ANALOG DEVICES, INC.,
Plaintiff
v
.
CHRISTOPHER MICHALSKI, KIRAN KARNIK, and MAXIM INTEGRATED
PRODUCTS, INC.,
Defendants
Womble Carlyle Sandridge & Rice, P.L.L.C., by Burley B.
Mitchell, Jr., and Michael E. Ray, and Hale and Dorr L.L.P.,
by James C. Burling and John T. Gutkoski, for plaintiff-
appellant.
Smith Helms Mulliss & Moore, L.L.P., by James G. Exum, Jr.,
and Jonathan A. Berkelhammer, and Brown & Bain, P.A., by Alan
H. Blankenheimer and Laura E. Underwood, for defendants-
appellees.
CALABRIA, Judge.
This matter is before the Court on the plaintiff's appeal of
the trial court's order denying the issuance of a preliminary
injunction. Analog Devices, Inc. (“Analog”) and Maxim Integrated
Products, Inc. (“Maxim”) are corporations that compete to produce
various types of integrated circuits including analog-to-digital
converters (“ADCs”). ADCs are used to convert real world signals
such as voice, sound, or light signals into digital representations
that can be used by computers, cell phone systems, and other
electronic equipment for processing or storage. The primary
characteristics of an ADC can be broken down into two performancespecifications: sample rate or speed (measured in megasamples per
second or MSPS) and resolution or accuracy of conversion (measured
in bits). Analog is currently the market leader in the field of
high speed (sample rates of 65 MSPS or higher), high resolution
(resolution of 12 bits or higher) ADCs.
Christopher Michalski (“Michalski”) is a design engineer with
a master's degree in electrical engineering. Michalski worked at
Westinghouse Defense and Electronic Center for over eight years on
ADCs. After leaving Westinghouse, Michalski worked for Analog for
over five years as a lead design engineer on different ADC models
designed and produced by Analog. Kiran Karnik (“Karnik”), also a
former engineer at Analog with a master's degree in electrical
engineering, worked for over a year in Analog's design center in
the production of ADCs. In September of 2001, both Michalski and
Karnik left Analog for positions at Maxim.
On the night before departing Analog, Michalski printed
approximately 77 pages of confidential schematics and documents
concerning Analog's ADC products and components. Analog contended
Michalski took those documents with him when he left. Michalski
denied taking the documents. He explained the reason he needed
hard copies was to compare the schematics with technical journals
to distinguish between techniques and devices known generally in
the industry versus those which were proprietary to Analog.
During Michalski and Karnik's exit interviews, Analog provided
proprietary rights agreements. Both signed the agreements not to
disclose confidential information belonging to Analog. NeitherMichalski nor Karnik signed a covenant not to compete when they
commenced employment with Analog, and both refused to sign a
covenant not to compete at their exit interviews.
On 21 September 2001 in Guilford County Superior Court, Analog
moved for a temporary restraining order to prevent the disclosure
of confidential information and trade secrets to Maxim. The
Honorable Lindsay R. Davis granted Analog's motion for a temporary
restraining order. On 15 October 2001, Analog moved for a
preliminary injunction to enjoin Maxim from seeking to hire any
engineer at Analog working in the high speed, high resolution
(“HSHR”) ADC divisions and to enjoin Michalski and Karnik from
“working in the development, design, implementation and marketing
of high-speed analog to digital converters” with specification of
12 bits or higher and sample rates of 65 MSPS or higher. On 12
February 2002, after conducting a four-day hearing, the Honorable
Peter M. McHugh entered an order dissolving the temporary
restraining order and denying Analog's motion for a preliminary
injunction. In so doing, the trial court found: (1) the process
technology differences between Analog and Maxim rendered the trade
secrets “mostly irrelevant . . . [and] of no use[;]” (2) Analog had
failed to specifically identify any trade secrets or show either
actual or threatened misappropriation as required by North Carolina
law; and (3) Analog had failed to show irreparable harm should
Michalski and Karnik work for Maxim. Analog appeals.
“The denial of a preliminary injunction is interlocutory and
as such an appeal to this Court is not usually allowed prior to afinal determination on the merits.” N.C. Electric Membership Corp.
v. N.C. Dept. of Econ. & Comm. Dev., 108 N.C. App. 711, 716, 425
S.E.2d 440, 443 (1993). However, review is proper if “such order
or ruling deprives the appellant of a substantial right which he
would lose absent a review prior to final determination.” A.E.P.
Industries v. McClure, 308 N.C. 393, 400, 302 S.E.2d 754, 759
(1983). “[T]his Court [has] recognized that disclosure of trade
secrets could affect a substantial right.” Cox v. Dine-A-Mate,
Inc., 129 N.C. App. 773, 777, 501 S.E.2d. 353, 355 (1998) (citation
omitted). A substantial right is presented here since, absent a
preliminary injunction, Maxim would be free to employ Michalski and
Karnik in the design of HSHR ADC products and any disclosure or
misappropriation of Analog's trade secrets would be irreparable.
“The scope of appellate review in the granting or denying of
a preliminary injunction is essentially de novo.” Robins & Weill
v. Mason, 70 N.C. App. 537, 540, 320 S.E.2d 693, 696 (1984). “[A]n
appellate court is not bound by the findings, but may review and
weigh the evidence and find facts for itself.” McClure, 308 N.C.
at 402, 302 S.E.2d at 760. However, a trial court's ruling on a
motion for a preliminary injunction is presumed to be correct, and
the party challenging the ruling bears the burden of showing it was
erroneous. Conference v. Creech, 256 N.C. 128, 140, 123 S.E.2d
619, 627 (1962) (citation omitted).
A preliminary injunction is an
extraordinary measure, and will be issued only
if (1) [a] plaintiff is able to show a
likelihood of success on the merits of his
case and (2) [a] plaintiff is likely to
sustain irreparable loss unless the injunctionis issued, or if, in the opinion of the Court,
issuance is necessary for the protection of
his rights during the course of litigation.
Wade S. Dunbar Ins. Agency, Inc. v. Barber, 147 N.C. App. 463, 467,
556 S.E.2d 331, 334 (2001).
I. Likelihood of success on the merits
A. Actual or Threatened Misappropriation
North Carolina's Trade Secrets Protection Act provides
“[e]xcept as provided herein, actual or threatened misappropriation
of a trade secret may be preliminarily enjoined during the pendency
of the action and shall be permanently enjoined upon judgment
finding misappropriation . . . .” N.C. Gen. Stat. § 66-154 (2001).
Misappropriation is defined as the “acquisition, disclosure, or use
of a trade secret of another without express or implied authority
or consent, unless such trade secret was arrived at by independent
development, reverse engineering, or was obtained from another
person with a right to disclose the trade secret.” N.C. Gen. Stat.
§ 66-152(1) (2001). A trade secret is defined in N.C. Gen. Stat.
§ 66-152(3) (2001) as follows:
[B]usiness or technical information, including
but not limited to a formula, pattern,
program, device, compilation of information,
method, technique, or process that:
a. Derives independent actual or potential
commercial value from not being generally
known or readily ascertainable through
independent development or reverse engineering
by persons who can obtain economic value from
its disclosure or use; and
b. Is the subject of efforts that are
reasonable under the circumstances to maintain
its secrecy. At this stage of the proceedings, Analog has failed to show a
likelihood of success on the merits because Analog has not produced
sufficient evidence establishing actual or threatened
misappropriation of their trade secrets that would entitle them to
injunctive relief. In fact, the evidence at trial indicates the
integrated circuits produced by Maxim and Analog are too divergent
to allow interchangeable use of Analog's trade secrets.
The production of integrated circuits can be categorized,
among other ways, by process technology, by device size or
geometry, and by device composition. Both Maxim and Analog
fabricate integrated circuits using BiCMOS process technology.
However, the device geometry and device composition used by the two
companies differ. Analog utilizes larger geometries (.6 and .35
micron) in fabricating the integrated circuits they produce. By
contrast, the geometry of the integrated circuits produced by Maxim
is .18 and .5 microns. The reduction in the device size and the
resulting decrease in the supply voltage preclude the use of many
circuit designs that may otherwise be viable at a larger geometry.
While Analog used a .18 micron TSMC process that shares some
specifications with Maxim's .18 micron process, neither Michalski
nor Karnik has designed using the .18 micron TSMC process while
employed at Analog.
Moreover, Analog and Maxim use different device compositions.
Analog uses a bulk silicon process in the manufacture of its ADCs
while Maxim uses and has been using a silicon germanium process.
Neither Michalski nor Karnik designed integrated circuits at Analogusing a silicon germanium process. In fact, the record discloses
no evidence that Analog is engaged in designing integrated circuits
composed of silicon germanium. Maxim intends for both Michalski
and Karnik to work on future ADC designs fabricated using a .18
micron silicon germanium BiCMOS process. Thus, both will be
employed in the production of integrated circuits using a different
device size and device composition.
These differences in sizes and compositions and the resulting
design changes render the alleged trade secrets largely non-
transferable. As the trial court held in contemplating the
testimony of Analog's witnesses concerning the impact of these
differences:
The evidence is undisputed that the process
technology impacts the design of ADCs.
Analog's director of high-speed ADCs testified
that all circuits are heavily process
dependent. Mr. Michalski's supervisor,
[engineer Tom] Tice, testified that a
substantial difference in process technologies
renders the trade secrets “mostly irrelevant”
and further explained that if the device sizes
for the processes are different, the trade
secrets “would be of no use.” Maxim uses a
different process technology, having a
different device size and a different
composition (silicon germanium).
These conclusions are supported by the expert testimony of Dr.
William T. Holman for defendants. Based on the differences between
the geometry and the composition, Holman testified the design
differences would be “significant.” Such differences would require
scaling down the circuit designs, lowering operating voltage, and
creating new circuit topologies. When asked if the circuits
involved in the case sub judice would have to be redesigned, Holmananswered, “[m]any circuits . . . would have to be redesigned and
[would] be completely nonfunctional at 1.8 volts [the corresponding
voltage for a .18 micron design.]” Moreover, Maxim has expressly
required and both individual defendants have expressly agreed not
to use or disclose Analog's trade secrets. Based on the foregoing
evidence, misappropriation of Analog's trade secrets by Maxim is
unlikely, and a claim of misappropriation on the evidence currently
before this Court must fail.
B. Specific Trade Secrets for Analog's Components or Combinations
Analog contends trade secret protection is warranted in three
areas: (1) the ADC chips as a whole and the processes and
techniques used to produce it, (2) specific components and
implementations used by Analog, and (3) process of determining
those efforts that will lead to successful developments and those
efforts that will only be a waste of time and resources.
It is generally accepted that a plaintiff must identify a
trade secret with sufficient particularity so as to enable a
defendant to delineate that which he is accused of misappropriating
and a court to determine whether misappropriation has or is
threatened to occur. See, e.g., FMC Corp. v. Cyprus Foote Mineral
Co., 899 F. Supp. 1477, 1484 (W.D.N.C. 1995); IDX Systems Corp. v.
Epic Systems Corp., 285 F.3d 581, 584 (7th Cir. 2002); Del Monte
Fresh Produce Co. v. Dole Food Co. Inc., 148 F. Supp. 2d 1322, 1325
(S.D. Fla. 2001); Xerox Corp. v. IBM Corp., 64 F.R.D. 367, 371-72
(S.D.N.Y. 1974). We find persuasive the analysis set forth by FMC,
899 F. Supp. at 1484, where a preliminary injunction was deniedbecause the plaintiff failed to “present[] evidence of specific
trade secrets and processes.”
Just as the plaintiff in FMC asserted trade secrets at almost
every stage in the production of their products but offered only
general evidence in support of those assertions, Analog has
asserted there are trade secrets at risk and has submitted
schematics and documents in support of their claim. Analog has
failed to show what, if anything, in those schematics is
specifically deserving of protection. Instead, Analog has made
general claims concerning areas of ADC production and design and
requested a preliminary injunction that acts as an absolute bar to
Maxim's future efforts in ADC research through its employees,
Michalski and Karnik. For example, in their proposed findings of
fact to the trial court, Analog stated the following in defining
their trade secrets:
47. The circuit designs and solutions
developed by Analog Devices . . . .
48. While each of Analog's designs and
solutions, along with their specific
implementations . . . may contain individual
trade secrets, “it's a combination of all of
the aspects which constitute trade secrets
that make the device itself a trade secret.”
. . .
50. “The techniques and the variations and
the adjustments that are required to make . .
. successful components . . . .”
. . .
52. Trade secrets can be found in the overall
design and implementation of Analog's 94xx
products, even if all the constituent parts of
that design were publicly known.
Analog invites this Court to acknowledge the existence of trade
secrets in the submitted information without bearing the burden ofidentifying those trade secrets. We will not read into Analog's
claims specific identification of devices worthy of trade secret
protection when it is Analog's burden to come forward with evidence
of such devices.
To the extent Analog has claimed the chips or their production
processes and techniques are trade secrets, the evidence presented
as of yet in the record discloses ADCs are easily and readily
reverse engineered.
(See footnote 1)
To the extent Analog has attempted to
specifically state components deserving of trade secret
protection,
(See footnote 2)
the record presently before this Court shows those
examples do not merit trade secret protection because they are
either generally known in the industry, are process dependent so as
to preclude misappropriation, or are readily ascertainable by
reverse engineering. To the extent Analog has claimed it possesses
a trade secret as to the process of determining those efforts that
will lead to successful developments and those efforts that willonly be a waste of time and resources, the evidence presently
indicates the substantial differences in the integrated circuits to
be produced by Maxim will require new experimentation and
development of new ways to effectively identify efforts that will
lead to successful development. Otherwise, any process by any
former Analog employee to develop new, different, or superior
technologies, in the field of ADC design, would be precluded as a
trade secret belonging solely to Analog.
C. Inevitable Disclosure
Analog urges this Court to adopt the doctrine of “inevitable
disclosure”
(See footnote 3)
and find it is inevitable that Michalski and Karnik
will disclose trade secrets of Analog during the course of their
employment if they are allowed to work for Maxim. We need not
reach the consideration of whether to adopt the doctrine of
inevitable disclosure since it would not be applied in the fashion
promoted by Analog.
Analog's interpretation of the doctrine of inevitable
disclosure would permit the injunction sought to act as an absolute
barrier to working in the field of ADC design without reference to
the composition, geometry, or process used to produce the ADC, all
of which impact the relevance of the trade secrets for whichprotection is sought. Maxim has already produced ADCs with the
resolution and speed denoted in the injunction. Again we find the
analysis of FMC to be instructive: “if the doctrine is applied as
urged by [Analog], then no employee could ever work for its former
employer's competitor on the theory that disclosure of confidential
information is 'inevitable.' In fact, if [Analog] succeeded in
this case, then [Michalski and Karnik] would not be able to market
[their] expertise.” FMC, 899 F. Supp. at 1482-83.
Analog ignores the important countervailing considerations at
issue: both Michalski and Karnik have a great deal of general skill
and knowledge as engineers who have studied for and worked in this
area for years. These skills are not specific to the techniques
and processes used by Analog, and both engineers are free to market
those skills to competitors. “The mere fact that [they] acquired
some of these skills while working for [Analog] does not mean that
[they] must work for [Analog] or not work at all.” Id., 899 F.
Supp. at 1483. Michalski and Karnik have merely “exercised the
privilege every citizen has of accepting employment in the field
for which he is trained.” Engineering Associates v. Pankow, 268
N.C. 137, 140, 150 S.E.2d 56, 59 (1966).
Michalski and Karnik have signed agreements not to divulge
confidential information belonging to Analog, Maxim has instructed
them not to do so, and there is no evidence that any party to this
litigation intends to induce them to break their agreement.
(See footnote 4)
“[A]ninjunction [will not] be issued to restrain one from doing that
which he is not attempting to do.” Laboratories, Inc. v. Turner,
30 N.C. App. 686, 696, 228 S.E.2d 478, 486 (1976). While Analog
might have prevented Michalski and Karnik from working in the field
of HSHR ADC design and development in the event they ceased working
for Analog by making a non-compete clause part of their employment
contract, no such clause has been presented.
II. Irreparable Harm
In light of our holding concerning likelihood of success on
the merits, Analog cannot show the denial of a preliminary
injunction will work an irreparable injury.
In sum, Analog has failed to present sufficient evidence
tending to show misappropriation is threatened or actually going to
occur. Analog has yet to come forward with evidence of or sought
protection for particular and specific devices, combinations, or
processes that would merit trade secret protection. “[A]n
injunction [should not issue] merely to allay the fears and
apprehensions or to soothe the anxieties of a party.” Turner, 30
N.C. App. at 696, 228 S.E.2d at 486. Accordingly, we hold thetrial court did not err in refusing to issue the preliminary
injunction.
Affirmed.
Judges McGEE and HUNTER concur.
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