A perennial issue in trade secret litigation is: what factual allegations must be pled regarding what trade secrets are left when there are related patents from the same company on the same technology.  The recent decision Safe Haven Wildlife Removal and Property Management Experts, LLC v. Meridian Wildlife Services LLC provides insight on this issue at the motion to dismiss phase.

In this case, the court inferred differences between the alleged trade secrets and publicly-available patent based on the owner’s general allegations, stating there were differences and that the patent covered “non-proprietary” aspects of Meridian’s technology. Under the permissive Rule 12 standard for review of a complaint, this was enough to survive dismissal and enter discovery.

The case started more than two and a half years ago when Safe Haven sued Meridian for patent infringement. After a transfer of venue and a brief stay, in May 2023 Meridian filed counterclaims asserting infringement of its own two patents and trade secret misappropriation by Safe Haven and its founder Derek Tolley, a former employee of Meridian.

Meridian’s asserted U.S. Patent Nos. 9,943,073 and 10,154,663 are entitled “Indoor Live Bird Capture System” and are directed to a method and device for the safe live capture of a flying bird inside a building using bird netting with adjustable height support poles.

Meridian’s claimed trade secrets include (1) Meridian’s proprietary non-lethal practices, methods, and techniques for removing birds from commercial spaces and its unique application of bird behavior analysis and netting in that process; (2) Meridian’s bird behavior assessment methods, techniques, and processes; and (3) Meridian’s compiled, confidential customer and potential customer database including pricing, confidential contact information, customer buying preferences and history.

Safe Haven and Tolley, in their motion to dismiss, challenged Meridian’s claim of trade secret misappropriation on several grounds, including that Meridian’s trade secrets under categories (1) and (2) relating to the bird behavior assessment and capture techniques were not “secret” because Meridian filed and obtained patents on those assessment and capture techniques. In other words, because the information was subject to patent, it was known to the public and could not be secret.

The court rejected this argument, finding that Meridian explicitly described its patents as covering “non-proprietary” aspects of its bird capture systems. Taking all alleged facts as true and construing the counterclaim in a light most favorable to Meridian, the court inferred that Meridian’s allegations were that “the public filing of the patents did not contain the trade secrets implicated” which therefore does not impact their purported “secrecy.”

The court took a relatively permissive view on any potential overlap between publicly-known information disclosed in a Meridian’s asserted patent and that which it claimed as trade secrets. The court inferred differences based on Meridian’s general allegations that the patents cover “non-proprietary” aspects of its bird capture systems. In effect, the court took Meridian at its word that there is a distinction. As the proceedings unfold, Meridian may be required to more specifically identify the differences between its trade secrets and its patents, or it may be subject to continued challenges from Safe Haven and Tolley.

The Ninth Circuit’s decision in Perrin Bernard Supowitz, LLC v. Morales continues to highlight the high bar necessary for a motion for preliminary injunction, the evidence required to establish irreparable harm, and the limited “abuse of discretion” standard that may be applied during any appeal.  Case No. 23-55189, 2023 WL 1415572 (9th Cir. Feb. 5, 2024).

In Perrin, the Ninth Circuit found no abuse of discretion in the Central District of California’s decision to deny a preliminary injunction that Individual FoodService (“IFS”), a supplier of food service products, sought against two former employees who formed a competing business while still employed at IFS, for misappropriation of a trade secret – IFS’s customer list. 

Although the Court noted that “there was no dispute that IFS’s customer order history qualified as a trade secret,” the Court found that any trade secrets the former employees may have misappropriated from IFS were “old and stale,” and therefore IFS was at no risk of suffering irreparable harm by being “wronged again” by their continued use.  The Court explained that this finding of staleness sufficed to deny the preliminary injunction because such a remedy should only last as long as it is necessary to preserve the rights of the parties and eliminate the commercial advantage gained through misappropriation. 

The Court further reasoned that barring the two former employees from doing business with any customer they serviced while still employed at IFS was a punitive measure, “whereas the purpose of a preliminary injunction is to preserve the status quo.”  The Court explained that by refusing to enjoin activity that potentially extended beyond the two former employees’ trade secret misappropriations, the lower court properly balanced the competing public interests of protecting trade secrets and allowing open competition and employee mobility. 

This case highlights the need to critically assess the bases for a request for preliminary relief when claims of misappropriation of trade secrets are being asserted.  One should be particularly careful about the scope and strength of the trade secrets at issue and be able to articulate the various harms that may be encountered if those secrets are allowed to be misused on an ongoing basis. 

The legal battle between VANDA Pharmaceuticals, Inc. and the United States government provides guidance on the minimum requirements that the government must meet to protect trade secrets provided during the regulatory approval process for pharmaceuticals. The case, which involves alleged unlawful disclosure of trade secrets by government officials to generic drug competitors, presents several issues of first impression.

VANDA did not assert a trade secret misappropriation claim, but rather asserted a Fifth Amendment takings claim. (VANDA’s breach of implied-in-fact contract claim was dismissed). At the core of the case are two of Vanda’s brand-name drugs, Fanapt and Hetlioz. VANDA claimed that Food and Drug Administration (FDA) officials improperly shared the company’s trade secret and confidential manufacturing information with generic competitors by disclosure through the review process for generic drug manufacturers’ proposed competing products. VANDA alleges that the disclosure not only breached the FDA’s duty of confidentiality with VANDA, but also resulted in considerable economic harm to the company and violated the statute preventing the unauthorized disclosure of trade secrets by federal government officials who “obtain that information in the course of their official duties.” 18 USC § 1905.

On January 18, 2024, the court denied the government’s motion to dismiss regarding the Fifth Amendment takings claim. The court stated that the FDA’s review and approval of NDAs falls squarely within the scope of the federal agency’s statutorily authorized duties. Furthermore, unlawful acts are not per se unauthorized for purposes of engaging in a Fifth Amendment takings analysis, and can still be imputed to the government. In other words, even if the government employees’ acts eventually were found to be unlawful, the actions could still constitute unauthorized taking by the agency. The court declined to determine if this was a per se or regulatory taking at this stage.

The Court also left open the question of whether VANDA even had any trade secret or proprietary rights in the disclosed information. As the legal proceedings unfold, VANDA’s confrontation with the U.S. government will impact how trade secrets are handled within the pharmaceutical industry’s regulatory framework, and what remedies are available to future plaintiffs.

  1. The “Elf on a Shelf” has seen a lot from the outside.  Make sure the employment agreement prevents them from sharing within. 
  2. If elves are working remote, make sure they know not to download the gift-wrapping procedure from the Workshop shared drive to personal devices.
  3. Distribute the “Naughty or Nice” list on a need to know basis only.
  4. No photographs of the sleigh allowed. 
  5. Don’t forget about the NDAs with the reindeer handlers and flight navigators. 
  6. Revisit the Workshop’s plan to limit disclosure of confidential information if a human finds their way in. 
  7. Review the applicable law of the North Pole to ensure Confidentiality Agreements are enforceable and do not violate an elf’s right to work at a competitor. 
  8. Do not mark gift wrapped toys as “Confidential,” since those gifts do not contain trade secret or confidential information.
  9. Confirm that trade secret protection is best for the innovations developed—the Workshop likely wants to keep them secret for as long as possible and not the limited lifespan patent protection offers. 
  10. Remind Mrs. Claus not to share information at the New Year’s Magical Creature Gathering— “Loose lips can unwrap gifts!”

Earlier this year the Federal Judicial Conference released its Trade Secret Case Management Judicial Guide.  That paper is over 400 pages but contains comprehensive insights for courts and litigants in the various stages of a trade secret case.  It is required reading for those practicing in the field.


Key Takeaways

  • The new law has the potential to have a great impact on how domestic companies protect their IP, and how foreign companies assess theft of trade secrets.
  • Many crucial issues, however, are left open. The scope and impact of the law will depend heavily on how the executive branch decides to address these issues, if at all.

On January 5, 2023, President Biden signed into law the Protecting American Intellectual Property Act, a new bill aimed at imposing sanctions on foreign individuals and entities involved in the theft of trade secrets belonging to a U.S. individual or entity. The law provides a new mechanism for the U.S., and potentially U.S. companies, to combat theft of trade secrets committed by foreign entities or individuals.

Read more here.

The Sedona Conference’s Trade Secret Working Group recently published an article titled “7 Ways To Approach The Difficulties Of Trade Secret Litigation”. Crowell’s Mark Klapow is a member of the working.

Read more at: https://www.law360.com/articles/1559728/7-ways-to-approach-the-difficulties-of-trade-secret-litigation?copied=1

Crowell & Moring is a proud sponsor of this year’s American Intellectual Property Law Association (AIPLA) Trade Secrets Summit, taking place December 8-9 in Miami, FL.

Please join us for a panel discussion on “Best Practices for Trade Secret Identification in Litigation,” led by Crowell & Moring attorney Mark Klapow on Thursday, December 8 at 9:45 AM (ET).

For more information about the 2022 AIPLA Trade Secret Law Summit and to register, please click here.

A Central District of California court recently denied a defendant’s motion for summary judgment where the defendant argued that the plaintiff’s claims for trade secret misappropriation were barred by the applicable statute of limitations. The court determined that the statute of limitations did not bar the plaintiff’s claim because a reasonable jury could find that the plaintiff did not have reason to believe that all of the elements of its trade secret misappropriation claim were met prior to the bar date. In particular, the court concluded that a reasonable jury could find that the plaintiff did not have reason to believe that the defendant possessed the required knowledge of the trade secrets themselves, despite having knowledge that the product was manufactured using the trade secrets.

Continue Reading Pinkerton Tobacco v. Kretek Int’l: Defendant’s Statute of Limitations Argument Goes Up in Smoke

A judge in the Northern District of Texas recently declined to dismiss a lawsuit, CiCi Enterprises LP et al. v. Mucho Pizza, LLC et al., alleging a pizza franchisee failed to maintain the confidentiality of Texas pizza chain CiCi Enterprises LP’s trade secrets after two affiliates inked a development deal with competitor, Papa John’s. This case highlights the importance of comprehensive agreements and the reduction of agreement modifications to writing.

Beginning in 2010, CiCi Enterprises[1] and Mucho Pizza, LLC[2] entered into 17 franchise agreements, which provided Mucho Pizza access to CiCi Enterprises’ trade secrets and other confidential information, including confidential financial and store performance information, pricing, supplier contacts, strategic marketing research, and sales techniques. Each agreement required Mucho Pizza commit to not communicating, divulging, or otherwise using for another party’s benefit these trade secrets and confidential information. The agreements also required Mucho Pizza not to directly or indirectly hold an interest in a competitive pizza restaurant during or immediately after the agreements’ term. These agreements were signed by Mucho Pizza and Mucho Pizza’s personal guarantor, Guillermo Perales. CiCi Enterprises asserts both were bound by the agreements’ terms.

Continue Reading Trade Secrets Food Fight Spotlights Importance of Comprehensive Agreements