Litton Systems, Inc. v. Sundstrand Corp., 84-1356

• Citation: 224 USPQ 252,750 F.2d 952
• Decision Date: 19 December 1984
• Docket Number: No. 84-1356,84-1356
• Parties: LITTON SYSTEMS, INC., Appellant, v. SUNDSTRAND CORPORATION, A Delaware Corp., et al., Appellees. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 952

750 F.2d 952

224 U.S.P.Q. 252

LITTON SYSTEMS, INC., Appellant, v. SUNDSTRAND CORPORATION, A Delaware Corp., et al., Appellees.

Appeal No. 84-1356.

United States Court of Appeals, Federal Circuit.

Dec. 19, 1984.

Frederick A. Lorig, Kendrick, Netter & Bennett, Los Angeles, Cal., argued for appellant. With him on the brief was Elwood S. Kendrick, Los Angeles, Cal., and Allen M. Sokal, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C.

Gregory A. Long, Overton, Lyman & Prince, Los Angeles, Cal., argued for appellees. With him on the brief were Walther E. Wyss, Mason, Kolehmainen, Rathburn & Wyss, Chicago, Ill., Richard J. Hoskins, Schiff, Hardin & Waite, Chicago, Ill., was also on brief.

Before MARKEY, Chief Judge, NICHOLS, Senior Circuit Judge, and BISSELL, Circuit Judge.

MARKEY, Chief Judge.

Appeal from an order of the United States District Court for the Central District of California denying Litton Systems' (Litton's) motion for preliminary injunction. We affirm.

Background

Litton makes and sells, as do others, a ring laser gyroscope (RLG), formed normally of a thermally and mechanically stable block of quartz ceramic material. Counter-rotating laser beams are generated in a cavity in the block and are reflected around the cavity by high quality, almost totally reflective mirrors affixed to the corners of the block. Any imperfection in mirror alignment can result in a plane or missile carrying the RLG to wander miles off course.

On December 27, 1983, Litton filed a complaint for infringement of six patents and misappropriation of unidentified "confidential information and trade secrets" relating to RLGs. The complaint was filed against the Sundstrand Corporation, Sundstrand Data Control, Inc. (SDC), Sundstrand Optical Technologies, Inc. (Optec), Global Systems, Inc. (Global), Daryl C. Stjern (Stjern) and George L. Dobson (Dobson). Dobson was one of the founders of Litton filed an application for a temporary restraining order (TRO) and a preliminary injunction on December 29, 1983. Citing Sundstrand's disclosures in a brochure and at trade shows, Litton sought to enjoin Sundstrand from disclosing any of Litton's trade secrets, and proposed that Sundstrand submit to Litton's designee any RLG related materials that might contain such secrets.

the predecessor of Optec. Optec is a wholly-owned subsidiary of SDC which, like Global, is a wholly-owned subsidiary of Sundstrand Corporation. Stjern is Vice-President of Optec. The defendants are referred to here as "Sundstrand".

The district court entered a stipulated TRO on January 4, 1984, restraining Sundstrand:

(a) From publishing, disclosing, or communicating to any third parties the technology used in designing, testing, or producing of ring laser gyroscopes ... unless plaintiff's approval is first obtained or from destroying or permanently altering any documents referring or relating to said designing, testing or producing. Plaintiff may not withhold its approval, referenced above, unless it reasonably believes its trade secrets will thereby be disclosed.

During the next five months, the parties filed more than 2,200 pages of briefs, exhibits, and deposition testimony. The court ordered Sundstrand to produce any documents relating to RLG technology which had been disclosed to third parties. Litton took 100 photographs at Sundstrand's RLG facility.

Sundstrand demanded that Litton identify its trade secrets so that it could defend by showing that those asserted trade secrets are either not secrets or not used by Sundstrand.

Litton said it would take eight months to list its "thousands" of secrets. The district court twice ordered Litton to identify its trade secrets. Litton first produced a list of more than 300 "areas", (e.g., "data analysis method") which it said contained unidentified trade secrets. Litton later cut its list to 239 "areas" and produced boxes of documents which it said contained still unidentified trade secrets. The parties dispute the question of whether Litton ever specified any trade secrets, and if it did, whether they numbered 2, 6, or 17.

The district court continued the TRO for five months to allow time for briefing and hearing of three motions on scope of discovery, for Litton to list its trade secrets, and for drafting and filing papers relating to Litton's motion for a preliminary injunction.

During the TRO period, Sundstrand submitted three documents to Litton's counsel, and obtained permission to disclose two, one having been disclosed before entry of the TRO and referring to a type of RLG that Litton does not make, the other being a government report.

The district court conducted a hearing on the motion for preliminary injunction on May 30, 1984. It denied Litton's motion, dissolved the TRO, and instructed Sundstrand to propose findings of fact. The court rejected three, modified six, and adopted twelve of Sundstrand's 21 proposed findings. Of those adopted and modified, the first ten recited background facts (e.g., states of incorporation, corporate relationships of defendants, number of Sundstrand employees).

The court's findings state that the motion is a "toss up" on the merits, that "there are serious questions going to the merits", and that Litton "failed to demonstrate a likelihood of success on the merits." The court found that Litton had not demonstrated that it would suffer irreparable injury and that the balance of hardships tilted against granting the injunction. Litton's unsolicited proposed findings were rejected.

The district court found that the requested injunction would be against use of trade secrets, and would be devastating to Sundstrand because it would "effectively" prevent it from communicating with potential and existing customers and suppliers.

In its conclusions of law, the district court repeated its findings on likelihood of success and balance of hardships.

Litton filed a notice and amended notice of appeal to this court and moved the district court to reinstate the TRO during pendency of the appeal. The district court denied Litton's motion, finding that the proposed reinstatement "would not maintain the status quo ... the relevant status quo ... [being] the state of affairs prior to bringing the instant action." The district court also found that:

... an injunction pending appeal may cause defendants irreparable harm in that defendants have contracts to deliver ring laser gyroscopes ("RLGs") pending and are seeking certification from the Federal Aviation Administration, and an injunction pending appeal would effectively enjoin defendants from disclosing any information regarding design and technology of RLGs.

Litton moved under FRAP 8 for an order from this court reinstating the TRO. This court denied the motion.

Issue

Did the district court abuse its discretion, commit an error of law, or seriously misjudge the evidence when it denied Litton's motion for a preliminary injunction?

OPINION

In Smith Int'l, Inc. v. Hughes Tool Co., 718 F.2d 1573, 1579, 219 USPQ 686, 691 (Fed.Cir.), cert. denied, --- U.S. ----, 104 S.Ct. 493, 78 L.Ed.2d 687, 220 USPQ 385 (1983), this court noted the widely recognized test for reviewing a denial of a preliminary injunction:

One denied a preliminary injunction must meet the heavy burden of showing that the district court abused its discretion, committed an error of law, or seriously misjudged the evidence. Eli Lilly and Co. v. Premo Pharmaceutical Labs., supra [630 F.2d 120, 207 USPQ 719, (3rd Cir.), cert. denied, 449 U.S. 1014 [101 S.Ct. 573, 66 L.Ed.2d 473] 208 USPQ 88 (1980) ]. The district court's discretion is not absolute, however, and must be measured against the standards governing the issuance of injunctions. Singer Co. v. P.R. Mallory & Co., Inc., supra, at 234 [671 F.2d 232, 213 USPQ 202 (7th Cir.1982) ]; Fox Valley Harvestore, Inc. v. A.O. Smith Harvestore Products, Inc., 545 F.2d 1096, 1097 (7th Cir.1976).

Smith, Int'l involved a preliminary injunction in a patent case within the exclusive appellate jurisdiction of this court. The Ninth Circuit has in a trade secret case emphasized "abuse of discretion" as the standard. Dekar Industries, Inc. v. Bissett-Berman Corp., 434 F.2d 1304 (9th Cir.1970), cert. denied, 402 U.S. 945, 91 S.Ct. 1621, 29 L.Ed.2d 113 (1971). Though we respond here to Litton's arguments devoted to alleged misjudgment of the evidence, we apply the Ninth Circuit standard, finding no abuse of discretion in the district court's evaluation of relative hardship.

In its Conclusion of Law 2, the district court cited Benda v. Grand Lodge of Int'l Ass'n., 584 F.2d 308, 315 (9th Cir.1978), cert. dismissed, 441 U.S. 937, 99 S.Ct. 2065, 60 L.Ed.2d 667 (1979), and Aguirre v. Chula Vista Sanitary Serv., 542 F.2d 779 (9th Cir.1976), from which it quoted the discernable standard applicable in the Ninth Circuit and applied by this court in this case:

One moving for a preliminary injunction assumes the burden of demonstrating either a combination of probable success and the possibility of irreparable injury or that serious questions are raised and the balance of hardships tips sharply in his favor.

As the district court indicated (a "toss up"), the case before us is not on the merits as clearly one-sided as counsel for each party asserts. ¹ When a district court has struck a balance on a comparatively evenly balanced record, a basis is lacking for an appellate court's striking a contrary balance. The issue is not whether this court would have granted or denied the present motion for preliminary injunction, but whether the record is such that the district court's action could have resulted only from an abuse of discretion, error of law, or misjudgment of evidence.

Litton's Achilles Heel on this record is its insistence on postponing identification or description of such a broad universe of thousands of unidentified trade secrets as to require an extraordinarily sweeping injunction entitling it to veto...