Question

North Atlantic Instruments, Inc., manufactured electronic equipment used on ships, tanks, and aircraft. In August 1994, North Atlantic acquired Transmagnetics, Inc. (TMI), which designed, manufactured, and sold customized electronic devices to a limited number of engineers in the aerospace and high-tech industries. At the time North Atlantic acquired TMI, Fred Haber was a one-third owner of TMI, as well as its president and head of sales. This position allowed Haber to develop extensive client contacts. North Atlantic conditioned its agreement to acquire TMI on Haber's continuing to work for North Atlantic in a role similar to the role he had played at TMI.
The specialized nature of TMI's business made the identity of the relatively small number of engineers who required its products especially crucial to its business success. Even in companies employing thousands of engineers, a very small number of those engineers-sometimes only two-might need the technology produced by TMI. The identity and needs of that small number of engineers (i.e., TMI's client contacts) would have been very difficult for any company to derive on its own. TMI's list of client contacts was among the intangible assets for which North Atlantic paid when it acquired TMI. North Atlantic retained Haber as president of its new TMI division. An employment agreement between North Atlantic and Haber ran until July 31, 1997. Its terms obligated Haber not to disclose North Atlantic's customer lists, trade secrets, or other confidential information, either during his employment by North Atlantic or after that employment ceased. As president of the TMI division, Haber had access through desktop and laptop computers to information about North Atlantic's technology and customer bases, including lists of clients and information about their individual product needs and purchases. In July 1997, Haber left North Atlantic to join Apex Signal Corp., which manufactured products targeted toward the same niche market as North Atlantic's TMI division. According to North Atlantic, Apex began targeting North Atlantic's customer base, with Haber allegedly asking clients he had dealt with at North Atlantic and TMI to do business with Apex. North Atlantic also contended that Haber had taken its confidential client information with him when he joined Apex. North Atlantic sued Haber and Apex for misappropriation of trade secrets and requested a preliminary injunction. The federal district court later preliminarily enjoined Haber and Apex from using the individual client contacts Haber had developed at North Atlantic and TMI. Haber and Apex appealed.
Was the court correct in issuing the preliminary injunction?



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  • CreatedJuly 16, 2014
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