Microstrategy Inc. v. Business Objects, S.A.
| Decision Date | 22 October 2002 |
| Docket Number | No. 01-CV-826.,01-CV-826. |
| Citation | 233 F.Supp.2d 789 |
| Court | U.S. District Court — Western District of Virginia |
| Parties | MICROSTRATEGY, INC., Plaintiff, v. BUSINESS OBJECTS, S.A., et al., Defendants. |
Thomas J. Cawley, Ingo Frank Burghardt, Hunton & Williams, McLean, VA, Benita Webster Ellen, Hunton & Williams, Norfolk, VA, Peter Edward Moll, Joseph Phillip Lavelle, Howrey Simon Arnold & White, LLP, Washington, DC, James Fredrick Valentine, Howrey Simon Arnold & White, LLP, Menlo Park, CA, Brian D. Wallach, Paul Yang, Howrey Simon Arnold & White, LLP, Washington, DC, for MicroStrategy Inc.
Dana Johannes Finberg, David James Sensenig, McCandish Holton, Richmond, VA, Gary H. Ritchey, Daniel J. Furniss, Theodore G. Brown, III, Townsend and Townsend and Crew LLP, Palo Alto, CA, for Business Objects, S.A.
Michael Braden Hubbard, Seyfarth Shaw, Washington, DC, for Fragomen, Del Rey, Bernsen & Loewy, P.C.
This matter has come before the court upon Business Objects, S.A. and Business Objects America, Inc.'s ("defendants") Motion for Partial Summary Judgment of Unenforceability of Employment Agreements. MicroStrategy, Inc. ("plaintiff") has filed two responsive memoranda; first, a Motion to Strike the defendants' Motion as Untimely and second, a substantive opposition to the Motion. The matter has been fully briefed and is ripe for review. After examination of the briefs, this court determines oral argument is unnecessary because the facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. For the reasons more fully articulated below, the plaintiff's Motion to Strike is denied and the defendants' Motion for Partial Summary Judgment is granted in part and denied in part.
On October 30, 2001, the plaintiff filed this lawsuit against the defendants alleging infringement of two of its patents, United States Patent Numbers 6,260,050 ("the '050 patent") and 6,279,033 ("the '033 patent"), as well as other state law tort claims. The complaint was amended twice, first on April 18, 2002 and then again on May 15, 2002. This second amended complaint contains six counts which include: (I) Infringement of U.S. Patent No. 6,279,033; (II) Infringement of U.S. Patent No. 6,260,050; (III) Violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030; (IV) Violation of the Uniform Trade Secrets Act, Va.Code § 59.1-336 et seq.; (V) Tortious Interference with MicroStrategy Agreements; and (VI) Conspiracy in Violation of Va.Code § 18.2-499 et seq. See Pl.'s Second Am. Compl. Dkt. 62 ("Compl."). At the heart of the complaint, the plaintiff alleges that the defendants recruited employees of the plaintiff corporation ("Business Objects Recruits") in order for the defendants to gain access to plaintiff's confidential information, including products and technical advantages, marketing and sales processes, pricing strategies and overall business plans, marketing plans for specific customers and potential customers, and products that had not been released to the public. See Compl., ¶¶ 9-12.
The instant Motion for Partial Summary Judgment addresses the employment agreements allegedly interfered with in count five of the complaint. The defendants assert that paragraphs 4.b and 5 of the employment agreements are unenforceable as unreasonable restrictive covenants. Furthermore, the defendants contend that the savings clause in the employment agreements is void and therefore, the entire employment agreement must fall. In response, the plaintiff makes a number of arguments, including (1) that the Motion is untimely and should be struck as violative of the Local Rules, (2) that section 4.b is not at issue in this case, (3) that the solicitation clause in section 5 is valid, and (4) that even if the clause is not valid, the remainder of the employment agreement is enforceable as a result of the savings clause. The court will address each of these issues in turn.
Summary judgment is appropriate when it is apparent from the entire record, viewed in light most favorable to the nonmoving party, that there are no genuine disputes of material fact. See, e.g., Clark v. Alexander, 85 F.3d 146, 150 (4th Cir. 1996); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). When a court declines to grant summary judgment, sufficient evidence must exist favoring the nonmoving party which would allow a reasonable jury to return a verdict for that party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A properly supported motion for summary judgment may not be defeated by "the mere existence of some alleged factual dispute between the parties." Id. at 247-48, 106 S.Ct. 2505. The requirement is that there are no genuine issues of material fact. See id. Entry of summary judgment is mandated "against a party who fails to make a sufficient showing to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. 2548.
One week after the defendants filed their Motion for Partial Summary Judgment, the plaintiff filed a Motion to Strike the defendants' Motion as untimely filed and violative of the Local Rules of the court. In this Motion, the plaintiff argues that the defendants have unreasonably delayed in the filing of their motion, in violation of the Local Rules. The plaintiff also contends that the defendants' Motion has violated the scheduling order set forth by this court.
In support of its assertion, the plaintiff cites United States v. Newdunn Assoc., 195 F.Supp.2d 751 (E.D.Va.2002). In Newdunn, the court refused to consider a motion for partial summary judgment, filed 32 days prior to trial, since it "did not mature within a reasonable time before the trial date." Id. at 756. The defendants argue that this case is easily distinguishable, and this court agrees. In Newdunn, the court was faced with two complex motions for summary judgment, involving numerous complex issues. Unlike Newdunn, this case deals with a simple restrictive covenant, which can easily be ruled upon in the time remaining before trial.
In addition, Local Rule 56(a) states that a motion for summary judgment will be considered if it is "filed and set for a hearing or submitted on briefs[] within a reasonable time before the date of trial...." The defendants filed the Motion for Partial Summary Judgment on September 4, 2002, 35 days prior to the trial date.1 As an initial matter, the defendants state that the employment agreements were not at issue in the case until the plaintiff amended its complaint on April 18, 2002. Second, the defendants argue that they did not receive all of the agreements at issue until July 11, 2002. Finally, the defendants contend that this Motion was filed one week after the close of fact discovery and is therefore, not unreasonably delayed. However, the plaintiff points to a number of other facts which support its position that the defendants have unreasonably delayed in filing this Motion.
First, is the fact that the defendants argued this point to the state court in a parallel case against two individual Business Objects Recruits.2 In Exhibit 2 to the plaintiff's Reply Memorandum, the plaintiff furnishes a copy of a Demurrer filed by one of the individual Business Object Recruits in October of 2001. In this Demurrer, the party argues that the non-compete clause (subsection 4.b) of the MicroStrategy employment agreement is unenforceable as it "is punitive and purports to impose limits on employees and former employees far greater that reasonably necessary to protect MicroStrategy's legitimate business interests." Pl.'s Reply, Dkt. 139, Ex. 2. This court does not understand why the defendants, knowing that this argument existed regarding the employment contract back in October of 2001, waited until September of 2002, a month before trial was to commence, to raise it with this court. However, despite the delay, the court had adequate time to review the Motion for Summary Judgment prior to the commencement of trial. Furthermore, it appears that the non-solicitation clause of the employment agreement (subsection 5) was not an issue in the state court case and thus, it was not challenged in the Demurrer. In an effort to streamline the issues for trial, the court will rule on the Motion for Summary Judgment. Therefore, the plaintiff's Motion to Strike is denied.
As stated above, the defendants filed a Motion for Partial Summary Judgment that the employment agreements that are the subject of Count V of the Complaint, are unenforceable as a matter of law. The defendants argue that subsections 4.b and 5 of the agreement contains restrictive covenants which unreasonably restrain trade more than necessary to protect the interests of the employer. The defendants further contend that despite the savings clause in subsection 7 of the agreement, the entire agreement is unenforceable based on the invalid restrictive covenants.
Subsection 4.b reads
4. Conflict of Interest. Upon termination of my employment, I am free to exercise in any capacity I choose those skills developed while working for MicroStrategy, provided, however, that:
* * * * * *
b. I do not directly or indirectly provide services or products competing with those provided by MicroStrategy to any former, present, or prospective clients of MicroStrategy for a period of twelve (12) months following termination of my employment. A prospective client means a business which, at anytime during the period of my employment or twelve (12) months following...
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Microstrategy Inc. v. Business Objects, S.A.
...this clause invalid and unenforceable as a matter of Virginia law in a summary judgment order. See MicroStrategy, Inc. v. Business Objects, S.A., 233 F.Supp.2d 789, 795 (E.D.Va.2002) (Non-solicitation Judgment). The second aspect involves a confidentiality clause in the same employee contra......