Earthweb, Inc. v. Schlack
| Decision Date | 27 October 1999 |
| Docket Number | No. 99 CIV. 10035(WHP).,99 CIV. 10035(WHP). |
| Citation | 71 F.Supp.2d 299 |
| Parties | EARTHWEB, INC., Plaintiff, v. Mark SCHLACK, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Nathaniel H. Akerman, Andrew B. Lachow, Seyfarth, Shaw, Fairweather & Geraldson, New York, NY, for Plaintiff.
Catherine E. Reuben, Michael B. Golden, Shawn P. Landau, Robinson & Cole, LLP, New York, NY, for Defendant.
This diversity action involves claims of breach of contract and misappropriation of trade secrets in the fluid and ever-expanding world of the Internet. Plaintiff EarthWeb, Inc. ("EarthWeb") moves for preliminary injunctive relief enjoining defendant Mark Schlack ("Schlack"), a former EarthWeb vice president responsible for "content" on the company's websites, from: (1) commencing employment with International Data Group, Inc. ("IDG"), and (2) disclosing or revealing EarthWeb's trade secrets to IDG or any third parties. For the reasons discussed below, the motion is denied.1
EarthWeb filed this action on September 27, 1999. The next day, EarthWeb filed an order to show cause and temporary restraining order seeking, inter alia, to enjoin Schlack from commencing employment with IDG and from disclosing EarthWeb's trade secrets. After hearing argument from both parties, this Court entered a temporary restraining order granting that temporary relief.2 At that time, EarthWeb offered to continue to pay Schlack his regular salary and benefits during the pendency of the temporary restraining order, and the Court incorporated that condition in its order. The Court also established an expedited briefing schedule and a return date of October 7, 1999 for EarthWeb's application for preliminary injunctive relief.
Over the next nine days, the parties conducted two depositions and submitted a significant volume of discovery material in connection with EarthWeb's motion. At defendant's request and upon consent of the parties, the Court adjourned the motion return date to October 12, 1999. The parties appeared on that date and engaged in lengthy oral argument. At the conclusion of that argument, the Court extended its temporary restraining order pending a determination of this motion.
EarthWeb, which was founded in 1994, provides online products and services to business professionals in the information technology ("IT") industry. IT professionals are individuals who manage and run computer systems, develop software and perform related tasks for the companies that employ them. (Schlack Aff. ¶ 1) EarthWeb employs approximately 230 individuals in offices located in New York City and around the country. Its stock is publicly traded.
EarthWeb operates through a family of websites offering IT professionals information, products and services to use for facilitating tasks and solving technology problems in a business setting. (Gollan Aff. ¶ 3) Some of EarthWeb's websites are free to the user, while others require a subscription fee. EarthWeb's websites contain, inter alia, (1) articles on subjects tailored to IT professionals that discuss and examine the implementation of technology in the corporate environment; (2) lists of articles, training materials, periodicals, books and downloads organized and indexed by subject matter; (3) compilations and aggregations of technical news; (4) a reference library of full-text versions of technical books; and (5) an online forum of discussion groups. (Gollan Aff. ¶ 4)
EarthWeb obtains this content primarily through licensing agreements with third parties. (Gollan Aff. ¶ 9; Schlack Aff. ¶ 6) Advertising is EarthWeb's primary source of revenue. In 1998, the company generated approximately $3.3 million in revenue. (Gollan Aff. ¶ 4)
Schlack has worked in the publishing industry for the past 16 years. (Schlack Aff. ¶ 1) Prior to joining EarthWeb, Schlack had been employed as senior editor and/or editor-in-chief of several print magazines, such as BYTE and Web Builder. (Gollan Aff. ¶ 5; Schlack Aff. ¶ 3)
Schlack began his employment with EarthWeb in its New York City office on October 19, 1998, and he remained with the company until his resignation on September 22, 1999. His title at EarthWeb was Vice President, Worldwide Content, and as the name suggests, Schlack was responsible for the content of all of EarthWeb's websites. (Gollan Aff. ¶¶ 5, 6) Thus, as described in greater detail below, Schlack had overall editorial responsibility for what appeared on the websites.
Schlack permanently resides in Massachusetts. During his twelve-month tenure with EarthWeb, Schlack resided in a New York City hotel approximately two or three days per week at EarthWeb's expense. (Gollan Aff. ¶ 6) Schlack was one of ten vice presidents at EarthWeb. He served below two senior vice presidents, an executive vice president, and the chief executive officer. (Schlack Aff. ¶ 10)
On September 22, 1999, Schlack tendered to EarthWeb senior vice president William F. Gollan his letter of resignation. Upon inquiry by Gollan, Schlack revealed that he had accepted a position with IT-world.com, a subsidiary of IDG. According to EarthWeb, IDG is the world's leading provider of IT print-based information. (Schlack Aff. ¶ 9; Gollan Aff. ¶ 22) The company generates over $1 billion in annual revenues and publishes more than 280 monthly periodicals. (Reinstein Aff. ¶ 9; Gollan Aff. ¶ 22) The position IDG offered Schlack is based in Massachusetts and would provide him a significant increase in compensation.
EarthWeb describes Schlack as one of its most important officers, while Schlack claims that EarthWeb has inflated the nature of his duties and responsibilities. Schlack also argues that the position waiting for him at IDG is so different that he would have no occasion to divulge any trade secrets belonging to EarthWeb. From those respective viewpoints, the parties have inundated the record with material concerning the extent to which Schlack had access to trade secrets and proprietary information. In particular, EarthWeb has produced copies of over 1,100 documents, a large percentage of which are intra-company e-mails, in order to show that Schlack reviewed and/or created this sensitive information. The trade secrets and other confidential information that EarthWeb claims are likely to be used and disclosed by Schlack to their detriment may be grouped into four broad categories: (1) strategic content planning; (2) licensing agreements and acquisitions; (3) advertising; and (4) technical knowledge. (Pl.'s Mem. at 11) Each category is addressed below.
EarthWeb claims that Schlack's primary job responsibilities involved making all significant strategic decisions relating to content. The company also asserts that Schlack either authored or supervised the creation of the content plans for a number of EarthWeb websites launched within the last year. (Gollan Reply Aff. ¶ 5) Thus, Schlack was involved in deciding what content EarthWeb licensed and how that content would be structured on its websites in order to reach specific types of IT professionals. Schlack was also involved in determining whether the users of a particular EarthWeb website should pay for access to the site, and if so, what the appropriate price should be. (Gollan Aff. ¶ 9) As a result, Schlack knows the specific target audience for each website, how EarthWeb aggregated content on those websites to reach the targeted audience, and how EarthWeb may intend to improve the content and delivery of particular websites. (Gollan Reply Aff. ¶ 6)
Schlack does not dispute the extent of his editorial involvement with EarthWeb's websites. Instead, he claims that he had virtually no interaction with senior management and therefore knows little about EarthWeb's overall business goals. (Schlack Aff. ¶ 16) He also contends that whatever he knows about EarthWeb's strategic planning is likely to become obsolete rather quickly because the company's websites are constantly changing. (Schlack Aff. ¶ 18)
During his employment, Schlack was involved in negotiating at least two licensing agreements with third parties, and he was generally aware of the terms and conditions of other such agreements. (Gollan Aff. ¶ 9; Schlack Aff. ¶ 23) Schlack also knows of companies whose content EarthWeb is interested in licensing. As vice president for content, Schlack often played a key role in determining whether particular content should be licensed, and if so, what the terms of the deal would be. (Gollan Reply Aff. ¶ 12) With respect to acquisitions, Schlack analyzed and evaluated websites and companies that EarthWeb later acquired. Schlack also knows of at least four companies that EarthWeb continues to view as desirable acquisitions. (Gollan Reply Aff. ¶ 9)
Schlack contends, and EarthWeb does not dispute, that the terms of EarthWeb's licensing agreements are frequently revealed by licensors as they continue to search for better deals. (Schlack Aff. ¶ 22) Schlack disputes the number of acquisitions in which he was actually involved, and claims that the mechanics of the deals were handled by a separate department at EarthWeb. (Schlack Aff. ¶ 20-21) Schlack also suggests that he analyzed prospective acquisitions simply by looking at their websites (Schlack Aff. ¶ 21), but the record indicates that his research also included meetings with high-level managers of those companies. (Gollan Reply Aff. ¶ 9; Dep/Schlack/31-33, 106)
It should be noted that EarthWeb does not allege that Schlack has retained copies of any licensing agreements or other sensitive documents concerning licensors. Schlack maintains that he does not remember the details of the licensing agreements which he worked on...
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