On October 29, 2021, the District of Delaware allowed Park Lawn Corporation to continue with its trade secret claims against fellow cemetery management competitor, PlotBox, Inc., holding that the competitor only needed to have a “reason to know” improper means were used to access alleged trade secrets, based on the position of the individual feeding them the secrets.
Both Park Lawn and PlotBox develop technological solutions to manage cemetery plot placement methods, using software to facilitate mapping of gravestones electronically. This software helps automate cemetery design plans and expedites managerial tasks. The lawsuit also states that Park Lawn planned to license the trade secrets in the software to others in the industry. This plan was eventually disrupted by the Chief Executive Officer of Park Lawn, who was allegedly feeding the trade secret information to PlotBox, which also tried to hire on Park Lawn’s Chief Technology Officer. Park Lawn sued under the Defend Trade Secrets Act (“DTSA”).
PlotBox argues that it did not misappropriate trade secrets, because even if they did learn something from the CEO, it never knew it got trade secret information by improper means as required under the DTSA. PlotBox says they had no awareness of a confidentiality or non-disclosure agreement, or that the information provided to them was a trade secret. However, in denying the motion to dismiss the trade secret claims, the Court relied on PlotBox having a reasonable inference that the CEO of a competitor company would be disclosing secrets improperly. PlotBox “should have known something was amiss” when the CEO broke his promise to his company to keep quiet. Even without direct evidence of the competitor knowing improper means were used, this inference alone, drawn in favor of the moving party at this stage, allows the claims to continue. As the Court put it: “True, PlotBox might never have read the CEO’s confidentiality agreement. But how often does Ford rush to tell Toyota about its innovations?”.
This case serves as a reminder to trade secret holders that one can survive a motion to dismiss a DTSA trade secret misappropriation claim even without documentary evidence that the trade secrets were transferred to a competitor by improper means. The reasonable inference standard may prove to be a useful tool to bring a trade secrets misappropriation claim, depending on the fiduciary duties and position of the provider of trade secrets to a competitor.