Arkansas Business Litigation Lawyer & Attorney : Allen Law Firm : Serving Little Rock, Fort Smith, North Little Rock

Employees accessed computer files of their employer, and they later set up their own competing firm. This was the situation in Ervin & Smith Advertising v. BTM, Inc., 2009 U.S. Dist. LEXIS 8096 (Feb. 3, 2009) and Lasco Foods, Inc. v. Hall and Shaw Sales, 2009 U.S. Dist. LEXIS 4241 (E.D. Mo. Jan. 22, 2009). Both former employers brought claims under the Computer Fraud and Abuse Act, and the former employees moved to dismiss.

 

In Ervin, the court recognized that employees exceed their authorization when they access files for personal gain and denied the motion to dismiss. However, in Lasco, the former employer failed to allege that the former employees exceeded their authorized access. The court granted the motion to dismiss.

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Nelson Design Group (NDG) filed an architectural design copyright infringement lawsuit in the Eastern District of Arkansas. Nelson Design Group, LLC v. Puckett, No. 07-177 (filed 11/21/07). Puckett is a former employee of NDG. According to the Complaint, Puckett copied NDG's designs and gave them to defendants. The defendants used these designs to build houses in Jonesboro, Arkansas. 

 

The Complaint alleges eight counts of copyright infringement and breach of Puckett's employment contract. The Complaint is accompanied by a motion for preliminary injunction but does not include a count for computer fraud.

 

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The Central District of California granted a preliminary injunction in Ticketmaster, LLC v. RMG Technologies, Inc., No. 07-2534 (10/16/07; full text of order here).

 

Ticketmaster sells tickets for entertainment and sports events to the public. Access to its website is governed by specific Terms of Use, which prohibit the use of automated software. Ticketmaster has had some negative press recently when its events sell out in a matter of minutes. Tickets to these events then appear on websites such as StubHub at prices significantly above their face value (or they are offered for free with a $500 coffee mug). The problem comes from software that permits its users to infiltrate the Ticketmaster system and purchase bulk quantities of tickets.  

 

RMG is one such software provider that designs a software specifically tailored to elude the policing controls in force by Ticketmaster. The software is run through RMG's computer system.  RMG's customers log in to RMG's system and then use the software to purchase bulk tickets. Ticketmaster filed suit primarily for copyright infringement, violation of the Digital Millennium Copyright Act, violation of the Computer Fraud and Abuse Act, and breach of contract.

 

The court anchored its decision on two main points: (1) Ticketmaster owns a copyright in its website; (2) visitors to the website are granted a nonexclusive license to use the website under the conditions set out in the Terms of Use. The court held that RMG itself violated the Terms of Use and caused its customers to violate the Terms of Use. As a result, Ticketmaster showed a likelihood of success on all its causes of action.

 

As to irreparable harm, Ticketmaster received some help from the Arkansas Attorney General. The court observed that public outcry over the unavailability of Hannah Montana tickets caused the Attorneys General of Arkansas and Missouri to initiate investigations. The court held that RMG was causing extensive damage to Ticketmaster's goodwill, which amounts to irreparable harm. Ticketmaster was required to post a $300,000 bond.   

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The Northern District of Iowa denied a motion for temporary restraining order but will schedule a hearing on the motion for preliminary injunction in FastServers, Inc. v. TLDS, LLC, 2007 WL 2611820 (N.D. Iowa 9/6/07).

 

FastServers claims that TLDS took an internal passwords database, which contained client information, from their internal computer network. TLDS then posted some of this information on its website. FastServers moved for a temporary restraining order based on trade secret misappropriation and interference with business relationships. 

 

Rule 65 requires that a motion for TRO must be supported by an affidavit or verified complaint, which FastServers failed to do. The court denied the motion for TRO but will set the matter for a hearing on the motion for preliminary injunction.

 

FastServers also failed to assert a claim for violation of the Computer Fraud & Abuse Act, even though it alleges the information was taken directly from its internal computer network. It will be interesting to see if this claim gets added.  

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The District Court of Minnesota dismissed trade secret claims and refused to permit amended pleading to add a computer fraud claim in Boston Scientific, Inc. v. Ev3, Inc., 2007 WL 2493117 (D. Minn. 8/29/07).

 

Boston Scientific originally filed a patent infringement claim against Ev3. Discovery revealed that Ev3 obtained trade secret documents related to the patent at issue, and Boston Scientific was permitted to amend the complaint to add a claim for trade secret misappropriation. The trade secret claim later expanded to include numerous documents unrelated to the patent claim. Ev3 moved to dismiss the trade secret claim for lack of supplemental jurisdiction.

 

The court held that when the trade secret claim added issues beyond the patent claim, it ceased to have a common nucleus of operative facts with the patent claim. The court dismissed the trade secret claim for lack of supplemental jurisdiction.

 

Boston Scientific also asked the court for leave to amend the trade secret claim as a violation of the Computer Fraud and Abuse Act. The court declined this request because the request did not meet the formal procedure required by the court, and the deadline for amending pleadings had already passed.

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The District Court of Minnesota granted a motion to dismiss for failure to state a claim under the Computer Fraud and Abuse Act (CFAA) in Cenveo Corp. v. CelumSolutions Software GMBH & Co., 2007 WL 951550 (D. Minn. 3/27/07).

 

Wilker was an employee at Cenveo for 10 years, then left to join CelumSolutions (CS). Cenveo filed suit claiming that Wilker gave CS access to Cenveo's computer systems in violation of the CFAA. The complaint included 10 other counts, including trade secret misappropriation.

 

The court granted the motion to dismiss on the CFAA claim because Cenveo only pled that Wilker wrongfully and intentionally accessed its computer system. However, Cenveo failed to plead damages as required by the CFAA, and the CFAA claim was dismissed with prejudice.

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