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Pixon Imaging, Inc., A Delaware v. Empower Technologies Corp.

August 24, 2011

PIXON IMAGING, INC., A DELAWARE
CORPORATION; AND PIXON IMAGING, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, PLAINTIFFS,
v.
EMPOWER TECHNOLOGIES CORP., A CORPORATION ORGANIZED UNDER THE LAWS OF CANADA; AND EMPOWER TECHNOLOGIES, INC., A WASHINGTON CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge

ORDER GRANTING PLAINTIFF'S EX PARTE APPLICATION FOR TEMPORARY RESTRAINING

ORDER

Doc. No. 12

Plaintiffs Pixon Imaging, Inc. and Pixon Imaging, LLC (together, "Pixon") brought the instant action against Defendants Empower Technologies Corp. and Empower Technologies, Inc. (together, "Empower") based on Empower's alleged misappropriation of certain proprietary and confidential information. Pixon's complaint names seven causes of action for

(1) breach of contract, (2) misappropriation of trade secrets, (3) conversion, (4) unfair competition, (5) unjust enrichment, (6) false advertising under § 43(a) of the Lanham Act, and (7) declaratory relief. (Doc. No. 1, "Complaint.") Pixon now brings an ex parte application for a temporary restraining order ("TRO") enjoining Empower from using or disclosing Pixon's proprietary information. (Doc. No. 12.)

I. BACKGROUND

Pixon is the author, creator, and owner of a technology that removes unwanted visual and audio data from video footage. For example, this technology (also known as the "Pixon Algorithms") allows users to eliminate the distorting effects of conditions such as fog, haze, and heat, thereby enhancing the detail, clarity, and contrast of the resulting images. Pixon markets its technology to customers through the sale of hardware boards linked with associated software. Pixon believes that its Algorithms represent the most advanced image enhancement technology in the world to date.

Pixon alleges that it began purchasing off-the-shelf hardware boards from Empower sometime in 2008, and subsequently entered into discussions with Empower regarding potential modifications to Pixon's software that would allow it to run on Empower's products. On or around July 3, 2008, the parties signed a non-disclosure agreement (the "NDA") to protect the confidentiality of the information Pixon was providing to Empower in the course of their discussions. Under the NDA, Empower was prohibited from disclosing Pixon's information or using it for any reason other than "evaluation and development purposes." (Doc. No. 12-1 p.4.) Subsequently, over the course of the next year or two, Pixon sent Empower a series of source code files, schematics, software, and other information that, taken together, comprised the entirety of "Pixon's core trade secrets." (Id.) According to Pixon, the totality of the information it sent to Empower over that period "provided Empower with the knowledge and capacity needed to create products based on Pixon's Algorithms." (Id.)

On or around October 1, 2009, soon after this transfer of information, the parties entered into an agreement for Empower to purchase Pixon outright (the "Purchase Agreement"). The Purchase Agreement provided that all of Pixon's proprietary information was to be kept confidential and returned to Pixon should Empower fail to close the transaction.

While Empower attempted to raise the funds necessary to complete its purchase of Pixon, Pixon continued to purchase hardware from Empower, including a transaction memorialized in a letter dated March 17, 2010 (the "March 17, 2010 Agreement") in which the parties agreed that Empower would retain ownership of certain products previously ordered by Pixon (the "Deliverables"), including design drawings and source code, until Pixon had paid the invoice for those items.

Around July 2010, it became evident to the parties that Empower would be unable to raise the money it needed to close on the Purchase Agreement. Therefore, Pixon informed Empower on or around July 18, 2010 that it was no longer interested in completing the transaction. The parties thereafter entered into another letter agreement on August 23, 2010 (the "August 23, 2010 Letter") in order to settle any unresolved debts, including the amount owed on the invoice for the March 17, 2010 purchase order. However, Pixon alleges that, even after signing the August 23, 2010 Letter, Empower refused to return the Deliverables to Pixon as required by the March 17, 2010 Agreement. In addition, Empower refused to perform under the terms of the August 23, 2010 Letter, which provided, inter alia, that Empower acquire an equity share in Pixon.

A year later, Empower issued a press release in which it announced it would be launching a "new line of video and still imaging products based on Empower's proprietary real time Image Signal Correction (ISC) technology." (Doc. No. 12 Exh. G.) According to Empower, its ISC technology includes "high performance image processing software" that performs certain image enhancing functions:

The proprietary high performance image processing software provides real-time dehazing, deblurring, dewarping, denoising, color and contrast enhancement functions utilizing the powerful Empower embedded computing hardware. . . . Empower's proprietary real time Image Signal Correction Technology reduces any fogged up image due to fog, smog, smoke, dust, rain, snow or heat waves to clarify any images enabling the monitor of the live situation to see clearly . . . . (Id.) Subsequently, on April 11, 2011 and July 25, 2011, Empower announced it had signed deals to integrate its ISC technology into the products of several foreign companies. (Id. at Exhs. H & J.) Pixon also claims that it received separate confirmation from a different source that Empower has admitted its ISC technology specifically incorporates proprietary information obtained from Pixon.

Pixon filed suit in this court on May 18, 2011, and brought the instant ex parte application for a TRO on August 5, 2011. Empower opposes the request. (Doc. No. 14.) The parties appeared before this court on August 22, 2011 and presented oral argument on the matter, which was thereafter taken under submission.

II. LEGAL STANDARD

"A preliminary injunction is an extraordinary remedy never awarded as of right. In each case, courts 'must balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief.'" Winter v. Natural Res. Def. Council, 555 U.S. 7, 24 (2008) (quoting Amoco Prod. Co. v. Gambell, 480 U.S. 531, 542 (1987)). In order to demonstrate entitlement to preliminary injunctive relief, a party must establish four factors: (1) likelihood of success on the merits; (2) likelihood that she will suffer irreparable harm without such relief; (3) that the balance of equities tips in her favor; and (4) that an injunction is in the public interest. Id. at 20.

III. DISCUSSION

A. Likelihood of Success on the Merits

Pixon argues that it is likely to succeed on at least three of its claims, namely its causes of action for misappropriation of trade secrets, ...


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