Synygy, Inc. v. ZS Assocs., Inc.

• Decision Date: 11 February 2015
• Docket Number: CIVIL ACTION No. 07-3536
• Court: U.S. District Court — Eastern District of Pennsylvania
• Parties: SYNYGY, INC. v. ZS ASSOCIATES, INC., et al.

SYNYGY, INC. v. ZS ASSOCIATES, INC., et al.

CIVIL ACTION No. 07-3536

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

February 11, 2015

O'NEILL, J.

MEMORANDUM

Now before me are four summary judgment motions by Novo Nordisk, Inc., ZS Associates, Inc. and ZS Associates International, Inc. (collectively, defendants) for summary judgment on the issues of: (1) causation (Dkt. No. 178); (2) Synygy's trade secrets claims (Dkt. No. 179); (3) Synygy, Inc.'s copyright claims (Dkt. No. 180); and (4) Synygy's state law claims for unfair competition, breach of contract, tortious and intentional interference, conversion and unjust enrichment/quantum meruit (Dkt. No. 181).¹ For the reasons that follow, I will: (1) deny defendants' motion for summary judgment on causation; (2) grant in part and deny in part defendants' summary judgment motion on trade secrets; (3) grant in part and deny in part defendants' summary judgment motion on copyright; and (4) grant in part and deny in part defendants' motion for summary judgment on plaintiff's state law claims.

BACKGROUND

The claims in this case arise out of incentive compensation or "IC" services that Synygy and ZS delivered to Novo, a pharmaceutical company. IC "is focused on structuring and delivering the correct financial incentives to motivate the performance of sales representatives . . . and managers." Defs.' Causation Mem. at 6. Synygy and ZS "compete in providingsoftware and services for managing sales compensation, sales quotas, and sales objectives." ZS's Answer to Second Am. Compl. at ¶ 34. "Synygy is a global software and services company in the business of providing sales compensation management . . . and sales performance management . . . software and services to its clients, many of whom are in the pharmaceutical industry." Second Am. Compl. ¶ 10. "ZS is a global management consulting firm specializing in sales and marketing strategy, operations, and execution that, among other things, provides software and services for managing sales compensation, sales quotas, sales objectives, and other sales processes." ZS's Answer to Second Am. Compl. at ¶ 10. Among ZS's clients are corporations in the "financial, pharmaceutical and biotech industries." Id. at ¶ 27.

In the fall of 2005, Novo was in the final months of an automatically-renewed one year contract term with Synygy for "outsourced services in the form of monthly data processing and reporting used in the administration of Novo's incentive compensation program for its sales force - often called TC administration' or 'IC operations.'" Defs.' Causation Mem. at 1. In October 2005, Novo informed Synygy that it would "not renew [its] contract automatically." Id. at 16. In December 2005, Novo's "manager of incentive compensation," Raja Selvanathan, id. at 9, emailed a final termination notice to Synygy in which he explained, inter alia, that Novo had located "an alternate provider that is better aligned with our long term plan and strategies" and would not renew its contract with Synygy. Id. at 16-17.

Novo transitioned its IC administration work to ZS from Synygy. Id. at 17. In or around October 2005, ZS and Novo entered into a three-year agreement for ZS to provide IC administration services for Novo. Pl.'s Causation Opp'n Mem. at 22. During the proposal process and the transition of IC administration work from Synygy to ZS, Novo provided ZS withsamples of IC reports that Synygy had delivered to Novo in prior years. Defs.' Causation Mem. at 17. Synygy contends that "Novo has stipulated that it disclosed incentive compensation reports designed by Synygy [to] ZS" and that "[t]his is also true with respect to the compensation simulators and software macros contained within those reports." Pl.'s Trade Secret Opp'n Mem. at 38; see Pl.'s Ex. 57 (ZS Stipulation). ZS has stipulated that it "received those materials from Novo in electronic native format." Pl.'s Trade Secret Opp'n Mem. at 38. Novo disclosed the materials in question to ZS "without the knowledge or consent of Synygy." Id.

Certain documents or software files that Novo provided to ZS included notations marking the documents as confidential and/or subject to copyright by Synygy. Pl.'s Causation Opp'n Mem. at 23. Also, at least some of the information included in the disclosed reports was password protected. See Pl.'s Trade Secret Opp'n Mem. 4, citing Pl.'s Ex. 13 ("there are two worksheet tabs in the Excel file: a static page one (which conveys information to the sales representative in terms of how they were performed, (and is also password protected); and a dynamic page 2 compensation simulator, which enables the sales representatives to change variables and simulate how they would have performed if the variables changed."); Pl.'s Trade Secret Opp'n Mem. at 15 ("the overwhelming majority of the files it sent to Novo were password protected."); see also id. at 39 (same). Synygy contends that "in order to access and use the Synygy reports ZS received from Novo, ZS was required to crack the Synygy passwords." Id. at 15. Defendants' expert, Cliff Ragsdale testified that to access information in a document that was password protected, ZS effectively had two options, first, to request the password from Synygy, something which ZS did not do, and second to, break through the password using "an online program or a hexadecimal file editor." Id. at 39, citing Ragsdale Dep. at 150:4-22.

Plaintiff contends that "as a mandatory prerequisite to receiving [the] custom reports andother deliverables [that Synygy prepared for Novo], Novo was required to sign a confidentiality agreement in which it agreed not to disclose any of the documents, including, but not limited to the report designs, to any third parties." Pl.'s Trade Secret Opp'n Mem. at 3. Effective April 9, 1999, Synygy and Novo entered into an agreement entitled "Incentive Compensation Services Agreement." Defs.' State Law Mem. at 7, citing Defs.' Ex. 14 (Dep. Ex 72). In section 8 of the agreement, under the heading "Confidentiality," Synygy and Novo

agree[d] not to divulge, disclose, convey or permit the disclosure of any of the Proprietary Information of the other, either verbally or in writing, to any person, corporation, or third party, other than employees, agents, subcontractors or independent contractors of Synygy or [Novo] and their parent corporations, subsidiaries, or affiliates who are engaged in performing this Agreement.

Defs.' Ex. 14 at SYN0000700. They further agreed

to bind their employees, agents, subcontractors and independent contractors, individually, and their parent corporations, subsidiaries, and affiliates, which have access to the other party's Proprietary Information, to the same standard of confidentiality and nondisclosure contained [there]in, and additionally to prohibit them from using any Proprietary Information for any purpose other than for the purposes described in [the] Agreement.

Id. Proprietary Information is defined in the agreement as information "which may include but is not limited to (a) Synygy's Software Processes, Documents, Report Designs, and other confidential information and (b) [Novo's] data, business affairs, methods of operation, and other confidential information." Id. Documents are defined as "all documents created, in whole or in part, by Synygy, - except for those parts of documents which contain [Novo's] proprietary information." Id. at SYN0000699. Processes are defined as "the data processing, report design, and report creation processes and methodologies used by Synygy to complete the" incentive compensation services for Novo. Id. Report designs are defined as "the format, layout, structure and algorithms associated with all reports designed, in whole or in part, by Synygy, except forthose parts of report designs which contain [Novo's] proprietary information." Id. at SYN0000699-700.

The parties agreed that:

Synygy is and shall be the sole and exclusive owner and author of:

(i) the system of software programs and documentation known as ADEPT used to process and manage data and to design, create and view reports (the "Software"),

(ii) the data processing, report design, and report creation processes and methodologies used by Synygy to complete the Services (the "Processes"),

(iii) all documents created, in whole or in part, by Synygy, - except for those parts of documents which contain [Novo's] proprietary information (the "Documents"), and

(iv) the format, layout, structure and algorithms associated with all reports designed, in whole or in part, by Synygy, except for those parts of report designs which contain Novo's proprietary information (the "Report Designs").

Id. They further agreed that Novo "shall be the sole and exclusive owner of [Novo's] proprietary information and nothing [in their agreement] shall be deemed to transfer to Synygy any right or title to [Novo's] proprietary information." Id. at SYN0000700. Novo also retained "the right to copy and distribute all reports created for [Novo] by Synygy under th[eir] Agreement for the purposes intended [there]in." Id. The agreement also provided that

Synygy's rights of ownership with respect to the Software, Processes, Documents and Report designs include, but are not limited to, the exclusive right to make derivative works of the Software, Processes, Documents and Report Designs and to exploit such works commercially. Synygy agrees that any derivative works made available commercially shall not include references to Client or its proprietary information.

Id.

I will consider each of the pending motions in turn.

STANDARD OF REVIEW

Summary judgment will be granted "against a party who fails to make a showing sufficient 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 Corp. v. Catrett, 477 U.S. 317, 322 (1986). The party moving for summary judgment bears the burden of demonstrating that "there is no genuine...