Opinion ID: 712938
Heading Depth: 2
Heading Rank: 1

Heading: The prior case.

Text: 4 FTSS was, before December of 1990, America's sole designer and manufacturer of ATDs. FTSS owned many copyrights, trade secrets, inventions, and trademarks for ATDs, and for related computer calibration programs, components, and manufacturing processes. FTSS also possessed customer lists, contracts, pricing information, and marketing strategies typical of any manufacturing firm. 5 On December 18, 1990, plaintiff Fuhr left FTSS to form Vector, which he and plaintiff Wade incorporated the next day. Wade, also an FTSS employee, remained at FTSS for sixteen more days before joining Vector. Plaintiff Depinet left FTSS to join Vector in March of 1991. Vector intended to compete with FTSS in the design and production of ATDs and related computer software. 6 FTSS eventually filed a complaint against Vector, Fuhr, Wade, and Depinet, alleging copyright infringement, unfair trade practices, unfair competition, conversion, receiving and concealing trade secrets, and tortious interference with contracts and business advantage. FTSS simultaneously filed an emergency motion for an ex parte order authorizing a search of Vector's premises, pursuant to the Copyright Act, 17 U.S.C. § 503, the Supreme Court Rules of Copyright Practice (the Copyright Rules) which appear following 17 U.S.C. § 501, and Federal Rule of Civil Procedure 65(b). In support of its request, FTSS alleged that Vector had engaged in numerous business activities that could only have been possible with the use of proprietary FTSS information, and that Vector and its employees therefore must have violated copyright laws and employee confidentiality agreements. 7 The district court issued an order authorizing the United States Marshal and persons acting under the Marshal's supervision, including representatives of FTSS, to inventory, impound, inspect, copy, and photograph certain materials on Vector's premises, or anywhere else the materials might be found. Only materials belonging to FTSS and bearing the name of FTSS or one of its corporate predecessors could be taken from Vector. The search party was to copy everything else and return the originals to Vector. Either the marshals, or FTSS's counsel in trust for the court, was to hold the impounded material. 8 On April 8, 1992, two U.S. Marshals, FTSS's Michigan counsel (Howard & Howard, represented by Clemens), three FTSS employees (Gutwald, Goldner, and Smrcka), and FTSS's Ohio counsel (Marshall & Melhorn, represented by Martin), and others, went to Vector's premises in Milan, Ohio to conduct the search. The federal marshals stayed only an hour, but the rest of the search party remained for another five hours. The Marshall & Melhorn firm held the seized materials in trust for eight days until the district court held a hearing that dealt with a motion Vector had made to vacate the impoundment order. 9 The district court denied Vector's motion, concluding that either the Copyright Act, the Copyright Rules, or Rule 65 authorized the ex parte order. Marshall & Melhorn then transferred the impounded materials to the custody of the district court. Vector appealed, and this court held that the district court had abused its discretion in issuing the order. First Technology Safety Sys., 11 F.3d at 652. 10 This court rejected Vector's arguments that the order failed to comply with the technical requirements of the Copyright Rules, but did hold that the order was too broad to fall within the authorization of 17 U.S.C. § 503 and the Copyright Rules. Id. at 649. This court noted that section 503(a) of the Copyright Act authorizes the impoundment of materials that infringe copyrights, or equipment that can be used to copy infringing goods, and that the Copyright Rules authorize seizures and mandate the return of articles seized for any reason not appropriate under the Copyright Act. The court reasoned, however, that the business records seized were neither infringing goods nor materials that could be used to copy such goods, but rather were only possible evidence of the alleged infringement. Id. Because this court saw no congressional intent to give a copyright holder a means to preserve evidence generally, it held that Vector's business records were not subject to impoundment under the statute, and thus that portion of the order was not authorized by law. 11 Moreover, this court stated that because section 503 did not authorize the order as issued, the Copyright Rules did not provide the proper procedure for obtaining it, and thus the district court should have proceeded under Rule 65(b) to determine the propriety of granting injunctive relief ex parte. Id. at 649-50 (citations omitted). The court stated that, on the rare occasions when ex parte temporary restraining orders are proper, they should be limited to preserving the status quo only for so long as is necessary to hold a hearing. Id. at 650 (citing Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423, 439, 94 S.Ct. 1113, 1124, 39 L.Ed.2d 435 (1974)). Applying that maxim and the language of Rule 65(b) to the facts, this court held that FTSS failed to demonstrate that ex parte relief was warranted, primarily because FTSS did not show that appropriate circumstances existed--i.e., that Vector was likely to take advantage of an opportunity to conceal or destroy evidence (and thereby render further prosecution of the action fruitless) if it had notice of the order. Id. at 651. 12