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COMPUTER CARE v. SERVICE SYS. ENTERPRISES

March 20, 1991

COMPUTER CARE, Plaintiff,
v.
SERVICE SYSTEMS ENTERPRISES, INC. and LARRY ARONSON, Defendants


Milton I. Shadur, United States District Judge.


The opinion of the court was delivered by: SHADUR

MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE

 This action has been heard on the motion of plaintiff Computer Care for a preliminary injunction against defendants Service Systems Enterprises, Inc. ("Service Systems") and Larry Aronson ("Aronson"). *fn1" Both Computer Care and defendants, each represented by able counsel, appeared at the preliminary injunction hearing (the "Hearing") and presented evidence -- after which counsel have completed their submissions by the filing of post-Hearing memoranda. For the reasons stated in this memorandum opinion and order, which reflects this Court's findings of fact ("Findings") and conclusions of law ("Conclusions") in accordance with Fed. R. Civ. P. ("Rule") 52(a), *fn2" a preliminary injunction is entered in Computer Care's favor of substantially broader scope than the relief granted by the TRO.

 Findings of Fact

 Because two lengthy portions of the factual presentation in Plaintiff's Post-Trial Brief in Support of Its Motion for Preliminary Injunction ("P. Mem.") are accurate in virtually every respect, this Court adopts that presentation as its own. In order that these Findings may be self-contained and that the description of the acts sought to be restrained may conform to Rule 65(d), P. Mem. 1-13 is attached as Ex. 1 and P. Mem. 27-31 is attached as Ex. 2 to this preliminary injunction order. Only these matters set out in Ex. 1 are excluded from this Court's Findings:

 
1. Although it is true that Riordan prepared and furnished to Service Systems a list of Computer Care's customers (Ex. 1 at 5 and 7), this Court does not find that to be an actionable violation of Computer Care's rights. It is considered as relevant evidence only regarding defendants' intent -- their state of mind -- when they engaged in the other aspects of copying that do constitute infringements of Computer Care's copyright and trade dress and trade secrets.
 
2. Service Systems' use of false advertising claims, which have ascribed to Service Systems attributes that are true as to Computer Care but are knowingly false as to Service Systems (Ex. 1 at 8), do not "deceive customers into believing that their service is Computer Care and not Service Systems" (id.). In fact this action is not a "palming off" case in that sense. Instead such activity is unfair competition that, whether or not actionable under Lanham Act § 43(a) (15 U.S.C. § 1125(a)), violates Illinois law.

 This Court also makes several additional Findings based on the evidence adduced during the Hearing. Those may be set out in relatively brief compass.

 For one thing, Computer Care sought unsuccessfully -- through many (fully 12) efforts by a professional process server -- to subpoena two other persons known to be Services Systems sales representatives (Ex. 1 at 13). Both of them were unquestionably ducking service -- Aronson himself cynically indicated that to the process server (id.). This Court has accordingly drawn the inference that the testimony of those sales representatives as to Service Systems' past and current conduct of its business, and particularly as to the continuing infringement of Computer Care's rights by that conduct, would have been unfavorable to Service Systems and hence favorable to Computer Care.

 Second, the changes that are manifested in Service Systems' currently produced sales scripts -- which appear to have deleted the direct misrepresentations that originally misappropriated Computer Care-related facts for Service Systems' benefit -- are not sufficient under the circumstances to dispel the overall pattern of copying and misappropriation involved here. *fn3" Although Fed. R. Evid. 407 bars the admissibility of subsequent remedial measures "to prove . . . culpable conduct in connection with the event," such activity may of course bear on the propriety of injunctive relief against future violations by Service Systems. In this instance the combination of defendants' past culpable activity and the nature of their response to this litigation calls for a total lack of confidence in the noninfringing nature of their future conduct unless Computer Care is given the assurance that can be provided only by an injunction order.

 Third, any suggestion by Feldgreber that Service Systems had developed its materials independently, rather than by copying them from Computer Care virtually lock, stock and barrel, is rejected as incredible. If anything, that unbelievable assertion tends to underscore Service Systems' intention to engage in the deliberate infringements and misappropriations that have been disclosed by the record. Feldgreber's efforts to explain Service Systems' copying of the Computer Care format, as presented in its three types of report, on the basis that what was copied was functional is also wholly unworthy of belief in light of Kaufman's testimony to the contrary. All that Feldgreber rather demonstrated was that the presentation and format could be set up as Computer Care did, and as Service Systems copied, in order to serve customers -- but not at all that the presentation and format had to be done that way in order to perform the function. *fn4" Dramatic evidence of the non-functionality of that information is provided by the facts (1) that Computer Care's own more recent reports do not include some of its aspects and (2) that the new Mopar Customer Care program, being presented pursuant to a contract with (but not being provided directly by) Computer Care, will employ a different format.

 Fourth, although Computer Care's trade secrets may not be entirely as broad as it seeks to claim in that respect, Kaufman's testimony established that various matters that he had designed in the Computer Care system and that were kept closely under wraps (not known even to Computer Care's sales manager) *fn5" were matters of which Riordan was aware. It is a reasonable inference, and this Court finds, that Service Systems' incorporation of those same unique factors into its modus operandi -- factors highly important to the commercial success of the operation -- were derived through the imparting of those confidential trade secrets from Riordan to Aronson.

 Conclusions of Law

 All the relevant criteria for issuance of a preliminary injunction are the same as the preconditions to issuance of a TRO, as outlined in the TRO in this case. But because the scope of the preliminary injunction called for in this case is broader than that of the TRO, it is necessary to recapitulate those criteria (again drawing on their explication in Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380 (7th Cir. 1984)) and to apply them to the situation disclosed in the Hearing. To make these Findings and Conclusions self-contained, this Court will copy or borrow freely from portions of the TRO. Accordingly it turns to the legal reasons that the preliminary injunction granted here is both necessary and appropriate.

 Roland Machinery, 749 F.2d at 386 teaches the centuries-old wisdom that a plaintiff must establish the absence of an adequate remedy at law as a precondition to any form of equitable relief. By its very nature, a claim of invasion of intellectual property such as a trademark or trade dress or trade secrets demands injunctive relief if the value of that property is not to be destroyed by the alleged infringer. And the need for such injunctive relief is the paradigmatic example of the absence of an adequate remedy at law.

 Irreparability of Harm

 Roland Machinery, id. says "the requirement of irreparable harm is needed to take care of the case where although the ultimate relief that the plaintiff is seeking is equitable, implying that he has no adequate remedy at law, he can easily wait until the end of trial to get that relief." As applied to a trademark infringement case, Hyatt Corp. v. Hyatt Legal Services, 736 F.2d 1153, 1158 (7th Cir. 1984), quoting from this Court's opinion in Instrumentalist Co. v. Marine Corps League, 509 F. Supp. 323, 332 (N.D. Ill. 1981), confirms that the effect on the trademark owner's business if the infringement is permitted to go unchecked conclusively demonstrates the irreparability of the harm sustained. This presumption of irreparable harm holds equally true in cases of trade dress infringement ( A.J. Canfield Co. v. Vess Beverages, Inc., 612 F. Supp. 1081 (N.D. Ill. 1985), aff'd, 796 F.2d 903 (7th Cir. 1986)). And the same concept applies to the misappropriation of trade secrets (cf. AMP Inc. v. Fleischhacker, 823 F.2d 1199, 1206-07 (7th Cir. 1987)).

 Likelihood of Success on the Merits

 Computer Care has demonstrated a substantial probability -- far more than the "better than negligible" chance that Roland Machinery, 749 F.2d at 387, sets as a floor requirement -- of prevailing on the merits of this action, and specifically on the merits of its claims that:

 
1. Service Systems' trade dress, especially as embodied in Service Systems' sales brochures and its reminder letters, infringes Computer Care's rights in its own trade dress.
 
2. Service Systems' incorporation into its system of the elements that are an important key to the success of this business -- the already-described elements (see n. 5 and, for a more detailed statement, Ex. 2) that were developed by Kaufman and have not been disclosed to Computer Care's salespeople or customers -- are protected trade secrets and have been improperly obtained and utilized by Service Systems.

 This Court's review of copies of Computer Care's trade dress and Service Systems' trade dress and the evidence received at the Hearing leads it to conclude that there is more than a very substantial probability that Service Systems has infringed Computer Care's protected trade dress rights. In that respect, see such cases as Roulo v. Russ Berrie & Co., 886 F.2d 931 (7th Cir. 1989).

 As for the trade secrets issue, since the Hearing our Court of Appeals has handed down an important decision fleshing out that concept, explaining the policy reasons for their protection and rejecting the wooden approach to security measures that had too often caused trade secret claimants to lose their right to legal protection (see Rockwell Graphic Systems, Inc. v. DEV Industries, Inc., 925 F.2d 174, 177-180, 1991 U.S. App. LEXIS 1969, at 11-18, 20-21, 17 U.S.P.Q.2D (BNA) 1780 (7th Cir. 1991)). Portions of the Rockwell Graphic opinion might well have been written for this case, providing a graphic *fn6" illustration of the reasons that Computer Care is entitled to broad protection against Service Systems' infringement here. Indeed, Rockwell Graphic, id. 925 F.2d at 176-77, 1991 U.S. App. LEXIS 1969, at 6-8 expressly holds that the owner of trade secrets does not forfeit protection for information that is secret by "over-claiming" the scope of its trade secrets out of an abundance of caution.

 Roland Machinery, 749 F.2d at 387-88 teaches the application of a "sliding scale" approach, under which ( id. at 387):

 
the more likely the plaintiff is to win, the less heavily need the balance of harms weigh in his favor; the less likely he is to win, the more need it weigh in his favor.

 In the balancing process, the relevant comparison is between the harm that the moving party would suffer from the wrongful denial of a preliminary injunction (or a TRO) as against the harm that the defendant would sustain if such preliminary injunctive relief were wrongfully granted ( id. at 388). In this instance that balance weighs heavily in Computer Care's favor.

 It is true that the preliminary injunction granted here will deprive Service Systems of the benefit of the service contracts that it has obtained through its marketing of a system derived from poaching on Computer Care's preserves. It is also true that Service Systems will not be able to re-enter the business without demonstrating that it is doing so with an independently-created format and method. *fn7" And those things could create material harm to Service Systems if the preliminary injunctive relief proved to have been wrongfully granted.

 But on the other side of the coin, if a preliminary injunction were wrongfully denied to Computer Care it would confront the problem that this Court described in Instrumentalist, 509 F. Supp. at 333 and that was later quoted by our Court of Appeals in Hyatt Corp., 736 F.2d at 1158:

 
There is no effective way to measure the loss of sales or potential growth -- to ascertain the people who don't knock on the door or to identify the specific persons who do not [return] because of the existence of the infringer.

 If there is any difficulty in quantifying the loss on either side because the loss of good will would have to be measured in damages rather than avoided by injunctive relief, *fn8" the balancing of harms must be viewed as coming down in favor of the party such as Computer Care, which was clearly first in the field and unquestionably developed its own operation and methodology independently.

 What this discussion teaches is that both components of the sliding scale taught in Roland Machinery tip substantially toward Computer Care. Thus that precondition to preliminary injunctive relief is also satisfied.

 Public Interest

 No public interest is disserved by the entry of a preliminary injunction in this case. Roland Machinery, id. at 388 identifies the "public interest" in terms of any "consequences beyond the immediate parties." In this instance the unrepresented third parties are the consuming public in general. Based on the evidence at the Hearing, the public surely ought to be protected against the potential or the actuality of purchasing or using services from Service Systems that are infringing and that are sold under false auspices in the marketplace.

 * * *

 It is therefore ordered, adjudged and decreed that:

 1. This Court has jurisdiction over the subject matter and over the ...


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