Nucap Indus., Inc. v. Robert Bosch LLC

NUCAP INDUSTRIES, INC., et al., Plaintiffs, v. ROBERT BOSCH LLC, et al., Defendants.

No. 15 C 02207

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

September 7, 2019

Judge Edmond E. Chang

MEMORANDUM OPINION AND ORDER

Plaintiffs Nucap Industries, Inc. and Nucap US Inc. (Nucap) brought this suit against Robert Bosch LLC; Bosch Brake Components LLC; and Robert Bosch GmbH (Bosch) after the dissolution of their five-year commercial relationship.¹ Nucap brought both federal and state law claims, all of which relate to Bosch's use of Nucap's allegedly proprietary drawings of after-market brake pad components, which Nucap had originally allowed Bosch to access as part of their relationship. In turn, Bosch levelled counter-claims against Nucap, challenging Bosch's ownership of the drawings, as well as Nucap's decision to stop acting as a supplier for Bosch. The parties now cross-move for summary judgment. For the reasons discussed below, both motions are granted in part and denied in part.

I. Background

In deciding cross-motions for summary judgment, the Court views the facts in the light most favorable to the respective non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). So, when the Court evaluates Bosch's summary judgment motion, Nucap gets the benefit of reasonable inferences; conversely, when evaluating Nucap's cross-motion, the Court gives Bosch the benefit of the doubt.

A. Aftermarket Brake Pads

Both parties in this suit operate in the industry of aftermarket brake pads. R. 1140.16, Khokhar Dec. ¶¶ 9, 10; R. 1116.8, Wilkes Dec. ¶¶ 8-10. Bosch buys component parts from suppliers to construct a final aftermarket brake system, which it then sells to auto-parts retailers like Autozone and O'Reilly's. Wilkes Dec. ¶ 8; R. 1159.2, Pls.' Resp. DSOF ¶¶ 1, 13. Nucap manufactures and sells aftermarket brake components. Pls.' Resp. DSOF ¶ 10. Bosch buys various parts—backing plates, shims, and brake hardware—from suppliers, such as Nucap, and then constructs the final product using its own proprietary friction material. Id. ¶ 912. It is undisputed that in order to design and create aftermarket brake components, suppliers need to reverse engineer original equipment (known as "OE" in the industry) brake pads. Pls.' Resp. DSOF ¶ 7. Nucap outlined its reverse-engineering process in an email to a Bosch employee, in which Nucap explained that it measures OE brake parts and then creates component drawings based on those measurements. Wilkes Dec. ¶¶ 18, 19;id. at Ex. 1, 11/5/12 Khokhar Email. Nucap uses the drawings to create the component parts its sells to customers, like Bosch. Wilkes Dec. ¶ 18.

When Bosch sources a particular brake component from a supplier, Bosch typically requests either a drawing of the component part or a physical sample. Wilkes Dec. ¶ 10. Bosch then performs an initial evaluation to determine if the potential supplier's parts conform and fit with Bosch's existing tooling. Id. ¶ 11. "If the new component is an alternative or replacement, Bosch may compare the new suppliers' part drawings to the part already being provided [by the original supplier] to assure that they are close in shape and dimensions." Id. To be clear, Bosch does not request drawings from its suppliers, including Nucap, in order to develop its own competing parts. Instead, Bosch uses the drawings to determine if the components would work with its existing brake components, or so that it could develop its own mold tool to work with the new components. Id. at ¶ 13.

B. Bosch-Nucap Relationship

The parties dispute when exactly Bosch began purchasing aftermarket brake components from Nucap, but it was no later than 2009. Pls.' Resp. DSOF ¶ 14. Bosch ordered its parts by submitting purchase orders to Nucap; the purchase orders initially went to Nucap customer-service representatives. R. 1140.10, Barruch Emails. Although Nucap's internal process of fulfilling the purchase orders is somewhat opaque, it is undisputed that Bosch's purchase orders were also sent to Nucap's senior-level executives at least 11 times after July 2011. Pls.' Resp. DSOF ¶ 27. Once Nucap received and processed the purchase orders, Nucap would ship thegoods to Bosch, along with invoices, packing lists, and bills of lading that referenced specific Bosch purchase-order numbers. Id. ¶¶ 15, 18. The invoices included some written text that addressed the calculation of interest charges, while the packing lists specified the time in which Bosch could report quantity discrepancies. Id. ¶ 21.

As is Prologue in countless commercial cases, the parties never executed a formal supply agreement outside of the purchase orders. R. 1166, Defs.' Resp. PSOF ¶ 15. In April 2010, however, the parties traded drafts of a Purchase and Supply Agreement. R. 1142.35, 4/9/10 Butera Email. At one point, Vince Butera, Nucap's Chief Executive Officer, sent Chris Thornton, Bosch's Purchasing Manager, a draft agreement in which Butera deleted a paragraph that Bosch had proposed. Id. at 5. There is no evidence that the parties ever executed this agreement. Nonetheless, between September 1, 2010 and November 10, 2014, Nucap filled thousands of Bosch purchase orders and, in exchange, received more than $170,000,000 from Bosch. Pls.' Resp. DSOF ¶¶ 20, 43. Throughout this time, Nucap also gave Bosch access to its drawings of the component parts that Bosch was purchasing. Id. ¶ 25.

Although the parties dispute the exact date, no later than September 2010, Bosch began including the following language in its purchase orders, referring to an online set of terms and conditions (the eye-numbing capitalization is in the original):

THE TERMS AND CONDITIONS OF PURCHASE ARE AVAILABLE AT WWW.BOSCHNASUPPLIERS.COM AND INCORPORATED HEREIN BY REFERENCE, SHALL BECOME A BINDING AGREEMENT UPON SELLER COMMENCING PERFORMANCE OF THIS PURCHASE ORDER, OR UPON

SELLER OTHERWISE ACKNOWLEDGING ACCEPTANCE, WHICHEVER OCCURS FIRST.

Pls.' Resp. DSOF ¶ 17. Also, backing up a few months, in February 2010, Bosch sent Nucap a letter stating that it expects their "suppliers to understand and comply with the requirements in the Bosch Supplier Manual. The contents of the Supplier Manual are accessible via www.boschnasuppliers.com." Id. ¶ 19.

Bosch's terms and conditions of purchase (which the parties call "POTCs") purported to set out the terms that governed the parties' relationship, including warranties, customs, and remedies for incomplete or delayed deliveries. R. 1121, Bosch POTCs. The POTCs also included provisions that would preclude Nucap from suing Bosch for any alleged misuse of its component part drawings or other intellectual property. See, e.g. id. §§ 23.1, 23.4 (prohibiting Seller from asserting claims against Buyer "with respect to any technical information that Seller has disclosed ... except to the extent expressly covered by a separate written confidentiality and/or license agreement"); id. §§ 22.4, 23.3 (establishing all intellectual property provided to Buyer and relating to the manufacture of the parts as the "sole and exclusive property of" the Buyer and assigning all "copyrights and moral rights" in the IP to the Buyer). According to Thornton (Bosch's Purchasing Manager), Bosch "would never eliminate the Bosch terms and conditions of purchase from the agreements that we have with suppliers. We just wouldn't do business with a company that would not agree to our terms and conditions of purchase." R. 1118.12, Thornton 30(b)(6) Dep. at 250:17-21.

On March 2, 2011, Bosch sent Nucap a draft "Purchase and Sale Agreement" and a "Corporate Agreement," both of which incorporated the POTCs. Pls.' Resp. DSOF ¶¶ 28, 29. Bill Murray, Nucap's Vice President of Global Sales, discussed both agreements with other Nucap executives and Nucap's in-house legal counsel, but did not sign it. Id. ¶ 30. A few months later, on May 17, 2011, Murray sent Thornton an email listing ten "Talking Points for Contract," and specifically stated that Nucap "cannot have any blind acceptance of Bosch standard terms and conditions." Id. ¶ 33. The parties later met in person that same day to discuss a variety of matters, including Bosch's proposed contracts. Id. ¶ 34. Following the meeting, Nucap's Greg Andes prepared a summary email in which he stated, "[h]ave agreed on all of our issues on the contract, but [Bosch] wants us to tell them what issues we have with their standard terms and conditions on their PO's. They will then address with their legal department." Id. ¶ 35.

The parties dispute what happened next. Bosch contends that it did not hear any objections to the POTCs from Nucap following the May 17, 2011 meeting. R. 1116, DSOF ¶ 37; Thornton 30(b)(6) Dep. at 248:22-249:4, 253:6-8, 270:24-271:8. Nucap asserts that Butera told Thornton that Nucap "rejected" the POTCs and that it "would not go through the provisions one-by-one in multiple conversations between March and June 2011." Pls.' Resp. DSOF ¶ 37; R. 1143.8, Butera Dep. at 97:18-25, 180:23-181:15, 244:25-246:12. The parties met again on May 31, 2011, but no one raised the POTCs. Pls.' Resp. DSOF ¶ 39. Nucap also continued to fulfill Bosch's purchase orders without objection. Id. ¶ 40.

There appears to have been no meaningful correspondence between the parties about additional agreements for a couple of years. Then, in 2013, discussions on confidentiality and disclosure ramped up. First, in March 2013, Don Garrett, Bosch's Purchasing Director, and Robert Wilkes, Bosch's Director of Product Development, alerted other Bosch employees that their practice of using supplier drawings needed to be adjusted to avoid misusing the suppliers' intellectual property. R. 1141.4, 4/3/13 Wilkes Email. Wilkes shared this discussion with Murray (Nucap's Vice President of Global Sales). R. 1141.9, 3/22/13 Wilkes Email. Wilkes then sent a follow up email to Murray and Metu Khokhar, Nucap's Chief Operating Officer, explaining "what [Bosch was]...