Molon Motor and Coil Corporation et al v. Merkle-Korff Industries, Inc. et al
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang. For the reasons stated in the Opinion, Defendant Nidec's motion to dismiss Counts 3 and 4 67 is denied. The status hearing of 06/01/2017 is accelerated to 05/18/2017 at 9:1 5 a.m., to discuss the discovery plan on the trade secrets claims. The parties also should immediately start engaging in settlement negotiations, now that both the summary judgment motion and the dismissal motion have been decided.Emailed notice(slb, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
MOLON MOTOR AND COIL
NIDEC MOTOR CORPORATION,
No. 16 C 03545
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
Molon Motor and Coil Corporation sued Nidec Motor Corporation for, among
other things, violation of the federal Defend Trade Secrets Act of 2016, Pub. L. No.
114-153, 130 Stat. 376, and the Illinois Trade Secrets Act, 765 ILCS 1065/1 et seq.
R. 64, Third Am. Compl.1 Molon contends that its former Head of Quality Control,
Manish Desai, copied confidential data onto a portable data drive before taking up a
new job at Molon’s competitor, Merkle-Korff (which eventually became Nidec). Id.
¶¶ 58-65. Molon further alleges that Nidec, a direct competitor, has used and
continues to make use of the secrets that Desai downloaded. Id. ¶¶ 66-67. Nidec
now moves to dismiss the trade secrets claims (which are the only remaining counts
of the complaint),2 arguing that there was nothing unlawful about Desai copying the
files while he was still a Molon employee and that there is no plausible allegation
to the docket are indicated by “R.” followed by the docket entry.
the operative complaint (the Third Amended Complaint), Molon also brought two
counts of patent infringement, but one of those counts (Patent No. 6,465,915) was defeated
on summary judgment, R. 78, 3/29/17 Opinion and Order, and the other (Patent No.
D451,072) was dismissed through a joint stipulation, R. 75, Joint Stipulation of Dismissal
of Design Patent Claims.
that Nidec has used the trade secrets contained on the thumb drive.3 R. 68, Nidec’s
Mot. to Dismiss, at 1-2, 6-7. For the reasons stated below, Nidec’s motion is denied.
For purposes of this motion, the Court accepts as true the allegations in the
Third Amended Complaint. Erickson v. Pardus, 551 U.S. 89, 94 (2007). Nidec is the
successor corporation to Merkle-Korff Industries, Inc., which in 2016 merged with
Nidec Kinetek Corporation. Third Am. Compl. ¶ 4. Nidec Kinetek then ultimately
merged with Nidec Motor Corporation, the defendant in this case. Id.
Molon makes bespoke fractional and sub-fractional electric motors and
gearmotors for customers across various industries, such as manufacturers of
vending machines, refrigerator ice makers, and breast pump motors. Third Am.
Compl. ¶¶ 55, 66. It also makes standardized, off-the-shelf motors that are widely
distributed. Id. ¶ 66. According to Molon, Nidec competes in precisely the same
industries, battling for market share in both the custom and standardized motor
Before June 2013, Manish Desai served as Molon’s Head of Quality Control.
Third Am. Compl. ¶ 58. In this position, he oversaw product liability testing,
coordinated the production of engineering data, and processed quality assurance
test results as well as other compliance paperwork. Id. ¶ 61. As a condition of
getting that job, he signed an employment agreement which included at least one
Court has subject-matter jurisdiction over the federal trade secrets claims
under 28 U.S.C. § 1331 and 1338(a). Supplemental jurisdiction applies over the state trade
secrets claim, 28 U.S.C. § 1367, because the state-law claim is part of the same case or
controversy as the federal trade secrets claim.
restrictive covenant banning the unauthorized use of company data. Id. ¶¶ 57, 60.
According to Molon, Desai’s job put him in a position to access “all of Molon’s trade
secrets and confidential business information” through his work computer. Id. ¶ 64.
In June 2013, Desai left Molon for Nidec. Third Am. Compl. ¶ 58. But before
leaving, he allegedly copied dozens of Molon’s engineering, design, and quality
control files onto a personal Kingston portable data drive.4 Id. ¶ 65; R. 65, Appendix
to Third Am. Compl. Desai downloaded motor design and engineering drawings,
motor production inspection protocols, data on motor production tools, quality
control test protocols, quality control testing data and reports, and communication
files with customers. Appendix to Third Am. Compl.5
After making these data transfers to his own thumb drive, Desai then moved
to a new job at Merkle-Korff (Nidec’s predecessor), taking up responsibilities similar
to those he had at Molon. Third Am. Compl. ¶ 67. Without identifying specific
instances, Molon alleges (on information and belief) that Desai “unlawfully
disclosed” the trade secrets he took from the memory stick to Nidec and that Nidec
used and continues to use that information. Id. ¶¶ 59, 67, 71, 79.
Nidec’s dismissal motion primarily argues that Molon has failed to state a
plausible claim because Desai’s actions, even as alleged, do not constitute
“misappropriation” under either the Illinois Trade Secrets Act or the Defend Trade
Secrets Act of 2016. Nidec’s Mot. to Dismiss at 1-2, 6. Nidec goes on to contend that
is emphatic that its company does not use portable data drives. Third Am.
Compl. ¶¶ 56, 69.
5In its Appendix to the Third Amended Complaint, Molon provides file names and
brief descriptions for the data copied by Desai.
there is no ground for inferring that it accessed or used any of the information Desai
pulled. Id. at 7-9. And finally, Nidec argues that even if Desai did take trade secrets
and gave them to Nidec, all of that occurred before the effective date of the Defend
Trade Secrets Act, so at least the federal claim must be dismissed. Id. at 9-10.
II. Standard of Review
Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need
only include “a short and plain statement of the claim showing that the pleader is
entitled to relief.” Fed. R. Civ. P. 8(a)(2). This short and plain statement must “give
the defendant fair notice of what the … claim is and the grounds upon which it
rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original)
(internal quotation marks and citation omitted). The Seventh Circuit explained that
this rule “reflects a liberal notice pleading regime, which is intended to ‘focus
litigation on the merits of a claim’ rather than on technicalities that might keep
plaintiffs out of court.” Brooks v. Ross, 578 F.3d 574, 580 (7th Cir. 2009) (quoting
Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002)).
“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to
state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of
Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “[A] complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,
550 U.S. at 570). These allegations “must be enough to raise a right to relief above
the speculative level.” Twombly, 550 U.S. at 555. Allegations that are entitled to the
assumption of truth are those that are factual, instead of mere legal conclusions.
Iqbal, 556 U.S. at 678-79.
In Count 3 of its Third Amended Complaint, Molon accuses Nidec of violating
the federal Defend Trade Secrets Act of 2016. Third Am. Compl. ¶¶ 55-72. And in
Count 4, Molon contends Nidec also ran afoul of the Illinois Trade Secrets Act. Id.
¶¶ 73-81. For both of these claims, Nidec says that the complaint does not
adequately allege (1) that Desai downloaded the information via “improper means”
under the relevant statute; or (2) that Nidec has used the alleged trade secrets. The
federal and Illinois claims can be discussed together because the pertinent
definitions of the two acts overlap.
The Defend Trade Secrets Act of 2016 allows “[a]n owner of a trade secret
that is misappropriated … [to] bring a civil action … if the trade secret is related to
a product or service used in, or intended for use in, interstate or foreign commerce.”
18 U.S.C. § 1836(b)(1).6 For the purposes of this Act, “misappropriation” is either:
“(A) 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” or “(B) disclosure or
“trade secret” for this Act is defined as “all forms and types of financial, business,
scientific, technical, economic, or engineering information, including patterns, plans,
compilations, program devices, formulas, designs, prototypes, methods, techniques,
processes, procedures, programs, or codes, whether tangible or intangible, and whether
or how stored, compiled, or memorialized physically, electronically, graphically,
photographically, or in writing if—(A) the owner thereof has taken reasonable measures to
keep such information secret; and (B) the information derives independent economic value,
actual or potential, from not being generally known to, and not being readily ascertainable
through proper means by, another person who can obtain economic value from the
disclosure or use of the information.” 18 U.S.C. §1839(3).
use of a trade secret of another without express or implied consent” under certain
conditions.7 Id. § 1839(5). “[I]mproper means,” in turn, is defined here as “theft,
bribery, misrepresentation, breach or inducement of a breach of a duty to maintain
secrecy, or espionage through electronic or other means.” Id. § 1839(6).8
Similarly, the Illinois Trade Secrets Act authorizes a civil action for “[a]ctual
or threatened misappropriation[s]” of trade secrets.9 The Illinois Act defines
“misappropriation,” “improper means,” and “trade secrets” very similarly, and for
purposes of this dismissal motion, the slight differences are immaterial.”10 Compare
person will be liable for misappropriation by disclosure if the person either:
(i) used improper means to acquire knowledge of the trade secret;
(ii) at the time of disclosure or use, knew or had reason to know that the knowledge
of the trade secret was—
(I) derived from or through a person who had used improper means to acquire
the trade secret;
(II) acquired under circumstances giving rise to a duty to maintain the
secrecy of the trade secret or limit the use of the trade secret; or
(III) derived from or through a person who owed a duty to the person seeking
relief to maintain the secrecy of the trade secret or limit the use of the trade
(iii) before a material change of the position of the person, knew or had reason to
(I) the trade secret was a trade secret; and
(II) knowledge of the trade secret had been acquired by accident or mistake.
18 U.S.C. § 1839(5).
8The “improper means” definition section also explicitly specifies that “reverse
engineering, independent derivation, or any other lawful means of acquisition” do not count
as improper means. 18 U.S.C. § 1839(6).
9On injunctive relief: “Actual or threatened misappropriation may be enjoined.” 765
ILCS 1065/3(a). On damages: “In addition to the relief provided for by Section 3, a person is
entitled to recover damages for misappropriation. Damages can include both the actual loss
caused by misappropriation and the unjust enrichment caused by misappropriation that is
not taken into account in computing actual loss.” Id. § 1065/4(a).
10For the Illinois Act, trade secret is “information, including but not limited to,
technical or non-technical data, a formula, pattern, compilation, program, device, method,
technique, drawing, process, financial data, or list of actual or potential customers or
suppliers, that: (1) is sufficiently secret to derive economic value, actual or potential, from
765 ILCS 1065/2(a), (b), (d), with 18 U.S.C. § 1839(3), (5), (6). For both the federal
and the Illinois trade secret statutes, then, the question is whether Molon has
plausibly alleged that (1) there are trade secrets (2) that were misappropriated by
A. Trade Secrets
For purposes of the dismissal motion, Nidec does not directly contest that
what Desai allegedly put onto a thumb drive could have contained trade secrets.
Nidec acknowledges that, in a sealed appendix to the Third Amended Complaint,
Molon has added details—file names and summaries—of the alleged stolen trade
secrets, but Nidec suggests that these additions do not ultimately change the fact
that there remains no “plausible basis for alleging that [Nidec] accessed or used any
alleged trade secrets.” Nidec’s Mot. to Dismiss at 6.
Although not directly contested by Nidec, for the sake of completeness, the
Court notes that Molon did sufficiently allege that the downloaded files do comprise
trade secrets. To be sure, alleging what trade secrets were misappropriated does
require some concreteness and specificity at this stage, but the claims do not need to
be as detailed as when the case is going to trial. See AutoMed Techs., Inc. v. Eller,
160 F. Supp. 2d 915, 920-21 (N.D. Ill. 2001); Mobile Mark, Inc. v. Pakosz, 2011 WL
3898032, at *1 (N.D. Ill. Sept. 6, 2011). Molon’s Appendix to the Third Amended
Complaint—which lists out file names and summaries of motor design and
engineering drawings; protocols for motor production inspection; production data;
not being generally known to other persons who can obtain economic value from its
disclosure or use; and (2) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality.” 765 ILCS 1065/2(d).
quality control protocols and testing data; and customer correspondence—provides
more than enough detail to plausibly allege that what was downloaded comprises
trade secrets. Appendix to Third Am. Compl. Beyond this, Nidec will be free to
demand more specifics in interrogatories, and additional discovery will flesh out
further facts. But at this dismissal-motion stage, the allegations plausibly assert
that Manish Desai downloaded trade secrets.
The next question arises from the second half of the federal and Illinois trade
secrets acts’ “misappropriation” definition: did Nidec know or have reason to know
that the trade secret was acquired by “improper means”? Nidec argues that Desai’s
behavior does not fit this definition. Nidec’s Mot. to Dismiss at 6. It contends that
Desai’s access to the files in the Molon computer system was authorized. Id. To
Nidec’s way of thinking, nothing improper happened because Desai was still an
employee when he put the data on the thumb drive, and used his normal username
and password to get access. Id. So even if what Desai took was ultimately a trade
secret, he did not, in Nidec’s view, take it through “improper means.” For its part,
Molon disagrees. Citing the definition of “improper means” from the trade secret
statutes, it argues that Desai’s actions qualify as a “breach or inducement of a
breach of a confidential relationship or other duty to maintain secrecy or limit use .”
R. 72, Molon’s Resp. Br. at 3-4. This confidential relationship and duty to maintain
secrecy, Molon avers, was established by Desai’s employment agreement with
Molon. Id. at 4 (quoting Third Am. Compl. ¶ 62 (“Mr. Desai agreed that he would
follow this and other restrictive covenants regarding Molon’s trade secrets and
confidential business information during his employment with Molon and for as
long as the confidentiality of trade secrets and proprietary business information
were to be maintained under applicable law.”)).
Misappropriation can manifest in different ways, but according to the
statutory definitions, the method of acquisition needs to be “improper”: “theft,
bribery, misrepresentation, breach or inducement of a breach of a duty to maintain
secrecy, or espionage through electronic or other means.” 18 U.S.C. § 1839(6).11 If
there is nothing “improper” to point to, then the trade secret claim must fail.
Triumph Packaging Grp. v. Ward, 834 F. Supp. 2d 796, 813 (N.D. Ill. 2011)
(rejecting a trade secrets claim in part because Plaintiff “does not argue, and has
presented no evidence, that [Defendant] obtained [Plaintiff’s] trade secrets through
Through his employment agreement with Molon, Desai was on notice that he
was not to use his company’s confidential information for any purpose other than
his work there. Third Am. Compl. ¶ 62 (“In the restrictive covenants in his
employment agreement, including those concerning trade secrets and confidential
information, Mr. Desai agreed that Molon’s trade secrets and confidential
information … were Molon’s sole and exclusive property.”). Molon alleges that it has
adopted policies and procedures to protect its trade secrets, and insists that it does
language of Illinois’ trade secret statute differs slightly: “theft, bribery,
misrepresentation, breach or inducement of a breach of a confidential relationship or other
duty to maintain secrecy or limit use, or espionage through electronic or other means.” 765
not provide or use memory sticks for access to its computer network. Id. ¶¶ 56, 69.
Based on those allegations, it is reasonable to infer (and Molon gets the benefit of
reasonable inferences right now) that Desai’s use of the thumb drive was not part of
the normal course of his employment.12 That in turn renders plausible Molon’s
allegation that Desai took the information in order to eventually use it at a
competing firm, and that breach of his duty to maintain secrecy readily meets the
definition of acquiring trade secrets through “improper means.” To be sure, in
arguing against a finding of impropriety at a trial, Nidec will point to the fact that
Desai downloaded the files when he was a current employee and that he simply
used his normal sign-in information when he did it. But those facts are not
necessarily inconsistent with downloading the files in order to use them for a
competitor. Molon has plausibly alleged that Desai breached a duty to maintain
C. Acquisition or Use
That brings us to the closest question in the case: even if Desai allegedly
acquired a trade secret by improper means, Molon still must adequately allege that
Nidec acquired or used that secret. Nidec argues that, on this issue, Molon “provides
no specific allegations that would plausibly show that Mr. Desai disclosed the
alleged trade secrets to [Nidec] or that [Nidec] otherwise obtained and used any
information allegedly copied by Mr. Desai.” Nidec’s Mot. to Dismiss at 7. Molon, on
does not, however, plead that it outright banned employees from using
memory sticks or bringing them into the workplace. The precise status of Desai’s actions in
relation to his employment contract and expectations should become clearer with further
factual development in discovery.
the other hand, argues that it does not need to give specifics on this front, because
the disclosure and use can be inferred under the “inevitable disclosure doctrine.”
Third Am. Compl. ¶ 67; Molon’s Resp. Br. at 5-7.
The “inevitable disclosure doctrine” allows a plaintiff to “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). In evaluating whether the facts
justify this circumstantial-evidence inference, courts consider: “(1) the level of
competition between the former employer and the new employer; (2) whether the
employee’s position with the new employer is comparable to the position he held
with the former employer; and (3) the actions the new employer has taken to
prevent the former employee from using or disclosing trade secrets of the former
employer.” Saban v. Caremark Rx, L.L.C., 780 F. Supp. 2d 700, 734-35 (N.D. Ill.
2011); see also Triumph, 834 F. Supp. 2d at 809; Mobile Mark, 2011 WL 3898032, at
Taking these factors in order, Molon has sufficiently pled at this stage that
Nidec is a serious competitor. Molon provides details about the nature of the custom
motor market in which it and Nidec compete, as well as the “standard, off-the-shelf”
is worth noting that calling a line of reasoning a “doctrine” poses the risk of
ossifying the “factors” into a rigid test. At bottom, whether a trade secret would be
inevitably disclosed is really a question of circumstantial evidence, and those types of
questions defy straitjacket formulas.
market, which is also a competitive arena for both parties. Third Am. Compl. ¶ 66;
Molon’s Resp. Br. at 6.14
On the second factor, Molon has also adequately pled that Desai’s position
with Nidec is similar to his former position at Molon. Third Am. Compl. ¶ 67;
Molon’s Resp. Br. at 5-6. Nidec implicitly acknowledged the overlap in Desai’s
responsibilities between companies in its motion to dismiss, Nidec’s Mot. to Dismiss
at 8-9,15 but then later contended in its reply brief that Desai’s responsibilities
between his two jobs do not overlap. R. 73, Nidec’s Reply Br. at 8. Setting aside the
reply-brief argument,16 Nidec primarily argues that the real problem with Molon’s
reinforce the Third Amended Complaint’s allegations, Molon asserts in its
response brief that it has lost the business of a specific customer to Nidec. Molon’s Resp. Br.
at 6 n.2. In some situations, an additional factual allegation, as distinct from an additional
claim, might be permissible in a response brief. See, e.g., Milazzo v. O'Connell, 925 F. Supp.
1331, 1339-40 (N.D. Ill. 1996), aff’d, 108 F.3d 129 (7th Cir. 1997) (weighing authority on
each side). But the Court need not decide whether the allegation in the response brief
should be considered, because the complaint itself contains enough competition detail to
survive the dismissal motion.
15Instead of taking on the factual allegations, Nidec’s dismissal motion cited to three
cases to try to undermine the similar-employment element. The citation to Triumph
Packaging Group, 834 F.Supp.2d at 809, is not illuminating. Nidec’s Mot. to Dismiss at 8.
Although it is generally true that “the mere fact that a person assumed a similar position at
a competitor does not, without more,” trigger the inference of an inevitable disclosure, id.
(emphasis added), Molon is not asking the Court to make the decision based on that “mere
fact” alone. Nidec’s other two citations, Cintas Corp. v. Perry, 2004 WL 2032124 (N.D. Ill.
Aug. 20, 2004), and Teradyne, Inc. v. Clear Communications Corp., 707 F. Supp. 353 (N.D.
Ill. 1989), also do not help much, because they do not deal with the similar-employment
element of the inevitable disclosure doctrine. They instead state more generally that mere
speculation or fear should not be sufficient to win a trade secrets claim. This caveat is true
and important (and is reiterated below), but is not immediately relevant in the similaremployment analysis.
16In the reply brief, Nidec’s argument conflates other factors (whether an employee
admitted to stealing data, whether the employee was involved in design, whether the new
employer was facilitating the trade theft, and so on) with the relatively straightforward
question of whether Desai’s two positions are similar. Nidec’s Reply Br. at 7-9. Nidec also
cites Saban v. Caremark Rx, L.L.C., 780 F.Supp. 2d at 710, in which it was found that an
employee’s outgoing and incoming positions were different, to argue for the first time that
“[t]his is true for Mr. Desai as well,” even though Nidec did not otherwise discuss how
reliance on inevitable disclosure is that Desai worked (and still works) in quality
control rather than design. Nidec’s Mot. to Dismiss at 8-9 (“As a quality control
engineer at Molon, Mr. Desai was not involved with designing or selling Molon’s
products. … There is no allegation that Mr. Desai was designing new products to
compete with Molon’s products. … In performing quality-control tests on MerkleKorff’s established commercial products, there would be no use for the alleged
secrets that Molon purports were misappropriated.”). But the fact that Desai does
quality control work, rather than design, is not fatal to triggering the circumstantial
inference of inevitable disclosure. Design does not have a monopoly on trade secret
cases. Although it might be that many trade secret cases deal with confidential
design secrets, many other types of information, featuring employees of all stripes,
have been found to fit the bill. See, e.g., PepsiCo, 54 F.3d at 1270 (“PepsiCo has not
brought a traditional trade secret case, in which a former employee has knowledge
of a special manufacturing process or customer list and can give a competitor an
unfair advantage by transferring the technology or customers to that competitor. …
This type of trade secret problem [(knowledge of past employer’s marketing plans)]
may arise less often, but it nevertheless falls within the realm of trade secret
protection under the present circumstances.”).
Desai was Head of Quality Control at Molon: this was not a limited, low-rung
position, but instead a very broad role with a far-reaching set of tasks. Third Am.
Compl. ¶ 61. Specifically, Molon alleges that Desai’s duties in that role included,
Desai’s quality control responsibilities at Nidec are different than those he had at Molon.
Nidec’s Reply Br. at 8.
among other things, “providing quality control engineering, including through
product reliability testing,” “engaging Molon service personnel to achieve sales and
service objectives by providing accurate engineering data,” and “providing timely
and accurate reports on quality assurance test results as required by Molon
management.” Id. In view of these duties, it is plausible that Desai had access to a
wide variety of trade secrets. Indeed, Molon’s Appendix to the Third Amended
Complaint lists many different types of downloaded files. Some are ostensibly
design files, while others appear to relate directly to Desai’s work in quality control
engineering and communications. Appendix to Third Am. Compl. And even if the
design files do not directly intersect with Desai’s previous or current work—a
question that is too premature to answer at this stage of the case17—it still is
plausible that a quality control engineer would use design secrets to perform quality
control duties at Nidec.
On the third factor that courts examine when deciding whether the inevitable
disclosure doctrine has been triggered, namely, actions the new employer has taken
to prevent the incoming employee from using or disclosing the former employer’s
trade secrets, the record is silent. At this stage of the litigation, that silence is not
surprising, because a complaint is not likely to contain any allegations about what,
if anything, the competitor did to safeguard the plaintiff’s secrets.
is correct that Nidec’s argument on this point attempts “to make a
substantive determination as to the value that [Nidec] may have derived from Mr. Desai’s
use, or the use of any employee at [Nidec] who may have had access, of the trade secrets,”
and that finding cannot be made one way or the other at the dismissal-motion stage.
Molon’s Resp. Br. at 6 n.3. See, e.g., Homeyer v. Stanley Tulchin Assocs., Inc., 91 F.3d 959,
962 (7th Cir. 1996) (a factual determination is “not the type of finding that is generally
appropriately made on a motion to dismiss”).
All told, Molon’s allegations on the direct competition between the parties, as
well as the allegations on the employment breadth and similarity of Desai’s quality
control work at the two companies, are enough to trigger the circumstantial
inference that the trade secrets inevitably would be disclosed by Desai to Nidec. To
be sure, going forward, Molon ultimately will bear the burden of proving—not just
alleging—enough facts such that disclosure is not premised on a mere
unsubstantiated fear. PepsiCo, Inc., 54 F.3d at 1268-69; Saban, 780 F. Supp. 2d at
734; Teradyne, 707 F. Supp. at 357. For now, Molon has pled enough for the trade
secrets claims to avoid the Rule 12(b)(6) chopping block.18
D. Continuing Use
Nidec’s final argument is that the federal Defense of Trade Secrets Act claim
should fail because no acts occurred after the effective date of the Act, specifically,
May 11, 2016. Nidec’s Mot. to Dismiss at 9-10; Nidec’s Reply Br. at 9-10. The key
question is whether the inference of inevitable disclosure reasonably extends to
continued use beyond the Act’s effective date.
It is true that inferences should not be stacked on top of one another past the
point of reasonableness and crossing the line into speculation. But that is not what
is happening here. At least on the limited record—the Third Amended Complaint—
is worth noting that Nidec made a passing reference in its Motion to Dismiss to
Molon’s Second Amended Complaint, R. 18, and its ostensible failure to allege how Nidec
was responsible for the actions of Desai. Nidec’s Mot. to Dismiss at 5. This procedural
commentary is not relevant here, but for the sake of completeness: Molon need not allege
that Nidec was responsible for Desai’s downloading at the time it happened in order to state
a claim for trade secret misappropriation. It is enough that Desai (allegedly) later disclosed
the information to Nidec and that Nidec made use of it, knowing (or having reason to know)
that the secrets were acquired by improper means.
the alleged trade secrets are not of the nature that would necessarily go stale in the
course of a couple of years. A motor design, and the quality control data associated
with it, plausibly would retain its trade secret value well into the future. If it is
plausible that some of the alleged trade secrets maintain their value today, then it
is also plausible that Nidec would be continuing to use them. Of course, further
discovery could upend any or all of this, but at this stage, continued use beyond the
May 2016 effective date is plausible.
For the reasons discussed, Nidec’s Motion to Dismiss Counts 3 and 4 is
denied. The status hearing of June 1, 2017, is accelerated to May 18, 2017, at 9:15
a.m., to discuss the discovery plan on the trade secrets claims. The parties also
should immediately start engaging in settlement negotiations, now that both the
summary judgment motion and the dismissal motion have been decided.
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: May 11, 2017
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