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Seventh Circuit: Injunction against use of plaintiff's copyrights and trade secrets too vague
January 14, 2008
In a decision last week, the Seventh Circuit vacated and remanded a district court's preliminary injunction in a copyright and trade secret case. The court addressed the degree of specificity necessary for an injunction against misappropriating trade secrets and infringing copyrights, and vacated the injunction because it failed to detail the substance of the trade secret or confidential information the defendant was enjoined from using.Interestingly, the court called attention to the fact that most of the information claimed as trade secret could actually be obtained by FOIA requests sent to state authorities. The parties are modular home manufacturers, and are required to submit specific details of the homes they plan to sell in order to obtain state approval; those details were among the purported trade secrets. The court said the injunction did not specify whether information obtained through the FOIA requests would violate the injunction.More detail of Patriot Homes, Inc. v. Forest River Housing, Inc. after the jump.The plaintiff, Patriot Homes, manufactures and sells modular homes in what the court called "Big Ten territory": Indiana, Ohio, Michigan, and Illinois. Patriot has a contentious relationship the defendant, Forest River, d/b/a Sterling Homes, with whom it competes in the modular housing manufacturing industry. In 2004, Forest River unsuccessfully tried to purchase Patriot. Afterwards, Sterling hired four employees of Patriot, including its general manager. Before leaving, the four employees copied information from Patriot's computers and brought other materials with them to Sterling.Thereafter, Patriot sought preliminary and permanent injunctive relief against Sterling to prevent the disclosure or use of its copyrighted computer files and trade secret information. Sterling did not deny that the four employees took information from Patriot's computers, nor did it deny that it used the information. Sterling did, however, contend that all of the alleged confidential information was readily available to the public. To prove this point, Sterling sent FOIA requests to Indiana, Michigan, and Illinois after the preliminary injunction hearing. Each of these states requires companies in the modular home industry, like Patriot, to submit specific details about the homes they intend to sell in order to obtain state approval. The states provided thousands of documents, including Patriot's systems manuals, quality assurance manual, and engineering calculations.In June 2006, the district court entered a preliminary injunction which enjoined Sterling from "[u]sing, copying, disclosing, converting, appropriating, retaining, selling, transferring, or otherwise exploiting Patriot’s copyrights, confidential information, trade secrets, or computer files." The preliminary injunction also required Sterling to "[c]ertify that copied data and materials of Patriot’s property, confidential information and trade secrets on computer files and removable media (CDs, DVDs, tapes, etc.) have been deleted or rendered unusable."The Seventh Circuit vacated the injunction. The court began by noting Rule 65(d) requires an injunction to "be specific in terms . . . [and] describe in reasonable detail . . . the acts or acts sought to be restrained." The injunction in this case did not do so. As eloquently stated by the court:
The preliminary injunction entered by the district court uses a collection of verbs to prohibit Sterling from engaging in certain conduct, but ultimately it fails to detail what the conduct is, i.e., the substance of the "trade secret" or "confidential information" to which the verbs refer.
The court also noted the injunction was not dispositive of whether using information obtained through the FOIA requests would violate the injunction. As a result, the injunction required "a lot of guesswork on Sterling's part to determine if it is engaging in activities that violate the injunction, since the order itself is a little more than a recitation of the law." As a result, the court vacated the preliminary injunction for lack of specificity and remanded the case.To read the full decision in Patriot Homes, Inc. v. Forest River Housing, Inc., click here.
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