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AutoMed Technologies, Inc. v. Microfil

June 7, 2006

AUTOMED TECHNOLOGIES, INC., PLAINTIFF,
v.
MICROFIL, LLC AND WILLIAM GEROLD, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Plaintiff AutoMed Technologies, Inc.'s ("AutoMed") and Defendant William Gerold's ("Gerold") motions for summary judgment on the issue of damages and injunctive relief. For the reasons stated below, we grant in part and deny in part AutoMed's motion for an injunction and grant in part and deny in part AutoMed's request for damages. We also grant in part and deny in part Gerold's motion for summary judgment on the issue of an injunction and grant Gerold's motion for summary judgment on the issue of damages.

BACKGROUND

AutoMed is the assignee of U.S. Patent No. 6,449,927 ("'927 Patent") and U.S. Patent No. 6,742,671 ("'671 Patent"). Both the '927 Patent and the '671 Patent cover a system and methods for automatically dispensing prescriptions. The inventions claimed and described in the AutoMed patents are embodied in AutoMed's QuickScript System. On April 20, 1998, Gerold entered into a written and oral agreement with Baxter Healthcare Corporation ("Baxter") to become the project manager of Baxter's QuickScript project that included a Non-employee Security Agreement ("Agreement"). On March 31, 1999, when AutoMed purchased the division of Baxter with which Gerold was associated, AutoMed became the assignee of the Agreement and the QuickScript project.

In 2002, after Gerold ended his consulting work for Baxter and AutoMed, Gerold founded Vanguard Medical Systems, which is now Defendant Microfil, LLC ("Microfil"). Gerold then began the development of an automated pill dispensing system of his own. AutoMed brought the instant patent infringement suit against Microfil, alleging that Microfil's 219, 107, and Auger Systems (collectively referred to as "the Microfil Systems") infringe AutoMed's '927 Patent and '671 Patent. AutoMed further alleged that Gerold breached the Agreement by using confidential information gained during his employment for Baxter and AutoMed in the design of the Microfil Systems. On October 26, 2005, we ruled on the parties' cross motions for summary judgment, granting AutoMed's motion for summary judgment on the breach of contract claim. AutoMed Technologies, Inc. v. Microfil, LLC, 2005 WL 2861043, at *1 (N.D. Ill. 2005). On January 18, 2006, we granted Microfil's motion for summary judgment on AutoMed's patent infringement claim.

DISCUSSION

I. AutoMed's Request for a Permanent Injunction

AutoMed seeks an injunction permanently barring Gerold from disclosing AutoMed's confidential information and barring Gerold from using AutoMed's confidential information to develop or manufacture any pharmaceutical automation systems for two years. (A Mot. 5). In determining whether a permanent injunction is proper, a court must first consider whether the plaintiff has actually succeeded on the merits of his claim. Plummer v. American Institute of Certified Public Accountants, 97 F.3d 220, 229 (7th Cir. 1996). The court also must consider: (A) "whether the plaintiff will have an adequate remedy at law or will be irreparably harmed if the injunction does not issue;" (B) "whether the threatened injury to the plaintiff outweighs the threatened harm the injunction may inflict on the defendant;" and (c) "whether the granting of the injunction will harm the public interest." Id. In the instant action, we have already determined that Gerold breached his contract with AutoMed, and therefore AutoMed has succeeded on the merits of its breach of contract claim. Accordingly, we will consider the remaining three factors to determine whether the entry of a permanent injunction is proper.

A. Adequate Remedy at Law or Irreparable Harm Factor

AutoMed argues that "[i]t is well established that the use and disclosure of another's confidential information causes irreparable harm." (A Mot. 6). However, the Seventh Circuit has stated in relation to breach of contract cases, such as the instant action, that "damages are the norm in breach of contract as in other cases [and that because] damages are the norm, . . . the plaintiff must show why his case is abnormal." Walgreen Co. v. Sara Creek Prop. Co., B.V., 966 F.2d 273, 274-75 (7th Cir. 1992). In order to meet this burden, a plaintiff "must show that damages are inadequate, not that the denial of the injunction will work irreparable harm." Id.

In the instant action, we found in an earlier opinion that Gerold breached his contract with AutoMed. (10/26/05 Op.) As is stated above, the typical remedy for a breach of contract is monetary damages. Walgreen Co., 966 F.2d at 274-75. However, "[w]hen a breach of contract is proved but damages cannot be estimated with reasonable certainty, the plaintiff is entitled to an injunction." Cook Inc. v. Boston Scientific Corp., 333 F.3d 737, 744 (7th Cir. 2003)(holding that because neither the plaintiff's product or the defendant's product had made it to the marketplace, "translat[ing] [the effect of defendant's breach of contract] into a dollar amount of lost expected profits to [the plaintiff] is impossible").

In the instant action, AutoMed has two problems in demonstrating that it suffered any damages because of the breach of contract by Gerold. First, while Gerold referenced at least some of AutoMed's confidential information before designing the Microfil Systems, and thus breached his Agreement with AutoMed, it is not clear to what degree or to what extent Gerold used AutoMed's information. AutoMed has not provided to the court sufficient information regarding what portion of the Microfil Systems, if any, are based on Gerold's breach of contract. Second, because the Microfil Systems are yet to reach the market, AutoMed has failed to show how Gerold's breach of the contract will actually affect any of AutoMed's sales. At this point in time, AutoMed's only injury is the loss of its exclusive use over its confidential information, and AutoMed admits that it has not lost any sales or its ability to market its own QuickScript system as a result of Gerold's acts. (Resp. G SF Par. 2-3). AutoMed has not shown that Gerold's breach of the contract resulted in any damages to AutoMed. This is not a case where a plaintiff has established damages but such damages cannot be calculated with a reasonable certainty, thus entitling the plaintiff to an injunction. In this case, AutoMed has not even made a prima facie case that there are any damages or irreparable harm. Therefore, AutoMed's rights can be vindicated through the entry of a judgment in its favor and the entry of a nominal damages award.

B. Balance of the Harms Factor

In ruling on a request for a permanent injunction, the court must determine "whether the threatened injury to the plaintiff outweighs the threatened harm the injunction may inflict on the defendant." Plummer, 97 F.3d at 229. In the instant action, AutoMed's request for a permanent injunction has two components. First, AutoMed is seeking to bar Gerold from ever disclosing AutoMed's confidential information. In light of the fact that Gerold has already signed a contract that ...


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