of any of the claims on which it bases its application for a preliminary injunction, it has established that serious questions for litigation exist with respect to its claim that Braunstein breached a confidentiality and noncompetition agreement and its claim that DermaRite is using its alleged trade secret customer list and price information to lure away Geritrex's customers. Hence, we must balance the hardships that each party faces in order to determine whether a preliminary injunction is appropriate.
Geritrex has offered evidence that its sales have declined roughly 20%, from approximately $ 2.2 million during 1994 to a projected $ 1.8 million for 1995. Geritrex has as yet offered no convincing evidence that this decline was a result of DermaRite's activities. Madaio testified that he first noticed a drop-off in sales in August 1995 (Tr. 87-88), but he did not produce monthly sales records to support this contention. Nevertheless, it is difficult to imagine that DermaRite's presence in the market could cause a $ 400,000 drop in Geritrex's sales, particularly where purchases by former Geritrex customers represent only about $ 30,000 of DermaRite's sales. Furthermore, the parties do not dispute that the regional marketplace is highly competitive. Indeed, Braunstein offered testimony, as yet uncontroverted by plaintiff, that only 1% of the nursing homes in New York, New Jersey and Connecticut are Geritrex customers (Tr. 307). In such a competitive market, it is by no means clear that plaintiff's losses are attributable to DermaRite, which has only a tiny market share (roughly .14%).
By contrast, the effect of a preliminary injunction on DermaRite would be devastating. It is a fledgling company, with only 35 customers and $ 100,000 in total sales as of the date of the hearing. Braunstein is a minority owner of DermaRite, its president and head of its sales force. A preliminary injunction prohibiting him from competing with Geritrex might well put DermaRite out of business. Furthermore, Geritrex seeks to enjoin DermaRite's entire product line, which would have an obviously catastrophic effect on DermaRite. See Jeffrey Milstein, Inc. v. Greger, Lawlor, Roth, Inc., 58 F.3d 27, 35 (2d Cir. 1995). The balance of hardships, therefore, weighs sharply in defendants' favor.
Plaintiff contends that defendants cannot be heard to complain about potential damage to their business because Braunstein and Minzer invested in DermaRite despite knowing that Braunstein had signed a confidentiality and noncompetition agreement. This argument is, of course, based on the hotly disputed premise that Braunstein signed an agreement. We will not issue a preliminary injunction on such a dubious basis. Plaintiff also argues that we should disregard the potential for hardship to DermaRite because, at the least, Minzer and Braunstein knew before investing that Geritrex considered its customer list and price information confidential. Plaintiff bases this contention on Braunstein's admission that he told Minzer that Madaio had presented him with a confidentiality and noncompetition agreement (Tr. 317-18). While there may be some merit to this argument, it is not sufficient to tip the balance of hardships decidedly in plaintiff's favor.
B. Irreparable Harm
Although our analysis of the merits of the case and the balance of hardships provides a sufficient basis for denying plaintiff's motion, we note that plaintiff has also failed to demonstrate irreparable harm. We are well aware that in a trade dress infringement case, a finding of likelihood of consumer confusion establishes the risk of irreparable harm, see Jeffrey Milstein, 58 F.3d at 31, because of the damage to plaintiff's business reputation that may be presumed to stem from the confusion of its products with another's. We have determined, however, that there is, as yet, no convincing evidence of a likelihood of confusion in this case. Hence, plaintiff may not benefit from the application of this presumption.
We are also well aware that the Second Circuit has held that the damage caused by loss of trade secrets is ordinarily not measurable in terms of money damages. See FMC Corp. v. Taiwan Tainan Giant Indus. Co., 730 F.2d 61, 63 (2d Cir. 1984) (per curiam) ("A trade secret once lost is, of course, lost forever."); Computer Assocs. Int'l, Inc. v. Bryan, 784 F. Supp. 982, 986 (E.D.N.Y. 1992). In this case, however, plaintiff does not contend that there is any danger of defendants disseminating its alleged trade secrets; instead, plaintiff contends only that it will suffer injury from defendants' use of the alleged trade secrets to lure customers away from Geritrex. It seems to us that under these circumstances, the only possible injury that plaintiff may suffer is loss of sales to a competing product. See 4 Rudolf Callmann, The Law of Unfair Competition, Trademarks and Monopolies § 22.37, at 279 (1995) (citing Bayline Partners L.P. v. Weyerhaeuser Co., 1994 U.S. Dist. LEXIS 19638, 31 U.S.P.Q.2d 1051, 1055 (N.D. Cal. 1994)). In the event that plaintiff proves its case at trial and secures a permanent injunction against DermaRite's use of Geritrex's alleged trade secrets, any harm done to plaintiff in the interim should be ascertainable by comparing the customer lists and sales information of the two companies and should be fully compensable by money damages unless defendants are judgment-proof.
In the absence of a presumption in its favor, plaintiff has not demonstrated that it is likely to suffer irreparable harm if DermaRite is permitted to continue its operations until this matter is ready for trial. Plaintiff has alleged only that its sales are projected to be 20% lower this year than last year, and it has provided no evidence of a direct link between defendants' activities and plaintiff's decreased sales.
As plaintiff has failed to satisfy both prongs of the standard for granting a preliminary injunction, we deny plaintiff's motion.
II. Defendants' Motion to Dismiss
Defendants have moved to dismiss plaintiff's claim for copyright infringement of plaintiff's product catalog. Defendant contends, correctly, that registration of the copyright is a pre-requisite to plaintiff's infringement claim. See 17 U.S.C. § 411(a); Whimsicality, Inc. v. Rubie's Costume Co., 891 F.2d 452, 453 (2d Cir. 1989); Carter v. Helmsley-Spear, Inc., 861 F. Supp. 303, 331 (S.D.N.Y. 1994), aff'd in pertinent part, 1995 U.S. App. LEXIS 33708, 1995 WL 711290, at *1 (2d Cir. Dec. 1, 1995). The complaint does not allege that plaintiff has registered a copyright on its product catalog. See Complaint, at P 50 ("Plaintiff is the owner of Copyright Registration No. [left blank] for said product catalog."). Therefore, this court is without jurisdiction to decide plaintiff's claim for copyright infringement, and that claim is dismissed.
For the foregoing reasons, plaintiff's motion for a preliminary injunction is denied. Defendants' motion to dismiss plaintiff's claim for copyright infringement is granted.
Date: January 10, 1996
White Plains, New York
William C. Conner
Senior United States District Judge