Marcam Corp. v. Orchard, Civ. A. No. 95-10527-RCL.

• Decision Date: 03 April 1995
• Docket Number: Civ. A. No. 95-10527-RCL.
• Citation: 885 F. Supp. 294
• Parties: MARCAM CORPORATION, Plaintiff, v. Frank E. ORCHARD and Datalogix International, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

885 F. Supp. 294

MARCAM CORPORATION, Plaintiff, v. Frank E. ORCHARD and Datalogix International, Inc., Defendants.

Civ. A. No. 95-10527-RCL.

United States District Court, D. Massachusetts.

April 3, 1995.

Adam P. Forman, Testa, Hurwitz & Thibeault, Boston, MA, for plaintiff.

Paul Whitby, Lowenthal, Landau, Fischer & Ziegler, New York City, David S. Mortensen, Diane J. Perlowski, Tedeschi, Grasso & Mortensen, Boston, MA, for defendants.

MEMORANDUM AND ORDER

LINDSAY, District Judge.

The plaintiff, Marcam Corporation, has brought this action to enforce the non-competition provisions of an employment agreement between it and its former employee, defendant Frank Orchard. Marcam also has made claims against Orchard's current employer, Datalogix International, for intentional interference with the contractual relations between Marcam and Orchard and for violation of Mass.Gen.L. c. 93A. Marcam seeks injunctive relief and damages (including damages under Mass.Gen.L. c. 93A) against Orchard and damages (including damages under Mass.Gen.L. c. 93A) against Datalogix.

Now before the court is Marcam's motion for a preliminary injunction¹ to prevent Orchard from working for Datalogix in its operations within the United States during the term of the non-competition covenant, and from using or disclosing Marcam's trade secrets and other proprietary or otherwise confidential business information. After a review of the papers, and after a hearing, the court grants Marcam's motion.

Facts

The following facts appear from the pleadings and affidavits filed by the parties.

Marcam and Datalogix are competitors, engaged in the development and licensing of software in the "process" manufacturing industry. Process manufacturers produce products (such as food, beverages, and pharmaceuticals), by controlling chemical reactions through such procedures as mixing, separating, heating and refining. Marcam's PRISM software directly competes with software products of Datalogix called CIMPRO and GEMMS in the process manufacturing market.

In April of 1991, Orchard was hired as Marcam's Director of Development. He later became Marcam's Vice-President of Development, the position he last held with Marcam.

When he was first hired by Marcam, Orchard signed an employment agreement which contained non-competition provisions that Orchard would not compete with Marcam or accept employment with a competitor of Marcam for one year if, within five days of being notified by Orchard of his intention to resign, Marcam offered to pay him 110% of the salary offered by the competitor during that restricted year.² The agreement further provided that Orchard would not disclose proprietary information or material relating to Marcam's business.

For the past fourteen months, Marcam has been developing and marketing a new software product for use in the process manufacturing industry, PRISM Client/Server. Orchard was directly responsible for the research and development of PRISM Client/Server, and was involved in all other significant aspects of the product, including budget and marketing decisions.

As Director, and later Vice President of Development, Orchard was responsible for a staff of approximately sixty employees in the areas of product development, product assurance, and technical consulting with respect to several of Marcam's PRISM products. He was also responsible for managing the budget of Marcam's Development Committee — a budget in excess of one million dollars. Orchard was also involved in Marcam's sales efforts for PRISM products (especially PRISM Client/Server); and he conducted numerous sales presentations and demonstrations of such products to prospective customers.

For three and a half years Orchard was privy to top-level discussions concerning Marcam's research and development efforts pertaining to its current products, as well as to its future products. This information provided Orchard with an intimate understanding of Marcam's plans for future development and of its sales and marketing strategies.

On February 22, 1995, Orchard announced his intention to resign from Marcam, effective February 24, 1995. At that time, he advised Marcam that he had received an offer from Datalogix. Marcam informed Orchard that it wished to invoke the non-competition provision in his employment agreement and would pay him 110% of the salary offered by Datalogix. Marcam now contends that Orchard breached the employment agreement by accepting employment with Datalogix after Marcam agreed to pay 110% of the salary offered by Datalogix. Orchard contends that Marcam failed to offer him the full 110% of the salary he expected from Datalogix, and that he was therefore free to leave Marcam and enter into an employment relationship with Datalogix.

Standard for Granting a Preliminary Injunction

A party moving for a preliminary injunction must establish four things before that relief may be granted: (1) that the movant will suffer irreparable injury if the injunction is not granted, (2) that such injury outweighs any harm that the opposing party would suffer if the injunction were granted, (3) that there is a likelihood that the movant will succeed on the merits at trial and (4) that the public interest will not be adversely affected if the injunction is granted. Jackson v. Fair, 846 F.2d 811, 814-15 (1st Cir. 1988). As to each of these matters the court's analysis of this case follows.

Irreparable Harm

Marcam argues that the knowledge that Orchard has of its products and operations will provide Datalogix with critical proprietary and confidential information that Marcam has spent years and millions of dollars to develop. As Director of Development, and later as Vice President of Development, Orchard was privy to information pertaining to all aspects of the development and marketing of PRISM Client/Server and to significant confidential information concerning other products of Marcam.

Orchard's claim, in response, that his knowledge of Marcam's products is not translatable to Datalogix's products, because the Datalogix products use a different computer language, is not persuasive. Whether Orchard's knowledge of PRISM products is directly applicable to Datalogix's product is too narrow an inquiry. Orchard knows intimately, for example, the evolution of PRISM Client/Server, including its strengths and weaknesses. This information may be used to inform Datalogix's strategies in developing and promoting its competing GEMMS product, notwithstanding the fact that the two products use different computer languages.

Moreover, Orchard has knowledge of Marcam's marketing strategies and its plans for future development. Even if Orchard thinks he is keeping Marcam's secrets, he will, as Datalogix's employee inevitably, even if inadvertently, be influenced by the knowledge he possesses of all aspects of Marcam's development efforts. That knowledge will provide an advantage to Datalogix as it contemplates its own strategies regarding future development of products that compete with PRISM Client/Server, and with Marcam's other products.

As Judge Zobel of this District said in a recent decision, in which she granted a preliminary injunction in favor of an employer which had a similar non-competition agreement with an employee:

The plaintiff has so far spent over $2 million and two years developing a product that, it hopes, will be sold at a highly competitive price and will satisfy the customers. Defendant had detailed knowledge of all phases of the plaintiff's development and marketing strategy. Although I fully credit his testimony that he took no documents that could in any way compromise the plaintiff, he could not and did not leave behind his special knowledge of plaintiff's operation, and in serving his new employer he will inevitably draw upon that knowledge.

Bard v. Intoccia, 1994 WL 601944 (D.Mass. 1994).

Here, as in Bard, the harm to the plaintiff cannot be avoided simply by the former employee's intention not to disclose confidential information, or even by his scrupulous efforts to avoid disclosure. The problem for Marcam is that when Orchard goes to Datalogix he does not go with a tabula rasa with respect to Marcam's products, its development strategies, its marketing plans, its customers and other significant business information. It is difficult to conceive how all of the information stored in Orchard's memory can be set aside as he applies himself to a competitor's business and its products. On the contrary, what Orchard knows about Marcam is bound to influence what he does for Datalogix, and to the extent it does, Marcam will be disadvantaged.

In addition to its interest in protecting against the inevitable use of confidential information, Marcam has a legitimate interest in protecting the good will of its customers. Wells v. Wells, 9 Mass.App.Ct. 321, 400 N.E.2d 1317, 1319 (1980). As the person responsible for the production and development of PRISM Client/Server, Orchard enjoyed an "industry-wide reputation" for his efforts in developing PRISM Client/Server. Marcam's customers relied on Orchard to the extent that some insisted upon conferring with him personally prior to negotiating over the licensing of PRISM Client/Server.

It is well-settled that a non-competition agreement may be enforced to protect a company's reputation and its relationship with its customers. New England Tree Expert Co. v. Russell, 306 Mass. 504, 28 N.E.2d 997, 1000 (1940); Kroeger v. Stop & Shop, 13 Mass.App.Ct. 310, 432...