NASDAQ, INC. et al v. MIAMI INTERNATIONAL HOLDINGS, INC. et al

Filing 310

OPINION filed. Signed by Judge Zahid N. Quraishi on 7/25/2023. (jjc)

Case 3:17-cv-06664-ZNQ-DEA Document 310 Filed 07/25/23 Page 1 of 21 PageID: 6578

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

NASDAQ INC., et al.,
Plaintiffs,

Civil Action No. 17-6664 (ZNQ) (DEA)

v.

OPINION

MIAMI INTERNATIONAL HOLDINGS,
INC., et al.,
Defendants.
QURAISHI, District Judge

THIS MATTER comes before the Court upon two motions: a Motion to Dismiss or Stay
and Bifurcate Counterclaims (ECF No. 224) filed by Plaintiffs Nasdaq, Inc., Nasdaq ISE, LLC,
and FTEN, Inc. (collectively, “Plaintiffs”), and a Motion for Judgment on the Pleadings (ECF No.
250) filed by Defendants Miami International Holdings, Inc., Miami International Securities
Exchange, LLC, MIAX PEARL, LLC, and Miami International Technologies, LLC (collectively,
“Defendants”).
In support of their Motion to Dismiss, Plaintiffs filed a Memorandum of Law (“MtD
Moving Br.”, ECF No. 224-1). Defendants opposed (“MtD Opp.”, ECF No. 238), and Plaintiffs
replied (“MtD Reply”, ECF No. 251).
In support of their Motion for Judgment on the Pleadings, Defendants filed a Memorandum
of Law (“MJoP Moving Br.”, ECF No. 216-1). Plaintiffs opposed (“MJoP Opp.”, ECF No. 248),
and Defendants replied (“MJoP Reply”, ECF No. 246).

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The Court has carefully considered the parties’ submissions and decides the Motion
without oral argument pursuant to Federal Rule of Civil Procedure 78 and Local Civil Rule 78.1.
For the reasons set forth below, the Court will GRANT-IN-PART and DENY-IN-PART Plaintiffs’
Motion to Dismiss Defendants’ Counterclaims and it will DENY Defendants’ Motion for
Judgment on the Pleadings.
I.

BACKGROUND AND PROCEDURAL HISTORY
A.

FACTUAL BACKGROUND 1

This case began as a suit for patent infringement and trade secret misappropriation, but it
has since evolved into a suit for trade secret misappropriation and countersuit for antitrust
violations.
In early 2011 a series of Nasdaq employees left Nasdaq to join MIAX (Nasdaq-to-MIAX
Employees, or “NTMEs”). (Compl. ¶ 28, ECF No. 1.) Prior to their departure, some of the former
senior Nasdaq employees forwarded to personal email accounts internal technical documents that
contained information Nasdaq maintained as trade secrets or improperly acquired and retained
such documents. (Id. ¶¶ 29–32.) In 2014, “unbeknownst to Nasdaq,” the United States Patent
Office (“USPTO”) issued U.S. Patent No. 8,868,461 (“the ‘461 Patent”) based on an application
(“the ‘461 Application”) filed in December 2013 by six of the NTMEs, together with others not
previously employed by Nasdaq. (Id. ¶ 33.) The ‘461 Patent disclosed a data storage architecture
and process that “bears a striking resemblance” to Nasdaq’s confidential, proprietary, and trade
secret design. (Id. ¶ 34.) Accordingly, based on the foregoing, and on “information and belief,”
Plaintiffs allege that MIAX’s trading platforms are using their trade secrets. (Id. ¶ 35.)

For the purposes of considering the Motion for Judgment on the Pleadings, the Court accepts all allegations in the
Complaint as true. See Zimmerman v. Corbett, 873 F.3d 414, (3d Cir. 2017).

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B.

PROCEDURAL HISTORY

Given its nearly six-year tenure, this case has a lengthy but relevant history. In December
2017, Defendants filed a Motion to Dismiss the Complaint. (See ECF No. 28.) Before a decision
was rendered, MIAX filed a Motion to Stay this action because it had filed petitions for Covered
Business Method Patent Review (“CBMR”) of the patents then in suit with the USPTO’s Patent
Trial and Appeal Board (“PTAB”). (ECF No. 72.) In August 2018, the Court denied MIAX’s
Motion to wait to see whether the PTAB took up the petitions for review. (ECF No. 103.) In
December 2018, the Court entered an Order staying the case because the PTAB had elected to
institute CBMR on all of the patents. (ECF No. 130.)
In November 2019, Nasdaq informed the Court the PTAB had issued decisions finding the
patents in suit were invalid. (ECF No. 135.) The case remained stayed, however, while the parties
awaited a decision by the United States Supreme Court in United States v. Arthrex that related to
the proper authority and review of decisions rendered by the PTAB’s Administrative Patent
Judges. In June 2021 the Supreme Court decided Arthrex, and the undersigned was assigned to
this matter. The parties sought and obtained an extension of the stay pending issuance by the
USPTO of procedures for PTAB decisions like the one in this case that were impacted by the
Arthrex decision. (ECF No. 162.)
In August 2021, Defendants filed an Answer to the Complaint that asserts a lengthy series
of counterclaims. (ECF No. 170.) Counterclaim Counts I–VIII allege Walker-Process-type and
sham-litigation-type claims under federal and New Jersey state law. (Id. ¶¶ 291–356.) Counts
IX–XXII seek declaratory judgments of non-infringement, invalidity, and unenforceability of the
patents in suit. (Id. ¶¶ 357–428.)

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On stipulation by the parties, the stay of this matter was lifted in June 2022 (ECF No. 189),
and Plaintiffs’ patent infringement claims were dismissed with prejudice (ECF No. 190). 2 This
effectively mooted Defendants’ declaratory judgment counterclaims, and left remaining only
Plaintiffs’ trade secret misappropriation claims (Complaint Counts VIII–X) and Defendants’
antitrust counterclaims (Counterclaim Counts I–VIII). As a matter of posture, it should be noted
that Plaintiffs have not yet Answered the Counterclaims because Plaintiffs elected instead to move
to dismiss them.
In January 2023, at Plaintiffs’ request and over Defendants’ objections, the Court appointed
a Special Discovery Master to assist with discovery because it had become “clear to the Court that
this matter will continue to require intensive case management involving the resolution of
numerous additional discovery and other disputes” and the level of case management required is
“untenable given the burdens on the District of New Jersey.” (ECF No. 268.)
II.

JURISDICTION
The Court has original subject matter jurisdiction over the parties’ claims under federal law

pursuant to 28 U.S.C. §§ 1331, 1836 and supplemental jurisdiction over the parties’ claims under
state law pursuant to 28 U.S.C. § 1367.
III.

LEGAL STANDARD
A.

RULE 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a claim “for
failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). On a motion
to dismiss for failure to state a claim, the moving party “bears the burden of showing that no claim
has been presented.” Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr
The parties’ 2022 stipulation actually dismissed remaining patent infringement Counts I–II and IV–VII of the
Complaint. Count III had already been dismissed by stipulation of the parties in 2018. (ECF No. 100.)
2

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Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)); Haney v. USA Gymnastics,
Inc., Civ. No. 21-07213, 2022 WL 909871, at *2 (D.N.J. Mar. 29, 2022). When reviewing a
motion to dismiss for failure to state a claim, courts first separate the factual and legal elements of
the claims, and accept all of the well-pleaded facts as true. See Fowler v. UPMC Shadyside, 578
F.3d 203, 210–11 (3d Cir. 2009). While Federal Rule of Civil Procedure 8(a)(2) does not require
that a complaint contain detailed factual allegations, “a plaintiff’s obligation to provide the
‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007) (citation omitted).
Thus, to survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient
factual allegations to raise a plaintiff’s right to relief above the speculative level, so that a claim
“is plausible on its face.” Id. at 570; Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir.
2008) (citation omitted). “A claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). All reasonable inferences must be made in
the plaintiff’s favor. See In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 314 (3d Cir. 2010).
B.

RULE 12(c)

Federal Rule of Civil Procedure 12(c) provides: “After the pleadings are closed—but early
enough not to delay trial—a party may move for judgment on the pleadings.” A movant seeking
judgment on the pleadings must establish: (1) that no material issue of fact remains to be resolved;
and (2) the entitlement to judgment as a matter of law. See Rosenau v. Unifund Corp., 539 F.3d
218, 221 (3d Cir. 2008) (citing Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290–91
(3d Cir. 1988)). In resolving a motion made pursuant to Rule 12(c), the Court must view the facts

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in the pleadings and the inferences therefrom in the light most favorable to the non-movant. See
id.
Although a motion for judgment on the pleadings is filed after the pleadings have been
closed, it is reviewed under the same standards that apply to a motion to dismiss made under Rule
12(b)(6). See Szczurek v. Pro. Mgmt. Inc., 627 F. App’x 57, 60 (3d Cir. 2015) (citing Revell v.
Port Auth. of N.Y. & N.J., 598 F.3d 128, 134 (3d Cir. 2010)); see also Muhammad v. Sarkos, Civ.
No. 12-7206, 2014 WL 4418059, at *1 (D.N.J. Sept. 8, 2014) (citing Turbe v. Gov’t of Virgin
Islands, 938 F.2d at 428); Gebhart v. Steffen, 574 F. App’x 156, 157 (3d Cir. 2014).
IV.

DISCUSSION
A.

MOTION TO DISMISS OR STAY AND BIFURCATE COUNTERCLAIMS
1.

Defendants’ Counterclaims Will be Stayed and Bifurcated

In their Motion to Dismiss the Counterclaims, Plaintiffs seek in the alternative to stay and
bifurcate the counterclaims pending resolution of Plaintiffs’ trade secret misappropriation claims.
They argue that because Defendants’ counterclaims depend on a finding that Plaintiffs’ claims are
objectively baseless—“and Plaintiffs’ suit cannot be baseless if it obtains relief on its claims”—
bifurcating and staying the counterclaims would have the benefits of streamlining issues for trial
and promoting judicial economy. (MtD Moving Br. at 29.) Plaintiffs contend that it has become
standard practice for Courts to invoke Rule 42(b), to stay and bifurcate sham litigation
counterclaims. (Id. at 30–34) (citing cases).
Unsurprisingly, Defendants object to staying and bifurcating their counterclaims. They
argue that Plaintiffs already sought this relief from the Magistrate Judge and were denied, making
the Magistrate Judge’s ruling law of the case. (MtD Opp. at 3 n.3.) (citing Order issued October
4, 2022, ECF No. 233.) In the alternative, they incorporate by reference their prior letter brief to
the Magistrate Judge. (Id.) (citing ECF No. 225.)
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Plaintiffs reply that their application for a stay, and the Magistrate Judge’s ruling, was
limited to the interim period until this Court decided the pending Motion to Dismiss or Stay and
Bifurcate. (MtD Reply at 15.)
Having considered the parties’ arguments, the undersigned agrees that the counterclaims
should be stayed and bifurcated for the following reasons. First, staying and bifurcating the
counterclaims has the practical effect of closing the pleadings in this matter for now. This permits
the Court to take up Defendants’ Motion for Judgment on the Pleadings, which would otherwise
be procedurally improper under Rule 12(c) because such motions are generally to be filed and
considered “after the pleadings have closed.” Fed. R. Civ. P. 12(c). Second, while discovery
appears to have progressed to some degree since October 2022, the parties have had no small
amount of difficulty, as demonstrated by successive motions to compel (ECF Nos. 239, 265), the
Court’s conclusion that appointment of a Special Discovery Master was warranted (ECF No. 284),
and an outstanding appeal from a decision issued by that Special Master (ECF No. 300).
Bifurcating and staying the counterclaims has the benefit of focusing and expediting the parties’
discovery on the issues raised by Plaintiffs’ trade secret misappropriation claims. Finally, as
Plaintiffs point out, there is merit in narrowing the issues for either summary judgment or trial (if
needed), thus preserving the parties’ resources, promoting judicial economy, and avoiding
potential jury confusion.

All of these reasons favor staying and bifurcating Defendants’

counterclaims pending resolution of Plaintiffs’ trade secret misappropriation claims. Accordingly,
the Court will enter an appropriate order to do so.
B.

MOTION FOR JUDGMENT ON THE PLEADINGS
1.

The DTSA Claim Does Not Pre-date the Statute

In their Motion for Judgment on the Pleadings, Defendants challenge the Complaint’s trade
secret misappropriation claim under the federal Defend Trade Secrets Act (“DTSA”), 18 U.S.C.
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§ 1836 on the basis that the statute does not cover acts of misappropriation that occurred on or
before May 11, 2016, when the statute was enacted. (MJOP Moving Br. at 19.) They argue that
the Complaint alleges no well-pled facts showing misappropriation after that date. (Id. at 20.) The
misappropriation by NTMEs occurred prior to 2012, and the patent application that issued as the
‘461 Patent was filed in 2013 and published in 2014. Defendants concede that the Complaint
alleges some misappropriation conduct after 2016, but they maintain that these are merely
conclusory, information-and-belief allegations of continuing misuse. Defendants therefore urge
the Court to ignore the allegations under a Rule 12 analysis, and argue that—even if the allegations
were to be considered—they must fail because the DTSA does not recognize a theory of continuing
misappropriations. Rather, a DTSA claim arises once at the time of the initial appropriation. The
Court disagrees for the following reasons.
The DTSA creates a private right of action under federal law for the misappropriation of
trade secrets. 18 U.S.C. § 1836(b)(1). Misappropriation can be established in three ways:
improper acquisition, disclosure, or use of a trade secret without consent. 18 U.S.C. § 1839(5).
The statute applies to “any misappropriation of a trade secret . . . for which any act occurs on or
after the date of the enactment of the Act.” Pub. L. No. 114-153. Courts in the Third Circuit have
interpreted the DTSA to apply to misappropriations occurring before the statute’s enactment where
a plaintiff alleges “pre-enactment acquisition of a trade secret coupled with post-enactment
continued use.” Marimar Textiles, Inc. v. Jude Clothing & Accessories Corp., Civ. No. 17-2900,
2017 WL 4391748, at *6 (D.N.J. Oct. 2, 2017) (collecting cases); see also Teva Pharma. USA,
Inc. v. Sandhu, 291 F. Supp. 3d 659, 674–75 (E.D. Pa. 2018) (“Misappropriation, as defined in the
DTSA, includes unauthorized ‘use,’ not just acquisition of a trade secret. Thus, one who acquired
and used a trade secret before enactment of the DTSA and continued to use it after enactment is

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liable.” (citations omitted)). The Third Circuit has implicitly validated this approach to preenactment acquisition/post-enactment use. See Oakwood Labs LLC v. Thanoo, 999 F.3d 892, 908
n.16 (3d Cir. 2021) (noting that “[w]e focus only on the ‘use’ of the trade secret . . . because all of
Oakwood’s allegations regarding acquisition and disclosure reference dates that took place prior
to . . . the date when the DTSA became effective,” and ultimately reversing the district court’s
dismissal because the panel found the complaint’s “use” allegations stated a plausible claim under
DTSA.) Here, the Court finds the following paragraph of the Complaint relevant insofar as it
specifically alleges Defendants have used Plaintiffs’ trade secrets at least as recently as 2017 in
Defendants’ MIAX Pearl exchanges:
136. MIAX’s acquisition, use, and disclosure of the Nasdaq Trade
Secrets provided significant competitive benefit to MIAX,
particularly in its development and unveiling of MIAX Options and
MIAX Pearl—two electronic exchanges launched nationally on
December 7, 2012 and February 6, 2017, respectively. MIAX
continues to operate these two exchanges today.
(Compl. ¶ 136.) Accordingly, the Court finds that the Complaint’s DTSA claim (Count VIII) does
not fall outside the scope of the statute.
2.

The NJTSA Claim Does Not Pre-Date the Statute

According to Defendants, Plaintiffs’ claim under the New Jersey Trade Secrets Act
(“NJTSA”), N.J.S.A. §56:15-2, also fails because the misconduct alleged pre-dates the NJTSA’s
effective date of January 5, 2012. According to Defendants, the gravamen of the Complaint’s
NJTSA claim is grounded in the pre-2012 activity of the NTMEs or the inevitable disclosure and
use doctrine. Here again, the Court disagrees.
The NJTSA prohibits the misappropriation of a trade secret. N.J.S.A. § 56:15-3. It defines
misappropriation of a trade secret to include:

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(1) Acquisition of a trade secret of another by a person who knows
or has reason to know that a person acquired the trade secret by
improper means; or
(2) Disclosure or use of a trade secret of another without express or
implied consent of the trade secret owner by a person who:
(a) Used improper means to acquire knowledge of the trade
secret; or
(b) At the time of disclosure or use, knew or had reason to know
that the knowledge of the trade secret was derived or acquired
through improper means; or
(c) Before a material change of position, knew or had reason to
know that it was a trade secret and that knowledge of it had
been acquired through improper means.
N.J.S.A. § 56:15-2.

Accordingly, “disclosure or use of a trade secret” constitutes a

misappropriation.
There are indeed suggestions that NJTSA is less generous with respect to its application to
conduct prior to its January 5, 2012 effective date. See 2011 N.J. Laws 161 § 10 (“With respect
to a continuing misappropriation that began prior to the effective date, the Act does not apply to
the continuing misappropriation that occurs after the effective date.”); N.J.S.A. § 56:15-8 (For the
purposes of this section, a continuing misappropriation constitutes a single claim.) Moreover, the
Third Circuit’s decision in Oakwood explicitly declined to address the NJTSA in the same way it
addressed the DTSA, Oakwood, 999 F.3d at 908 n.16 (observing that the complaint’s allegations
“may, however, suffice as support for similar claims under the NJTSA—though we do not need to
decide that here”), and the only court in this District to consider this issue in any depth dismissed
an NJTSA claim based on pre-enactment misappropriation. See Mu Sigma, Inc. v. Affine, Inc.,
Civ. No. 12-1323, 2013 WL 3772724, at *8 (D.N.J. July 17, 2013) (“Plaintiff's reliance on the
[NJTSA] is misplaced because the [it] ‘does not apply to misappropriation occurring before the
effective date’ of the Act, which was January 5, 2012. . . . The bulk of the allegations relating to
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misappropriation of [p]laintiff’s confidential information by the Founders took place in 2010, and
[p]laintiff filed this suit in state court in 2011, which occurred prior to the passage of the T.S.A.
As such, based on the timing, the T.S.A. cannot address these alleged wrongdoings.”); see also Air
Express Int’l v. Log-Net, Inc., Civ. No. 12-1732, 2016 WL 5334659, at *2 (D.N.J. Sept. 22, 2016)
(quoting Mu Sigma in dicta).
The Court, however, finds Mu Sigma readily distinguishable insofar as the Complaint in
this matter was filed well after the enactment of the NJTSA, and its pleadings allege “disclosure”
and “use”-type misappropriation under the statute against the corporate Defendants—not the
NTMEs that the Complaint alleges improperly took the trade secret information.

Here,

Defendants’ conduct began with a filed patent application on December 6, 2013 that disclosed
Plaintiffs’ trade secrets, which was after the NJTSA’s effective date. (Compl. ¶¶ 33–34, 141,
151.) 3 Likewise, the Complaint alleges that Defendants launched its MIAX Options and MIAX
Pearl exchanges in December 2012 and February 2017, respectively, which are also after the
NJTSA’s January 5, 2012 effective date. (Compl. ¶ 152.) Accordingly, the Court finds that the
Complaint plausibly alleges that Defendants—as opposed to the NTMEs—have violated the
NJTSA after its effective date.
3.
The Trade Secret Misappropriation Claims are Not Time-Barred Under the
Relevant Statutes of Limitations
In their Motion for Judgment on the Pleadings, Defendants contend that all of Plaintiffs’
trade secret misappropriation claims (Counts VIII–X) are barred as untimely. In Defendants’ view,
Plaintiffs’ claim accrued in 2011 when the NTMEs left to work for Defendants, especially given

3
The ‘461 Application published on June 12, 2014. This is not alleged in the Complaint, but the Court takes judicial
notice of this fact as a matter of public record and because this information is available on the face of the ‘461 Patent,
which is referenced by the Complaint. See Wolfington v. Reconstructive Orthopaedic Assoc. II, PC, 935 F.3d 187,
195 (3d Cir. 2019). Because both the filing of the application and the publication of the application took place after
the effective date of the NJTSA, the Court need not resolve which event constitutes the disclosure-type violation.

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Plaintiffs’ professed belief that the NTMEs use of Nasdaq’s alleged trade secrets at MIAX was
“inevitable.” (MJOP Moving Br. at 14–17.) Separately, Defendants argue that Plaintiffs were
also on constructive notice of any purported misappropriation on June 12, 2014, when Defendants’
patent application published that showed what Plaintiffs allege was a “striking resemblance” to
Plaintiffs’ trade secrets. (Id. at 17–19.)
In response, Plaintiffs emphasize the general rule that because a statute of limitations
defense is an affirmative one, it can only be resolved on a Rule 12 motion in the rare case when a
plaintiff effectively pleads itself out of court by alleging facts that are sufficient to establish the
defense. (MJOP Opp. at 16.) Specifically in this case, Plaintiffs object to Defendants’ attempt to
set an accrual date for Plaintiffs’ claims based on the NTME’s transition in 2011. Plaintiffs argue
that their claims accrued when they were injured. (MJOP Opp. at 17.) Going a step further,
Plaintiffs invoke the discovery rule to contend that their claims accrued when the injury caused by
MIAX “was known or knowable, through the exercise of reasonable diligence.” (Id.) (citation
omitted). Plaintiffs insist that this applies to each individual instance of alleged misappropriation,
and argue that the relevant question becomes when Plaintiffs knew or should have known each
time that MIAX acquired, disclosed, or used their trade secrets.

(Id.)

Plaintiffs dispute

Defendants’ reliance on the “inevitable disclosure” allegations in their Complaint because
(1) Defendants denied those allegations in their Answer, and (2) inevitability does not establish
misuse at the first opportunity. (Id. at 18–19). Rather it is Plaintiffs’ injuries—when Plaintiffs’
knew or should have known that they occurred—that matters. (Id. at 19.)
On reply, Defendants reiterate their position that Plaintiffs’ claims were discoverable in
2011 when the NTMEs transitioned, or at least since June 2014 when the ‘461 Application was
published. (MJOP Reply at 2–7.)

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This suit was filed on September 1, 2017, and the parties agree that the DTSA and NJTSA
have a three-year statute of limitations, while a trade secret misappropriation claim under New
Jersey common law has a six-year statute of limitations. The parties’ dispute on this issue therefore
centers on when Plaintiffs’ claims accrued. If the claims accrued prior to September 1, 2011, all
of the Complaint’s trade secret misappropriation claims are barred by the their respective
limitations periods. If the claims accrued prior to September 1, 2014, the DTSA and NJTSA claims
should be barred.
a)

Plaintiffs’ Claims Did Not Accrue in 2011 Based on the Complaint

Having reviewed the Complaint, the Court readily rejects Defendants’ contention that
Plaintiffs’ misappropriation claims accrued in 2011 when the NTMEs made their transition to
MIAX. Defendants’ inevitable disclosure argument lacks merit. While the Complaint does raise
the issue of inevitable disclosure and/or misappropriation, it does so in a different context. As
Plaintiffs point out, those allegations are prospective in nature, and are directed to the likelihood
of a future inevitable disclosure of trade secrets in the employee’s possession that might warrant
the entry of preliminary injunction against its employee. This is apparent from the relevant
paragraphs of the Complaint:
163. In violation of Nasdaq’s rights, the MIAX Defendants have
actually misappropriated and/or threaten to inevitably
misappropriate Nasdaq’s confidential, proprietary, and trade secret
information in violation of New Jersey law, in the improper and
unlawful manner as alleged herein.
171. As the direct and proximate result of MIAX’s conduct, Nasdaq
has suffered, and if MIAX’s conduct is not stopped, will continue to
suffer severe competitive harm, irreparable injury, and significant
damages, including lost profits, reasonable royalties, and other
damages as set forth herein, in an amount to be proven at trial.
MIAX has been, will be or is being unjustly enriched by the
misappropriation of Nasdaq’s trade secrets and, unless retrained,
will continue to threaten to use, actually use, divulge, inevitably

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disclose, acquire, distribute, and/or otherwise misappropriate
Nasdaq’s trade secrets.
(Compl. ¶¶ 163, 171) (emphases added). Even if Plaintiffs were aware in 2011 that the NTMEs
were leaving and that they were leaving for MIAX, Plaintiffs’ position—taken six years later in
their 2017 Complaint—cannot reasonably be used retroactively against them as an admission that
they appreciated or should have appreciated their trade secret misappropriation claims in 2011.4
In short, Court finds no grounds in law or fact to impute notice to Plaintiffs of their injuries based
on their inevitable disclosure allegations. 5
b)

Whether Plaintiffs’ DTSA and NJTSA Claims Accrued in 2014

In the alternative, Defendants argue that the statute of limitations on Plaintiffs’
misappropriations claims should have begun to run from June 12, 2014, when the ‘461 Application
published, putting Plaintiffs on either actual or constructive notice. (MJOP Moving Br. at 18–19).
Plaintiffs respond that it would be improper for the Court to determine, based on the
pleadings alone, whether they knew or should have known about the publication of the ‘461
Application. (MOP Opp. at 22.) Plaintiffs insist that courts around the county have found that the
publication of a patent application is not enough, a plaintiff must have been under a duty to inquire
that arose after sufficient facts were available to provoke a reasonable person to investigate their
contents. In the absence of such facts discernible from the Complaint, it is this factually intensive
inquiry that courts should avoid. (Id. at 23.)

In the undersigned’s view, imputing “inevitable disclosure” in this way is impractical in at least one sense: it risks
motivating “protective” trade secret misappropriation claims among previous-employer plaintiffs seeking to enforce
a confidentiality provision or covenant not to compete against employees who are leaving to join a competitor.
5
Insofar as the Court rejects Defendants’ principle position with respect to a 2011 claim accrual, it does not reach
Plaintiffs’ counter-argument that Defendants’ admissions to the relevant allegations in their Answer should technically
preclude Defendants from asserting their position on a motion for judgment on the pleadings.
4

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On reply, Defendants cite competing cases in which courts have found that patent
application publication or issuance suffices to put a plaintiff on notice and trigger the start of the
statute of limitations period. (MJOP Reply at 10–12.)
The Court begins its analysis with the text of the relevant statutes. DTSA includes its own
statute of limitations:
Period of limitations.--A civil action [brought by a private party] . . .
may not be commenced later than 3 years after the date on which the
misappropriation with respect to which the action would relate is
discovered or by the exercise of reasonable diligence should have
been discovered. For purposes of this subsection, a continuing
misappropriation constitutes a single claim of misappropriation.
18 U.S.C. § 1836(d). The NJTSA includes a similar provision:
An action for misappropriation shall be brought within three years
after the misappropriation is discovered or by the exercise of
reasonable diligence should have been discovered. For the purposes
of this section, a continuing misappropriation constitutes a single
claim.
N.J.S.A. § 56:15-8. Accordingly, the statutes of limitations for both the DTSA and the NJTSA
explicitly incorporate a discovery rule. 6 The question before the Court is whether, based on the
facts as alleged in the Complaint, Plaintiffs were on notice of their claims. Defendants urge the
Court to find that the limitations periods for the DTSA and NJTSA claims were triggered as of the
date of the 2014 publication of the ‘461 Application.
As a first matter, the Complaint does not allege that the ‘461 Application was published at
all, much less its date of publication. The Court need not take judicial notice of its publication for
this purpose, because it rejects the underlying premise. Courts in this Circuit have indeed split as
to the effect of a patent publication. In the District of Delaware alone there are a series of

Though less relevant based on the timing of events in this case, the same discovery rule also applies to a claim for
misappropriation under New Jersey common law. See Blystra v. Fiber Tech Group, Inc., 407 F. Supp. 2d 636, 644–
645 (D.N.J. 2005) (citing County of Morris v. Fauver, 153 N.J. 80, 109 (1998)).

6

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competing decisions. See Ocimum Biosolutions (India) Ltd., v. LG Chemical Ltd., Civ. No. 192227, 2022 WL 3354708, at *9–11 (D. Del. July 31, 2022) (“But we are presently at the Rule
12(b)(6) stage—a point where the record is necessarily more limited than it would be if the issue
were further litigated later in the case. And with inquiry notice being a fact-intensive question, in
these circumstances, it is ‘an issue on which there ought to be discovery.’”); Lambda Optical
Solutions, LLC v. Alcatel-Lucent USA Inc., Civ. No. 10-487, 2015 WL 5470210 (D. Del. Aug. 6,
2015) (denying motion to dismiss); Capricorn Pharma v. Matrixx Initiatives, Inc., Civ. No. 08873, 2009 WL 2567022 (D. Del. Aug. 19, 2009); Raza v. Siemens Med. Sols. USA Inc., 607 F.
Supp. 2d 689, 693 (D. Del. 2009) (granting motion to dismiss and observing that “[c]ourts have
recognized that the public disclosure of products, as well as the publicly noticed filing of patent
protection constitutes, at a minimum, constructive knowledge for purposes of discovering a claim
based on the misappropriation of trade secrets and commencing the limitations period under the
statute”)
From these cases, and others cited by the parties (see MJOP Moving Br. at 18–19; MJOP
Opp. at 22–24; MJOP Reply at 10–12), the Court understands that: (1) the publication of a patent
or patent application allegedly containing a trade secret is an important factor in assessing whether
a trade secret misappropriation claimant should have, through the exercise of reasonable diligence,
discovered the misappropriation; but (2) it is not necessarily dispositive, and other factors can and
should play a role in the inquiry. In engaging in this inquiry, a court should also examine whether
there is evidence of fraudulent concealment (if alleged), and/or whether any other evidence exists
to show that the claimant should our should not have been on notice of the alleged
misappropriation.

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In reaching this conclusion, the undersigned joins those courts who recognize that “[i]t
would be unreasonable (that is to say, it would impose costs far in excess of any conceivable
benefits) to impose a duty to monitor all patent applications on every company that maintains an
active patent portfolio. A duty to investigate a patent application should arise ‘only when sufficient
facts were available to provoke a reasonable person to investigate their contents,’ i.e., ‘reason to
suspect a potential misappropriation of its confidential information, such that it was under a duty
to investigate the contents of [defendant's] published patent applications.’” Ferris Mfg. Corp v.
Carr, Civ. No. 14-4663, 2015 WL 279355, at *4 (N.D. Ill. Jan. 21, 2015).
Here, it is clear from the Complaint that Plaintiffs were aware at some point that at least a
dozen NTMEs had joined Defendants by 2011. (See Compl. ¶ 28.) In an effort to charge Plaintiffs
with knowledge in 2011, Defendants argue that the Court should take judicial notice of a
publication announcing the NTMEs’ transition. (MJOP Moving Br. at 15–16) (citing April 2011
Dow Jones newspaper article). The Complaint and the newspaper article, however, raise more
questions than they answer with respect to whether a reasonable claimant would have been put on
inquiry notice by the transitioning employees. Notably, there are no facts in the record with respect
to the frequency with which Plaintiffs’ employees left to join competitors, or employees in this
field generally shift employment. Likewise, there are no facts in the record as to the volume of
patent applications filed by the parties in this case, much less by the industry as a whole.
Accordingly, based on the facts alleged in the Complaint viewed in a light most favorable to
Plaintiffs, the Court cannot find that Plaintiffs had reason to suspect a misappropriation sufficient
to impose a duty to investigate Defendants’ patent activities, such that their claims should be
dismissed at this early stage of the case for failure to timely act on them. The Court therefore
further finds that, on this record, the publication of the ‘461 Patent Application did not trigger the

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statutes of limitations for Plaintiffs’ misappropriation claims. In reaching this conclusion, the
Court is well aware that it may be called to revisit this issue on summary judgment after discovery
and briefing provides a more developed record.
4.
The Complaint Does Not Fail to Plead Plausible Claims Under DTSA,
NJTSA, and/or Common Law
Defendants seek to dismiss the Complaint’s trade secret misappropriation claims under
DTSA, NJTSA, and New Jersey common law for failure to state a claim. Defendants challenge
the adequacy of the pleadings with respect to (1) the Complaint’s definition of Plaintiffs’ purported
trade secrets and (2) the Complaint’s allegations that Defendants misappropriated the information
when they knew or should have known that they were trade secrets.
Both the DTSA and the NJTSA require a plaintiff “to demonstrate (1) the existence of a
trade secret, defined broadly as information with independent economic value that the owner has
taken reasonable measures to keep secret, and (2) misappropriation of that secret, defined as the
knowing improper acquisition and use or disclosure of the secret.” Par Pharm., Inc. v. QuVa
Pharm, Inc., 764 F. App’x 273, 278 (3d Cir. 2019). Courts in this district “fold” the DTSA analysis
into the NJTSA review. Scherer Design Grp. LLC v. Schwartz, Civ. No. 18-3540, 2018 WL
3613421, at *4 (D.N.J. July 16, 2018). New Jersey common law similarly requires, inter alia, that
a trade secret was “acquired by the competitor with knowledge of the [employee’s] breach of
confidence, and [] used by the competitor to the detriment of the plaintiff.” Rohm & Haas Co. v.
ADCO Chem. Co., 689 F.2d 424, 429–430 (3d Cir. 1982) (citing Stone v. Goss, 65 N.J. Eq. 756,
759–60 (1903)); Ferroline Corp. v. General Aniline & Film Corp., 207 F.2d 912, 921 (7th Cir.
1953) (applying New Jersey law), cert. denied, 347 U.S. 953 (1954)); see also P.C. of Yonkers,
Inc. v. Celebrations! The Party and Seasonal Superstore, LLC, Civ. No. 04-4554, 2007 WL

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708978, at *10 (D.N.J. Mar. 5, 2007). Therefore, this Court will consider the challenges to the
claims together.
a)

The Complaint Adequately Alleges Trade Secret

A complaint must identify purportedly trade secret information “with enough specificity to
place a defendant on notice of the bases for the claims being made against it.” Oakwood, 999 F.3d
at 906 (citation omitted). A complaint, however, “need not spell out the details of the trade secret
to avoid dismissal.” Id. (internal quotation marks omitted). “Rather, the subject matter of the trade
secret must be described with sufficient particularity to separate it from mattes of general
knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and
to permit the defendant to ascertain at least boundaries within which the secret lies.” Id. (internal
quotation marks omitted). This is a “fact-specific question to be decided on a case-by-case basis.”
Id.
The Complaint includes the following relevant allegations:
23. Nasdaq’s renowned INET electronic trading technology
platform has been an essential component in Nasdaq’s business
strategy and performance since 2005. As an electronic
communication network, INET is the core software engine behind
all Nasdaq trading systems and also the Nasdaq Financial
Framework, which Nasdaq provides commercially to other
exchanges, CCPs, and CSDs, globally. INET has proven to be one
of the most stable and reliable exchange technologies in the world
with over 100 market operators that depend on the platform as a
mission-critical component of their businesses. Nasdaq has
continually raised the bar by investing in INET quality and
performance. The Nasdaq solution provides unparalleled capacity
and speed, supporting processing of up to five million messages per
second at speeds of sub-100 microseconds on average. INET is by
far the highest performing, fastest trading system among U.S.
exchanges by a wide margin, and believed to power the fastest
exchange platforms on the planet.
24. Over the years, Nasdaq has expended significant resources to
develop and improve upon INET to provide Nasdaq customers with
the competitive advantage of an automated system that is highly
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efficient and exceptionally stable, and that reliably facilitates highspeed pairings of buy and sell orders to improve liquidity, reduce
latency, assure the fair handling of orders, and diminish transaction
costs to both firms and investors alike. Specifically, INET’s unique
middleware messaging bus, which facilitates the communication of
data between different components that are connected to the
messaging bus, contributes significantly to INET’s reliability and
performance. A number of features implemented in the messaging
bus, such as its multi-tier data storage architecture and gap-fill
process, have been and continue to be drivers in exchange
innovation.
34. Among the MIAX ’461 Patent’s disclosures are a messaging bus
(which has a multi-tier data storage architecture and implements a
specific gap-fill process) that bears a striking resemblance to
Nasdaq’s own highly confidential and proprietary INET design and
reflects Nasdaq’s trade secrets. For example, the architecture
depicted in Figure 10 and the gap-fill process described in columns
20 and 21 of the MIAX ’461 Patent are nearly identical to the
systems architecture, processes, and configuration that are unique to
Nasdaq’s INET and comprise Nasdaq’s trade secrets. Accordingly,
Nasdaq is informed and believes, and based thereon alleges, that
MIAX brazenly used the inventions that were acquired and
improperly disclosed or used by the Nasdaq-to-MIAX Employees
to prepare MIAX’s own patent application. Nasdaq is further
informed and believes, and based thereon alleges, that MIAX has,
in October 2014, received the ’461 Patent on inventions that were
Nasdaq Trade Secrets, which were provided to the Nasdaq-toMIAX Employees under confidentiality and nondisclosure
obligations in the course of their employment with Nasdaq.
The Court finds that paragraphs 23 and 24 of the Complaint provide sufficient description of the
nature of Plaintiffs’ alleged trade secrets. Moreover, paragraph 34 describes, indirectly, their trade
secrets by reference to specific portions of a specific document: the ‘461 Patent. Together, these
allegations parallel the level of description approved by the Third Circuit in Oakwood, and
therefore suffice to meet Plaintiffs’ obligations. See 999 F.3d at 907.
b)

The Complaint Adequately Alleges Defendants’ Misappropriation

The Complaint alleges that NTMEs had access to trade secret information, improperly
acquired it, and disclosed it to Defendants. (Compl. ¶¶ 28–32.) Plaintiffs required employees with

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access to the trade secret information to sign non-disclosure and confidentiality agreements. (Id.
¶ 25.) Technical details bearing a “striking resemblance” to that trade secret information appeared
in the ‘461 Patent that was issued to MIAX based on an application that was filed by six of the
NTMEs, together with non-former Nasdaq employees. (Id. ¶¶ 33–34.)
It may be that discovery will establish that Defendants’ independently developed their
technology or that their technology is distinctly different from what Plaintiffs’ claim as a trade
secret, but the facts as alleged more than plausibly plead Defendants’ misappropriation.
V.

CONCLUSION
For the reasons stated above, the Court will GRANT-IN-PART and DENY-IN-PART the

Motion to Dismiss Counterclaims (ECF No. 224), STAY and BIFURCATE the Counterclaims,
and DENY the Motion for Judgment on the Pleadings (ECF No. 250). The parties will also be
instructed to confer and file a joint letter by August 1, 2023 advising to what extent the Court’s
decision on the above motions affects the pending appeal of the Special Master’s decision (ECF
No. 300). An appropriate Order will follow.

Date: July 25, 2023
s/ Zahid N. Quraishi
ZAHID N. QURAISHI
UNITED STATES DISTRICT JUDGE

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