caltradesecrets.com

Northern District Rejects Motion to Dismiss Misappropriation of Trade Secrets Claim

In Motion to Dismiss on September 15, 2010 at 8:00 pm
Takshashila Academic Complex in IIT Kharagpur
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In Farhang v. Indian Institute Of Technology, Kharagpur, No. C-08-02658 RMW, WL 3504897 (N.D. Cal. Sept. 7, 2010), Defendant Indian Institute of Technology, Kharagpur (“IIT”) moved to dismiss a complaint for misappropriation of trade secrets on the grounds that it failed to allege sufficient facts showing that: (1) the alleged trade secrets were subject to reasonable efforts to maintain their secrecy; (2) IIT misappropriated trade secrets; and (3) plaintiffs suffered harm as a result.  Id. *1.  The court denied the motion.

Reasonable Efforts Allegations

The court rejected IIT’s contention that plaintiffs failed to allege reasonable efforts to maintain the secrecy of their alleged trade secrets because: (1) plaintiff sent a copy of a confidential business plan to the “Incubation Society Board,” which included members that had not agreed to be bound by an NDA; and (2) earlier complaints admit that plaintiff engaged in “high level discussions” with Sun, Microsoft, Motorola, and Sprint.  Id. *5.

The fact that Farhang engaged in ‘high level discussions’ with third parties does not suggest that she disclosed trade secrets to these third parties. As for the disclosure of the confidential business plan to the Incubation Society Board, the TAC alleges that Farhang had been led to believe that the Incubation Society was an IIT entity, and that plaintiffs had entered into an NDA with IIT for the protection of their confidential information.

The court found these allegations sufficient.

Misappropriation Allegations

The court found that the Non-Disclosure Provision of the NDA between the parties “makes clear that IIT’s knowledge of the trade  secrets was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use.” Id. *6.  The court conclude that the complaint contained factual allegations that “allow one to infer that IIT improperly disclosed plaintiffs’ trade secrets to an IBM representative on a technical committee of the Incubation Society who had not agreed to be bound by an NDA.” Id.

Causation of Injuries

IIT argued that the complaint failed to allege facts suggesting that IIT’s actions were a substantial factor in causing plaintiffs’ injuries because it states that Farhang disclosed a confidential business plan to IBM, and earlier complaints admit that Farhang engaged in “high level discussions” with Sun, Microsoft, Motorola, and Sprint.  Id. The court found that “neither these facts nor the existence of competition in the marketplace conclusively establish that IIT’s alleged disclosure of plaintiffs’ trade secrets to an IBM representative was not a substantial factor in causing plaintiffs to lose the opportunity to enter into a deal with Indian Railways.”  Id.

Judge

District Judge Ronald M. Whyte.

By CHARLES JUNG

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