IP UPDATE
Exploring the Latest in Intellectual Property Law
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Exploring the Latest in Intellectual Property Law
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Exclusive Licensee Has Constitutional but Not Statutory Standing

by | Dec 9, 2021 |

The US Court of Appeals for the Federal Circuit vacated the dismissal of an exclusive licensee’s complaint for lack of statutory and constitutional standing, despite affirming that the licensee had no statutory standing where the district court erroneously found no constitutional standing. Univ. of So. Florida Res. Found., Inc. v. Fujifilm Med. Sys. U.S.A., Inc., Case No. 20-1872 (Fed. Cir. Nov. 23, 2021) (sealed opinion issued Oct. 22, 2021) (Stoll, J.)

In April 1997, the University of South Florida (USF) received an invention disclosure related to a workstation-user interface for digital mammography. In September 1997, the inventors, USF and the USF Research Foundation (USFRF) entered into a revenue allocation agreement assigning all rights in the invention to USF. The inventors also entered into a separate assignment agreement in 2002. The patent issued in 2003. The revenue allocation agreement was later followed by a nunc pro tunc license agreement, which recited an effective date of July 1997.

In May 2016, USFRF sued Fujifilm Medical Systems for infringement of the issued patent. USFRF pled that USF assigned its rights in the issued patent to USFRF such that USFRF was “currently the owner” of the patent. In June 2019, Fujifilm moved for summary judgment, arguing that USFRF lacked statutory standing because USF had not fully assigned the patent to USFRF. Five days later, USFRF amended its complaint to state that it was an exclusive licensee (i.e., it was not the assignee).

In May 2020, the district court dismissed the case, finding that USFRF lacked both statutory and constitutional standing. Analyzing the nunc pro tunc license agreement, the district court found a lack of statutory standing because the agreement was silent on (and thus did not transfer to USFRF) the right to sue to enforce the patent. The district court also found that USFRF lacked constitutional standing because USFRF had not established that the invention disclosure number in the license agreement corresponded to the issued patent and had not shown that the nunc pro tunc agreement was signed before the complaint was filed. USFRF appealed.

The Federal Circuit analyzed both statutory and constitutional standing and affirmed the district court’s finding with respect to statutory standing, reasoning that this case was analogous to others in which an exclusive licensee lacked statutory standing because the right to sue was either not transferred or only partially transferred. The Federal Circuit found that the district court had clearly erred with respect to constitutional standing, however. First, the Court held that there had been sufficient evidence tying the invention disclosure identified in the assignment agreement to the issued patent. Second, the Court found that it did not matter when the nunc pro tunc agreement was signed because the original revenue allocation agreement was signed before the complaint was filed and conveyed at least one exclusionary right to USFRF—enough for USFRF to have constitutional standing.

Because “the district court’s dismissal was predicated on constitutional standing,” the Federal Circuit remanded for further proceedings, including determination of whether USFRF may join USF.

[...]

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IPR on Written Description? Claims Found Unpatentable Based on Lack of Entitlement to Priority Date

by | Dec 9, 2021 |

The US Court of Appeals for the Federal Circuit affirmed a Patent Trial & Appeal Board (Board) ruling, based on a written description analysis, that certain claims were invalid as anticipated by an earlier priority application from the same family. Indivior UK Ltd. v. Dr. Reddy’s Labs. S.A., Case Nos. 20-2073, -2142 (Fed. Cir. Nov. 24, 2021) (Lourie, J.) (Linn, J., concurring in part and dissenting in part).

Indivior’s patent, which issued from a fifth continuation application claiming priority back to 2009, claimed orally dissolvable films with therapeutic agents. Some of the claims recited numeric ranges, such as “about 40% wt to about 60% wt of a water-soluble polymeric matrix.” Instead of a range, one claim recited a specific amount of “about 48.2% wt” of the polymeric matrix. The patent’s specification did not expressly mention the claimed ranges or the specific 48.2% amount, but it did contain tables comprising quantities of polymer from which Indivior contended a person of ordinary skill in the art could calculate the percentage of polymer by weight.

Indivior argued that the polymer weight percentage limitations were supported by the priority application and, therefore, the patent was entitled to that priority date. Dr. Reddy’s contended that since the polymer weight percentage limitations were added later, an intervening patent publication (Myers) was prior art and anticipated the claims. Indivior did not contest that if Myers was prior art, it anticipated the claims. As a result, the Board’s decision on anticipation under 35 U.S.C. §102 turned on the priority analysis which, in turn, hinged on written description. The Board found that the tables disclosed formulations from which the “48.2% wt” could be calculated and, thus, claims reciting that limitation were not anticipated by Myers. However, the Board found that the claimed ranges (i.e., about 40% wt to about 60% wt) were not disclosed in the specification, and those claims were therefore anticipated by Meyers. Indivior appealed the Board’s anticipation finding, and Dr. Reddy’s appealed the no anticipation finding.

The Federal Circuit first analyzed the specification and concluded that there was no written description support for the broader range of “about 40% wt to about 60% wt.” The Court explained that the range was not disclosed in the specification, the specific values of 40% and 60% were not disclosed and there was another “inconsistent” teaching for weights of “at least 25%.” The Court noted that two specific tables in the specification “do not constitute ranges; they are only specific, particular examples. For written description support of a claimed range, more clarity is required.” The Court explained that “[h]ere, one must select several components, add up the individual values, determine the aggregate percentages, and then couple those aggregate percentages with other examples in the [] application to create an otherwise unstated range. That is not a written description of the claimed range.” The Court applied similar analysis in finding lack of written description for other claims reciting a slightly different range. Ultimately, the Court agreed that there was no written [...]

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Federal Circuit Reverses Judge Stark Decision, Finds Computer Network Patent Eligible

by | Dec 9, 2021 |

The US Court of Appeals for the Federal Circuit concluded that a representative claim was directed to a patent-eligible improvement to computer functionality, and therefore reversed a decision authored by Judge Leonard P. Stark as a sitting judge in the US District Court for the District of Delaware. Mentone Solutions LLC v. Digi International Inc., Case Nos. 21-1202, -1203 (Fed. Cir. Nov. 15, 2021) (Moore, C.J.) (nonprecedential).

Mentone Solutions sued Digi International for infringement of Mentone’s patent directed to an improvement in dynamic resource allocation in a GPRS cellular network utilizing shifted uplink status flags (USF). Digi moved to dismiss under Fed. R. Civ. P. 12(b)(6), arguing that the patent claims were not patent eligible under 35 U.S.C. § 101. The district court granted the motion to dismiss, holding that the representative claim was patent ineligible for being “directed to the abstract idea of receiving a USF and transmitting data during the appropriate timeslots.” Mentone appealed.

The Federal Circuit began its analysis with a detailed explanation of the claimed technology and how its use of a “shifted USF” improved the normal operation of the communication system, noting that the shifted USF specifically allowed a mobile station to access previously restricted multi-slot configurations.

Reviewing the district court’s § 101 eligibility determination de novo, the Federal Circuit applied the Supreme Court’s two-step Alice framework, first determining whether the representative claim was directed to an abstract idea. The Court explained that in cases involving software, step one often turns on whether the claim focuses on specific asserted improvements in the computer’s capabilities rather than on an abstract idea which merely invoked a computer as a tool.

The Federal Circuit compared the claim in issue to those at issue in Packet Intelligence v. NetScout Sys., in which the Court found that the challenged claims were directed to a problem unique to computer networks and that the patent specification provided details on how the solution to the network problem was achieved. In Packet Intelligence, the Court looked to the patent specification to inform its understanding of the claimed invention and found that the specification made clear that the claimed invention solved a challenge unique to computers.

Similarly, in this case, the Federal Circuit explained that the representative claim did not recite generalized steps to be performed on a computer but rather a particular method of breaking the timing between the downlink USF and the subsequent uplink transmission. The Court noted that the term “shifted USF” was coined by the inventor, and that the specification and figures informed the Court’s understanding of the term, the claimed invention, the technical solution and how the elements of the claim work together to provide the solution. The Court concluded that the claimed invention solved a challenge unique to computer networks and was directed to patent-eligible improvements in computer functionality.

The Federal Circuit rejected the district court’s characterization of the claim as directed to the abstract idea of “receiving a USF and transmitting data during the appropriate [...]

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European UPC Almost Ready to Launch as Austrian Parliament Approves Ratification

by and | Dec 9, 2021 | ,

Austria became the 13th country to join the protocol on a European Unified Patent Court (UPC) on provisional application (PPA) when the second chamber of the Austrian parliament (Bundesrat) approved the PPA unanimously on December 2, 2021. The Austrian government is expected to formally deposit its ratification shortly.

As expected, Austria followed Slovenia as the last of the 13 EU Member States that were required to ratify in order for the PPA to take effect. This group mandatorily included Germany, Italy and France (i.e., the three Member States in which the most European patents were in effect in 2012).

With the upcoming Austrian ratification, the UPC Preparatory Committee (Committee) will be able to formally start its work. Although there is no timeline set for the initial provisional application stage, the Committee expects that stage to take approximately six to 10 months. As stated in a note published by the Presidency of the Council of the European Union on September 24, 2021, this stage includes the adoption of the secondary legislation of the UPC, including procedures, establishment of a budget, recruitment of judges and administrative staff, election of a president, final configuration and testing of the file management system and ensuring that all IT infrastructure is properly set up and secured. In addition, a working agreement with the European Patent Office (EPO) on patent application and validation remains to be completed. Many observers regard the timeline to complete preparations as challenging, noting that several of these steps will likely require significant discussion.

As noted in the Presidency of the Council’s statement, the UPC will be in force when these preparations are completed, which could be as early as the second half of 2022. The exact start date of the UPC and the Unitary Patent System depends on how long the initial provisional application stage takes. It also depends on when Germany formally deposits its UPC Agreement ratification, which has been withheld so far in order to give the committee time to complete its work. Once the UPC member states agree that the initial provisional application stage is almost complete (likely during the next two to six months), Germany will deposit its UPC Agreement ratification, which will trigger another four-month period before the UPC may officially take its first cases. The UPC will finally open its doors four months after that last instrument deposit. At that point, European patents with unitary effect could be available at the EPO.

Practice Note: Entities doing business in the European Union should check whether their intellectual property strategy is fit for the UPC entering into force and European patents with unitary effect becoming available.



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PTO Publishes Regulations to Implement Trademark Modernization Act

by | Dec 2, 2021 |

The US Patent and Trademark Office (PTO) recently published its final rules implementing provisions of the Trademark Modernization Act of 2020 (TMA). Most changes are effective as of December 18, 2021, but certain changes (i.e., adjustments to the office action response period) won’t go into effect until December 1, 2022. The new regulations are summarized below.

Ex Parte Proceedings

The TMA created two new ex parte proceedings by which any third party (including the PTO director) can seek to challenge registrations for nonuse: Reexamination and expungement.

One of the TMA’s underlying legislative aims was to clean up the “clutter[ed]” register by removing registrations for marks not properly in use in commerce. These new proceedings offer efficient and less expensive alternatives to a cancellation proceeding before the Trademark Trial and Appeal Board (Board).

Reexamination

Any party (or the PTO director) can file a reexamination action to cancel some or all of the goods or services covered by a use-based registration if the trademark was not in use in commerce in connection with those goods or services before (1) the application filing date when the application was based on Section 1(a) (Use in Commerce), or (2) if the application was filed based on Section 1(b) (Intent to Use), the date the amendment to allege use was filed, or the deadline by which the applicant needed to file a statement of use, whichever is later. A reexamination proceeding must be initiated within the first five years of registration.

Expungement

Similarly, an expungement action can be brought by any party (including the PTO director) seeking to cancel some or all of the goods and/or services from a registration based on the registrant never having used the trademark in commerce in connection with the relevant goods/services. An expungement proceeding must be initiated between the third and 10th year of registration. However, until December 27, 2023, an expungement action can be requested for any registration that is at least three years old, regardless of how long it has been registered.

Requirements for Ex Parte Petitions

The final rules detail the requirements for a petition for expungement or reexamination:

  • A $400 fee
  • The US trademark registration number of the registration being challenged
  • The basis for the petition
  • The name and contact information of the petitioner
  • The name and contact information of the designated attorney, if any
  • A list of the goods and services that are subject to challenge
  • A verified statement of the facts, which should include details of the reasonable investigation of nonuse and a “concise factual statement of the relevant basis for the petition”
  • Copies of the supporting evidence with an itemized index.

A reasonable investigation of nonuse will vary depending on the nature of the goods and/or services but “should focus on the mark disclosed in the registration and the identified goods and/or services, keeping in mind their scope and applicable trade channels.” Also, “[a]s a general matter, a single search using an internet search engine likely would not be [...]

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Big Little Lies: Guidelines for Challenging Trademark Acquired Distinctiveness Claims

by | Dec 2, 2021 |

For the second time, the US Court of Appeals for the Federal Circuit examined the standard for demonstrating fraud in a party’s claim of a trademark’s acquired distinctiveness for purposes of registration under Section 2(f) of the Lanham Act. The Federal Circuit found that a party challenging an applicant’s Section 2(f) claim based on substantially exclusive use of that trademark does not need to establish secondary meaning in its own mark to undercut the applicant’s claim of substantially exclusive use. The Court also found that use of the mark by any party, regardless of its relationship to the challenger, may undercut a trademark applicant’s claim of substantially exclusive use. Galperti, Inc. v. Galperti S.R.L., Case No. 21-1011 (Fed. Cir. Nov. 12, 2021) (Taranto, J.)

Galperti S.R.L. (Galperti-Italy) filed a US trademark registration for the mark GALPERTI in 2008. In an effort to overcome the US Patent and Trademark Office’s (PTO) initial refusal to register the trademark as “primarily merely a surname” (and therefore not registrable unless the mark has become distinctive of the applicant’s goods in commerce), Galperti-Italy asserted acquired distinctiveness of the GALPERTI mark under Section 2(f) and stated that the mark had become distinctive of Galperti-Italy’s metal hardware goods through its substantially exclusive and continuous use in commerce for the five years prior to the trademark registration. In 2013, Galperti-USA, a US company unrelated to Galperti-Italy that operates in the similar business of metal flanges and related products, petitioned to cancel Galperti-Italy’s registration on various grounds, including fraud in Galperti-Italy’s claim of substantially exclusive use of the GALPERTI trademark during the years 2002 – 2007. Galperti-USA claimed that it and other third parties also used the mark during that time, undercutting Galperti-Italy’s “substantially exclusive use” claims.

The Trademark Trial and Appeal Board (Board) rejected Galperti-USA’s cancellation claims, including the fraud claim. Galperti-USA filed its first appeal, and the Federal Circuit vacated the Board’s determination that Galperti-USA failed to prove the falsity of Galperti-Italy’s Section 2(f) claim. The Court remanded to the Board to assess whether the other uses of GALPERTI noted by Galperti-USA were significant or inconsequential, which would impact the proof of falsity of Galperti-Italy’s representations to the PTO. On remand, the Board again found that Galperti-USA failed to prove significant—rather than inconsequential—uses of GALPERTI between the years 2002 – 2007 so as to make Galperti-Italy’s representations of “substantially exclusive use” false. Galperti-USA filed its second appeal.

In this appeal, Galperti-USA challenged the Board’s conclusions that (1) Galperti-USA had to show that it acquired secondary meaning in its own GALPERTI trademark during the relevant time period, and (2) Galperti-USA could not undercut Galperti-Italy’s claims of substantially exclusive use with evidence of use by third parties with no privity to Galperti-USA. The Federal Circuit determined that both of the Board’s premises for its fraud analysis were incorrect as a matter of law, and it was therefore unclear whether the Board’s determination was affected by these errors. Taking a closer look at the Board’s conclusions, the Court found that [...]

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Dispute on Arbitrability Needs an Arbitrator

by | Dec 2, 2021 |

The US Court of Appeals for the Federal Circuit found that a license agreement between two parties required an arbitrator to determine whether a dispute between the parties had to be heard by an arbitrator. ROHM Semiconductor USA, LLC v. MaxPower Semiconductor, Inc., Case No. 21-1709 (Fed. Cir. Nov. 12, 2021) (O’Malley, J.)

MaxPower owns patents directed to silicon transistor technology and licensed said patents to ROHM Japan in a technology license agreement (TLA) that contained an arbitration clause applicable to any disputes arising from or related to the TLA, including disputes regarding patent validity. A dispute arose between the parties regarding whether the patents covered certain ROHM Japan products. After MaxPower notified ROHM USA that it was initiating arbitration under the TLA, ROHM USA filed a complaint for declaratory judgment of noninfringement of four MaxPower patents in a California district court. After MaxPower filed a motion to compel arbitration, the district court granted the motion and dismissed the district court action, finding that the TLA “unmistakably delegate[s] the question of arbitrability to the arbitrator.” ROHM USA appealed.

The issue on appeal rested on legal determinations concerning whether the parties agreed to arbitrate arbitrability. The Federal Circuit noted that “courts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clear and unmistakable’ evidence that they did so.” ROHM USA argued that its TLA with MaxPower lacked clear and unmistakable evidence of an agreement to arbitrate arbitrability, and that two provisions of the California Code of Civil Procedure (CCCP) were ambiguous regarding arbitrability. The Court noted that the CCCP sections cited by ROHM were explicitly superseded by another provision of the CCCP for international commercial arbitration.

ROHM USA then challenged the international nature of the case. ROHM USA attempted to position the matter as a dispute between two domestic corporations and stated that ROHM USA was not a signatory to the TLA at issue. The Federal Circuit concluded that ROHM USA clearly was covered by, and obligated under, the TLA, because the TLA explicitly applied to all subsidiaries of ROHM Japan. The Court also noted that the present case was “merely one aspect of a sprawling international dispute” involving MaxPower, ROHM Japan and ROHM USA.

ROHM USA also argued that the meaning of “may” in the CCCP’s statement that “[t]he arbitral tribunal may rule on its own jurisdiction” was ambiguous, but the Federal Circuit found that MaxPower’s interpretation of “may” as permissive (i.e., “may, if arbitrability is disputed”) made sense in the context of the TLA. The Court concluded:

In contracts between sophisticated parties, it is fair to hold the parties to all provisions of their contract, including those incorporated by reference. To hold otherwise would deprive sophisticated parties of a powerful tool commonly used to simplify their contract negotiations—adoption of provisions established by neutral third parties. And to refuse to give effect to the plain language of the contract, both its incorporation of the CCCP and the CCCP’s delegation of arbitrability to an arbitrator, would ignore [...]

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No More Bites at the Apple: Imminent and Non-Speculative Standing Still Required

by | Nov 18, 2021 |

The US Court of Appeals for the Federal Circuit reiterated that a patent challenger did not have Article III appellate standing to obtain review of a final Patent Trial & Appeal Board (PTAB) ruling because the underlying district court proceedings had been dismissed with prejudice after the parties reached a settlement and license agreement. Apple Inc. v. Qualcomm Inc., Case Nos. 20-1683; -1763; -1764; -1827 (Fed. Cir. Nov. 10, 2021) (Prost, J.) (Newman, J., dissenting).

This is the second dispute between Apple and Qualcomm to reach the Federal Circuit. In the first appeal (Apple I), the Court found that Apple did not have standing to maintain an appeal from the PTAB because the parties had entered into a settlement agreement.

As in the earlier case, here Qualcomm asserted patent infringement in district court, and Apple filed petitions for inter partes review of the patent claims that Qualcomm asserted Apple had infringed. The PTAB instituted on four petitions. While the inter partes review proceedings were pending, the parties settled the district court litigation, whereby Apple received a license in exchange for royalty payments to Qualcomm. The parties filed a joint motion to dismiss Qualcomm’s district court action with prejudice, which the district court granted. Ultimately, the PTAB found that Apple failed to prove that the challenged claims were unpatentable. Apple appealed.

As in Apple I, Qualcomm moved to dismiss the appeal for lack of standing. Apple responded by arguing that “[a]lthough Apple continues to disagree with [Apple I], in light of that decision and the . . . order denying Apple’s petition for rehearing en banc, Apple believes that the present appeal can be resolved on the briefs without the need for oral argument.” The parties filed a joint motion to vacate oral argument, but the Federal Circuit instead held a consolidated oral argument. Apple reiterated its disagreement with the Court’s ruling in Apple I but admitted that the operative facts in this appeal were “the same.” The Court found that other than the specific difference of the patents in issue themselves, the operative facts were the same and the alleged failure of proof as to certain patent claims (regarding whether the petitioner had established them to be unpatentable) were the same. The Court further found that any specific patent differences were irrelevant since the settlement and license agreements in each case covered the patents in issue in that case.

Apple raised a “nuance” not “specifically addressed” in Apple I, namely that Apple I “did not explain why the threat of liability, if Apple ceases the ongoing payment and the agreement is terminated, is not a sufficient injury to support standing.” The Federal Circuit was not convinced that this nuance merited a different treatment because:

  • The Court would need to sit en banc to change Apple I, and panels of the Court are bound by stare decisis.
  • Apple acknowledged that this “nuance” was at the core of its denied en banc petition in Apple I.

Accordingly, [...]

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Federal Circuit Clarifies Venue in Hatch-Waxman Case

by | Nov 18, 2021 |

Addressing venue in the context of a Hatch-Waxman case, the US Court of Appeals for the Federal Circuit explained that sending a paragraph IV notice letter to a company in the district is insufficient to establish venue. Celgene Corp. v. Mylan Pharmaceuticals Inc., Case No. 21-1154 (Fed. Cir. Nov. 5, 2021) (Prost, J.) The Court affirmed a district court finding that venue was improper since the defendant had not committed any acts of infringement and did not have a regular and established place of business in the district.

Celgene owns patents related to a multiple-myeloma drug that it markets and sells under the brand name Pomalyst. Mylan Pharmaceuticals Inc. (MPI) submitted abbreviated new drug applications (ANDAs) to the US Food & Drug Administration in order to bring a generic version of Pomalyst to market. Celgene filed suit in New Jersey against MPI and its related companies, Mylan Inc. and Mylan N.V. While Celgene is headquartered in New Jersey, MPI is based in West Virginia, Mylan, Inc. is based in Pennsylvania and Mylan N.V. is based in the Netherlands and Pennsylvania. The district court dismissed the case for improper venue (MPI and Mylan, Inc.) and for failure to state a claim (Mylan N.V.). Celgene appealed.

Citing Valeant v. Mylan, the Federal Circuit reiterated that venue for Hatch-Waxman cases must be predicated on past acts of infringement, and “it is the submission of the ANDA, and only the submission, that constitutes an act of infringement in this context.” Celgene argued that because MPI sent a paragraph IV notice letter from West Virginia to Celgene’s headquarters in New Jersey, acts of infringement occurred in New Jersey. Celgene also argued that since the notice letter was mandatory and the ANDA had to be amended to include proof of delivery, the delivery of the letter was “sufficiently related to the ANDA submission.” The Court disagreed, explaining that venue in Hatch-Waxman cases is focused on the submission of the ANDA itself, including acts involved in the preparation of an ANDA submission. The Court noted these acts must be part of the ANDA submission and that Celgene’s “related to” standard was impermissibly broad. The Court found that since the submission of the ANDA did not take place in New Jersey, venue there was improper.

The Federal Circuit also found that neither MPI nor Mylan, Inc. had a regular and established place of business in New Jersey. Celgene argued both had a regular and established place of business based on places associated with Mylan employees as well as Mylan affiliates. In rejecting these arguments, the Court noted that the employees Celgene pointed to were working remotely from home, and that the employee’s home numbers were contained in business communications. However, the Court noted that there was no indication that the defendants owned, leased or rented the employees’ homes; participated in the selection of the homes; stored inventory there or took any other actions to suggest that they had an intention to maintain a place of [...]

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The Plot Plot Thickens: Trade Secret, Tortious Interference, Fiduciary Duty Claims Survive Motion to Dismiss

by | Nov 11, 2021 |

A judge from the US Court of Appeals for the Third Circuit sitting by designation in the US District Court for the District of Delaware denied a motion to dismiss claims of misappropriation of trade secrets, tortious interference and breach of fiduciary duty, finding that the plaintiff plausibly pled facts supporting each claim. Park Lawn Corp. v. PlotBox Inc., Case No. 20-cv-01484-SB (D. Del. Oct. 29, 2021) (Bibas, J., sitting by designation).

Park Lawn and PlotBox are competitors in the cemetery business. In 2018, Park Lawn began developing software to automate various cemetery management tasks to cut costs. Park Lawn also hoped to generate revenue by licensing the software to competitors. Park Lawn’s CEO, however, had been leaking information to PlotBox about the software, its unique features and Park Lawn’s strategy for licensing. The CEO also helped PlotBox in its efforts to recruit Park Lawn’s chief technology officer, who had been overseeing the software project. The CEO acted despite having signed confidentiality, non-compete and non-solicitation agreements. Park Lawn ultimately discovered the CEO’s involvement with PlotBox and fired him. Soon after, the CEO became PlotBox’s chairman. Park Lawn sued PlotBox for stealing its trade secrets, interfering with the CEO’s employment agreements and helping the CEO breach his fiduciary duty to Park Lawn. PlotBox moved to dismiss.

The district court denied the motion. As to the trade secret claims, PlotBox argued that it did not misappropriate any trade secrets since the CEO never actually gave PlotBox any information. The court found that the complaint alleged otherwise. In particular, the court noted the complaint alleged:

  • The CEO and PlotBox exchanged compromising emails discussing the “status,” “developments in ‘death-tech,’” and the CEO’s interest in becoming PlotBox’s chairman.
  • The CEO invited PlotBox executives to his home to discuss a “Park Lawn Update” and “Technical Presentation.”

The court found that these allegations plausibly alleged that the CEO could have disclosed a trade secret.

PlotBox argued that even if it did learn something from the CEO, it never knew that the CEO obtained that information through improper means. The district court again disagreed, finding that PlotBox should have known something was amiss since the CEO broke a promise to keep quiet. While the court acknowledged that PlotBox may have never read the CEO’s confidentiality agreement, PlotBox should have reasonably inferred that it was improper for the CEO of a competitor to disclose his company’s innovations.

PlotBox also argued for dismissal because any information it received from the CEO did not count as a trade secret under the Defend Trade Secrets Act. Once again, the district court disagreed, explaining that Park Lawn alleged that the information provided was technical in nature (e.g., unique features of software and strategy of selling it to rivals), Park Lawn took adequate measures to protect the information by only allowing a few employees who signed confidentiality agreements to access the software and the information was valuable because it was secret. The court thus permitted the trade secret claim to proceed.

The [...]

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