Emulex Wins Partial Victory in Trade Secrets Suit Injunction

Emulex Corp., a Costa Mesa-based computer parts manufacturer, has won a federal appeals court decision that lifts part of a preliminary injunction against it in the bitter patent infringement and trade secrets lawsuit brought by Digital Equipment Corp.

The U.S. Court of Appeals for the Federal Circuit, a special patent appeal panel in Washington, threw out a key portion of a lower court injunction that had prohibited Emulex from designing, developing, manufacturing or selling certain products.

“The appeals court has granted Emulex exactly the remedy we sought,” Fred B. Cox, Emulex chairman, said in a prepared statement. “The appeals court stated that the vacated portion of the injunction . . . was extremely broad and appeared to go beyond what would be appropriate after trial.”

But the appellate court’s decision rested on the failure of a U.S. District Court judge in Concord, N.H., to follow proper procedures in granting the injunction.

Digital now will ask the lower court judge to follow the procedures laid out by the higher court and reinstate the full injunction against Emulex, according to Jeffry Gibson, a spokesman for the Maynard, Mass., company.

When it took the case three months ago, the appellate court issued a temporary order lifting the injunction, and last month, Emulex introduced a four-disk-drive unit that is compatible with Digital’s new DEC 8000 super minicomputer. About 70% of the Emulex product line is designed to work with Digital computers, according to Emulex officials.

In its decision Wednesday, Cox said, the appellate court also held that the remaining portions of the injunction do not preclude Emulex from using properly acquired information or material.

The other portions of the injunction prohibit Emulex from using any proprietary information from former Digital employee Charles Hess, whom Emulex hired in July 1985, as its engineering director, and from using Hess to work on Digital-related products or on the lawsuit.

Hess was locked out a week after joining Emulex and left the company in early January because he brought trade secrets with him in violation of a compact with Emulex not to use any Digital information, Michael Lewis, chief financial officer of Emulex, said in an interview Thursday. Hess could not be reached for comment.

Lewis said his company turned over the Digital information to its lawyers to be returned to Digital and that Emulex employees never used any of Hess’ information.

Digital sued Emulex in a U.S. District Court in New Hampshire in July, 1985, claiming that the Costa Mesa company had infringed on Digital’s patents. Ten days later, after learning of what Hess did, it filed an amended complaint accusing Emulex of unfair business practices and misappropriation of trade secrets.

A trial on the merits of the suit and on Emulex’s counterclaim of misuse of patent laws and antitrust violations has not yet been set.