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Battelle Energy Alliance, LLC v. Southfork Security, Inc.

United States District Court, D. Idaho

October 29, 2013

BATTELLE ENERGY ALLIANCE, LLC, a Delaware limited liability company, Plaintiffs,
v.
SOUTHFORK SECURITY, INC., an Idaho corporation, COREY THUEN, an individual, and DOES 1 through 10, inclusive, Defendants

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[Copyrighted Material Omitted]

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For Battelle Energy Alliance, LLC, a Delaware limited liability company, Plaintiff: A. Dean Bennett, Scott E. Randolph, LEAD ATTORNEYS, HOLLAND AND HART LLP, Boise, ID; Ginger Utley, PRO HAC VICE, Holland & Hart LLP, Salt Lake City, UT; Mark A Miller, PRO HAC VICE, HOLLAND & HART, Salt Lake City, UT.

OPINION

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MEMORANDUM DECISION AND ORDER

B. Lynn Winmill, Chief United States District Judge.

INTRODUCTION

On October 15, 2013, this Court granted plaintiff Battelle Energy Alliance, LLC's ex parte application for a temporary restraining order. See Dkt. 8. The restraining order prevented defendants from releasing a computer software product known as Visdom (which Battelle claims is a copy of its product, Sophia) as an open-source product. It also required defendants to deliver defendants' computer hard drive to defendants for imaging.

After receiving notice of the order, defendants informed the Court and Battelle that they had released Visdom as an open-source product over three months ago -- in July 2013. Based on this new information, Battelle now asks the Court to order defendants to remove Visdom's source code from the internet repository where it is currently posted. It also asks the Court to continue the terms of the Court's October 15 temporary restraining order.

The Court heard argument on Battelle's request for a preliminary injunction on October 23, 2013, and the parties submitted supplemental briefing on October 25, 2013. The Court now issues its ruling. For the reasons explained below, the Court will deny the requested preliminary injunction because Battelle has failed to demonstrate that, absent an injunction, it is likely to suffer immediate, irreparable injury.

BACKGROUND

The Idaho National Laboratory is a federal government facility owned by the United States Department of Energy. Plaintiff Battelle is the lab's management and operating contractor. Battelle's work at the lab includes performing federally funded research projects.

In 2009, the Department of Energy commissioned Battelle to research and develop a computer program aimed at protecting the United States' critical energy infrastructure (oil, gas, chemical and electrical companies) from cyber-attacks. Defendant Corey Thuen is a former Battelle employee who helped develop this computer

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program during his tenure at Battelle. [1] The program ultimately became known as Sophia. The name Sophia was chosen as a reference to the Greek goddess of wisdom.

Battelle tested Sophia in 2012 and learned that electric utility companies were interested in a commercial version of the software program. These companies, however, said they did not want an " open source" version of the software, which means that the source code would be available to the public. Instead, they wanted a closed-loop proprietary version of the software. See Kaczor Dec., Dkt. 2-4, ¶ 16.

Battelle is not able to commercialize its research products and inventions. Instead, the lab licenses its technologies to third parties who market and sell them. Thus, as Sophia neared completion, Battelle began a bidding process, which allowed commercial software and network security firms to compete for the right to exclusively license Sophia.

In 2012, Thuen became interested in creating a spin-off company for the purpose of bidding on the Sophia licensing project. Because Thuen was interested in licensing Sophia, Battelle removed him from the Sophia project in August 2012 and revoked his access to Sophia files. Still, Thuen remained employed at Battelle, working on other projects. Oct. 22, 2013 Thuen Dec., Dkt. 16-1, ¶ 11

Roughly five months later, in February 2013, Thuen began a one-year unpaid professional leave of absence from Battelle. Id. ¶ 12. The terms of his leave, which are discussed more fully below, obligated Thuen to seek permission from Battelle if he wanted to perform any outside activity other than forming a spinoff company which would have the " single purpose of pursuing the commercialization license of Sophia." See Pickett Dec., Dkt. 28-2, Exs. A and B thereto.

On February 28, 2013 -- the very beginning of Thuen's professional leave of absence -- defendant Southfork, which was created for the purpose of bidding on Sophia, submitted a licensing proposal for Sophia. Stmt. of Facts ¶ 42. Thuen also says that " around" the next day, March 1, 2013, he began writing Visdom with co-developer Kristopher Watts. Id. ¶ 14. (Watts later took a job with Battelle.) Roughly six weeks later, on April 18, 2013, Southfork abruptly withdrew from the competitive business process to license Sophia. Then, on May 1, 2013, Southfork began promoting Visdom on its website. Id. ¶ 44. Meanwhile, Battelle awarded another company, NexDefense, the right to negotiate an exclusive commercial license for Sophia. See Stmt. of Fact s, Dkt. 2-2, ¶ 22.

Battelle terminated Thuen on June 27 or 28, 2013. A few weeks later, on July 18, 2013, Thuen placed Visdom's source code on github.com. Thuen says github.com is well known among computer programmers and is among the most popular internet repositories for open-source software. Id.

In October 2013, Battelle sued Thuen and Southfork, alleging eight claims: (1) copyright infringement; (2) trade secret misappropriation; (3) breach of contract; (4) tortious interference with prospective economic advantage; (5) unfair competition; (6) conversion; (7) breach of the implied covenant of good faith and fair dealing; and (8) unjust enrichment.

LEGAL STANDARD

A preliminary injunction is an " extraordinary remedy that may only be

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awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 22, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008). To making this showing, the moving party must establish: (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm to the moving party in the absence of preliminary relief; (3) that the balance of equities tips in favor of the moving party; and (4) that an injunction is in the public interest. Id. The requirements are stated in the conjunctive so that all four elements must be established to justify injunctive relief. The court may apply a sliding scale test, under which " the elements of the preliminary injunction test are balanced, so that a stronger showing of one element may offset a weaker showing of another." Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011).

An even more stringent standard is applied where mandatory, as opposed to prohibitory, preliminary relief is sought. Prohibitory injunctions restrain a party from taking action and effectively " freeze[] the positions of the parties until the court can hear the case on the merits." Heckler v. Lopez, 463 U.S. 1328, 1333, 104 S.Ct. 10, 77 L.Ed.2d 1431 (1983). Mandatory injunctions go well beyond preserving the status quo, as they order a party to take some action. See Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 879 (9th Cir. 2009). The Ninth Circuit has noted that although the same general principles inform the court's analysis in deciding whether to issue mandatory or prohibitory relief, courts should be " extremely cautious" about ordering mandatory relief. Martin v. Int'l Olympic Comm., 740 F.2d 670, 675 (9th Cir.1984). Mandatory preliminary relief should not issue unless both the facts and the law clearly favor the moving party and extreme or very serious damage will result. See Marlyn Nutraceuticals, 571 F.3d at 879. Mandatory injunctions are not issued in doubtful cases, or where the party seeking an injunction could be compensated in damages. Id.

The Court agrees with defendants that Battelle seeks mandatory relief. The defendants released Visdom as an open-source product three months before this lawsuit was filed. Thus, as of October 15, 2013, when Battelle sued, the status quo was that Visdom was available to the public. See, e.g., Marlyn Nutraceuticals, 571 F.3d at 879 (the status quo is the " last, uncontested status which preceded the pending controversy" ) (quotation marks and citations omitted). Battelle is not seeking to freeze that particular state of affairs. It wants defendants to do something that will change the status quo -- ...


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