Is Nike In Trouble for Theft of Golf Club Design? The Court of Appeals for the Fifth Circuit Sends Case Back to the District Court

Misappropriation of trade secrets, negligent misrepresentation, breach of confidentiality, breach of implied contract, and deceptive trade practices… All things that Nike Golf, Impact Golf Technologies, and famed golf club designer Tom Stites were accused of by Triple Tee Golf. Sounds like a great made for TV movie (well at least made for the Golf Channel movie).

First, a little background. In late 2000, Jack Gillig, founder of Triple Tee Golf (TTG), was searching for a company that would fabricate a prototype golf club that he had designed. That’s when Gillig contacted club designer Tom Stites and his company Impact Golf Technologies (IGT). Gillig shared his ideas and designs with Stites, and plans were made to fabricate the prototypes at IGT. However, shortly after their initial meeting, Stites was hired by Nike Golf as its Director of Product Creation. Subsequently, Stites informed Gillig that IGT would no longer be able to make the prototypes. A few years later, while attending a trade show, Gillig noticed that Nike’s CPR Woods looked similar to one of the club designs he shared with Stites. Gillig suspected that Stites had provided Nike with his designs to develop the CPR Woods and other Nike clubs.

As mentioned above, TTG filed a lawsuit against Nike and Stites primarily based on misappropriation of trade secrets. The district court (N.D. Texas) granted Nike’s motion for summary judgment as to all of Triple Tee Golf’s (TTG) pending claims because TTG could not show that Nike had “used” its trade secrets in developing the Nike CPR Woods and SlingShot Irons. The main trade secret involved was directed to a system for weighting golf clubs that is adjustable by the golfer. Since the Nike clubs suspected by TTG of incorporating its trade secrets did not feature weights adjustable by the golfer, the district court concluded that Nike had not “used” TTG’s trade secrets. After granting summary judgment for Nike, TTG became aware of two patent applications that Nike did not disclose during discovery that covered clubs with weighting systems adjustable by the golfer, and thereafter filed a motion for relief from final judgment. The district court denied TTG’s motion noting that the applications had “nothing to do with the issues presented to the court for decision in this case.”

The Fifth Circuit reversed the district court’s grant of summary judgment and remanded the case for further proceedings. In reversing the grant of summary judgment, the Court relied on expert testimony that opined that Nike couldn’t have produced the accused club (adjustable or not) without using certain elements of TTG’s design as specified in its trade secrets. The Court found this evidence sufficient to create an issue of material fact as to whether Nike misappropriated some of the fundamental design elements of TTG’s trade secrets.

Regarding Nike’s two undisclosed patent applications, the Fifth Circuit noted that had they been produced during discovery, the district court likely would not have limited TTG’s evidence to only the accused CPR Woods and SlingShot Irons on any of its claims. Thus, the Fifth Circuit’s reversal of TTG’s denial of post-judgment relief will allow TTG to expand its claims to include any misappropriation of its trade secrets in any Nike club covered by the two applications.

It will be interesting to see how this case shakes out…

The Order (issued on April 17, 2007) from Court of Appeals for the Fifth Circuit is found here.

David Dawsey – The Golf Industry Patent Attorney