Trade Secrets: Hub Group, Inc. v. Clancy – Plaintiff unable to obtain preliminary injunction

The recent case of Hub Group, Inc. v. Clancy, decided by Judge Stengel of the Eastern District of Pennsylvania on January 25, 2006, provides an interesting look at a trade secrets case (they’re relatively rare when compared to other forms of intellectual property) and it also provides a review of the standards needed in order to obtain a preliminary injunction.

Plaintiff Hub Group, Inc. (“Hub”) is an Illinois-based transportation management service company. Defendant Clancy is a former employee who, prior to the end of his employment, sent information from Hub’s confidential pricing database to his wife’s Hotmail account. Clancy then began working for a direct competitor of Hub’s. A temporary restraining order (“TRO”) was entered in May of 2005, then a preliminary injunction hearing was held in August, 2005. The hearing was to decide whether the facts of the case were sufficient to justify extending that TRO into a preliminary injunction that would last until trial. No explanation is given in the opinion for the delay between the preliminary injunction hearing in August and this decision in January of 2006.

Trade secrets cover any information so long as it is kept reasonably secret and it provides economic advantage to the one possessing it. The pricing database is a trade secret because it contains confidential information that is kept secret. Clancy had signed a confidentiality agreement that covered access to the database, which is password protected.

Federal jurisdiction is based on violation of the Computer Fraud & Abuse Act. Clancy tried to argue that Hub wasn’t sufficiently damaged for the Act to apply, but that argument was unsuccessful. Clancy did exceed the scope of his authorization to use the information in that database, and Hub did allege sufficient damage.

In order for Hub to succeed and obtain the preliminary injunction, it needed to prove the following elements:
1)HUB needed to establish that it suffered irreparable harm by Clancy’s actions;
2)HUB needed to prove a reasonable probability of success on the merits;
3)that the harm to HUB outweighed the possible harm to other interested parties, and
4)that the injunction would be in the public interest.

In this case, however, Hub was unable to meet these required elements. Hub could not prove that it would suffer harm that could not be remedied by other means, such as payment of monetary damages. Clancy had no continuing access to Hub’s information, plus the pricing information obtained by Clancy was already severely out of date. The court reasoned that the monetary remedies were sufficient if Clancy chose to use the old data, so accordingly the preliminary injunction was denied and the temporary restraining order was dissolved.

Analysis
The information obtained by Clancy had a very short useful life, so the fact that Hub had succeeded in preventing Clancy from using it for over seven months (by bringing suit and obtaining the TRO) was already a sufficient remedy. There was no sufficiently compelling reason to prevent Clancy from accessing the information until a trial since there were other remedies available if Clancy were to actually use this obsolete information. If there were ongoing serious harm, it is likely that the injunction could have been granted.

Hub Group, Inc. v. Clancy, 2006 WL 208684 (E.D.Pa.), January 25, 2006.

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