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Oakwood Laboratories, LLC v. Thanoo, 19-3707 (3rd. Cir. Jun. 8, 2021)
Pleading your trade secrets in a trade secret dispute can present a dilemma for the trade secret holder. Plead too few details, and the plaintiff risks dismissal or delay in the litigation. Plead too many, and the complaint itself can destroy the very trade secrets that plaintiff is trying to protect. Reversing a fourth dismissal of a DTSA complain for lack of specificity, in Oakwood Laboratories, LLC v. Thanoo, 19-3707, the Third Circuit attempted to clarify the pleading requirements for claims made under the Defend Trade Secrets Act, 18 U.S.C. §1836(b).
“[T]he subject matter of the trade secret must be described ‘with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.’ Slip. Op. at 26.
In its decision, the Court recognized the difficulty that plaintiffs face when pleading their case:
"[I]f the trade secret plaintiff is forced to identify the trade secrets at issue without knowing which of those secrets have been misappropriated, it is placed in somewhat of a `Catch-22': Satisfying the requirement of detailed disclosure of the trade secrets without knowledge [of] what the defendant is doing can be very difficult. If the list is too general, it will encompass material that the defendant will be able to show cannot be trade secret. If instead it is too specific, it may miss what the defendant is doing." Id. at 28, internal citations omitted.
Finding that the plaintiff’s allegations were sufficiently detailed as to the existence of its trade secrets, the Court also clarified that one need not plead that a trade secret has been incorporated into a specific product to survive dismissal. Though the DTSA does not define the term “use,” the Court turned to the broad definitions found in the Restatement, and in interpretation by numerous other courts under the UTSA for context.
“In accordance with its ordinary meaning and within the context of the DTSA, the ‘use’ of a trade secret encompasses all the ways one can take advantage of trade secret information to obtain an economic benefit, competitive advantage, or other commercial value, or to accomplish a similar exploitative purpose, such as "assist[ing] or accelerat[ing] research or development.” Id. at 36. Though the Oakwood decision recognizes that courts have wide discretion in weighing the sufficiency of a complaint, it does shed some light on what types of allegations will survive dismissal in a DTSA case. RETURN TO INSIGHTS
“[T]he subject matter of the trade secret must be described ‘with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.’ Slip. Op. at 26.
In its decision, the Court recognized the difficulty that plaintiffs face when pleading their case:
"[I]f the trade secret plaintiff is forced to identify the trade secrets at issue without knowing which of those secrets have been misappropriated, it is placed in somewhat of a `Catch-22': Satisfying the requirement of detailed disclosure of the trade secrets without knowledge [of] what the defendant is doing can be very difficult. If the list is too general, it will encompass material that the defendant will be able to show cannot be trade secret. If instead it is too specific, it may miss what the defendant is doing." Id. at 28, internal citations omitted.
Finding that the plaintiff’s allegations were sufficiently detailed as to the existence of its trade secrets, the Court also clarified that one need not plead that a trade secret has been incorporated into a specific product to survive dismissal. Though the DTSA does not define the term “use,” the Court turned to the broad definitions found in the Restatement, and in interpretation by numerous other courts under the UTSA for context.
“In accordance with its ordinary meaning and within the context of the DTSA, the ‘use’ of a trade secret encompasses all the ways one can take advantage of trade secret information to obtain an economic benefit, competitive advantage, or other commercial value, or to accomplish a similar exploitative purpose, such as "assist[ing] or accelerat[ing] research or development.” Id. at 36. Though the Oakwood decision recognizes that courts have wide discretion in weighing the sufficiency of a complaint, it does shed some light on what types of allegations will survive dismissal in a DTSA case. RETURN TO INSIGHTS