VIKEN DETECTION CORPORATION, v. VIDERAY TECHNOLOGIES INC., et al

Filing 51

Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: For the forgoing reasons, the amended motion of defendants to dismiss all counts against them (Docket No. 26 ) is DENIED.So ordered. (Vieira, Leonardo)

United States District Court
District of Massachusetts
Viken Detection Corporation,
Plaintiff,
v.
Videray Technologies Inc. and
Paul E. Bradshaw,
Defendants.

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Civil Action No.
19-10614-NMG

MEMORANDUM & ORDER
GORTON, J.
Viken Detection Corporation (“Viken” or “plaintiff”) brings
this suit against Paul Bradshaw (“Bradshaw”) and Videray
Technologies Inc. (“Videray”) (collectively “defendants”),
alleging that Bradshaw misappropriated Viken’s confidential
information when he left Viken to form Videray to compete
directly with Viken.

Viken asserts that defendants’ conduct

constitutes 1) a violation of the Defend Trade Secrets Act (“the
DTSA”), 18 U.S.C. § 1836(b)(1); 2) a violation of the Computer
Fraud and Abuse Act (“the CFAA”), 18 U.S.C. § 1030;
3) misappropriation of trade secrets, M.G.L. c. 93, §§ 42 and
42A; 4) breach of contract; 5) breach of the duty of loyalty;
and 6) tortious interference with contracts.

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Pending before the Court is the motion of defendants to
dismiss all counts of plaintiff’s complaint (Docket No. 26).
I.

Background
A.

The Parties

Viken, formerly known as “Heuresis Corporation”, is a
Delaware corporation with its principal place of business in
Massachusetts.

Viken produces and sells hand-held x-ray

scanners used by law enforcement and security professionals to
discover concealed explosives, narcotics and other contraband in
a quick and cost-effective manner.

Among Viken’s main products

is the HBI-120, which is a hand-held x-ray backscatter imaging
device.
Videray is a Delaware corporation with its principal place
of business in Massachusetts.

Bradshaw is a resident of

Massachusetts and the founder and president of Videray.

Videray

has developed the PX1 which, like the HBI-120, is a hand-held xray backscatter imaging device.
B.

Bradshaw’s Employment with Viken

Bradshaw began his employment with Viken in November, 2013,
as its Director of Engineering.

He also periodically acted as

Viken’s Information Technology Administrator (“ITA”).

At some

point during his employment, Bradshaw was assigned to a team
tasked with developing the HBI-120.
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As part of his role on that team and as Viken’s Director of
Engineering, Bradshaw had access to proprietary and confidential
information regarding the design, performance, marketing and
strategic plan for the HBI-120, as well as potential
modifications, improvements and design changes to that device.
That information, which was stored electronically, was subject
to access restrictions and password protection.

In his role as

ITA, Bradshaw was charged with implementing and overseeing most
or all of the electronic access controls used to protect the
HBI-120 proprietary and confidential information.
Bradshaw stored proprietary and confidential information
relating to the HBI-120 on his desktop computer, laptop computer
and personal Dropbox account.

His Dropbox account allegedly

contained approximately 1,800 sensitive files in a folder named
“Hbi120.”

Bradshaw also kept files related to the plans for

other Viken products on his personal Dropbox.
Others on Viken’s research and development team purportedly
had access to the files on Bradshaw’s personal Dropbox account,
including the former CEO of Viken, Henry Grodzins (“Grodzins”).
The current CEO of Viken, Jim Ryan, attests, however, that he is
not aware that anyone at the company previously knew that
Bradshaw stored sensitive Viken documents on his personal
Dropbox account.

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Viken requires all new employees to sign a nondisclosure
agreement (“the NDA”).

Bradshaw was compelled to sign the NDA

as a condition of his employment.

Pursuant to that contract, he

agreed that he would
keep in strictest confidence and trust all Proprietary
Information [as defined in the NDA], and . . . not use
or disclose any Proprietary Information without the
written consent of the Company, except as may be
necessary in the ordinary course of performing my
duties to the Company.
Bradshaw also agreed that he would not retain any
Proprietary Information of Viken upon termination of his
employment.

He further agreed that during his employment and

for a period of one year thereafter, he would not 1) recruit or
solicit for employment any employee of Viken or any affiliate of
the company (or a former employee within his or her one-year
grace period) or 2) interfere with Viken’s business
relationships with other persons or companies by inducing or
attempting to induce a person or company to refrain from or
discontinue doing business with Viken.
C.

The Alleged Misconduct

In June, 2017, Katie McCabe (“McCabe”), a former employee
of Viken, informed the company that while Bradshaw was still
working at Viken, he told her that he planned to leave Viken and
start a new company that would produce and sell a competing
product.

She also alleged that, while still employed by Viken,
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Bradshaw met with a potential investor to solicit funds for his
new company.

He also purportedly solicited co-workers to leave

with him by accessing confidential salary and equity information
from Viken’s protected server.
McCabe also alleged that Bradshaw failed to share customer
feedback with Viken as to potential product improvements, while
telling his co-workers that his new product would include those
improvements.

She told Viken managers that Bradshaw asked other

employees to help him collect confidential Viken customer
information for use at his new company.

Finally, Bradshaw

purportedly told McCabe that, in reference to a computer on
which he kept proprietary and confidential information about the
HBI-120, “I have everything I need”.

Bradshaw vigorously denies

those allegations but at least one other Viken employee
reiterates McCabe’s assertions.
In May or June, 2017, Viken terminated Bradshaw’s
employment, at least partly as a result of McCabe’s allegations.
Within a few days after his termination, however, then-CEO
Grodzins offered Bradshaw his job back because he believed that
McCabe either lied or exaggerated about Bradshaw’s conduct.
Bradshaw declined the offer of re-instatement.
Viken alleges that within two months after he left the
company, Bradshaw formed Videray.
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Videray has developed the PX1

which apparently has the same external design, ergonomics and
operating characteristics as Viken’s HBI-120.

Viken alleges

that the PX1 1) is the same size and shape, 2) uses
approximately the same x-ray energy, 3) uses approximately the
same power and 4) likely achieves the same x-ray shielding
requirements for user safety as the HBI-120.

It allegedly does

so by using
a combination of Viken trade secrets involving
characteristics of the X-ray anode, X-ray shielding
material (alloy), and source-detector geometry.
Viken asserts that the PX1 includes certain design
modifications that were taken from confidential Viken documents
and which Videray advertises as product advantages on its
website.

Those modifications include 1) increased power by

upgrading to “140 [keV]”, 2) “[i]mage analysis and processing
. . . object recognition capability” and 3) use of a touch
screen interface with additional buttons to control the device.
Viken purportedly protected those design modifications as trade
secrets for possible future use and Bradshaw had access to that
information during his employment with Viken.

Plaintiff

contends that the files maintained on Bradshaw’s personal
Dropbox account were proprietary and confidential information of
Viken and that Bradshaw misappropriated and used that
information after he left Viken.

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D. Procedural History
Plaintiff filed its complaint in the instant action in
March, 2019.

Shortly thereafter, it filed a motion for a

temporary restraining order and preliminary injunction.
Defendant moved to dismiss plaintiff’s complaint in its entirety
in May, 2019.
This Court considered plaintiff’s motion for injunctive
relief at a hearing in June, 2019.

The Court ultimately denied

plaintiff’s motion on the ground that plaintiff failed to
demonstrate a reasonable likelihood of success on the merits.
II.

Defendants’ Amended Motion to Dismiss
A.

Legal Standard

To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to “state a claim
to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007).

In considering the merits of

a motion to dismiss, the Court may only look to the facts
alleged in the pleadings, documents attached as exhibits or
incorporated by reference in the complaint and matters of which
judicial notice can be taken. Nollet v. Justices of Trial Court
of Mass., 83 F. Supp. 2d 204, 208 (D. Mass. 2000), aff’d, 228
F.3d 1127 (1st Cir. 2000).

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Furthermore, the Court must accept all factual allegations
in the complaint as true and draw all reasonable inferences in
the plaintiff’s favor. Langadinos v. Am. Airlines, Inc., 199
F.3d 68, 69 (1st Cir. 2000).

If the facts in the complaint are

sufficient to state a cause of action, a motion to dismiss the
complaint must be denied. See Nollet, 83 F. Supp. 2d at 208.
Although a court must accept as true all the factual
allegations in a complaint, that doctrine is not applicable to
legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662 (2009).
Threadbare recitals of legal elements which are supported by
mere conclusory statements do not suffice to state a cause of
action. Id.

Accordingly, a complaint does not state a claim of

relief where the well-pled facts fail to warrant an inference of
any more than the mere possibility of misconduct. Id. at 1950.
B.

Application
1. Count II: Violation of the CFAA

To establish a claim under the CFAA, a plaintiff must prove
that the defendant “knowingly and with intent to defraud”
accessed a protected computer without valid authorization or in
excess of authorization to further the intended fraud and obtain
something of value, with certain exceptions not relevant here.
18 U.S.C. § 1030(a)(4).

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The phrase “without authorization” is not defined in the
statute, but this Court has previously recognized that the First
Circuit Court of Appeals has advocated for a broad
interpretation of that phrase to include an employee who
accesses his employer’s computer, without the employer's
knowledge, to acquire, or after acquiring, an interest adverse
to his employer.

Guest-Tek Interactive Entm’t, Inc. v. Pullen,

665 F. Supp. 2d 42, 45 (D. Mass. 2009) (citing EF Cultural
Travel BV v. Explorica, Inc., 274 F.3d 577, 582-84 (1st Cir.
2001)).

The phrase to “exceed authorized access” is defined as

to access a computer with authorization and to use
such access to obtain or alter information in the
computer that the accesser is not entitled so to
obtain or alter.
18 U.S.C. § 1030(e)(6).
Defendant urges the Court to narrow its interpretation of
the CFAA, arguing that plaintiff’s claim must be dismissed
because there is no violation of the CFAA when an employee
misappropriates information that he had authorization to access.
See Wec Carolina Energy Solutions, LLC v. Miller, 687 F.3d 199
(4th Cir. 2012).

Viken responds that when Bradshaw accessed its

sensitive and confidential information, he was acting not as an
authorized employee, but as an unauthorized competitor. See
International Airport Centers, LLC, 440 F.3d at 419-20.

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In denying plaintiff’s motion for a preliminary injunction,
this Court found that plaintiff had not demonstrated a
reasonable likelihood of success on its CFAA claim because
members of Viken’s research and development team apparently had
access to the files on Bradshaw’s personal Dropbox account and
former-CEO Grodzins attested that he was aware of and had no
issue with Bradshaw’s use of his personal Dropbox account for
that purpose.
That conclusion does not, however, support an inference
that Viken has failed to state a claim upon which relief can be
granted.

Indeed, Viken alleges that regardless of what level of

authorization Bradshaw was granted as its employee, when he
accessed its protected information for the purpose of competing
with Viken, a quintessential adverse interest, he was acting
either without or in excess of his authorization.

Considering

such allegations as true for the purpose of the motion at issue,
plaintiff has stated a claim for relief pursuant to the CFAA
under First Circuit law.
2. Counts I and III: Violation of the DTSA and
Misappropriation of Trade Secrets
A plaintiff can establish misappropriation of trade secrets
pursuant to M.G.L. c. 93, § 42 by proving that the defendant
acquired them through improper means (including by theft,
bribery, misrepresentation or breach of contract but not by
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reverse engineering) or by disclosing or using trade secrets
obtained through improper means without that person’s consent.
M.G.L. c. 93, § 42.

A plaintiff may also bring a claim under

the DTSA for misappropriation of trade secrets if the trade
secret is related to a product or service used in or intended to
be used in interstate or foreign commerce. 18 U.S.C. §
1836(b)(1).

The standard for misappropriation under the DTSA is

substantially similar to that under Massachusetts law. Compare
18 U.S.C. § 1839(5)-(6), with M.G.L. c. 93, § 42(1)-(2).
To prevail on a claim of misappropriation of trade secrets,
a plaintiff must establish that 1) the information at issue
constitutes a trade secret, 2) the plaintiff took reasonable
measures to secure the confidentiality of the information and 3)
the defendant obtained the trade secret through improper means.
Optos, Inc. v. Topcon Medical Systems, Inc., 777 F. Supp. 2d
217, 238 (D. Mass. 2011).
A trade secret is any confidential information used in the
plaintiff’s business that “gives [the owner] an advantage over
competitors who do not know or use it”. Id. (quoting J.T. Healy
& Son, Inc. v. James A. Murphy & Son, Inc., 260 N.E.2d 723, 729
(Mass. 1970)).

Matters of public knowledge or information

generally known in an industry cannot be a trade secret. J.T.

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Healy, 260 N.E.2d at 729; see also Ruckelhaus v. Monsanto Co.,
467 U.S. 986, 1002 (1984).
Viken’s complaint identifies the following information as
comprising its trade secret:
HBI-120 Confidential and Trade Secret Information
includes the design files, operating characteristics,
and physical optimization constraints for the device;
it also includes the strategic plan for the HBI-120
and for potential modifications, improvements and
design changes [including] characteristics of the Xray anode, X-ray shielding material (alloy), and
source detector geometry.
Defendants respond that such information is not a
trade secret because it is readily ascertainable from
publicly accessible features of Viken’s HBI-120.

Indeed,

at the preliminary injunction stage, the Court recognized
that sworn affidavits of experts in the field stated that
the following features are generally known in the industry
and thus likely do not amount to trade secrets: 1) size,
2) shape, 3) energy, 4) power and 5) weight of a handheld
x-ray backscatter device and the use of 6) an x-ray tube,
7) a scanning method, 8) a shielding element and
9) software to translate the radiation pulses into images.
Nevertheless, plaintiff has plausibly alleged the
existence of a trade secret.

In addition to the listed

physical characteristics of the HBI-120, plaintiff
identifies certain information undisclosed to the public,
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such as information regarding the iterative development
process, alternative or incorrect solutions and
developmental “dead ends”.

Viken further contends that its

unique alloy composition cannot be determined precisely
without the use of specialized advanced laboratory
techniques and, even then, is difficult to determine with
accuracy. Plaintiff also alleges that defendants
misappropriated certain of its strategic product plans and
potential product modifications.
Such undisclosed information, according to Viken,
provided Bradshaw with an unfair advantage in developing a
competing complex product, which defendants did in an
“unusually concentrated timeline”.

Viken has, therefore,

sufficiently stated a claim that its developed information
constituted a trade secret.
With respect to the second element of trade secret
misappropriation, plaintiff has sufficiently alleged that
it took reasonable measures to protect its trade secrets,
including restricting access to select employees and
requiring employees to sign non-disclosure agreements.
As to the final element of trade secret
misappropriation, Bradshaw contends that he did not obtain
Viken’s confidential and sensitive information by improper
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means.

To the contrary, and as described with respect to

plaintiff’s CFAA claim, the Complaint alleges that, in
accessing Viken’s sensitive information to further an
interest adverse to it, Bradshaw either acted as an
unauthorized competitor or exceeded his authorization as an
employee.
Accordingly, plaintiff has alleged that defendants
misappropriated its trade secrets under Massachusetts law
and the DTSA.
3. Counts IV & V: Breach of Contract
Under Massachusetts law, to prove a breach of contract the
plaintiff must demonstrate that: 1) “there was an agreement
between the parties”; 2) “the agreement was supported by
consideration”; 3) “the plaintiff was ready, willing, and able
to perform his or her part of the contract”; 4) “the defendant
committed a breach of the contract”; and 5) “the plaintiff
suffered harm as a result”. Bulwer v. Mount Auburn Hosp., 46
N.E.3d 24, 39 (Mass. 2016).
A valid contract in the form of the NDA clearly existed.
The only dispute is whether Bradshaw breached the terms of that
agreement.

Viken submits that Bradshaw breached the NDA by,

among other things, 1) failing to “keep in strictest confidence
and trust” the proprietary and confidential information of
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Viken; 2) retaining Viken’s proprietary and confidential
information upon termination of employment; and 3) recruiting or
soliciting Viken employees to join a competitor.
Specifically, Viken avers that Bradshaw utilized
proprietary and confidential information to “jumpstart the
development” of the PX1.

Viken also submits that certain

combinations of design elements Bradshaw utilized to accelerate
the development of Videray’s competing product amounts to an
improper use of proprietary and confidential information.

Viken

maintains that Bradshaw retained such information upon
termination and that, while still employed by Viken, utilized
proprietary and confidential employee records to entice other
Viken employees to join Videray after its formation.
At the preliminary injunction stage, this Court noted that
plaintiff’s circumstantial evidence tending to show Bradshaw
used protected information to compete with Viken during and
after his employment was insufficient to warrant the
“extraordinary remedy” of a preliminary injunction.

Such

allegations are sufficient, however, to survive a motion to
dismiss.
4. Count VI: Breach of Duty of Loyalty
An employee who occupies a position of confidence and trust
owes a “duty of loyalty” to his employer and must protect the
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interests of his employer. Chelsea Industries, Inc. v. Gaffney,
449 N.E.2d 320, 326 (Mass. 1983).

An employee is bound to act

solely for his employer’s benefit in all matters taken within
the scope of his employment. Id.

As a result, an employee may

not actively compete with his employer during the tenure of his
employment. Id.
Bradshaw submits that he merely prepared to compete with
Viken by making certain logistical arrangements during his
employment and, therefore, did not breach his duty of loyalty.
Plaintiff’s complaint alleges that Bradshaw’s conduct
amounts to more than simply making logistical arrangements to
prepare to compete.

Indeed, Viken complains that Bradshaw

actively competed by, among other things, 1) meeting with a
potential investor to solicit funds; 2) soliciting a co-worker
to join his new company; 3) collecting Viken customer contacts;
4) accessing confidential salary and equity information of Viken
employees to entice co-workers to join his new company; 5)
failing to share customer feedback related to product
improvements and intending to utilize such information to
improve his competing product; and 6) asking co-workers to help
him collect confidential customer information.

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Such allegations support a claim that Bradshaw actively
competed with Viken during his employment and, therefore,
breached his duty of loyalty.
5. Count VII: Tortious Interference with Contracts
A claim for tortious interference of contract requires the
plaintiff to prove that 1) he had a contract with a third party,
2) the defendant induced the third party to break that contract,
and 3) the plaintiff was harmed by the defendant’s actions.
United Truck Leasing Corp. v. Geltman, 551 N.E.2d 20, 21 (Mass.
1990).
Viken claims Videray knowingly induced Bradshaw into
breaching his contractual obligations to Viken.

Defendants

contend that plaintiff has failed to state a claim for tortious
interference because Bradshaw, as owner and principal of
Videray, is synonymous with his company.

In other words,

Bradshaw is so “closely identified” with Videray that he should
not be considered a third party for purposes of a claim of
tortious contractual interference. See Schinkel v. Maxi-Holding,
Inc., 565 N.E.2d 1219, 1225 (Mass. App. Ct. 1991).
Whether an individual is synonymous with a corporation of
which he is owner and principal is a question ill-suited for
resolution at the motion to dismiss stage. Id.

Such an inquiry

requires fact-intensive investigation regarding whether an
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individual “might be so closely identified with the corporation
itself, and with its policies” that he cannot be considered a
third party. Id.
Furthermore, as emphasized by plaintiff, the only citation
proffered by defendants in support of their motion to dismiss
plaintiff’s claim of tortious interference holds that a
principal, in some circumstances, may not be treated as a third
party in relation to “corporate contracts.” Schinkel, 565 N.E.2d
at 1225-26.

Here, plaintiff conversely alleges that the

corporation tortiously interfered with a contract of its
principal.
Accordingly, defendants’ have not met their burden of
demonstrating that plaintiff has failed to state a claim of
tortious interference with contractual relations.
ORDER
For the forgoing reasons, the amended motion of defendants
to dismiss all counts against them (Docket No. 26) is DENIED.

So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated January 7, 2020
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