Tate v. Scanlan International, Inc.

403 N.W.2d 666, 1987 Minn. App. LEXIS 4217
CourtCourt of Appeals of Minnesota
DecidedApril 7, 1987
DocketC0-86-1159
StatusPublished
Cited by11 cases

This text of 403 N.W.2d 666 (Tate v. Scanlan International, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tate v. Scanlan International, Inc., 403 N.W.2d 666, 1987 Minn. App. LEXIS 4217 (Mich. Ct. App. 1987).

Opinion

OPINION

FORSBERG, Judge.

This case arises from respondent Karen Tate’s action against Scanlan International for damages as a result of Scanlan’s use of Tate’s unpatented idea for a surgical supply product. Tate’s claims were for breach of express or implied contract, unjust enrichment, conversion and breach of confidence. A jury trial resulted in a verdict for Tate in the amount of $520,313.

Scanlan moved for judgment notwithstanding the verdict (jnov) or for a new trial and sought a reduction of prejudgment interest awarded respondent. The trial court denied the jnov and new trial motions and partially reduced the award of *669 prejudgment interest. We affirm in part and reverse in part.

FACTS

Respondent has been an operating room nurse at the University of Minnesota for the past 19 years. In 1978 she came up with an idea to solve a common problem experienced by operating room nurses working with Prolene suture which, although possessing great tensile strength, was extremely delicate and often broke when clamped in place during surgery. Nurses had developed a practice of cutting pieces of catheter tubing to fit over the ends of the clamps to allow for a firm grip while protecting the suture from damage. Yet, this method was time consuming, the pieces of tubing were uneven and were not radiopaque (capable of being seen under x-ray), and it was difficult to keep track of the number of pieces cut, making mandatory accounting of operating room supplies difficult. Respondent’s idea was to have available pre-cut uniform shods or tips to put on the ends of the clamps. The tips would be accessible, easily accountable, ra-diopaque, sterile, and able to hold the suture.

In September of 1979, respondent contacted Timothy Scanlan, president of appellant Scanlan International, a designer and marketer of surgical supplies. Respondent set up a meeting with Scanlan to present her idea, with the understanding that he would keep her idea confidential and that if he used her idea, she would be compensated. At the meeting, respondent explained the problem of working with the Prolene suture. She brought a “Kittner” sponge holder to illustrate a possible method for achieving some of the characteristics of the product she envisioned. The Kittner holder is a foam block with holes which secures the sponges until use, but allows them to be extracted with only one hand holding a clamp. With Kittners, nurses can determine from the number of empty holes in the block how many sponges are still in a patient’s body.

Scanlan later wrote respondent that he liked her idea and that the company was going to look into it, including a package of “Tip-Guards” as an example after which they might model the proposed product. Tip-Guards, manufactured by appellant, were unsterilized, uniform plastic tips sold in bulk, and used to protect the ends of surgical instruments.

After their initial meeting, and over the course of the next two years, respondent was kept apprised of developments of the product by Scanlan, who consulted with her on various aspects of the design of the prototype such as color, number per package, and serrated vs. non-serrated surface ridges. Respondent gave Scanlan a list of potential customers.

In April of 1980, respondent and Scanlan met again, at which time respondent inquired as to her compensation. Scanlan told respondent that she would make money when the company made money, but no definite terms were discussed.

In February of 1981, respondent and Scanlan met to examine prototypes prepared by appellant. Respondent approved of the design of the prototype, and Scanlan told her that his company planned to sell a box of the products called “Suture Boots” for about $6.00 and that she would receive about $.35 per box, which would have been slightly less than six percent of gross sales.

When Suture Boots hit the market in May of 1981, each package contained one foam block which held ten plastic tips. The block had an adhesive strip on the bottom, and its entire contents were sterile. On June 22, 1981, appellant sent respondent two contract proposals. The first contract proposed payment of a royalty of 5% of appellant’s net profit on Suture Boots for five years. Net profit was $2.00 per box. The alternative proposal was the immediate and final payment of $3,000. These proposals were revoked by letter dated July 7, 1981, before respondent had an opportunity to respond to either of them.

Appellant revoked the offers after learning from its patent attorney that the foam holder from the Kittner sponges that respondent had brought to the first meeting with Scanlan, and which had been incorporated into Suture Boots, had been previous *670 ly patented (the Chapel patent). Appellant consequently revoked its contract proposals to respondent, and by letter dated September 2, 1981, presented her with a new proposal. The new proposal offered respondent $1,000 for her time and help plus a commission on any sales by her to customers. Respondent did not respond to this offer, and instead instituted this action against Scanlan International.

Appellant subsequently entered into a licensing agreement with the patent holder, Surgicott, to permit the use of the block in Suture Boots. This agreement required appellant to pay Surgicott a royalty of slightly more than 2% of gross sales.

At trial, testimony from patent attorneys was conflicting on the issue of whether Suture Boots actually infringed on the Chapel patent. Testimony revealed that appellant had previously investigated the idea of using plastic tips over the ends of clamps to aid in grasping suture. In the 1970’s, Timothy Scanlan and Dr. Jose Ernesto Molina had unsuccessfully experimented with permanently affixing plastic to clamp jaws. Dr. Molina and Dr. Walton Lillehei testified that prior to May of 1981, there was no product on the market designed to handle the suture without damage or slippage.

On the question of respondent's damages, in addition to testimony relating to previous offers by Scanlan to Tate and Scanlan’s license agreement with Surgicott, Thomas McGoldrick, a medical marketing expert, testified that a reasonable royalty for a “niche” product such as Suture Boots would be 30% of sales. McGoldrick’s determination was based on an analysis of actual profit and profit objective for Suture Boots, the need for and risk involved in marketing the product, and possible competition. McGoldrick acknowledged that 30% was high, but noted that the 60% net profit appellant made on the product was very high for the medical field. John Heinmil-ler, an accountant, testified that sales of Suture Boots would increase 4.5 percent per year for the next five years.

The case was submitted to the jury by special verdict. The jury found respondent’s idea was novel and concrete; that her idea was not covered by a patent; that respondent communicated her idea to appellant with the understanding that the idea would be kept confidential were it not used; that appellant expressly or impliedly agreed to compensate respondent if it profitably marketed a product using her idea; and that appellant breached its agreement with respondent. The jury awarded Tate $245,033 for the use of her idea up to the time of trial, and $275,280 in future damages.

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Bluebook (online)
403 N.W.2d 666, 1987 Minn. App. LEXIS 4217, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tate-v-scanlan-international-inc-minnctapp-1987.