Pleading Trade Secret Misappropriation Requires Detail, Even If Not All Support Needed for the Plaintiff to Ultimately Prevail

In Vesta Corp. v. Amdocs Mgmt., No. 3:14-cv-1142-HZ (D. Or. Jan. 13, 2015), the plaintiff survived a Rule 12(b)(6) motion to dismiss a claim of alleged trade secret misappropriation.  The plaintiff alleged that the defendant stole its confidential information during a joint development effort, and used that information to develop a competing product.

Both the plaintiff and defendant provided services to mobile phone network operators (MNOs). Metro PCS, a large MNO, was the target customer for collaboration efforts between the two parties. The plaintiff specialized in electronic payment solutions and fraud prevention technology that assist the MNO in receiving payments from the end-user of the mobile device. The defendant offered mobile telephone billing software and services as a billing platform that maintains account status and account information for the MNO and its customers. MNOs “generally require both payment solutions and billings platforms to serve their customers.” With this premise in mind, the parties underwent a joint effort to “integrate their services and platforms in order to appeal to their shared customer base.” After the relationship ended, the plaintiff alleged that the defendant used its confidential information to develop and sell a competing product to Metro PCS.

A threshold question was what state’s law governed the plaintiff’s trade secret misappropriation claim. The parties had signed Non-Disclosure/Confidentiality Agreements which clearly stated that substantive legal issues regarding alleged breach of contract claims were governed by New York law. However, the NDAs were not broad enough to make provisions for trade secret misappropriation claims which are non-contractual and “arise in tort.” Therefore, the tort claim in this instance was “decided according to the law of the forum state,” Oregon in this case.

Under Oregon’s Uniform Trade Secrets Act, ORS 646.460, three requirements must be demonstrated by the plaintiff in order to establish a claim. First of these requirements is to show that the “subject of the claim qualifies as a statutory trade secret.” Here, the complaint presented detailed architectural drawings and diagrams that showed how the plaintiff would design its “payment solution” specifically for Metro PCS, “the exact same client to whom Defendants provided a payment solution.” The complaint also described “detailed statistical information” compiled over a 20 year period used in developing fraud detection algorithms. The court concluded that the level of significance of this information “reflects the kind of compilation that courts in this district . . . have recognized as a trade secret.”

The second requirement for pleading trade secret misappropriation is that the “plaintiff employed reasonable measures to maintain the secrecy of its trade secrets.” Here, the plaintiff utilized NDAs, enforced badge access policies, maintained “locked facilities, computers, and networks,” and also alleged that the defendants’ employees signed NDAs upon each of their visits to the plaintiff’s headquarters. The court held that the plaintiff “sufficiently alleges that it maintained the secrecy of its information by safeguarding the information from public knowledge.”

The third requirement for pleading trade secret misappropriation in Oregon is to demonstrate the “conduct of the defendants constitutes statutory misappropriation.” The Oregon statute defines “misappropriation” as breaching a duty to maintain secrecy or limit the use of known trade secrets of another without consent. The plaintiff alleged that “but for” the theft of its confidential information, the defendants “would not have been able to develop, sell and launch its own payment solution platform for Metro PCS” in the timeframe required by Metro PCS. The court found that the complaint as written “sufficiently alleges misappropriation,” but the plaintiff may need to “provide more support for its allegations in order to ultimately prevail.”

Thanks to law clerk Robert Billings for his help with this post.