might agree that Flexible could not show immediate, irreparable harm because it waited three years before seeking such an injunction and because lost sales to a domestic competitor could be compensated in money damages. Flexible, however, is not seeking to enjoin the operation of the hose-making machine; rather, it seeks to prevent World Tubing from moving the hose-making machine out of the country. The Court notes that World Tubing's plan to move the machine overseas is a significant change of circumstance that would place the machine and its technical secrets effectively beyond the reach of this Court. In the context of this material change of circumstance, the elapsed three-year period is understandable, as is Flexible's heightened concern over the planned overseas shipment of the allegedly offending device.
World Tubing also argues that Flexible cannot establish irreparable harm because it has implicitly conceded that money damages are adequate. In its motion for a preliminary injunction, Flexible argues that Primaflex, the prospective recipient of the machine at one point, is not a profitable concern and attaches Primaflex's balance sheet as Exhibit 1. World Tubing argues that Flexible concedes that it would not seek injunctive relief if Primaflex was a profitable corporation. Although World Tubing is correct that a preliminary injunction will not issue where money damages will be adequate compensation, see Jackson Dairy, Inc., 596 F.2d at 72, World Tubing reads too much into Flexible's statement concerning Primaflex's financial condition. Indeed, in its motion for a preliminary injunction, Flexible argues that, if the machine is shipped to Scotland, it will lose its trade secrets and a "damage remedy from World Tubing will not be able to compensate Flexible Technologies for its loss."
Courts have recognized that the loss of trade secrets constitutes irreparable harm because money damages are inadequate to compensate the loss. See Computer Associates Int'l, Inc. v. Bryan, 784 F. Supp. 982, 986 (E.D.N.Y. 1992) (Spatt, J.) ("The loss of trade secrets is not measurable in terms of monetary damages . . . [because] 'a trade secret once lost is, of course, lost forever and is thus considered irreparable harm.'") (citing FMC Corp. v. Taiwan Tainan Giant Indus. Co., 730 F.2d 61, 63 (2d Cir. 1984)). Because money damages would not compensate Flexible for the loss of its trade secrets, Flexible has established that it would suffer irreparable harm if the preliminary injunction were not granted.
World Tubing embraces its eleventh-hour proposed stipulation that it will not sell the machine or knowingly display it to third parties and argues that Flexible cannot establish irreparable harm. World Tubing's argument ignores the essence of the parties' disputes. Flexible seeks in effect to prevent the removal of the proceeds of the theft, the machine itself, from effective monitoring and control by this Court. The proposed stipulation would allow World Tubing to capitalize on its allegedly larcenous behavior. Under the proposed stipulation, World Tubing's employees would not be required to execute confidentiality agreements; therefore, these employees could convey Flexible's claimed trade secrets to third persons who are beyond the jurisdiction of the United States courts. The Court recognizes that World Tubing and its employees could engage in similar conduct in Connecticut. However, the Court finds that having the machine in this country, under the supervision of the federal courts, provides for the effective implementation of any order the Court might devise. In sum, the Court is convinced that Flexible has demonstrated that it will suffer immediate, irreparable harm if the preliminary injunction is denied.
B. Likelihood of success on the merits and balance of hardships
To meet the second prong of the preliminary injunction standard by showing a likelihood of success on the merits, the "movant need not show that success is an absolute certainty. It need only be shown that the probability of the movant prevailing is better than fifty percent." Abdul Wali v. Coughlin, 754 F.2d 1015, 1025 (2d Cir. 1985). To succeed on its misappropriation of trade secrets claim under New York law, Flexible must establish (1) that it possessed a trade secret, and (b) that World Tubing used the trade secret in breach of an agreement, a confidential relationship, or as a result of discovery by improper means. Hudson Hotels Corp. v. Choice Hotels Int'l, 995 F.2d 1173, 1176 (2d Cir. 1993); Integrated Cash Management Servs. v. Digital Transactions, Inc., 920 F.2d 171, 173 (2d Cir. 1990).
Flexible has offered substantial evidence in support of its contention that World Tubing misappropriated its trade secrets in building its hose-making machine. This evidence includes Cearny's affidavit, Hall's deposition testimony that he hired Scovil because he had worked on the Flexible machines with him, Hall's deposition testimony describing his visit to Poland and his explanation for the trip that he "wanted to look at the details of that machine," the Polish engineer's deposition testimony that the World Tubing delegation misrepresented themselves as being licensed by Flexi, and Simpson's deposition testimony describing the similarities between the two machines. The Court has also had the opportunity to compare Flexible's and World Tubing's hoses. The striking similarity between the products cannot be denied, and it lends considerable weight to Flexible's claims. The Court finds that, at this stage in the proceedings, the available, credible evidence supports a strong inference that World Tubing misappropriated Flexible's trade secrets. Flexible has demonstrated a likelihood of success on the merits.
The Court also finds that the balance of hardships weighs decidedly in favor of Flexible. In the affidavit of its president, World Tubing states that it seeks to move the machine to Scotland in order to save labor costs. Flexible, on the other hand, asserts that the World Tubing machine incorporates its trade secrets and is about to be shipped out of the country. See FMC Corp., 730 F.2d at 63 ("A trade secret once lost is, of course lost forever."). The case is ready to proceed to trial. A preliminary injunction will not impose an undue burden on World Tubing. Flexible's risk of losing forever its trade secrets clearly outweighs the inconvenience and additional costs imposed on World Tubing by granting the preliminary injunction. The Court therefore holds that the balance of hardships tips decidedly in favor of Flexible.
Because Flexible has satisfied the requirements for a preliminary injunction, the Court grants the preliminary injunction.
II. Motion to Transfer
World Tubing moves pursuant to 28 U.S.C. § 1404(a) to transfer this action to the District of Connecticut. Section 1404(a) provides that "for the convenience of the parties and witnesses, in the interests of justice, a district court may transfer any civil action to any other district or division where it might have been brought." The determination of whether to grant a motion to transfer under section 1404(a) is within the broad discretion of the district court. Red Bull Assocs. v. Best Western Int'l, Inc., 862 F.2d 963, 967 (2d Cir. 1988). The party seeking transfer bears the burden of establishing the propriety of a section 1404(a) transfer. Barr Laboratories, Inc. v. Quantum Pharmics, Inc, 827 F. Supp. 111, 113 (E.D.N.Y. 1993). To determine whether World Tubing has satisfied its burden, a district court should consider the following factors: (1) the convenience of the parties; (2) the convenience of material witnesses; (3) the availability of process to compel the presence of unwilling witnesses; (4) the cost of obtaining witnesses; (5) the relative ease of access to sources of proof; (6) where the events at issue took place; (7) the practical problems indicating where the case can be tried more expeditiously and inexpensively; and (8) the interests of justice in general. Id. After considering these factors and the fact that the plaintiff sensibly does not object to the transfer, the Court concludes that the action should be transferred to the District of Connecticut.
The Clerk of the Court is directed to transfer this action to the District of Connecticut.
Dated: Brooklyn, New York
January 10, 1996
RAYMOND J. DEARIE
United States District Judge
© 1992-2004 VersusLaw Inc.