Opinion
Civil Action No. 1:04-CV-1708-RWS.
January 5, 2005
ORDER
This case came before the Court for a hearing on Plaintiff's Motion for Preliminary Injunction [15-1]. Defendant's Motion for Leave to File Surreply to Plaintiff's Motion for Preliminary Injunction [30-1] and Plaintiff's Motion for Leave to File Supplemental Reply in Support of its Motion for Preliminary Injunction [34-1]. Pursuant to the rulings made at the hearing and after considering the parties' arguments and briefs, the Court enters the following Order.
As a preliminary matter, Defendant's Motion for Leave to File Surreply to Plaintiff's Motion for Preliminary Injunction [30-1] and Plaintiff's Motion for Leave to File Supplemental Reply in Support of its Motion for Preliminary Injunction [34-1] are hereby GRANTED nunc pro tunc.
Background
Plaintiff Diamond Power International, Inc. ("Diamond Power") is in the business of manufacturing and selling industrial boiler cleaning systems. Defendant Clyde Bergemann, Inc. ("Bergemann") is engaged in a substantially similar business and is a direct and primary competitor of Diamond Power. This case arose out of Bergemann's employment of Wayne Davidson, a former employee of Diamond Power.Prior to October 2003, Davidson was the Manager of U.S. Service Center Operations for Diamond Power. Around October 2003, Bergemann formally hired Davidson as its Manager of its Rebuild Activities. Davidson formally resigned from Diamond Power on October 31, 2003. After his departure from Diamond Power, the company examined the laptop computer that had been issued to Davidson during his employment. Diamond Power found what it believed was evidence that Davidson had transferred proprietary documents from the company — issued laptop to an external drive. As a result, Diamond Power filed suit against Davidson on January 13, 2004, Diamond Power International, Inc. v. Wayne Davidson, civil action no. 1:04-CV-91-RWS. Diamond Power asserted claims for violation of the Georgia Trade Secrets Act, breach of contract, breach of fiduciary duty and loyalty, violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and misappropriation and conversion of property seeking injunctive relief and damages. On January 14, 2004, the Court granted Diamond Power's Motion for ex parte temporary restraining order to permit Diamond Power to obtain duplicate images of Davidson's computer hard drives and equipment. Subsequently the parties entered into a consent restraining order in that case.
After reviewing the images made from Davidson's computer, on June 14, 2004, Diamond Power initiated the instant lawsuit against Bergemann asserting claims for violations of the Georgia Trade Secrets Act, violation of the computer fraud and abuse act, 18 U.S.C. § 1030, misappropriation and conversion of property, tortious interference with business relations, unjust enrichment and tortious interference with contract. On June 17, 2004 the Court entered a temporary restraining order [3] enjoining Bergemann from inter alia, using or disclosing any documents that originated from Diamond Power and from spoilating evidence. The TRO also permitted Diamond Power to make images of the computer and servers of Bergemann.
Both the suit against Davidson (the "Davidson action") and the suit against Bergemann (the "Bergemann action") are now pending before the Court. On July 8, 2004, the Court entered an Order that consolidated discovery in both cases and established deadlines based on the Bergemann action. The Joint Preliminary Report and Discovery Schedule entered into by the parties and approved by the Court indicates that discovery in the two cases is scheduled to close on January 14, 2005.
On October 20, 2004, Diamond Power filed the motions that are now before the Court including the motion for expedited hearing and motion for preliminary injunction. The parties came before the Court on December 15, 2004 for a hearing. At the hearing, the Court granted Plaintiff's Motion for Expedited Hearing and indicated that it will hold an evidentiary hearing on Plaintiff's Motion for Preliminary Injunction. An evidentiary hearing is not always required before the issuance of a preliminary injunction but the Court finds that the facts are sufficiently contested, and the determination of the propriety of injunctive relief will turn on credibility that is best decided at an evidentiary hearing. Four Seasons Hotels Resorts v. Consorcio Bar, 320 F.2d 1205, 1211 (11th Cir. 2003).
The Court will hold an evidentiary hearing on Plaintiff's Motion for Preliminary Injunction. The Court will allow each party to present evidence for a maximum of three hours. Evidence may be presented in the form of live testimony, affidavit, or by deposition. If either party desires to provide evidence by affidavit or deposition, that party should provide copies of the affidavit and deposition designations to opposing counsel and the Court. The affidavits and depositions shall be due five business days prior to the date of the hearing. Responsive affidavits and designations shall be due to the Court two business days prior to the hearing. The parties shall confer to schedule discovery for the purposes of the evidentiary hearing. The parties shall provide the Court with a Consent Scheduling Order defining the time and the scope of the discovery to be had. Additionally, the parties shall confer with the Courtroom Deputy Clerk to set a hearing date as soon as possible after the close of the hearing discovery period. Moreover, the parties should attempt to reach agreement as to additional scheduling including mediation, any requests for extension of discovery and the filing of dispositive motions.
Discussion
At the hearing, the Court stated that it would attempt to resolve some contested legal issues prior to the evidentiary hearing. The Court now turns to these issues.
I. Whether the Georgia Trade Secrets Act protects intangible information or only tangible information?
The Court is persuaded that the protection of the Georgia Trade Secrets Act ("GTSA") is not limited solely to tangible lists. The GTSA, O.C.G.A. § 10-7-761, sets forth the definition of a trade secret.
(4) "Trade secret" means information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information:
(A) Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
(B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
O.C.G.A. § 10-7-761. The rule and the cases to which Defendant refers generally deal with the application of the GTSA to customer lists and customer information. Where customer lists and customer information are at issue under the GTSA, the Georgia courts have held that in order to be protected as a trade secret, the plaintiff must show misappropriation of a tangible customer list. See Avnet, Inc. v. Wyle Labs., Inc., 437 S.E.2d 302, 304 (Ga. 1993). In Avnet, the Georgia Supreme Court held that the GTSA retained the common law distinction that an employer's customer lists were the employer's property, but the employee's personal knowledge of customer information was not. Id. Following Avnet, Georgia courts have consistently drawn this distinction between tangible customer lists and employee knowledge of customer information based on the common law protection of employer's property. See Stone v. Williams Gen. Corp., 597 S.E.2d 456, 459-60 (Ga.Ct.App. 2004) (affirming jury charge which stated in reference to customer lists that they must be in tangible form); Bacon v. Volvo Serv. Ctr., Inc., 597 S.E.2d 440, 443 (Ga.Ct.App. 2004) (stating the customer information is not inherently confidential and that customers are not trade secrets); DeGiorgio v. Megabyte Int'l, Inc., 468 S.E.2d 367, 369 (Ga. 1996) (noting that only tangible lists of customers are the property of the employer and subject to protection as a trade secret).
Therefore, in order to be considered "property" a customer list must be in tangible form to be protected under the GTSA. By contrast, an employer's trade secrets are already considered its "property." Therefore, trade secrets need not be in any particular form to be entitled to protection. Avnet, 437 S.E.2d at 304 ("Trade secrets are the property of the employer and cannot be taken or used by the employee for his own benefit, but customers are not trade secrets.") (emphasis in original). In fact, trade secrets are entitled to protection as long as competitors fails to duplicate them by legitimate, independent research. Thomas v. Best Manf. Corp., 218 S.E.2d 68, 71 (Ga. 1975). Therefore, if a company can show that it is otherwise entitled to protection under the GTSA, unless it is complaining of misappropriation of a customer list, Georgia law does not require that the trade secret be in tangible form. See Tronitec, Inc. v. Shealy, 547 S.E.2d 749, 756 (Ga.Ct.App. 2001) (question of fact whether company's data, programs, devices and methods of repairing circuit boards was a trade secret);Sanford v. RDA Consultants, Ltd., 535 S.E.2d 321, 325 (Ga.Ct.App. 2000) (company had proprietary interests in software that required protection under GTSA regardless of whether the nondisclosure agreement was valid); Essex Group, Inc. v. Southwire Co., 501 S.E.2d 501, 503 (Ga. 1998) (holding that company's logistical process was a trade secret); Thomas v. Best Manf. Corp., 218 S.E.2d 68, 71 (Ga. 1975) (holding that formula, process and machinery configuration for manufacture of coated gloves constituted a trade secret). Moreover, even without a valid written contract or written covenant, an employee is required to refrain from disclosing his employer's trade secrets. Id.; see Sanford, 535 S.E.2d at 325 ("one of the implied terms of a contract of employment is that the employee will not disclose a trade secret learned during his employment, to a competitor of his former employer").
Defendant cites to language in Stone v. Williams General Corp., 597 S.E.2d 456, 459 (GA. Ct. App. 2004), which states that "In Avnet, our Supreme Court held that any individual is free to use any information he can remember from his former employment, including trade secrets, in the absence of a valid and enforceable covenant." This statement appears to support Defendant's argument. However, the Court's reading of Avnet is inconsistent with the Georgia Court of Appeals characterization of it. Notably, in Avnet, the Georgia Supreme Court specifically recognized that trade secrets are an employer's property. 437 S.E.2d at 304. Moreover, the statement above inStone is inconsistent with the vast body of caselaw and the plain language of the GTSA.
Additionally unavailing is Defendant's citation to Thomas v. Best Manf. Corp., 218 S.E.2d 68, 71 (Ga. 1975) for the proposition that an individual's aptitude, skill and other subjective knowledge is not the property of the employer. A complete reading of that passage discloses that trade secrets are not included among this category.
The employment agreement being illegal and void, matters other than trade secrets are without protection because a man's aptitude, his skill, his dexterity, his manual and mental ability, and such other subjective knowledge as he obtains while in the course of his employment, are not the property of his employer and the right to use and expand these powers remains his property unless curtailed through some restrictive covenant entered into with the employer.
Thomas, 218 S.E.2d at 70.
II. The definition of "misappropriation"
Under the GTSA misappropriation is defined as "Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means" or "[d]isclosure or use of a trade secret of another without express or implied consent . . ." O.C.G.A. § 10-17-61(2). Therefore, it does appear that Plaintiff may show misappropriation through acquisition, disclosure or use of its trade secrets.
Finally, though the Court has indicated its inclination on these legal issues, the Court will reserve ruling on the applicability of these principles in the present case until after it has heard the evidence and arguments at the hearing.
Conclusion
Accordingly, the Court RESERVES RULING on Plaintiff's Motion for Preliminary Injunction [15-1]. Defendant's Motion for Leave to File Surreply to Plaintiff's Motion for Preliminary Injunction [30-1] and Plaintiff's Motion for Leave to File Supplemental Reply in Support of its Motion for Preliminary Injunction [34-1] are hereby GRANTED nunc pro tunc.The Court will hold an evidentiary hearing on Plaintiff's Motion for Preliminary Injunction. The Court will allow each party to present evidence for a maximum of three hours. Evidence may be presented in the form live testimony, affidavit, or by deposition. If either party desires to provide evidence by affidavit or deposition, it should provide copies of the affidavit and deposition designations to opposing counsel and the Court. The affidavits and depositions shall be due five business days prior to the date of the hearing. Responsive affidavits and designations shall be due to the Court two business days prior to the hearing. The parties shall confer to schedule additional discovery for the purposes of the evidentiary hearing. The parties shall provide the Court with a Consent Scheduling Order defining the time and the scope of the discovery to be had. Additionally, the parties shall confer with the Courtroom Deputy Clerk to set a hearing date as soon as possible after the close of the additional discovery period. Moreover, the parties should attempt to reach agreement as to additional scheduling including mediation, any requests for extension of discovery and the filing of dispositive motions.
SO ORDERED.