                                                                         F I L E D
                                                                  United States Court of Appeals
                                                                          Tenth Circuit

                                                                           JAN 30 2002
                   UNITED STATES COURT OF APPEALS

                          FOR THE TENTH CIRCUIT                      PATRICK FISHER
                                                                              Clerk


 WALTER W. WEIBLER, doing
 business as W Cubed Manufacturing
 & Engineering,

              Plaintiff-Appellant,

 v.                                                     No. 00-1374
                                                    (D.C. No. 96-S-2548)
 UNIVERSAL TECHNOLOGIES,                                 (D. Colo.)
 INC.; JESSE ROGERS,

              Defendants-Appellees.


                          ORDER AND JUDGMENT            *




Before EBEL , KELLY , and LUCERO , Circuit Judges.




      Walter Weibler, doing business as W Cubed Manufacturing & Engineering

(“W Cubed”), sued Universal Technologies, Inc. (“UTI”) and its president, Jesse

Rogers, for misappropriation of trade secrets, unjust enrichment, negligent


      *
         The case is unanimously ordered submitted without oral argument
pursuant to Fed. R. App. P. 34(a)(2) and 10th Cir. R. 34.1(G). This order and
judgment is not binding precedent, except under the doctrines of law of the case,
res judicata, and collateral estoppel. The Court generally disfavors the citation of
orders and judgments; nevertheless, an order and judgment may be cited under the
terms and conditions of 10th Cir. R. 36.3.
misrepresentation, fraud, and promissory estoppel. The United States District

Court for the District of Colorado held a bench trial on the misappropriation of

trade secrets claims, ruled that UTI had misappropriated Weibler’s trade secrets, 1

and awarded Weibler damages in the amount of $111,180. Weibler appeals the

district court’s refusal to award attorney’s fees and its method of calculating

damages. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

                                          I

      Weibler contracted with UTI to manufacture heat exchangers, an integral

part of a plastic waste processor that UTI supplied to the United States Navy

(“Navy”) under a July 1995 contract. 2 The initial contract between UTI and the

Navy required UTI to purchase the heat exchangers from Tranter, a Georgia-based

manufacturer, whose patented titanium heat exchanger cost approximately $3,400

per unit. UTI thought that the Tranter price was too high and asked the Navy to

amend its specifications to allow for other heat exchanger suppliers. In



      1
        Summary judgment was granted on behalf of UTI on the unjust
enrichment claim in October 1998, and the misappropriation of trade secrets
claims against two UTI employees were dismissed with prejudice in September
1998. Appellant voluntarily dismissed his negligent misrepresentation and
promissory estoppel claims at the conclusion of the presentation of his evidence at
trial. At the same time, appellant decided to pursue his misappropriation of trade
secret claims against UTI and Rogers rather than his fraud claims, and as a result
the fraud claims were dismissed.
      2
       Within the plastic waste processor the heat exchanger transfers heat from
hot water, generated by the melting process, into cold sea water.

                                         -2-
November of 1995, the Navy agreed to permit UTI to purchase the heat

exchangers from any manufacturer that could make the product within the Navy’s

test parameters.

      In its search for a qualified manufacturer, UTI located Weibler. UTI gave

Weibler the Navy specifications and a drawing UTI had created of a “reverse-

engineered” Tranter heat exchanger. 3 As they began working together, Weibler

told Rogers that Weibler’s ideas were to be kept secret. Rogers agreed and told

Weibler that UTI had no intention of building heat exchangers.

      The parties initially agreed to have Weibler manufacture the entire heat

exchanger. However that agreement was later modified such that Weibler was to

build the interior component of the heat exchanger and UTI would build the

exterior component. Weibler never furnished UTI with any drawings of his

interior component or instructions as to how the exterior   component was to be

manufactured.

      In June 1996, a UTI employee, Quentin Horton, created shop drawings of

the heat exchanger Weibler and UTI were developing. As the development

process continued, Rogers periodically directed Horton to amend the drawings.

UTI subsequently manufactured and shipped its own heat exchangers based on


      3
       UTI had dismantled a Tranter heat exchanger in order to understand the
construction and method of operation of this particular type of titanium heat
exchanger.

                                           -3-
these shop drawings because Weibler failed to develop an interior   component for

the heat exchangers able to meet the Navy’s test parameters.

      Based on the record evidence, exhibits, and testimony of the parties, the

district court held that UTI had misappropriated Weibler’s trade secrets. The

district court did not award attorney’s fees because it found that UTI’s

misappropriation of Weibler’s trade secrets was not willful and malicious as

required by the Colorado Uniform Trade Secrets Act. Finally, the court

concluded that a reasonable royalty was the appropriate method for measuring

damages. The court calculated this reasonable royalty as a fair price for licensing

UTI and Rogers to make use of the trade secrets in the manner they intended at

the time of the misappropriation. This calculation awarded Weibler the cost of

the Tranter heat exchanger ($3,400 per unit), multiplied by a profit of 15 percent,

multiplied by the number of exchangers delivered to the Navy by UTI before the

date of Weibler’s October 1998 patent (218 exchangers). 4 The total damage

award was $111,180.

      Weibler filed post-trial motions arguing that he was entitled to attorney’s

fees and damages based on a disgorgement of profits theory. The district court


      4
        Weibler applied for a patent on a heat exchanger device and the method
of making it in August 1996 . The initial patent application was rejected in
December of 1997. Weibler’s amended application was rejected in April of 1998,
after which he withdrew certain claims and amended others. He was issued a
patent on the remaining twice-amended claims in October of 1998.

                                         -4-
rejected Weibler’s arguments, and Weibler now appeals.

                                          II

      Appellant presents two issues for review by this Court. He first contends

that the district court erred in failing to award him attorney’s fees as authorized

by the Colorado Uniform Trade Secrets Act. Colo. Rev. Stat. § 7-74-105. He

also argues that the trial court erred in refusing to grant disgorgement of profits as

damages for appellees’ misappropriation of his trade secrets.

                                          A

      This court reviews the district court’s award of attorney’s fees for an abuse

of discretion. Griffin v. Steeltek, Inc., 261 F.3d 1026, 1028 (10th Cir. 2001). A

court abuses its discretion when it bases its decision on an erroneous conclusion

of law or when there is no rational basis in the evidence for the ruling. Mann v.

Reynolds, 46 F.3d 1055, 1062 (10th Cir. 1995). The underlying factual findings

are reviewed for clear error. Lancaster v. Indep. Sch. Dist. No. 5, 149 F.3d 1228,

1237 (10th Cir. 1998). “A finding of fact is ‘clearly erroneous’ if it is without

factual support in the record or if the appellate court, after reviewing all the

evidence, is left with a definite and firm conviction that a mistake has been

made.” Cowles v. Dow Keith Oil & Gas, Inc., 752 F.2d 508, 511 (10th Cir. 1985)

(citation omitted).

      Weibler claims the district court erred in refusing to grant him attorney’s


                                          -5-
fees because the evidence showed that UTI’s actions were willful and malicious

as required by the Colorado Uniform Trade Secrets Act. Section 7-74-105 of this

Act states that if “willful and malicious misappropriation exists, the court may

award reasonable attorney fees to the prevailing party.”

      The district court found that appellees’ misappropriation was not willful

and malicious. Finding that appellees’ misappropriation began “with innocent

acts such as UTI creating shop drawings of the heat exchangers because Weibler

would not provide the necessary drawings,” the court concluded that there was no

“element of meaningful control and deliberate action which is normally associated

with willful acts.” (Appellees’ Br., Tab B at 2.) The court also found that

appellees’ behavior was not malicious, concluding that Rogers’s statement to

Weibler at the beginning of their relationship—that UTI had no interest in making

heat exchangers—was truthful and that later developments, including Weibler’s

conduct, caused UTI to reevaluate that position. The record supports these

factual findings and we conclude that the district court’s factual findings are not

clearly erroneous.

      The district court can only award attorney’s fees if it determines that the

misappropriation was willful and malicious. Colo. Rev. Stat. § 7-74-105.

Because the district court properly found that appellees’ misappropriation was not

willful and malicious, it had no grounds for awarding attorney’s fees and did not


                                         -6-
abuse its discretion in refusing to do so.

                                             B

      Weibler also argues that the trial court erred in refusing to grant

disgorgement of profits as damages for appellees’ misappropriation of his trade

secrets. Federal appellate courts apply the trade secrets law of the appropriate

state in assessing the trial court’s damage award. See Roton Barrier, Inc. v.

Stanley Works, 79 F.3d 1112, 1116 (Fed. Cir. 1996). In this case, we apply the

trade secrets law of Colorado. Under Colorado law, “[t]he factfinder has the sole

prerogative to assess the amount of damages, and its award will not be set aside

unless it is manifestly and clearly erroneous.” Sonoco Prods. Co. v. Johnson,

23 P.3d 1287, 1289 (Colo. Ct. App. 2001).

      Under the Colorado Uniform Trade Secrets Act, the fact finder has

discretion in choosing the appropriate measure of damages:

      Damages may include both the actual loss caused by
      misappropriation and the unjust enrichment caused by
      misappropriation that is not taken into account in computing actual
      loss. In lieu of damages measured by any other methods, the
      damages caused by misappropriation may be measured by imposition
      of liability for a reasonable royalty for a misappropriator’s
      unauthorized disclosure or use of a trade secret.

Colo. Rev. Stat. § 7-74-104.




                                             -7-
       The district court used Exhibit 80, a document explaining UTI’s costs for

manufacturing the heat exchangers, to determine that UTI received no profits

from the manufacture of the heat exchangers. The lack of profits thus made

disgorgement of profits an inappropriate measure of damages. As the district

court stated:

       The evidence presented at trial established that Defendants did not
       receive any profits from the manufacture of heat exchangers.
       Defendants’ Exhibit 80 sets forth the costs expended by Defendants
       to manufacture the heat exchangers ultimately supplied to the Navy
       in fulfillment of the contract. Application of those amounts would
       result in a negative damage figure if disgorgement of profits was
       used. Consequently, there is no evidence to support this measure of
       damages for Plaintiff.

(Appellees’ Br., Tab A at 10.)

       Weibler challenges the court’s use of Exhibit 80 arguing that it was

offered without foundation, was inadmissible hearsay, and did not adhere to the

Federal Rule of Evidence 1006 requirements for a summary of financial data.

We review the district court’s decision to admit evidence for abuse of discretion.

United States v. Samaniego, 187 F.3d 1222, 1223 (10th Cir. 1999). We will

reverse evidentiary rulings only when the party timely objected and the error has

affected a party’s substantial rights, unless the error constitutes plain error. See

Fed. R. Evid. 103(a)(1);   United States v. Mendoza-Salgado   , 964 F.2d 993, 1008

(10th Cir. 1992).



                                          -8-
      The timely objection must state the specific grounds for the objection if

the specific ground was not apparent from the context.        See Fed. R. Evid.

103(a)(1); Mendoza-Salgado , 964 F.2d at 1008. In this case, Weibler first

objected to testimony concerning Exhibit 80 on the grounds that it had not been

offered as an exhibit and there was “no foundation that [defendant Rogers]

knows the numbers or . . . created them.” (Appellant’s App. at 329.) After

appellees’ counsel questioned Rogers further, Weibler said simply, “I object.”

(Id. at 330.) Appellees’ counsel continued to question Rogers and then moved to

admit Exhibit 80 again. This time Weibler did not object. (       Id. at 331.)

      Assuming Weibler properly preserved his foundation objection, he has not

established that the district court abused its discretion in admitting Exhibit 80.

Rogers established that he was familiar with the information in Exhibit 80 and

that it had been prepared under his supervision by UTI’s regular accounting staff.

(Appellees’ Br. at 34; Appellees’ App. at 389.) The district court had a rational

basis in the evidence for admitting Exhibit 80 and we conclude that the district

court did not abuse its discretion in doing so.

      During the trial, Weibler only objected to Exhibit 80 on foundation

grounds. It was not until his post-judgment motion that Weibler argued that

Exhibit 80 was improper hearsay, the underlying records were never produced,

and Exhibit 80 was not a business record. ( Id. at 114-18.) Because Weibler


                                           -9-
failed to state these specific grounds for the objection at the time Exhibit 80 was

offered as evidence and they were not apparent from the context, they cannot

serve as the basis for a timely objection to the introduction of Exhibit 80 and we

will not reverse the district court’s evidentiary ruling.     Finally, Weibler does not

suggest that the district court’s admission of Exhibit 80 constitutes plain error,

nor do we find there to be “plain error resulting in manifest injustice.”     See

United States v. Taylor , 800 F.2d 1012, 1017 (10th Cir. 1986).

       Because we find no error in the district court’s admission of Exhibit 80 we

hold that the district court’s damage award is not clearly erroneous.

Accordingly, the judgment is AFFIRMED.



                                                     ENTERED FOR THE COURT



                                                     Carlos F. Lucero
                                                     Circuit Judge




                                              -10-
