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Farmers Edge Inc. v. Farmobile, LLC

United States District Court, D. Nebraska

August 7, 2018

FARMERS EDGE INC., FARMERS EDGE U.S. INC., and FARMERS EDGE U.S. LLC, Plaintiffs/Counterclaim Defendants,
v.
FARMOBILE, LLC, JASON G. TATGE, HEATH GARRETT GERLOCK, and RANDALL THOMAS NUSS, Defendants/Counterclaimants.

          MEMORANDUM AND ORDER

          Joseph F. Bataillon Senior United States District Judge.

         This matter is before the court after a bench trial on May 23, 2018, and May 24, 2018, on a claim for attorney fees under the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1835, sought by defendants/counterclaimants Farmobile, LLC, Jason G. Tatge, Heath Garrett Gerlock, and Randall Thomas Nuss (hereinafter, collectively, “Farmobile”, or “the individual defendants” when referring to Tatge, Gerlock and Nuss, ) from plaintiffs/counterclaim defendants Farmer's Edge Inc., Farmer's Edge (US) Inc., and Farmers Edge (US) LLC's (collectively, “FEI”).

         This action involves the disintegration of a business and employment relationship, alleged misuse of proprietary information, and other alleged business-related torts and defenses. United States and Canadian patents and patent law issues are tangentially involved in the dispute. The relevant background details are set forth in the court's previous orders and need not be repeated herein. See Filing No. 407 and Filing No. 408.

         Briefly, the court granted Farmobile's motion for summary judgment on FEI's claim for misappropriation of trade secrets under the DTSA, as well as its claims under the Nebraska Trade Secrets Act (“NTSA”), Neb. Rev. Stat. § 87-504, and common law. Farmers Edge Inc. v. Farmobile, LLC, No. 8:16CV191, 2018 WL 2869005, at *6 (D. Neb. May 3, 2018). The court found that FEI could not maintain an action under the DTSA because FEI failed to identify any use or disclosure of the alleged trade secrets after the enactment of the DTSA in 2016. Id. at *5. Further, the court dismissed FEI's NTSA claim, finding that “none of the trade secrets identified by FEI are actual trade secrets under Nebraska law because the allegedly protected information was at least readily ascertainable by proper means.” Id.The court denied FEI's cross-motion for summary judgment. Filing No. 407. Thereafter, the parties settled the remaining claims and counterclaims, except for Farmobile's DTSA claim for attorney fees. That claim was tried to the court.

         Farmobile argues that FEI acted in bad faith in bringing and maintaining the DTSA action. It argues that the court has already found FEI's DTSA claim objectively specious and contends the only issue for resolution is FEI's subjective intent in bringing and continuing to maintain the claim. It asserts that FEI had either actual knowledge that its trade secret misappropriation claim had no merit at its inception or at some point further along in the litigation or was reckless in not knowing that the claim lacked merit. It argues that FEI's shifting definitions of its trade secrets are evidence of its subjective bad faith. Further, Farmobile argues that there is no continuing violation since the misappropriation occurred the day Farmobile filed its patent application. It contends that FEI knew the misappropriation occurred more than 3 years before the DTSA was enacted.

         FEI, on the other hand, contends that it had a good faith belief the Farmobile's Canadian and U.S. Patent Application disclosed and revealed Crop Ventures' trade secrets in violation of the DTSA. It contends the DTSA claim is not objectively specious because continued use of a trade secret after the date of enactment of the DTSA violates the DTSA even if the misappropriation occurred before that date. FEI also contends it acted with subjective good faith in concluding that Farmobile violated the DTSA after its enactment by filing an amendment and response to a Non-Final Office Action with the United States Patent and Trademark Office (“USPTO”) in May of 2016. Further, it relies on the fact that Farmobile has not withdrawn its Canadian patent and has filed an action for infringement against FEI in Canada.

         I. FINDINGS OF FACT

         FEI filed this lawsuit on April 29, 2016 and the Farmobile defendants were served with the summons and complaint on May 9, 2016. The Defend Trade Secrets Act went into effect on May 11, 2016. SeePub. L. 114- 153, 130 Stat. 376. On June 22, 2016, FEI amended its complaint to add a misappropriation of trade secrets claim under the DTSA. FEI alleged that Farmobile had misappropriated the trade secrets of Crop Ventures, a company that FEI had acquired. FEI also alleged that Farmobile improperly used Crop Ventures' software code. The record shows that on June 10, 2016, Farmobile filed an “Amendment and Response to Non-Final Office Action” with the USPTO that argued that the claimed invention in its U.S. Patent Application was novel, focusing on the fact that the claimed invention was using multiple implement profiles to match and understand the data coming from the implement.

         At the bench trial, Wade Barnes, the CEO of FEI, testified that he made the decision to go forward with the DTSA claim, in consultation with Ron Osborne and Chief Technical Officer Kevin Grant, though he acknowledged he did not know when the DTSA was enacted. He stated that he and Osborne talked about what was claimed in the patent, the work that had been done at Crop Ventures, and the similarities between the two. He admitted that although he was CEO, he was not “detailed around the engineering and the technical side of it” and characterized himself as the “big picture guy.” Further, Barnes stated that although he did not know all the engineering details, Osborne was one-hundred percent confident that the claims in the patent were identical to things that had been worked on at Crop Ventures. He also stated that as things developed in discovery, he became more confident of FEI's position in pursuing the claim. In particular, he pointed to emails disclosed in discovery. Barnes did not recall when he was made aware of the fact that there was no evidence that FEI had copied Crop Ventures' software code.

         Barnes also stated that FEI once pursued a partnership or joint venture with Farmobile, and, as part of that negotiation, had become aware in May of 2014 that Farmobile had a patent application. He also stated that the fact that precision agriculture companies had not built a telemetrics device like those involved in this litigation before then led him to believe there were trade secrets involved. He stated that at the time he acquired Crop Ventures, he was not fully aware of the fact that Crop Ventures might have a claim against Farmobile and the individual defendants, but he thought there was something fishy about the situation.

         Ron Osborne, formerly CEO of Crop Ventures and now employed as Chief Strategy officer at FEI, testified that he reviewed the complaint and amended complaint in this case before filing and reviewed responses to interrogatories during the course of the litigation. He stated that Crop Ventures was sold to FEI on January 31, 2015. He stated that no money changed hands in connection with the transaction. At the time of the acquisition, FEI was Crop Ventures' only customer.

         Osborne stated he had been angry, hurt, and disappointed with Jason Tatge's departure from Crop Ventures and subsequent creation of Farmobile. He testified that he knew that Tatge had formed a new company that was competing with Crop Ventures by December of 2013. With respect to Farmobile's patent application, Osborne testified that he believed he had first seen the document in the fall of 2015 in an internal email from someone at FEI. He was asked to determine if the inventions described in the patent were conceived at Crop Ventures. He considered everything in the patent to have been developed or conceived at Crop Ventures. He stated that although the terminology was different, the concepts were the same.

         Osborne testified to his background as an entrepreneur, having started several tech-related companies. He first created a company called Transmission Networking and later formed Salus-Novus, a medical data technology firm. In 2012, Heath Gerlock, then a Salus-Novus employee, proposed an ag-related implement to automate the creation of a farm record. He stated that the terminology “electronic farm” record had been used and the concept of a travel path had been discussed at Crop Ventures. He stated Farmobile's patent application included “exactly what they had been doing at Crop Ventures-wanting to have the CAN data automatically create an implement profile inside the platform so that Crop Ventures could more intelligently record the information, display it to the farmer and feed it into the record.” He stated that the information in the patent appeared to be taken from work done by Gerlock and Randy Nuss at Crop Ventures. He believed these were designs and concrete plans by Crop Ventures to achieve its business goals.

         Osborne also testified that he believed the information in Farmobile's patent application contained Crop Ventures' trade secrets and he also believed that the essence of what Crop Ventures was doing was not in the public sphere at that time. He further testified that Nuss had been working on a method for mapping parameters when he left Crop Ventures. After the lawsuit was filed, Osborne became aware of an email from Randy Nuss to Tatge and Gerlock that discussed the issue.

         Dr. George Edwards testified that he was retained as an expert on behalf of Farmobile to perform a software analysis and software comparison of products developed by Crop Ventures and Farmobile. He stated that at the time the individual defendants left Crop Ventures, the software and source code for the Crop Ventures product did not have the functionality to perform the functions Osborne described. Dr. Edwards further testified that the technical concepts that were identified in the report of FEI's expert, Aaron Ault, were disclosed or ascertainable from public sources of information. He also stated he is sometimes asked to do that sort of analysis in a pre-lawsuit investigation.

         Jason Tatge also testified at the trial. He is presently the founder and CEO of Farmobile. He stated that while employed at Crop Ventures, he became aware that Crop Ventures' product could not do what Osborne had claimed it could do. He stated he resigned from the company with cause because he had not been paid. He remained in contact with Osborne over the summer of 2013, occasionally texting or calling Osborne about the unpaid salary. He testified he attempted to negotiate with Osborne to purchase the assets of Crop Ventures in August 2013. He testified that, at that time, ...


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