Public Systems, Inc. v. Towry
Public Systems, Inc. v. Towry
Opinion
The parties present us with several issues concerning the Alabama Trade Secrets Act, Ala. Code 1975, §
The essential facts of the case are as follows. The plaintiff, Public Systems, Inc., is a private, closely held corporation that specializes in providing financial and technical assistance to public and private agencies in Alabama and Tennessee to obtain financing for projects for public purposes, including water systems, sewer systems, and government housing. After the clients obtain financing, PSI assists them in administering and carrying out the projects in accordance with the various state and federal regulations.
The defendants, Herman Kenneth Towry and Susan Dawn Adams, are former employees of PSI. Towry worked as a consultant at PSI for approximately nine years. When he voluntarily terminated his employment, Towry was serving as vice-president of operations. Adams worked at PSI as a staff consultant for approximately one year, at which point she was terminated by PSI. As part of their duties, both Towry and Adams helped prepare grant applications for PSI, and when those grants were funded, they helped to supervise and administer the grant projects. Upon the cessation of their employment with PSI, Towry and Adams formed a company that would directly compete with PSI.
PSI brought this action against the defendants under the provisions of §
"Towry and Adams, by improper means, illegally, without authority and without the privilege to do so, performed the following acts:
"a. Misappropriated trade secrets of PSI;
*Page 971"b. The misappropriated trade secrets of PSI were used and intended for use in the trade or business of PSI;
"c. Made or retained copies of lists of clients of PSI;
"d. Made or retained copies of grant applications of PSI;
"e. Made or retained copies of forms developed and used by PSI;"f. Made or retained copies of computer printouts of information developed by PSI;
"g. Made or retained copies of project financial records."
PSI also requested that the trial court issue a temporary restraining order and a preliminary injunction, seeking to enjoin the defendants from contacting certain clients of PSI, from disseminating the alleged trade secrets, from hiring PSI's employees, and from retaining documents that allegedly belonged to PSI.
The trial court denied the motion, noting the following:
"[T]he plaintiff and defendants did not have a contract containing any restriction on the defendants' right to compete. In the absence of such an agreement, this Court cannot restrict the defendants in competing with the plaintiff. . . . With respect to the dissemination of information which the plaintiff claims is a 'trade secret,' this claim is based on the plaintiff's contention that information which it gathers from public sources and programs into a commercially available software program constitutes a 'trade secret.' This Court cannot agree. The information and the software program are readily available to the public."
This is an interlocutory appeal from the trial court's denial of PSI's motion for a temporary restraining order and preliminary injunction. Initially, we define our scope of review in an appeal from an order denying a preliminary injunction. As stated in Alabama Educ. Ass'n v. Board ofTrustees,
"Wide discretion is accorded the trial judge hearing the application and deciding whether to grant a temporary injunction and his action will not be disturbed on appeal unless he abuses his discretion. . . . His discretion is a legal or judicial one subject to review for abuse or improper exercise, as where there has been a violation of some established rule of law or principle of equity, or a clear misapprehension of the controlling law."
"(a) Is used or intended for use in a trade or business;
"(b) Is included or embodied in a formula, pattern, compilation, computer software, drawing, device, method, technique, or process;
"(c) Is not publicly known and is not generally known in the trade or business of the person asserting that it is a trade secret;
"(d) Cannot be readily ascertained or derived from publicly available information;
"(e) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; and
"(f) Has significant economic value."
See Ala. Code 1975, §
The burden is on the one asserting the trade secret, here PSI, to show that it is included or embodied in the categories listed in §
The third requirement for trade secret protection is that the information "[i]s not publicly known and is not generally known in the trade or business of the person asserting that it is a trade secret." An examination of PSI's spreadsheet software data program reveals that the information the plaintiff seeks to protect is readily ascertainable or derivable from information that is publicly available. According to trial testimony, the spreadsheet began as an off-the-shelf computer program "available to *Page 972
anybody who wants to go down to the software store and buy it." The program produces a screen of rows and columns and contains various command keystrokes to allow the user to modify the spreadsheet to insert blocks of information. The program also has the capability to perform mathematical calculations. There is no evidence in the record, and apparently no claim, that PSI made any changes to the technical aspects of the program; therefore, there is no trade secret protection in the program itself.1 As stated in the comments to §
All of the information compiled and embodied in PSI's spreadsheet data program is available to the public. The spreadsheet consists of a cover sheet, a key to the legends, a map and a multipage graph. The map is a reprint of an Alabama Department of Economic and Community Affairs ("ADECA") map that shows the counties of Alabama and the location of the regional planning and development commissions. PSI admits that the map is a state document with general dissemination.
The succeeding pages are in graph form. The first two columns contain the names of the cities and counties of Alabama. The third column, headed "REG.PLNCOM" shows the regional planning commission under whose jurisdiction each city and each county operates. The next columns, "1980 populations," "percent minority population," and "percent LMI [low and moderate income]," all contain information taken from the 1980 census.
The next two columns include a "community need factor" and a "DISCTYSTA" (distress county status), both figures were obtained from ADECA, are periodically published by ADECA, and are available to anyone who requests the information. The next column shows the "Fiscal Year 1989 Waste Water Treatment System Priority" as established by the Alabama Department of Environmental Management. This information is also generally available to the public.
The final columns contain a complete history of grant applications submitted by local governments. According to PSI, this information is obtained from ADECA and is information that one could obtain "if they knew what they were asking for."
Closely aligned with the requirements of (c), above, is the requirement of §
As stated in the comments to §
Saunders v. Florence Enameling Co.,
We hold that the trial court did not abuse its discretion in denying the injunctive relief based upon its finding that the client list was not a trade secret.
In its brief, PSI contends that this case falls within the ambit of the tort of interference with business or contractual relations. In Fossett v. Davis,
"1) the existence of a contract or business relation; 2) defendant's knowledge of the contract or business relation; 3) intentional interference by the defendant with the contract or business relation; and 4) damage to the plaintiff as a result of the defendant's interference."
Although a party might be able to show a competitor's wrongful interference with a contractual relationship, we conclude that PSI has failed to provide evidence from which the factfinder could infer that a wrongful interference had taken place here and that PSI had suffered damage as a result of that interference. Absent such evidence, we must hold that the trial court did not err in holding that Towry and Adams had a right to conduct a rival *Page 974
business and to deal with former clients who, because of past services, may have elected to patronize them. See Joseph v.Hopkins,
Because we hold that Towry and Adams have a right to conduct a competing business, we pretermit any discussion of issues three and four.
In summary, there is no merit to PSI's claim that the spreadsheet data program or the client list are trade secrets entitled to protection under the Alabama Trade Secrets Act. Further, absent a covenant not to compete, Towry and Adams have a right to conduct a competing business. For the foregoing reasons, the trial court's judgment denying the preliminary injunction is affirmed.
AFFIRMED.
HORNSBY, C.J., and SHORES, ADAMS, HOUSTON, STEAGALL and INGRAM, JJ., concur.
Reference
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- Public Systems, Inc. v. Herman Kenneth Towry and Susan Dawn Adams.
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