## Facts

- Kadant, Inc., through its AES division in Queensbury, New York, manufactured equipment used in papermaking processes, including shower and spray devices, nozzles, foils, and related components.
- Stephen Corlew worked for Kadant AES, had access to product design specifications and AES’s computer system, and used CAD tools to create manufacturing drawings.
- Corlew signed a confidentiality agreement barring disclosure or use of AES confidential information, including customer information; Kadant terminated him in summer 2001.
- In April 2002, Corlew joined competitor Seeley Machine, Inc., through its APS division, and helped develop and market a new product line for the pulp and papermaking industry.
- Seeley introduced products soon after Corlew’s arrival; Kadant claimed the speed of entry implied use of Kadant’s design specifications and customer information.
- Defendants asserted their products were developed through lawful reverse engineering of products available on the market and not protected by patents or trade secrets.
- Kadant also alleged Lanham Act trademark infringement and unfair competition based on defendants’ use of an acronym similar in sound and appearance to Kadant’s mark on similar goods.
- Kadant sued and sought emergency relief; the court issued a temporary restraining order and later held argument on a motion for a preliminary injunction.

## Issues

1. Whether Kadant satisfied the Second Circuit preliminary-injunction standard (irreparable harm and likely success, or serious questions plus hardships) on its Lanham Act trademark infringement and unfair competition claims.
2. Whether Kadant was entitled to preliminary injunctive relief on New York common-law trade secret and unfair competition claims, and related breach of contract and fiduciary-duty claims against Corlew, based on alleged misuse of design specifications and customer information.
3. Whether the court should impose interim restrictions to preserve electronically stored information relevant to the dispute.

## Decision

- The court granted a preliminary injunction in part and denied it in part.
- The court granted injunctive relief on the Lanham Act trademark/unfair competition theory, finding a sufficient likelihood of confusion based on similarity of the marks and the parties’ competitive proximity.
- The court denied preliminary injunctive relief on trade secret misappropriation and the related contract and fiduciary-duty claims, finding inadequate proof of protectable trade secrets and misappropriation on the preliminary record and crediting the plausibility of reverse engineering.
- The court ordered defendants not to use the disputed mark and required preservation of relevant computer data.

## Legal Principles

- A preliminary injunction requires irreparable harm and either (a) likelihood of success on the merits or (b) serious questions going to the merits with the balance of hardships tipping decidedly toward the movant.
- Under the Lanham Act, a showing of likely consumer confusion, evaluated through a multi-factor analysis that includes similarity of marks and proximity of the products, can support preliminary injunctive relief.
- Under New York law, trade secret protection requires proof that the information is actually secret (not readily ascertainable by proper means) and that defendants misappropriated it.
- Lawful reverse engineering or independent development can defeat a request for preliminary relief where the plaintiff cannot show that the defendant obtained the information by improper means.
- Suspicion and timing-based inferences, without concrete evidence of taking or use of confidential information, may be insufficient to establish likely success for trade secret, contract, or fiduciary-duty claims at the preliminary-injunction stage.
- Courts may impose interim evidence-preservation obligations, including for computer data, to prevent spoliation while merits litigation proceeds.

## Conclusion

The court enjoined defendants from using a confusingly similar mark for competing papermaking equipment but refused to impose trade secret and employment-duty injunctions because the preliminary record lacked concrete proof of misappropriation and supported a lawful reverse-engineering explanation, while also ordering preservation of relevant electronic data.


Kadant, Inc. v. Seeley Mach., Inc., 244 F. Supp. 2d 19 (N.D.N.Y. 2003)