object to Osae’s technical violation of the BCR and, as such, the Court, in its discretion, elects to proceed with its consideration of the motions to exclude. 4 The motion incorrectly refers to Petrie as “Michael” Petrie, instead of “Edward.” claim. Therefore, Osae’s motion to exclude expert testimony of Petrie is denied as

moot.

72. As to Paschall, Osae moves under Rules 702 and 403 of the North Carolina

Rules of Evidence to exclude Paschall’s testimony that Plaintiffs are entitled to

approximately $10.32 million in damages—EBS’s alleged gross profits from its

inception through February 2017—as a result of Osae’s misappropriation of

Plaintiffs’ trade secrets at EBS. (Def. Osae’s Mot. to Exclude Expert Test. of Michael

Paschall & Mot. Summ. J. 1−2, 13, ECF No. 102.) Additionally, Osae argues that,

upon exclusion of Paschall’s testimony regarding damages, Osae is entitled to

summary judgment because Plaintiffs cannot establish the damages element of their

substantive claims. (Def. Osae’s Mot. to Exclude Expert Test. of Michael Paschall &

Mot. Summ. J. 15.)

73. As an initial matter, to the extent that Osae’s motion to exclude also

requests summary judgment on the ground that Plaintiffs cannot establish damages,

the motion is improper. Osae argued this ground at length as a basis for his motion

for summary judgment, (Def. Osae’s Mem. Supp. Mot. Summ. J. 13−15), and

“although [t]here may be more than one motion for summary judgment in a

lawsuit, . . . the second motion will be appropriate only if it presents legal issues that

are different from those raised in the earlier motion[,]” Cail v. Cerwin, 185 N.C. App.

176, 181−82, 648 S.E.2d 510, 514 (2007) (alteration and omission in original)

(quotation marks and emphasis omitted). 74. Pursuant to N.C. Gen. Stat. § 66-154(b), a plaintiff who establishes

misappropriation of trade secrets may recover the economic loss suffered by it or the

unjust enrichment enjoyed by defendant as a result of the misappropriation,

whichever is greater. Here, Paschall’s testimony regarding the amount of EBS’s gross

profits bears on Osae’s unjust enrichment as a result of Osae’s alleged

misappropriation of trade secrets, as Plaintiffs contend that a nexus exists between

Osae’s unjust enrichment and EBS’s gross profits. (Pls.’ Resp. Opp’n Def. Osae’s Mot.

Exclude Expert Test. of Michael Paschall & Mot. Summ. J. 19−20, ECF No. 221.) The

Court has concluded that Defendants are entitled to summary judgment on Plaintiffs’

misappropriation of trade secrets claim. Plaintiffs’ remaining claims are for breach

of contract, to which Osae’s alleged unjust enrichment is irrelevant. “For a breach of

contract the injured party is entitled as compensation therefore to be placed, insofar

as this can be done by money, in the same position he would have occupied if the

contract had been performed.” Moses H. Cone Mem’l Health Servs. Corp. v. Triplett,

167 N.C. App. 267, 275, 605 S.E.2d 492, 497 (2004). “The interest being protected by

this general rule is the non-breaching party’s ‘expectation interest,’ and in so doing,

the injured party receives the ‘benefit of the bargain.’” First Union Nat’l Bank v.

Naylor, 102 N.C. App. 719, 725, 404 S.E.2d 161, 164 (1991). “Additionally, nominal

damages are allowed where a legal right has been invaded but there has been no

substantial loss or injury to be compensated.” Lee Cycle Ctr., Inc. v. Wilson Cycle Ctr.,

Inc., 143 N.C. App. 1, 9−10, 545 S.E.2d 745, 750 (2001). “[Q]uantum meruit is an

appropriate measure of damages only for breach of an implied contract, and no contract will be implied where an express contract covers the same subject matter.”

APAC-Carolina, Inc. v. Greensboro-High Point Airport Auth., 110 N.C. App. 664, 675,

431 S.E.2d 508, 514 (1993).

75. In sum, Paschall’s testimony regarding Osae’s unjust enrichment is

relevant only to Plaintiffs’ trade secrets claim, which the Court has concluded must

be dismissed. Any damages for Plaintiffs’ remaining breach of contract claims may

not be measured by Osae’s unjust enrichment. Therefore, Osae’s motion to exclude

Paschall’s testimony is denied as moot.

VII. MOTIONS TO FILE UNDER SEAL

76. In connection with the parties’ motions for summary judgment and Osae’s

motions to exclude, the parties filed numerous briefs and exhibits, most of which were

filed under seal. In compliance with BCR 5.2, the parties filed multiple motions to

file under seal. Thereafter, the parties filed public versions of some, but not all, of

the documents that were filed under seal. During the hearing on the parties’ motions

for summary judgment and Osae’s motions to exclude, the Court informed counsel

that, based on its review of the sealed filings and comparison of those documents with

the redacted versions made publicly available, the public versions of documents filed

under seal were overly redacted and, accordingly, not in compliance with BCR 5.2.

At the Court’s request, the parties conferred and submitted to the Court a proposed

schedule, which the Court adopted by order dated November 1, 2017, pursuant to

which the parties were to re-file redacted versions of all documents filed under seal.

In accordance with the Court’s order, the parties re-filed redacted versions of sealed documents on December 18 and 19, as well as two additional motions to file under

seal. The Court now resolves all pending motions to file under seal.

77. The public has the right to inspect court records in civil proceedings. N.C.

Gen. Stat. § 7A-109(a); Virmani v. Presbyterian Health Servs. Corp., 350 N.C. 449,

463, 515 S.E.2d 675, 685 (1999). A court may shield portions of court records from

the public under proper circumstances, however, this should only be done “when its

use is required in the interest of the proper and fair administration of justice[.]”

Virmani, 350 N.C. at 463, 515 S.E.2d at 685. Further, pursuant to N.C. Gen. Stat.

§ 66-156, “[i]n an action under [the TSPA], a court shall protect an alleged trade

secret by reasonable steps which may include . . . sealing the records of the action

subject to further court order[.]”

78. In essence, Plaintiffs contend that the redacted material constitutes

Plaintiffs’ trade secrets and confidential information, as well as information

designated as “Confidential” or “Highly Confidential” under the protective order

entered in this litigation. (Pls.’ Rule 5.3 Suppl. Br. Supp. Def. SBI’s Mot. to Seal &

Def. Osae’s Mot. to Seal 3−5, ECF No. 153.) On the one hand, the Court is troubled

by the inherently inconsistent position taken by Plaintiffs that the Components have

been publically disclosed in the patent literature but, at the same time, constitute

trade secrets and confidential information. See SCR-Tech LLC v. Evonik Energy

Servs. LLC, 2011 NCBC LEXIS 27, at *39 (N.C. Super. Ct. July 22, 2011) (“[I]t is well

established that patent disclosure precludes trade secret protection for the

information disclosed . . . .”); Bondpro Corp. v. Siemens Power Generation, Inc., 463 F.3d 702, 706 (7th Cir. 2006) (“Publication in a patent destroys the trade secret . . . .”).

On the other hand, the Court is mindful that, to the extent that any trade secret

protection exists, such protection is lost upon publicly filing documents disclosing the

alleged trade secrets. See RoundPoint Mortg. Co., 2016 NCBC LEXIS 18, at *39

(“Information for which a claimant asserts trade secret protection can lose the benefit

of protection if it has been disclosed, publicly released, or publicly filed during

litigation.”); Glaxo Inc. v. Novopharm Ltd., 931 F. Supp. 1280, 1301 (E.D.N.C. 1996).

Further, “it is possible for simultaneous patent and trade secret protection to subsist

for related components of an article or steps in a process[.]” SCR-Tech LLC, 2011

NCBC LEXIS 27, at *39 (quotation marks omitted).

79. As the Court did not reach the issue of which information, if any, qualifies

for trade secret protection, and having reviewed the redacted versions most recently

filed, the Court concludes that the redacted information justifies sealed filing as

confidential commercial information. The motions to file under seal are granted.

VIII. CONCLUSION

80. For the foregoing reasons, the Court ORDERS as follows:

A. The Court GRANTS Defendants’ motions for summary judgment

and DENIES Plaintiffs’ motion for summary judgment on Plaintiffs’

misappropriation of trade secrets claim, and such claim is dismissed

with prejudice. B. The Court DENIES Plaintiffs’ and Defendant SBI’s motions for

summary judgment on Plaintiffs’ first count for breach of contract

against SBI, and such claim shall go forward to trial.

C. As to Plaintiffs’ first count for breach of contract against Defendant

Osae, the Court GRANTS Plaintiffs’ motion for summary judgment

on the issue of Defendant Osae’s liability, and such claim shall go

forward to trial on the issue of damages.

D. The Court DENIES Plaintiffs’ motion for summary judgment on

Plaintiffs’ second count for breach of contract against Defendant

Osae, and such claim shall go forward to trial.

E. The Court GRANTS Defendants’ motions for summary judgment

and DENIES Plaintiffs’ motion for summary judgment on Plaintiffs’

UDTPA claim, and such claim is dismissed with prejudice.

F. The Court GRANTS Defendants’ motions for summary judgment as

to Plaintiffs’ request for punitive damages.

G. The Court DENIES AS MOOT Defendant Osae’s motions to exclude

expert testimony.

H. The Court GRANTS the parties’ motions to file under seal. SO ORDERED, this the 30th day of January, 2018.

/s/ Michael L. Robinson Michael L. Robinson Special Superior Court Judge for Complex Business Cases