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August 23, 2000


The opinion of the court was delivered by: Larimer, Chief Judge.


In this action, PSC, Inc. and PSC Scanning, Inc. ("PSC") seek a preliminary injunction barring one of its former salesmen, defendant Martin J. Reiss ("Reiss"), from working for a competitor, Optimal Robotics Corporation ("Optimal"), at least until February 2001. PSC also seeks related relief including an injunction precluding Reiss from disclosing any trade secrets or confidential information to Optimal that he obtained while employed at PSC.

Because PSC has failed to meet the rigorous requirements for obtaining such relief, the motion for a preliminary injunction is denied. The principal remedy sought by PSC is to bar one of its most successful salesmen from working in the same capacity with Optimal, a company that PSC hopes to compete with commencing in January 2001. Such a remedy — barring a person from working in his chosen field or profession — is generally disfavored except in the most unique circumstances. In sum, the facts developed at the hearing on this matter do not support the relief requested.

In general, to be entitled to a preliminary injunction, a litigant must show "(1) that it will be irreparably harmed in the absence of an injunction, and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits of the case to make them a fair ground for litigation, and a balance of hardships tipping decidedly in its favor." Forest City Daly Housing, Inc. v. Town of North Hempstead, 175 F.3d 144, 149 (2d Cir. 1999). In appropriate circumstances, the owner of trade secrets may obtain an injunction against their use or disclosure by another in breach of his confidential relationship with the owner. See Bridge C.A.T. Scan Associates v. Technicare Corp., 710 F.2d 940, 946 (2d Cir. 1983).

"[A] trade secret is `any formula, pattern, device or compilation of information which is used in one's business, and which gives [the owner] an opportunity to obtain an advantage over competitors who do not know or use it.'" Softel, Inc. v. Dragon Med. & Scientific Communications, Inc., 118 F.3d 955, 968 (2d Cir. 1997) (quoting Restatement of Torts § 757 cmt. b (1939)), cert. denied, 523 U.S. 1020, 118 S.Ct. 1300, 140 L.Ed.2d 466 (1998); accord Ashland Mgt. Inc. v. Janien, 82 N.Y.2d 395, 407, 604 N.Y.S.2d 912, 624 N.E.2d 1007 (1993). In determining whether information constitutes a trade secret, New York courts have considered the following factors: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the business to guard the secrecy of the information; (4) the value of the information to the business and its competitors; (5) the amount of effort or money expended by the business in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Ashland Mgt., 82 N.Y.2d at 407, 604 N.Y.S.2d 912, 624 N.E.2d 1007; accord Hudson Hotels Corp., 995 F.2d 1173, 1176 n. 1 (2d Cir. 1993); Integrated Cash Management Servs., Inc. v. Digital Transactions, Inc., 920 F.2d 171, 173 (2d Cir. 1990).

The Court conduct an expedited, four-day hearing on plaintiffs' application for immediate injunctive relief. The Court heard extensive testimony from Reiss, Linda J. Miller, Senior Vice-President for PSC ("Miller"), and Neil Wechsler, Chief Executive Officer of Optimal ("Wechsler"), on the matters in dispute. The Court also received and considered scores of exhibits and related documentary evidence.

Most of the material facts established at the hearing were largely uncontested. PSC and Optimal have worked as partners for the past several years to manufacture and market one product — an automated self-checkout system for use in grocery stores and other retail establishments. The system is marketed under the trade name "U-Scan®" which is owned by Optimal.

The system, as designed, allows customers to "checkout" and pay for their purchases without the aid of a store employee by using the automated scanning, weighing and cash management system integrated into the unit. Optimal owns the trademark, developed the computer software necessary and designed the configuration of the U-Scan® unit.

Since 1998, PSC's role has been to manufacture and assemble the component parts into the U-Scan® unit for shipment to customers. Customers dealt directly with Optimal concerning terms of payment and service.

Although PSC has other products including scanners, by the terms of the agreement between PSC and Optimal, PSC is precluded from competing with Optimal in the self-scanning business, as long as their contract remains in effect.

The relationship between Optimal and PSC began to deteriorate during the summer of 1999, as the parties discussed terms relating to an extension of their cooperative agreement. The matter came to a head in a September 1999 meeting between the principals of both companies. It became clear at that meeting that the "marriage" between the two was dead. Several weeks later, in late October 1999, Optimal notified PSC that it was exercising its option to terminate the 1998 contract between the parties effective December 31, 2000.

The termination of the relationship allowed PSC to compete with Optimal in the self-checkout industry and PSC began in earnest to design and develop its own system, under the project name "Prowler," to compete with Optimal commencing in approximately February 2001.

Reiss had been employed by PSC for several years as a salesman. When he left PSC in June, 2000, he was Eastern Sales Manager and had several salespersons working under his direction. In addition to his other duties for PSC, he marketed and sold the U-ScanĀ® product as ...

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