Computer Associates Intern., Inc. v. Bryan

• Decision Date: 29 January 1992
• Docket Number: No. CV 91-0195(ADS).,CV 91-0195(ADS).
• Citation: 784 F. Supp. 982
• Parties: COMPUTER ASSOCIATES INTERNATIONAL, INC., Howard A. Rubin and Howard Rubin Associates, Inc., Plaintiffs, v. David W. BRYAN and Application Development Technologies, Inc., Defendants.
• Court: U.S. District Court — Eastern District of New York

784 F. Supp. 982

COMPUTER ASSOCIATES INTERNATIONAL, INC., Howard A. Rubin and Howard Rubin Associates, Inc., Plaintiffs, v. David W. BRYAN and Application Development Technologies, Inc., Defendants.

No. CV 91-0195(ADS).

United States District Court, E.D. New York.

January 29, 1992.

Gold, Farrell & Marks, New York City (Jane G. Stevens, Mark N. Diller, of counsel), for plaintiffs.

Cullen and Dykman, Garden City, N.Y. (Peter Mastaglio, John P. McEntee, William F. Logan on the brief, of counsel), for defendants.

DECISION AND ORDER

SPATT, District Judge.

Claiming misappropriation of trade secrets and confidential and proprietary information, the plaintiffs move, pursuant to Fed.R.Civ.P. 65(a), for a preliminary injunction to prevent the defendants from misappropriating, using, releasing or reproducing the computer software system known as "CA-ESTIMACS" or "ESTIMACS". In this regard, the plaintiffs also claim that the defendant David W. Bryan breached contractual and fiduciary duties owed to the plaintiffs by the creation and marketing of the defendants' product known as AD/TEC-SYS ("AD/TEC").

FACTUAL BACKGROUND

The defendant David W. Bryan ("defendant" or "Bryan"), was employed by the plaintiff Computer Associates International, Inc. ("Computer Associates" or "CA"), for approximately seven years starting in 1982. CA is a Delaware corporation with its principal place of business in Garden City, Long Island, New York. Upon commencing his employment with CA as a sales representative in the Chicago office, Bryan signed an employment agreement, in which he agreed not to use or misappropriate any trade secret or confidential information for his own benefit or for the benefit of any other person or entity. Upon his departure in July, 1989, Bryan also signed a "departing employee agreement", which again reiterated that he would not disclose or use any trade secrets or confidential information gathered during the course of his employment with CA.

In 1981, the plaintiff Howard A. Rubin ("Rubin"), through his wholly-owned corporation Rubin Systems, Inc., began marketing a computer software product that permits users to estimate the time, staff, risks, money required and type of computer hardware it would take to develop new software or modify existing software applications. This system was made up of several products, based loosely on an earlier IBM model, and was called "Quest".

In 1982, by agreement, Rubin granted a license to Management and Computer Services, Inc. ("MACS"), giving MACS exclusive rights to use and sell "Quest" in exchange for royalty payments. By agreement in 1985, Computer Associates acquired all of the MACS rights under the agreement with Rubin. Since that time, CA has used the tradenames "CA-ESTIMACS" and "CA-PLANMACS" for that product. CA alleges that it has invested millions of dollars in improving, designing, enhancing and guarding these programs, and that they contain valuable trade secrets and confidential information.

From mid- to late-1987, Bryan was a member of the CA-ESTIMACS sales force and later became an ESTIMACS product manager responsible for marketing the product. During 1988 and 1989, while in the employ of CA, Bryan worked on software similar to the ESTIMACS system which would also permit a user to estimate the effort, cost and risks in developing software programs. He called this program "HIQ". Bryan demonstrated the HIQ product to various co-employees at CA.

Bryan left the employ of CA in July, 1989 and ultimately formed a corporation known as Application Development Technologies, Inc. ("ADT"), a California corporation located in Dallas, Texas, which is also a defendant in this case. Bryan is the President and the sole shareholder of ADT. While at ADT, Bryan has been testing and marketing the AD/TEC program, which, according to CA, utilizes the trade secrets embodied in CA's programs. CA also contends that the AD/TEC program is actually based on the HIQ product developed by Bryan while in the employ of CA.

The plaintiffs commenced this action against Bryan and ADT, alleging causes of action based on misappropriation of trade secrets, breach of employment agreement, breach of fiduciary duty and unfair competition. The plaintiffs seek compensatory damages, punitive damages and injunctive relief. At this juncture, the plaintiffs move for a preliminary injunction pursuant to Fed.R.Civ.P. 65(a), to prevent Bryan and ADT from misappropriating and using CA's trade secrets, specifically the trade secrets combined and contained in the CA-ESTIMACS program, allegedly used to create and develop the defendants' AD/TEC program.

In opposition to this motion for a preliminary injunction, the defendants allege the following: (1) the plaintiffs' CA-ESTIMACS system does not in fact contain "trade secrets"; (2) the AD/TEC program is substantially different from the ESTIMACS program; (3) Rubin developed the ESTIMACS system by using printed material readily available to anyone in the trade and he did not conceive any "trade secrets" in the ESTIMACS system; (4) the employment contract is unconscionable and therefore invalid; (5) Bryan did not breach the employment agreement, since ADT did not do business until more than one year after the termination of Bryan's employment; and (6) the plaintiffs' delay in seeking to obtain an injunction undermines any claim of "irreparable harm." Furthermore, the defendants contend that the plaintiffs have not demonstrated irreparable harm.

WHAT IS ESTIMACS?

ESTIMACS is a software product which estimates the resources required to develop new software or modify existing software. As good an explanation as any provided to the Court of the purpose of ESTIMACS is set forth in the testimony of Marion Harlow, as follows:

"Q Perhaps you can describe for the Court an example you would give at the seminars that you gave.

A We always used the same example. It was a financial system. In a financial system you have accounts receivable, accounts payable, you have a billing system, you have a general ledger.

Q Please slow down.

A I am sorry. Those are all the different what would be considered subsystems of a financial system. And what the developers would actually do is to code — to actually write programs in COBOL or PL-1 or whatever the computer language is, to actually allow the computer to compute the billing for the company. That's the best I can do in layman's terms.

Q And Estimacs would be able to tell you what with respect to developing this system?

A How many woman hours or staff hours it would take to build the project. It would also tell you how many people were going to be required, insofar as how many project leaders, how many system analysts, how many programmers, how much it was going to cost and how long it was going to take" (Tr. at pp. 1128-29).

PROCEDURAL SETTING

On January 18, 1991, this Court signed an Order to Show Cause, scheduling a hearing on the motion for a preliminary injunction for January 25, 1991. At that time, the Court also temporarily sealed the affidavits and exhibits in support of the motion due to the alleged trade secrets and confidential information contained in the papers.

At the request of counsel, the commencement of the hearing was adjourned several times to permit the defendants to file papers in opposition. The Court thereafter began the hearing on the motion for preliminary injunction on February 22, 1991, and intermittently continued the hearing over the course of several months until its conclusion on July 19, 1991. Upon the conclusion of the hearing, in order to assist the Court in its determination, the parties submitted proposed findings of fact and conclusions of law (see Rule 23 of the Civil Rules of the United States District Court for the Eastern District of New York). In the final stage of the hearing, summations were heard by the Court on October 7, 1991.

After the hearing was terminated, the parties continued to submit post-hearing letters, affidavits and memoranda of law. By letter dated November 22, 1991, the Court advised counsel that it would not consider the post-hearing submissions or any issues raised therein, in the absence of a formal motion on notice (cf. United States v. Wallach, 935 F.2d 445 743 n. 1 2d Cir.1991 Altimari, J., concurring post-argument submissions on appeal are "looked upon with extreme disfavor", citing United States v. Bortnovsky, 820 F.2d 572, 575 2d Cir.1987 per curiam).

On December 5, 1991, a motion was made by the defendants for leave to supplement the record on the ground that the defendants "released a new version of the AD/TEC-SYS program referred to as AD/TEC-SYS 3.0" which program includes certain changes from the prior AT/TEC products. On January 17, 1992, the Court denied the motion without prejudice in an oral decision, essentially finding that the motion was premature and there was no reason to supplement the record with new facts which occurred subsequent to the conclusion of the hearing. The Court determined that after this lengthy and complex trial both sides were entitled to a decision on the merits of the charges and defenses.

In the interim, without waiving any rights, counsel for the plaintiffs consented to the defendants selling and marketing the subject products.

Pursuant to Fed.R.Civ.P. 52(a), set forth below are the Court's required findings of fact and conclusions of law (see Tekkno Laboratories, Inc. v. Perales, 933 F.2d 1093, 1097 2d Cir.1991; Society for Good Will to Retarded Children, Inc. v. Cuomo, 902 F.2d 1085, 1088 2d Cir.1990 see also Weitzman v. Stein, 897 F.2d 653, 658 2d Cir.1990 district court "must" set forth reasons for grant or denial of preliminary injunction).

APPLICABLE LAW

A. Jurisdiction

Subject matter jurisdiction over this action exists pursuant to 28 U.S.C. § 1332, since the plaintiffs and defendants are of diverse citizenship, and the amount in controversy exceeds $50,000.

B. Standard on Preliminary Injunction

The...