[co-author: Kyla Vick]
On May 11, 2017, a Northern District of Illinois federal court ruled that a Plaintiff properly alleged misappropriation under both the federal Defend Trade Secrets Act (DTSA) and the Illinois Trade Secrets Act (ITSA) in a case where the employee downloaded files onto a personal thumb drive and then went to a competitor.
Plaintiff Molon Motor and Coil Corporation (“Molon”) contended that its former Head of Quality Control, Manish Desai, downloaded confidential data onto a portable data drive before leaving Molon for a competitor, Nidec Motor Corporation (“Nidec”). Molon further contended that Desai provided the confidential data to Nidec and Nidec then used (and continues to use) the confidential data to compete with Molon. Nidec filed a Motion to Dismiss Molon’s Complaint against Nidec (Molon did not sue Desai) on the basis that Molon could not state a claim under the DTSA or the ITSA because a) Desai downloaded the trade secrets while still employed by Molon, and b) Molon did not make a plausible allegation that Nidec used the trade secrets.
Specifically, Nidec argued that because Desai downloaded the files while still employed by Molon, Desai did not “misappropriate” the trade secrets for purposes of the DTSA and ITSA. Molon countered by citing the definitions of “misappropriation” and “improper means” from the trade secret statutes, which state that “misappropriation” is “acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means”. The statutes further state that “improper means” includes “breach or inducement of a breach of a duty to maintain secrecy”. Molon argued that Desai’s actions of downloading files while still employed by Molon qualified as a breach of a duty to maintain secrecy. The Court agreed with Molon, and in doing so, found that a confidential relationship and duty to maintain secrecy was established by Desai’s employment agreement with Molon.
The Court also gave Molon some wiggle room by allowing Molon to use the “inevitable disclosure” doctrine to show that Nidec possesses, and is using, Molon’s trade secrets. Under the inevitable disclosure doctrine, a plaintiff can “prove a claim of trade secret misappropriation by demonstrating that defendant’s new employment will inevitably lead him to rely on the plaintiff’s trade secrets.” PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995). Here, the Court found that Molon’s Complaint should survive a Motion to Dismiss because, at the pleading stage, it is enough for a plaintiff/Molon to allege, “based upon information and belief,” that a competitor is using the trade secrets stolen by a former employee.
However, the Court also emphasized that “Molon will ultimately bear the burden of proving—not just alleging—enough facts such that disclosure is not premised on a mere unsubstantiated fear.” In other words, Molon has won a battle, not the war; and Molon now has to show (presumably through discovery) that Nidec did, in fact, receive Molon’s trade secrets if Molon is to ultimately prevail in this litigation.
