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UNIVERSAL BUSINESS COMP. CO. v. COMPREHENSIVE

United States District Court, Northern District of Illinois, E. D


May 26, 1982

UNIVERSAL BUSINESS COMPUTING COMPANY, PLAINTIFF,
v.
COMPREHENSIVE ACCOUNTING CORPORATION, DEFENDANT.

The opinion of the court was delivered by: Aspen, District Judge:

MEMORANDUM OPINION AND ORDER

Plaintiff Universal Business Computing Company ("UBC"), a vendor of "mini-computers" and computer software, filed this federal antitrust action on May 14, 1982, alleging that defendant Comprehensive Accounting Corporation ("CAC") had violated sections 1 and 2 of the Sherman Act, 15 U.S.C. § 1, 2, by illegally tying the sale of computer hardware and software to the accounting, bookkeeping, management consulting, and assorted other services sold and licensed by CAC to its franchisees. Appended to UBC's federal claims are state claims for theft of trade secrets and unfair competition. This Court has jurisdiction over the federal claims for declaratory, injunctive and monetary relief pursuant to sections 4 and 16 of the Clayton Act, 15 U.S.C. § 15, 26, and over UBC's state claims pursuant to well-established principles of pendent jurisdiction. United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).

On May 17, 1982, CAC, the defendant in this federal action, filed suit in Kane County Circuit Court in the State of Illinois against UBC and others alleging, in substance, misappropriation of trade secrets and unfair competition relating to the same line of mini-computers and software as is involved in this federal action. CAC also sought a temporary restraining order in its state court suit that would prevent UBC from selling or attempting to sell its minicomputer line to any of CAC's franchisees during the pendency of that action. On May 20, 1982, UBC filed a motion in this Court seeking to enjoin or stay the state court proceedings initiated by CAC. After an emergency hearing on UBC's motion, with argument from counsel representing both sides, we denied the motion to stay indicating that a draft opinion would follow shortly. The reasons for our earlier ruling are set forth below.

The Anti-Injunction Act, 28 U.S.C. § 2283, provides:

    A court of the United States may not grant an
  injunction to stay proceedings in a State court
  except as expressly authorized by Act of
  Congress, or where necessary in aid of its
  jurisdiction, or to protect or effectuate its
  judgments.

The Act is an absolute prohibition against an injunction of any state court proceedings, unless the injunction falls within one of the three specifically defined exceptions in the Act. Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 630, 97 S.Ct. 2881, 2887, 53 L.Ed.2d 1009 (1977); Mitchum v. Foster, 407 U.S. 225, 228-29, 92 S.Ct. 2151, 2155, 32 L.Ed.2d 705 (1972). In the case at bar, UBC contends that the stay it seeks is necessary in aid of this Court's jurisdiction over UBC's antitrust claims.

The "in aid of jurisdiction" exception to the Anti-Injunction Act has been called "the most enigmatic of the three exceptions to the Anti-Injunction Statute." M. Redish, Federal Jurisdiction: Tensions In The Allocation of Judicial Power 278 (1980). It has been narrowly construed as a codification of a historical exception to the Anti-Injunction Act and co-existent principles of comity and federalism for in rem actions in the context of which two courts would be vying for jurisdiction over the same res unless one of the judicial proceedings were stayed. Toucey v. New York Life Insurance Company, 314 U.S. 118, 134-35, 62 S.Ct. 139, 144-45, 86 L.Ed. 100 (1941); Kline v. Burke Construction Co., 260 U.S. 226, 43 S.Ct. 79, 67 L.Ed. 226 (1922). As Justice Rehnquist noted more recently for the plurality in Vendo Co. v. Lektro-Vend Corp., supra:

  The traditional notion is that in personam actions
  in federal and state court may proceed
  concurrently, without interference from either
  court, and there is no evidence that the exception
  to § 2283 was intended to alter this balance. We
  have never viewed parallel in personam actions as
  interfering with the jurisdiction of either court.

433 U.S. at 642, 97 S.Ct. at 2893.*fn1

UBC maintains that the instant action is akin to an in rem proceeding because both it and CAC claim a proprietary interest in the design of certain computer software systems for use with the mini-computer line. UBC contends that CAC stole the software system from it while CAC maintains the computer software system was stolen from it by UBC. At oral argument on the motion to stay, however, counsel for UBC conceded that he could cite no case authority for the rather novel proposition that computer software standing at the center of an antitrust dispute constitutes a res that converts what is generally assumed to be an in personam proceeding into an in rem proceeding. Indeed, it is not really the tangible embodiment of the computer software that is at issue in this case at all, but rather the right to the ideas embodied in the computer software system in which both UBC and CAC claim an interest. In a similar context, the United States District Court for the Southern District of New York has held that the ideas embodied in a computer software program are not equivalent to a res for purposes of creating in rem jurisdiction. Trans-American Computer Associates, Inc. v. Tower Systems, Inc., 203 U.S.P.Q. 719 (S.D.N.Y. 1978).

Although UBC's argument that the computer software involved in this case is equivalent to a res for purposes of creating in rem jurisdiction and the attendant need for an injunction in aid of that jurisdiction is very creative, the same argument could have been made and was implicitly rejected with regard to the patents at issue in Vendo Co. v. Lektro-Vend Corp., supra. Similar to the situation in the case at bar, the parties in Lektro-Vend each claimed the exclusive right to profit from certain patents. See Lektro-Vend Corp. v. Vendo Co., 545 F.2d 1050, 1053-54 (7th Cir. 1976), reversed, 433 U.S. 623, 97 S.Ct. 2881, 53 L.Ed.2d 1009 (1977). The Supreme Court, however, held that Lektro-Vend's motion to stay enforcement of the state court judgment against it while it prosecuted its federal antitrust action, including state claims for theft of trade secrets and unfair competition, essentially sought to "preserve" a case or controversy for the federal court in an in personam action, a result which, as in the instant case, is barred by the Anti-Injunction Act. Id., 433 U.S. at 642, 97 S.Ct. at 2893.

In sum, although UBC's creative argument is not without appeal, it ultimately must fail.*fn2 Accordingly, UBC's motion to stay the state court proceedings is denied. It is so ordered.


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