Titan Manufacturing Solutions, Inc. v. National Cost, Inc.

          ORDER DENYING RENEWED MOTION FOR PRELIMINARY INJUNCTION

          WILLIAM J. MARTINEZ UNITED STATES DISTRICT JUDGE

         Plaintiff Titan Manufacturing Solutions, Inc. (“Plaintiff”), sues Defendants National Cost, Inc., Leigh Ferry, and Stephanie Reynoso (together, “Defendants”) for breach of contract, trade secret misappropriation in violation of the Colorado Uniform Trade Secrets Act (“CUTSA”), Colo. Rev. Stat. §§ 7-74-101 to -110, and related causes of action. Currently before the Court is Plaintiff's Renewed Motion for Temporary Restraining Order and Preliminary Injunction. (ECF No. 38.) Despite the motion's title, it only attempts to justify a preliminary injunction, not a temporary restraining order.

         For the reasons explained below, the Court finds that no evidentiary hearing is needed because Plaintiff fails to show that it faces irreparable harm, even accepting Plaintiff's version of the facts. The motion is therefore denied.

         I. BACKGROUND

         The following narrative is drawn from Plaintiff's perspective, unless otherwise noted.^[1]

         Plaintiff “develops proprietary tax solutions for, among other things, the Research and Development Tax Credit (the ‘R&D Tax Credit').” (ECF No. 38-1 ¶ 2.) The R&D Tax Credit is particularly complex. (Id. ¶ 3.) “Among other software solutions, [Plaintiff] developed Titan Armor®, an online, web-based software platform that efficiently captures, defensibly documents, and accurately calculates the R&D Tax Credit.” (Id. ¶ 5.) “Oversimplified, Armor is essentially a highly-specialized version of TurboTax® for the R&D Tax Credit.” (ECF No. 38 at 2 n.1.)^[2] Armor is a particularly effective tool because Plaintiff itself assists taxpayers claiming the R&D Tax Credit, and Plaintiff has spent ten years providing free audit support to those clients, so it “has gained unparalleled insight [in]to how the IRS evaluates the R&D tax credit.” (ECF No. 38-1 ¶¶ 4, 9-10, 14.) Plaintiff estimates that it has invested at least 4, 000 manhours in these audit support activities, plus another 15, 000 manhours specifically in “developing and refining” the Armor application. (Id. ¶¶ 6, 11.)

         “One proprietary aspect of Titan Armor® is its Task Library, a proprietary list of descriptions of client activity that allows Titan Armor® to sort various research and development expenses into fields for analysis, and provides critical documentation and substantiation for the R&D Tax Credit.” (Id. ¶ 15.) “The Titan Armor® Task Library is not known outside of Titan and its licensees, each of which has executed licensing and user agreements with strict confidentiality protections.” (Id. ¶ 16.)

         “Another proprietary aspect of Titan Armor® is its Qualifying Questionnaire, a proprietary qualitative assessment of the R&D Tax Credit regulations based on Titan's extensive audit experience. The Qualifying Questionnaire includes questions that taxpayers are likely to see during the audit process, but that are not present in the Internal Revenue Code.” (Id. ¶ 20.)

         Defendant National Cost, Inc. (“NCI”), describes itself as a “company that helps businesses with their tax solutions, including R&D Tax Credit assistance by providing the necessary documentation consistent with [federal requirements].” (ECF No. 48-2 ¶ 1.) Defendant Ferry is president of the company. (Id.) Defendant Reynoso is the company's director of operations. (ECF No. 14 at 7, ¶ 6.)

         In January 2018, NCI began licensing Armor from Plaintiff. (ECF No. 38-3 at 6.)

         The cost of the license was a monthly fee (“Monthly Fee”) for access to the web platform (id. at 3), and then a separate fee for each final report generated (“Report Fee”) (ECF No. 48-1 at 12). NCI, like all licensees, agreed that it would not

copy, modify, reproduce, distribute, republish, display, post or transmit in any form or by any means, create a derivative work of, reverse engineer, or decompile any aspect of the Service, or otherwise attempt to create unauthorized access to the Service and/or modified versions of the Service, including (without limitation) for the purpose of building a similar or competitive product or service.

(ECF No. 38-3 at 4.) The Terms of Service that apply to the Armor website contain an identical prohibition, and further prohibit sharing login information with non-licensed parties. (ECF No. 38-4 at 2, ¶¶ 8, 9.)

         In February 2019, Defendants hired a third party, Leigh Database Development (“Leigh”), to create a Microsoft Access database to replicate Armor's functionality. (See ECF No. 38-5.) Defendants say they did so because, among other reasons, they concluded that Armor's cost was not worth the value it created and that NCI “could do the calculations ...