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Sensus Usa, Inc. F/K/A Sensus Metering Systems, Inc v. Elliott Bay Engineering

July 6, 2011

SENSUS USA, INC. F/K/A SENSUS METERING SYSTEMS, INC., PLAINTIFF,
v.
ELLIOTT BAY ENGINEERING, INC.,
DEFENDANT.



The opinion of the court was delivered by: Ambrose, Senior District Judge

OPINION and ORDER OF COURT

Plaintiff Sensus USA, Inc. f/k/a Sensus Metering Systems, Inc. ("Sensus") has brought this diversity action against Defendant Elliott Bay Engineering, Inc. ("Elliott") seeking declaratory judgment regarding Sensus's obligations under a license agreement it entered into with Elliott. Sensus also alleges breach of the license agreement by Elliott. Elliott, in turn, has filed a first amended counterclaim against Sensus alleging common law claims for breach of contract, unjust enrichment, and a claim for misappropriation of trade secrets in violation of the Pennsylvania Uniform Trade Secrets Act ("PUTSA"), 12 Pa. Cons. Stat. § 5301 et seq. Pending before the court is Sensus's Motion to Partially Dismiss Defendant's First Amended Counterclaim. (Docket No. 10). Specifically, Sensus seeks dismissal of Elliott's unjust enrichment and misappropriation of trade secrets claims. Elliott opposes the motion to dismiss. (Docket No. 17). After careful consideration, Defendant's motion to dismiss is granted in part and denied in part as more fully set forth below.

I. Background*fn1

A. Factual Background

Elliott is a Washington corporation that provides engineering, consulting and related support services in the field of electrical power distribution, power generation, power conversion and industrial controls. It supports new and existing electrical utilities, industrial manufacturing and commercial facilities. In its Answer to Sensus's Complaint, Elliott admitted that Sensus is a Delaware corporation that manufactures and sells products to entities in the energy industry, including manufacturing and selling electric meters to the electric utility market.

In 2004, Elliott was working with Advanced Metering Data Systems, LLC ("AMDS") to add an external remote connect/disconnect capability to AMDS's existing efforts to install its RF AMR transceiver technology into a Sensus iCon meter. In the process of developing the external remote connect/disconnect feature for the integration of AMDS's technology into the Sensus iCon meter, Elliott conceived of, worked independently on and succeeded in placing a remote connect/disconnect switch inside a Sensus iCon meter (i.e. "under glass") for the first time.

In January 2005, Elliott attended a trade show that Sensus representatives also attended. Elliott informed Sensus of Elliott's successful effort of placing a remote connect/disconnect switch "under glass" in a Sensus iCon meter. Sensus eagerly requested Elliott to demonstrate the discovery to the Sensus representatives. Subject to a confidentiality agreement, Elliott showed the preliminary design concept and assembly to the Sensus representatives who were attending the trade show. The Sensus representatives later told Elliott that until Elliott showed them that it could be done, they did not realize that a remote connect/disconnect switch could be housed "under glass," i.e., inside a Sensus meter. The Sensus representatives at the trade show immediately informed Elliott that Sensus would like to have a connect/disconnect switch placed inside its iCon meter and to make this high demand feature available commercially.

In February 2005, very shortly after the trade show, Sensus sent some of its iCon meters to Elliott so that Elliott could continue its work on the design and development of the remote connect/disconnect feature inside a Sensus iCon meter. The challenge presented was to get a switch to fit securely in the existing molded plastic bracket on which the remaining controls for the meter were mounted, taking into account the AMDS efforts described above.

Between February and October 2005, Sensus was working on other changes and improvements to the controls mounted inside the iCon meter. Dale Lange of Elliott interfaced with Sensus representatives to coordinate the new remote connect/disconnect switch design with the other changes on which Sensus was working for the interior of the iCon meter.

Sensus later informed Elliott that it wanted an interior switch for both its 2S and 12S meters. In April 2005, at Sensus's request, Elliott sent Sensus a sample of the switch design, as it had developed through that date, to use the sample at a trade show in Las Vegas. The sample was well received at the Las Vegas trade show. On the heels of the Las Vegas trade show, Sensus informed Elliott that Sensus looked forward to reaching an agreement with Elliott for commercializing the disconnect relay.

Between April 2005 and October 2005, Elliott and Sensus negotiated the terms for commercializing the disconnect relay.*fn2 In August 2005, Sensus announced a partnership with AMDS to incorporate AMDS's FlexNet communications network into Sensus's meters.*fn3 In September 2005, Elliott sent another sample to Sensus. By this time, Elliott and Sensus had negotiated all of the business points in the agreement to commercialize the switch design. Arlen Rummel of Sensus informed Dale Lange of Elliott that Rummel was glad the agreement was behind them and that the next step was to inspect for load voltage before reconnect and finalization of the design for the reset mechanism. On October 3, 2005, Sensus and Elliott executed the License Agreement at issue in this case, the negotiation of which already had been finalized in September.*fn4

In February 2006, Sensus called a meeting to address finalization of integration of the remote connect/disconnect switch into the Sensus meter. At this meeting, Sensus discussed a new meter they were developing and wanted to make sure that the remote connect/disconnect switch as developed by Elliott would fit in this new meter as well. By this point, the issues were focused on getting the functionality of AMDS's FlexNet controls from the control card, where they resided as of that time, up onto the Sensus display board. Eliminating the AMDS control board from the control rack would make more room for the Elliott-designed remote connect/disconnect switch integration and would further solve temperature issues inside the meter. Based on the February 2006 meeting, there was nothing further that Elliott was asked to do relative to integrating the remote connect/disconnect switch inside the Sensus iCon meter. Later in February 2006, Sensus informed Elliott that Sensus now wanted pricing from the third party manufacturer for the 200 amp switch.

During the Spring of 2006, the supplier of the remote connect/disconnect switch used by Elliott in the design began selling a newer model of the switch. Sensus unilaterally determined that it wanted to use the newer model switch. Sensus's internal engineering department undertook on its own to configure bus bars to mount the newer model of the remote connect/disconnect switch in the iCon/FlexNet meter. During that same Spring, however, Sensus enlisted Elliott's assistance to obtain from the switch manufacturer a 3D model of the newer-model switch so that the bus bars could be developed. Elliott worked on behalf of Sensus to obtain the model, drawings, and other requests made to the manufacturer to enable Sensus to configure the mount for the updated switch model using substantially the same principles that Elliott had used to mount the remote connect/disconnect switch inside the Sensus iCon meter. Elliott also worked during the Spring or Summer 2006 on behalf of Sensus to expedite the procurement from the switch manufacturer of the newer model switch.

During the Spring of 2006, Sensus was in discussions with AMDS to acquire AMDS or substantially all of its assets. The acquisition of AMDS and its FlexNet technology combined with the exclusive license from Elliott would give Sensus a significant competitive advantage in the marketplace. In June 2006, Sensus announced the acquisition of all or substantially all of the assets of AMDS.*fn5 Between its acquisition of AMDS and the present, Sensus has announced major contracts with utility companies for the sale of its (formerly AMDS's) FlexNet metering system, which now included the ability to remotely connect and disconnect the customer's service via the switch inside Sensus's meters.

On an unknown date after its acquisition of AMDS's assets, Sensus began producing on its own the remotely enabled connect/disconnect meter, incorporating information, methods, techniques, and devices that Elliott demonstrated to Sensus in confidence and only for a limited purpose.

In June 2010, Elliott requested audit information from Sensus to determine whether, and if so, how many iCon meters had been sold containing the remote connect/disconnect switch that would entitle Elliott to royalty payments. Sensus refused to comply with Elliott's requests for audit information. Elliott contends that in 2010, Sensus fabricated an argument that Elliott had breached its obligations under the License Agreement. According to Elliott, having acquired all of the technology to market and sell meters with the FlexNet communications system and the ability to connect and disconnect a ...


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