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GTAT Corp. v. Fero

United States District Court, D. Montana, Missoula Division

May 25, 2017

GTAT CORPORATION, Plaintiff,
v.
CHAD FERO, Defendant.

          ORDER

          Donald W. Molloy, District Judge.

         On May 3, 2017, Plaintiff GTAT Corporation's ("GTAT") received a temporary order restraining former employee Defendant Chad Fero ("Fero") from accessing, using, disclosing, or making available to any person or entity other than GTAT, any of GTAT's confidential, proprietary, or trade secret documents, data, or information. (Doc. 8.) On May 16, 2017, a hearing was held on whether that temporary restraining order should be turned into a preliminary injunction. (See Minute Entry, Doc. 18.) At that hearing, the parties presented testimony and evidence and the temporary restraining order was extended for ten days pending a judicial determination on the issuance of a preliminary injunction.

         GTAT has not shown, for the purposes of a preliminary order, that Fero likely used its trade secrets and that an injunction is warranted while the case progresses.

         Factual Background

         GTAT is a technology company that offers equipment and technology in the solar and electronics industries. (Compl., Doc. 1 at ¶ 5.) Part of GTAT's business is devoted to technology and equipment utilized in the polysilicon process, a raw material used primarily in the solar industry. Hearing Tr. 15 (Gum). The polysilicon portion of its business is based out of Missoula, Montana. Hearing Tr. 14 (Gum). The defendant, Fero, began working for GTAT in 2006 as an engineer and eventually as a director of both the technology and development divisions. Hearing Tr. 155 (Fero). In his position, Fero was involved with the research and development of GTAT's polysilicon technology. Id.

         While general processes for producing polysilicon are generally known, see Hearing Tr. 23 (Gum), over the last decade GTAT has engaged in research and development to create its own proprietary polysilicon process. The two primary components of the polysilicon process are hydrochlorination, or turning of metallurgical-grade silicon into gas, and chemical vapor deposition ("CVD"), the purification and redeposition of that gas. Hearing Tr. 16-17 (Gum). GTAT is a market leader in hydrochlorination technology, and about half of the world's poly silicon is made from trichlorosilane made from GTAT's technology. Hearing Tr. 17 (Gum). In the context of relative capacity, GTAT's technology and equipment has a capacity of approximately 250, 000 metric tons of trichlorosilane per year while the closest leading competitor is on the order of 150, 000 metric tons. Id. Similarly, in relation to CVD, the products marketed and sold by GTAT are capable of approximately 1, 000 metric tons of polysilicon production per year and the closest competition is around 600 to 700 metric tons. Hearing Tr. 18 (Gum).

         According to Jeffery Gum, Director of Global Sales for GTAT, it took GTAT almost a decade and millions of dollars to develop the knowledge and equipment used in its polysilicon process. Hearing Tr. 19-26 (Gum); Ex. 1. With its knowledge and expertise, GTAT offers its clients complete "basic engineering packages" ("BEPs"), or blueprints, and equipment packages for the establishment of polysilicon plants. Hearing Tr. 27 (Gum); Exs. 2, 3 (sealed). Although GTAT does not manufacture the equipment, it works with fabricators around the world to produce equipment that is provided directly to the client. Hearing Tr. 30 (Gum).

         GTAT treats all of the information, materials, and equipment surrounding its polysilicon process as confidential and proprietary, and requires sales material be labeled accordingly. Hearing Tr. 46-47 (Gum). As described by Mr. Gum, the alleged trade secrets at issue here fall into three "buckets, " the (1) materials of construction, (2) internal components, and (3) specific processes involved in the polysilicon process. Hearing Tr. 33-34; see also Doc. 21 (sealed).

         At the time he was hired, Fero signed a Confidentiality Agreement, agreeing to keep confidential technical and business information acquired by GTAT, even after his employment ended. (See Doc. 5-2 at 3-8.) Fero was also aware of the GTAT's Code of Conduct, which specifies that employees must protect the confidentiality of GTAT's intellectual property and proprietary information. See Hearing Tr. 46 (Gum explaining that Fero would review his sales presentations to ensure they did not contain confidential information).

         In September 2016, Fero left his employment with GTAT. Hearing Tr. 159 (Fero). Shortly after his employment ceased, he entered into a consulting agreement with GTAT and worked in that capacity until early January 2017. Hearing Tr. 53 (Gum). No exit interview was performed. Hearing Tr. 160 (Fero). Since leaving GTAT, Fero has been operating a polysilicon technology business under the name "Ferosilicon." See Hearing Tr. 170 (Fero). While Fero is not bound by a non-compete provision, GTAT alleges that Fero could not have "independently developed the chemical processes, equipment designs, and engineering specifications he is now offering without using any of GTAT's trade secret information." (Doc. 1 at ¶ 30.)

         GTAT presents various evidence in support of its belief that Fero misappropriated its trade secrets, focusing primarily on a $10 million deal with a Chinese company that had been in development since October 2015 and was expected to close in April 2017. See Ex. 4 (sealed). When Mr. Gum arrived to close the deal he was informed by the Chinese company that it could no longer proceed at the $10 million price because Fero had offered "essentially the same technology and equipment at a much lower price." Hearing Tr. 60 (Gum). GTAT was only able to make a sale of a BEP, not an entire technology and equipment package, for approximately $750, 000. Hearing Tr. 80-81 (Gum).

         Legal Standard

         A party seeking a preliminary injunction "must establish that [it] is likely to succeed on the merits, that [it] is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in [it]s favor, and that an injunction is in the public interest." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). A plaintiff only need raise "serious questions going to the merits" so long as the balance of hardships tips sharply in the plaintiffs favor and the remaining two Winter elements are met. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1137, 1131 (9th Cir. 2011).

         Analysis

         GTAT raises the following claims: (1) misappropriation of trade secrets under the Defend Trade Secrets Act, 18 U.S.C. § 1836, et seq.; (2) misappropriation of trade secrets under the Montana Uniform Trade Secrets Act, Mont. Code Ann. § 30-14-401, et seq.; (3) breach of the Confidentiality Agreement; (4) breach of the implied covenant of good faith and fair dealing; (5) intentional interference with business relations; and (6) punitive damages. (Doc. 1.) GTAT's request for a preliminary injunction appears to rest solely on its claims for misappropriation of trade secrets and breach of the ...


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