A collaboration between Beacon Wireless Solutions and Garmin International, to integrate Beacon’s Global Positioning System fleet management vehicle tracking program into Garmin’s personal navigation devices, went awry. Allegedly without Beacon’s knowledge or consent, in order to boost Garmin’s sales, Garmin allegedly published to Beacon’s competitors Beacon’s confidential integration application specifications. Beacon sued, alleging trade secret misappropriation, breach of contract, and unjust enrichment. A few days ago, basing his decision on Kansas law, a U.S. District Court Judge in Virginia denied most of Garmin’s motions for summary judgment. Beacon Wireless Solutions, Inc. v. Garmin Int’l, Inc., Civ. Ac. No. 5:11-cv-0025 (May 9, 2012).

In its motion directed at the misappropriation count, Garmin asserted that, far from being kept confidential, Beacon’s supposed design trade secrets are displayed to Beacon’s customers and derive no value other than by public use. Beacon responded that it is not the individual features but their combination that is confidential, is not easily duplicated, and that enables Beacon’s fleet management system to communicate with a Garmin device. In addition, Beacon maintained that it transferred technical information to Garmin which was a trade secret and did not, as Garmin insisted, constitute mere problem-solving support. The court determined that a jury trial is necessary because genuine issues of material fact exist with regard to whether the combination of design features, and the transferred technical information, constitute trade secrets under Kansas law. However, Garmin’s summary judgment motion was granted as it related to Beacon’s source code and other technical details of Beacon’s software to which Garmin did not have access.

Beacon also avoided summary judgment on its breach of contract count. Under the parties’ non-disclosure agreement, “Confidential information” was defined “to include, but is not limited to” data “relating to a party, its business or products which is marked as confidential or proprietary.” Beacon claimed Garmin breached by disclosing data even though it was not marked “confidential or proprietary” because either (a) the agreement expressly prohibited such disclosure (by using the phrase “includ[ing] but not limited to”), or (b) a question was raised, to be determined by the court, as to whether the agreement was ambiguous in this respect. 

The court ruled that the agreement was unambiguous and clearly requires that information must be labeled as confidential or proprietary to qualify as “Confidential Information.” Surprisingly, however, the court went on to say that “this legal conclusion does not end the analysis” and that a material question of fact remains. 

Beacon and Garmin exchanged unlabeled information and mutually promised to treat it as confidential. Despite a clause in the original contract stating that it could only be amended by a writing signed by both parties, “there is persuasive authority under Kansas law . . . supporting the proposition that an unambiguous written agreement . . . may be modified by a subsequent” unwritten accord. A “reasonable jury could determine that there was a meeting of the minds by the parties, evidenced by their course of conduct, to enter into an agreement to modify the Nondisclosure Agreement’s clause regarding how information exchanged by the parties could qualify as ‘Confidential Information’ under the contract.” 

Finally, Beacon dodged a summary judgment bullet regarding the unjust enrichment count because Beacon gave Garmin more than simply trade secrets. In the court’s view, “a reasonable jury could find that [Beacon’s] provision of ancillary services to [Garmin], which falls outside the purview of the Nondisclosure Agreement, bestowed a benefit upon [Garmin] under circumstances that would render inequitable the retention of that benefit.” 

Recent case law is consistent with the court’s conclusion that a unique combination of secret and non-secret information, that affords a competitive advantage and is not readily ascertainable, is a trade secret. See, e.g., Avid Air Helicopter Supply, Inc. v. Rolls-Royce Corp., 663 F.3d 966, 972 (8th Cir. 2011) (Indiana and Missouri law) (this case was the subject of a recent Seyfarth Shaw trade secrets blog); Tewari De-Ox Syst. v. Mountain States/Rosen, L.L.C., 637 F.3d 604, 613 (5th Cir. 2011) (Texas law); and the dissent in a recent unreported Fourth Circuit decision, Hill Holliday Connors Cosmopulos, Inc. v. Greenfield,433 Fed. Appx. 207, 222-23 (2011 U.S. App. LEXIS 11241). The more unusual ruling in the Beacon-Garmin litigation is that a written contract can be deemed modified by the parties’ course of conduct despite a provision precluding unwritten-unsigned amendments. Readers of this blog should take particular note of that risk.