Burten v. Milton Bradley Co.
763 F.2d 461, 226 U.S.P.Q. (BNA) 605 (1st Cir. 1985)
Before Coffin and Torruella, Circuit Judges, and Re, * Judge.
* Chief Judge, of the United States Court of International Trade, sitting
[*462] Coffin, Circuit Judge.
This case concerns the clarity of a disclosure agreement between appellants,
independent toy inventors, and the Milton Bradley Co., a toy manufacturer,
and whether the parties intended by their disclosure agreement to preclude
the formation of a confidential relationship. Plaintiffs-appellants
Roger Burten and Allen Coleman claim that appellee Milton Bradley, when
entrusted with a prototype of an electronic board game they designed, misappropriated
their ideas and their technology. * * *
"Triumph" is the name of an electronic board game invented by Coleman
and Burten which they had hoped to sell to Milton Bradley. Milton
Bradley has a policy to consider game ideas only from inventors known
to it, and only after inventors agree to sign its "Disclosure Record"
form. Appellants willingly signed Milton Bradley's standard disclosure
agreement which ostensibly delineates the parties' rights pending evaluation
of the product, and Triumph was accepted for review. The disclosure
agreement contained language to the effect that the submission was undertaken
voluntarily, that no relationship to Milton Bradley was to be implied
from the company's willingness to review the idea, that Milton Bradley
assumed no obligation to accept the product, and that the disclosing party
was to retain all rights under United States patent laws. The disclosure
agreement also authorized Milton Bradley to reproduce for its records
all material submitted.
Appellants failed to secure a contract on the first review of Triumph,
so they modified the game and resubmitted it to Milton Bradley after signing
new disclosure agreements. Triumph again was rejected by Milton
Bradley. This should have been the end of the story, but approximately
one year later, appellants discovered that Milton Bradley was marketing
a new electronic board game under the name of "Dark Tower". Because
appellants believed that Dark Tower contained significant structural and
design similarities to Triumph, they brought this action for trade secret
* * * At the close of appellants' case, the fraud count was
withdrawn, the court directed a verdict for Milton Bradley on the contract
claim, and denied without prejudice Milton Bradley's motion for a directed
verdict on the misappropriation counts. After the lengthy trial
was concluded, the jury returned a general verdict for Coleman and Burten
in the amount of $737,058.10 for royalties based on the Dark Tower profits.
Milton Bradley moved for judgment notwithstanding the verdict, and
the district court, after a meticulous survey of the cases, which it recognized
posed a "surprisingly close question", set aside the verdict. We
share the court's view of the closeness of the question, but feel constrained
to allow the verdict to stand.
In Massachusetts the law of torts affords limited protection to the owner
of a trade secret for the misappropriation of his ideas. The essence
of the wrong is generally the breach of the duty not to disclose or to
use without permission confidential information acquired [*463]
from another. . . . In order to successfully establish a cause of
action for misappropriation, therefore, a plaintiff must show that he
or she shared confidential relationship with the defendant, possessed
a trade secret, disclosed it to the defendant, and that the defendant
made use of the disclosure in breach of the confidence reposed in him.
A confidential relationship generally arises by operation of law from
the affiliations of the parties and the context in which the disclosures
are offered. . . . Where the facts demonstrate that a disclosure was made
in order to promote a specific relationship, e.g., disclosure to a prospective
purchaser to enable him to appraise the value of the secret, the parties
will be bound to receive the information in confidence. . . . As
the district court indicated, a confidential relationship typically will
be implied where disclosures have been made in business relationships
between employers and employees, . . . purchasers
and suppliers, . . ., or prospective licensees and licensors, . . .
The formation of a confidential relationship imposes upon the disclosee
the duty to maintain the information received in the utmost secrecy; the
unprivileged use or disclosure of another's trade secret becomes the basis
for an action in tort. * * *
An implied confidential relationship can be defeated, however, if the
disclosing party voluntarily conveys a trade secret to another without
limitation upon its use, . . . [*464] or if the parties,
by agreement, expressly disclaim such a relationship . . . . Apparently
the latter is what Milton Bradley intended to accomplish when it asked
appellants to sign its Disclosure Record forms.(1)
Milton Bradley argues that its disclosure form waives, as a matter of
law, any duties or obligations it might owe to appellants other than those
under the patent laws. The language of the form, it asserts, clearly
disclaims "any relationship" between it and appellants which includes
a fortiori Milton Bradley's refusal to establish a confidential
relationship. Milton Bradley reasons, therefore, that appellants'
claim of misappropriation must fail. Finding this argument persuasive,
the district court concluded that there was no issue of fact to submit
to the jury regarding the parties' understanding of the disclosure agreement.
What makes the issue so close a question in this case is the use of undifferentiated
or general terminology. We begin our analysis, therefore, recognizing
that the disclosure agreement in the case at bar cannot stake a claim
to a clearly "express disclaimer". A widely quoted statement of
the law in such a case is the following:
"[A] disclosure expressly received in confidence may create a confidential
relationship. Conversely, express disclaimer by the disclosee of
a confidential relationship from the outset will dispel the existence
of such a relationship." Milgrim, Trade Secrets § 4.03 at
4-18, citing Crown Industries, Inc. v. Kawneer Co., 335 F. Supp.
749, 754-755 (N.D. Ill. 1971).
In Crown Industries v. Kawneer, 335 F. Supp. at 754, the plaintiff's
agreement to the conditions of submission for review of his idea precluded
the formation of a confidential relationship. The Kawneer Company
policy booklet explicitly stated:
"1. No confidential relationship is to be established by such submission
or implied from consideration of the submitted material, and the material
is not to be considered to be submitted ‘in confidence.' (Confidential
relationships have been held to create obligations which are beyond those
that the Company is willing to assume.)"
Similarly, in Kearns v. Ford Motor Co., 203 U.S.P.Q. (BNA) at
886, the plaintiff signed an equally unambiguous form entitled "CONFIDENTIAL
DISCLOSURE WAIVER" which contained language to the effect that "Ford Motor
Company cannot receive suggestions in confidence." The court in
Kearns concluded that plaintiff's right to rely on an implied confidential
relationship, to the extent it was shown to exist under the circumstances,
was effectively terminated upon signing the waiver form. In both
cases, therefore, the explicit waivers barred plaintiff's recovery for
misappropriation of trade secrets. . . . [*465] In contrast
to the language of the above agreements, the Milton Bradley disclosure
agreement contains no explicit language regarding waiver of a confidential
relationship. Nor is it, as appellee contends, "almost identical"
to the disclaimers appellants signed with Parker Brothers Games ("this
suggestion is not submitted in confidence") and the Western Publishing
Company ("disclosures . . . are not received or held on a confidential
basis") in which the signing party's waiver of a confidential relationship
clearly addressed. By the same token, we cannot accept the district
court's equating the instant agreement with those of Parker and Western
as "a like disclaimer". Indeed, as we show below, the absence of
an express disclaimer at best conveys an ambiguous message as to whether
the agreement covers confidential relationships.
We do not dispute Milton Bradley's assertion that its form may credibly
be read to waive all relationships and obligations between the parties,
including a confidential relationship. So, however, can it equally
be understood to address only the relationship between the parties during
Milton Bradley's review procedure. The agreement clearly puts appellants
on notice that they are not entitled to remuneration from Milton Bradley
merely upon submission of Triumph, but it does adequately apprise them
of the rights and obligations of the parties upon Milton Bradley's affirmative
use or appropriation of the ideas submitted.
In its decision denying appellee's motion for a directed verdict, the
district court found the disclosure agreement to be an explicit waiver
of all contract rights between the parties. The court was
concerned, however, that the disclosure did not carry equal force with
respect to a confidential relationship because such relationship provides
the basis for an action in tort. The court suggested that
the language necessary to waive contractual obligations may not be sufficient
to disclaim tort liability for the misappropriation of trade secrets.
Although the district court, after trial, reached a different conclusion,
we find merit in this analysis.
Under Massachusetts law, parties cannot easily contract out of liability
for tortious behavior. It is, for example, clearly against public
policy for one party to attempt to exempt itself from liability for its
own gross negligence or its own misrepresentations. Restatement (Second)
of Contracts § § 195, 196 (1981) . . . . The Milton Bradley disclosure
form, in contrast to those in the above cases, conspicuously lacks language,
[sic] we think that a jury could reasonably
read "relationship" as it is used in the Milton Bradley form to embrace
only those ties and obligations established by consensual understanding
or course of dealing (under contract principles) and not those legal constructs
which may be triggered by unanticipated, covert, and devious misuse.
Moreover the apparently clear waiver language of one paragraph of the
Milton Bradley form is muddied by additional language also contained in
the agreement. We refer specifically to two segments of the agreement,
a handwritten addendum to the first disclosure form signed by appellants,
and the clause authorizing reproduction of the submitted prototype. The
handwritten notation on the disclosure form, as explained by a Milton
Bradley executive, reflects Milton Bradley's agreement to pay a non-refundable
$25,000 advance against [*466] future royalties if it holds the
game longer than 30 days. For each additional thirty days that Triumph
is in Milton Bradley's possession, Milton Bradley will advance another
We believe that the handwritten addendum modifies several terms of the
written agreement. Although the disclosure form calls for the waiver
of all obligations and relationships between the parties, the addendum
indicates Milton Bradley's willingness to assume an obligation to return
Triumph to appellants within a designated time period. Similarly,
while the disclosure agreement ostensibly denies appellants all recourse
against Milton Bradley except that available under the patent laws, the
addendum clearly authorizes appellants to receive royalties from Milton
Bradley if the company fails to meet its obligation to return Triumph
within the requisite time period. In light of this agreement to
compensate appellants for the "honorable" holding of Triumph should it
extend beyond thirty days, a jury could reasonably conclude that appellants
had not waived any claim to royalties for the "dishonest" holding or use
In addition, by the terms of the so-called xerox clause contained in the
disclosure agreement, Milton Bradley is authorized to photocopy or otherwise
reproduce material submitted only for its records.
A jury could reasonably conclude form the limiting language of this
clause that Milton Bradley promised confidentiality in the handling and
use of Triumph while the game was in its possession. We note further
that neither the Parker Brothers nor the Western Publishing
forms, which explicitly disclaim confidential relationships, contain similar
On its face, then, we find that the disclosure agreement falls short of
an unambiguous waiver of all rights in Triumph and does not, as a matter
of law, bar appellants' action for misappropriation. The jury, therefore,
was correctly allowed to consider evidence outside of the form to fairly
assess the meaning of the agreement and the intent of the parties in signing
it. . . .(3)
The district court reached a similar result in Houser v. Snap-On Tools
Corp., 202 F. Supp. 181 (D. Md. 1962), when it analyzed a disclosure
agreement which is comparable to the Milton Bradley form.(4)
In that case, although plaintiff's action for misappropriation was
ultimately unsuccessful, the district court concluded that the signing
party had not waived all rights other than those based on the patent laws.
The court doubted whether such a document "would give a manufacturer
the right to expropriate a disclosure without remuneration, where the
course of dealings between the parties indicates . . . that the disclosing
[*467] party was seeking remuneration for the use of his creation."
The reasons which have led us to conclude that the Milton Bradley disclosure
agreement is ambiguous insofar as a waiver of confidential relationship
is indicated also lead us to find unpersuasive the few cases which equate
disclaimers like the present one, or that discussed in Houser v. Snap-On
Tools, with the explicit waiver of a confidential relationship [found
in other cases]. Moreover, there are policy considerations that
militate against reading ambiguous disclosure forms to disclaim tort liability.
The underlying goal of the law which protects trade secrets, like that
which protects copyrights and patents, is to encourage the formulation
and promulgation of ideas by ensuring that creators of ideas benefit from
their creations. Massachusetts encourages the protection of trade
secrets not only because the public has a manifest interest in commercial
innovation and development, but also because it has an interest in the
maintenance of standards of commercial ethics. Fundamental to this,
we believe, is the expectation by the parties that, absent an explicit
waiver, the exchange of ideas will take place in trust and confidence.
Were this not the case, we are hard pressed to understand why experienced
and informed inventors would submit their ideas for consideration and
thereby waive all rights to compensation for their labor.
We fully recognize that a manufacturer may wish to insulate itself from
the claims of misuse of materials submitted in confidence, whether founded
on fact, fantasy or coincidence. This objective may be clearly realized
by the kinds of explicit waivers we have noted in the same industry. We
see no ponderable burden attached to requiring such explicitness.
The effect of the disclosure form on the relationship between the parties
was therefore a factual question appropriately submitted to the jury at
the conclusion of the trial. Finally, we believe that there was
sufficient evidence before the jury for it to find for the appellants.
We rely on the district court's review of the facts to support the
"Succinctly put, the jury had evidence before it that the plaintiffs'
approach was a novel one, that they were the instrument of [Milton Bradley's]
enlightenment as to the concept, and that they expected [Milton Bradley]
to honor both their revelations and their proprietary interest. Most
salient, the jury could well have inferred . . . that [Milton Bradley]
plagiarized the plaintiffs' idea without so much as a by-your-leave. .
. . It suffices to say at this juncture that, if a higher tribunal
should hereafter declare that the case was properly entrusted to the tender
ministrations of the finders of the facts, then no miscarriage of justice
would result from the imposition of liability. And, the size of
the compensatory damage award is plainly responsive to the evidence of
Finding all remaining arguments unpersuasive, the judgment of the district
court is, reversed.
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1. [court's footnote 3] The disclosure
agreement, which is reproduced in full in the district court's opinion,
states in relevant part:
"I submit my idea or item voluntarily and I understand that this submission
by me and its acceptance by Company does not, in whole or in part, establish
or create by implication or otherwise any relationship between Company
and me not expressed herein. I further understand and agree that
Company, in its own judgment, may accept or reject the idea or item submitted
and shall not be obligated to me in any way with respect to my idea or
item until Company shall at its own election enter into a properly executed
written agreement with me and then only, according to all of the terms
of said agreement. If no agreement is concluded, I shall rely solely
upon such rights as I may have under U.S. Patent laws. . . .
"I further agree that Company may photograph, xerograph or otherwise reproduce
for its records only any material submitted by me herewith or subsequently
with respect to said idea or item whether accepted or rejected."
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2. [court's footnote 4] The handwritten
|Monday, March 31 30 -- $25,000
|every 30 days + 25,000
|until contract is signed
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3. [court's footnote 5] Of particular
relevance was evidence introduced at trial which established that Milton
Bradley fostered the expectation of confidentiality in a number of ways.
In the words of the district court, there was:
"an industry-wide custom among reputable game and toy companies to maintain
the secrecy of ideas submitted by outside inventors and to use innovations
only if royalties were paid to the inventor. The evidence further
showed that not only did [Milton Bradley] adhere to this custom, but it
fostered such an understanding with outside inventors. High-level
[Milton Bradley] executives testified that the industry, as well as virtually
all the independent professionals, shared this expectation."
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4. [court's footnote 6] In Houser,
the plaintiff was allowed to submit an idea for a new socket wrench after
"2. No obligation of any kind is assumed by, nor may be implied
against, [Snap-On Tools] unless or until a formal written contract has
been entered into and then the obligation shall be only such as is expressed
in the formal written contract.
"3. This preliminary disclosure arrangement in no way extends to
nor affects the rights provided under the patent laws of the United States
except as such may be embodied in a formal written contract between the
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