Partech, Inc. v. Jackson

Background

Partech, Inc. alleged that Michael Jackson, a former Director of Product Management, misappropriated its trade secrets and confidential information after leaving the company and joining Qu POS, Inc., a competing point-of-sale provider. Partech alleged that Jackson downloaded sensitive documents to personal devices and created a backup of his company laptop. Jackson’s agreements with Partech included restrictions on disclosing confidential information, and his equity award documents provided that certain conduct could require him to return or pay for proceeds from vested shares.

Partech filed claims including breach of contract, tortious interference with a contractual relationship, trade-secret misappropriation, violation of the Economic Espionage Act, unfair competition, and unjust enrichment. It sought emergency relief under Federal Rule of Civil Procedure 65, including orders barring use or disclosure of its information, requiring identification of recipients of the information, and permitting inspections and forensic examinations of devices and systems. The court had previously granted a temporary restraining order in part.

Personal Jurisdiction

The court held that personal jurisdiction—the authority to exercise judicial power over a defendant—was a threshold issue that had to be addressed before deciding whether Partech met the requirements for a preliminary injunction. Applying New York’s long-arm statute and constitutional due-process principles, the court concluded that Partech had not shown a reasonable probability of establishing personal jurisdiction over either defendant.

As to Jackson, the court found that his employment by a New York corporation was not enough by itself. Jackson worked remotely from Texas, never traveled to Partech’s New York office, negotiated his employment agreement with employees located in Maryland and California, and had supervisors, direct reports, and product-team colleagues located outside New York. The court also noted that Jackson’s employment agreement selected Texas law, while his restricted-stock-unit agreement selected Delaware law; the New York choice-of-law provision in the nondisclosure agreement applied to interpreting that agreement and was not by itself enough to establish jurisdiction.

The court also considered New York Civil Practice Law and Rules section 302(a)(3), which can provide jurisdiction for certain out-of-state tortious acts causing injury in New York. The court accepted that Partech had identified alleged tortious conduct outside New York and claims arising from that conduct. But it found that Partech had not provided evidence of a direct injury in New York, such as a threatened loss of identified New York customers or profits from New York operations. Partech acknowledged that it had not yet lost customers or revenue, and its evidence did not identify New York-based existing or prospective clients, the size of any threatened accounts, or whether Qu had targeted them.

The court emphasized that Partech’s New York incorporation and principal place of business did not automatically establish that any resulting commercial harm occurred in New York. It also noted that the record did not resolve whether a threatened loss involving a customer headquartered outside New York but operating retail locations in New York could qualify as a direct New York injury. The court therefore found the record insufficient to support jurisdiction over Jackson or Qu under section 302(a)(3). It further noted that the parties had not addressed one remaining requirement: whether Jackson derived substantial revenue from interstate or international commerce.

Preliminary-Injunction Discussion

Because it found no adequate showing of personal jurisdiction, the court did not decide whether Partech otherwise satisfied Rule 65. It nevertheless explained that a preliminary injunction generally requires a likelihood of success on the merits, likely irreparable harm, a favorable balance of hardships, and consistency with the public interest. Irreparable harm must be actual and imminent rather than merely possible, and trade-secret misappropriation does not automatically establish irreparable harm because monetary damages may sometimes provide a complete remedy.

The court observed that the record did not show that Qu planned to disclose the trade secrets broadly or otherwise destroy their value. Qu had placed Jackson on administrative leave and suspended his access to its systems. The defendants also represented that the relevant devices had been given to a third-party vendor while the parties worked on a process to identify, separate, and remove Partech’s information. The court stated that, without evidence that Jackson or Qu still had access to the information and intended to use or disclose it in a way causing irreparable harm, Partech would not be entitled to a preliminary injunction.

Disposition

The court denied Partech’s application without prejudice to renewal upon an adequate showing of personal jurisdiction. It dissolved the temporary restraining order immediately and granted Partech leave to file amended pleadings within fifteen days, by February 13, 2025. Judge Vargas did not issue a final ruling on the underlying trade-secret and related claims.