Thinly Pled Allegations of Trade Secret Misappropriation under DTSA Are Vulnerable to Dismissal

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A dismissal with prejudice is a plaintiff’s worst fear realized. When it comes to alleging a proper claim for trade secret misappropriation, the Western District of Kentucky recently reminded plaintiffs just how critical it is to “kick the tires.” In Raben Tire Co., LLC v. McFarland, Case No. 5:16-cv-00141 (W.D. Ken.), plaintiff Raben Tire Co., LLC, alleged misappropriation of trade secrets against two former employees under the Defend Trade Secrets Act of 2016 (“DTSA”), 18 U.S.C. § 1831 et seq., and the Kentucky Uniform Trade Secrets Act (“KUTSA”), Ky. Rev. Stat. § 365.880 et seq., along with a handful of additional common-law claims.

Pursuant to Federal Rule of Civil Procedure 12(b)(6), however, plaintiff found itself on the wrong side of a motion to dismiss with prejudice for failing to state the most basic of its claims, namely, how the alleged misappropriated information qualified as a “trade secret” under federal law. In its decision, the court reminded plaintiffs that “Congress adopted the DTSA to provide a single, national standard for trade secret misappropriation with an eye toward promoting clear rules and predictability in trade-secrets litigation.” While the DTSA defines a trade secret, in part, as information that the owner “has taken reasonable measures to keep . . . secret,” the court found that Raben Tire Co.’s complaint was entirely devoid of any allegations of how it protected the information in question from dissemination. The court found that making boilerplate assertions that the information in question was “confidential and proprietary” was not sufficient to establish that Raben Tire Co. took the necessary steps to maintain its secrecy. This oversight proved fatal to plaintiff’s claim and is a concrete warning that thinly pled allegations of trade secret misappropriation under the DTSA will be vulnerable to early dismissal.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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