MEMORANDUM
TO: Law Firm
FROM: Janet Constantin
DATE: October 16, 2007
RE: Technicon Data Systems Corp. v. Curtis 1000, Inc., 224 U.S.P.Q. 286 (Court of Chancery Delaware, New Castle County 1984).
SUMMARY:
Technicon Data Systems Corp. (“Techniconâ€) sought a preliminary injunction when Curtis 1000, Inc. (“Curtisâ€) attempted to market its MSI 1000 computer systems. Technicon claimed that the trade secrets used to create its MIS system were misappropriated by Curtis in order to produce Curtis’s MSI system.
PROCEDURAL HISTORY:
Technicon’s application for a temporary restraining order was denied on June 7, 1984. Curtis’s motion to stay was denied on July 2, 1984. The Court of Chancery granted Technicon’s motion for a preliminary injunction against Curtis on August 21, 1984.
ANALYSIS:
Technicon’s Medical Information System (“MISâ€) had been used in hospitals for display, storage and transmission of hospital information. The system consisted of a host computer, which communicated with video matrix terminals (“VMTâ€) or display screens throughout the hospital. MIS enabled physicians to input and retrieve patient data from any display screen in the hospital. Physicians could also enter patient orders and direct the printing of those orders to the proper nursing station or pharmacy VMT by simply highlighting the desired action with the attached penlight.
Technicon alleged that the process by which the host computer and VMTs communicated was considered to be a trade secret. Technicon also alleged that Curtis obtained these trade secrets by improperly manipulating its MIS units at other hospitals. Curtis claimed that the processes involved in the transmission of data were well known, and therefore subject to reverse engineering.
George Bridgmon, a former employee of Technicon, founded Medsoft with another former Technicon employee. Bridgmon was aware that Technicon considered its computer manuals confidential, and had consented to a confidentiality agreement with the company. Bridgmon had worked as a private consultant for hospitals that used MIS. Bridgmon attempted to recruit several Technicon employees to work for his company, but was unsuccessful.
John Cline, an electrical engineer, was eventually hired by Bridgmon to assist him in creating schematics similar to those used in Technicon’s computer system. Because the schematics of Technicon’s VMT was upheld by a confidentiality agreement between Technicon and its manufacturer, Zentec, the two men were only able to secure the schematics for Technicon’s lightpen option. How Bridgmon obtained this information was unclear.
Although Bridgmon had access to operation manuals while employed by Jewish Hospital, he claimed that Zentec freely sent him material at his request. Bridgmon maintained that the only indication of confidentiality regarding the material was the confidentiality stamp present during the course of litigation.
Cline stated that the schematics were not used to develop Bridgmon’s new product. However, the Court focused on highlighted portions of the material, which indicated an error in the circuit’s construction. The Court considered that because the information would have been helpful to Bridgmon in developing his MSI unit, it was reasonable to find that Bridgmon has used the material to formulate his own system.
Bridgmon and Cline had also tapped into Presbyterian Hospital’s MIS unit after business hours. Bridgmon had worked as a consultant at both Jewish and Presbyterian Hospitals. The men attempted to send instructions to the VMT and decode its impulses. Bridgmon claimed that this practice was an acceptable method of reverse engineering.
Bridgmon and Cline continued their efforts at both the Methodist Hospital and Irvine Medical Center. Both men had implemented trials of their system at the National Institute of Health (“NIHâ€). Members of the NIH testified that the company’s express permission to test the MSI did not include intercepting communications between the host and VMT units.
Curtis had intended to market Bridgmon’s system, and continued its efforts after being made aware of how the MSI was developed. Curtis had inquired as to whether Bridgmon had signed a confidentiality agreement. Bridgmon had indicated that he did not, when in fact, he had.
Curtis entered into an exclusive agreement with Medsoft to market the MSI 1000. Over 50 MSI units had been ordered, but it is unclear whether any of these orders had been filled.
Curtis claimed that Technicon’s trade secrets were “readily ascertainable†and that the company had not made reasonable attempts to ensure its trade secrets. The Court reasoned that Bridgmon’s “wiretap†process had required over two-thousand hours, and still had not yielded a fully functional product. The Court held that this amount of time indicated that a trade secret was not readily ascertainable. As well, the confidentiality agreements that had been implemented by Technicon had persuaded the Court to find that Technicon had made reasonable efforts to protect its trade secrets.
Curtis later argued that the unlimited accessibility of VMT units in hospitals required the company to take additional measures to guarantee confidentiality. The Court relied on the reasoning in E.I. duPont de Nemours v. Christopher to hold that as long as measures are reasonable, additional measures are not required to protect trade secrets.
The Court also found that Bridgmon’s affiliation with Technicon and the Jewish Hospital implied that he had a duty to keep any information acquired a secret. Although the Court would not rule on whether Technicon’s routine practice of requiring even customers to agree to confidentiality provisions would make discovery of trade secrets unlikely, it held that Bridgmon’s methods of acquiring Technicon’s trade secrets had been improper.
Because Curtis had been aware, or should have been aware of Bridgmon’s practices, it would be held responsible for his actions. Although Curtis alleged that Technicon’s “tying†its products, that is making competitor products incompatible for use with its system, deprived Technicon of relief, the Court disagreed. It reasoned that because Technicon’s technology was new, there could be no conclusion of Technicon’s attempt at “illegal tying.â€
Lastly, Technicon would be granted an injunction because it had successfully demonstrated that it suffered irreparable injury and that the public would not be disserved if an injunction were granted. The Court added, that although the hospitals would benefit from a more economic and versatile computer system, the Technicon system did not jeopardize the quality of care that patients received.
TO: Law Firm
FROM: Janet Constantin
DATE: October 16, 2007
RE: Technicon Data Systems Corp. v. Curtis 1000, Inc., 224 U.S.P.Q. 286 (Court of Chancery Delaware, New Castle County 1984).
SUMMARY:
Technicon Data Systems Corp. (“Techniconâ€) sought a preliminary injunction when Curtis 1000, Inc. (“Curtisâ€) attempted to market its MSI 1000 computer systems. Technicon claimed that the trade secrets used to create its MIS system were misappropriated by Curtis in order to produce Curtis’s MSI system.
PROCEDURAL HISTORY:
Technicon’s application for a temporary restraining order was denied on June 7, 1984. Curtis’s motion to stay was denied on July 2, 1984. The Court of Chancery granted Technicon’s motion for a preliminary injunction against Curtis on August 21, 1984.
ANALYSIS:
Technicon’s Medical Information System (“MISâ€) had been used in hospitals for display, storage and transmission of hospital information. The system consisted of a host computer, which communicated with video matrix terminals (“VMTâ€) or display screens throughout the hospital. MIS enabled physicians to input and retrieve patient data from any display screen in the hospital. Physicians could also enter patient orders and direct the printing of those orders to the proper nursing station or pharmacy VMT by simply highlighting the desired action with the attached penlight.
Technicon alleged that the process by which the host computer and VMTs communicated was considered to be a trade secret. Technicon also alleged that Curtis obtained these trade secrets by improperly manipulating its MIS units at other hospitals. Curtis claimed that the processes involved in the transmission of data were well known, and therefore subject to reverse engineering.
George Bridgmon, a former employee of Technicon, founded Medsoft with another former Technicon employee. Bridgmon was aware that Technicon considered its computer manuals confidential, and had consented to a confidentiality agreement with the company. Bridgmon had worked as a private consultant for hospitals that used MIS. Bridgmon attempted to recruit several Technicon employees to work for his company, but was unsuccessful.
John Cline, an electrical engineer, was eventually hired by Bridgmon to assist him in creating schematics similar to those used in Technicon’s computer system. Because the schematics of Technicon’s VMT was upheld by a confidentiality agreement between Technicon and its manufacturer, Zentec, the two men were only able to secure the schematics for Technicon’s lightpen option. How Bridgmon obtained this information was unclear.
Although Bridgmon had access to operation manuals while employed by Jewish Hospital, he claimed that Zentec freely sent him material at his request. Bridgmon maintained that the only indication of confidentiality regarding the material was the confidentiality stamp present during the course of litigation.
Cline stated that the schematics were not used to develop Bridgmon’s new product. However, the Court focused on highlighted portions of the material, which indicated an error in the circuit’s construction. The Court considered that because the information would have been helpful to Bridgmon in developing his MSI unit, it was reasonable to find that Bridgmon has used the material to formulate his own system.
Bridgmon and Cline had also tapped into Presbyterian Hospital’s MIS unit after business hours. Bridgmon had worked as a consultant at both Jewish and Presbyterian Hospitals. The men attempted to send instructions to the VMT and decode its impulses. Bridgmon claimed that this practice was an acceptable method of reverse engineering.
Bridgmon and Cline continued their efforts at both the Methodist Hospital and Irvine Medical Center. Both men had implemented trials of their system at the National Institute of Health (“NIHâ€). Members of the NIH testified that the company’s express permission to test the MSI did not include intercepting communications between the host and VMT units.
Curtis had intended to market Bridgmon’s system, and continued its efforts after being made aware of how the MSI was developed. Curtis had inquired as to whether Bridgmon had signed a confidentiality agreement. Bridgmon had indicated that he did not, when in fact, he had.
Curtis entered into an exclusive agreement with Medsoft to market the MSI 1000. Over 50 MSI units had been ordered, but it is unclear whether any of these orders had been filled.
Curtis claimed that Technicon’s trade secrets were “readily ascertainable†and that the company had not made reasonable attempts to ensure its trade secrets. The Court reasoned that Bridgmon’s “wiretap†process had required over two-thousand hours, and still had not yielded a fully functional product. The Court held that this amount of time indicated that a trade secret was not readily ascertainable. As well, the confidentiality agreements that had been implemented by Technicon had persuaded the Court to find that Technicon had made reasonable efforts to protect its trade secrets.
Curtis later argued that the unlimited accessibility of VMT units in hospitals required the company to take additional measures to guarantee confidentiality. The Court relied on the reasoning in E.I. duPont de Nemours v. Christopher to hold that as long as measures are reasonable, additional measures are not required to protect trade secrets.
The Court also found that Bridgmon’s affiliation with Technicon and the Jewish Hospital implied that he had a duty to keep any information acquired a secret. Although the Court would not rule on whether Technicon’s routine practice of requiring even customers to agree to confidentiality provisions would make discovery of trade secrets unlikely, it held that Bridgmon’s methods of acquiring Technicon’s trade secrets had been improper.
Because Curtis had been aware, or should have been aware of Bridgmon’s practices, it would be held responsible for his actions. Although Curtis alleged that Technicon’s “tying†its products, that is making competitor products incompatible for use with its system, deprived Technicon of relief, the Court disagreed. It reasoned that because Technicon’s technology was new, there could be no conclusion of Technicon’s attempt at “illegal tying.â€
Lastly, Technicon would be granted an injunction because it had successfully demonstrated that it suffered irreparable injury and that the public would not be disserved if an injunction were granted. The Court added, that although the hospitals would benefit from a more economic and versatile computer system, the Technicon system did not jeopardize the quality of care that patients received.