Deltek, Inc. v. Iuvo Systems, Inc. et al
MEMORANDUM OPINION re: 3 Plaintiff's Motion for Preliminary Injunction. Signed by District Judge Anthony J Trenga on 04/20/2009. (kbro)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
DELTEK, INC., Plaintiff,
v. IUVO SYSTEMS, INC., et al.,
) ) No. l:09cv330(AJT/JFA)
This case arises out of a dispute between Plaintiff Deltek, Inc. ("Deltek") and three of its former employees who allegedly formed a new company, Iuvo Systems, Inc. ("Iuvo"), to
compete with Deltek. On March 25,2009, Deltek brought a civil action against Iuvo, Deltek's
three former employees, and another unnamed individual (collectively the "Defendants") for federal trademark infringement, federal unfair competition, common law trademark infringement
and unfair competition, cybersquatting, breach of contract, tortious interference with contract,
tortious interference with business relations and business expectancy, breach of fiduciary duty,
fraud, statutory civil conspiracy, common law civil conspiracy, defamation, conversion, violation
of the Virginia Uniform Trade Secrets Act, and unjust enrichment.
On March 27,2009, Deltek filed the instant motion for a preliminary injunction pursuant to Fed. R. Civ. P. 65. The Court heard oral argument on Deltek's motion on April 8,2009. At
that hearing, Deltek presented the testimony of two witnesses: Brian Murphy, Vice President for North American Sales, and Kim Latkiewicz, Vice President for Global Sales. Following the
hearing on April 8, 2009, the Court granted certain of Plaintiff s requests for preliminary relief
and took the balance of Plaintiff s requests under advisement.' Upon consideration of the legal
memoranda, exhibits, affidavits, sworn testimony and arguments of counsel, and for the reasons
stated below, the Court denies the balance of Plaintiff s motion and issues this Memorandum
Opinion in further support of its April 8, 2009 Order granting certain of Plaintiff s requests for a preliminary injunction and in support of its decision to deny the balance of Plaintiff s motion.
I. BACKGROUND The following facts, as alleged in Plaintiffs Verified Complaint, Motion for Preliminary
Injunction and sworn affidavits and testimony in support thereof, do not appear to be contested at
this stage of the proceedings based on the Defendants' filings, sworn declarations and arguments of counsel: 1. Plaintiff Deltek is a Delaware corporation headquartered in Herndon, Virginia. Deltek's
business is based on its proprietary project accounting and financial software, which allows
organizations to track financial information for discrete projects and obtain real-time performance measurements. Compl. at ^ 21. Deltek's revenue is generated primarily from the
licensing of its software, the provision of maintenance and support for customers using Deltek
software and from the provision of consulting services related to the implementation and use of
Deltek software. Id. at J 22.
Deltek is the owner of the domain name "deltek.com" that was registered with Network
Solutions on October 10,1994. Id. at U 83. Deltek has used the Deltek name in commerce since
1983 and has been marketing its products and/or services online under the Deltek name since
the "www.iuvosystems.com" website, the use of Deltek's trademarks or trade names as metatags and Defendants' use of the web domain names "www.installdeltek.com" and "www.installdeltek.net." See Preliminary Injunction Order, Apr. 8, 2009 (Doc. No. 15).
1 The Court granted those requests that pertained to Defendants' use of Deltek's trademarks on
Deltek owns numerous federally registered trademarks including: DELTEK (stylized)
Registration No. 1674008 (registered February 4, 1992, renewed 2002); OPEN PLAN,
Registration No. 1585338 (registered March 6,2000); COSTPOINT, Registration No. 1978814
(registered March 12,2002); COBRA and DESIGN, Registration No. 1727269 (registered
October 22,2002); WINSIGHT, Registration No 2746672 (registered August 5,2003); and GCS
PREMIER, Registration No. 2547994 (registered June 4, 1996 and cancelled December 2008). Id. at f 84. Deltek also has pending an application for the following trademark: D DELTEK and
Design, Serial No. 78/47729. Id. at H 85. 4. Defendant Edward Muldrow ("Muldrow") began his employment with Deltek on June 9,
1997. Id. at H 28. Muldrow announced his resignation from Deltek on August 18,2008,
effective that same day. Id. at U 58. At the time he left Deltek, Muldrow held the position of Managing Director. Id. at 129. His responsibilities included supporting ongoing sales efforts and managing the consulting services provided by Deltek to an assigned client base. Id. He was
also responsible for maintaining regular contact with senior-level management to ensure that the
clients received optimal value from Deltek's products and services. Id. 5. Defendant Tom Truong ("Truong") began his employment with Deltek on November 16,
1998. Id. at U 30. Truong announced his resignation from Deltek on March 5,2008, and his
final day of employment was March 31, 2008. Id. at U 55. At the time he left Deltek, Truong held the title of Consulting Manager. Id. at ^ 31. His responsibilities included mentoring and supporting a team of consultants and providing technical services on customer projects. Id. As a result of his employment, Truong had significant levels of interaction with Deltek customers and gained knowledge of Deltek's software applications. Id.
As a result of their positions at Deltek, Muldrow and Truong had access to information
that Deltek considers to be confidential, proprietary and trade secret information belonging to Deltek. Id. at ^ 32. That information included techniques and strategies for implementing Deltek software and internal company tool sets and documentation regarding Deltek products,
such as manuals, that are not publicly available. Id. Muldrow and Truong also had access to
Deltek business proposals, pricing strategies, business and marketing plans and strategy, contract
terms, and financial information regarding the company's operations. Id. at f33.
7. Defendant Lynn Varan ("Varan") began her employment with Deltek on January 2, 2007.
Id. at % 42. Varan was an employee of Deltek until February 8,2008. Mem. in Opp. to Mot., Ex.
3, Declaration of Lynn Varan at *j 2 [hereinafter Varan Decl.]. At the time she left Deltek, Varan
held the position of Services Coordinator. Compl. at \ 42. As Services Coordinator, Varan was responsible for scheduling technical consultants on customer engagements, collecting all
necessary requirements for consulting engagements and providing information to consultants,
and acting as a main point of contact for consulting activities for internal and external clients. Id.
As a result of her employment, she had access to reports on financial results, and assisted with
processing orders and providing quotes for services. Id. She also had access to information that
Deltek considers to be confidential, proprietary and trade secret information belonging to Deltek, including the identities of Deltek customers, the names of decision-makers at customers and the nature of the consulting services provided by Deltek. Id. at \ 43. 8. As a condition of employment with Deltek, Muldrow, Truong, and Varan entered into
certain noncompetition agreements with Deltek, copies of which are attached to Plaintiffs
Verified Complaint. Id. at ^ 35, 36,44.2 These noncompetition agreements contained
nondisclosure provisions that prohibited the use or disclosure of "Confidential Information" or "Confidential or Proprietary Information," both during and after employment. Id. at ffi| 37,45.
As defined in those agreements, "Confidential Information" or "Confidential and Proprietary
Information" included information that is essential to Deltek's success or that has or is
reasonably likely to have competitive value to Deltek or a competitor and that is created,
acquired or learned by the employee during his or her employment but not generally available to
the public. Id. atffi|38,46.
The noncompetition agreements also contained noncompete provisions. Id. at fflj 39,48.
Muldrow and Truong agreed that for a period of two years after the termination of their
employment for any reason, they would "not directly or indirectly be engaged as an employee or consultant of any firm or corporation engaged in a business which is in competition with [Deltek]" or "provide consulting services to any Deltek customer other than as an employee of
[Deltek]." Id. at ^|39. Varan agreed that for a period of twelve months after the termination of
her employment, she would not engage in any "Competitive Activity," which was defined to include directly or indirectly owning, managing, operating, being employed by, or participating
in any Competitor or acting as a Competitor in an individual capacity. Id. at fflj 48, 49.
Varan's noncompetition agreement also provided that for a period of twelve months after
the termination of her employment, she would not "directly or indirectly solicit for employment,
including recommending to any subsequent employer the solicitation for employment of, any
employee of [Deltek]." Id. at 1)47.
on May 27,2997 and November 16, 1998, respectively. Id. at ffi| 35-36. Varan entered into an Employee Agreement with Deltek on January 2,2007. Id. at \ 44. These agreements are collectively referred to as noncompetition agreements throughout this Memorandum Opinion.
2 Muldrow and Truong entered into Confidential Information and Noncompetition Agreements
On February 1,2008, Truong created and registered the domain name
"iuvosystems.com." Id. at ^ 56; Mem. in Opp. to Mot., Ex. 1, Declaration of Tom Truong at ^
16 [hereinafter Truong Decl.]. 12. On August 20,2008, Muldrow joined Iuvo as its President. Compl. at ^ 59; Mem. in
Opp. to Mot., Ex. 2, Declaration of Edward Muldrow at ^ 12 [hereinafter Muldrow Decl.].
13. Varan began working as an independent contractor with Iuvo on or about April 21,2008.
Varan Decl. at \ 11. Deltek believes that Varan continues to possess information Deltek considers to be confidential, proprietary and trade secret information belonging to Deltek and is
using such information for her own benefit and for the benefit of Iuvo, Muldrow and Truong.
Compl. at U 80.
The Iuvo website, "http://www.iuvosystems.com," advertises various services using the
Deltek name including "Deltek Upgrade," "We Provide Deltek Solutions," and "Technology Consultants with Deltek Experience." Id. at *\ 64.
15. Iuvo advertises in commerce including on the iuvosystems.com website and on another
website, "http://www.installdeltek.com". Id. at ^ 89.
Iuvo uses Deltek trademarks as metatags on the iuvosystems.com website. Id. at U 90.
Since associating with Iuvo, Muldrow and Truong have approached or been contacted by
certain Deltek customers to discuss Iuvo replacing Deltek or a Deltek partner in providing consulting and application management services and to provide services related to Deltek
software. Id. at H 61; Mem. in Opp. to Mot., Ex. 4, Declaration of Iuvo Systems, Inc. at ffi| 15,
16, 18 [hereinafter Iuvo Decl.].
Certain current or former Deltek customers that have had contact with Iuvo have
expressed concerns or questions to Deltek regarding the services offered by Iuvo, the information
known by Iuvo regarding the customer's use of Deltek products, or the relationship between
Deltek and Iuvo. Compl. at U 73. 19. Deltek is aware that Iuvo has replaced Deltek or a Deltek partner as a service provider for
Deltek related consulting or implementation services for at least two Deltek customers, Alliant Techsystems, Inc. ("ATK") and TerraHealth. Id. at ffil 77-78; Iuvo Decl. at K 16. 20. Deltek suspects that Muldrow and Iuvo learned that Deltek had sold, or was in
discussions regarding the sale of, its Costpoint software to certain customers, the price offered by
Deltek for its consulting services and the name of customers' contact person from a current Deltek employee. Compl. at ^ 71, 76. However, Defendants categorically deny such allegations. See Truong Decl. at \ 24; Muldrow Decl. at ^14; Varan Decl. at f 15; Iuvo Decl. at
Deltek alleges upon information and belief that Iuvo offered to provide consulting
services for use of the Deltek software at a lower cost than such services were offered by Deltek, based on improper use of information Deltek considers to be confidential, proprietary or trade secret information belonging to Deltek and that Defendants are relying on such information to
provide consulting services. Compl. at ffl| 74, 78. Defendants deny that they have relied on or used Deltek's confidential or proprietary information to offer or provide Iuvo's services to potential clients. Truong Decl. at K 25; Muldrow Decl. at J 15; Iuvo Decl. at 1 13.
Deltek also believes that Iuvo, Muldrow, Truong and Varan have solicited at least two
individuals to leave their employment with Deltek and join Iuvo. Compl. at 181.
Upon learning that Muldrow and Truong were competing with Deltek, Deltek notified
them in writing that their conduct was improper and demanded that they cease immediately. In response, despite discussions, the parties could not reach any agreement to resolve their disputes.
Id. at 167.
II. LEGAL STANDARD
The issuance or denial of a preliminary injunction "is committed to the sound discretion of the trial court." Quince Orchard Valley Citizens Ass 'n, Inc v. Model, 872 F.2d 75, 78 (4th Cir.
1989). In determining whether an injunction is appropriate, a district court must apply the "balance-of-hardship" test. See Blackwelder Furniture Co. v. SeiligMfg. Co., Inc., 550 F.2d
189,194 (4th Cir. 1977); Railway Labor Executives' Ass 'n v. Wheeling Acquisition Corp., 736 F.
Supp. 1397, 1401-02 (E.D. Va. 1990) (applying Blackwelder test to determine issuance of
temporary restraining order).
Under the test, a court should examine the following four factors: (1) the likelihood of irreparable harm to the plaintiff without the injunction; (2) the likelihood of harm to the
defendant with an injunction; (3) the plaintiffs likelihood of success on the merits; and (4) the public interest See Hughes NetworkSys., Inc. v. InterDigital Communications Corp., 17 F.3d
691, 693 (4th Cir. 1994); Blackwelder Furniture, 550 F.2d at 193-96. No single factor can
defeat a motion for a preliminary injunction. Rather, "[t]he decision to grant or deny a preliminary injunction depends upon a 'flexible interplay' among all the factors considered."
Blackwelder Furniture, 550 F.2d at 196.
When applying the four-factor test, the Court must first balance "the likelihood of
irreparable harm to the plaintiff if denied and of harm to the defendant if granted." See Manning
v. Hunt, 119 F.3d 254,263 (4th Cir. 1997). The plaintiff must demonstrate that the harm is
'"neither remote nor speculative, but actual and imminent.'" Id. (quoting Rum Creek Coal Sales,
Inc. v. Caperton, 926 F.2d 353, 359 (4th Cir. 1991)). Thus, once the court finds that the harm to the plaintiff is actual and imminent, it should proceed to balance this harm against the harm to
the defendant if the preliminary injunction issues. See id.
The district court then determines the likelihood of success on the merits on a sliding scale as follows:
If, after balancing [the likelihood of harms], the balance "tips decidedly" in favor of the plaintiff, a preliminary injunction will be granted "if the plaintiff has raised questions going to the merits so serious, substantial, difficult and doubtful, as to make them fair ground for litigation and thus for more deliberate investigation." As the balance tips away from the plaintiff, a stronger showing on the merits is
See id. (quoting Direx Israel, Ltd. v. Breakthrough Med. Corp., 952 F.2d 802, 812 (4th Cir.
Finally, after balancing the hardships, the Court must consider the public interest. See id.
Deltek seeks an order from this Court (1) restraining Defendants from using the
"www.installdeltek.com" and "www.installdeltek.net" websites; (2) requiring Defendants to
change the "www.iuvosystems.com" website to (i) remove the phrases "Deltek Upgrade," "We
Provide Deltek Solutions," and "Technology Consultants With Deltek Experience" and (ii) remove the puzzle pieces associated with the word "Deltek"; (3) requiring Defendants to cease using any Deltek trademarks as metatags; (4) requiring Defendants to refrain from using any
other websites, metatags or phrases that would similarly infringe on Deltek's trademarks; (5) restraining Defendants from (i) promoting, advertising, publicizing, offering for sale or selling
any products or services similar or related to those offered by Deltek under any of the Deltek trademarks or any other mark, name, symbol, or logo that incorporates or is confusingly similar
to any of the Deltek trademarks, (ii) using false designations of origin or engaging in acts that
constitute unfair methods of competition with Deltek and from otherwise interfering with, or
injuring the Deltek trademarks or goodwill associated with them, and (iii) representing that Iuvo
is in any way sponsored by, affiliated with, or endorsed by Deltek; (6) restraining Defendants
from using or disclosing Deltek's trade secrets or other confidential or proprietary information;
and (7) restraining Deltek's former employees from (i) engaging in the business of consulting on
Deltek proprietary software in direct competition with Deltek; (ii) directly or indirectly soliciting
any customers of Deltek for the purpose of consulting on Deltek proprietary software in direct competition with Deltek; (iii) using or disclosing confidential or proprietary information of
Deltek; and (iv) soliciting Deltek employees for a period of at least two years, with respect to Defendants Edward Muldrow and Tom Truong, or, alternatively, twelve months, with respect to
Defendant Lynn Varan. PL's Mot. for Preliminary Injunction at 1-3.
The Court views these requests as falling into three general categories: (1) those requests
that relate to Defendants' use of Deltek's trademarks; (2) those requests that relate to
Defendants' use or disclosure of Deltek's trade secrets or other confidential or proprietary
information; and (3) those requests that relate to Defendants' competition with Deltek and solicitation of Deltek's customers and employees. The Court will analyze Deltek's requests
accordingly. A. Use of Deltek's Trademarks
With respect to Deltek's first category of requests, Plaintiff contends that Defendants'
infringing use of Deltek's trademarks and violations of Deltek's rights regarding the use of its
name on the internet are causing irreparable harm to Deltek. Mem. in Supp. of Mot. at 4.
Plaintiff asserts that the following phrases should be removed from the "www.iuvosystems.com"
website: "Deltek Upgrade," "We Provide Deltek Solutions," and "Technology Consultants With Deltek Experience" and that the puzzle pieces associated with the word "Deltek" should also be
removed. Plaintiff also requests an order requiring the Defendants to cease using any Deltek trademarks as metatags for their websites and restraining Defendants from using the
"www.installdeltek.com" and "www.installdeltek.net" websites. Plaintiff argues that there is a presumption of irreparable injury in trademark
infringement cases as such cases present a real threat of injury to reputation. Mem. in Supp. of
Mot. at 5. In Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922,939
(4th Cir. 1995), the Fourth Circuit recognized that "in the context of a trademark infringement action, a number of courts have adopted the reasoning that '[a] finding of irreparable injury
ordinarily follows when a likelihood of confusion or possible risk to reputation appears.'" See also Wesley-Jessen Div. ofSchering Corp. v. Bausch & Lomb Inc., 698 F.2d 862, 867 (7th Cir.
1983) ("Courts readily find irreparable harm in trademark infringement cases because of the
victim's inability to control the nature and quality of the infringer's goods."). Thus, "a
presumption of irreparable injury is generally applied once the plaintiff has demonstrated a
likelihood of confusion, the key element in an infringement case." Scotts Co. v. United Indus. Corp., 315 F.3d 264,273 (4th Cir. 2002). For this reason, whether Plaintiff will suffer
irreparable harm is "bound up" with an inquiry into the likelihood that Plaintiff will prevail on
the merits of its trademark infringement and unfair competition claims. See id. at 272.
Accordingly, "because the balance-of-the-hardship question is intertwined with questions about
the merits, [the] analysis of the balance-of-the-hardship question will first require a detour into
the substance of [Plaintiff s] Lanham Act claims." Id.
To establish its claims for trademark infringement and unfair competition, Plaintiff must prove the following elements: (1) that Deltek possesses the trademarks at issue; (2) that Iuvo uses the Deltek trademarks; (3) that such use occurs in commerce in connection with the sale or offering for sale, distribution, or advertising of goods or services; and (4) in a way that is likely
to cause confusion among consumers. See 15 U.S.C. §§ 1114,1125(a); Lone Star Steakhouse &
Saloon, 43 F.3d at 930. Defendants have acknowledged for the purposes of this motion that "Deltek owns protectable rights in the Deltek Trademarks" and that Iuvo has used that mark.
Mem. in Opp. to Mot. at 20,22. However, Defendants contend that Plaintiff cannot succeed on the merits because Plaintiff cannot demonstrate that Defendants use of the Deltek trademarks
creates a likelihood of confusion. Specifically, Defendants claim that their fair use of the Deltek
trademarks is a defense to a claim of infringement. See 15 U.S.C. § 1115(b).
The standard for likelihood of confusion is established in 15 U.S.C. § 1114(1). Under that test, the analysis turns on whether the use of the trademark is "likely to cause confusion, or to cause mistake, or to deceive." 15 U.S.C. § 1114(1); Pizzeria Uno Corp. v. Temple, 747 F.2d
1522, 1527 (4th Cir. 1984). A trademark owner need not demonstrate actual confusion. Pizzeria
Uno, 747 F.2d at 1527. Rather, "an unauthorized use of a trademark infringes the trademark
holder's rights if it is likely to confuse an 'ordinary consumer' as to the source or sponsorship of
the goods." Anheuser-Busch, Inc. v. L&L Wings, Inc., 962 F.2d 316, 318 (4th Cir. 1992).
Thus, determining the likelihood of confusion is an inherently factual issue that depends on "varying human reactions to situations incapable of exact appraisement." Colburn v. Puritan Mills, Inc., 108 F.2d 377, 378 (7th Cir. 1939); see also Anheuser-Busch, 962 F.2d at 318.
The Fourth Circuit has delineated several factors a court must consider in determining
whether a likelihood of confusion exists: "(1) the strength or distinctiveness of the mark; (2) the
similarity of the two marks; (3) the similarity of the goods and services that the marks identify; (4) the similarity of the facilities that the two parties use in their businesses; (5) the similarity of
the advertising the two parties use; (6) the defendant's intent; and (7) actual confusion." Lone
Star Steakhouse & Saloon, 43 F.3d at 933 (citing Pizzeria Uno, 747 F.2d at 1527). Not all of
these factors are of equal relevance in every case. Id In support of its motion, Plaintiff contends that (1) its mark is exceedingly strong, having
been used for years and having been the subject of significant advertising, promotion, use and
customer recognition and goodwill; (2) its mark is more than strikingly similar to the mark used
by Defendants, and that they are in fact virtually identical as Iuvo prominently uses the phrase
"Deltek" throughout its website and as metatags; (3) the goods and services offered by Deltek
and Iuvo - specifically support and consulting services for Deltek software - overlap and the
companies use similar methods of advertising (i.e., their websites); (4) Iuvo intended to trade upon Deltek's mark and goodwill by implying an affiliation that does not exist; and (5) there has
been actual customer confusion as a result of Defendants' use of Deltek's marks. Defendants, however, contend that they are making use of the Deltek trademark in a
permissible, descriptive fashion only to describe the goods and services Iuvo offers. In support of their contention that there is no likelihood of confusion, Defendants point to a disclaimer on the bottom of the "www.iuvosystems.com" website which states that "Deltek, Deltek Time & Expense, Deltek Vision, Deltek GCS Premier and Deltek Costpoint are registered trademarks of
Deltek, Inc." and that "Iuvo Systems is not affiliated or endorsed by Deltek, Inc." Defendants use Deltek's trademarks in three contexts on the "www.iuvosystems.com"
website. First, the website contains a flashing banner that remains on the top of the internet page
and displays a series of different images. Three of these images include the term "Deltek" as
follows: (1) "Deltek Upgrade;" (2) "We Provide Deltek Solutions" and (3) "Technology
Consultants With Deltek Experience." Second, Defendants use certain Deltek trademarks as
metatags to identify the subject or content of their website and which may act as hidden
keywords for Internet search engines. Defendants also use Deltek's name in the title of two
websites registered by Defendants: "www.installdeltek.com" and "www.installdeltek.net."
Third, the services section of the "www.iuvosystems.com" website includes a list of Iuvo's areas
of expertise. This list includes certain Deltek products and applications. Plaintiff does not
contest Defendants' third use of Deltek's trademarks.
With respect to Defendants' first use of Deltek's trademarks, the use of Deltek's name
and trademarks in the flashing banner is prominently displayed on the website in a manner
Plaintiff described as an "attention getter." This use of Deltek's name and trademarks is not
simply a descriptive use in the sense that it identifies the goods or services that Defendants provide; rather, it is an attempt to trade on Deltek's trademarks and associated goodwill.
Moreover, the specific phrases are such that they imply some connection between Deltek and
Defendants and therefore may cause an ordinary consumer to believe that Defendants are
affiliated or sponsored by Deltek. For example, to say that Defendants provide "Deltek Solutions" is misleading and confusing. Defendants do not provide "Deltek Solutions;" rather,
Defendants provide Iuvo's solutions using Deltek products. The Court concludes that
Defendant's use of Deltek's name and trademarks in the flashing banner on the Iuvo website
creates a likelihood of confusion.
Defendants' second use of Deltek's trademarks as metatags may also create a likelihood
of confusion. Other courts have held that the use of a competitor's trademarks as metatags can
create confusion and constitute trademark infringement. See, e.g., N. Am. Med. Corp. v. Axiom
Worldwide, Inc., 522 F.3d 1211,1218-1224 (1 lth Cir. 2008); Suarez Corp. v. Earthwise Tech.,
Inc., Nos. C07-5577RJB, C07-2020RJB, 2008 WL 4934055, at *6 (W.D. Wash. Nov. 14, 2008).
Plaintiff submitted evidence that an internet search for "iuvosystems" returned results including
the "www.iuvosystems.com" website. The description of Iuvo Systems displayed in the list of search results stated: "'Deltek Costpoint' 'Deltek Hosting' 'Deltek Install' 'Deltek Consulting'." See Reply in Supp. of Mot., Affidavit of Jamie Konn, Ex. C. This use of Deltek's trademarks as
metatags may cause a consumer to believe that Iuvo is affiliated or related to Deltek and may
therefore constitute an improper attempt to trade on the commercial value associated with the
marks. The Deltek name and trademarks are not merely being used in a descriptive fashion, but
in a manner that may lead to consumer confusion. See generally N. Am. Med. Corp., 522 F.3d at 1223 (recognizing that use of metatags may cause a likelihood of actual consumer confusion as to source). The use of the Deltek name in two of Defendants' websites may also constitute cybersquatting in violation of the Anticyberscquatting Consumer Protection Act, 15 U.S.C. §
Thus, Plaintiff has made a sufficient showing at this stage of the proceedings that this use of Deltek's trademarks creates a likelihood of confusion. As the Fourth Circuit recognized, "[a] finding of irreparable injury ordinarily follows when a likelihood of confusion or possible risk to
reputation appears." Lone Star Sieakhouse & Saloon, 43 F.3d at 939; see also Scotts Co., 315
F.3d at 273. Defendants have not shown that they will be harmed if an injunction prohibiting this limited use of Deltek's trademarks were to issue. Finally, the public has a strong interest in
the enforcement of trademark law.
For the above reasons, Defendants are enjoined from using in the
"www.iuvosystems.com" website the phrases "Deltek Upgrade", "We Provide Deltek Solutions"
and "Technology Consultants With Deltek Experience"; from using as metatags for any website associated with the Defendants' business activities any Deltek trademarks or trade names
including, but not limited to, "Deltek Costpoint," "Deltek Time Collection," "Deltek Install,"
"Deltek Hosting" and "Deltek Consulting" and from using the web domain names
"www.installdeltek.com" and "www.installdeltek.net."
Use or Disclosure of Deltek's Confidential, Proprietary or Trade Secret Information
1. Balance of the Harms
Plaintiff seeks to enjoin Defendants from using or disclosing Deltek's trade secrets or
other confidential or proprietary information. Plaintiff contends that Defendants are obtaining confidential information regarding Deltek's recent licensing deals and ongoing negotiations with
customers and then interceding in such deals to offer consulting services at lower prices than Deltek offers. Plaintiff also contends that Defendants are using trade secrets or other confidential or proprietary information that they learned during the course of their employment
at Deltek to provide consulting services to Deltek customers. See Mem. in Supp. of Mot. at 4-5.
Plaintiff provided evidence that certain current or former Deltek customers that have had contact
with Iuvo have expressed concerns or questions regarding the information known by Iuvo and that Iuvo has replaced Deltek, or a Deltek partner, as a service provider for Deltek related consulting or implementation services for at least two Deltek customers, ATK and TerraHealth.
Plaintiff argues that Defendants' conduct justifies the imposition of an injunction because "when the failure to grant preliminary relief creates the possibility of permanent loss of
customers to a competitor or the loss of goodwill, the irreparable injury prong is satisfied."
Mem. in Supp. of Mot. at 5 (quoting Multi-Channel TV Cable Co. v. Charloitesville Quality
Cable Operating Co., 22 F.3d 546, 552 (4th Cir. 1994)). However, Plaintiff failed to establish
what trade secret, confidential or proprietary information was acquired by Defendants and that Defendants are now using or disclosing that information. Defendants' sworn declarations
categorically deny that Defendants have received trade secret, confidential or proprietary
information since leaving Deltek and that Defendants are using any of Deltek's trade secret,
confidential or proprietary information at Iuvo. Truong Decl. at ffll 24-25; Muldrow Decl. at HI
14-15; Varan Decl. atffll 7, 15; Iuvo Decl. at Iflj 12-13. For a preliminary injunction to issue, Plaintiff must demonstrate that the harm is '"neither remote nor speculative, but actual and imminent.'" Manning, 119 F.3d at 263 (quoting Rum
Creek Coal Sales, 926 F.2d at 359). At this juncture, Plaintiff has failed to make a clear showing of irreparable harm. See generally Direx Israel, 952 F.2d at 812 (the district court must find that
the plaintiff has made a "clear showing" of irreparable harm that is "neither remote nor speculative, but actual and imminent"). Moreover, without further information on the nature of
the trade secret, confidential or proprietary information Plaintiffs seek to enjoin Defendants
from using, Defendants will be harmed by an ambiguous and potentially overbroad injunction.
2. Plaintiffs Likelihood of Success on the Merits
At this stage of the proceedings, Deltek has failed to provide evidence that Defendants
have in fact received confidential or proprietary information since their departure from sources inside Deltek. Indeed, Defendants categorically deny receiving any trade secret, confidential or
proprietary information from sources within Deltek since their termination. Truong Decl. at ffll
24-25; Muldrow Decl. at UK 14-15; Varan Decl. atffl|7, 15; Iuvo Decl. atffl[ 12-13. Deltek has also failed to establish what precise trade secret or confidential information
was acquired or known by Defendants and is being used by Defendants that is not publicly
available. For example, Plaintiff contends that the identity of their customers is confidential information. However, the evidence presented demonstrates that the identity of many Deltek
customers is publicly available on Deltek's website or by attending conferences such as the
annual Deltek Insight Conference. Moreover, Defendants submitted sworn affidavits that state that Iuvo's contacts with the Deltek customers referenced in Plaintiffs Verified Complaint have
been the result of unsolicited communications from the customers or from referrals by contacts outside of Deltek. See Muldrow Decl. at ffi| 17,20; Iuvo Decl. at ffl 15-18. Plaintiff also provided evidence that Deltek employees and certain Deltek partners
receive manuals that contain proprietary and confidential information about Deltek's products
and strategies and techniques for implementing and using those products. However, at the April 8, 2009 hearing, Deltek's representative testified that these manuals have been revised since
Defendants' employment was terminated. The testimony also indicated that the manuals are
made available to Deltek's partners as well as people who attend Deltek training programs such as Deltek University and that there are no contractual restrictions imposed upon them with respect to that information. Moreover, Defendants have indicated that much of the information contained in these manuals could be derived from other sources and that "Iuvo has not relied on
nor has it used Deltek's confidential or proprietary information to offer or provide Iuvo's
services to potential clients." Iuvo Decl. at ^1 13.
Finally, Plaintiff contends that Deltek's pricing structures and the consulting services
they offer are trade secret and confidential information. At the April 8, 2009 hearing, however,
Plaintiffs witnesses testified that there is no restriction placed on Deltek's customers that would
prevent them from disclosing the prices Deltek quotes.
Given the lack of evidence as to Defendants' use of confidential, proprietary or trade secret information at this stage of the proceedings, Plaintiff has not demonstrated a strong likelihood of success on the merits with respect to its claims that relate to the use or disclosure of
Deltek's confidential, proprietary or trade secret information.
3. The Public Interest
The Court concludes that the public interest lies with denying the relief sought with
respect to trade secret, confidential or proprietary information given Plaintiffs failure to make a clear showing of actual or imminent harm and the ambiguous and potentially overbroad nature of
Plaintiffs requests. C. Competition with Deltek and Solicitation of Deltek's Customers and Employees 1. Balance of the Harms
Deltek's final category of requests relate to Defendants' competition with Deltek and
solicitation of Deltek's customers and employees. Deltek contends that this conduct is barred by
Muldrow, Truong and Varan's respective noncompetition agreements and that allowing
Defendants to continue to compete with Deltek and solicit Deltek's customers and employees
will irreparably harm Plaintiff. Specifically, Plaintiff provided evidence that a number of
Deltek's customers have had communications with Iuvo or the individual Defendants regarding
services that the Defendants can provide to those customers. Plaintiff also presented evidence
that Iuvo has replaced Deltek or a Deltek partner as a service provider for Deltek-related
consulting or implementation services for at least two Deltek customers. Compl. at ffl] 77-78.
Plaintiff contends that this evidence alone is sufficient to establish irreparable injury. See Mem.
in Supp. of Mot. at 5 (citing Multi-Channel TV Cable Co., 22 F.3d at 552).
Defendants, however, contend that any harm to Plaintiff is not irreparable because money damages could fully compensate Plaintiff if it is ultimately successful on the merits and that the harm Defendants would suffer if a preliminary injunction were to issue greatly outweighs the
harm to Plaintiff should the injunction not issue. Muldrow, Truong and Varan submitted sworn declarations testifying that if the preliminary injunction requested by Plaintiff were to issue, they
would be substantially harmed in their ability to earn a living. See Truong Decl. at \ 27; Muldrow Decl. at \ 22; Varan Decl. at H 16. Similarly, Defendants have submitted evidence that the injunctive relief sought by Plaintiff would substantially harm Iuvo's business and Iuvo would
be forced to permanently shut its doors and cease its business. Iuvo Decl. at fflj 19-20. In
response Plaintiff argues that the injunctive relief sought would not preclude Iuvo from
continuing to operate aspects of its business. The "Services" page of the Iuvo website states that
Iuvo's areas of expertise include certain Deltek products and also other products and systems
unrelated to Deltek such as Oracle and Windows.
The Court concludes that the balance of hardships weighs slightly in favor of Plaintiff. The evidence shows that at Plaintiff has lost some business from at least two Deltek customers -
however, the evidence also shows that Deltek has over 11,000 customers. Moreover, although
an injunction might severely limit Iuvo's abilities to continue operating, Plaintiffs are correct that Iuvo's own website states that they offer services in addition to those regarding Deltek products.
2. Plaintiffs Likelihood of Success on the Merits
After balancing the likelihood of irreparable harm to the plaintiff if the preliminary
injunction is denied and the harm to the defendant if the preliminary injunction is granted, the Court is obligated to determine the plaintiffs likelihood of success on the merits. The showing
on the merits varies depending on the balance of the harms. See generally Manning, 119 F.3d at
263. Where, as here, the balance of the hardships does not tip "decidedly" in favor of Plaintiff, the Court must consider whether there is a sufficient showing of a likelihood of success on the
Under Virginia law, the following criteria determine the validity of non-competition
(1) Is the restraint, from the standpoint of the employer, reasonable in the sense that it is no greater than is necessary to protect the employer in some legitimate
(2) From the standpoint of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing his legitimate efforts to
earn a livelihood?
(3) Is the restraint reasonable from the standpoint of a sound public policy?
Blue Ridge Anesthesia & Critical Care, Inc. v. Gidick, 239 Va. 369, 371-72 (1990).
During the April 8, 2009 hearing, Defendants' counsel did not dispute that Muldrow, Truong and Varan are competing with Deltek in a manner that would fall under the noncompete
provisions of their respective noncompetition agreements. Defendants also conceded that the
conduct Plaintiff seeks to enjoin could be barred by a properly drafted noncompete provision. However, Defendants contend that the noncompete provisions at issue here are unenforceable
under Virginia law because they are vague and, more importantly, overbroad. Thus, Plaintiffs likelihood of success on the merits depends on whether the noncompete provisions at issue are
Plaintiff contends that the noncompete provisions are no greater than necessary to protect Deltek's legitimate business interests and that the restrictions are reasonable when viewed from
the standpoint of each former employee and taking into account the practical effect of the
restrictions given the nature of Deltek's business and competitors. Specifically, Plaintiff argues
that the restrictions only bar former employees from "capitalizing on their training by Deltek, their in-depth knowledge of Deltek's proprietary software, and their knowledge of specific
customers' use of Deltek products' for a limited period of time." Mem. in Supp. of Mot. at 15.
Plaintiff also argues that because Deltek's business is centered upon its own proprietary software
and extends only to the sale of that software, maintenance and support for that software and
consulting services regarding that software, the restrictions imposed on Deltek's former
employees are narrow and reasonable. Id. In that regard, Deltek presented evidence that it has no direct competitors with respect to its proprietary software such that prohibiting Defendants
from working for a "competitor" only restricts Defendants from doing what they admit they are
currently doing. Thus, Deltek contends that the noncompete provisions have to be analyzed in
context and that the provisions are not "functionally" overbroad given the nature of Deltek's
Defendants argue, however, that the covenants are ambiguous and overbroad. As an example, the covenants appear to prohibit Muldrow, Truong, or Varan from working in any
capacity at an entity that is a competitor of Deltek, including in a position unrelated to Deltek or
their former employment at Deltek. See, e.g., Roto-Die Co. v. Lesser, 899 F. Supp. 1515, 1521
(W.D. Va. 1995) (holding covenant unenforceable where it "could be read to prohibit any type of employment, even employment outside the scope of the work" done for the prior employer and
would prevent employee "from working in any capacity, including that of a janitor, for a
'Competitive Business'"). Defendants also contend that even accepting that Deltek does not
have any direct competitors with respect to its proprietary software, Deltek does have
competitors that provide maintenance and support to customers using Deltek software and
consulting services related to the implementation and use of Deltek software.
Here, each noncompete provision "must be evaluated on its own merits, balancing the provisions of the contract with the circumstances of the businesses and employees involved."
Parikh v. Family Care Center, 273 Va. 284, 288 (2007). The validity of a noncompete provision
is not determined based on the language of the covenant alone. Id. Therefore, the validity of the noncompete provisions at issue here is affected, in part, by the number and types of Deltek's
competitors. Similarly, the analysis as to the validity of a non-competition clause necessarily includes consideration of the existence of a trade secret, or other confidential or proprietary information, to be protected. See Decision Insights, Inc. v. Sentia Group, Inc., No. 07-1596,
2009 WL 367585 (4th Cir. Feb. 12,2009).
At the April 8,2009 hearing, there was some dispute among the parties regarding whether and to what extent Deltek has competitors. Whether Deltek possesses any trade secrets and the scope of any confidential or proprietary information is similarly a point of contention among the parties. At this point in the proceedings, Plaintiff has raised questions that go to the
merits of the validity and enforceability of the noncompete provisions so as to make them "fair
ground for litigation and thus for more deliberate investigation." Manning, 119 F.3d at 263 (quoting Rum Creek Coal Sales, 926 F.2d at 359). The Court is of the view, however, that
Plaintiff has not made so strong a showing of likelihood of success on the merits to warrant the injunctive relief sought where, as here, the balance of harms does not tip decidedly in favor of
The Public Interest
Plaintiff and Defendants point to competing public interests with respect to the
enforcement of covenants not to compete. As Plaintiff contends, Virginia courts have
recognized that "there is a strong public interest in creating and maintaining a customer base."
Int'I Limousine Serv. Inc. v. Reston Limousine & Travel Serv, Inc., 68 Va. Cir. 84,2005 WL
1026985, at *2 (Va. Cir. Ct. May 3, 2005). However, a court must also be mindful that
subjecting an employee to an ambiguous covenant not to compete "offends sound public policy."
Power Distribution, Inc. v. Emergency Power Engineering, Inc., 569 F. Supp. 54, 58 (E.D. Va.
1983) (citing Meissel v. Finley, 198 Va. 577, 580, 95 S.E.2d 186, 188 (1956)). Accordingly,
given the breadth of the noncompete provisions at issue here, the Court is of the opinion that the public interest will not be served at this point by enjoining the Defendants from competing with
Deltek on the basis of their respective noncompetition agreements. Plaintiffs request for
preliminary relief with respect to Defendants' noncompetition agreements and the services
currently offered by Iuvo is denied.
For the reasons stated above and at the hearing on April 8,2009, the Court grants in part
and denies in part Plaintiffs Motion for a Preliminary Injunction. Following the April 8, 2009
hearing, the Court issued an Order granting Plaintiffs requests for preliminary relief with respect
to Defendants' use of Deltek's trademarks on the "www.iuvosystems.com" website, the use of Deltek's trademarks or trade names as metatags for any website associated with Defendants'
business activities and Defendants' use of the web domain names "www.installdeltek.com" and
An appropriate Order addressing the remainder of Plaintiffs requests will issue.
Anthony J. Trenga United States District Judge