COM-SHARE, INCORPORATED v. Computer Complex, Inc.

• Decision Date: 22 November 1971
• Docket Number: Civ. A. No. 37026.
• Citation: 338 F. Supp. 1229
• Parties: COM-SHARE, INCORPORATED, a Michigan corporation, Plaintiff, v. COMPUTER COMPLEX, INC., a Delaware corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

338 F. Supp. 1229

COM-SHARE, INCORPORATED, a Michigan corporation, Plaintiff, v. COMPUTER COMPLEX, INC., a Delaware corporation, Defendant.

Civ. A. No. 37026.

United States District Court, E. D. Michigan, S. D.

November 22, 1971.

Donald S. Young, of Dykema, Gossett, Spencer, Goodnow & Trigg, Detroit, Mich., for plaintiff.

Robert A. Hall, Houston, Tex., for defendant.

OPINION

TALBOT SMITH, District Judge.

The case before us arises out of a dispute between the parties to a contract related to the operation of computers. We have ruled upon (and denied) defendant's motions to dismiss for lack of jurisdiction, for failure to state a claim upon which relief can be granted, and for failure to join an indispensable party. We have heard several days of testimony from the principals, have weighed their respective credibilities, have considered numerous exhibits, and briefs, have heard oral arguments and have considered submitted findings of fact and conclusions of law submitted by both parties. It is our conclusion that the conduct of the defendant has been unconscionable and that a preliminary injunction should issue forthwith for reasons that will be spelled out in detail hereinafter.

Certain background materials are necessary not only to an understanding of the issues (which, legally, are not complicated) but as well to the explanation of certain of the unique meanings given words commonly employed in every day speech. Thus the word "languages", as used in this operation is a collection of programs that individually allow a user to develop programs of his own in a language something like English, but which is susceptible to translation into such computer languages as NEWBASIC, XTRAN, and QED.

The plaintiff, Com-Share, Incorporated, is a Michigan corporation with its principal place of business in Ann Arbor. Defendant,¹ Computer Complex, Inc., is a Delaware corporation, with its principal place of business in Houston, Texas. Computer Complex is the successor to the business, assets, and obligations of Com-Share Southern, Inc., a Texas corporation. It does a continuous and systematic part of its general business within the State of Michigan. Two of the defendant's customers are located within this state. Defendant derived $4,566 (or 0.2%) of its total revenues from customers in Michigan in 1969, $1,017 (or 0.3%) in 1970, and $66,184 (or 2%) in 1971.

The contract between the parties concerned the business each was engaged in, namely, offering the use of computer systems on a "time sharing" basis. This business and its mechanisms are so set up that different customers can use the computer system simultaneously from their places of business through the use of telephone facilities. Both parties are also engaged in developing and marketing what is known as "software". This word, as here employed, refers to the programs and controls which are used in the computer. It is clear that this business of computer time sharing is a fast moving operation. Developments in the technology and improvements thereof are frequently made and are important not only for the service of existing customers but in attracting potential customers for the systems.

The agreement before us, concerning which the dispute arises, was entered into on February 10, 1967 and denominated "Technical Exchange Agreement".² The negotiations preceding the Technical Exchange Agreement began in or around January, 1967 and were conducted in part by Mr. William D. Mercer, then President of the defendant, who came to Ann Arbor and Detroit for the purpose of these negotiations, which ultimately resulted in the Technical Exchange Agreement. Defendant's stated objective was to obtain workable systems of time sharing software, plaintiff's subsequent new software developments, and all enhancements, and the maintenance of such software. Summarizing briefly, under the Technical Exchange Agreement, so negotiated, plaintiff and defendant agreed to provide to each other during the term of their agreement, all information concerning "hardware" (e. g., specifications, designs, production drawings, changes, improvements, and new designs relating to computer components) and "software" (i. e., programs and controls that are read into a computer) that came into the legal possession of either party and which related to any phase of operating an SDS 940 Time Sharing Computer System, except that the exchange of applications software in any way proprietary to a user was subject to the express permission of the user. The technology was supplied by magnetic tapes, listings, printouts, and other appropriate transfer media.

From, then, approximately February of 1967 through November 1, 1970, in reliance upon and pursuant to the terms of the Technical Exchange Agreement, plaintiff supplied to defendant, in confidence, from and within the State of Michigan, information, systems software developments and technology called for by the Technical Exchange Agreement, including developments, information, training, knowhow, documents, tapes, tangible things and other technology developed by plaintiff. Such developments and technology as were supplied by defendant to plaintiff under the Technical Exchange Agreement were delivered by defendant to plaintiff in Ann Arbor, Michigan. In addition, certain of the defendant's employees received extensive technical training under the Technical Exchange Agreement at plaintiff's offices in Ann Arbor.

Consistent with the confidential nature of such developments and technology, the Technical Exchange Agreement specifically provided³ as follows:

"Com-Share and Southern now Computer Complex, Inc. each agreed not to lease, sell or otherwise divulge to any third party interest, without the prior written consent of the other, any and all systems software developments supplied to it by the other."

Further to safeguard the information and data thus supplied, the Technical Exchange Agreement also provided⁴ that

"Notwithstanding the expiration or termination of this Agreement, the limitations set forth in Section XI (last paragraph) shall continue for a period of 24 months after such expiration or termination."

Differences having arisen between the parties, they agreed by letter dated November 30, 1970 that the Technical Exchange Agreement was terminated effective as of November 1, 1970. This letter, which was drafted by the defendant, provided in part as follows:

"This letter signifies mutual termination of the Technical Exchange Agreement dated February 10, 1967 between our two companies. This termination shall be effective as of November 1, 1970, as of which date neither company requires further performance by the other under the said agreement."

The prayer for a preliminary injunction before us was triggered in large part by the circumstance that on August 5, 1971, defendant publicly announced that it had entered into an agreement with Tymshare, Inc., a California corporation, to sell substantially all of defendant's assets and goodwill related to its computer time sharing operations to Tymshare, Inc. The obligations of Tymshare, Inc. under this agreement, which is dated August 4, 1971, are subject to certain conditions precedent, including the approval of defendant's shareholders. Defendant's shareholders have not yet approved the sale of the assets to Tymshare, Inc., which corporation, we find, is not an indispensable party which must be joined or in the absence of which this action must be dismissed under Fed.R.Civ.P. 19(a) and 12(b) (7). Cherokee Nation v. Hitchcock, 187 U.S. 294, 23 S.Ct. 115, 47 L.Ed. 183 (1902); Franklin Tp. in Somerset County, N. J. et al. v. Tugwell, 66 App.D.C. 42, 85 F.2d 208 (1936); See, also, Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968).

The plaintiff, obviously disturbed by the implications of the above with respect to its confidential data, wrote to both defendant and Tymshare, Inc., a letter (August 10, 1971) citing to them the provisions of the paragraphs above quoted of the Technical Exchange Agreement, and stating, in addition, that plaintiff presumed that defendant would not divulge to Tymshare, Inc. any information about or pertaining to the systems software developments which had been supplied to the defendant by the plaintiff. Subsequent thereto, the plaintiff took the action before us. On August 27, 1971 it filed for preliminary and permanent equitable relief. On September 13, 1971 defendant filed motions to dismiss the complaint for failure to state a claim upon which relief could be granted, for lack of jurisdiction, and for failure to join an indispensable party. On October 1, 1971, plaintiff filed its motion for a preliminary injunction restraining and enjoining defendant Computer Complex, Inc., its directors, officers, agents and employees, and all other persons acting in concert with them who receive notice of its order, pending the final determination of this action and thereafter until November 1, 1972, from leasing, selling, transferring, disclosing or otherwise divulging to Tymshare, Inc., its directors, officers, agents, and employees, or to any other third party, any of the systems software developments and technology supplied by plaintiff to defendant pursuant to the Technical Exchange Agreement.

With reference to the "systems software developments and technology supplied by plaintiff", the record shows that during the period from 1967 to November 1, 1970, plaintiff delivered to defendant, pursuant to the Technical Exchange Agreement, certain magnetic tapes, symbolics, listings, printouts, documents and other items containing or embodying plaintiff's systems software developments and technology as the use of such was made commercially available by plaintiff. Pursuant to the amendment to the Technical Exchange Agreement dated August 3, 1970, plaintiff also delivered to defendant software developments and technology pertaining to the SDS (X...