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Ultraviolet Devices, Inc. v. Kubitz

November 13, 2009

ULTRAVIOLET DEVICES, INC., PLAINTIFF,
v.
KEN KUBITZ, JOHN KONIECZKA, AND GREEN LADDER TECHNOLOGIES, L.L.C., DEFENDANTS.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff Ultraviolet Devices, Inc. ("UVDI") filed suit against Defendants Ken Kubitz ("Kubitz"), John Konieczka ("Konieczka") and Green Ladder Technologies ("Green Ladder"). On September 14, 2009, Plaintiffs moved for a temporary restraining order, a preliminary injunction and expedited discovery as to Count I of the Complaint, alleging actual or threatened misappropriation of UVDI's trade secrets in violation of the Illinois Trade Secrets Act ("ITSA"), 765 ILCS 1065/1 et seq. The preliminary injunction is denied for the reasons set forth below.

BACKGROUND

A federal court presented with a motion for a preliminary injunction may conduct an evidentiary hearing and make its determination on the basis of evidence presented at the hearing. See Fed.R.Civ.P. 65(a); Univ. of Texas v. Camenisch, 451 U.S. 390, 395 (1981). This Court heard nearly eight hours of testimony from the parties. The Court's findings of fact are as follows:

In 1997, Ken Kubitz began Sparks Technology, Inc. ("Sparks"), a company which designed, developed and sold bonded carbon air filters and other filtration technology. (See Kubitz Aff. ¶ 2.) He sold Sparks to UVDI in 2006. (See Compl. ¶ 1.) The acquisition was governed by an Asset Purchase Agreement, which contained a non-compete clause that expired on June 5, 2009. (See Kubitz Aff. ¶¶ 17, 19; Def. Ex. 3 § 14.1.) Kubitz's continued employment with UVDI was ensured by an Employment Continuation Agreement. (See Pl. Ex. 3.) After some organizational restructuring, Kubitz became Vice President and Chief Technology Officer for Sparks, working at a manufacturing facility in Batavia, Illinois. (See Compl. ¶ 1; Kubitz Aff. ¶¶ 8, 11.)

In 2008, certain of UVDI's customers began to complain that the bonded carbon air filters provided to them by UVDI were insufficient to meet their "challenges," that is, the filters failed to adequately filter out a given customer's targeted air pollutants or contaminants. (See Hr'g Trans. 11:01:44-11:03:10, Oct. 15, 2009.) (hereinafter "Hr'g Trans 1") Kubitz was therefore tasked with the development of a new and more effective bonded carbon air filter. (See id. 11:05:36-11:06:28.)

In order to develop this new product, Kubitz sought the assistance of John Konieczka, a chemical engineer. (See Kubitz Aff. ¶¶ 17, 19.) Konieczka offered his consulting services to UVDI under the name of JBK Consulting, which he had formed in 2004. (See Konieczka Aff. ¶¶ 3, 7.) Konieczka did not sign, and was not asked to sign, a non-disclosure agreement prior to beginning work on the project or at any time during the project. (See id. ¶ 11.) His work on the project took place in the Sparks manufacturing facility. (See id. ¶¶ 12, 13.) At the onset of the project, Konieczka provided UVDI with a project proposal that was marked "highly confidential." (See Def. Ex. 5; Hr'g Trans. 1 11:08:26-11:10:14.) In May and September of 2008, he gave two progress reports to UVDI executives and directors, neither of which was marked "confidential." (See Konieczka Aff. ¶ 16; Def. Exs. 6 and 7.)

Potential formulae for the new air filter line were tested at the Sparks facility in Batavia throughout the summer of 2008. (See Kubitz Aff. ¶¶ 21; 24-25.) The testing area was located within a multi-tenant commercial space that was generally accessible without the use of security badges or codes. (See id. ¶ 21; Konieczka Aff. ¶¶ 12-13.) While Konieczka was primarily responsible for the initial testing, Kubitz took over the project at the end of 2008 and finalized the formula in preparation for commercialization. (See Kubitz Aff. ¶¶ 21; 28-29.) Commercial manufacture of the new filters also took place in the publicly-accessible area of the Batavia plant. (See id. ¶ 31.)

Konieczka then founded Green Ladder, in order to manufacture and sell a new industrial soap. (See Konieczka Aff. ¶¶ 18, 20.) Kubitz became an investor in Green Ladder in March 2009. (See Kubitz Aff. ¶ 34.) Kubitz resigned from UVDI in June 2009, and began working with Green Ladder in August 2009. (See Compl. ¶ 1; Kubitz Aff. ¶¶ 35; 37.) UVDI became concerned that its former executive and former contractor were engaged in new projects that would infringe its asserted trade secrets, and requested that Kubitz and Konieczka provide assurances to the contrary. (See Compl ¶ 2.) UVDI's concern primarily arose from two events. First, a UVDI supplier informed UVDI that Kubitz had inquired about air filter components similar to those used in UVDI's new air filter line. (See id. ¶ 21; Kubitz Aff. ¶ 41.). Second, Green Ladder hired Robert Tower, a former UVDI sales manager who had resigned shortly after Kubitz's resignation. (See Compl. ¶ 22; Def. Ex. 11 (email offer of employment from Konieczka to Robert Tower).)

UVDI now makes two trade secret claims, as well as breach of fiduciary duty claims that are irrelevant to this Motion for a preliminary injunction. The parties do not dispute that the basic process for making a bonded carbon air filter is the same across the industry, in that some physical binder is combined with some ratio of carbon powder or granule component and baked at some temperature for some length of time. UVDI asserts, however, that their particular manufacturing process in its totality, or its "recipe," for developing the new bonded carbon air filter is a trade secret.

(See Compl. ¶ 15; Hr'g Trans 13:57:02-13:57:36; id. 14:00:54-14:02:16 (Oct. 19, 2009).) (hereinafter, "Hr'g Trans 2") UVDI's second trade secret claim is that each particular ingredient in that recipe, that is, the materials used, the ratio of materials combined, and the baking time and temperature, represents a UVDI trade secret. (See Hr'g Trans. 1 14:33:48-14:47:06.) The Court must consider, therefore, whether UVDI is entitled to a preliminary injunction barring the Defendants from using any particular component of its process, or from using the process in its entirety, to manufacture their own line of bonded carbon air filters.

STANDARD OF REVIEW

A preliminary injunction represents an extraordinary exercise of judicial power, one which the Seventh Circuit has warned is "never to be indulged in except in a case clearly demanding it." Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 389 (7th Cir. 1984). Whether such a remedy is appropriate depends upon a two-step inquiry in which the court first analyzes whether a given circumstance meets the necessary threshold, and then balances the risks of harm to each of the parties. See Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States of America, 549 F.3d 1079, 1085-86 (7th Cir. 2008).

To demonstrate an entitlement to a preliminary injunction as a threshold matter, a plaintiff must show that irreparable harm will be done if the preliminary injunction is denied, that the available remedies at law are inadequate, and that it has some chance of success on the merits of its case. See id. at 1086. In the balancing phase of the inquiry, the harm to the plaintiff if ...


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