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

The Eighth Circuit affirmed denial of a preliminary injunction in CDI Energy Services, Inc. v. West River Pumps, Inc., No. 08-1031 (5/29/09).

 

CDI sells oilfield equipment. It had one location in North Dakota with three employees. Those employees left CDI to form West River, a competing business. CDI's customers went to West River, and the CDI office went out of business. After obtaining a TRO for trade secret misappropriation and other counts, the district court dissolved the TRO and denied the preliminary injunction.

 

The Eighth Circuit affirmed, with two interesting holdings. First it held the customer lists were not trade secrets. Because the potential CDI customers was a small number of local oilfield companies, the information would be readily obtainable. Second, the court held no irreparable harm because, since CDI's office was closed, an injunction would do nothing to help them. In other words, CDI had been harmed to such a degree that the harm was no longer irreparable.

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The District Court of Minnesota denied a preliminary injunction based on trade secret misappropriation and false advertising in Benefit Resource, Inc. v. Apprize Technology Solutions, Inc., 2008 WL 2080977 (D. Minn. 5/15/08).

 

BRI owns a software product called UBenefit. In 2005, BRI hired Apprize to market UBenefit. In 2007, Apprize developed a competing software called E.A.S.E. and hired away one of BRI's key employees. Apprize then terminated its relationship with BRI and sent an email to UBenefit users that UBenefit will begin reporting information to a Minnesota HMO. BRI then filed this lawsuit.

 

The court denied the preliminary injunction, focusing on BRI's failure to show likelihood of success. The crux of its trade secret claim was an inference that trade secrets had been misappropriated. The court did not find evidence to justify this inference. As to the false advertising claim, there was no evidence that future communications would be disseminated to UBenefit users.

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The Arkansas Court of Appeals affirmed a preliminary injunction in Freeman v. Brown Hiller, Inc., No. 07-717 (4/2/08).

 

Freeman was an insurance agent for BHC. She signed a limited noncompete agreement that prohibited her from soliciting BHC customers for a period of 2 years after her employment ended. The contract also had a provision prohibiting disclosure of trade secrets. The agreement did not contain a geographic limitation. Freeman resigned and immediately went to work for a competitor. Before resigning she accessed, copied and deleted 300 of BHC's computer files.

 

The trial court granted the preliminary injunction for breach of the noncompete agreement but not for trade secret misappropriation. On appeal, Freeman argued the agreement was really an unenforceable covenant not to compete masquerading as a nondisclosure agreement. The court of appeals rejected this argument and affirmed the preliminary injunction.

 

Although Freeman copied an deleted 300 computer files, BHC did not bring a claim for Computer Trespass or Computer Fraud, which is the focus of this recent Arkansas Lawyer article-- Beyond Trade Secrets: Protecting Business Information in Arkansas.

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The Eastern District of Missouri granted a temporary restraining order based on trademark infringement in Sensient Technologies Corp. v. SensoryFlavors, Inc., 2008 WL 762092 (E.D. Mo. 3/21/08).

 

Sensient Technologies is the corporate umbrella that used to be Universal Foods Corporation. One of Sensient's companies is Sensient Flavors. SensoryFlavors is a competitor that was formed by Charles Nicolais, the former head of Sensient Colors, Inc., which is another of Sensient's subsidiaries.  Defendants argued they came up with the name SensoryFlavors without copying Sensient Flavors.

 

The court easily granted the TRO and only required a $25,000 bond. This case is a good reminder that trademark infringement turns on likelihood of confusion; it does not matter how the infringing mark was created.

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The District Court of Minnesota granted a preliminary injunction based on trademark infringement and trademark dilution in J&B Wholesale Distributing, Inc. v. Redux Beverages, LLC, 2007 WL 4563457 (D. Minn. 12/20/07).

 

J&B sells steaks and other meat products under the trademark No Name. It owns several trademark registrations for "No Name" and has sales over $26 million. Redux sold Cocaine energy drinks, but the FDA caused them to quit using the word "cocaine." Redux renamed its energy drinks No Name.  

 

Although the companies are not direct competitors, the court held the products are closely related enough to create confusion. The court found that J&B was likely to succeed on both claims and would suffer irreparable harm without the injunction. J&B was required to post a $50,000 bond.

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The District Court of Minnesota granted a preliminary injunction based on trademark infringement and false advertising in Fitger's On-The-Lake, LLC v. The Fitger Company, LLC, 2007 WL 4531502 (D. Minn. 12/19/07).

 

Fitger's has operated a brewery in Minnesota since the 1880's, and it holds a number of trademarks that have now become famous. The current location is a full resort spa complete with a hotel, restaurants and ample shopping. The defendant Douglas Donnelly claims he is related to August Fitger, the original brewmaster for Fitger's. Donnelly believes this entitles him to set up businesses using Fitger's trademarks and making false statements that his companies are the "official Fitger beer" operated "since 1881." He even filed fraudulent trademark applications with the USPTO.

 

Despite Donnelly's novel argument, ancestry cannot confer trademark rights. The court granted the preliminary injunction both on grounds of trademark infringement and false advertising.

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The Arkansas Court of Appeals dismissed the appeal for failure to timely file the record in Murphy v. Michelle Smith Designs, No. 07-251 (12/5/07).

 

Murphy sold the assets of his embroidery business to Smith. He agreed to work for her as a manager and signed a noncompete agreement that he would not compete against her for 2 years after his employment ended. However, he opened a competing business immediately after his employment ended.

 

Smith obtained a preliminary injunction to prohibit Murphy from operating a competing business. After the trial was delayed, the trial court refused to dissolve the preliminary injunction on January 23, 2007. Murphy appealed that order and filed the record with the clerk on March 9, 2007. When a party appeals a refusal to modify a preliminary injunction in Arkansas, the record must be filed with the clerk within 30 days of the entry of the order. See Ark. R. App. P.--Civ. 5(a). In this case, Murphy had to file the record by February 22, 2007. The court dismissed the appeal for lack of jurisdiction.

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The District Court of North Dakota granted a temporary restraining order based on trade secret misappropriation in CDI Energy Services, Inc. v. West River Pumps, Inc., 2007 WL 4180581 (D.N.D. 11/20/07).

 

CDI Energy sells oilfield supplies and provides services to oil companies. The industry is specific an individualized, requiring detailed customer information. Three employees ran CDI's branch in Dickinson, North Dakota. On October 16, 2007, these employees resigned and opened West River Pumps, Inc. They took with them all CDI's customer information, and almost all CDI's customers transferred their business to West River.

 

The defendants chose October 16 because this was a time of year when CDI's customers had increased business. When the defendants resigned, CDI had no employees in Dickinson to meets its customers' needs. The customers had to transfer their business to West River to ensure their needs were met.

 

The court had no trouble issuing the temporary restraining order, finding CDI had established likelihood of success and irreparable harm on its trade secrets claim. CDI was not required to post a bond.

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The Arkansas Supreme Court reversed a temporary restraining order for failure to comply with Ark. R. Civ. P. 65 in IBAC Corp. v. Becker, No. 07-252 (10/25/07).

 

This case involves the Royal Arkansas Hotel and Suites in Pine Bluff. Plaintiffs filed a lawsuit for fraud and related claims. Plaintiffs requested the TRO but failed to include an affidavit or verified complaint that irreparable harm will occur without the TRO. The trial court granted the TRO without a hearing. Among other things, the TRO required a full inspection of the hotel's financial records and prevented any transfer of hotel assets.

 

The court easily dismissed the TRO. There are only two ways to obtain preliminary injunctive relief in Arkansas: (1) provide notice to the other side and have a hearing; or (2) the plaintiff must submit an affidavit or verified complaint stating that irreparable harm will occur. In this case, the plaintiffs failed to comply with the rule. The opinion does not state the amount of the bond, if any, that plaintiffs had to post to get the TRO.

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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 Southern District of Iowa denied a preliminary injunction for patent infringement in Titan Tire Corp. v. Case New Holland, Inc., 2007 WL 2914513 (S.D. Iowa 10/3/07).

 

Titan Tire is the licensee of a patent held by Goodyear and brought suit against Case New Holland. The motion for preliminary injunction was denied, but what makes this case interesting is that Titan Tire satisfied all the elements of a preliminary injunction except likelihood of success. CNH established a substantial question of validity by showing the patent is likely obvious when compared to the prior art. That alone was enough to defeat the preliminary injunction.

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The Western District of Arkansas denied a preliminary injunction in Murphy Oil USA, Inc. v. SR Intern. Business Ins. Co., Ltd., 2007 WL 2752366 (W.D. Ark. 9/20/07).

 

Murphy Oil purchased insurance from the defendants. The policies were negotiated and prepared in Switzerland and delivered to Murphy Oil's broker in London, England. The policies contained arbitration provisions that required arbitration in London and also selected New York law to govern any disputes. Murphy Oil filed this action in Arkansas for damages incurred from Hurricane Katrina and asked for a preliminary injunction to prevent arbitration in London.

 

Several conflicting laws form the basis of this action. Arkansas law prohibits arbitration clauses for insurance contracts, New York law does not. The McCarran-Ferguson Act, 15 U.S.C. § 1101, et seq, preserves state statutes regulating insurance and gives these statutes precedence over federal laws. Meanwhile, the New York Convention, a treaty entered into by the United States, directs courts to honor arbitration agreements between international merchants.

 

The court held that the New York Convention supersedes the McCarran-Ferguson Act because the McCarran-Ferguson Act only applies to domestic commerce. The court denied the preliminary injunction but did not have a motion before it to dismiss the complaint. The language of the opinion implies that the court will dismiss the complaint once the defendants file their motion.

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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 South Dakota granted a temporary restraining order based on trade secret misappropriation in Poet Plant Management, LLC v. Simpson, 2007 WL 2493514 (D.S.D. 8/29/07).

 

The opinion is brief, but Simpson is a former employee of Poet Plant Management (PPM). He is currently employed by Ethanex. PPM claimed Simpson would intentionally or unintentionally disclose its trade secrets and confidential information to Ethanex, which would cause irreparable harm to PPM.

 

The district court granted the temporary restraining order, requiring a $20,000 bond by PPM. A hearing on the preliminary/permanent injunction is scheduled for September 25, 2007, and the court has expedited discovery to accommodate the hearing.

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The Eighth Circuit affirmed a preliminary injunction in Doe v. South Iron R-1 Sch. Dist., 2007 WL 2363216 (8th Cir. 8/21/07).

 

The South Iron R-1 School District permitted Gideons International to distribute bibles to fifth graders. The Gideons distributed these bibles on school grounds during the school day. Parents of fifth graders filed this lawsuit alleging violation of the Establishment Clause. The district court agreed a granted a preliminary injunction to prevent further distribution of the bibles.

 

The school district then adopted a content-neutral policy for distribution of materials to students. This policy would allow the Gideons to distribute bibles and allow other groups to distribute materials. The Eighth Circuit affirmed the injunction as to the old policy, but declined to make a decision as to the constitutionality of the new policy.

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The District Court of Minnesota granted a preliminary injunction in MSP Corp. v. Westech Instruments, Inc., 2007 WL 2253473 (D. Minn. 8/6/07).

 

MSP is a particle technology company that makes devices for various industries. In the pharmaceutical industry, an impactor is a device to measure and test medical inhalers. A consortium of 15 pharmaceutical companies (the "Consortium") hired MSP to design a new impactor. MSP created the next generation impactor. This impactor has a specific blue color and puzzle design, but MSP did not register the trademarks or trade dress. 

 

Westech Instruments began marketing its own impactor that it called "next generation." This impactor was also blue. Moreover, Westech made statements on its website that its impactor was sponsored by the Consortium. MSP brought suit for trademark infringement, false advertising, and trade dress infringement.

 

The court agreed with MSP on the trademark infringement and false advertising claims. However, the court found that MSP was unlikely to succeed on its trade dress claims. The court granted the preliminary injunction as to the trademark and false  advertising claims, requiring a $100,000 bond.

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The District Court of Minnesota granted a preliminary injunction based on patent infringement in Quantronix, Inc. v. Data Trak Technologies, Inc., 2007 WL 2249133 (D. Minn. 8/1/07).

 

Quantronix holds 3 patents for technologies to measure and weigh packages. In the industry, this is referred to as "dimensioning." These technologies help companies quickly and accurately measure the size and weight of packages.  Data Trak is a competing firm that sells a dimensioning device which Quantronix claims incorporates its patented technologies. The district court agreed and granted the preliminary injunction but did require a bond.

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The Eastern District of Missouri denied a motion for temporary restraining order based on a noncompete agreement in Tank Tech, Inc. v. Neal, 2007 WL 2137817 (E.D. Mo. 7/23/07).

 

Tank Tech repairs storage tanks used in the petroleum industry. Neal was a foreman that signed a noncompete agreement. Shortly before joining a competitor, Neal emailed company information to his personal email account. Tank Tech filed this suit for breach of the noncompete agreement.

 

The court denied the TRO because Tank Tech failed to establish the elements of trade secrets under Missouri law. Even if Tank Tech had overcome this hurdle, the noncompete agreement is subject to a reasonableness challenge: the agreement applies for 5 years and covers the entire continental United States.   

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The District Court of Minnesota granted in part and denied in part a preliminary injunction in Novus Franchising, Inc. v. Oksendahl , 2007 WL 2084143 (D. Minn. 7/17/07).

 

Novus specializes in auto glass repair and has over 250 franchisees, including Oksendahl. The franchise contract prohibits franchisees from competing with Novus for 2 years after the expiration of the contract. It also prohibits use of Novus trademarks after expiration. When Oksendahl's franchise expired, he continued to operate a competing business.

 

The court granted a partial injunction against Oksendahl prohibiting him from using Novus trademarks. However, the court determined that Novus failed to show irreparable harm on the noncompete claim. Oksendahl can operate the competing business while the case proceeds.

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The District Court of Minnesota granted a temporary restraining order in Wells Fargo Investments, LLC v. Bengtson, 2007 WL 2007997 (D. Minn. 7/9/07).

 

Wells Fargo hired Bengtson in their wealth management department. Part of the employment contract contained a non-solicitation and a nondisclosure agreement. Bengtson left Wells Fargo to join Merrill Lynch. He immediately began soliciting Wells Fargo clients and disclosing information to Merrill Lynch. Wells Fargo brought suit for breach of contract and trade secret misappropriation.

 

The court had no trouble granting the TRO, but its take on Bengtson's defense is interesting. Bengtson argued that Wells Fargo should be barred by the doctrine of unclean hands because they encouraged him to bring over client lists when they hired him from Piper Jaffray. The court rejected this argument, holding that Wells Fargo must have been guilty of unconscionable conduct in their employment contract with Bengtson for unclean hands to apply.

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The Northern District of Iowa imposed Rule 11 sanctions in Ideal Instruments, Inc. v. Rivard Instruments, Inc., 2007 WL 1953147 (N.D. Iowa 7/3/07). The denial of Rivard's motion for preliminary injunction was previously posted 4/12/07.

 

Ideal moved for Rule 11 sanctions, and, in a thorough opinion, the court reluctantly imposed sanctions. Rivard based its motion for preliminary injunction on the expert testimony of Dr. Hoff. Ideal conducted several depositions of Dr. Hoff, and it became obvious that Dr. Hoff's test results were incredible. The court found that any reasonable inquiry would have revealed the inaccuracies in his tests.

 

Ideal also relied on a metallurgical expert whose testimony was provided to supplement Dr. Hoff's testimony. The court was troubled by this testimony but did not find it so utterly lacking any merit as that of Dr. Hoff. Therefore, the court awarded sanctions in the amount of: (1) all Ideal's reasonable fees and costs through February 2, 2007; and (2) half Ideal's reasonable fees and costs after February 2, 2007.

 

The sanctions were awarded against Ideal, its primary counsel and its local counsel. The court expressed its regret in the ruling: "The court cannot adequately express its disappointment that it has been necessary to impose sanctions upon any party or attorney appearing before it."

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The District Court of Minnesota granted a partial preliminary injunction in H.B. Fuller Co. v. Mooney, 2007 WL 1827240 (D. Minn. 6/22/07).

 

H.B. Fuller is an adhesive manufacturer that operates in 34 countries. Mooney, a strategic manager, signed a noncompete agreement. However, he took a job at Coim USA, one of H.B Fuller's competitors. Mooney took with him customer files and copied thousands of computer files. Fuller filed suit for breach of the noncompete agreement and trade secret misappropriation.

 

The court partially granted the preliminary injunction. Mooney is enjoined from disclosing information about Fuller's customers or strategies, but he is permitted to continue his employment at Coim USA. Moreover, the court based the injunction on the noncompete agreement claim; the court found that H.B. Fuller failed to show a likelihood of success on the trade secret claim. The preliminary injunction only has an initial term of 3 months and still commanded a $40,000 bond.

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The District Court of Minnesota denied a motion for preliminary injunction based on patent infringement in Torspo Hockey Int'l, Inc. v. Kor Hockey Ltd., 2007 WL 1752725 (D. Minn. 6/18/07).

 

Kor Hockey owns a patent for its hockey skate design. Torspo Hockey initiated the lawsuit by seeking a declaration that its competing skate design does not infringe Kor's patent. Kor then counterclaimed and moved for a preliminary injunction. The court denied the motion largely in part because Kor only identified an arch shape in the skate as a point of novelty. The court observed that Torspo will likely prove that the arch shape is not novel.

 

This case also featured a new ripple resulting from eBay, Inc. v. MercExchange, LLC, 126 S.Ct. 1837 (2006), which held that irreparable harm cannot be presumed when evaluating permanent injunctions (detailed coverage at PatentlyO). The court held that eBay applies with equal force to preliminary injunctions and determined that Kor failed to establish irreparable harm.

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The District Court of Minnesota granted in part and denied in part a preliminary injunction based on copyright infringement in DF Institute, Inc. v. Marketshare Eds, 2007 WL 1589525 (D. Minn. 6/1/07).

 

This case involved Kaplan Professional Schools, the real estate exam branch of exam-preparation giant Kaplan. In 2006, Peggy McNamara enrolled in two of Kaplan's courses regarding the Minnesota real estate salesperson exam. In January 2007, McNamara opened her own company, Marketshare, which provided materials for passing the same exam. Kaplan immediately filed this suit, claiming the Marketshare course materials infringe Kaplan's copyrights.

 

After a thoughtful analysis, the court concluded that the bulk of Kaplan's material consists of noncopyrightable elements, such as statements of law and facts that students must learn. However, the court did find that Kaplan's hypothetical questions and answers are copyrightable expression. The court granted the preliminary injunction, but only as to these hypotheticals and answers, which represent a small percentage of the Kaplan course materials. The court denied the remainder of the motion.

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The Eastern District of Missouri denied a preliminary injunction based on breach of contract and trademark infringement in Noodles Development, L.P. v. Ninth Street Partners, LLP, 2007 WL 1115216 (E.D. Mo. 4/13/07).

 

Noodles Development (N.D.) is the franchisor of the Nothing but Noodles restaurant chains. Defendants are franchisees. When their contracts expired, they continued running noodle-themed restaurants called Ninth Street Noodles. They later changed the restaurants to Ninth Street Cafe and quit using a noodle theme.

 

After a strange preliminary injunction hearing that began November 17, 2006 but did not end until January 8, 2007, the court denied the preliminary injunction. The court found N.D. could not show irreparable harm because the defendants had returned all N.D.'s operating manuals and quit operating noodle-themed restaurants. However, the court noted that the merits of the case appear to strongly favor N.D.

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The Eastern District of Missouri granted a preliminary injunction based on copyright infringement in Icke v. Adams, 2007 WL 1063426 (E.D. Mo. 4/5/07).

 

David Icke is a British author obsessed with the Illuminati and an interdimensional race that secretly rules the world. Royal Adams approached Icke to provide printing services for Icke's books in the United States. Adams never acquired exclusive publishing rights or any rights to Icke's copyrights in the books. However, Adams set up a large distribution system of Icke's books without Icke's permission.

 

The court granted an extensive preliminary injunction. The court ordered Adams to immediately turn over all his profits from the venture and to provide Icke with access to all documents and electronic media relating to the infringement.

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The Northern District of Iowa denied a preliminary injunction in Ideal Instruments, Inc. v. Rivard Instruments, Inc. 2007 WL 915174 (N.D. Iowa 3/28/07).

 

The case began as a patent infringement suit when Ideal sued Rivard, claiming infringement of its patent for a detectable heavy duty needle. In the livestock industry, a "detectable" needles prevent broken needles that are occasionally left in livestock from making their way through the food processing system.

 

In an interesting defense, Rivard filed a counterclaim for false advertising, claiming that Ideal's needles are not detectable as advertised, and sought a preliminary injunction. This claim was based on an admission by Ideal that some of its needles were made with a non-detectable alloy. Ideal had corrected the problem, and there was no evidence that a needle had found its way into a consumer's food. The court found Rivard failed to establish likelihood of success or irreparable harm and denied the preliminary injunction.

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Another preliminary injunction was granted in an Arkansas trademark case. Tempur-Pedic Int'l, Inc. v. Waste to Charity, Inc., 2007 WL 951879 (W.D. Ark. 3/28/07).

 

Tempur-Pedic is a well-known manufacturer of mattresses, pillows and cushions. In 2005, Tempur-Pedic sought to make a donation to victims of Hurricane Katrina. It donated $15 million of merchandise to Waste to Charity (WTC) to distribute to the victims. Rather than give the merchandise to the victims, WTC sold them for a profit.

 

Tempur-Pedic styled its claim as one for breach of contract and fraud rather than trademark infringement. The court still had no trouble in granting the preliminary injunction, but it did require Tempur-Pedic to post a $500,000 bond.

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The District Court of Minnesota denied a preliminary injunction based on copyright infringement in Windgate Software, LLC v. Minnesota Computers, Inc., 2007 WL 951668 (D. Minn. 3/27/07).

 

Windgate manages a database called RISC Analysis that manages thousands of replacement parts for various IBM products. Windgate obtained a copyright for the database. Minnesota Computers buys and sells IBM parts. Minnesota copied some of the part numbers and descriptions from Windgate's database and posted them on the Minnesota Computers site.

 

The court denied the preliminary injunction on two main grounds. First, MC did not copy any copyrightable elements of the database, so Windgate could not establish likelihood of success. Second, Windgate only presented evidence of commercial harm; it could not establish the requisite irreparable harm.

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The Eastern District of Arkansas denied motions for sanctions and attorney fees in Mail Boxes Etc., Inc. v. PBC Services, Inc., 2007 WL 841664 (E.D. Ark. 3/15/07).

 

On February 7, 2006, Mail Boxes brought suit against the defendants for trademark infringement and breach of a noncompete agreement. The court granted a temporary restraining order, and the defendants had to cease business operations. The court also ordered the trial to be consolidated with the preliminary injunction proceedings to begin March 20, 2006.

 

The defendants were parties in a California lawsuit (Morgate) against Mail Boxes that had been ongoing for several years and involved hundreds of parties. The court agreed to let the defendants assert their Morgate claims as counterclaims in the Arkansas trademark case. Mail Boxes chose not to try Morgate in Arkansas, and it voluntarily dismissed the Arkansas claims.

 

The defendants promptly moved to execute on the bond. They also moved for attorney fees of just under $300,000 (for a case that lasted 38 days) and moved for sanctions pursuant to 28 U.S.C. § 1927. After a lengthy recitation of the dispute, the court allowed the defendants to execute $19,990.51 against the bond, but denied the motions for attorney fees and sanctions.

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The Western District of Arkansas granted a preliminary injunction based on trademark infringement and trade dress infringement in Rotoworks Int'l Ltd. v. Grassworks USA, LLC, 2007 WL 703747 (W.D. Ark. 3/5/07).

 

Rotoworks, a New Zealand company, sells weed wipers called Rotowipers. All Rotowipers are painted aqua. The defendants were exclusive distributors of Rotowipers in the U.S. However, the defendants began selling their own weed wipers instead of the Rotowipers. The defendants' wipers were designed just like Rotowipers and painted aqua. The defendants told their customers that the Arkansas-made wipers would better suit their needs, which dissuaded them from purchasing Rotowipers.

 

The court had no trouble in issuing the preliminary injunction under these circumstances, and the court only required a $5,000 bond.

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The Western District of Arkansas denied a temporary restraining order based on false advertising and trademark infringement in Trott's WoodProducts, Inc. v. American Cabinet Doors & More, Inc., 2007 WL 625920 (W.D. Ark. 2/27/07).

 

Trott's took pictures of its cabinets to use in promotional materials. American Cabinet acquired these pictures from one of Trott's former employees and used the photographs in their own sales brochures. Trott's claimed false advertising and trademark infringement but failed to assert a claim for copyright infringement.

 

The court found no false advertising claim because there was no evidence consumers were deceived by the photographs. In fact, only a trained professional can distinguish the cabinets of one company from another. The court also found the cabinets themselves were generic and could not qualify for trademark protection. The court easily denied the TRO.

 

Trott's had the right idea but brought the wrong claims. The photographs are copyrightable, and Trott's likely would have been successful had it registered copyrights and asserted copyright infringement.

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The Eastern District of Arkansas denied a preliminary injunction in Sobba v. Elmen, 2007 WL 283140 (E.D. Ark. 1/30/07).

 

The case involved Cupids, which is a lingerie and adult novelty store with locations in Central Arkansas. It has received a lot of publicity through promotions with the Buzz radio station. The Cupids stores are owned by Sobba and Elmen in a peculiar way. The two Little Rock stores and Hot Springs store are each owned by a separate corporation. Sobba and Elmen jointly own each of these corporations. They advertised all 3 stores as a collective, but they never registered the Cupids trademark or created a written agreement involving intellectual property rights.

 

Elmen claims the parties agreed to divide up the state of Arkansas. He opened a new store in Conway in 2006 and planned to open another store in Jacksonville this year. Sobba filed suit to prevent the Jacksonville opening claiming trademark infringement and breach of fiduciary duty. Sobba's argument was greatly damaged by the fact that he unsuccessfully tried to open his own store in Fayetteville.

 

The court easily denied the preliminary injunction. This case could produce some interesting results. At present, it involves 3 corporations, 2 LLCs and 2 owners, but no trademark registrations and no intellectual property agreements.

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The Eastern District of Missouri granted a temporary restraining order based on a noncompete agreement in U.S. Bank Nat'l Ass'n v. Meyer, 2007 WL 188406 (E.D. Mo. 1/23/07).

 

Meyer was a former Senior Portfolio Manager with U.S. Bank. He signed a noncompete agreement that prohibited him from soliciting U.S. Bank customers and from accepting business from these customers. In an extremely brief opinion, the court granted the TRO, and the case quickly settled.

 

This case is important because it presents a limited noncompete agreement. This limited agreement only prohibited Meyer from doing business with existing U.S. Bank customers; it did not prohibit his employment at a competing bank. These limited noncompete agreements are a growing trend to avoid courts' general dislike for noncompete agreements that prohibit employment.

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The District Court of Minnesota granted a preliminary injunction on false advertising claims in Medtox Scientific, Inc. v. Tamarac Medical, Inc., 2007 WL 37793 (D. Minn. 1/4/07).

 

Esca Tech has a current patent application pending for towel and soap products for removing led from the skin. Esca Tech granted Defendant Tamarac the exclusive license to use and sell these products. Medtox is a laboratory testing company that sometimes uses the products covered in the patent application.

 

Even though no patent has issued, Tamarac made representations to customers that it was the only company that had the rights to use the products because of the patent application. The court found these statements were false because the application itself did not grant any rights to Tamarac, and the court granted a preliminary injunction for Medtox.

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The Southern District of Iowa denied a preliminary injunction in a complex case involving trademark infringement and trade secret misappropriation in Outcomes Pharmaceutical Health Care, L.C. v. Nat'l Community Pharmacists Ass'n, 2006 WL 3782905 (S.D. Iowa 12/22/06).

 

Outcomes provides medication therapy management (MTM) services, which consist of advising patients on how to get the most out of their medications. Outcomes used the term "Encounter" to identify its services. NCPA and the other defendants contracted with Outcomes to provide MTM services. During this time, Outcomes provided defendants with several documents Outcomes used in its business. After the contract expired, the defendants began offering their own MTM services, and they also used the term "Encounter."

 

The court conduced a 3-day hearing before denying the preliminary injunction. On the trade secret claim, the court found some likelihood of success but that Outcomes failed to establish irreparable harm.

 

On the trademark claim, the court found that "Encounter" as used by Outcomes is generic because "encounter" is used throughout the medical industry to describe a meeting between a patient and a medical professional. The court also mad alternate findings that Outcomes failed to establish secondary meaning, and there was no likelihood of confusion caused by the defendants' use.

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The District Court of North Dakota issues a temporary restraining order based on trademark infringement in Northwest Airlines, Inc. v. Bauer, 2006 WL 3733295 (D.ND. 12/15/06).

 

Northwest Airlines periodically distributes discount coupons called e-Certificates. Customers can gift the e-Certificates to others but cannot sell them. Without permission, Bauer sold e-Certificates on the website www.northwestdiscountcoupons.com (now inactive). Northwest purchased some certificates from this website, which were used in support of its motion.

 

In a clear-cut decision, the court found likelihood of success on the trademark infringement claim and issued a temporary restraining order for Northwest.

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High technology in the ice cream sandwich industry was displayed in Interbake Foods, LLC v. Tomasiello, 2006 WL 3302678 (N.D. Iowa 11/13/06).

 

Interbake owns a 95% share of the wafer market (a wafer is the sandwich part of an ice cream sandwich). Interbake takes great steps to preserve its recipes, formulas, and processes as trade secrets. Tomasiello was an upper level manger for Interbake and had access to all the secrets. He signed a Code of Conduct prohibiting him from disclosing these secrets, but he was not required to sign a noncompete agreement.

 

BoDeans is a successful ice cream cone company that entered the wafer market in 2006. BoDeans hired Tomasiello in October 2006. Just before he left, Tomasiello accessed numerous computer files at Interbake containing trade secrets and confidential information. However, Interbake could not show Tomasiello was using its trade secrets at BoDeans.

 

In a split ruling, the court enjoined Tomasiello and BoDeans from misappropriating Interbake's trade secrets but did not enjoin his employment with BoDeans. More importantly, the court ordered both defendants to preserve all electronic data they have relating in any way to BoDeans' recruitment of Tomasiello.

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The Western District of Arkansas denied a preliminary injunction for breach of a noncompete agreement and trade secret misappropriation in Rare Valley Resources, Inc. v. Kinetic Technologies, LLC, 2006 WL 3096682 (W.D. Ark. 10/31/06).

 

Rare Valley and Kinetic both sell veterinary products. They entered into an agreement where Kinetic distributed Rare Valley's products, which included a noncompete agreement for 2 years after the venture terminated. However, the noncompete agreement was limited to the Aloe products, not veterinary products in general.

 

Rare Valley waited almost 6 months after filing the complaint to move for a preliminary injunction, which the court found as strong evidence against irreparable harm. The court also found no likelihood of success for either the noncompete claim or the trade secret misappropriation claim.

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The District Court of Minnesota denied a preliminary injunction in Gregerson v. Vilana Financial, Inc., 2006 WL 3227762 (D. Minn. 11/7/06).

 

Vilana asserted trademark infringement claims against Gregerson for using Vilana's trademarks as a link and in subject lines on his websites www.cgstock.com and www.phototour.minneapolis.mn.us. Gregerson also used the trademarks as metatags on these sites.

 

Although trademark disputes involving metatags are relatively common, this case is unique because the parties sell entirely different products. Gregerson sells photographs, but Vilana provides financial services. The court found that Vilana could not show likelihood of success and denied the injunction.

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The District Court of Minnesota denied a preliminary injunction against a former employee in Unisource Worldwide, Inc. v. Schroeder, 2006 WL 3030887 (D. Minn. 10/23/06).

 

Unisource claimed breach of a noncompete agreement and trade secret misappropriation by Schroeder after he joined a competing firm. The parties' employment arrangement was altered by several letter agreements, but they never reduced the arrangement into one cohesive contract.

 

The court found no likelihood of success because Unisource could not establish that the noncompete agreement was still in effect, and Unisource could not provide evidence of trade secret misappropriation. The court also found that any harm could be remedied with monetary damages.

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Federal Law

A preliminary injunction is an order to stop a party from engaging in certain conduct while the litigation is pending; it can only issue after notice and a hearing. A temporary restraining order can accomplish the same result without notice or a hearing in certain circumstances. See Fed. R. Civ. P. 65.

 

The Eighth Circuit uses a four-factor test in determining whether a party is entitled to a preliminary injunction: (1) the probability that the movant will succeed on the merits; (2) the threat of irreparable harm; (3) the balance between the harm and the injury that granting the injunction will inflict on the parties, and (4) the public interest. Dataphase Sys. Inc. v. CL Sys., Inc., 640 F.2d 109 (8th Cir. 1981).

 

Most intellectual property violations can qualify as irreparable harm. As a result, intellectual property litigation often involves a motion for preliminary injunction or temporary restraining order.

 

Arkansas Law

The Arkansas rule differs in two significant respects. First, Arkansas does not distinguish between a preliminary injunction and a temporary restraining order. See Ark. R. Civ. P. 65. Second, the only factors considered are likelihood of success and irreparable harm. See id.; W.E. Long Co. v. Holsum Baking Co., 307 Ark. 345 (1991).

 

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