Ever.Ag, LLC v. Milk Moovement, Inc. ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 DAIRY, LLC, a Delaware Limited No. 2:21-cv-02233 WBS AC Liability Company, 13 Plaintiff, 14 ORDER DENYING MOTION FOR v. PRELIMINARY INJUNCTION 15 MILK MOOVEMENT, INC., a/k/a Milk 16 Moovement, LLC, a foreign Corporation, 17 Defendant. 18 19 ----oo0oo---- 20 Plaintiff has moved for a preliminary injunction 21 requiring defendant to: “(i) preserve all potentially relevant 22 evidence and submit electronic devices, accounts, and files to 23 forensic examination, (ii) refrain from using or disclosing any 24 of the stolen trade secrets or confidential information, (iii) 25 return everything they stole and destroy any copies, and (iv) 26 refrain from soliciting Dairy’s customers to reveal Dairy’s trade 27 secrets.” (Docket No. 31.) 28 1 In order to obtain a preliminary injunction, the moving 2 party must establish (1) it is likely to succeed on the merits, 3 (2) it is likely to suffer irreparable harm in the absence of 4 preliminary relief, (3) the balance of equities tips in its 5 favor, and (4) an injunction is in the public interest. Winter 6 v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008); Humane 7 Society of the U.S. v. Gutierrez, 558 F.3d 896, 896 (9th Cir. 8 2009). 9 Because the court finds that plaintiff has made an 10 insufficient showing of a likelihood of success on the merits, 11 its motion will be denied. Plaintiff’s first amended complaint 12 (“FAC”) (Docket No. 48) is based upon allegations of 13 misappropriation of trade secrets under the Defend Trade Secrets 14 Act of 2016 (“DTSA”), 18 U.S.C. § 1836, and the California 15 Uniform Trade Secrets Act (“CUTSA”), California Civil Code § 16 3426.1; and its request for a preliminary injunction is based 17 upon defendant’s alleged use of its trade secrets.1 18 Courts typically analyze DTSA and CUTSA claims together 19 as the elements for trade secret misappropriation and the 20 definitions of those elements are substantially similar under 21 both acts: (1) the existence of a trade secret, and (2) 22 misappropriation of the trade secret. See ExamWorks v. Baldini, 23 2:20-cv-00920-KJM, 2020 WL 3127928, *5 (E.D. Cal. June 11, 2020) 24 (vacated in part on other grounds); Waymo, LLC v. Uber Techs., 25 Inc., No. C 17-00939 WHA, 2017 WL 2123560, * 7 (N.D. Cal. May 15, 26 27 1 The complaint also contains a claim for intentional interference with contractual relations, which is not part of the 28 basis for the pending motion for preliminary injunction. 1 2017). Plaintiff has not made a sufficient showing that the 2 information it seeks to enjoin defendant from using either 3 constitutes a trade secret or was obtained by misappropriation. 4 Plaintiff claims as a trade secret: 5 Dairy’s producer payroll application enables its clients to easily and efficiently maximize the benefits 6 of FMMO pool participation. This is accomplished by supporting the pool versus non-pool decisions that 7 dairy handlers make each month around FMMO participation. Dairy’s software includes and implements 8 a methodology for handling FMMO pooling that is unique in the industry and is Dairy’s trade secret. 9 The proprietary pooling functionality in Dairy’s 10 software enables Dairy’s clients to maximize the benefits of FMMO pooling participation by enabling them 11 to make more economically advantageous pooling decisions and accurately document those decisions for 12 reporting purposes. 13 (FAC ¶¶ 23-24.) 14 In order to establish this as a trade secret, 15 plaintiff must demonstrate that it is the subject of reasonable 16 efforts to maintain its secrecy. See ExamWorks, 2020 WL 3127928, 17 at *6; 18 U.S.C. § 1839(3)(A); Cal. Civ. Code § 3426.1(d)(2). 18 While the court acknowledges that plaintiff has described 19 measures it took to keep access to its actual software limited, 20 at this stage plaintiff has not shown a likelihood that can 21 establish it took reasonable measures under the circumstances to 22 maintain secrecy over the information in reports plaintiff 23 alleges are trade secrets. 24 For example, plaintiff’s former employee who informed 25 plaintiff that plaintiff’s customer, California Dairies Inc. 26 (“CDI”), had shared reports with defendant, himself sent a report 27 generated by plaintiff’s software to defendant while working for 28 CDI. (Decl. of Jon King (“King Decl.”) Ex. 3 (Docket No. 50- 1 2).); (Decl. of Jon King ISO of TRO Opp’n (“King TRO Decl.”) ¶ 35 2 (Docket No. 15-1).) The report he sent contained similar 3 information to the reports later shared. (King Decl., Ex. 3.); 4 (King TRO Decl. ¶ 35.) Though the former employee claims that 5 the reports shared by CDI with defendant are known in the 6 industry to be confidential, his action of sharing a similar 7 report was not consistent with that proposition. 8 Plaintiff argues that the reports show the “structure 9 and organization” and “data inputs” its software tracks, which 10 the defendant could allegedly use to create its own software. 11 (Req. to Seal, Mem. ISO of Pl.’s Mot. (“Pl.’s Mot.”) at 7.) 12 However, plaintiff has posted screenshots of its software on its 13 own website that include placeholders for data input, like those 14 in the at issue reports, for users to fill out. (King Decl. ¶ 15 62-63.) If plaintiff wanted to keep secret the data inputs its 16 software requires to prevent reverse engineering, it can be 17 assumed that it would take the reasonable measure to not place 18 that information on its website.2 19 Moreover, even if plaintiff could show that it took 20 reasonable steps to maintain secrecy of the information and 21 therefore that it qualifies as a trade secret, plaintiff has not 22 shown a likelihood of establishing that the information was 23 misappropriated, meaning defendant improperly acquired, disclosed 24 or used plaintiff’s trade secrets. See Cal. Civ. Code § 25 2 Plaintiff argues that the screenshots of the software do not show any of the “pooling-related features of the producer 26 payroll application,” but the data inputs appear similar to those 27 shown on reports. It is thus unclear how the reports would be indicative of the pooling-feature and payroll producer 28 application but the screenshots of the software would not. 1 3426.1(b); 18 U.S.C § 1839(5). Plaintiff has established that 2 the user agreement it had with its clients restricted them from 3 sharing confidential information, which included the reports, 4 freely with third parties. However, plaintiff must show that 5 defendant “knew or had reason to know” about CDI’s agreement with 6 plaintiff. See Cal. Civ. Code § 3426.1(b); 18 U.S.C. 1839(B). 7 Plaintiff provides no evidence to that effect. 8 Further, plaintiff’s misappropriation claims rest on 9 the theory that defendant took the reports given to it by CDI 10 “for purpose of reverse engineering” plaintiff’s software, 11 specifically the pickup-level pooling method. (Pl.’s Mot. at 12 12.) However, defendant’s Chief Product Officer and the Senior 13 Vice President and Chief Financial Officer of CDI describe that 14 the software defendant has created for CDI does not make pickup- 15 level pooling decisions for CDI. (King Decl. ¶ 21); (Decl. of 16 Carla Oakley, Ex. 1, Decl. of Philip Girard ISO of PI ¶ 9 (Docket 17 No. 50-1).) Defendant’s function for logging quantities of milk 18 is also different from plaintiff’s, which shows that it is 19 unlikely that defendant reverse engineered plaintiff’s software 20 to make its own. 21 Even if defendant was able to or did reverse engineer 22 the reports to obtain plaintiff’s alleged trade secret payroll 23 producer application methodology and pickup-level pooling 24 feature, the DTSA and the CUTSA allow for reverse engineering. 25 See Cal. Civ. Code § 3426.1(a) (“Reverse engineering . . . alone 26 shall not be considered improper means”); 18 U.S.C. 1839(6)(B) 27 (“the term ‘improper means’ does not include reverse 28 engineering”). nnn nen nnn enn nnn en nn ne nn nn nn nn nO I ND EE 1 In sum, plaintiff has not demonstrated a likelihood of 2 success on either element of the DTSA and the CUTSA claims. 3 Plaintiff “must make a showing on all four prongs to obtain a 4 preliminary injunction.” Woman's Friend Pregnancy Res. Clinic v. 5 | Becerra, 901 F.3d 1166, 1167 (9th Cir. 2018) (internal quotation 6 | marks and citations omitted). Plaintiff has failed to meet the 7 first prong, and therefore, plaintiff’s motion for a preliminary 8 injunction must be denied. 9 IT IS THEREFORE ORDERED that plaintiff’s motion for a 10 | preliminary injunction (Docket No. 31) be, and the same hereby, 11 is DENIED. . = ak. ah Lhe, (LA. 12 Dated: February 25, 2022 WILLIAMB.SHUBB `` ``~——O 13 UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28