Opinion
Case No. 3:03CV7120.
March 21, 2005
ORDER
This is a diversity suit in which the plaintiff, Asahi Glass Co., Ltd. (Asahi), a Japanese glass manufacturer, claims that proprietary information that it provided to a German glass manufacturer, Schott Glas (Schott), has been improperly disclosed to the defendant Toledo Engineering Co., Inc. (TECO).
Asahi manufactures "TFT float glass," which is an ultra-thin glass used for products calling for very thin glass of very high optical quality. Asahi claims to be the world's leading, if not only manufacturer of such glass. It also claims that its know-how is proprietary and confidential, and that disclosure of that know-how would be extremely adverse to its proprietary rights and commercial interests.
TECO designs and builds float baths for glass manufacturers.
In 1992 Asahi entered into a licensing agreement with Schott, which was planning to construct its "SAM" float glass plant in Jena, Germany. That agreement, inter alia, prohibited Schott from disclosing Asahi's proprietary information to others.
Schott contracted with TECO to have TECO construct a float bath for Schott's "NOWA" float glass project. Asahi claims that Schott, in violation of Schott's obligations under the licensing agreement, disclosed Asahi proprietary information to TECO during the course of TECO's work on the NOWA project.
On the basis of its belief about Schott's improper disclosure of its know-how to teco, Asahi instituted an arbitration proceeding pursuant to the Asahi/Schott licensing agreement. That proceeding, which is pending in Switzerland, and which has been underway for more than two years, has yet to be completed.
Asahi's related concerns about possible misuse and disclosure by TECO of its propriety information, as acquired from Schott, caused it to institute this suit.
Asahi's complaint seeks, inter alia, injunctive relief that would restrain TECO directly or indirectly:
(1) from using [Asahi] Know-how for any purpose, including without limitation in connection with the design, construction, installation, shipping, export or delivery of float bath equipment or (2) disclosing the [Asahi] Know-how to any other person.
(Doc. 1, Prayer for Relief, ¶ 1).
TECO sought a temporary restraining order. By agreement of the parties, this court entered an order on April 7, 2003, which stated in pertinent part:
6. TECO and its subsidiaries shall neither use for their own benefit, nor disclose to any other person or entity, any information disclosed to TECO by Schott Glas relating to the design of the Schott TFT glass manufacturing line currently being installed at Jenaer, Germany; and
7. The limitation imposed by the preceding paragraph shall neither: a) preclude TECO form using or disclosing to any other person or entity any information relating to float glass manufacturing methodology or technology that was known to TECO prior to the time it was disclosed by Schott, or that is now or was at the time of the disclosure generally known by or available to members of the industry, nor b) restrict or prohibit TECO from fulfilling its contractual obligations to Schott Glas relating to the Schott TFT glass manufacturing line currently being installed at Jenaer, Germany.
(Doc. 32).
At the time the injunction was entered, the parties and undersigned anticipated that the arbitration proceeding between Asahi and Schott would be concluded within a few months thereafter. They also anticipated that that proceeding would determine the extent to which Schott had: a) obtained Asahi proprietary information, and b) disclosed any such information to TECO.
At that time TECO also anticipated that it would not be asked to design any float baths or other glass manufacturing projects that would involve any information (not just possibly Asahi-derived information) it had obtained while working on Schott's NOWA line. Thus, it agreed to an injunction that was more broad in its reach than sought in Asahi's complaint.
The arbitration has, as noted, not been concluded. Though the arbitrators have issued in interim award, an additional six months may pass before a final award is issued.
The parties agree that the interim award, which is final and binding on Asahi and Schott, defines, to some extent at least, what information obtained by Schott constitutes Asahi know-how as covered by the license agreement.
In addition, the parties have obtained a copy of a report by an independent expert retained by the arbitration panel and charged by it to address certain remaining issues. The arbitrators will take testimony from the expert in the next two or three weeks.
In the meantime, Schott has asked TECO to bid on another project — the "Alpha" project. To do so, TECO necessarily must use some information learned from Schott during its work on the NOWA line. This is cannot do under the terms of the April 7, 2003, injunction, which prohibits TECO from using " any information disclosed to TECO by Schott. . . ." (Emphasis supplied), not just Asahi-derived information.
During the pendency of the April 7, 2003, injunction, TECO corresponded and met with Schott employees with regard to the Alpha project. These activities have been found to have been in violation of the April 7, 2003 injunction, as they encompassed use by TECO of information obtained from Schott during its work on the NOWA project. No decision has been made as to the sanction to be imposed for such violation or Asahi's motion for an award of attorneys' fees and costs relative to the show cause proceedings leading to that finding.
TECO, accordingly, has moved to have the April 7, 2003, order modified to enable it to respond to Schott's request for a bid on the Alpha project. Schott has notified TECO that any such bid must be provided by the end of this month. If TECO does not bid on the project, it will, according to its understanding, lose any chance it might otherwise have to work on the Alpha project, and, as well, possibly other projects as well.
In addition, a Korean glass company, for whom TECO has constructed glass manufacturing facilities in the past, has begun discussions with TECO about possibly building a new plant for it.
Asahi opposes any change in the existing injunction that might lead to use and/or disclosure by TECO of its proprietary information. TECO is willing to avoid such use or disclosure; it argues, though, that the modification that it seeks in the April 7, 2003, order must be based on notice from Asahi as to just what information Asahi claims is proprietary and has been disclosed to TECO by Schott.
Asahi declines to do so. In part, at least, Asahi declines to undertake to define the information that it deems proprietary, disclosed to Schott, and disclosed further by Schott to TECO due to the pendency of the arbitration. The purpose of that proceeding is, to a major extent, to resolve those otherwise disputed matters.
The parties have submitted alternative versions of an amendment to the April 7, 2003, injunction: without reviewing those conflicting proposals in detail, it suffices to say that Asahi is asking for more than TECO wants to accept, and TECO is offering less than Asahi believes is necessary.
I agree that it is appropriate to alter the original injunction. As noted at a recent hearing relating to TECO's request to loosen the strictures of that order, Asahi, when that order was entered on agreement of the parties, was called on to show that it had a substantial likelihood of success on the merits or post any security.
One approach to TECO's request might be to direct Asahi forthwith to show that it is likely to succeed on its claim that TECO obtained Asahi know-how from Schott, and, if it does so, to set a reasonable bond before either continuing or altering the April 7, 2003 injunction.
This approach would create some major problems. Among these are the fact that Asahi's counsel is preparing for the expert's appearance in a couple of weeks before the arbitration panel. It is not possible for him, and those of his associates who have worked with him on this case, simultaneously to prepare for the forthcoming hearing before the arbitration panel and, as well, a hearing before this court on, among other things, Asahi's likelihood of success in this case.
In addition, for this court to undertake even such a relatively limited inquiry into the matters in dispute between Asahi and Schott might take it into territory that properly should remain occupied exclusively by the arbitrators.
This approach might also take us without resolution past the deadline that TECO claims it must meet if it is to have any chance whatsoever of working for Schott on the Alpha project.
Asahi does not, however, contend that doing that work is not of substantial importance to TECO.
I conclude that the best approach is to alter the earlier injunction to limit its scope to that which Asahi requested in its complaint — to use and disclosure of Asahi-derived information. This leaves TECO free to use whatever it wants of whatever else it either learned from Schott or has learned on its own in the decades during which it has been building glass-making facilities.
I also conclude that it is not appropriate to impose the burden on Asahi at this point of describing the know-how that Schott may have transferred to TECO, and which TECO cannot use.
TECO has access to the arbitrator's interim award; it can discern from that award what the panel has concluded about Asahi know-how acquired by Schott. TECO also has the independent expert's report. I assume that it will like wise obtain testimony and other information developed in the soon to be held proceedings in front of the arbitrators.
While not being final, and thus not being finally definitive, this information gives TECO substantial guidance in determining what it can and cannot use in its work on the Alpha project. Given what TECO now knows and may learn from the arbitration proceedings, it is appropriate toto place the burden on it of determining whether it is likely to be making use of Ashai-derived know-how in its work for Schott. The risk of guessing wrong should also be on it.
I note that TECO has contended that the arbitrators' interim award strongly, though not entirely favors Schott, and thus TECO. It also contends that the independent expert's report is likewise strongly supportive of Schott, though his testimony has yet to be heard.
Asahi gets, at least for now, all that its complaint asks for in the way of injunctive relief. Anything more expansive would not be appropriate — especially in view of the fact that it is getting what it asked for at the outset without yet making the ordinarily required showing of a substantial likelihood of success on the merits.
I decline for now to require Asahi to post a bond. At the recent hearing, TECO indicated that it could accept the proposal which I made at that hearing, and which this order incorporates, that the injunction be modified to do what Asahi requested at the outset of these proceedings. This modification enables TECO to work with Schott on the Alpha project — something which each, apparently, earnestly desires.
I also note that TECO can try to protect itself against a future finding of misuse of Asahi-derived propriety information (as the arbitrators ultimately define such information) by seeking an indemnification, hold-harmless, or similar agreement in its favor from Schott, which will benefit most from TECO's work on (and any misuse of Asahi-information with regard to) the Alpha project.
This alteration of the injunction seeks to protect Asahi's interests in its technology and enable TECO, within the limits imposed by the amended injunction, to engage in its business, including its continued business with Schott.
If TECO reasonably believes that its commercial interests are not sufficiently accommodated by this order, it may request the posting of appropriate security and undertake to demonstrate convincingly the need for and reasonableness of any such security.
In light of the foregoing it is
ORDERED THAT the injunction entered on April 7, 2003, be and the same hereby is amended by vacating paragraphs six and seven of that order; and substituting therefore:
6. TECO and its subsidiaries shall not use for any purpose (including without limitation, in connection with the design, construction, installation, shipping, export or delivery of float bath equipment) any proprietary float glass manufacturing technology that: a) is owned by Asahi Glass Company, Ltd.; b) is covered by any licensing agreement restricting the use and disclosure of such technology between Asahi Glass Company, Ltd. and Schott Glas company; and c) was or is obtained by TECO from Schott Glas.
7. TECO and its subsidiaries shall not disclose to any person any proprietary float glass manufacturing technology that: a) is owned by Asahi Glass Company, Ltd.; b) is covered by any licensing agreement restricting the use and disclosure of such technology between Asahi Glass Company, Ltd. and Schott Glas company; and c) was or is obtained by TECO from Schott Glas.
So ordered.