Citcon USA, LLC v. RiverPay, Inc. et al
Filing
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ORDER DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION. Re: Dkt. No. 185 . Signed by Judge Nathanael Cousins. (lmh, COURT STAFF) (Filed on 6/25/2019)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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CITCON USA, LLC,
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United States District Court
Northern District of California
Plaintiff,
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v.
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RIVERPAY INC., et al.,
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Case No. 18-cv-02585-NC
ORDER DENYING
PLAINTIFF’S MOTION FOR
PRELIMINARY INJUNCTION
Re: Dkt. No. 185
Defendants.
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In this trade secrets theft case, plaintiff Citcon moves for a preliminary injunction to
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prevent defendant RiverPay from using, disclosing, accessing, or copying any of its
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allegedly misappropriated source code. The Court finds that Citcon failed to identify its
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source code with sufficient particularity and failed to present admissible evidence of
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misappropriation. Therefore, Citcon has not demonstrated a likelihood of success on the
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merits. The Court also finds that Citcon has not shown that it will suffer irreparable harm
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in the absence of preliminary relief, or that the balance of equities or public interest weigh
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in its favor. As such, the Court DENIES Citcon’s motion for a preliminary injunction.
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I.
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Background
Plaintiff Citcon provides services to merchants in the United States to facilitate
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customer payments using major Chinese mobile payment systems. Dkt. No. 136 at ¶ 13.
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Citcon brings claims for (1) misappropriation of trade secrets under the DTSA; (2)
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misappropriation of trade secrets under the CUTSA; (3) conversion of funds; (4)
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conversion of a POS device, and (5) unfair competition. Dkt. No. 136. Citcon’s first two
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claims include five categories of trade secrets allegedly misappropriated by defendants,
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one of which is Citcon’s source code. Id. at ¶ 55. The Third Amended Complaint defines
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the allegedly misappropriated source code by listing five payment processing algorithms.
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Id. at ¶ 55(a). Citcon alleges that defendant RiverPay, which offers competing services,
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created its products using source code copied from Citcon by defendants Hua and Shi—
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both former Citcon employees now working for RiverPay. Id. at ¶¶ 15–17, 53–72.
All parties consented to the jurisdiction of a magistrate judge. Dkt. Nos. 7, 13.
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II.
Legal Standard
A plaintiff seeking a preliminary injunction must demonstrate that “he is likely to
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United States District Court
Northern District of California
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succeed on the merits, that he is likely to suffer irreparable harm in the absence of
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preliminary relief, that the balance of equities tips in his favor, and that an injunction is in
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the public interest.” Winter v. Nat’l Res. Def. Council, Inc., 555 U.S. 7, 20 (2008); see
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also Fed. R. Civ. P. 65. A preliminary injunction is an “extraordinary remedy that may
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only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter,
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555 U.S. at 22.
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III.
Discussion
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A. Likelihood of Success on the Merits
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To succeed on its trade secret misappropriation claims under both the California
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Uniform Trade Secrets Act and the Defend Trade Secrets Act, Citcon must show that it
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possessed a trade secret, that the defendant misappropriated the trade secret, and that the
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defendant’s conduct damaged the plaintiff. Cal. Civ. Code § 3426.1(b); Alta Devices, Inc.
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v. LG Elecs., Inc., 343 F. Supp. 3d 868, 877 (2018).
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Here, Citcon fails to show that it is likely to succeed on its source code trade secret
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misappropriation claim for two reasons. First, Citcon fails to identify with sufficient
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particularity what source code has been misappropriated. Second, Citcon fails to provide
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admissible evidence of misappropriation.
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1. Identification of Source Code
A party seeking injunctive relief “has the burden to show that the information that
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was misappropriated constitutes a trade secret” and, to do so, must identify that
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information “with sufficient particularity.” Agency Solutions Com., LLC v. Trizetto Group,
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Inc., 819 F. Supp. 2d 1001, 1015, 1017 (E.D. Cal. 2011).
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Citcon’s motion for preliminary injunction simply refers to the allegedly
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misappropriated trade secret as its “source code.” Dkt. No. 185 at 7. Citcon describes a
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few specific categories of source code, but these categories appear to function primarily as
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exemplars to show instances of alleged misappropriation rather than to define
comprehensively the source code at issue in the case. Id. at 5–6. This Court recently held
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United States District Court
Northern District of California
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in its order denying defendants’ motion for partial summary judgment that the parties
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currently dispute material facts about the identification of the source code. Dkt. No. 237 at
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4–6. That order found a lack of clarity in the record as to the authorship of the source code
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and as to precisely what of its source code Citcon alleges RiverPay misappropriated. Id.
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Since then, Citcon has not defined the source code with any more particularity. In
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contrast, a court in this district recently found that the plaintiff in WeRide had sufficiently
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identified its source code trade secrets for purposes of a preliminary injunction motion
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when it filed a twenty-page identification of ten specific trade secrets and described the
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functionality of each, along with named files from its code base reflecting the source code
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specific to each trade secret. WeRide Corp. v. Huang, 2019 WL 1439394, No. 19-CV-
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07233-EJD, at *5–6 (N.D. Cal. Apr. 1, 2019). Citcon’s identification in this case has been
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much more vague.
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Moreover, the proposed order that Citcon filed in connection with this motion
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defines its desired injunctive relief even more broadly than “source code.” In the proposed
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order, Citcon proposes that the Court restrain RiverPay from using, accessing, or copying
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its “trade secrets . . . and other propriety information from all Citcon’s products and
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projects, such as (but not limited to) source code, schematics, and other business, technical,
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and financial information.” Dkt. No. 185, Ex. 3. The briefing on this motion does not
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even address “schematics and other business, technical, and financial information.”
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Similarly, Citcon’s reply brief requests that the Court enjoin defendants from “any and all
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use, disclosure, access to, providing third parties access to, transferring, copying
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duplication, reproduction, publication, distribution, broadcasting or marketing of any
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version of Citcon’s Code including, but not limited to” three specific “modules” of
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RiverPay code. Dkt. No. 240 at 15. This use of expansive language prevents the Court
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and the defendants from understanding what Citcon alleges was misappropriated. The
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Court cannot enjoin RiverPay from using such a limitless swath of information. Citcon’s
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motion is overly broad as to the relief it seeks because it does not define with sufficient
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United States District Court
Northern District of California
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particularity the source code at issue.
2. Evidence of Misappropriation
To show that its source code was misappropriated, Citcon provided a declaration
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from its counsel, Andrew Pierz. Dkt. No. 185, Ex. 1 (Pierz Declaration). Mr. Pierz states
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that he conducted four reviews of the source code produced by RiverPay and, having
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“studied” both RiverPay’s and Citcon’s source code, “discovered that RiverPay’s . . .
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software contain[s] substantial portions of code that is identical to Citcon’s source code.”
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Id. at ¶ 2. Pierz attaches some examples of such code and explains the similarities. Id. at
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¶¶ 3–10. He also states that other RiverPay source code produced for inspection, but not
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attached to his declaration, “continue[s] to use Citcon’s source code.” Id. at ¶ 10.
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Mr. Pierz offers an expert opinion, but he is an attorney for Citcon and not an expert
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witness. See Fed. R. Evid. 702. Citcon has not shown that Pierz is qualified with
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scientific, technical, or specialized knowledge to give an opinion as to the similarities of
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the source code. Fed. R. Evid. 702(a). Nor has Citcon shown that Pierz’s opinion is based
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on sufficient data, or that it was formed reliably. Fed. R. Evid. 701(b)–(d). Citcon argues
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that “the point” of Mr. Pierz’s declaration “was that anyone who can read English could
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see the fact that” RiverPay’s source code “was essentially copied from Citcon’s.” Dkt. No.
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240 at 4. But Mr. Pierz’s opinion relies upon much more than English fluency, as
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indicated by defendants’ expert witness who disagrees with Mr. Pierz’s interpretation of
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the source code similarities. See Dkt. No. 219, Ex. A (Ferrera Declaration). The Court
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finds that the Pierz declaration is inadmissible and thus disregards it.
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In its reply to defendants’ opposition to its motion for preliminary injunction,
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Citcon provides new evidence of misappropriation in the form of a declaration from Dr.
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Dean Sirovica. Dkt. No. 240, Ex. 1 (Sirovica Declaration). Dr. Sirovica, an expert on
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mobile phones and wireless communications, opined that he found evidence that RiverPay
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had copied Citcon’s source code. Id. However, the Court cannot consider his declaration
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because it is impermissible new evidence submitted on a reply brief in violation of Civil
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Local Rule 7-3(d)(1). The Court thus disregards the Sirovica declaration.
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United States District Court
Northern District of California
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Without any admissible evidence to show misappropriation, Citcon has not met its
burden in establishing its likelihood of success on the merits.
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B. Irreparable Harm
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“Irreparable harm is traditionally defined as harm for which there is no adequate
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legal remedy, such as an award of damages.” Ariz. Dream Act Coalition v. Brewer (Ariz.
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I), 757 F.3d 1053, 1068 (9th Cir. 2014). Disclosure of trade secrets can constitute
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irreparable harm. See, e.g., WeRide, 2019 WL 1439394 at 5–6.
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Citcon has presented little evidence that it will suffer irreparable harm. Citcon states
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that the mobile payment processing industry now has five companies offering similar
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products and calls the industry “crowded,” but provides no concrete examples of harm it
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will endure without injunctive relief. Dkt. No. 185 at 11. The plaintiff in WeRide, for a
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contrasting example, provided evidence that the defendant was in the process of hiring 100
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new engineers, all of whom would have been given the trade secret information. WeRide,
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2019 WL 1439394 at 11–12 (also in contrast, the plaintiff in WeRide had already shown a
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likelihood of success on the merits). Citcon has not explained how it will be injured
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irreparably without the extraordinary measure of preliminary relief—particularly given this
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case’s rapidly-approaching trial date of December 9, 2019.
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The Court finds that Citcon has not clearly shown that damages are an inadequate
remedy for its alleged harms.
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C. Balance of Equities and Public Interest
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The Court must balance “the competing claims of injury and must consider the effect
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on each party of the granting or withholding of the requested relief.” Winter, 555 U.S. at
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defendant is low where the defendant would only be enjoined from activity that is illegal
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or improper. Henry Schein, Inc. v. Cook, 191 F. Supp. 3d 1072, 1077 (2016). Similarly,
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the public has a strong interest in ensuring that trade secrets are protected and that those
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who illegally misappropriate trade secrets are enjoined from doing so. Waymo LLC v.
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Uber Techs., Inc., 2017 WL 2123560, No. 17-CV-00939-WHA, at *11 (N.D. Cal. May 15,
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2017).
Both the balance of equities and public interest factors would tip in Citcon’s favor
United States District Court
Northern District of California
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had it established a likelihood of success on the merits, because both of these elements
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weigh against a party engaging in illegal activity. Comet Techs. USA, Inc. v. Beuerman,
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2018 WL 1990226, at *5 (N.D. Cal. Mar. 15, 2019). But Citcon has not done so. Without
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a finding that RiverPay is likely liable for trade secret misappropriation, the balance of
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equities and public interest instead weigh in RiverPay’s favor. RiverPay would experience
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significant economic harm from an injunction against conducting its business. Likewise,
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the public interest is not served by restraining business activity that is not improper.
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Because the Court found that Citcon has not demonstrated a likelihood of success on the
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merits, the Court finds that neither of these factors is established either.
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IV.
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Conclusion
The Court finds that Citcon has not demonstrated a likelihood of success on the
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merits, a likelihood of irreparable harm in the absence of preliminary relief, or that the
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balance of equities or the public interest weighs in its favor. The motion for preliminary
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injunction is therefore DENIED.
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IT IS SO ORDERED.
Dated: June 25, 2019
_____________________________________
NATHANAEL M. COUSINS
United States Magistrate Judge
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