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MANGANARO v. INTEROPTEC CORP.

January 23, 1995

MATTHEW MANGANARO and MICROIMAGE SOFTWARE CORP.
v.
INTEROPTEC CORPORATION, JAMES P. ROYNAN and SINA ADIBI



The opinion of the court was delivered by: J. CURTIS JOYNER

 JOYNER, J.

 Before this Court today is Plaintiffs' request for a Temporary Restraining Order against Defendants. Plaintiffs' Complaint alleges causes of action under theories of breach of contract, conversion, tortious interference and fraud. The immediate relief requested is an order that would:

 
1) enjoin Defendants from using, copying, developing derivative works from, or transferring in any way to any third party, the original source code and any source codes or other derivative works derived from the original source code of the computer software known as OpticImage;
 
2) enjoin Defendants from divulging or making any use of OpticImage;
 
3) order Defendants to return to MicroImage and Manganaro all originals and copies of OpticImage in their possession, along with all development tools relating to OpticImage in their possession.

 FACTS

 According to the facts alleged by the parties, Matthew Manganaro purchased all rights, title and interest in a computer software program called OpticImage in 1993. OpticImage is a document sorting program. Manganaro granted MicroImage the exclusive rights to distribute OpticImage and in turn, MicroImage hired InteropTec to further develop OpticImage to make it commercially viable. InteropTec received an Assignment and Security Agreement from MicroImage.

 At some point in 1994, Plaintiffs arranged to have Defendants transfer its unfinished work on OpticImage to a second software development firm, Vista Development, because Defendants had allegedly failed to complete the development as agreed. The floppy disc Vista received from Defendants allegedly indicated that Defendants had been developing software using the source code from OpticImage and a third party.

 Upon learning of this discovery, Plaintiffs asked Vista to send the floppy disc to them. According to Plaintiffs, their investigation revealed that Defendants had copied and used OpticImage's source code for a project not affiliated with or related in any way to Plaintiffs.

 To date, InteropTec has admittedly refused to return the original OpticImage source code to Plaintiffs. It asserts that pursuant to the InteropTec/MicroImage contracts it has no duty to return the source code directly to Plaintiffs, but instead, is obligated only to give it to an escrow agent as may be established by Plaintiffs. Defendants further allege that Plaintiffs have not established an escrow agent. Defendants assert that if InteropTec returns the source code to Plaintiffs directly, its security interest is lost.

 DISCUSSION

 Rule 65(a) of the Federal Rules of Civil Procedure establishes the federal standard governing requests for preliminary injunctions. Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 800 (3d Cir. 1989) (quoting System Operations, Inc. v. Scientific Games Dev. Corp., 555 F.2d 1131, 1141 (3d Cir. 1977)). Injunctive relief is an extraordinary remedy that should be granted only in limited circumstances. Frank's GMC Truck Center, Inc. v. General Motors Corp., 847 F.2d 100, 102 (3d Cir. 1988). At the trial level, the party seeking a preliminary injunction bears the burden of convincing the court that: (1) the movant has shown a reasonable probability of success on the merits; (2) the movant will be irreparably injured by denial of relief; (3) granting preliminary relief will not result in even greater harm to the other party; and (4) granting preliminary relief will be in the public interest. Campbell Soup Co. v. Conagra, Inc., 977 F.2d 86, 90-91 (3d Cir. 1992); ECRI v. McGraw-Hill, Inc., 809 F.2d 223, 226 (3d Cir. 1987). Showing a risk of mere irreparable harm is not enough to warrant injunctive relief. A plaintiff must make a "clear showing of immediate irreparable (not merely serious or substantial) injury of a peculiar nature so that compensation in money cannot atone for it." Campbell Soup, 977 F.2d at 91-92 (emphasis added); ECRI, 809 F.2d at 226; In re Arthur Treacher's Franchisee Litig., 689 F.2d 1137, 1145 (3d Cir. 1982).

 Plaintiffs argue that injunctive relief is necessary, first, because they will suffer irreparable harm without it. They support this argument by asserting that without the original source code they cannot fulfill their contractual obligations to their clients, which will cause future business and profit losses to those clients. This harm ...


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