Virginia Lawyers Weekly VA Lawyers Weekly
A company’s claims that a competitor hired its employees and induced them to breach non-disclosure agreements, or NDAs, to misappropriate trade secrets can move forward, the Eastern District of Virginia has held.
U.S. District Judge Rossie D. Alston Jr. said the complaint contained “the required factual specificity necessary for this Court to infer that Plaintiffs’ Proprietary Information may qualify for trade secret protection.”
The plaintiffs’ trade secrets and contract breach claims survived the defendants’ motion to dismiss, but Alston found the inter-corporate immunity doctrine barred conspiracy claims. He also denied the plaintiffs’ request for an injunction.
The opinion is Apex Advanced Technology, LLC, et al., v. RMSI Private Limited, et al. (VLW 022-3-456).
Misappropriation
Cadsys Technologies and Apex Advanced Technology are U.S. companies owned by Cadsys (India) Limited, an Indian company. The plaintiffs are providers of geospatial information systems, or GIS, to telecommunications and wireless carrier clients.
RMSI Private Limited conducts business in the U.S. through RMSI-North America, or RMSI.
The plaintiffs developed proprietary information they use to sell technical and engineering services. This information includes automated processes and a data management tool that was sold to AT&T.
In 2016, Apex purchased assets from a company that included rights to an NDA with RMSI. Apex later disclosed to RMSI details about its customer relationship with AT&T. According to the plaintiffs, the 2016 NDA was never terminated.
Apex owns the rights to the plaintiffs’ proprietary information and requires that technical staff execute NDAs.
In December 2018, the defendants began soliciting and hiring members of Apex’s technical staff. In February 2021, the plaintiffs asked the defendants to cease and desist from acquiring, using, or disclosing Apex’s proprietary information or hiring their employees. The defendants allegedly responded with “scathing attacks and name-calling.”
The plaintiffs filed suit for alleged violations of the Defend Trade Secrets Act, or DTSA, and the Virginia Uniform Trade Secrets Act, or VUTSA, as well as breach of contract and conspiracy.
They claimed the defendants knowingly induced Apex employees to disclose proprietary information, used that information for financial gain and solicited customers in direct competition with the plaintiffs.
The defendants moved to dismiss the claims for lack of personal jurisdiction and failure to state a claim.
Forum selection
The defendants said there was no basis for asserting general or specific personal jurisdiction because its U.S. subsidiary didn’t have minimum contacts with Virginia. The plaintiffs, however, assert that all parties were bound by the 2016 NDA.
Alston noted that the NDA included a forum-selection clause that required disputes to be litigated in Virginia. Further, under federal law “a forum-selection clause is prima facie valid and should be enforced unless enforcement is ‘unreasonable’ under the circumstances.”
Here, the forum-selection clause was not unreasonable, the judge said.
Alston found no suggestion that the clause was induced by fraud or over-reaching; that the defendants would be deprived of their day in court, that Virginia law was unfair; or that enforcement of the clause would contravene strong public policy.
He also declined to find that the NDA itself was no longer in effect or that the defendants were exempt from the forum-selection clause.
Trade secrets
A misappropriation of trade secrets claims required “(1) the information in question must constitute a trade secret, and (2) that trade secret must have been misappropriated,” Alston said.
He added “‘[t]he case law is clear that just about anything can constitute a trade secret under the right set of facts,’ so long as the information (i) has independent economic value by virtue of its being a secret and (ii) is subject to reasonable efforts to maintain that secrecy.”
Here, Alston found that the plaintiffs had identified specific proprietary information that qualified for trade secret protection under the DTSA and VUTSA.
The relevant statutes “recognize misappropriation of trade secrets under two sets of circumstances: (1) improper acquisition of a trade secret; or (2) disclosure or use of a trade secret,” the judge said.
Additionally, the defendants must employ improper means with knowledge or reason to know that their knowledge of the trade secret was “either acquired under circumstances giving rise to a duty to maintain its secrecy or derived through a person owing such a duty to Plaintiffs.”
Alston found that the plaintiffs’ allegations plausibly alleged misappropriation of trade secrets.
Remaining claims
Alston rejected the defendants’ arguments that the conspiracy claims should be dismissed either for lack of valid claims under the DTSA and VUTSA or that because the statutes preempt any common law claim based on misappropriation of trade secrets.
However, he concluded that the intra-corporate immunity doctrine “generally precludes such conspiracy claims, and Plaintiffs … fail to explain why the doctrine should not bar the claims asserted here.”
Alston said that, at the motion to dismiss stage of the proceedings, all parties were presumed to be bound by the NDA, and that the plaintiffs had plausibly plead violations of the NDA’s non-compete and non-solicitation clause.
However, he denied the plaintiffs’ request for injunctive relief.
