2004 WL 4963292 Page 1

2004 WL 4963292 (N.Y.Sup.) (Trial Order)

Supreme Court of New York.

New York County
RENAISSANCE TECHNOLOGIES CORPORATION, Plaintiff,
v.
MILLENNIUM PARTNERS, LP, Millennium Management, LLC, Millennium International
Management, LLC, Pavel Volfbeyn, and Alexander Belopolsky, Defendants.
No. 603839/03.
April 2, 2004.

Part No. 18575

GAMMERMAN, J.H.O.:

This action is brought by plaintiff Renaissance Technologies Corporation

("Renaissance") against two former employees, Pavel Volfbeyn and Alexander
Belopolsky, along with their present employer and related entities, Millennium
Partners, LP; Millennium Management, LLC; and Millennium International Management,
LLC (collectively "Millennium").

In motion sequence no. 001, plaintiff moves for a preliminary injunction, as

follows:

- enjoining the individual defendants and others from managing, controlling or

directing equity trades or an equity trading portfolio on behalf of any Millennium
partnership;

- enjoining all defendants and others from disclosing, using or applying

plaintiffs "confidential information" or "intellectual property" as defined in the
individual defendants' employment agreements;

- enjoining all defendants and others from destroying or failing to preserve all
products, objects, notes, memoranda manuals, emails, charts, graphs, programs,
disks, magnetic tapes, business plans or any other written, recorded or graphic
materials and all copies thereof, in their possession or under their control,
wherever located, which do or may contain, reflect or relate to, directly or
indirectly, any trade secrets, intellectual property or confidential business
information of plaintiff, or to communications, negotiations or agreements relating
to any relationship between the individual defendants and Millennium or any other
potential employer; and

- enjoining Millennium from employing the individual defendants to develop, manage

or use a statistical arbitrage system or strategy based on computerized analysis
and models to generate trading instructions.

This motion was orally adjudicated on the record on March 9, 2004. At that time I
advised the parties that a written opinion would be forthcoming.

FACTS

Defendants Volfbeyn and Belopolsky are former employees of Renaissance.

Renaissance engages in statistical arbitrage, described by plaintiff as the use of
"complex and proprietary models to forecast price trajectories of securities and
futures, and to decide how to place trades so as to maximize expected profits while
managing risk and costs." It is undisputed that plaintiff has achieved considerable
success. Both of the two individual defendants signed confidentiality agreements at

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

2004 WL 4963292 Page 2
2004 WL 4963292 (N.Y.Sup.) (Trial Order)

the time they were hired. Subsequently, they were given promotions to "principal"
status. It is undisputed that both at the time they were hired, and at the time
they were offered the promotions, they were not told that either the promotions or
their continued employment was contingent on signing noncompete agreements.
Subsequent to the promotions, they were asked to sign one-year noncompete
agreements. Both refused to sign. Both were fired for refusing to sign. After being
fired, they were hired by Millennium. It is undisputed that defendants'
responsibilities and duties were not changed by the promotions, and that plaintiffs
employees who are not "principals" have access to confidential information but are
not required to sign noncompete agreements.

For the purpose of this decision, I assume, without deciding, that Millennium is a
"competitor" within the scope of the relevant case law.

Plaintiff proffers no direct evidence of any misappropriation or misuse, or of any

threats of misappropriation or misuse. Instead, plaintiff relies on a doctrine
called "inevitable disclosure." That doctrine is based on the premise that if there
is enough of a nexus between the nature of the information and the nature of the
work done by the employee, it is predictable that, even if inadvertently, the
employee, in serving his or her new employer, will use knowledge and understanding
gained during his or her former employment. [FN1] In addition, despite having
conducted considerable discovery already, plaintiff relies on what can best be
described as a combination of circumstantial evidence and conjecture in an attempt
to suggest that defendants intended to use plaintiffs alleged confidential
information. [FN2]

FN1. Contrary to plaintiffs assertion at p 10 of its reply memo of law, my

ruling earlier in this action regarding defendants' proposed expert witness was
unrelated to any concern about "inevitable disclosure."

The "inevitable disclosure" doctrine relates only to the use of confidential

information for the employee's new employer. It does not substitute for actual
evidence of disclosure to the marketplace generally, and there is a wholesale
dearth of evidence to support even the conjecture that any such marketplace
disclosure would occur. To the contrary, if plaintiffs "harm" theory is correct,
then any benefit that defendants might realize by using plaintiffs confidential
information for Millennium, would be destroyed if defendants disclosed it to the
marketplace in general.

FN2. By way of example, plaintiff points to the fact that after plaintiff
insisted that the individual defendants sign the noncompete clauses, the individual
defendants began to explore alternative employment without informing plaintiff that
they were doing so. Plaintiff contends that this supports the conclusion that the
individual defendants intended to misappropriate plaintiffs confidential
information. Such a weak inference fails to support the drastic relief that
plaintiff seeks. It is neither unusual nor improper for employees who anticipate a
potential need for new employment, to seek it while still employed and without
telling their present employer that they are doing so.

In its reply papers, plaintiff relies on certain deposition testimony to argue

that defendants are using protected information. Regardless of whether that
testimony was available at the time of the initial motion, and even assuming
arguendo that the testimony support plaintiffs contentions, relief may not be
granted if the moving papers do not, independently, and in the first instance,
support the relief sought.

Thus, in essence, this case presents the issue of whether two employees who were
fired for refusing to sign one-year noncompete agreements can be restrained,

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

2004 WL 4963292 Page 3
2004 WL 4963292 (N.Y.Sup.) (Trial Order)

potentially indefinitely, based on the premise that it is "inevitable" that they

will disclose or use the former employer's confidential information.

To the extent that plaintiff seeks to enjoin defendants' employment, that relief
is contrary to the principles enunciated by the Court of Appeals in American
Broadcasting Cos. v Wolf, 52 NY2d 394 (1981):

After a personal service contract terminates, the availability of equitable

relief against the former employee diminishes appreciably. * * * Only if the
employee has expressly agreed not to compete with the employer following the term
of the contract, or is threatening to disclose trade secrets or commit another
tortious act, is injunctive relief generally available at the behest of the
employer [citations omitted].

The Court of Appeals held further:

Equally unavailing is ABC's request that the court create a noncompetitive

covenant by implication. Although in a proper case an implied-in-fact covenant not
to compete for the term of employment may be found to exist, anticompetitive
covenants covering the postemployment period will not be implied. [fn omitted].
Indeed, even an express covenant will be scrutinized and enforced only in
accordance with established principles.

In Maltby v Harlow Meyer Savage, Inc., 223 AD2d 516 (1st Dept), lv dismissed 88
NY2d 874 (1996), citing Wolf, the First Department affirmed a preliminary
injunction against competitive employment because the employee had opted to sign
the noncompete clause in return for a quid pro quo. The implication is that had the
employee not signed the noncompete clause, Wolf would preclude an injunction
against competition.

Wolf did not address the "inevitable disclosure" doctrine. The doctrine has been
the subject of a very small number of New York State cases. Most notably, in Willis
of New York, Inc. v DeFelice, 299 AD2d 240 (1st Dept 2002), the First Department
held that the doctrine could be applied to high-level employees who had signed
restrictive covenants. However, neither the lower court nor the First Department
issued any injunction as to the scope of employment, which is what plaintiff seeks
herein, or of the employment itself.

The only injunctive relief that was issued (either by the Supreme Court or the
First Department) was to enjoin solicitation of plaintiffs clients, and to enjoin
disclosure and use of trade secrets. [FN3] Since solicitation and disclosure would
have been per se wrongful, enjoining them did not prohibit the defendants from
doing what they were otherwise permitted to do. Here, plaintiff seeks to enjoin
defendants from activities that are both legal and contractually permissible.

FN3. The lower court's order, contained in the Record on Appeal in Willis at
pp 13 et seq., provides, in pertinent part:

1. Plaintiffs' motion is denied, on the grounds of enforcement of the restrictive

covenants contained in certain employees' employment contracts, plaintiffs having
failed to satisfy the elements for such relief, including probability of success on
the merits, irreparable harm and balancing of the equities in their favor.
Plaintiffs may renew their motion only on the grounds of unfair competition and/or
corporate raiding and solely in the event employees of Willis en masse join Aon
Risk Services, Inc. of New York as a result of solicitation by the individual
defendants restrained below.

2. The court, in the exercise of its equitable powers and to prevent unfair

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

2004 WL 4963292 Page 4
2004 WL 4963292 (N.Y.Sup.) (Trial Order)

competition, hereby (a) restrains defendants DeFelice, McCarthy and Andler from
soliciting, directly or indirectly, Willis clients in contravention of their
agreements with Willis, and (b) restrains defendants DeFelice, McCarthy, Andler
Galiano, Berlingiori and Nowicki from violating their common law duty to not
divulge any confidential or proprietary information of Willis concerning Willis
clients, that they gained through their employment at Willis.

Of special interest is the following discussion by the First Department regarding

paragraph 2(b) of the order, which restrained the individual defendants from
divulging plaintiffs confidential or proprietary information:

plaintiffs failed to demonstrate that they would likely prevail in demonstrating

that the individual defendants were, in fact, misappropriating and exploiting their
confidential information, and thus the restraint imposed is not sustainable as to
defendants [names] who were not shown to be high-level employees upon whom such a
restraint might be sustainable under the "inevitable disclosure" doctrine without a
showing of actual misappropriation or exploitation [citing Earthweb, Inc. v
Schlack, 71 F Supp 2d 299, 310 (SD NY 1999), remanded 205 F3d 1322 (2d Cir 2000)].
Defendants DeFelice and McCarthy, on the other hand, were properly included in the
paragraph 2(b) restraint since they were undisputedly high-level Willis employees
with access to confidential information that could be easily utilized by them in
their new positions at Aon to Willis's detriment [citing Lumex, Inc. v Highsmith,
919 F Supp 624 (ED NY 1996)]. Since plaintiffs showed that the use and disclosure
of their confidential information by DeFelice and McCarthy was likely to occur,
they satisfied the requirement of showing a likelihood of irreparable injury to
justify the paragraph 2(b) restraint [citation omitted] and, given their showing of
irreparable harm, and the lack of significant countervailing equities to support
permitting DeFelice and McCarthy unfettered use of the confidential and proprietary
information acquired by them during their employment with plaintiffs, the equities
favor the paragraph 2(b) restraint with respect to these two defendants.

Subsequent to the First Department's decision in Willis, the Third Department

decided Marietta Corp. v Fairhurst, 301 AD2d 734 (3d Dept 2003). The lower court
had relied on the inevitable disclosure doctrine to grant a preliminary injunction.
As in the present case, there was a confidentiality provision but no noncompete
clause. When defendant's contract was due to expire, plaintiff offered a new
contract that contained both a confidentiality provision and a noncompete
provision. Defendant sought to obtain additional compensation correlating to the
noncompete provision, but the negotiations failed. While defendant signed the
confidentiality provision, he did not sign the noncompete provision. He was
terminated.

Plaintiff sought to enjoin, defendant from working for his new employer, a
competitor. The lower court granted a preliminary injunction. Reversing, the Third
Department held as follows:

Plaintiff contended that Fairhurst had, or would inevitably, use confidential

information and trade secrets from plaintiff in carrying out the duties of his new
position and that such conduct constituted a misappropriation of trade secrets and
breach of the confidentiality agreement. Absolutely no evidence was proffered to
support the assertion that Fairhurst had already intentionally disclosed any
proprietary information; nor was an anticompetitive employment agreement in effect.
Building from the concept of a threatened disclosure of trade secrets, Supreme
Court utilized a doctrine, not yet adopted by the state courts, [FN4] of inevitable
disclosure (see EarthWeb, Inc. v Schlack, 71 F Supp 2d 299, 309-310; PSC Inc. v
Reiss, 111 F Supp 2d 252, 258-259; International Paper Co. v Suwyn, 966 F Supp.
246, 258-259). It concluded, after finding "no persuasive evidence that Fairhurst
has intentionally disclosed any proprietary information he obtained from plaintiff

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

2004 WL 4963292 Page 5
2004 WL 4963292 (N.Y.Sup.) (Trial Order)

to Pacific Direct, or any of its employees," that plaintiff met the irreparable
harm prong necessary for the issuance of a preliminary injunction. Despite the lack
of evidence that Fairhurst had actually misappropriated any alleged trade secrets,
the court reasoned that since it was extremely likely that he would "use those
secrets-- if only unconsciously--in carrying out his duties with Pacific Direct, to
[plaintiffs] unfair advantage," that plaintiff had established a likelihood of
success on its claims of misappropriation and breach of the confidentiality
agreement. We find insufficient record evidence to support these findings.

FN4. The Third Department's decision in Marietta decision does not mention
Willis. The lower court's decision in Marietta was issued prior to the Appellate
Division's decision in Willis.

Acknowledging that irreparable harm can be established if a trade secret has been
misappropriated, where there is no actual theft of a trade secret, the court, in
applying the doctrine of inevitable disclosure, is "asked to bind the employee to
an implied-in-fact restrictive covenant" not to compete (EarthWeb, Inc. v Schlack,
supra at 310). As no restrictive covenant was in existence here and our well
entrenched state public policy considerations disfavor such agreements, the
doctrine of inevitable disclosure is disfavored as well, "[a]bsent evidence of
actual misappropriation by an employee" (id. at 310). In those rare instances where
such doctrine is applied, it is further cautioned that the proponent should not be
permitted to "make an end-run around the [confidentiality] agreement by asserting
the doctrine of inevitable disclosure as an independent basis for relief" (id. at
311). In assessing whether such injunctive relief is appropriate, the court should
consider whether:

"(1) the employers * * * are direct competitors providing the same or very
similar products or services; (2) the employee's new position is nearly identical
to his old one, such that he could not reasonably be expected to fulfill his new
job responsibilities without utilizing the trade secrets of his former employer; *
* * (3) the trade secrets at issue are highly valuable to both employers [;... and
(4) ] the nature of the industry and [its] trade secrets" (id. at 310). (See PSC
Inc. v Reiss, 111 F Supp 2d 252, 256- 257, supra.)

Assessing the proof presented here to support the issuance of a preliminary

injunction under the theory of inevitable disclosure, we find a failure in the
proffer demonstrating irreparable harm. As there was no actual misappropriation,
the showing emanates from the presumption that there will be an inevitable
disclosure of trade secrets by Fairhurst since Pacific Direct is in direct
competition with plaintiff and he possesses such "highly confidential or technical
knowledge concerning manufacturing processes, market strategies, or the like"
(EarthWeb, Inc. v Schlack, 71 F Supp 2d 299, 309, supra). While we agree that
Fairhurst was privy to confidential information, there exists a valid and
enforceable confidentiality agreement which clearly anticipated that he may change
his employment during its duration after acquiring plaintiffs confidential
information. Upon the record presented, we fail to find any evidence of a breach of
such agreement or that the confidential information also constituted a trade secret
[emphasis added.]

In a footnote, the Third Department cited and quoted from Wolf, supra.

Here, as in Marietta, there is a dearth of evidence of actual misappropriation or

misuse. Here, as in Marietta, the claim is based on the disfavored "inevitable
disclosure" doctrine. Here, as in Marietta, there is a written employment
confidentiality agreement that contemplates, at least impliedly, that the employee
may work for a competitor subsequent to his termination.

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

2004 WL 4963292 Page 6
2004 WL 4963292 (N.Y.Sup.) (Trial Order)

Two federal decisions, while only persuasive authority, contain useful analyses of
the doctrine and its application in New York law. The first is EarthWeb, Inc. v
Schlack, 71 F Supp 2d 299 (SD NY 1999), by Judge Paniev, discussing the inevitable
disclosure doctrine (at pp 11-13). EarthWeb is cited by both Wilits and Marietta,
supra. On appeal, in an unpublished decision reported at 205 F3d 1322 (2d Cir
2000), the Second Circuit found no error or abuse of discretion in denying a
preliminary injunction based on the breach of contract claim based on the
anticompete clause, but remanded for the district court to set forth precise
findings and reasons for denying injunctive relief relating to the preliminary
injunction based on the breach of contract claim based on the confidentiality
clause, and for clarification as to the grounds for denying injunctive relief based
on the misappropriation of trade secrets claim. On appeal after remand, Earthweb,
Inc. v Schlack, 2000 WL ?? 3320 (2d Cir 2000), the Second Circuit, affirming,
agreed that there was no showing of irreparable harm,

In a similar vein, in Colonize.com, Inc. v Perlow, 2003 US Dist LEXIS 20021 (ND NY
2003), a case in which there was a noncompete clause, the court denied a
preliminary injunction, holding:

The doctrine of inevitable disclosure is disfavored in New York because the

State's strong public policy against restrictive non-competition agreements.
Federal courts have also displayed reluctance in using the doctrine. New York
courts have used the doctrine very sparingly to grant injunctive relief only in
circumstances where other evidence of theft of trade secrets exists. That is not
the casein this action. The Company's claim here is insufficient to support the
theory that Perlow has used or threatened to use any of the Company's trade
secrets. Absent any wrongdoing that would constitute a breach under the non-compete
agreement, mere knowledge of the intricacies of a business is simply nkt enough.

In Doubleclick, Inc. v Henderson, 1997 WL 731413 (Sup Ct NY County 1997), the

court granted a preliminary injunction although there was no anticompete agreement.
The decision focused on the ample evidence of misappropriation. The court described
the "inevitable disclosure" doctrine as "bolstering" its finding of
misappropriation. The court held:

there is substantial evidence that defendants 1) used DoubleClick's proprietary

information to prepare for the launch of Alliance and to position it to compete
with DoubleClick, 2) worked on their plans for their new company during working
hours at DoubleClick and used resources given to them by DoubleClick to do so, and
3) sought customers and financing for Alliance without regard to their duties to
their current employer. Plaintiff has been able to marshall [sic] these facts
without the benefit of discovery.

Here, plaintiff offers nothing but supposition and inferences. In any event, while
Wolf was decided prior to Doubleclick, the Doubleclick decision does not mention
Wolf. I conclude that the decision in Doubleclick is inconsistent with the relevant
principles as enunciated by the Court of Appeals in Wolf.

Plaintiffs reliance on U.S. Reinsurance Corp. v Humphreys, 205 AD2d 187 (1st Dept
1994) is misplaced. In that case, as described by the court:

defendant resigned from the company on one day's notice, advising plaintiffs
president and general counsel that he did not feel bound to observe confidentiality
with respect to any information he had obtained through his employment and
directorship, including the proprietary products at issue herein. The next day he
appeared at an insurance trade association conference, handed out personal business
cards, approached a number of plaintiffs clients, and was heard boasting that he
would take about $1 million in brokerage commissions away from plaintiff.

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

2004 WL 4963292 Page 7
2004 WL 4963292 (N.Y.Sup.) (Trial Order)

No such facts are demonstrated here. The fact that a party makes legal arguments
in the course of litigation as to whether alleged trade secrets qualify as such,
when the party represents that it will not and has not disclosed or used the
information at issue, does not constitute a threat of disclosure. [FN5]

FN5. In its reply papers, plaintiff describes the security measures that it
presently has in place. However, the issue is whether the security measures that
were in place at the time of defendants' employment, were adequate to endow the
information at issue with trade secret status. Plaintiffs own assertion that it had
inadvenently failed to obtain noncompete agreements from some of its "principal"
employees, coupled with its insistence that such protection is necessary, adds
considerable credence to defendants' contention that plaintiffs practices were
slipshod.

While I do not reach the issue, it would appear that whether or not the
information at issue qualifies as a trade secret within the common law meaning of
the term, is not necessarily dispositive here, since the parties' rights and
obligations concerning confidentiality are governed by contract. The contract
broadly defines "intellectual property." "Trade secrets" are included in that
definition, along with other types of intellectual property as thus defined. I do
not read defendants' papers as contending that plaintiffs failure to protect its
trade secrets would relieve the individual defendants of their contractual
obligations.

But in any event, in U.S. Reinsurance the plaintiff did not seek to enjoin
defendant's employment. As in Willis, the plaintiff sought an injunction against
use and disclosure. Thus, even if the present facts were analogous to those in U.S.
Reinsurance, it would support only the injunction against use and disclosure, an
injunction which, as discussed below, I am granting despite the lack of any showing
of a breach or threatened breach.

The central premise of the inevitable disclosure doctrine is that even with a good
faith effort, the employee will not be able to divorce what he learned from the
prior employment, when carrying out the functions of the new job. The ability to do
so would require mental compartmentalization: having knowledge but not using it. As
stated in plaintiffs reply memo of law, its premise is the supposed "?? inability
to 'forget' or ignore confidential scientific information even when attempting in
good faith to do so." But this is essentially the same mental discipline that New
York law deems those same humans to be capable of when they serve as jurors, absent
a showing the the contrary. Jurors are routinely instructed to disregard, e.g.,
statements made in open court.

In its reply papers, plaintiff supplies the affidavit of Kenneth Griffin, the
President and CEO of another hedge fund ("Citadel") which, according to Griffin:

uses a variety of trade secrets, proprietary processes and other proprietary

information to pursue highly sophisticated investment strategies in an attempt to
deliver high risk-adjusted rates of return for the investors in its Funds ...
Citadel uses complex, and often proprietary, mathematical/statistical techniques,
generally computer-aided, to identify investment opportunities." *** the disclosure
of the contend of Citadel's models to those with access to the capability to trade
at significant levels would likely severely impact or destroy tho effectiveness of
those models. Therefore, Citadel considers the details of its trading models to be
highly proprietary and critically valuable intellectual property and will not
disclose such information outside Citadel. To protect that information, Citadel
requires all employees to sign nondisclosure agreements. Senior employees with
access to Citadel's models and strategies are often required red to sign

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

2004 WL 4963292 Page 8
2004 WL 4963292 (N.Y.Sup.) (Trial Order)

noncompetition agreements in addition [emphasis added].

The statement that senior employees with access to the models and strategies are
"often" required to sign noncompetition agreements is another way of saying that
such employees are not always required to sign such agreements. That is,
notwithstanding the "inevitable disclosure" theory, Citadel does not find it
necessary, in order to protect its proprietary information, to prohibit all of its
senior employees with access to such sensitive information, from working for
competitors after their departure.

Similarly, the affidavit of Eric Wepsic, likewise supplied by plaintiff, states

that his company, D. E. Shaw, "requires all of its employees to sign
confidentiality (nondisclosure) agreements to protect its trading models as trade
secrets." No mention is made of any requirement that D. E. Shaw's employees sign
noncompete agreements.

Here, in the absence of any direct proof of misappropriation, plaintiff asks for
an injunction that goes beyond what its own chosen witnesses deem necessary for
adequate protection.

BALANCING OF THE EQUITIES

In marked contrast to the situation described by the First Department in Willis,

here the equities balance heavily in defendants' favor. Unlike Willis, in which the
injunctive relief sought was congruent with the nondisclosure agreement, here the
net result of the injunctive relief sought would be that plaintiff would obtain the
benefit of a noncompete clause without providing any quid pro quo in return, in
effect rewarding plaintiff for its refusal to offer sufficient incentive to obtain
such a drastic commitment from defendants.

Defendants have demonstrated that the injunction sought would essentially deprive
the individual defendants of their livelihoods, and cause irreparable damage to the
corporate defendant, their present employer. The suggestion that defendants could
obtain employment in another field is insufficient grounds to support injunctive
relief; the defendants would be deprived of the benefit of their labor and there is
no assurance that they would find substitute employment if they were enjoined by a
court from their present employment in a lawsuit in which they are accused of
misusing confidential information.

Nor is there any showing sufficient to require that I preliminarily enjoin

defendants from engaging in the field of endeavor in which they have found
employment by Millennium. Such an injunction would interfere not only with the
rights of the individual defendants, but with Millennium's contractual rights to
defendants' services. It is evident that Millennium would not have hired the
individual defendants had they signed a noncompete clause with plaintiff.
Plaintiffs slipshod administration cannot equitably be permitted to prejudice
Millennium.

Plaintiffs moving papers fail to supply adequate support for its conclusory
assertions that it will suffer irreparable harm in the absence of an injunction. It
attempts to remedy that defect in its reply papers. However, as noted above,
adequate, nonconclusory support for the relief sought must be supplied in the
moving papers. By placing the supporting material in its reply papers, plaintiff
has deprived defendant of an opportunity to respond. Therefore even assuming,
arguendo, that the new material is sufficient to show irreparable harm to plaintiff
absent the injunction, I decline to consider it to support the injunction.

In Doubleclick. supra, the court found the "equities" element to be satisfied

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

2004 WL 4963292 Page 9
2004 WL 4963292 (N.Y.Sup.) (Trial Order)

because "equity does not favor the employee who seeks to breach his fiduciary
duties to his former employer." But in Doubleclick there was persuasive evidence of
such a breach. Even if the Court of Appeals' discussion in Wolf did not preclude
enjoining defendants' employment and business, the irreparable harm, that would be
suffered by defendants from such an injunction cannot be justified where the only
basis for an injunction is not what defendants have actually done, but merely the
prediction of what could occur in the future.

In balancing the equities, I also consider which party is responsible for the
present circumstances. Here, plaintiff could have contractually entitled itself to
noncompete protection by obtaining an appropriate noncompete clause at the time it
hired or promoted the defendants, in return for a mutually agreeable quid pro quo
for the restriction. Yet it is undisputed in the present papers that, both at the
time they were hired, and at the time they were promoted, the individual defendants
were not told that promotions were contingent on signing anticompete clauses.
Instead, through no fault of the defendants, plaintiff promoted them without
advising them that the promotion would require a noncompete clause. Then it fired
them because they refused to waive rights to which New York law affords strong
protection. Whether characterized as slipshod administration or abusive
overreaching, plaintiffs conduct weighs heavily against the drastic injunctive
relief sought.

Defendants assert, with considerable detail, that they developed the Millennium
software independently, using different languages and different techniques. They
assert that the development of the Millennium code is documented line-by-line on an
ongoing basis, so as to make it possible to verify its independent development. To
enjoin them from utilizing the fruits of their intensive labors would not he an
appropriate exercise of my equitable discretion.

INJUNCTION AGAINST USE DISCLOSURE

While Wolf and the balancing of the equities effectively preclude use of the
"inevitable disclosure" doctrine to enjoin employment, this does not mean that
defendants cannot be enjoined from using or disclosing the alleged confidential
information, as was done in Willis. Here, while defendants make a persuasive
showing that the material is not a trade secret in the common law sense because
plaintiff failed to take adequate measures to protect its secrecy, defendants do
not rest their defense on this premise, and affirmatively state that they have not
and will not disclose or use the information at issue. Thus, an injunction
enjoining defendants not to disclose or use the information would mean only that
defendants will be enjoined from doing what they have represented they will not do.
Since the defendants contractually agreed not to disclose or use the information, I
conclude that, notwithstanding the dearth of evidence of any breach, an injunction
is appropriate, such injunction to be limited by the parameters of the contractual
confidentiality agreement itself.

DESTRUCTION OF DOCUMENTS

There is nothing in the moving papers to suggest that defendants will not preserve
any documents or other materials relevant to this action. Both sides have indicated
that such materials and documents will be preserved. Accordingly, in accordance
with the colloquy on the record, this injunctive relief is granted as to both
sides.

Accordingly, it is hereby

ORDERED that defendants are hereby enjoined, during the pendency of this action,
from disclosing, using or applying plaintiffs "confidential information" or

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

2004 WL 4963292 Page 10
2004 WL 4963292 (N.Y.Sup.) (Trial Order)

"intellectual property" as defined in the individual defendants' employment

agreements; and it is further

ORDERED that all parties are enjoined, during the pendency of this action, from
destroying or failing to preserve from destroying or failing to preserve all
products, objects, notes, memoranda, manuals, emails, charts, graphs, programs,
disks, magnetic tapes, business plans or any other written, recorded or graphic
materials and all copies thereof, in their possession or under their control,
wherever located, which do or may contain, reflect or relate to, directly or
indirectly, any issue known or reasonably expected to be at issue in this action;
and it is further

ORDERED that plaintiffs motion for a preliminary injunction is otherwise denied.

Dated: 4/2/04

ENTER:

J.H.O.

END OF DOCUMENT

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.