Advanced Technology Services, Inc. v. KM Docs, LLC

767 S.E.2d 821, 330 Ga. App. 188, 2014 Ga. App. LEXIS 819
Court of Appeals of Georgia·Decided November 21, 2014·No. A14A1424·Published·Cited by 4 cases

Opinion

Branch, Judge.

Advanced Technology Services, Inc. (“ATS”), filed suit against two former employees and the company the two men formed, asserting several claims arising out of allegations that the defendants used ATS trade secrets and confidential information improperly in their new business venture. The defendants removed the case to federal district court, which granted summary judgment in their favor on ATS’s claim of copyright infringement and remanded the remaining claims to the Superior Court of Fulton County. The superior court granted summary judgment to the defendants on the remaining claims, and ATS appeals. For the reasons that follow, we affirm.

On appeal from the grant of summary judgment, appellate courts “conduct [ ] a de novo review of the evidence to determine whether there is a genuine issue of material fact and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.” Shekhawat v. Jones, 293 Ga. 468, 469 (746 SE2d 89) (2013); State of Ga. Dept. of Corrections v. Developers Sur. and Indem. Co., 324 Ga.App. 371, 372 (750 SE2d 697) (2013).

[189]*189Construed in favor of ATS, the record1 shows that ATS, which now has five employees, develops and sells one product, a document management program called OptiDoc, for which it has approximately forty-four customers. Miles Waldron began employment with ATS in February 2001 as the lead software developer, and in July 2003, he entered into a “Trade Secrets and Confidential Information Agreement” (the “Trade Secrets Agreement”).2 In the Trade Secrets Agreement, Waldron agreed that all software developed by ATS employees, with certain limitations not relevant here, is an ATS trade secret, constitutes confidential information, and is owned by ATS. He agreed not to remove any such information from ATS without permission, not to utilize it to create software for his own or a third party’s use without permission and a license, and not to reveal it to a third party without permission. Waldron also agreed to return all ATS software and related information upon termination and to submit his computers and other devices to ATS for inspection in this regard.

While at ATS, Waldron personally rewrote most of the modules of ATS’s OptiDoc system to create a new version. To do so, he kept the source code for OptiDoc on his work computer, but he sometimes worked on the source code at home using his personal computers and a computer he built for the purpose of performing ATS work at home. An ATS employee averred that Waldron built the computer after November 2009, and that he would bring it to work, “hook it up and use it during the day, and take it home each day at the end of the day.”

In March 2009, ATS hired Harvey Heath to work in sales. Later in 2009, Waldron, at Heath’s request, enhanced the OptiDoc software to allow a person to continue working without having to log in repeatedly; the parties referred to this enhancement as a “secret” or “pop-up viewer” module. ATS alleges that Waldron did not tender this software to ATS when he resigned. The allegation is based on one sentence in an e-mail from Waldron to ATS’s president in which Waldron said, “There is already a top secret built in way to make our [190]*190viewer pop up without forcing a loginQ] I did this for [Heath] some time ago.”

In June 2009, while both men were employed by ATS, Heath reserved a web domain in the name of “www.kmdocs.com.” In September, the two men established an entity named KM Docs, LLC, in order to take advantage of a business opportunity that Heath had learned about and conveyed to Waldron. During that month, without informing ATS or seeking permission, Waldron wrote a custom software “bridge” application on behalf of KM Docs for a document management system company; Waldron admitted that the customer might have been a competitor of ATS. Heath and Waldron split the $5,000 paid by the customer for the work. Waldron used his personal computers to do the work, but not the custom computer that he used for ATS work. Waldron denied using any ATS software to develop the bridge application.

There is also evidence that beginning in September 2009, Wal-dron repeatedly told an ATS co-worker, “I have something in the works that I am working on. I can’t say anything else, but you will be taken care of.” And after that time, Waldron was uncharacteristically unproductive in his work for ATS, and he increasingly asked to work from home.

Waldron resigned his employment at ATS on June 1, 2010. He testified that he deleted the ATS source code from his personal computer shortly thereafter, although the exact date is uncertain. After resigning, Waldron continued to perform some additional work for ATS over the course of the following few weeks. In that regard, Waldron requested that he again be allowed access to the ATS source code, which was granted for that purpose. Heath, who never signed any written agreements related to his employment at ATS, resigned on July 7, 2010.

Within a day or two after Heath’s resignation, Waldron and Heath launched a website for KM Docs, and Waldron began programming “docUnity,” a document management system, and docDNA, a related module, for KM Docs.3 Waldron admits that the docUnity software provides some similar functions as ATS’s OptiDoc software. Waldron avers that he did not start programming docUnity until after July 7, 2010, when Heath left ATS. But a docUnity website states that docUnity was formed in 2009 and that since its inception, Waldron “has been focusing on the development of [the] docUnity [191]*191[document management system] from a strategic and technical design perspective.” KM Docs/docUnity made its first sale of the docUnity system in June 2012.

Meanwhile, in August 2010, Maureen Mitchell, the president and owner of ATS, who had become aware of Waldron and Heath’s early efforts to create a new system, wrote to the defendants and alleged that they had breached their duties to ATS, their contracts with ATS, and Georgia trade secret law. Mitchell asserted, “It is not possible that you or Miles Waldron could have written competing software that does not infringe on our rights in less than thirty days. It is more likely that your software product(s) are derived from our code, raising infringement issues and criminal theft issues.”

About 13 months later, ATS filed a verified complaint asserting claims of misappropriation of trade secrets and confidential information, conversion of the OptiDoc source code, tortious interference by Heath with Waldron’s contract, tortious interference with ATS’s customer contracts, breach of Waldron’s employment contracts, fraud, RICO, breach of fiduciary duty, theft of corporate opportunity, conspiracy, and copyright infringement. ATS also sought an injunction,4 punitive damages, and attorney fees.

Shortly thereafter, the defendants removed the case to federal court based on that court’s original jurisdiction of the copyright claim. The federal district court granted the defendants’ motion for summary judgment on ATS’s claim that the defendants infringed on ATS’s copyright for OptiDoc. In so doing, the federal court found that ATS (1) failed to present direct evidence that the defendants copied the OptiDoc source code and (2) failed to demonstrate indirect evidence of copying because it did not show that OptiDoc and docUnity were substantially similar.

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Advanced Technology Services, Inc. v. KM Docs, LLC, 767 S.E.2d 821, 330 Ga. App. 188, 2014 Ga. App. LEXIS 819 (Ga. Ct. App. 2014).

767 S.E.2d 821 (Advanced Technology Services, Inc. v. KM Docs, LLC) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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