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B&B Microscopes v. Armogida

September 25, 2007


The opinion of the court was delivered by: Ambrose, Chief District Judge.



B&B's Business

1. B&B Microscopes, Ltd. ("B&B") is engaged in the business of selling microscopes and imaging products in the states of Pennsylvania, Delaware, West Virginia, Ohio and Kentucky.

2. B&B is a distributor of Olympus America, Inc. ("Olympus") products.

3. The products themselves include very sophisticated imaging and microscope equipment with prices reaching into the hundreds of thousands of dollars.

4. B&B's business has changed over time. It started selling basic microscopes for low end research. Now it targets the high end research market. It takes hardware and software and integrates them and adapts them to the customer's needs. The imaging side of the business has increased in importance to B&B and now drives the microscope sales.

5. In fact, B&B offers imaging software packages, including a package known as MicroSuite, which allows B&B to provide customized imaging solutions to its customers.

6. B&B employs both microscope sales representatives and imaging specialists. Their territories overlap and imaging specialists work with the sales representatives on imaging system sales.

7. The focus on imaging drives who B&B looks for in imaging specialist employees. It looks for smart people who can ascertain customer needs, who have programming capabilities and who can think creatively.

8. Imaging specialists typically work longer than a 9 to 5 workday because they must be responsive to their customers' needs.

The Hiring of Armogida and His Job Duties

9. Andre Domino, a B&B manager, introduced Luigi Armogida ("Armogida") -his nephew - to B&B. Domino believed that Armogida's computer skills would prove beneficial to B&B.

10. In seeking employment with B&B, Armogida represented that he had advanced knowledge of computer hardware, operating systems, software, networking and programming languages, and an understanding of high resolution imaging, including image acquisition and storage options.

11. B&B relied upon these representations in hiring Armogida. He was hired to sell microscopes and to sell and provide custom imaging solutions to B&B's customers.

12. Although he was not hired to develop a specific patentable product or invention per se, I find that Armogida was hired to develop customized imaging solutions for customers. If a customer required something that B&B did not then offer, then B&B's imaging specialists, such as Armogida, had the task of developing the product.

13 Armogida entered into an Employment Agreement in 1998 and then executed an amendment to that Agreement in June of 2001. The amendment reflected Armogida's move to Cleveland, Ohio.

14. The Agreement did not expressly require Armogida to assign rights in any intellectual property to B&B, nor did the Agreement expressly address inventing a particular product.

15. The Agreement did, however, provide that Armogida would not compete, either directly or indirectly, with B&B while employed or for a period of twelve months following termination. This provision was limited to a one hundred mile radius of any locality where B&B had retained or paid for the full-time services of any employees.

16. The Agreement also contained a clause prohibiting Armogida from removing records of sales, service, customer lists, or any other forms, or matters of business pertaining to B&B, or any copies thereof, for his own use or for the use of others.

17.Though the term "imaging specialist" was not then used to describe Armogida's duties, Armogida essentially served as an imaging specialist. He himself began using the term "imaging specialist" to describe his duties at a later date.

18 Armogida consistently held himself out as an "imaging specialist." He used that designation on his business card and on his email signature. He explained that he was an "imaging specialist" because he could sell an imaging system based upon his understanding of how to configure software.

19 Throughout his employment, Armogida received training which enabled him to better perform his job as an imaging specialist. For instance, he attended seminars on the use of imaging software, macros and programming.

20. B&B always paid for the expenses associated with the training seminars.

21. Armogida did in fact develop custom imaging solutions for B&B's customers. He helped Domino in the development of software for the St. Gobain project because Domino was unable to customize the solution himself.

22. The St. Gobain project involved an automated imaging system. The system automatically searched for defects.

23. Armogida consistently held himself out to others as someone who had developed automated and customized imaging systems while employed at B&B. In a July 25, 2005 letter Armogida represented that he had nine years of digital microscope imaging experience and seven years of experience as an imaging specialist.

24. Armogida himself stated that one of his then recent projects included "developing an automated system to map a crystal for optimal sectioning before installed as a gamma knife detector." See Plaintiff's Ex. 17. Armogida also acknowledged that he "provided complete custom solution to that company to improve the quality of the detector they manufacture." Id. He references "creating solutions" for individual projects. Id.

Development of the KPICS System

25. The Ohio Bureau of Criminal Investigation ("OHBCI") has been a customer of B&B for at least ten years.

26. In February of 2005, David Navratil, a B&B employee, brought Armogida to the OHBCI to help him with a mobile cart demonstration. Navratil introduced Armogida to Dale Laux, a forensic scientist with the OHBCI, as an imaging specialist -a software specialist who understood computers.

27. Following the mobile cart demonstration, Laux showed Armogida the OHBCI lab and discussed a product he had seen on the web made by a competitor which aided in the finding of sperm on slides. Laux expressed an interest in purchasing a system which would automatically scan a slide to find the sperm.*fn1

28. Armogida responded that such a system could be formulated.

29. Armogida then contacted Andrew Hunt, a co-owner of B&B, about the idea for an automated sperm finder system. Armogida was excited about the prospect of developing such a system.

30. I find that Hunt directed Armogida to pursue the opportunity on behalf of B&B in order to provide a custom solution to their customer - the OHBCI.

31. By fax dated February 17, 2005, acting as an employee of B&B, Armogida forwarded to the OHBCI a description of the "Automated Scanning System." In that fax Armogida repeatedly identifies the automated scanning system as B&B's product. He stated that B&B had developed a series of complex processing to locate the sperm, and that the system would automatically make measurements, count particles, focus and save images. See Plaintiff's Ex. 28.

32. Domino, who was copied by Armogida on this fax, expressed his concern to Armogida regarding B&B's ability to deliver the quoted "Automated Scanning System." Armogida responded that such a system could be customized for the OHBCI but that he needed certain equipment to begin working on the System. Domino then secured the equipment for Armogida.

33. On March 31, 2005, the OHBCI submitted a purchase order for six "automated sperm identification systems." See Plaintiff's Exhibit 31. (emphasis added). The purchase order included a year of free software support.

34. The System sold to the OHBCI also included an Olympus BX-61 microscope, digital cameras, motorized arms, as well as software, including the MicroSuite imaging software, a macro recorder to automate frequent operations, a stage manager to define the path for the automated analysis, an automater to collect, process and analyze images, and an image calculator to perform logical and arithmetical operations on images.

35. The MicroSuite software is an image analysis package that is designed to support the development of customized imaging solutions.

36. The hardware that is used in the System is not unique. The only unique component of the System is the algorithm that was developed to automatically find the sperm.

37. The algorithm that detects and saves the location of the sperm cells calls on the functions of the MicroSuite software and the modules to the System to manipulate images, identify the sperm cells and record their locations.

38. It was the macros or algorithms that called upon the MicroSuite functions that made the System an automated sperm finding system. The same results could be achieved manually.

39. OHBCI understood that it was purchasing an automated sperm finder system from B&B. Indeed, the start-up screen for the System at the OHBCI currently identifies the System as a "Product of B&B Microscopes."

40. OHBCI never believed that it was purchasing an automated system from Armogida.

41. The sale would not have been made without the commitment by B&B to develop the System as an automated scanning system.

42. At the time the purchase was made, the System was not fully automated.

43. It was Armogida's job, as the imaging specialist servicing the OHBCI sale, to develop the algorithm which would make the System fully automated.

44. He was paid his salary, a commission and an additional bonus, as detailed below, for doing such work.

45. Armogida continued to work on the System, as was typical of many imaging sales. Both B&B and the OHBCI fully understood that further development of the System was required.

46. The system was installed in June of 2005, and Armogida continued to do additional work to refine the algorithm. Armogida kept Hunt abreast of his work.

47. I reject as lacking credibility Armogida's testimony that he worked on the System on his own time and with B&B's knowledge and understanding that he was doing so for his own purposes and benefit.

48. At each step of the process Armogida provided updates to B&B regarding development of the System, B&B provided financial support, and gave Armogida necessary equipment. Such a course of conduct is completely inconsistent with Armogida's representation he was developing the System on his own and with B&B's knowledge.

49. Indeed, eventually, B&B considered hiring another employee to help Armogida develop the System.

50. In July of 2005, with Armogida's knowledge and agreement, B&B hired Othman Abdul Karim to help work on the development of the System.

51. Abdul Karim's Confidentiality Agreement recites that: B&B owns and possesses technical and other proprietary information, including software source code relating to a "Sperm scanning and identification system"

See Plaintiff's Ex. 37 (emphasis added).

52. Armogida met with Andrew Hunt and Abdul Karim on two separate occasions to discuss the further development of the System. Armogida gave Hunt a copy of the algorithm.

53. While the testimony was not entirely clear, it does not appear that Abdul Karim contributed in any meaningful way to the development of the System. Neither is it clear how long he remained employed with B&B.

54. The name of the System eventually changed from "OASIS" (the Olympus Automated Sperm Identification System) to the "KPICS" System. "KPICS" referred to the colors of the stains used on the slides.

55. Armogida spent approximately 1600 hours between the Summer of 2005 and January of 2006 - when the KPICS System was finally certified to use on casework - working on development of the System.

56. That translates to roughly 200 eight hour days between the installation date at the OHBCI in June of 2005 and the certification of the KPICS System in January - or 33 eight hour days each month.

57. I reject, as incredible, Armogida's assertion that he worked these hours on "non B&B" time. Rather, I find that he was working on the KPICS System during B&B business hours, as a B&B employee, and for the specific purpose of delivering a fully automated sperm finder system as B&B promised the OHBCI and as directed by B&B.

58. B&B paid Armogida a $22,000 commission on the sales of the KPICS System to the OHBCI. He would not have received the commission had he not developed the algorithm which automated the System.

59. B&B also gave Armogida a $2,000 check for an "Innovation Award" in connection with the KPICS System.

60. Armogida cashed both checks.

61. Armogida also continued to receive his $38,000 base salary during this period of time.

Representations Regarding Ownership of the KPICS System

62. Throughout the development of the KPICS System, Armogida represented to B&B and to third parties that the KPICS System was owned by B&B.

63. He continuously provided B&B owners Tim and Andrew Hunt updates on his refinement of the System. These updates are consistent with the understanding that the development and refinement of the System were done for B&B, at B&B's direction and as a B&B employee.

64. As stated above, had Armogida truly been pursuing this opportunity on his own, there would have been no need to constantly interact with B&B regarding the development of the System.

65. Indeed, in a July 10, 2005 memo to Tim Hunt, Armogida suggested as a possibility for B&B's development and protection of the product - the securing of a collaborative grant with the OHBCI. See Plaintiff's Ex. 34.

66. He also recommended that B&B obtain a patent on the System and, short of obtaining a patent, otherwise protect the System by installing HASP keys, which would prevent reverse engineering. See Plaintiff's Exs. 46 and 47.

67. Again, Armogida's interactions with B&B in this regard are consistent with his understanding that B&B owned the System.

68. As late as March 14, 2006, just a week before his resignation, Armogida prepared a development proposal for Andrew and Tim Hunt which identified the KPICS Sperm Finder as a "Product of B&B." See Plaintiff's Ex. 99. It recites that, "[i]n 2005, new algorithms and methods were developed by imaging specialists at ...

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