Atlantic Research Marketing Systems, Inc. v. Troy et al

Filing 259

Judge Patti B. Saris: ORDER entered. FINDINGS OF FACT AND CONCLUSIONS OF LAW(Patch, Christine)

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS ) ) ) ) ) ) ) ) ) ) ) ) )

ATLANTIC RESEARCH MARKETING SYSTEMS, INC., Plaintiff, v. STEPHEN P. TROY, JR., AND TROY INDUSTRIES, INC., Defendants.

CIVIL ACTION NO. 07-11576-PBS

FINDINGS OF FACT AND CONCLUSIONS OF LAW May 11, 2010 Saris, U.S.D.J. I. INTRODUCTION

After a two week trial, a jury found Defendants Stephen P. Troy and Troy Industries (collectively "Troy") liable for misappropriation of trade secrets and breach of fiduciary duty and entered a verdict in favor of Plaintiff Atlantic Research Marketing Systems, Inc. ("A.R.M.S.") for $1,813,465. The Court

reserved judgment on Count V alleging that Troy knowingly and willfully committed unfair methods of competition and deceptive acts or practices in trade or commerce in violation of Mass. Gen. Laws ch. 93A, § 11.

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II. 1. A.R.M.S.

FINDINGS OF FACT

Richard Swan has worked with small arms since 1967 when he began testing and evaluating weapons, including the M16 rifle, for Colt Manufacturing. (Trial Tr. vol. 1, 67, June 15, 2009.)

He holds twenty-four patents related to small arms weapons accessories. 1980. (Trial Tr. vol. 1, 66.) Swan founded A.R.M.S. in

(Trial Tr. vol. 1, 64.)

It makes accessories for small A.R.M.S. sells

arms weaponry.

(Trial Tr. vol. 1, 65.)

approximately sixty weapons-related products to customers including the United States military, foreign militaries, law enforcement, and the commercial market. 66.) A.R.M.S.' facilities had an alarm system that was linked directly to the local police; its doors were kept locked; cameras were used to monitor the front door; visitors were required to sign a log book before entering the facilities and to sign nondisclosure agreements before being provided access to proprietary information. 38, 58.) 2. The Handguard The issues in this case center around the M14 family of weapons (i.e. the M4, M16, and AR14). was having problems with the M4. In the 1990s, the military (Trial Tr. vol. 1, 69, 89; Exs. 5, 10, (Trial Tr. vol. 1, 65-

The weapon's upper receiver is

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aluminum, and its barrel, which is secured to the upper receiver by a bolt, is steel. (Trial Tr. vol. 3, 129, June 17, 2009.) At

the time, the standard issue handguards were drop-in products that attached to the barrel of the weapon; they went inside the barrel cap on the front of the weapon and were secured into place by a spring-loaded delta ring. 34.) (Trial Tr. vol. 3, 24-25, 133-

Military personnel hung accessories and grips from the (Trial Tr. vol. 3, 24-25, 131.) When the weapon is

handguards.

used, the lugs on the bolt lock, and the round is fired; gas then causes the lugs to unlock, and the spent round is extracted. (Trial Tr. vol. 3, 126.) For some reason, the locking lugs were (Trial Tr. vol.

breaking off, preventing the weapon from firing. 3, 126.)

The barrel was also coming loose at the point where it (Trial Tr. vol. 3, 128.)

connected to the upper receiver.

The military suspected that heat was the source of the malfunction. (Trial Tr. vol. 3, 128-30.) When fired rapidly,

the weapon's steel barrel can heat to very high temperatures. (Trial Tr. vol. 3, 24-25, 128.) The handguards were made of (Trial Tr. vol. 1,

plastic or aluminum, both of which trap heat. 81-82.)

As the weapon was fired, the bolt pounded into the back

end of the hot barrel, reforging the aluminum receiver into an oval and causing the barrel to loosen. 128.) (Trial Tr. vol. 3, 24-25,

The weight of the attached accessories and the force of

soldiers pulling on the attached grips were also bending the barrel downward. (Trial Tr. vol. 3, 24-25, 131.) -3-

In 1996, Swan investigated the problem and prepared a report at the request of Major General Carl Ernst. 85-86; Ex. 75.) (Trial Tr. vol. 1,

He also reported his concerns in 1998 to

Sergeant Major Martin Barreras, a Force Modernization Officer with the U.S. Army, who was responsible for researching and evaluating equipment improvements. (Trial Tr. vol. 1, 88; Trial In

Tr. vol. 2, 13, June 16, 2009; Trial Tr. vol. 3, 122.)

December 1998, Barreras visited A.R.M.S. and discussed Swan's thoughts on the malfunction problem, including his 1996 report to Major General Ernst. 136-42.) Swan showed Barreras the A.R.M.S. Rigid Frame handguard that he had designed between 1989 and 1991. Trial Tr. vol. 3, 140-42.) (Trial Tr. vol. 1, 81-82; (Trial Tr. vol. 2, 12; Trial Tr. vol. 3,

The handguard was a free float

handguard; that is, it attached to the weapon without putting pressure on the barrel or conducting heat from the barrel. (Trial Tr. vol. 1, 81-82; Trial Tr. vol. 3, 140-42; Ex. 1.) and Barreras scheduled a time to meet again. 12-13.) On January 20, 1999, Swan and Barreras met again. Tr. vol. 3, 142-44.) (Trial Swan

(Trial Tr. vol. 2,

In the basement of the A.R.M.S. facility,

in front of Barreras, Swan machined a Proof of Concept handguard that used a clamp to attach solely to the barrel nut of the M4 for support. 47.) (Trial Tr. vol. 2, 14, 79; Trial Tr. vol. 3, 144-

Swan took a standard-issue aluminum drop-in handguard -4-

manufactured by Knights Armament. 4.)

(Trial Tr. vol. 2, 14-15; Ex.

He machined aluminum off the rearward end and machined

notches so that after the delta ring was removed the handguard would fit down on top of the tines of the barrel nut. vol. 2, 15-17; Ex. 3.) (Trial Tr.

Removing the delta ring allowed the

handguard to align with the top of the receiver and create one continuous level plane for the attachment of various devices. (Trial Tr. vol. 2, 17; Trial Tr. vol. 3, 146-47.) The handguard

sat directly on top of the barrel nut and sat up against the front of the receiver. (Trial Tr. vol. 3, 147.)

Swan then took a block of aluminum with a hole in it, and used a band saw to cut it in half ("the clamp"). 2, 18-19; Trial Tr. vol. 3, 101, 148-49; Ex. 15.) (Trial Tr. vol. Swan drilled

two screw holes on either side of the clamp and matching holes in the upper handguard. 150-51.) (Trial Tr. vol. 2, 21-22; Trial Tr. vol. 3,

The clamp fit around the bottom of the barrel nut and (Trial Tr. A lower

could be fastened to the upper handguard by screws.

vol. 2, 18-23; Trial Tr. vol. 3, 101, 148-51; Ex. 15.) handguard could then be snapped into place. 23-24.)

(Trial Tr. vol. 2,

The finished product did not touch the barrel of the

weapon and clamped solely to the barrel nut for support after the delta ring was removed. 145, 151-53.) A.R.M.S. did not bring the Proof of Concept to market because Swan believed that the branches of the United States -5(Trial Tr. vol. 2, 23; Trial Tr. vol. 3,

military did not have a consensus allowing removal of the delta ring, as the Army did not want it removed. 26-27, 40-41; Trial Tr. vol. 3, 27-31.) 3. The Crane Submission In 2003, A.R.M.S. prepared and submitted a response to a request for proposal concerning handguards issued by Crane Naval Surface Warfare Center ("Crane") in connection with the Miniature Day Night Sight ("MDNS") Program. Tr. vol. 3, 42-45.) (Trial Tr. vol. 2, 42; Trial (Trial Tr. vol. 2,

The response did not include the Proof of

Concept because Swan (wrongly) believed that the solicitation did not allow removing the delta ring and attaching the handguard solely to the barrel nut. vol. 3, 27-31, 152-53.) (Trial Tr. vol. 2, 42-43; Trial Tr. The solicitation did not, in fact, (Trial Tr. vol. 3, 48; Trial

prohibit removal of the delta ring. Tr. vol. 5, 46, 48; Ex. 64.)

Nevertheless, Swan had engaged in

discussions with relevant officials that led him to believe removal of the delta ring was unacceptable. (Trial Tr. vol. 2, As a result,

42-43; Trial Tr. vol. 3, 27-31, 42-43, 46, 152-53.)

A.R.M.S. submitted a handguard system that attached to the top of the receiver and clamped to the barrel nut, with or without the delta ring in place. (Trial Tr. vol. 2, 43.)

A.R.M.S.' response was rejected; A.R.M.S. appealed the rejection to the General Accounting Office, prevailed, and submitted a new response that included the Proof of Concept

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handguard.

(Trial Tr. vol. 2, 43-48.)

Crane eventually issued a

$16 million contract to A.R.M.S. for its M-CV handguard products that were based on the Proof of Concept. (Trial Tr. vol. 3, 104-

06; Trial Tr. vol. 4, 43-45, June 18, 2009; Exs. 31, 32, 33, 67, 68.) Bay State Machine began machining the A.R.M.S. M-CV

handguards in 2004, and A.R.M.S. sold its first M-CV product to Crane in 2005. 15.) 4. Swan and Troy Stephen Troy has been a Massachusetts State Trooper for ten years. (Trial Tr. vol. 5, 19, June 22, 2009.) He has an (Trial Tr. vol. 2, 50-52; Trial Tr. vol. 3, 113-

associates degree in criminal justice and in industrial security and a bachelor's degree in law enforcement. 19.) (Trial Tr. vol. 5,

He has served in the Civil Air Patrol, the Connecticut (Trial Tr. vol. 5,

National Guard and the Air Force Reserves. 19-20, 22.)

He graduated from the United States Air Force Police

Academy and the Air Force Academy Non-Commissioned Officer Academy. (Trial Tr. vol. 5, 22-23.) In the military he received

small arms weapons training, including training with the M4. (Trial Tr. vol. 5, 23.) He has numerous small arms weapons

qualifications, including qualifications with the M4 and M16; he has held various teaching positions, including teaching soldiers on the use of the M4 and M16; and he has received numerous military honors. (Trial Tr. vol. 5, 24-27, 34.) He attended the

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Colt Firearms M16 and M4 armorer's course which taught law enforcement and military personnel to assemble, disassemble and repair the weapons. (Trial Tr. vol. 5, 30.)

Troy met Swan in 2002, when Troy was running Basher Tactical, a law enforcement training business to teach police on the use of the M4 carbine, and a customer of A.R.M.S.'. Tr. vol. 2, 52-53.) (Trial

Troy asked to be an A.R.M.S. distributor. A.R.M.S. allowed Troy to become a

(Trial Tr. vol. 2, 52-53.)

distributor after he signed a Distributor Agreement, which contained a confidentiality provision. Ex. 53.) employee. (Trial Tr. vol. 2, 52-53;

Soon afterwards, A.R.M.S. hired Troy as a regular (Trial Tr. vol. 2, 53-54.) Before beginning work, (Trial Tr. vol. 2, 55; Swan told Troy

Troy signed a non-disclosure agreement.

Trial Tr. vol. 6, 26-27, June 23, 2009; Ex. 54.)

that all A.R.M.S. business and development information was confidential and proprietary. (Trial Tr. vol. 2, 57-58.) Troy

felt obligated to maintain the confidentiality of the information he learned from A.R.M.S. (Trial Tr. vol. 6, 27.) Troy

understood that his discussions with Swan were confidential. (Trial Tr. vol. 6, 29.) Troy understood that Swan trusted him,

and they discussed that Swan was training Troy to be his successor at A.R.M.S. (Trial Tr. vol. 6, 29-30.)

Swan taught Troy all of the essential information about A.R.M.S. and sent him out to customers, vendors, industry shows, and machine shops as his right-hand man. -8(Trial Tr. vol. 2, 54-

61; Trial Tr. vol. 6, 30.)

He gave Troy the necessary

information to train distributors, and familiarized him with A.R.M.S.' computer programs and equipment. 54-61.) (Trial Tr. vol. 2,

Swan introduced Troy to A.R.M.S.' machinist and taught (Trial Tr.

Troy A.R.M.S.' design and manufacturing processes. vol. 2, 54, 60, 115; Trial Tr. vol. 3, 87-91, 107.)

One of Troy's responsibilities was new product development. (Trial Tr. vol. 6, 27-29.) Swan showed Troy the Proof of Concept (Trial

and all the other proofs of concept that A.R.M.S. had. Tr. vol. 2, 56-57, 81-82.)

Troy's desk was approximately eight

feet from where A.R.M.S. stored the prototypes and proofs of concept. Swan talked to Troy about the M4 failures and the (Trial Tr. vol. 2, 56-57; Trial

development of his handguards. Tr. vol. 3, 91-92.)

In January 2003, Troy and his wife incorporated Troy Industries, Inc. with the knowledge of Swan. 72-73; Ex. 69.) (Trial Tr. vol. 5,

In February 2003, Troy and Swan attended the

SHOT Show, a large industry show at which A.R.M.S. had a booth. (Trial Tr. vol. 2, 63-64.) Swan allowed Troy to promote a

modified M14 weapon (the "SOPMOD M14") that Troy had been working on, but which did not compete with any A.R.M.S. product. Tr. vol. 2, 62-63; Trial Tr. vol. 5, 63-67; Ex. 60.) (Trial

Troy hoped

that a high-end consumer in the small arms area and federal agencies would have an interest in the rifle. 72-73.) -9(Trial Tr. vol. 5,

At the show, Swan learned that Troy had registered for Troy Industries to have its own booth at the 2004 show. vol. 2, 63-64; Trial Tr. vol. 6, 34-35.) (Trial Tr.

Claiming he was

outraged when he heard about the booth, and criticizing Troy for other alleged malfeasance, Swan terminated Troy by letter dated Friday, February 28, although Troy did not receive the letter until Monday, March 3. 37; Ex. 59.) (Trial Tr. vol. 2, 64; Trial Tr. vol. 6,

Troy claims Swan's reasons were a pretext.

Whatever the truth behind the firing, there was bad blood between the men after the discharge. The notice of termination indicated

that Troy was to return a laptop he had been using for A.R.M.S. business, but he did so only after significant delay and after he deleted its contents. 5. Troy Industries When Troy was fired, Troy Industries had only the SOPMOD M14 for sale. (Trial Tr. vol. 6, 37.) Troy contacted A.R.M.S.' (Trial Tr. vol. 2, 65, 105-06; Ex. 59.)

machinist, Frank Basile, to ask if he would work with him, but Basile declined. 108.) (Trial Tr. vol. 2, 66-67; Trial Tr. vol. 3,

Knowing about the Crane MDNS solicitation from his time at

A.R.M.S., Troy contacted Crane and offered a handguard system. (Trial Tr. vol. 2, 66; Trial Tr. vol. 3, 34-35.) Although Troy

had never designed a handguard system prior to being fired by A.R.M.S., he prepared a response to the Crane MDNS solicitation, which was dated March 5, 2003 ­ two days after his termination.

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(Trial Tr. vol. 6, 20-21, 38-39; Ex. 62.)

Troy's response (Trial Tr. vol.

featured a free-floating eight-sided handguard. 5, 98-99; Trial Tr. vol. 6, 40; Ex. 62.)

Troy says he decided,

however, that the necessary research and development was too expensive. (Trial Tr. vol. 5, 101-02.)

While on vacation in Turkey between May and July, 2003, Troy claims that he had a Eureka moment, and independently came up with an idea for a novel handguard in which the delta ring would be removed, the upper handguard piece would attach to a clamp with four screws, and the clamp would attach solely to the barrel nut of the weapon, with a removable lower handguard piece. (Trial Tr. vol. 2, 71, 77; Trial Tr. vol. 5, 108-09, 112-13, 12831, 147; Trial Tr. vol. 6, 43; Ex. 70, Ex. 16.) was not credible. This testimony

I find that Troy derived this concept from

Swan's trade secrets. Troy then proceeded to manufacture and sell a handguard that clamped solely to the barrel nut as the "Modular Rail Forend" ("MRF") in a variety of lengths. Tr. vol. 3, 90-91; Ex. 70.) (Trial Tr. vol. 2, 70; Trial

Troy incorporated A.R.M.S.' trade

secrets and proprietary information into the handguards; namely, the idea behind A.R.M.S.' Proof of Concept. Troy first offered (Trial Tr.

the MRF handguards for sale at the 2004 SHOT Show. vol. 5, 120; Ex. 71.) the MRF products.

Troy later applied for a patent to cover

(Trial Tr. vol. 5, 152; Ex. 201.)

Troy's MRF products compete with A.R.M.S.' M-CV products and -11-

are used on the same weapons. Tr. vol. 5, 149-52.)

(Trial Tr. vol. 4, 45-47; Trial

Troy's 7-inch MRF-C product is comparable

to A.R.M.S.' 50 M-CV product; Troy's 9-inch MRF-M product is comparable to A.R.M.S.' 50 M-CV product; Troy's 10-inch MRF-MX product is comparable to A.R.M.S.' 50 M-CV product; and Troy's 12-inch MRF-CX product is comparable to A.R.M.S.' 58 M-CV MOD product. (Trial Tr. vol. 4, 46-47, 64.)

Plaintiff's expert, Catherine Parente, used standard methodology for computing disgorgement damages by determining the profits earned by Troy on sales of the MRF products from 2004 through December 31, 2006. (Trial Tr. vol. 4, 92-94, 100.)

Parente multiplied the number of Troy's MRF products sold by $200, which represented Defendants' net profits on each sale. (Trial Tr. vol. 4, 96-99.) The $200 figure was based on Troy's

prior sworn testimony concerning Troy's average net profits on retail and wholesale sales of MRF products during the same period. (Trial Tr. vol. 4, 96-97, 121-22; Trial Tr. vol. 6, 18Troy relied on and advanced the $200 net Parente calculated (Trial Tr.

20, 61-66; Ex. 255.)

profit per unit figure in a prior proceeding.

A.R.M.S. total disgorgement damages to be $2,242,000. vol. 4, 95.) as $414,460.

Parente likewise calculated A.R.M.S.' lost profits (Trial Tr. vol. 4, 103-05.) Troy offered no

damages expert, and its only witness testified that he could not identify specific costs associated with the manufacture of the MRF products for any given period, nor could he testify -12-

competently concerning the basis for those costs. vol. 6, 16-17.)

(Trial Tr.

On June 26, 2009, the jury returned a verdict in favor of A.R.M.S., finding that Troy had misappropriated A.R.M.S.' trade secrets or confidential and proprietary information and that Stephen P. Troy had breached his fiduciary duty to A.R.M.S. jury awarded A.R.M.S. $1,813,465. III. CONCLUSIONS OF LAW The

Under Chapter 93A, "unfair or deceptive acts or practices in the conduct of any trade or commerce" are unlawful. Laws ch. 93A, § 2(a). Mass. Gen.

To determine whether a practice violates

Chapter 93A, the fact-finder must look to "(1) whether the practice . . . is within at least the penumbra of some commonlaw, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; [and] (3) whether it causes substantial injury to consumers (or competitors or other businessmen)." Mass. Eye & Ear Infirmary v.

QLT Phototherapeutics, Inc., 412 F.3d 215, 243 (1st Cir. 2005) (quoting PMP Assocs., Inc. v. Globe Newspaper Co., 366 Mass. 593, 596, 321 N.E.2d 915, 917 (1975)). Courts evaluate unfair and

deceptive trade practice claims based on the circumstances of each case. Kattar v. Demoulas, 433 Mass. 1, 13-14, 739 N.E.2d A claim of misappropriation of trade secrets Incase, Inc. v. Timex

246, 257 (2000).

can support a claim under Chapter 93A.

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Corp., 421 F. Supp. 2d 226, 239-40 (D. Mass. 2006); Jillian's Billiard Club of Am., Inc. v. Beloff Billiards, Inc., 619 N.E.2d 635, 639 (Mass. App. Ct. 1993). A.R.M.S.' theories of liability under Chapter 93A are derivative of its state law claims, particularly its claim of misappropriation of trade secrets. The Court has discretion to

consider a jury's findings in making an independent determination of a Chapter 93A claim, and the jury's verdict supports finding a violation of Chapter 93A. Prof'l Servs. Group, Inc. v. Town of

Rockland, 515 F. Supp. 2d 179, 194-96 (D. Mass. 2007); Guity v. Commerce Ins. Co., 631 N.E.2d 75, 76 (Mass. App. Ct. 1994); Refuse & Envtl. Sys., Inc. v. Indus. Servs. of Am., Inc., 932 F.2d 37, 42 n.2 (1st Cir. 1991). Here, Troy misappropriated A.R.M.S.' trade secrets and wrongfully used those trade secrets to further a competitive interest. Under the circumstances, the Defendants' actions are

"within at least the penumbra of some common-law, statutory or other established concept of unfairness," and are "immoral, unethical, oppressive, or unscrupulous." Mass. Eye & Ear

Infirmary, 412 F.3d at 243 (quoting PMP Assocs., 366 Mass. at 596, 321 N.E.2d at 917). As the Defendants' actions deprived

A.R.M.S. of sales and cost it profits, they "cause[d] substantial injury" to a competitor. 596, 321 N.E.2d at 917). violated Chapter 93A. -14Id. (quoting PMP Assocs., 366 Mass. at As such, the Defendants' conduct

Under Chapter 93A, the base "recovery shall be in the amount of actual damages." Mass. Gen. Laws ch. 93A, § 11. As a general

matter, "actual damages" are understood as the losses that flow foreseeably from the harmful conduct. See Haddad v. Gonzalez, The

410 Mass. 855, 867, 576 N.E.2d 658, 665 (1991).

Massachusetts Supreme Judicial Court and Appeals Court have not addressed whether disgorgement damages are an appropriate measure of recovery under Chapter 93A. Kelley v. CVS Pharmacy, Inc., One

2007 WL 2781163, at *12 (Mass. Super. Ct. Aug. 24, 2007).

court has analyzed the issue and determined that disgorgement damages can be an appropriate measure of recovery, but in that case, there was no other measure of damages available. *11-15. profits. Id. at

Here, a second measure of damages is available: lost Given the statute's focus on actual monetary loss and

damage, the Court determines the proper measure of damages here to be A.R.M.S.' lost profits, $414,460. See Refuse & Envtl.

Sys., 932 F.2d at 43; Arthur D. Little, Inc. v. Dooyang Corp., 147 F.3d 47, 56-57 (1st Cir. 1998). Where a defendant's actions are a willful or knowing violation of Chapter 93A, the plaintiff is entitled to an award of "up to three, but not less than two, times" its actual damages. Mass. Gen. Laws ch. 93A, § 11. Although Troy's actions

were unfair, they do "not rise to the level of callousness or meretriciousness that would justify multiple damages." Cambridge

Plating Co., Inc. v. Napco, Inc., 85 F.3d 752, 771 (1st Cir. -15-

1996).

Conduct that gives rise to a violation of Chapter 93A is

not enough, by itself, to warrant multiple damages. [S]hades of culpability are supposed to matter in applying the punitive damages provision of the statute. See Kansallis Fin. Ltd. v. Fern, 421 Mass. 659, 659 N.E.2d 731, 738 (1996) ("[T]he Legislature envisaged multiple damage awards against those defendants with a higher degree of culpability than that sufficient to ground simple liability."); Heller v. Silverbranch Constr. Corp., 376 Mass. 621, 382 N.E.2d 1065, 1070 (1978) (only "callous and intentional violations" merit multiple damages); VMark Software, Inc. v. EMC Corp., 642 N.E.2d 587, 596 (Mass. App. Ct. 1994) (court refused to multiply damages in intentional misrepresentation case stating that section 11 multiple damages are an "extraordinary remedy" not applicable to a case of "dogged bumbling"). Id. at 770. Liability is not enough to trigger punitive damages: Id.

"there must be something more."

In Incase Inc. v. Timex Corp., 421 F. Supp. at 239-42, the district court found that a violation of Chapter 93A had occurred, but that it was not "knowing or willful." Although the

court found no misappropriation of trade secrets had occurred because Incase had taken "inadequate steps to protect the secrecy of its design," it was a violation of Chapter 93A for Timex to engage Incase to develop a design by holding out the promise of a lucrative manufacturing deal; for Timex to then use that information to have an Incase competitor manufacture a similar product, which Timex could presumably obtain for lower cost because it did not have to pay the competitor to develop the design; and for Timex to then breach its contract with Incase for the original product based on a lack of demand. Id. at 240-41. Despite the fact that Timex induced Incase to

expend significant effort to develop a design specifically for -16-

Timex, gave the design to Incase's competitor, and then used the very result of its malfeasance to replace what it was contractually obligated to buy from Incase, the court found Timex' 93A violation not to be "knowing or willful." Id. at 242.

On appeal, the First Circuit affirmed the district court's conclusion. The First Circuit noted that:

[t]he cases, again, are unclear about what constitutes willful or knowing behavior, but most of them tend to cluster around findings of: (a) coercion or extortion, see Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 583 N.E.2d 806, 822 (1991) (withholding monies owed as a form of extortion is willful); Pepsi-Cola Metro. Bottling Co. v. Checkers, Inc., 754 F.2d 10, 18 (1st Cir. 1985) (withholding payment as a wedge to enhance bargaining power is willful); (b) fraud and similar forms of misrepresentation, see Datacomm Interface, Inc. v. Computerworld, Inc., 396 Mass. 760, 489 N.E.2d 185, 197 (1986); Serv. Publ'ns, Inc. v. Goverman, 396 Mass. 567, 487 N.E.2d 520, 528 n.13 (1986); see also Computer Sys. Eng'g, Inc. v. Qantel Corp., 740 F.2d 59, 67-68 (1st Cir. 1984) (a willful or knowing violation includes "a misrepresentation made with reckless disregard as to its truth or falsity"); or (c) abusive litigation, see Fed. Ins. Co. v. HPSC, Inc., 480 F.3d 26, 37 (1st Cir. 2007); Int'l Fid. Ins. Co. v. Wilson, 387 Mass. 841, 443 N.E.2d 1308, 1318 (1983). There was no evidence presented of coercion, fraud, abusive litigation, or similar behavior by Timex, and thus we find no error in the district court's decision to withhold punitive damages. Incase Inc. v. Timex Corp., 488 F.3d 46, 58 (1st Cir. 2007). Although Troy misappropriated A.R.M.S.' trade secrets, there was no evidence that he did so maliciously. There was no

evidence to suggest that Troy entered into A.R.M.S.' employ for the specific purpose of stealing trade secrets or that the idea ever occurred to him while he was there. -17There was no evidence

that he ever misrepresented himself or his intention to A.R.M.S. or undertook any sort of fraud. There was no evidence that Troy

was attempting to harm A.R.M.S. with the actions he took after he was terminated. There was no evidence that Troy believed, or had

any reason to believe, that he was directly damaging A.R.M.S. by manufacturing and selling his handguards as A.R.M.S. was not using the technology or even gearing up to do so at the time that Troy was terminated. Troy's actions lack the malfeasance of Thus although Troy's

extortion, fraud, or abusive litigation.

actions were unfair, they lack that "something more" that would make punitive damages appropriate. As Troy's actions were

neither "knowing or willful," the Court does not impose multiple damages. As A.R.M.S.' 93A damages arise from the same conduct that comprises the elements of A.R.M.S.' trade secrets claim, any separate award of damages would be improperly cumulative. See

Calimlim v. Foreign Car Ctr., Inc., 392 Mass. 228, 235-36, 467 N.E.2d 443, 447-48 (1984). $1,813,465. Thus A.R.M.S.' total damage award is

However, A.R.M.S. is also entitled to its reasonable

attorneys' fees, expenses, and costs, including expert fees. Mass. Gen. Laws ch. 93A, § 11; Maillet v. ATF-Davidson Co., 407 Mass. 185, 194-95, 552 N.E.2d 95, 100-01 (1990); see also Wyler v. Bonnell Motors, Inc., 624 N.E.2d 116, 119 (Mass. App. Ct. 1993) (awarding legal fees and costs but not cumulative 93A

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damages); Incase, 421 F. Supp. 2d at 242-45 (not awarding 93A damages as duplicative, but awarding attorneys' fees and costs). Finally, A.R.M.S. has moved the Court to enjoin permanently Troy from using the trade secrets at issue in this case. An

injunction is not appropriate in this case, however, as A.R.M.S. has publicly marketed products that incorporate its trade secrets, which can be reverse engineered, and numerous other manufacturers currently market the same or similar technology. Where "the plaintiff's product, including the trade secret, has been marketed," Massachusetts courts often look to the "head start rule," crafting injunctions to prevent defendants from receiving an unfair head start in competing with the plaintiff's product. Jet Spray Cooler, Inc. v. Crampton, 377 Mass. 159, 171 The head start rule

n.11, 385 N.E.2d 1349, 1357 n.11 (1979).

follows from the fact that "[t]he marketing of the product gives competitors a legitimate opportunity to study the product and to learn the principles of the trade secret through reverse engineering or similar procedures." Id. As such, "the time

necessary to engineer in reverse is one factor to be considered in determining . . . the [appropriate] duration of injunctive relief." Id. Also relevant is "evidence that other

manufacturers have been able to design and produce devices nearly identical to" the product that incorporates the trade secret. Analogic Corp. v. Data Translation, Inc., 371 Mass. 643, 648, 358 N.E.2d 804, 808 (1976). These considerations insure that the -19-

defendant cannot benefit from an ill-gotten "head start," but is not enjoined longer than necessary. "The scope of an injunction depends on a comparative appraisal of all of the facts of the case, and what is reasonable will depend in each instance on the particular facts." Billiard Club, 619 N.E.2d at 638. Jillian's

In Jillian's Billiard Club,

the court found it instructive to look to the Restatement of Unfair Competition: If the trade secret has already entered the public domain, an injunction may be appropriate to remedy any head start or other unfair advantage acquired by the defendant as a result of the appropriation. If the defendant retains no unfair advantage from the appropriation, an injunction against the use of information that is no longer secret can be justified only on a rationale of punishment and deterrence. However, because of the public interest in promoting competition, punitive injunctions are ordinarily inappropriate in trade secret actions. Id. at 638-39 (quoting Restatement (Third) of Unfair Competition § 44(2) cmt. c (Tentative Draft No. 4, 1993)). In this case,

A.R.M.S. has marketed the relevant product for a significant period of time. The product makes the trade secret evident.

Other manufacturers have been able to produce and market nearly identical products. advantage. warranted.1 The result is the same following the traditional test for entry of a permanent injunction that requires the court to find that "(1) plaintiffs prevail on the merits; (2) plaintiffs would suffer irreparable injury in the absence of injunctive relief; -201

At this point, Troy has no competitive

Considering the facts of the case, no injunction is

ORDER In sum, the Court finds for the Plaintiff on its Chapter 93A claim (Count V), but awards the Plaintiff only reasonable attorneys' fees, expenses, and costs, including expert fees.

/s/PATTI B. SARIS Patti B. Saris United States District Judge

(3) the harm to plaintiffs would outweigh the harm the defendant would suffer from the imposition of an injunction; and (4) the public interest would not be adversely affected by an injunction." A.W. Chesterton Co. v. Chesterton, 128 F.3d 1, 5 (1st Cir. 1997). Here, because the product incorporating the trade secret has been marketed and A.R.M.S. is receiving damages, A.R.M.S. would not suffer irreparable injury. Further, because the product has been marketed and there is significant competition, the harm to A.R.M.S. would not outweigh the harm to Troy. Finally, given those circumstances, the public interest in promoting competition weighs against granting an injunction. -21-