This post examines a decision by a U.S. District Court Judge in the Southern District of Ohio in a civil suit. The issue involved “Plaintiff Goken America, LLC (`Goken’)'s Motion for Temporary Restraining Order and Preliminary Injunction”.
Goken America, LLC v. Naveen
Bandepalya, et al., 2014 WL 6673830 (2014).
The judge begins this opinion by
explaining how the litigation arose:
Goken America, LLC
(`Goken’) is an Ohio engineering firm that employed defendant, Naveen Bandepalya
(`Bandepalya’), from September 2010 until January 2014. Goken promoted
Bandepalya to a supervisory position in October 2012. Goken issued Bandepalya a
company laptop and iPhone upon his promotion.
In April 2013, Bandepalya
requested access to a `Business Development’ subfolder within a larger `Admin’
folder. The larger `Admin’ folder houses a variety of important Goken files,
such as: a Japanese–English dictionary specified to Honda engineering terms,
employee payroll information, Development Support Engineer information, HR
information, employee immigration information, and a folder with legal files.
Goken CEO, Doug Smith (`Smith’), gave Bandepalya access to the entire `Admin’
folder on his Goken laptop because it would have been logistically difficult to
give Bandepalya restricted access to just the `Business Development’ subfolder.
The Goken network
required a unique username and password to access the `Admin’ folder so that
only approved employees have access to it. The parties did not discuss Bandepalya's
authorization for the other sub-folders within the restricted `Admin’ folder.
But Smith testified that it was his understanding that Bandepalya would only
access files in the `Business Development’ sub folder based on a conversation
they had and based on common practice. (Transcript of Preliminary Injunction
Hearing, Goken America v. Bandepalya, 2:14–cv–1445 (2014)).
Bandepalya quit his
job at Goken in January 2014. He returned his Goken-issued laptop and iPhone
during his exit interview, but both devices had been wiped clean of all
Bandepalya's files and restored to default settings. Goken then submitted the
devices to a forensic investigator who could recover deleted files and
determine some activity from the laptop. That investigator determined that a
month before quitting at Goken, in December 2013, Bandepalya copied 8,659
files, the entire contents of the restricted `Admin’ folder, onto his laptop
and then onto an external hard drive. Bandepalya confirmed that he copied those
files in or around the beginning of January. But he stated that he only meant
to take his personal files and presentations that he prepared during his
employment at Goken. He testified that he did not open any of Goken's files
after downloading them onto the external hard drive. But Liptak, the forensic
investigator, testified that Goken files from the `Admin’ folder had been
viewed at least 69 times from the external hard drive while it was in
Bandepalya's possession.
Goken America, LLC v. Naveen Bandepalya, et al., supra.
The judge goes on to explain that
both of the parties to this suit agreed there was
no non-compete
contract in effect when Bandepalya was employed at Goken. Goken published a
handbook of employee expectations, and that handbook included a confidentiality
clause, which Bandepalya signed. His signature affirmed that he had read and
understood the policies, but not specifically that he agreed to be bound by the
policies. But Bandepalya agreed that he knew that the information on the
`Admin’ folder was not to be shared with people outside the company. . . .
While working at
Goken, Bandepalya supervised ongoing projects with a valuable client, Honda R
& D Americas, Inc. (`Honda’). Bandepalya currently works for Defendant
American Hydrostatics (`AH’) and was contracted out to its subsidiary,
Defendant Cresttek, LLC (`Cresttek’). Bandepalya's duties at Cresttek are
similar to his prior responsibilities at Goken. The similarities include
working primarily with Honda, seeking to improve Cresttek's reputation at
Honda, and identifying resumes for filling prospective work at Honda. . . .
Goken America, LLC v. Naveen Bandepalya, et al., supra.
The judge explained that on September 3, 2014, Goken filed
the complaint that initiated this lawsuit and a motion for a Temporary Restraining Order (TRO) and “Preliminary Injunctive Relief”. Goken America, LLC v. Naveen Bandepalya, et al., supra. He entered the TRO which
enjoined the defendants from “using or disclosing Goken's confidential business
trade secret information”, prohibited Bandepalya “from working on Honda
projects until a hearing on the merits”, ordered the defendants “to preserve
all documents and electronic files that could be relevant to this lawsuit”,
ordered them to “identify and turn over all Goken trade secret information” and
ordered Bandepalya “to deliver all external hard drive and USB devices he
connected to his Goken laptop during his employment.” Goken America, LLC v. Naveen Bandepalya, et al., supra. Goken’s
motion asks the judge to replace the TRO with a Preliminary Injunction. Goken
America, LLC v. Naveen Bandepalya, et al., supra.
The judge began the substantive part
of his opinion by explaining that a
preliminary injunction is a remedy used by the court to preserve the status quo between the
parties pending trial on the merits. University of Texas v. Camenisch, 451
U.S. 390 (1981). When determining whether to grant a preliminary injunction, this
Court must balance the following four factors: (1) whether the movant has shown
a strong likelihood of success on the merits; (2) whether the movant will
suffer irreparable harm if the injunction is not issued; (3) whether the
issuance of the injunction would cause substantial harm to others; and (4)
whether the public interest would be served by issuing the injunction. Overstreet
v. Lexington–Fayette Urban Cnty. Gov't, 305 F.3d 566, (U.S. Court of
Appeals for the 6th Circuit 2002).
These factors are
to be balanced against one another other and should not be considered prerequisites
to the grant of a preliminary injunction. United Food & Commercial
Workers Union, Local 1099 v. Sw. Ohio Reg'l Transit Auth., 163 F.3d
341 (U.S. Court of Appeals for the 6th Circuit 1998). As an extraordinary
remedy, a preliminary injunction is to be granted only if the movant carries
his or her burden of proving that the circumstances clearly demand it. Leary
v. Daeschner, 228 F.3d 729 (U.S. Court of Appeals for the 6th Circuit 2000).
Goken America, LLC v. Naveen Bandepalya, et al., supra.
The judge noted that the plaintiff
alleged, “among other things, a cause of action for violation of the Computer Fraud and Abuse Act (CFAA),” which creates a civil cause of action as well as criminal
offenses. Goken America, LLC v. Naveen
Bandepalya, et al., supra. Goken claimed
“it has a strong likelihood of success because defendants violated three
sections” of the CFAA. Goken America, LLC
v. Naveen Bandepalya, et al., supra. Specifically, Goken asserted, first, that the
defendants in the suit violated
U.S. Code § 1030(a)
(2)(C). This subsection makes it illegal `intentionally [to] access[ ] a
computer without authorization or exceed[ ] authorized access’ and thereby
obtain information from a protected computer. 18 U.S. Code § 1030(a)(2)(C).
A protected computer is a computer `used in or affecting interstate or foreign
commerce or communication.’ 18 U.S. Code § 1030(e)(2)(B). Goken contends
Bandepalya violated this section of the Computer Fraud and Abuse Act because he
exceeded authorized access when he only had permission to access the `Business
Development’ subfolder within the larger `Admin’ folder, yet he accessed and
downloaded many other files in the `Admin’ folder.
Second, Goken
contends that Defendants violated § 1030(a)(4) of the CFAA. This subsection
makes it illegal for a person `knowingly and with intent to defraud, [to]
access[ ] a protected computer without authorization, or exceed [ ] authorized
access’ to further the intended fraud and obtain something of value. . . .
. Goken argues that Bandepalya's deletion of all the downloaded files from his
laptop and concealment of his business relationship with AH and Cresttek during
the time that he downloaded the files demonstrate the high likelihood of
succeeding on this point. Goken also discusses the competitive value of their
trade secrets and argue that they fulfill the “something of value” prong of
this section.
Third, Goken relies
on § 1030(a)(5)(C) of the CFAA, which prohibits an individual from `intentionally
access[ing] a protected computer without authorization, and as a result of such
conduct, causes damage and loss.’ . . . Goken argues that this section applies
because Bandepalya's access was outside the scope of his authority. Goken also
contends that it suffered damage and loss when its confidential business
information was made available to a direct competitor.
Goken America, LLC v. Naveen Bandepalya, et al., supra.
The defendants denied “any likelihood
of success” on the claim because there
is no violation of
the CFAA when permission is knowingly and voluntarily given. They contend that
the CFAA does not apply when an individual misappropriates information after
access is freely given. Defendants state that Goken gave Bandepalya access to
the `Admin’ folder, so there can be no violation of the CFAA. They argue that
the CFAA is not the appropriate statute for this case because Bandepalya did
not improperly access the files. Defendants assert that a Bandepalya
purportedly misused the information already at his disposal, rather
than improperly accessing it in the first place.
Goken America, LLC v. Naveen Bandepalya, et al., supra (emphasis in the original).
The judge began his analysis of the
parties’ respective positions by noting that courts
`around the country
struggle with whether the CFAA applies in a situation where an employee who had
been granted access to his employer's computers uses that access for an improper
purpose’ Ajuba Intern., L.L.C. v. Saharia, 871 F.Supp.2d 671 (U.S.District Court for the Eastern District of Michigan 2012). There are some
courts that `have construed the terms narrowly, holding that an employee's
misuse or misappropriation of an employer's business information is not
“without authorization” so long as the employer has given the employee
permission to access such information.’ Cranel Inc. v. Pro Image Consultants
Grp., LLC, 2014 WL 4829485 (U.S. District Court for the Southern District
of Ohio 2014). . . . Other courts have determined that `an employee accesses a
computer without authorization whenever the employee, without the employer's
knowledge, acquires an interest that is adverse to that of his employer or is
guilty of a serious breach of loyalty.’ Cranel Inc. v. Pro Image Consultants
Grp., supra. . .
One Court in this district
has construed the term `exceeds authorized access’ narrowly. That Court
recently held that an employee who has total access to an employer's computer
but misuses the information from that computer does not operate `without
authorization’ under the CFAA. See Cranel Inc. v. Pro Image
Consultants Grp., supra. The employee in that case did not `exceed
authorized access’ because the employee had authorization to access all files
on the computer. See Cranel Inc. v. Pro Image Consultants Grp., supra. An
employee `exceeds authorized access’ when that employee `access[es] a computer
with authorization and [uses] such access to obtain or alter information in the
computer that the accesser is not entitled so to obtain or alter.’ Cranel
Inc. v. Pro Image Consultants Grp., supra (citing 18 U.S. Code §
1030(e)(6)).
Goken America, LLC v. Naveen Bandepalya, et al., supra.
He went on to explain that while he
did not agree “with this narrow construction”, he did not have to “resolve this
issue” because
[e]ven under
the Cranel Court's narrow construction of the term `exceeds
authorized access,’ Bandepalya did exceed that access. Unlike the situation
in Cranel, Bandepalya was only given permission to access the `Business
Development’ subfolder within the larger `Admin’ folder. He was not explicitly
instructed to avoid the other folders, but in his email to Smith, he only
requested access to the `Business Development’ subfolder.
Furthermore,
Bandepalya admitted that he understood that the information was confidential
and was not to be shared outside of the company, especially with Goken
competitors. . . .
Smith testified
that it was his understanding that Bandepalya would only operate within the
business development folder `[b]ased on the conversation we had and my way of
thinking that that's common respect and you don't go looking at other people's
personnel information.’ (Transcript of Preliminary Injunction Hearing, Goken
America v. Bandepalya, (2014)). He also testified that Bandepalya's `request
and the authorization were all specific to the business development [sub]folder.’
Id. Smith's testimony regarding his understanding with Bandepalya, in
conjunction with Bandapalya's narrow request to access only the
business development subfolder, compel the conclusion that Bandepalya was not
authorized to access files that were beyond the purview of his duties and
responsibilities.
Goken America, LLC v. Naveen Bandepalya, et al., supra (emphasis in the original).
The judge therefore found that Goken
is likely to
succeed on the merits of §§
1030(a)(2)(C) and (a)(4) because it can show that Goken never
gave Bandepalya permission to access to the entire `Admin’ folder. Goken has a
high likelihood of success on this point because in his email to Smith,
Bandepalya only requested permission to access the `Business Development’
subfolder and not the entire `Admin’ folder.
So even under this
Court's narrow reading of the CFAA, Goken is likely to succeed on §§
1030(a)(2)(C) and (a)(4) because Bandepalya `exceeded authorized
access.’ But Goken is unlikely to succeed under §
1030(a)(5)(C) because that section only applies to those `without
authorization’ and Bandepalya merely `exceeded authorized access.’
Goken America, LLC v. Naveen Bandepalya, et al., supra.
The judge went on to consider the
three remaining preliminary injunction factors, finding, first, that Goken
will likely suffer
irreparable harm without this injunction because the case involves corporate
trade secrets. Courts are typically sensitive to the irreparable harm that
trade secret disclosure can cause. . . . As Defendants point out in
their response brief, grounds for irreparable injury include `loss of control
of reputation, loss of trade, and loss of good will.’ Kos Pharmaceuticals,
Inc. v. Andrx Corp., 369 F.3d 700 (U.S. Court of Appeals for the 3rd Circuit 1989). Because exposed trade secrets could harm a plaintiff's share of
the market and cause loss of business opportunities and reputation, this Court
finds a strong likelihood of irreparable injury for Goken without a preliminary
injunction.
Goken America, LLC v. Naveen Bandepalya, et al., supra.
He then took up the next factor:
substantial harm to others. Goken
America, LLC v. Naveen Bandepalya, et al., supra. Goken argued that “the balance of equities" favored
Plaintiff because `no
legally cognizable harm occurs . . . by enjoining the unlawful use of Goken
Business and Trade Secret Information” and any harm to Bandepalya “is the
direct result of his actions.’ Defendants
assert that an award of a preliminary injunction would cause their company
substantial harm because an inability to service Honda could cause it to go out
of business.
The Court can
significantly decrease the potential harm to Defendants by allowing the
companies AH and Cresttek to continue working with Honda and allowing
Bandepalya to continue working for AH and Cresttek. As with the Temporary
Restraining Order, the Court prohibits Bandepalya from performing work for
Honda but allows him to continue employment by servicing other clients.
Although Defendants claim that they might not be able to continue employing
Bandepalya if he is prohibited from working with Honda clients, Mr. Bramadesam,
an investor in both AH and Cresttek, testified that he has no doubt that
Bandepalya would be able to learn the software tools that Cresttek uses for
work with other clients like GM. . . . [T]o avoid irreparable injury for the
Defendants, this Preliminary injunction will not prevent Bandepalya from
working for AH and Cresttek but will prohibit him for working with Honda and on
current and prospective Honda business and projects.
Goken America, LLC v. Naveen Bandepalya, et al., supra.
Finally, the judge took up Goken’s
argument that “the public interest is served because the public has a
legitimate interest in an Ohio company “being able to protect its trade
secrets.” Goken America, LLC v. Naveen
Bandepalya, et al., supra. The defendants, on the other hand, argued that
the public interest
would be harmed if the Court awards a preliminary injunction to Goken because
they delayed a claim for seven months. They argue that the preliminary
injunction would not `maintain a status quo, which no longer exists’ because of
Goken's delay.
Goken America, LLC v. Naveen Bandepalya, et al., supra.
Having considered these arguments,
the judge found that the protection of trade secrets
weighs in favor of
the public interest. See Kendall Holdings Ltd. V. Eden Cryogenics
LLC, 630 F.Supp.2d 853 (U.S. District Court for the Southern District
of Ohio 2008). So this factor weighs in favor of Goken because it is in the
public's interest for a company to be able to protect its trade secrets.
Although Defendants cite the proposition that laches is appropriate to bar
injunctive relief when the party seeking relief lacked diligence in pursuing
its claim, the Court does not find that Goken lacked diligence in pursuing its
claims. A seven month delay, during which time Goken sought to uncover evidence
for its litigation, is common in litigation. Defendants have not asserted
adequate evidence that Goken lacked diligence in its pursuit of information and
in its preparation for litigation.
Goken America, LLC v. Naveen Bandepalya, et al., supra.
The judge therefore found that, based
on the above analysis, “the balance of factors weighs in favor of issuing a
preliminary injunction in this action.” Goken
America, LLC v. Naveen Bandepalya, et al., supra. He granted Goken’s motion and ordered that
A. Defendants are
enjoined from using or disclosing Goken's confidential trade secret
information;
B. Defendants are
ordered to preserve all documents and electronic files that could be relevant
in this lawsuit;
C. Defendants are
ordered to identify and turn over all Goken trade secret information;
D. Bandepalya is
ordered to deliver all external hard drive and USB devices he connected to his
Goken laptop during his employment;
E. Bandepalya is
prohibited from engaging in any work relating to Honda and on Honda projects;
and
F. Defendants are
enjoined from recruiting Goken employees.
Goken America, LLC v. Naveen Bandepalya, et al., supra.
No comments:
Post a Comment