After some 18 years as President of Abrasic 90, Inc., a manufacturer of grinding and sanding discs doing business as Camel Grinding Wheels, U.S.A. ("CGW"), defendant Joe O'Mera left to set up a competing abrasives business for Weldcote Metals, Inc. ("Weldcote"). He took with him some CGW files containing, the company contends, trade secret information about its pricing, customers, and suppliers. CGW has moved for a preliminary injunction against Weldcote, O'Mera, and Colleen Cervencik, another CGW employee who left to work for Weldcote, seeking to bar the defendants from operating in the abrasives industry and from using its trade secrets. But CGW has failed to show that a preliminary injunction is warranted. Largely because it did not protect its supposedly secret information, CGW has not shown that it is likely to succeed on the merits of its claims under any legal theory that could serve as the basis for a preliminary injunction. The injunction it seeks, moreover, is disproportionate to any harm it is likely to suffer and disserves the public's interest in fostering competitive markets. Accordingly, the motion for preliminary injunction, ECF No. 44, is denied.
I. BACKGROUND
CGW is a company based in Niles, Illinois that manufactures and sells over 5,000 abrasive products. CGW purchases materials from about 45 suppliers and sells its finished abrasive products through its internal sales force and a cadre of independent sales agents to roughly 4,000 distributors. About half of CGW's distributors receive prices from CGW that are discounted against CGW's "Mix & Match" catalogue, which is CGW's product-by-product starting point for pricing that is distributed to thousands of recipients. A software program tracks CGW's many thousands of pieces of transactional data and exports that data into various Excel spreadsheets. CGW stored its business and financial information-which included these Excel spreadsheets, the Mix & Match catalogue, sales reports containing information such as CGW's profitability by customer and by item, and other information such as shipping packaging weights-on CGW's shared drive (collectively, the "information at issue"). CGW's employees could access and work on the information on the shared drive as desired, and CGW sent some of the information, such as the sales reports, to its independent sales representatives.
From 2000 to January 29, 2018, Joseph O'Mera was CGW's President. O'Mera was also a director of CGW beginning at least as early as 2005.
O'Mera had an employment agreement with CGW from 2002 through 2007
So far as the record reflects, no other CGW officer or employee has ever been subject to a non-compete or confidentiality provision in an employment contract. CGW's employee handbook, which O'Mera approved in 2010, provides that employees may not "reveal or discuss information about CGW, its customers or its employees when outside of the company," Joint Ex., Hr'g on Mot. for Prelim. Inj. ("Joint Ex.") 1, at 3, but it does not impose any obligations on employees after their employment at CGW ends. CGW's independent sales representatives signed agreements informing them that "[c]ustomer information, pricing, strategies and sales analysis records" were considered confidential and requiring them to return CGW property when their relationships with CGW ended, Pl.'s Prelim. Inj. Ex. ("Pl.'s Ex.") 45 ¶¶ 11, 14, but nothing in the record suggests that others with access to the information at issue-such as CGW's own employees-entered into similar agreements or were likewise instructed regarding the confidentiality of certain categories of information. CGW also did not generally require others who had access to some of the information at issue, such as CGW's suppliers and distributors, to sign confidentiality or non-disclosure agreements.
Defendant Colleen Cervencik began working at CGW in 1998. She served as CGW's IT Manager from 2012 until approximately April 2018 when she was effectively demoted to a position as a "Special Projects Manager." During her tenure as the IT Manager, Cervencik maintained the shared drive where the information at issue was stored. She generally granted "office personnel" access to the shared drive if they asked for it (there is no evidence that any employee who sought access to the shared drive was denied such access), and about 39 of 108 CGW employees were given access. If an employee was given access to the shared drive, no inquiry was made as to whether the employee needed access to any particular subset of the information at issue, and there were no restrictions as to which folders within the shared drive that the employee could access; that employee had access to the entire shared drive. Nor were any restrictions imposed on what could be saved to the shared drive. None of the folders or files were password protected or encrypted. There were also no restrictions placed on the employee's ability to download the files, save them to his or her hard drive or an external storage device, print them, or
In February 2017, CGW hired Ana Maria Gheciu, who holds a degree from DeVry in network and telecommunications management, to work for Cervencik. Around April 2018, Gheciu replaced Cervencik as IT Manager. Gheciu suggested that CGW implement additional security measures, including limiting employees' access to certain files within the shared drive and implementing an "Acceptable Device Use Policy" requiring that employees remove company data from their personal devices at the time of their separation. See, e.g. , Joint Ex. 3. CGW did not implement those measures. Indeed, notwithstanding her recommendation to limit the dissemination of company materials via personal devices, Gheciu sent some of the information at issue to O'Mera's personal email account.
In 2017, O'Mera began engaging in business talks with Zika Group Ltd. ("Zika") about Zika's plans to start an abrasives business that would compete with CGW (among others). Those talks ultimately culminated in plans for Zika to acquire and expand the business of Weldcote, historically a manufacturer of welding products, to sell abrasives and safety products to welders. O'Mera accepted Zika's offer to work as CEO of Weldcote on January 28, 2018. But while O'Mera was still President of CGW, in April 2017, O'Mera sent an email to a Zika executive informing the Zika executive that O'Mera had obtained from VSM, a CGW supplier, a commitment to "work with [him] under the same exact pricing terms on their entire product line." Pl.'s Ex. 44, at 1. Other emails in the same thread suggest that O'Mera was engaging in similar discussions with CGW's major China vendor, Ningbo. O'Mera told Zika that O'Mera generally had "all the suppliers lined up." Id. at 5. O'Mera also wrote in the thread that he had "spent an enormous amount of time on new product testing," and that it would be best if he left CGW before CGW could benefit from his work. Id. O'Mera denies ever having conducted due diligence for Zika with respect to its acquisition of Weldcote, but he at least provided advice about the focus of some of Zika's due diligence work and met with Zika in North Carolina, where the Weldcote facility was then located, to discuss matters related to that potential acquisition. See Pl.'s Ex. 44; Tr. of Proceedings, Prelim. Inj. Hr'g, Oct. 19 & 22, 2018 ("Hr'g Tr.") 47:19-48:25, 160:21-23.
O'Mera resigned from CGW on the afternoon of January 29, 2018, to join Weldcote as its President. Shortly before resigning, O'Mera gathered his CGW laptop and other equipment from his home and turned it in to CGW. O'Mera kept, however, a flash drive storage device containing both personal files and some of the information at issue. Included among the files O'Mera kept was CGW's "All Items File," which contained a comprehensive summary of CGW's transactional information, including sales data, prices, and costs for its products and the identities of suppliers and distributors. When O'Mera left CGW, neither Cervencik nor Gheciu nor anyone else at CGW asked or instructed him to delete company information that had been emailed to his personal email address or
Jay Hickman worked in sales at CGW from 2005 until February 20, 2018. When Hickman joined CGW, he brought with him the business of 30 to 50 of the more than 200 distributors with whom he had previously worked. Fritz Klug worked in sales at CGW from 2000 until February 20, 2018. When Klug joined CGW, approximately 25% of his prior customers followed him to CGW. Both Hickman and Klug joined O'Mera at Weldcote a few days after resigning from CGW. When Klug resigned from CGW, he told a CGW human resources employee that he was dropping "everything" off, Hr'g Tr. 227:22-23, but he retained a memory stick that contained some of the information at issue.
A few months later, O'Mera offered Cervencik a position at Weldcote as its Purchasing manager. On June 16, 2018, Cervencik accepted O'Mera's offer. Over the following week, O'Mera and Hickman asked Cervencik to obtain some of the information at issue from the CGW shared drive. O'Mera asked Cervencik to supply CGW data regarding "VSM roll ordering," information regarding a price increase given to CGW by Inter Abrasives, and data regarding CGW's consumption of flap disc rolls. Pl.'s Ex. 16. Hickman also asked Cervencik to obtain some of the information at issue, explaining that he could use her help "with sales from western sales areas that I cover now, and had not for the last 5 years." Pl.'s Ex. 17. Cervencik obtained the information O'Mera and Hickman requested before she resigned from CGW on June 22. O'Mera, however, placed the order for which the VSM roll ordering data he requested from Cervencik was relevant before Cervencik had an opportunity to provide him with that data. Cervencik also took with her when she resigned from CGW three thumb drives containing information at issue because she believed it might be helpful to her at Weldcote. When O'Mera, Klug, and Cervencik separated from CGW, no one asked them whether they had any confidential CGW information in their possession or demanded that they return it.
Within a few weeks after Cervencik resigned, Gheciu discovered that Cervencik had deleted her working folder from the CGW network and that O'Mera had texted Cervencik to obtain CGW information. As a result, CGW hired QDiscovery LLC, d/b/a Forensicon, to examine the integrity of its network. The damage assessment cost CGW more than $ 20,000. First Am. Compl. for Inj. and Other Relief ("Am. Compl.") ¶ 190, ECF No. 41.
After joining Weldcote, O'Mera, Klug, and Hickman discussed the CGW information at issue, much of which had been uploaded to Weldcote computers. They used the data as a general reference point and a benchmark when determining some of Weldcote's initial needs. Some of the information at issue was used to confirm that CGW suppliers were charging Weldcote the same prices they were charging CGW. Weldcote employees have also sent some of the CGW information at issue to Weldcote's sales reps and instructed them to target key CGW distributors. Cervencik claims that she has not used any of the information at issue beyond opening one of the spreadsheets before quickly closing it. O'Mera has obtained at least some of the information at issue, including CGW's prices, from distributors, and other information such as the identity of suppliers can be readily ascertained from publicly available sources. Although suppliers generally do not disclose to a manufacturer the exact prices that they charge other manufacturers, suppliers generally provide information about which products are the best-sellers and the level at which those products should be priced.
As of the preliminary injunction hearing, Weldcote was working with approximately six abrasives suppliers and planned to sell about 900 abrasives products once its abrasives business is operating. Weldcote had already purchased approximately one-year's worth of inventory from suppliers, invested over $ 3 million, and had incurred $ 2 million in debt in connection with its abrasive business. CGW concedes that as of November 30, 2018, it cannot point to lost profits as a result of the defendants' conduct, but nevertheless maintains that a preliminary injunction is necessary to protect it from the future irreparable harm it will suffer once Weldcote begins selling abrasive products. CGW's preliminary injunction motion seeks to bar Weldcote from entering the abrasives business, from doing business with CGW's suppliers or distributors, and from using the information at issue. The defendants request that the Court deny CGW's motion for a preliminary injunction or, in the alternative, enter a preliminary injunction of a narrower scope.
II. DISCUSSION
The Seventh Circuit recently has provided a definitive statement of the standard that governs requests for preliminary injunctions:
An equitable, interlocutory form of relief, a preliminary injunction is an exercise of a very far-reaching power, never to be indulged in except in a case clearly demanding it. It is never awarded as a matter of right. To determine whether a situation warrants such a remedy, a district court engages in an analysis that proceeds in two distinct phases: a threshold phase and a balancing phase.
To survive the threshold phase, a party seeking a preliminary injunction must satisfy three requirements. It must show that: (1) absent a preliminary injunction, it will suffer irreparable harm in the interim period prior to final resolution of its claims; (2) traditional legal remedies would be inadequate; and (3) its claim has some likelihood of succeeding on the merits.
If the moving party satisfies each of these requirements, the court proceeds to the balancing phase of the analysis. In the balancing phase, the court weighs the irreparable harm that the moving party would endure without the protection of the preliminary injunction against any irreparable harm the nonmoving party would suffer if the court were to grant the requested relief. In so doing, the court employs a sliding scale approach: the more likely the plaintiff is to win, the less heavily need the balance of harms weigh in his favor; the less likely he is to win, the more need it weigh in his favor. Where appropriate,this balancing process should also encompass any effects that granting or denying the preliminary injunction would have on nonparties (something courts have termed the public interest).
Valencia v. City of Springfield, Illinois ,
Applying this standard, CGW's request for preliminary injunctive relief falls short. As to its principal claim-that the defendants misappropriated its trade secrets-CGW has shown neither an adequate likelihood of success on the merits nor that it would suffer irreparable harm without injunctive relief. To the extent that CGW's state law theories rely on similar allegations about the misappropriation of confidential information, they too are unlikely to succeed as they are preempted by the relevant trade secret statutes. And to the extent that any claims are not preempted, those claims fail because CGW has not shown (or even argued) that non-preempted conduct continues to cause irreparable harm.
A. DTSA and ITSA
CGW's lead claim is that the defendants are liable for their misappropriation of trade secrets under the Defend Trade Secrets Act ("DTSA"),
1. Likelihood of Success on the Merits
"A party moving for preliminary injunctive relief need not demonstrate a likelihood of absolute success on the merits. Instead, he must only show that his chances to succeed on his claims are better than negligible." Valencia ,
To prevail on a misappropriation of trade secrets claim, CGW must show that the information taken by the defendants was "(i) secret (that is, not generally known in the industry), (ii) misappropriated (that is, stolen from it rather than developed independently or obtained from a third source), and (iii) used in the defendants' business." Composite Marine Propellers, Inc. v. Van Der Woude ,
Although courts have identified many factors that can be relevant to an assessment of whether information qualifies as a trade secret, there are two basic elements to the analysis. For the information at issue to be considered a trade secret, it must have been "sufficiently secret
a) Nature of the Information at Issue
Here, much (though not all) of the information at issue is "publicly available" in the sense that parties other than CGW have access to that information, but the compilation of those pieces of information may nevertheless be protectable as a trade secret. Business and financial information, including lists of actual or potential customers or suppliers, can qualify as a trade secret. See
At least some of the information at issue satisfies these criteria. Undoubtedly the best example is CGW's "All Items File." That voluminous file-which O'Mera acknowledged he took with him when he left CGW-included both public and non-public information on the pricing and sales of all of CGW's products, its suppliers and costs, and financial metrics derived from this
The manner in which the information shared with suppliers and distributors was compiled could, in theory, transform the bits of information that on their own are not trade secrets into trade secrets in their compiled format. Accordingly, the Court has no difficulty concluding that some of the CGW information at issue was protectable as a trade secret. The problem for CGW, however, is that it did virtually nothing to protect that information to preserve its status as a trade secret.
b) Secrecy of the Information at Issue
CGW took almost no measures to safeguard the information that it now maintains was invaluable to its competitors. The company's almost total failure to adopt even fundamental and routine safeguards for the information at issue belies its claim that the information has economic value to its competitors and makes it quite unlikely that CGW will ultimately prevail on its trade secret claim. See Fail-Safe, LLC v. A.O. Smith Corp. ,
CGW's data security was so lacking that it is difficult to identify the most significant shortcoming, but the company's failure to require those with access to its supposed trade secrets to enter into non-disclosure and confidentiality agreements has to be counted among the most fundamental omissions by the company. Failure to enter into nondisclosure or confidentiality agreements often dooms trade secret claims. See, e.g. , Arjo, Inc. v. Handicare USA, Inc. , No.
The failure to use confidentiality agreements is symptomatic of the non-existence of any CGW policy concerning the confidentiality of its business information. So far as the record reflects, there was no policy at CGW regarding confidentiality beyond a vague, generalized admonition about not discussing CGW business outside of work. That admonition did not define, delineate, or specify which information was considered confidential. See Gillis Associated Indus., Inc. v. Cari-All, Inc. ,
In the absence of an articulated and developed confidentiality policy, it is not surprising to find that CGW did nothing to train or instruct employees as to their obligation to keep certain categories of information confidential. See Jackson ,
O'Mera's employment agreement required that he return CGW documents that he had in his possession upon the termination of the agreement or his employment, but that agreement was only in effect through 2012 at the latest and then was not renewed in 2013. O'Mera's agreement also did not delineate which CGW information was subject to heightened confidentiality protections. The company's contracts with independent sales representatives instructed them that certain information was considered confidential and required that they return CGW property when their relationships with CGW ended, but those agreements governed only independent sales representatives who were not a part of CGW's internal sales team (e.g. , not Klug or Hickman), which is only a subset of the dozens of people who had access to the information at issue. And there is no evidence of record that CGW took any steps to ensure that such information was actually returned to the company when those relationships ended.
CGW seems to have employed a similar policy of benign neglect when employees left the company. Although employees were instructed to return CGW property when they separated from CGW, they were not asked whether they possessed any of the information at issue or instructed to return or delete such information. Requiring that departing employees or contractors return company property when their relationship with the company ends is a routine, normal business practice, but precautions must go "beyond normal business practices" for the information to qualify for trade secret protection. Weather Shield Mfg., Inc. v. Drost ,
Apart from the absence of non-disclosure and confidentiality requirements to safeguard the information at issue, Cervencik was put in charge of maintaining the security of CGW's data and information, but she had no training in data security (or virtually any other area of IT management) and was ill-equipped to identify, much less champion, sound data security practices. Neither side presented any expert testimony on the subject (understandable in light of the expedited proceedings), but no expert is needed to know that the practices CGW followed during Cervencik's tenure as IT manager were
Cervencik granted access to the shared drive where the information at issue was located to 39 of CGW's 108 employees. "Restricting access to sensitive information by assigning employees passwords on a need-to-know basis is a step in the right direction" to obtain trade secret protection. Liebert ,
Consistent with this laissez-faire approach to data security, Cervencik assigned the same password to many CGW employees to facilitate their access to the shared drive, files were not encrypted, and there were no restrictions on employees' ability to access, save, copy, print, or email the information at issue. See Arcor, Inc. v. Haas ,
Although presumably as President, O'Mera made the decision to put Cervencik in a position overseeing IT security, others-such as those on Gamal's board or
Perhaps the most telling evidence that CGW did nothing in particular to safeguard its supposed trade secrets is that it took no measures to protect that information that were in any way different (much less more exacting) than the steps that it took to protect information that was indisputably not a trade secret. See Opus Fund Servs. (USA) LLC v. Theorem Fund Servs., LLC , No.
In the absence of meaningful security measures taken to safeguard its putatively valuable trade secrets, CGW argues that no amount of computer security could have stopped high-ranking officers like O'Mera and Cervencik from accessing and copying the data they wanted to take with them. That argument fails to persuade for several reasons. Most fundamentally, it is likely wrong and in any event hardly a given; a robust and well-articulated data security program may well have deterred the retention and use of such information by O'Mera and other departing employees. Beyond that, the argument misses the mark. The question is not whether CGW could have prevented the misappropriation it alleges but rather whether it took steps to safeguard data that were commensurate with CGW's claim that the information has economic value by virtue of its secrecy. That test is objective: Did CGW employ data security measures reasonably consistent
2. Irreparable Injury
Even if CGW could show a better than negligible likelihood of success on the merits of its trade secret claim, CGW has failed to establish that Weldcote's access to the information at issue is likely to cause CGW to suffer irreparable harm for which it has no adequate remedy at law. See Winter v. Natural Resources Defense Council, Inc. ,
Given the defendants' experience in the industry and publicly available information, the defendants likely already knew or could have learned which suppliers and distributors they should approach. Even if O'Mera could not have memorized all of the data contained in the information at issue (indeed, his inability to remember it is likely why he wanted it), he had a deep understanding of the most important data, including prices and profit margins for the best-selling products from his nearly two decades of experience as CGW's president. What he likely could not remember-and what he likely needed to reference the data for-were the lower volume products and the precise numbers for those data points of which he already had a general sense. Many of O'Mera's customers (as well as those of Klug and Hickman) followed them from their previous jobs to CGW; these relationships were forged over decades and it is reasonable to infer that many customers of CGW would willingly follow O'Mera to Weldcote regardless of whether it had access to the information at issue. The evidence established that a number of factors other than price also influence the choices of customers in the abrasives market, including the quality and brand of the product, the personal relationship between the individuals negotiating, and other factors that are unrelated to whether the defendants have a marginally better understanding of how products should be priced by virtue of knowing how CGW's products were priced many months ago.
Further, CGW has not shown that having access to the information at issue has allowed or will allow the defendants to
Weldcote has also already been able to obtain, or could obtain relatively easily, at least some of the information at issue directly from CGW's distributors. As to CGW's discount pricing, Weldcote can obtain substantially similar information by simply asking its customers what price it needs to beat as to any given product. Although the information provided by distributors might be anonymized-e.g. , a distributor might tell Weldcote that its price needs to be at a certain level to get the distributor's business-knowing the price at which Weldcote needs to set to get the distributor's business is what is valuable to Weldcote, not that a certain named competitor of Weldcote's is selling at that price.
Cervencik testified that she only opened one document but did not use it before closing it because she discovered the information was not useful. And although the VSM roll ordering data O'Mera asked Cervencik to obtain from CGW must have had at least some value to O'Mera (again, otherwise he would not have asked for it), clearly that information was not pivotal because O'Mera went ahead and placed the order for which that data would have been relevant without receiving the data. Using the information as a reference point, benchmark, or confirmation for the defendants that their memory served them as to a particular product's price or profit margin may have some value to the defendants. But to say that the information had some value is not to say its value is great enough for the Court to conclude that irreparable harm to CGW for which there is no adequate remedy at law is likely to flow from the defendants' use of such information.
If CGW ultimately sustains damages as a result of the defendants' alleged wrongful conduct, it may be challenging to quantify such damages, but CGW has not shown that such damages would be unreasonably difficult to quantify if they do materialize. Although "[a] plaintiff may suffer irreparable harm if the nature of the loss makes monetary damages difficult to calculate," E. St. Louis Laborers' Local 100 v. Bellon Wrecking & Salvage Co. ,
CGW's poor prospects of establishing that the information at issue is entitled to trade secret protection necessarily means that it cannot show a better than negligible chance of success on its remaining state law causes of action-breach of fiduciary duty, unfair competition, and unjust enrichment-at least to the extent those causes of action are based on the alleged misappropriation of CGW's confidential business information. That is because they are preempted by either the ITSA or the Delaware Uniform Trade Secrets Act ("DUTSA"), 6 Del. C. § 2001 et seq. And to the extent those state law causes of action are not based on the alleged misappropriation, they cannot provide a basis for injunctive relief because CGW has alleged no prospect of future irreparable harm flowing from anything other than the alleged, and preempted, claim that confidential information was misappropriated for use in Weldcote's business operations.
1. Preemption
State law causes of action that are based upon the misappropriation of confidential business information are preempted by ITSA or DUTSA
To the extent that CGW's state law theories of liability are premised on conduct other than the misappropriation of CGW's confidential business information, however, they are not preempted. See 765 ILCS § 1065/8 (The ITSA does not displace "other civil remedies that are not based upon misappropriation of a trade secret.").
What this means in this case is that to the extent that CGW's remaining state law theories depend on the characterization of the information at issue as trade secret, confidential, or proprietary information, they are preempted by ITSA or DUTSA (and are therefore unlikely to succeed on
In large measure, CGW's state law claims are premised on the purported confidentiality of the information at issue. If the information at issue were not confidential-that is, if CGW had posted all of the information at issue on its website for the general public's consumption-then it is difficult to imagine how the defendants could be said to have unjustly enriched themselves, unfairly competed, or breached the fiduciary duty they owed to CGW by copying and referencing the information just as any other member of the public could. Rather, if the information at issue were publicly available, then the defendants would have been entitled to do with that information exactly as they did. CGW's state theories of relief depend almost entirely on the purported confidentiality of the information at issue and are therefore preempted. And even if CGW has some better than negligible prospect for success on the merits of a state law claim that is not preempted, CGW has not shown that there is any continuing conduct relating to such a claim to enjoin.
2. Irreparable Harm and Adequacy of Remedy at Law
CGW has failed to establish that it is entitled to a preliminary injunction because it has not shown a better than negligible likelihood of success on any claim from which it alleges a threat of future irreparable harm. A claim for injunctive relief requires ongoing or impending harm. Swanigan v. City of Chicago ,
C. CFAA
CGW similarly fails to establish that the defendants' alleged violation of the Computer Fraud and Abuse Act ("CFAA"),
CFAA defines "loss" as "any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of the interruption of service."
But CGW does not allege that it needs an injunction to protect it from future "damage" or "loss" as defined in CFAA. CGW's alleged "loss" from retaining Forensicon to conduct a damage assessment has already been incurred. See Pl.'s Resp. 13 (arguing CGW suffered loss under CFAA, but not alleging any threat of future damages or losses). The kind of harm the CFAA protects against is not the kind of harm from which CGW seeks protection through its preliminary injunction motion. See Kluber Skahan & Assoc., Inc. v. Cordogen, Clark & Assoc., Inc. , No. 08-cv-1529,
D. Balancing of Harms
CGW has not shown a better than negligible chance of success on the merits or a likelihood of irreparable harm for which there is no adequate remedy at law to establish that it is entitled to a preliminary injunction of any scope. But even it had, the balance of harms analysis would still favor Weldcote when considering whether to bar Weldcote from operating in the abrasives industry. The point of assessing the balance of harms is to apportion the risk that injunctive relief is granted, or denied, in error. AM Gen. Corp. v. DaimlerChrysler Corp. ,
No injunction bond could fully compensate for the harm to the innocent Weldcote employees who would likely lose their jobs if the Court were to enter a preliminary injunction as broad as CGW requests. See Roland Mach. Co. v. Dresser Indus., Inc. ,
Weldcote also currently plans to operate in a narrower part of the abrasives industry than CGW, selling fewer products (approximately 900 products rather than 5,000 or more) and working with fewer suppliers (6 rather than 45). Given that Weldcote intends to do business with only a subset of the abrasives industry in which CGW has widespread ties, barring Weldcote from doing business with CGW's suppliers and distributors could be tantamount to an outright ban from the abrasives industry. At worst, for CGW, it faces a new competitor (as to a small portion of its products) who can offer highly competitive prices by virtue of knowing what CGW's costs and prices were as of June 2018. By contrast, the injunction CGW demands would stop Weldcote's entry into the abrasives business in its tracks. As such, on one side of the scale we have somewhat lower profits; on the other, the elimination of an entire business line. The latter would not be an equitable result.
E. Public Interest
Barring the defendants from operating in any subset of the abrasives industry would also disserve the public interest. The protection of trade secrets reflects a "balancing of social and economic interests." Sw. Whey, Inc. v. Nutrition 101, Inc. ,
The public has an interest in free and fair competition. Prohibiting a company from operating is an especially severe remedy that restrains free trade. "The primary purpose of trade secret law is to encourage innovation and development, and the law should not be used to suppress legitimate competition." Am. Can Co. v. Mansukhani ,
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To recap: The Court concludes that CGW has failed to demonstrate a better than negligible chance that it will prevail on the merits of its trade secret claim. Any
Notes
During the period relevant to this law suit, CGW was owned by Gamal, an Israeli corporation. CGW's only two board members based in the United States were O'Mera, who served on CGW's board of directors from 2005 until 2018, and Colleen Cervencik, who served on the board from 2008 until 2015. CGW's other board members were based in Israel.
The term of the agreement may have been extended to 2012, but there is no evidence that the agreement extended past 2012.
The Court analyzes the DTSA and ITSA together "because the pertinent definitions of the two acts overlap." Molon Motor and Coil Corp. v. Nidec Motor Corp. ,
Of course, even if CGW had used non-disclosure or confidentiality agreements, "such an agreement, without more, is not enough." Opus Fund Servs. (USA) LLC v. Theorem Fund Servs. LLC ,
The possible exception to this condition is CGW's efforts (themselves fairly minimal) to protect the confidentiality of its research and development work. None of the information at issue in this case, however, involves research and development materials. And the fact that CGW's took some steps to protect a particular category of information bolsters the inference that it was not concerned about the confidentiality of other information as to which it took virtually no steps to protect.
CGW has not disputed this claim. See, e.g. , Pl.'s Resp. 3 (mentioning but not disputing defendants' contention that suppliers and distributors could share CGW's information with competitors); see also Dryco, LLC v. ABM Indus., Inc. , No. 07 CV 0069,
The parties agree that Delaware law applies to CGW's breach of fiduciary duty cause of action whereas Illinois law applies to CGW's other state law causes of action. The relevant preemptive language of Delaware's DUTSA is identical to that of Illinois's ITSA. Compare 6 Del. C. § 2007 (The DUTSA preempts "other law of this State [Delaware] providing civil remedies for misappropriation of trade a trade secret."), with 765 ILCS 1065/8 (The ITSA preempts "other laws of this State [Illinois] providing civil remedies for misappropriation of a trade secret.").
See also 6 Del. C. § 2007(b)(2) (The DUTSA does not affect "[o]ther civil remedies that are not based upon misappropriation of a trade secret.").
In reaching this decision, the Court acknowledges a seeming anomaly that arises from the extension of ITSA preemption to any common law claim predicated on the misappropriation of information whether or not it rises to the level of a trade secret. Under the current state of the law, a plaintiff who asserts a claim based on the confidentiality of his business information may find himself in a proverbial "no man's land" where he cannot succeed on a trade secret claim because the information does not rise to the level of a trade secret and cannot pursue a misappropriation claim as to such information because it is nevertheless preempted.