American Can Company v. Ishwar Mansukhani, D/B/A Brand Associates, and Ruth Brand, D/B/A Brand Associates, and Brand M, Inc.

This is an appeal from the district court’s preliminary injunction enjoining defendants from taking actions which might constitute misappropriation of plaintiff’s trade secrets. The appeal presents several important procedural issues involving the use of ex parte temporary restraining orders in trade secret cases. The appeal also involves the scope and necessary precision of injunctive relief in trade secret cases. At the heart of the case is the problem that courts face in framing orders to prevent defendants from competing unfairly by using another’s trade secrets while still permitting defendants to compete fairly using public information and their own talents and experience.

*317 I

FACTS

Plaintiff-appellee American Can Company (“American Can”) develops, manufactures and sells commercial jet inks. Commercial jet inks are sprayed onto a printing surface without direct contact, and they are therefore useful for printing on delicate surfaces or other surfaces for which contact printing is unsuitable. For example, some of the commercial jet inks involved in this case are used to print date codes on aluminum beer cans or to print on plastic antifreeze jugs.

Defendants-appellants are Ishwar Mansukhani, his wife, Ruth Brand, and their businesses, Brand Associates and Brand M, Inc. Mansukhani is an experienced ink chemist, and his wife is also a physical chemist, although she had no experience with inks until she and her husband started their businesses in late 1980.

The relationship between plaintiff and defendants goes back to August 1976. At that time, American Can had a wholly owned subsidiary called M & T Chemicals, Inc. (“M & T”), which was engaged in the commercial jet ink business. M & T hired Mansukhani as a chemist; at that time, he was experienced in ink chemistry but had had no experience with jet inks. He signed an agreement with M & T promising not to use its trade secrets and to return all documents at the end of his employment. Mansukhani began to develop commercial jet inks, and he invented numerous inks. Over the next several years, Mansukhani continued to work at the same laboratory, but the identity of his employer changed several times. In August 1977, American Can sold M & T to Axco Industries, Inc., and in August 1979, Axco sold M & T to Whittaker Corporation. Then, in October 1980, Whittaker sold the assets and rights pertaining to the jet ink business back to American Can. (For the sake of simplicity, we shall generally refer to all of Mansukhani’s employers as “American Can” or “the plaintiff.”) When American Can took over the business, it asked Mansukhani to stay on the job, but he declined the offer. Instead, he and his wife started their own commercial jet ink business in December 1980. They began to sell commercial jet inks to several of American Can’s customers at substantially lower prices than American Can was offering.

American Can filed its original complaint in this action on October 23, 1981. Federal jurisdiction is based on diversity of citizenship. The complaint charged that Mansukhani was competing unfairly by misappropriating plaintiff’s trade secrets. After a trial in March 1982, the district court found that Mansukhani had violated the confidentiality agreement by taking with him copies of patent applications, ink formulas and other documents when he left his old job. The district court also found that Mansukhani had contacted several former customers of Whittaker and had sold jet inks to them for substantially lower prices. Mansukhani had had access to information needed to formulate inks suitable for those customers’ specific needs, and the inks Mansukhani had sold were precisely identical to the “400 Series” inks he had helped to develop for plaintiff. Applying Wisconsin trade secret law, 1 the court found that the formulas for the 400 Series inks were trade secrets and that defendants had misappropriated those secrets! The court entered a permanent injunction on June 18, 1982. American Can Co. v. Mansukhani, 216 U.S.P.Q. (BNA) 1094 (E.D.Wis.1982). The relevant, operative terms of the injunction permanently enjoined defendants from

selling the commercial jet inks developed while Mansukhani was employed by plaintiffs predecessors to the companies or individuals for whom those inks were specifically developed, or to any other companies or individuals.

216 U.S.P.Q. at 1100 (emphasis supplied). The defendants later asked the court to clarify that order. They asked whether the *318 order extended to inks other than the three which had been the subjects of the suit, and they asked whether the order covered inks which had different ingredients than those in the commercial version of the 400 Series inks described in the court’s June 18 memorandum. In response to the request for clarification, the district court said that the best clarification would be an explanation of its intentions. The court said the injunction was intended to cover “any of those commercial jet ink formulas developed for specific customers while Mansukhani was employed by plaintiff’s predecessors.” Order of July 13, 1982 (emphasis supplied). Defendants appealed the district court’s permanent injunction, and this court affirmed. American Can Co. v. Mansukhani, 728 F.2d 818 (7th Cir.1982).

On July 20, 1983, plaintiff American Can filed ex parte papers contending that defendants were violating the terms of the permanent injunction by selling their inks SK-2914 and SK-2916. American Can asked for an ex parte temporary restraining order and for a finding that defendants were in contempt of court by selling inks violating the injunction. The court apparently was not satisfied with the plaintiff’s initial showing. Five days later, on July 25, 1983, plaintiff presented to Judge Warren a second ex parte motion with a supplementary brief. In the motion, plaintiff sought an ex parte temporary restraining order which (1) would enjoin defendants from selling jet inks of any type to any of plaintiff’s customers and (2) would permit plaintiff’s employees (in the company of United States Marshals) to enter defendants' premises for the purpose of seizing ink samples and various documents.

On July 25, 1983, the district court held an ex parte hearing on plaintiff’s motion for the temporary restraining order. The next morning, July 26, the district court signed the ex parte order which enjoined defendants from selling

jet inks of any type, including defendants’ SK-2914 and SK-2916 jet inks, to any of plaintiff’s customers, previously serviced by Mansukhani when he was employed by plaintiff or its predecessors, including the customers Anheuser-Busch Company and Beverage Products, Inc.

Order of July 26,1983. That portion of the order was in effect for ten days. 2 The court also ordered United States Marshals to accompany plaintiff’s employees to the defendants’ plant and to seize ink samples and documents which plaintiff’s employees would identify. The temporary restraining order did not permit plaintiff to keep the seized samples and documents (as plaintiff had originally requested), but instead directed the marshals to keep the materials pending a further order from the court. In addition, the order set a hearing date of August 5 with respect to plaintiff’s request for a preliminary injunction. After the court issued the ex parte order, plaintiff’s employees and United States Marshals went to defendants’ plant, served defendants with the temporary restraining order and took the samples pursuant to the order. Also that same day, plaintiff notified all of its commercial jet ink customers that the defendants were subject to the temporary restraining order.

Later that day, the defendants filed a motion asking the district court to lift or modify the temporary restraining order. The next day, on July 27, the district court held a hearing on the motion, but defendants were not permitted to present testimony contradicting the affidavits upon which the ex parte order had been based. 3 The district court denied defendants’ motion to lift the restraining order, and on July 28 this court denied defendants’ emergency application for a stay pending appeal. On *319 August 4, 1983, the day before the hearing on the preliminary injunction, AnheuserBusch — a significant customer for both plaintiff and defendants — switched from defendants’ ink to plaintiff’s ink for use at its St. Louis canning facility. 4

On August 5,1983, the district court held a hearing on plaintiff’s request for a preliminary injunction. At the end of the hearing, the court concluded that a preliminary injunction should issue and instructed counsel for both parties to work out the proper wording. After counsel were unable or unwilling to agree on wording, the district court issued on August 16, 1983, a memorandum order which supplemented the prior permanent injunction. The order permanently enjoined defendants

from selling those commercial jet inks developed while defendant Mansukhani was employed by plaintiffs predecessor to the companies or individuals for whom those inks were specifically developed, or to any other companies or individuals. The set of inks so enjoined from sale by defendants includes but is not limited to those numbered R-453, P-473, and BK-493.

Order of August 16, 1983, at 6 (emphasis supplied). Defendants were also preliminarily enjoined from selling their inks numbered SK-2914 and SK-2916. This appeal followed. We have jurisdiction over this appeal under 28 U.S.C. § 1292(a)(1), for there can be little doubt that the preliminary injunction has had serious and perhaps irreparable consequences for defendants’ business, and the injunction can be effectively challenged only by immediate appeal. Defendants thus easily meet the test of Carson v. American Brands, Inc., 450 U.S. 79, 84, 101 S.Ct. 993, 996, 67 L.Ed.2d 59 (1981) (injunction might have irreparable consequences and only immediate appeal could be effective).

On appeal, defendants argue on various grounds that the temporary restraining order was improperly issued ex parte and that the preliminary injunction was invalid. For the following reasons, we conclude that the temporary restraining order should not have been issued ex parte, and that the preliminary injunction was erroneously granted because the plaintiff did not show sufficient likelihood of success on the merits and because the terms of the preliminary injunction are too vague. Defendants have raised numerous other arguments, but we find these to be without merit. 5

II

THE TEMPORARY RESTRAINING ORDER

Appellants challenge the validity of the district court’s temporary restraining order on a number of grounds, but all of their arguments revolve around the fact that the order was issued ex parte. Their conten *320 tions which merit attention on this appeal are that the temporary restraining order should not have been issued ex parte and that the order was defective on its face for failure to comply with Rule 65(b).

A. MOOTNESS

We must first consider whether any issues regarding the validity of the temporary restraining order are moot because that order has been superseded by the preliminary injunction. American Can argues that because the temporary restraining order is no longer in force, the order can have no further effect on the rights and liabilities of the parties. See Squillacote v. Local 248, Meat & Allied Food Workers, 534 F.2d 735, 746 (7th Cir.1976); Glen-Arden Commodities, Inc. v. Costantino, 493 F.2d 1027, 1030 (2d Cir.1974); White Eagle v. One Feather, 478 F.2d 1311, 1312 (8th Cir. 1973).

However, it is well established that the presence of an injunction bond may prevent the validity of an expired order from becoming moot, and the cases upon which American Can relies do not involve injunction bonds. Where the party obtaining an injunction executes a bond to protect the enjoined party from damages resulting from a wrongful injunction, the validity of the injunction is not moot where there is a substantial possibility that the enjoined party will seek to recover under the bond. E.g., Medtronic, Inc. v. Janss, 729 F.2d 1395, 1398-99 (11th Cir.1984); Stacey G. v. Pasadena Independent School District, 695 F.2d 949, 955 (5th Cir.1983). 6 The validity of an expired injunction can continue to affect the parties through an effort by the enjoined party to seek recovery on the bond for damages resulting from the injunction. 7 This view is also supported by University of Texas v. Camenisch, 451 U.S. 390, 393-94, 101 S.Ct. 1830, 1832-33, 68 L.Ed.2d 175 (1981), and Liner v. Jafco, Inc., 375 U.S. 301, 305-06, 84 S.Ct. 391, 394-95, 11 L.Ed.2d 347 (1964).

If it were highly unlikely that defendants would seek to recover on American Can’s injunction bonds, the existence of those bonds would not prevent the controversy from becoming moot. 8 In this case, however, we need not speculate on the mere possibility that the defendants might seek to recover on the bond. At oral argument, plaintiff informed us that defendants have moved under Fed.R.Civ.P. 65.1 to recover damages resulting from the district court’s temporary restraining order and preliminary injunction. The district court’s disposition of that motion would almost certainly address precisely the issues appellants ask us to consider on this appeal. The validity of the temporary restraining order thus remains in lively dispute between these parties.

There is some question, however, whether we should, as a prudential matter, address the validity of the temporary re *321 straining order on this appeal or should instead wait for further action by the district court and the parties. If the validity of the temporary restraining order turned on issues intertwined with the ultimate merits of the case, such as whether defendants’ inks SK-2914 and SK-2916 misused plaintiff’s trade secrets, then we would not attempt to decide such issues on this appeal. 9 However, the validity of the temporary restraining order here turns not on such final questions but instead on whether the ex parte temporary restraining order complied with due process and Rule 65. These issues are completely independent of the ultimate merits of the ease, and the record is complete with respect to these issues. Also, the parties have fully briefed these questions on this appeal; we therefore see no reason to delay consideration of these issues until some later stage in the proceedings. For these reasons, the validity of the temporary restraining order is not moot, and we may address it on this appeal.

B. THE EX PARTE PROCEEDINGS

This circuit has reviewed temporary restraining orders under the “abuse of discretion” standard applicable to preliminary injunctions. Squillacote v. Local 248, Meat & Allied Workers, 534 F.2d 735, 744-45 (7th Cir.1976). See also Majd-Pour v. Georgiana Community Hospital, Inc., 724 F.2d 901, 902 (11th Cir.1984) (denial of restraining order not an abuse of discretion); Community Communications Co. v. City of Boulder, 630 F.2d 704, 708-09 (10th Cir.1980) (entry of restraining order an abuse of discretion where based on error of law), rev’d on other grounds, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982). However, the district court may abuse its discretion if it issues a temporary restraining order based on an erroneous view of the law or without due regard for the procedural requirements for such orders. See, e.g., Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312, 315-16 (2d Cir.1982) (preliminary injunction); Community Communications, supra, 630 F.2d at 708-09 (temporary restraining order). In the present case, we conclude that the district court abused its discretion by ordering ex parte relief when there was no valid reason for proceeding ex parte and by disregarding the strict procedural requirements of Fed.R.Civ.P. 65(b) for the issuance of such ex parte orders.

The temporary restraining order was not invalid simply because it was issued ex parte. The Supreme Court has recognized that in some limited situations, a court may properly issue ex parte orders of brief duration and limited scope to preserve the status quo pending a hearing. See Granny Goose Foods, Inc. v. Teamsters, 415 U.S. 423, 438-39, 94 S.Ct. 1113, 1123-24, 39 L.Ed.2d 435 (1974); Carroll v. Princess Anne, 393 U.S. 175, 180, 89 S.Ct. 347, 351, 21 L.Ed.2d 325 (1968). In addition, Rule 65(b) expressly contemplates the issuance of ex parte temporary restraining orders. Nevertheless, the circumstances in which an ex parte order should be granted are extremely limited. The “stringent restrictions” imposed

on the availability of ex parte temporary restraining orders reflect the fact that our entire jurisprudence runs counter to the notion of court action taken before reasonable notice and an opportunity to be heard has been granted both sides of a dispute. Ex parte temporary restrain *322 ing orders are no doubt necessary in certain circumstances, cf. Carroll v. President and Comm’rs of Princess Anne, 393 U.S. 175, 180 [89 S.Ct. 347, 351, 21 L.Ed.2d 325] (1968), but under federal law they should be restricted to serving their underlying purpose of preserving the status quo and preventing irreparable harm just so long as is necessary to hold a hearing, and no longer.

Granny Goose Foods, supra, 415 U.S. at 438-39, 94 S.Ct. at 1124.

Ex parte temporary restraining orders are most familiar to courts where notice to the adversary party is impossible either because the identity of the adverse party is unknown or because a known party cannot be located in time for a hearing. This is not such a case. Here the identities of the defendants and their attorneys were known to plaintiff and to the district court well before the issuance of the temporary restraining order. Also, time was not a pressing factor, for the district court did not issue the order until six days after the plaintiff first made its ex parte application. During that period, neither the plaintiff nor the court made any effort to notify defendants of the proceedings.

Plaintiff agrees that notice could have been given to the defendants, but it argues that this case falls within a very narrow band of cases in which ex parte orders are proper because notice to the defendant would render fruitless the further prosecution of the action. See In the Matter of Vuitton et Fils S.A., 606 F.2d 1, 5 (2d Cir.1979) (“Vuitton”). In Vuitton -the Second Circuit issued a writ of mandamus ordering the district court to issue an ex parte temporary restraining order to assist the petitioner in its trademark infringement case. The district court had denied the application for such an ex parte order because the adverse parties were known to the petitioner. However, the Second Circuit found that the petitioner had demonstrated that, if notice were given to the alleged infringer, it was highly probable that the infringer would dispose of the infringing goods in the few hours before the hearing. The petitioner had supported that contention by describing its experience in other similar cases in which the actions became futile after defendants disposed of their inventories before the courts could issue orders and hold hearings. The Second Circuit held that the petitioner’s showing was sufficient to justify issuance of an order “narrow in scope and brief in its duration.” 606 F.2d at 5.

American Can argues that it “entertained the same fears as Vuitton.” Appellee’s Brief at 40. American Can asserts that notice of its ex parte request “would have immediately caused appellants to alter the inks in their factory and secrete the pertinent documents. In addition, notice would have permitted defendants to dispose of inks which clearly fall within the purview of the Court’s injunction. Notice, in effect, would have frustrated the very purpose of the action, namely, to ascertain the existence of infringing goods.” Id. Because an ex parte order is proper only when there is no reasonable alternative, we must examine each of the operative terms of the restraining order to determine whether this asserted risk justified the ex parte actions.

The first operative portion of the ex parte order enjoined defendants for ten days “from the continued sale of jet inks of any type ... to any of plaintiff’s customers, previously serviced by Mansukhani when he was employed by plaintiff or its predecessors____” 10 There is no plausible reason for issuing this portion of the order ex parte. Even if we were to conclude that American Can had shown sufficient reason under Vuitton to permit the ex parte order for the preservation of ink samples and documents, that reason has utterly no application to the portion of the order which, for practical purposes, closed defendants’ business for ten days. As the Supreme *323 Court explained in Granny Goose Foods, supra, ex parte temporary restraining orders “should be restricted to serving their underlying purpose of preserving the status quo and preventing irreparable harm just so long as is necessary to hold a hearing, and no longer.” 415 U.S. at 439, 94 S.Ct. at 1124 (emphasis supplied). This order was not thus restricted, and it should not have been issued. 11

The second operative portion of the ex parte order authorized plaintiff’s employees, with the assistance of the United States Marshals, to enter defendants’ premises, take samples of jet inks and obtain for copying “all documents relating to defendants’ sales of jet inks including sales to plaintiff’s customers, defendants’ production documents used to prepare the inks and Mansukhani’s correspondence with customers of plaintiff.” This is the portion of the order to which Vuitton might be applicable. We agree with the Second Circuit that ex parte orders of very limited scope and brief duration may be justified in order to preserve evidence where the applicant shows that notice would result in destruction of evidence. The problem we face here is whether American Can made a sufficient showing of the need for proceeding ex parte.

Where there are no practical obstacles to giving notice to the advérse party, an ex parte order is justified only if there is no less drastic means for protecting the plaintiff’s interests. In this case, it would have been possible for the court to issue an order ex parte telling defendants to be prepared to show cause in an immediate hearing why an order permitting such sampling and disclosure of documents should not have been entered. Such an order could have instructed defendants not to disturb their inventory, or to secrete documents pending the hearing, and an order of that scope would not have raised the concerns we have here about the ex parte proceedings. To show that a less drastic order would not have been sufficient to protect its interests, plaintiff must show, in effect, that the defendants would have disregarded a clear and direct order from the court to preserve the inks and documents for a few hours, until a hearing could have been held.

In the papers filed in support of the motion for a temporary restraining order, American Can supported its assertion that the defendants would hide or destroy documents and falsify ink samples by saying that the defendants had failed to produce prior to or at trial any formula, ink sample or document in response to plaintiff’s discovery requests and subpoenas. Plaintiff also pointed out that Mansukhani had had a number of plaintiff’s confidential documents in his possession at the time of the court’s permanent injunction. Mansukhani turned those documents over to plaintiff in compliance with the court’s order.

We have examined the record to search for support for plaintiff’s contentions, and we conclude that the record does not support any presumption that the defendants would have deliberately disregarded a direct court order to preserve inks and documents for a few hours. 12 The record leading up to the court’s permanent injunction *324 reveals numerous- discovery disputes involving discovery requests by both side, but there is nothing unusual about such disputes in a trade secret case where both sides seek highly confidential information. See, e.g., Natta v. Zletz, 405 F.2d 99, 101-02 (7th Cir.1968). Both sides here have sought technical data, financial information and customer lists from one another, and both sides have resisted those requests. The district court has had to resolve several of the disputes, but nothing suggests that defendants did not comply with the court’s orders. It is one thing to resist in good faith an opposing party’s discovery request, as the record shows here, and it is quite another to disobey the court’s order resolving such a dispute. There is simply no basis for inferring that a party who resists in good faith the opponent’s discovery requests will also deliberately disobey the court’s discovery orders. 13

American Can also claims that defendants were shown to have been willing to disregard court orders because the inks they were selling were in violation of the terms of the court’s permanent injunction. However, an ex parte allegation of contempt, upon which the ex parte order was based, is far different from a court’s conclusion that its order has been violated. In addition, as we shall discuss in Part III, the scope of the permanent injunction was not entirely clear, and we do not think the plaintiff or the court could infer from the defendants’ actions a willingness to disobey clear, specific and direct court orders.

C. FACIAL VALIDITY

The temporary restraining order was also invalid because the order violated the specific terms of Rule 65(b). Among the rule’s strict requirements for ex parte temporary restraining orders, each such order “shall define the injury and state why it is irreparable and why the order was granted without notice____” The temporary restraining order of July 26, 1983, failed to satisfy these requirements. The order did not (1) define or even mention the injury to be prevented, (2) state why that undefined injury would have been irreparable or (3) state why the order was granted without notice.

The specific requirements of Rule 65(b) are not mere technical legal niceties. They are “strongly worded, mandatory provisions which should be respected. They are not meaningless words.” Shannon v. Retail Clerks, International Protective Association, 128 F.2d 553, 555 (7th Cir.1942). A temporary injunction can be an extremely powerful weapon, and when such an order is issued ex parte, the dangers of abuse are great. See Walker v. City of Birmingham, 388 U.S. 307, 330, 87 S.Ct. 1824, 1837, 18 L.Ed.2d 1210 (1967) (Warren, C.J., dissenting) (“This injunction was such potent magic that it transformed the command of an unconstitutional statute into an impregnable barrier, challengeable only in what likely would have been protracted legal proceedings and entirely superior in the meantime even to the United States Constitution.”). See also Carroll v. Princess Anne, supra. Because “our entire jurisprudence runs counter to the notion of court action taken before reasonable notice and an opportunity to be heard has been granted both sides of a dispute,” Granny Goose Foods, supra, 415 U.S. at 439, 94 S.Ct. at 1124, the procedural hurdles of *325 Rule 65 are intended to force both the movant and the court to act with great care in seeking and issuing an ex parte restraining order. This court has said that Rule 65(d) with its companion requirements “is no mere extract from a manual of procedural practice. It is a page from the book of liberty.” H.K. Porter Co. v. National Friction Products Corp., 568 F.2d 24, 27 (7th Cir.1977). The same is true for the Rule 65(b) requirements for ex parte temporary restraining orders where the dangers of abuse are especially great. 14

The requirements of Rule 65(b) need not be burdensome when there is truly a need to proceed ex parte. The requirements at issue here demand only that the judge issuing the order articulate, and thus carefully consider, both the need for the restraining order and the need for proceeding ex parte. However, because this temporary restraining order did not comply with these facial requirements, it was wrongfully issued. 15

III

THE PRELIMINARY INJUNCTION

The other issues in this appeal concern the scope of the plaintiffs trade secrets and the extent of the injunctive relief to which the plaintiff is entitled. These problems affect the plaintiffs showing of its reasonable likelihood of success on the merits. The same problems also affect whether the preliminary injunction complied with the Rule 65(d) requirements that injunctions “shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained.”

This court has identified four requirements for the issuance of a preliminary injunction. The plaintiff must show (1) the threat of irreparable harm for which there is no adequate remedy at law; (2) that the threatened injury to plaintiff outweighs the harm an injunction might inflict on the defendant; (3) that the plaintiff has a reasonable likelihood of success on the merits; and (4) that the issuance of a preliminary injunction would not disserve the public interest. In re Uranium Antitrust Litigation, 617 F.2d 1248, 1261 (7th Cir. 1980). In reviewing a district court’s decision to grant a preliminary injunction, we will reverse only if the district court has abused its discretion. Machlett Laborato *326 ries, Inc. v. Techny Industries, Inc., 665 F.2d 795, 797 (7th Cir.1981).

, However, a district court abuses its discretion in issuing a preliminary injunction when it applies an incorrect legal standard in determining the likelihood of success on the merits. Charles v. Carey, 627 F.2d 772, 776 (7th Cir.1980). See Wilson v. Watt, 703 F.2d 395, 398 (9th Cir.1983); LeBeau v. Spirito, 703 F.2d 639, 642 (1st Cir.1983). Similarly, a failure to observe the substantive or formal requirements for the court’s order may constitute an abuse of discretion. Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312, 315 (2d Cir.1982). Where the district court’s error is the very predicate of its order, the order must be reversed as an improvident exercise of the court’s discretion. Id. at 316; White House Vigil for the ERA Committee v. Watt, 717 F.2d 568, 571 (D.C.Cir.1983).

In the present case, the district court abused its discretion by applying an incorrect legal standard to determine the plaintiff’s likelihood of success on the merits. The district court concluded that plaintiff had met its burden by showing the functional or practical similarity between its protected inks and defendants new inks. However the public information about plaintiff’s ink formulas (particularly as revealed in patent documents) and Mansukhani’s own knowledge and experience had placed very narrow limits on plaintiff s trade secrets in the original trial. The district court’s functional or practical similarity standard did not give adequate consideration to those original, narrow limits on plaintiff’s trade secrets. The district court therefore erred by issuing the new preliminary injunction without finding that defendants’ new inks were in fact substantially derived from plaintiff’s trade secrets and not from the public information and Mansukhani’s own skill, knowledge and experience. In addition, and as a result of the incorrect legal standard, the preliminary injunction does not comply with Fed. R.Civ.P. 65(d) because the terms are too vague to give the defendants fair notice of the prohibited conduct.

Throughout the proceedings in the district court) one of the thorniest issues concerned the scope of the injunctive relief to be accorded to plaintiff. It was clear that defendants could be and should be enjoined from continued misappropriation of plaintiff’s trade secrets. But at the same time, it was equally clear that Mansukhani could not be enjoined from using public information and his general know-how and experience to compete fairly in the commercial jet ink business. The district court’s permanent injunction in 1982 enjoined the defendants “from selling the commercial jet inks developed while Mansukhani was employed by plaintiff's predecessor to the companies or individuals for whom those inks were specifically developed, or to any other companies or individuals.” The 1983 preliminary injunction used virtually identical language. Should that language prohibit defendants from making any inks (such as SK-2914) compositionally similar to those developed by plaintiff, as the plaintiff argues? Or should the injunction prohibit only the copying of the precise ink formu]as developed by plaintiff, as the defendants argue?

To approach the problem> we must trace ¡n some detail the district court’s treatment 0£ y^e scope of plaintiff’s trade secrets and the appropriate relief, beginning with the 1982 trial leading to the permanent injunction. At that trial, Mansukhani’s principal defense was that plaintiff’s formulas for ¡ts 400 Series inks were not trade secrets, He introduced patent documents which, he argued, disclosed the relevant information, thus eliminating the secrecy needed to sustain a trade secret claim. (Several of the patent applications were by Mansukhani himself for inks developed while he was employed by plaintiff’s predecessors.) His defense apparently had a sound legal basis, for information disclosed in a patent application - is not secret and is not subject to trade