Structural Dyn. Res. Corp. v. Engineering Mech. R. Corp.

• Decision Date: 09 September 1975
• Docket Number: Civ. A. No. 4-71586.
• Citation: 401 F. Supp. 1102
• Parties: STRUCTURAL DYNAMICS RESEARCH CORPORATION, Plaintiff, v. ENGINEERING MECHANICS RESEARCH CORPORATION et al., Defendants.
• Court: U.S. District Court — Western District of Michigan

401 F. Supp. 1102

STRUCTURAL DYNAMICS RESEARCH CORPORATION, Plaintiff, v. ENGINEERING MECHANICS RESEARCH CORPORATION et al., Defendants.

Civ. A. No. 4-71586.

United States District Court, E. D. Michigan, S. D.

September 9, 1975.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Richard A. Harvey, Harvey, Kruse & Westen, P. C., Detroit, Mich., Thomas S. Calder, Dinsmore, Shohl, Coates & Deupree, Cincinnati, Ohio, for plaintiff.

Robert G. Cutler, Dykema, Gossett, Spencer, Goodnow & Trigg, Detroit, Mich., for defendants.

MEMORANDUM OPINION¹

FEIKENS, District Judge.

I.

Structural Dynamics Research Corporation (SDRC) brought this action against three former employees, Kant Kothawala, Karan Surana and Robert Hildebrand, for unfair competition, misappropriation and misuse of confidential and trade secret material, breach of confidential disclosure agreements and interference with SDRC's customer relations, and against Engineering Mechanics Research Corporation (EMRC) for conspiring with the individual defendants to accomplish the above purposes. It seeks both damages and a permanent injunction.

SDRC is an Ohio corporation with its principal place of business at Cincinnati, Ohio. EMRC is a Michigan corporation with its principal place of business at Southfield, Michigan. Kothawala, Surana and Hildebrand are all residents of Michigan.

This court has jurisdiction over the subject matter and over all parties to this action. This case was tried before the court sitting without a jury.

Both SDRC and EMRC are engaged in the business of structural analysis and testing. They are also engaged in the development of computer programs for such purposes for use in their business and for lease to other users.

Kothawala, Surana and Hildebrand were all formerly employed by SDRC in various technical capacities. Kothawala was employed by SDRC between August 3, 1972 and December 31, 1972 as a member of its Technical Staff.² Surana worked for SDRC from February of 1970 to January of 1973, initially as a project leader in the computer operations department and later as a member of the Technical Staff. Hildebrand was employed by SDRC as a project manager between August of 1972 and December 31, 1972. Each signed an Employee Patent and Confidential Information Agreement while so employed and, in addition, Kothawala executed an Employment Agreement.

These three individuals are now employed by EMRC. Kothawala is the President and sole shareholder. Surana is Vice-President of Engineering. Hildebrand is Manager of Applications.

Structural analysis involves, generally speaking, the prediction of how a physical structure will react when forces are applied to it. One of the methods used to solve structural analysis problems is a finite element computer program. The technical part of this dispute concerns two such programs. These computer programs are used to obtain an approximation of the reaction of a physical structure when forces are applied to it. This approximation is termed a mathematical model. It simulates actual conditions.

The method involves drafting a model of the structure under analysis. The model is then divided into sections or substructures known as elements. The elements are connected together at points called nodes or nodal points. The nodes are assigned coordinates which specify their location within the structure. The coordinates plus the material properties of the structure, the forces to be applied and the constraints on the structure are written in terms of mathematical equations. The availability of high speed computers permits the rapid solution of these equations in a computer program. The input data is "read" and in practical effect is converted into meaningful data which predicts reactions of the structure with sufficient accuracy to be attractive for commercial use.

The finite element computer programs generally in use prior to 1971 employed primarily straight sided elements such as triangles and rectangles. When the structure involved curved surfaces, straight sided elements had cost and accuracy limitations as a large number of elements were required to approximate the structure's configuration.

Thus, the concept of employing curved and irregular shaped elements and "higher order" elements with different nodal structures termed "isoparametric elements" was under investigation. Isoparametric elements, in a properly designed program, offer substantial advantages over conventional finite element programs since the use of curved and irregular shaped elements permits the user to achieve at least as accurate results at a lower cost due to the reduction of the number of elements necessary to prepare models of a structure to be tested.

SDRC first became interested in isoparametric elements when, in the fall of 1971, Surana and Russell Henke, vice-president of SDRC, attended a conference at Urbana, Illinois, where a number of technical papers were delivered. References to isoparametric elements appeared in some papers. Kothawala, then an employee of General Motors, also attended the conference.

Following the Urbana conference Surana began to investigate isoparametric technology thoroughly, primarily from the literature. Prior to this time Surana did not have a substantial background or knowledge in the field of isoparametric finite element technology. He concluded that an isoparametric program would be useful and advantageous to SDRC and so informed SDRC's management. SDRC encouraged Surana to continue his efforts but also required him to devote time to revenue producing projects. In April, 1972 SDRC gave formal recognition to Surana's isoparametric research by the establishment of a time charge account. By that time Surana had reduced to writing certain preliminary equations, computations and sketches necessary to the development of a program. He continued preliminary development work as time permitted until August.

In August of 1972 Kothawala joined SDRC as a member of the Technical Staff. Beginning a year or more prior to his employment, Kothawala and SDRC had discussed this possibility. SDRC wished to open a Detroit office and Kothawala desired a managerial position in a Detroit-based company which he would wholly or partially own. When Kothawala was hired, both parties anticipated that he would assume management responsibility for an SDRC office in Detroit but the details were left for future resolution. It was agreed that Kothawala would spend six to twelve months in Cincinnati to familiarize himself with SDRC's business and procedures.

Hildebrand was also hired in August of 1972 on Kothawala's recommendation. It was anticipated that he would also be involved in the Detroit office.

In August of 1972, shortly after Kothawala started working at SDRC, Surana showed him the results of his investigation concerning an isoparametric element computer program. Kothawala arranged to have Surana's conclusions reviewed by the Technical Staff.

A meeting of the Technical Staff was held on August 14, 1972. Surana explained to them what he had been doing with respect to isoparametric elements and the advantages he believed a program containing such elements would have over one containing conventional elements. At the conclusion of the meeting, this group gave Surana authority to devote all of his time to develop such a program and assigned to Kothawala and Surana responsibility for drafting a formal written proposal. Kothawala was eventually assigned supervisory responsibility for the project.

On August 23, 1972 Kothawala and Surana submitted a formal proposal. It stressed the importance of the proposed program to SDRC, the advantages and superiority of isoparametric elements, the significance of Surana's technical work to date and the uniqueness of the program. It also contained cost estimates and a timetable for completion. SDRC relied on these representations since no one employed by SDRC at this time other than Surana had any significant knowledge of isoparametric element theory or application.

On October 25, 1972 Kothawala and Surana issued a technical status report. Surana had developed the program to the point of running test problems. Kothawala stated that the program would "revolutionize" SDRC's problem solving ability. SDRC management felt this report established the feasibility of the program.

Surana continued his work on the program throughout the rest of the year. He named the program "NIESA", an acronym for "Numerically Integrated Elements for System Analysis".

During this period Kothawala submitted several plans for opening a Detroit office. These plans were not satisfactory to SDRC and led it to conclude that Kothawala lacked the business experience to assume full management responsibility. After a number of discussions with Kothawala, SDRC submitted a proposal on December 21, 1972 in which the Detroit entity would combine technical consulting and sales activities with Kothawala responsible for the former as a member of the Technical Staff, but reporting to management in Cincinnati. The offer included an increase in salary which would have made Kothawala the second highest paid employee in the company.

On December 28, 1972 Kothawala responded that, while the offer was attractive, he found it unsatisfactory. He requested to be released from his contract effective January 1, 1973. SDRC released him from the contract except for the provisions pertaining to post-termination activities. Kothawala returned to Detroit and established EMRC.

Hildebrand also gave SDRC notice of immediate resignation. He declined SDRC's offer to continue as a project engineer. Instead, he also returned to Detroit and began to work for EMRC as Manager of Applications.

On January 9, 1973 Surana gave notice of his resignation. He refused to reconsider but was persuaded to stay for a brief period during which he prepared a handwritten description of the program's status and he explained the program to other SDRC...