Kendall Holdings, Ltd. v. Eden Cryogenics LLC

• Decision Date: 20 June 2008
• Docket Number: Case No. 2:08-cv-390.
• Citation: 630 F.Supp.2d 853
• Parties: KENDALL HOLDINGS, LTD., d/b/a PHPK Technologies, Plaintiff, v. EDEN CRYOGENICS LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

630 F.Supp.2d 853

KENDALL HOLDINGS, LTD., d/b/a PHPK Technologies, Plaintiff, v. EDEN CRYOGENICS LLC, et al., Defendants.

Case No. 2:08-cv-390.

United States District Court, S.D. Ohio, Eastern Division.

June 20, 2008.

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Benjamen E. Kern, Benesch Friedlander Coplan & Aronoff, Columbus, OH, Steven M. Auvil, Cleveland, OH, for Plaintiff.

Stephen Eric Chappelear, Columbus, OH, Peter C. Schechter, Edwards Angell Palmer & Dodge LLP, New York, NY, for Defendants.

MEMORANDUM OPINION AND ORDER

JOHN D. HOLSCHUH, District Judge.

Plaintiff Kendall Holdings, Ltd., d/b/a PHPK Technologies ("Plaintiff") brought this suit against Defendants Eden Cryogenics LLC ("Eden"), Eden's founder and President Steven L. Hensley ("Hensley"), an Eden employee named Jim Mitchell ("Mitchell") and one or more John Doe defendants, to remedy Eden's alleged copyright infringement and misappropriation of trade secrets, among other claims. This matter is before the Court on Plaintiffs Motion for Temporary Restraining Order (doc. # 15), which asks the Court to enjoin Defendants from:

1) selling, advertising, or producing any product derived through the use of any of [Plaintiffs] confidential and proprietary information, including, but not limited to shop drawings, pricing information and customer lists in violation of Ohio Revised Code § 1333.61, et seq.;

2) reproducing [Plaintiffs] copyrighted catalog and any part thereof, including, but not limited to, the format, substance, structure, sequence, shop drawings, products, tables, charts, data, or language thereof, in any form in violation of the Copyright Act, 17 U.S.C. § 101, et seq.; and

3) distributing or displaying copies or reproductions of any aspect of [Plaintiffs] copyrighted catalog, including, but not limited to, reproductions of the format, substance, structure, sequence, shop drawings, products, tables, charts, data or language thereof, in any form in violation of the Copyright Act, 17 U.S.C. § 101, et seq.

(p. 1, doc. # 15.) For the following reasons, Plaintiff's Motion is DENIED.

I. Background

This case involves the cryogenics industry, which is a sophisticated, tightly-knit, relatively small industry that utilizes extremely low-temperature substances (such as liquid oxygen, nitrogen, and helium) and high-vacuum conditions. (Def. Resp. p. 3-4, doc. # 26.) Cryogenics companies such as the parties to this case manufacture and supply items, such as valves, bayonets,¹ and vacuum-insulated piping, for use in the industrial gas, automotive, military, aerospace, medical, and semiconductor industries. (Pl. Mot. T.R.O. p. 3, doc. # 15.) There are only approximately 200 to 300 private companies and government entities that use these types of cryogenic products, and competitors in the industry generally know who their potential customers are. (Def. Resp. p. 16-17, doc. # 26.) Additionally, Defendants assert that many of the products that the industry competitors produce are standardized and substantially similar across the industry. (Def. Resp. p 14, doc. # 26; Hensley Aff. ¶ 3, doc. # 26-2.)

Hensley began his career in the cryogenics industry in 1967 with CVI, Inc. ("CVI"), a cryogenics company founded by James Pierce ("Pierce"). Hensley asserts that "CVI was a leader in the cryogenics industry, and many of the products and innovations created by CVI form the basis for the standardized cryogenics products sold today." (Hensley Aff. ¶ 3, doc. # 26-2.) While at CVI, Hensley designed CVI's standardized products, including valves, bayonets, and piping, and eventually became CVI's Vice President of Standard Products. (Id. ¶ 5.) Hensley also states that he was the primary author of CVI's product catalog. (Id. ¶ 6.) CVI hired Mitchell in 1988, but Mitchell left CVI in 1989 to pursue a career as a firefighter. CVI hired Mitchell as an independent contractor in 1991, however, and Mitchell drafted "shop drawings," design and engineering drawings that contain detailed information about a company's products, for CVI's standard products, including valves, bayonets, and piping. (Mitchell Aff. ¶ 2-3, doc. # 26-3.)

Pierce, CVI's founder, retired from CVI in 1991 and founded PHPK Technologies, Inc. (referred to by the parties as "Old PHPK"). Old PHPK initially did not manufacture cryogenic products, but instead operated as an engineering consulting firm. (Hensley Aff. ¶ 8, doc. # 26-2.) Hensley and Mitchell remained at CVI, which was acquired by Chart Industries, Inc. in 1994. In 1995, however, Old PHPK decided to move into manufacturing cryogenic products and hired Hensley to create a standard product line. (Id. ¶ 9.) Old PHPK then hired Mitchell as an independent contractor in April 1995, and Mitchell states that he was the "primary designer of Old PHPK's standard product line, which consisted of products such as cryogenic valves, bayonets ... and piping." (Mitchell Aff. ¶ 10, doc. # 26-3.) Hensley and Mitchell created Old PHPK's standard product line using their knowledge of the cryogenics industry, as well as their experience and designs from CVI. Hensley and Mitchell also helped to develop Old PHPK's product catalog, with Hensley stating that he was the primary author and Mitchell stating that he created many of the drawings that were included in the catalog. (Id. ¶ 12; Hensley Aff. ¶ 13, doc. # 26-2.) Old PHPK also developed customer lists and pricing information for its products that it did not disclose to the public and attempted to keep secret. (Pl. Mot. T.R.O. p. 4, doc. # 15.)

Mitchell left Old PHPK in 1999, and acknowledges that he took approximately 200 Old PHPK shop drawings that he had created when he left. Mitchell asserts that it is customary in the cryogenics engineering industry for engineers and independent contractors to take their designs and shop drawings with them when they switched employers or left employment, and that Old PHPK never informed him of any limited-access policy with regards to the shop drawings or indicated to him that he could not take these drawings when he left Old PHPK. (Mitchell Aff. ¶¶ 6, 11, 13.) Hensley similarly states that Old PHPK had no policies related to limiting access to shop drawings, and did not require employees to return shop drawings when leaving employment. Hensley also states that it is common in the industry for engineers to retain these drawings and designs for reference and assistance with future designs. (Hensley Aff. ¶¶ 11, 14, 21.) Plaintiff vigorously disputes these assertions, and states that Old PHPK granted access to the shop drawings to only a select group of employees, kept the shop drawings protected in electronic format, stamped all shop drawings as proprietary and confidential, and in no way allowed employees to take these drawings and designs with them when they left employment. (Pl. Reply p. 12-14, doc. # 29; Kreinbrink Aff. ¶¶ 8-14, doc. # 29-3.) Mitchell returned to CVI/Chart upon leaving Old PHPK. (Mitchell Aff. ¶ 14, doc. # 26-3.)

Hensley remained at Old PHPK and eventually became Old PHPK's President and General Manager. However, he resigned in January 2004 and began looking for a business partner to purchase Old PHPK's assets and continue the operation. (Def. Resp. p. 4, doc. # 26.) He eventually met with Richard Coleman, Kendall Holdings, Ltd.'s C.E.O., who agreed to purchase Old PHPK. In March 2004, Kendall Holdings, Ltd. purchased all of Old PHPK's assets, including Old PHPK's shop drawings, designs, catalog, customer lists, and pricing information, from Pierce and became Plaintiff Kendall Holdings, Ltd. d/b/a PHPK Technologies, an entity that the parties refer to as "New PHPK." (Coleman Aff. ¶ 5, 6, doc. # 15-2.) Although the Asset Purchase Agreement and Bill of Sale indicate that Kendall Holdings Ltd. also purchased CVI's intellectual property and that Old PHPK warranted it had the authority to sell CVI's intellectual property (Pl. Reply p. 15, doc. # 29), it is not clear from the record how, exactly, Old PHPK had this authority, as CVI apparently continued to operate as an independent company after Pierce left to create Old PHPK and CVI was later acquired by a different company.

New PHPK retained Hensley as President, and he continued in the same role that he had at Old PHPK. New PHPK used Old PHPK's shop drawings and designs, and also used Old PHPK's product catalog that Hensley states he authored. New PHPK later hired Mitchell as an independent contractor. While with New PHPK, Mitchell again created designs and shop drawings for New PHPK standard products, but instead of the valve, bayonets, and piping that he had worked on previously, Mitchell now primarily designed cryopumps. (Mitchell Aff. ¶ 16, 17, doc. # 26-3.) New PHPK terminated Hensley in November 2004, however, and Mitchell left New PHPK shortly thereafter. (Def. Resp. p. 4, doc. # 26.) Hensley states that he took personal reference material with him when he left New PHPK, and he and Mitchell reiterate that New PHPK, like Old PHPK, had no policies regarding limited access to shop drawings or required employees to return such documents when leaving employment. (Id. p. 6.) Again, Plaintiff vigorously disputes these assertions.

After leaving New PHPK, Hensley was unemployed for a period and then worked as a consultant in the cryogenics industry before co-founding a new cryogenics company, Brehon Cryogenics, LLC, in January 2006. This company became Defendant Eden Cryogenics LLC. (Id. p. 5.) Eden designs and manufactures cryogenic equipment such as valves, bayonets, and piping, and is in direct competition with New PHPK. (Id.) Hensley hired Mitchell to help design Eden's standard product line, and Mitchell states that when designing these products he referred to his experience in the industry and the designs he created while at CVI and Old PHPK. (Mitchell Aff. ¶ 20, doc. # 26-3.) Hensley, with Mitchell's assistance, also designed Eden's product catalog.

In...