Independent Disclosure Of Trade Secrets Precludes Preliminary Injunctive
The U.S. Court of Appeals for the Fourth Circuit found no abuse of discretion and affirmed a district court's refusal to issue a preliminary injunction that would have enjoined a former employee from working for a competitor, where the record reflected a "strong possibility" that the competitor had already learned much of the information at issue independently. Technology Partners, Inc. v. Hart, Case No. 08-1651 (4th Cir., Sept. 23, 2008) (Duncan, J.) (unpublished opinion).
Technology Partners, Inc. (TPI), a software provider to the healthcare industry, sued its former employee, Brian Hart, claiming that Hart's employment with rival AMICAS would breach his non-compete covenants and result in the misappropriation of TPI's trade secrets.
Hart began work at TPI in 2003 as an hourly-wage programmer. Hart worked his way up through the ranks at TPI and its subsidiaries. In January 2008, Hart accepted a position at TPI as vice president of product management. At that time, he signed a new employment agreement, which included covenants not to compete. Hart had access to all of TPI's computer systems, server records, databases, product development, technology, client lists and confidential financial and business information.
In late 2006 and early 2007, AMICAS considered acquiring TPI and conducted due diligence investigations which familiarized AMICAS with TPI's financial, business and operational underpinnings. In the end, AMICAS did not acquire TPI, but became co-owner of TPI's flagship product, IMAGINEradiology software. TPI assigned Hart to oversee the installation of and training support for the software at AMICAS. In early 2008, AMICAS made Hart an offer and Hart resigned from TPI in April 2008. About three weeks later TPI moved for preliminary injunctive relief preventing Hart from joining AMICAS. The lower court denied the motion and TPI appealed.
The lower court applied the so-called Blackwelder three-part test for preliminary injunctive relief: balance of harms, likelihood of success on the merits and public interest. In balancing the harms, the lower court concluded that the balance did not tip in favor of either party—AMICAS had likely already and independently acquired much of the disputed information, undermining TPI's claim of irreparable harm, while Hart would likely lose the increased compensation at his new job.
On appeal, TPI argued, inter alia, that the lower court erred in its balancing analysis. The Court disagreed, pointing out that "[a]s to the harm to TPI, the record reflected a strong possibility that AMICAS had already learned much of the information at issue independently of Hart, either through its due diligence during earlier negotiations with TPI or through the [deal to purchase the IMAGINEradiology software]"—this "significantly mitigated any potential harm to TPI." Moreover, the Court found no fault in the lower court's conclusion that TPI had not shown likelihood of success on the merits.
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