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-Scan® product as ...