Oakwood Laboratories LLC v. Bagavathikanun Thanoo

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 19-3707
_____________
OAKWOOD LABORATORIES LLC,
Appellant
v.
DR. BAGAVATHIKANUN THANOO;
AUROMEDICS PHARMA LLC; AUROBINDO PHARMA
U.S.A. INC.; AUROBINDO PHARMA LTD.
_______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 3-17-cv-05090)
District Judge: Hon. Peter G. Sheridan
_______________
Argued
November 17, 2020
Before: JORDAN, KRAUSE, and RESTREPO, Circuit
Judges.
(Filed: June 8, 2021)
_______________
Michael J. Barrie [ARGUED]
Kevin M. Capuzzi
Benesch Friedlander Coplan & Aronoff LLP
1313 North Market Street – Suite 1201
Wilmington, DE 19801
Counsel for Appellant
Jonathan D. Janow [ARGUED]
Chance Lyman
Buchanan Ingersoll & Rooney
1700 K Street NW – Suite 300
Washington, DC 20006
Counsel for Appellees
_______________
OPINION OF THE COURT
_______________
JORDAN, Circuit Judge.
In 2017, Oakwood Laboratories, L.L.C. (“Oakwood”)
sued its former Vice President of Product Development,
Dr. Bagavathikanun Thanoo, as well as Dr. Thanoo’s current
employer, Aurobindo Pharma U.S.A., Inc. (“Aurobindo
USA”), the parent of that company, Aurobindo Pharma Ltd.
(“Aurobindo”), and a sister company, AuroMedics Pharma
LLC (“AuroMedics”) (collectively, “the Defendants”),
asserting claims of trade secret misappropriation, breach of
contract, and tortious interference with contractual relations.
More than two years and four iterations of its complaint later,
Oakwood was unable to get past the pleading stage of
litigation. The District Court dismissed each version of the
complaint for failure to state a claim.
2
After each dismissal, Oakwood endeavored to address
the problems the District Court perceived. Those efforts
culminated in a Third Amended Complaint (generally
referenced herein simply as the “Complaint”) so factually
detailed that, on appeal, we conclude it easily meets the
pleading requirements of the Federal Rules of Civil Procedure
and pertinent substantive law. We will, therefore, vacate the
District Court’s dismissal and remand the case for further
proceedings. In doing so, we endeavor to clarify the
requirements for pleading a trade secret misappropriation
claim under the Defend Trade Secrets Act, 18 U.S.C. § 1836(b)
(“DTSA”).
I. BACKGROUND
A. Factual Background1
According to its Complaint, “Oakwood is a technology-
based specialty pharmaceutical company focused on hard-to-
develop generic and quasi-generic, sustained-release, and
small molecule injectable drugs,” including “the research and
development of sustained release injectable drugs involving
microsphere systems (collectively, the ‘Oakwood
1
On plenary review of the District Court’s dismissal
under Federal Rule of Civil Procedure 12(b)(6), we “accept all
factual allegations [in the complaint] as true[.]” Bruni v. City
of Pittsburg, 824 F.3d 353, 360 (3d Cir. 2016) (internal
quotations omitted). Thus, we describe Oakwood’s allegations
as “facts” for the limited purpose of reviewing the order of
dismissal.
3
Products’).”2 (App. at 208, ¶ 17.) It “has devoted extensive
time, money, and other resources to the research, design, and
development of the Oakwood Products it manufactures[,]”
including its processes for manufacturing, testing, research,
quality assurance, and regulatory compliance. (App. at 209,
¶ 18.) Those processes “are not generally known outside
Oakwood’s organization, and Oakwood takes steps reasonable
under the circumstances to keep such information
confidential,” such as requiring non-disclosure agreements
(“NDAs”) with its scientists, vendors, suppliers, and business
partners prior to sharing information, as well as advising its
employees “that such information must be held confidential,
password protecting electronically stored information, and
reasonably controlling access to such information.” (App. at
209, ¶ 19.)
Accordingly, when Oakwood hired Dr. Thanoo in 1997
as its Senior Scientist “principally responsible for the
development of the Oakwood Products” (App. at 212, ¶ 28), it
required him to sign an NDA and related inventions agreement
“[a]s a condition of [his] employment and to protect Oakwood
from misuse and/or disclosure of proprietary information[.]”
(App. at 210, ¶ 23.) As Senior Scientist and later as Vice
President of Product Development, Dr. Thanoo “directly
designed Oakwood’s microsphere process technology” and
“had extensive involvement in and knowledge of the design,
development, and implementation of the Oakwood Products.”
2
Oakwood says that “[a] microsphere is a highly
sophisticated formulation method for sustained release of what
might be a relatively simple active pharmaceutical ingredient.”
(Reply Br. at 13 (citing App. at 28, 208, 213-16).)
4
(App. at 212-13, ¶ 28.) He “spent more than 80% of his tenure
with Oakwood working on [what the company calls] the
Microsphere Project” (App. at 218, ¶ 36), a project focused on
“the design, research and development, and test methods for
leuprolide and octreotide sustained released products, and
other products, that rely on microsphere process
technology[.]”3 (App. at 212-13, ¶ 28 (footnote omitted); see
also App. at 213-17, ¶¶ 29-30.) The Microsphere Project
forms the basis of Oakwood’s trade secrets claim.
Oakwood had invested more than $130 million, two
decades, and the efforts of dozens of full-time employees in its
Microsphere Project. By the fall of 2013, it had developed
three lead product candidates based on that work. (App. at 219,
3
Both leuprolide and octreotide are peptides used as
active pharmaceutical ingredients in microsphere sustained
release products. Leuprolide is a synthetic peptide that helps
slow or stop the growth of certain cancers. When leuprolide
and octreotide are injected using a microsphere system, those
peptides are sustainably released over an extended period of
time as microspheres, made of polymers, erode. The peptides’
release is “highly dependent on the interaction” between the
specific peptide used and the polymer within which it is
incorporated, among several other variables that contribute to
the release profiles of each peptide drug from the
microspheres. (App. at 213-17, ¶ 29.) As part of its
Microsphere Project, Oakwood designed formulations based
on those variables, “which were finally determined after
extensive trial and error testing” and ultimately culminated in
a microsphere system for drug delivery, including peptide-
based drugs. (App. at 213-16, ¶ 29; see also App. at 804-08.)
5
¶ 45.) All three of those products, which we will refer to as the
“Leuprolide Products,” are bioequivalent to a valuable brand-
name drug called Lupron Depot®. (App. at 212 n.1, 219,
¶ 45.) At the time, there were “no approved generic versions
of [Lupron Depot] in the US due to the high level of difficulty
in developing and manufacturing such specialized products.”
(App. at 219, ¶ 45.)
Around the same time, Aurobindo “sought out
Oakwood” to discuss an opportunity to collaborate on the
Microsphere Project.4 (App. at 219, ¶ 43.) Aurobindo is a
vertically integrated pharmaceutical company known for
manufacturing active pharmaceutical ingredients. The
companies “discussed a business venture in which Aurobindo
USA would sell an [active pharmaceutical ingredient] to
Oakwood for its Microsphere Project.” (App. at 219, ¶ 44.)
Aurobindo informed Oakwood during their discussions that “it
had no prior experience with peptide based microsphere
products.” (App. at 220, ¶ 47.) As part of those discussions,
Aurobindo and AuroMedics – Aurobindo’s subsidiary in “the
injectable business” (App. at 229, ¶ 77.a) – acquired some of
Oakwood’s trade secret information, information that both
Aurobindo and AuroMedics contracted in a confidentiality
agreement to keep “secret and confidential” and to use only for
non-competitive purposes.5 (App. at 221, ¶ 52.) Much of that
4
Based in India, Aurobindo “operates in … the United
States through its subsidiary Aurobindo USA[.]” (App. at 219,
223-24, ¶¶ 41, 62; see also App. at 479.)
5
Aurobindo USA is not a party to that confidentiality
agreement and Oakwood does not assert a breach of contract
claim against it.
6
information was contained in what is referred to as the
“Leuprolide Memo,” “a 27-page memorandum explaining the
[L]euprolide [P]roducts” involved in the Microsphere Project.
(App. at 220, ¶ 50.) Among other things, the memo revealed
Oakwood’s development of the microsphere-
based [L]euprolide [P]roducts, including the
specific ingredients of the formula used to
develop the … [Leuprolide Products],
Oakwood’s strategic plan to obtain regulatory
approval of the Leuprolide Products, the results
of its clinical trials of the Leuprolide Products
and the alterations Oakwood made to the formula
following its analysis of the clinical trial results,
Oakwood’s strategy to continue to refine the
Leuprolide Products formula, the forecasted
costs associated with launching the Leuprolide
Products, and the manufacturing process for the
Leuprolide Products.
(App. at 221, ¶ 51.)
Aurobindo’s CEO also “visited Oakwood’s
headquarters [in November 2013] … to discuss Aurobindo’s
and Aurobindo USA’s capabilities[,]” during which he spoke
with Dr. Thanoo. (App. at 220, ¶ 46.) Two days later,
Aurobindo’s CEO “connected via email Dr. Thanoo
and … [the] Vice President of Aurobindo, noting that the two
were old friends and ‘batch mate[s] at Madras University.’”
(App. at 220, ¶ 48 (alteration in original).) Ultimately,
however, after “having materially explored a business
relationship with Oakwood,” (App. at 222, ¶ 57), “Aurobindo
7
informed Oakwood that it was not interested in pursuing the
Microsphere Project and the Leuprolide Products with
Oakwood due to financial considerations.” (App. at 222, ¶ 56.)
But talks evidently continued with Dr. Thanoo, because
within about six months, in April 2014, Aurobindo USA hired
him. According to Oakwood, the Aurobindo companies used
him to misappropriate Oakwood’s trade secrets relating to
microsphere products. Dr. Thanoo had assured Oakwood that
he “was going to Aurobindo USA to develop standard generic
injectable drugs” and “that his work … would not include
microsphere system technology.” (App. at 222, ¶ 59.) To the
contrary, though, his work at Aurobindo USA does in fact
include microsphere technology.
“Within months” of Aurobindo USA hiring Dr. Thanoo,
AuroMedics had “formed a group in the United States to
develop microsphere technology” and, more specifically,
microsphere-based injectable products that Oakwood alleges
are “substantially similar to and competitive with Oakwood’s
Microsphere Project using Oakwood’s trade secret
information[.]” (App. at 224-25, 231, ¶¶ 64-65, 82; see also
App. at 672.) By May 2015, Aurobindo’s managing director
and AuroMedics’s CEO were telling the companies’ investors
that AuroMedics was “currently working on” four microsphere
products6 and expected it would begin submitting abbreviated
6
“Aurobindo announced … that it had microsphere-
based products in development” earlier, “during a February 5,
2015 investor call” in which it further explained that it “was
one of only a limited number of companies in the highly-
specialized microsphere space[.]” (App. at 224, ¶ 64.)
8
new drug applications to the Food and Drug Administration
(“FDA”) for “these products probably end of calendar 2016
beginning 2017” and would obtain its “first [FDA]
approval … sometime in calendar year 2018 with the first
product followed closely by the other three products.” (App.
at 225, ¶ 65; see also App. at 284.)
Besides boasting of a short development period for its
new products, AuroMedics said that, by the end of the fiscal
year, it expected to have invested about $6 million in the
microsphere products, for an “addressable market” of “$3
billion in the US.” (App. at 224-25, ¶¶ 64-65.) According to
Oakwood, that $6 million investment is remarkably small for
the scientific advances claimed, especially since Aurobindo,
Aurobindo USA, and AuroMedics had no prior experience
developing, manufacturing, or selling microsphere technology
before hiring Dr. Thanoo. (App. at 226, ¶¶ 67-69.) Oakwood
further asserts that, without prior experience and given the
more difficult nature of developing specialized microsphere
products compared to other products, “the Microsphere Project
is not something that could have been replicated in one-to-four
years … absent misappropriation of Oakwood’s trade secrets.”
(App. at 218, ¶ 37; see also App. at 228, ¶ 73.) In other words,
Oakwood says, “[i]t would be implausible for Aurobindo,
AuroMedics, and Aurobindo USA to have developed the
microsphere products in one-to-four years lacking Oakwood’s
trade secret information, when it has taken Oakwood nearly 20
years, $130 million, and countless man-hours of 20-40 full-
time employees to do the same.” (App. at 231, ¶ 81.)
Moreover, during that same May 2015 investor call,
Aurobindo emphasized that AuroMedics’s microsphere
“products would have limited competition unlike the typical
9
products.” (App. at 225, ¶ 65; see also App. at 299.)
AuroMedics later explained, during an August 14, 2015
investor call, that “[n]ot every company can do these, but we
have some very good experts working on these development
projects and we are making significant progress.” (App. at
226-27, ¶ 70; see also App. at 323.) Thus, in Oakwood’s
words, “AuroMedics had already built a team around Dr.
Thanoo and was capitalizing on his microsphere experience
gained at Oakwood on the peptide area[.]” (App. at 226, ¶ 70.)
Dr. Thanoo was one of those “very good experts” AuroMedics
referenced in its investor call and he was “engaged in the same
type of work, research and/or development for Aurobindo,
Aurobindo USA, and AuroMedics that he worked on for over
16 years at Oakwood[.]” (App. at 223, 226-27, ¶¶ 62, 70.) All
of that is confirmed, says Oakwood, by Dr. Thanoo’s LinkedIn
profile, in which he lists his “[s]pecialties” as “[p]roduct and
process development of sustained release injectable drugs,”
including “[m]icrospheres,” and includes the “[d]evelopment
of complex generic injectable drugs” under his job description
as Aurobindo USA’s Vice President of R&D Injectables.7
(App. at 223-24, ¶¶ 61-63; see also App. at 256-57.)
7
According to his LinkedIn profile, Dr. Thanoo works
in Dayton, New Jersey. Notably, Aurobindo has just one
research and development facility in Dayton, New Jersey, and
that facility, according to Aurobindo, has enhanced research
and development capabilities for “[d]eveloping microsphere
technology[-]based specialty injection products.” (App. at
672.) None of the other enhanced research and development
capabilities that Aurobindo lists for that facility mention
injectables.
10
Based on the foregoing factual allegations, Oakwood
asserts that the “Defendants could not [have] develop[ed] [its]
product within the rapid timeframe set forth above without Dr.
Thanoo’s assistance and his use of Oakwood’s … trade secret
information related to the Microsphere Project.” (App. at 232,
¶ 83.) Nor could they have done so “without Oakwood’s trade
secret information contained in the Leuprolide Memo that
Oakwood sent to Aurobindo and AuroMedics” for the limited
purpose of discussing a “potential business venture[.]” (App.
at 232, ¶ 84.) Oakwood accordingly claims that the
Defendants are liable for trade secret misappropriation, breach
of contract, and tortious interference with contractual relations.
B. Procedural Background
Although it is the District Court’s fourth order
dismissing the Complaint that we address and vacate, a review
of the several amended complaints highlights Oakwood’s
efforts to address issues the District Court identified. It also
provides a more complete view of the District Court’s
construction of trade secret law and how it led to the dismissal
of the last version of the Complaint.
1. Initial Complaint and First Dismissal
On July 12, 2017, Oakwood filed its Initial Complaint,
asserting that its research, design, and development of its
“sustained release injectable drugs involving microsphere
systems” were trade secrets. (App. at 28-29, ¶¶ 16-18.) The
District Court dismissed that complaint on November 28,
2017, saying “the list of actions allegedly constituting trade
secret was not sufficiently specific.” (App. at 87.) While the
Court acknowledged that Oakwood “is not required to set forth
a claim in heightened specificity” at the pleading stage, it
11
explained that Oakwood “must still provide sufficient
information to put Defendants on notice of the nature of the
claim and to support the claim itself.” (App. at 87.)
Oakwood’s failure to “identif[y] or point[ ] to a specific action,
process, or formula that is the subject of this action” resulted
in the Court concluding that Oakwood failed to sufficiently
plead allegations supporting “the elements [necessary] to bring
a claim for misappropriation.” (App. at 87.) The Court also
dismissed the remaining claims for contractual breach and
tortious interference, citing again its “inability to discern what
the trade secrets that were allegedly misappropriated are.”
(App. at 88.)
2. First Amended Complaint and Second
Dismissal
Oakwood’s First Amended Complaint incorporated
several new factual allegations regarding its trade secrets, in
response to the deficiencies the Court had said were in the
Initial Complaint. Oakwood identified the trade secrets
contained in the Leuprolide Memo, supra Section I.A., which
Aurobindo had obtained under a confidentiality agreement.
Oakwood also emphasized the confidential status of its
Microsphere Project information and the high value of that
information. Specifically, it highlighted the difficult and time-
consuming nature of developing its trade secrets, which
required “extensive experimentation” to produce a drug with
“the correct release profile[.]” (App. at 100-01, ¶ 31.)
Oakwood had “spent roughly 20 years developing
bioequivalent microsphere-based versions of leuprolide and
octreotide peptides[,]” both of which are central to the
Microsphere Project. (App. at 100-01, ¶ 31.) And that project
“required Oakwood to design formulations based on a number
12
of variables [that] were finally determined after extensive trial
and error testing[,]” (App. at 99, ¶ 29 (identifying those
variables and describing each one respectively),) each of which
may “interact with the other, and each can dramatically affect
the release profile of the product and are proprietary to
Oakwood.” (App. at 100-01, ¶ 31.) “None of [that]
information was generally known” and, therefore, “[g]iven the
competitive nature of the microsphere-based sustained release
injectable drug industry, that … information derived …
independent economic value from” its confidential status.
(App. at 100-01, ¶¶ 30, 33; see also App. at 96, ¶ 21.)
In addition to better specifying and explaining the
confidential information Oakwood claims as trade secrets, the
First Amended Complaint also gave a more detailed
description of Dr. Thanoo’s access to and acquisition of those
trade secrets during his employment with Oakwood, as well as
Aurobindo’s access to and acquisition of the same through its
successful recruitment efforts of Dr. Thanoo and via the
confidential Leuprolide Memo. (App. at 98, ¶¶ 27-28.)
Dr. Thanoo “was principally responsible for the development
of the Oakwood Products” and “directly designed Oakwood’s
microsphere systems technology, including … the
‘Microsphere Project[.]’” (App. at 98-99, ¶ 28.) And
“[d]uring the period of 2013,” prior to joining Aurobindo, he
had “instructed subordinates to send to his personal email
Oakwood’s trade secret information regarding Oakwood
Products, including trade secret information related to the
testing and processing of Oakwood’s microsphere systems
technologies involving leuprolide.” (App. at 105, ¶ 53.) Then,
knowing that Dr. Thanoo “possessed a granular knowledge
of … Oakwood’s proprietary and trade secret information
related to the Microsphere Project[,]” Aurobindo recruited
13
Dr. Thanoo and Aurobindo USA hired him as its “Vice
President of R&D Injectables.” (App. at 105, ¶¶ 50, 54.)
Oakwood further alleged in the First Amended
Complaint that Aurobindo “us[ed] Oakwood’s trade secret
information, including secrets related to the Leuprolide
Products,” to develop a product competitive with the products
Oakwood was working on in the Microsphere Project. (App.
at 106, ¶ 56.) That competing product could not have been
developed “within a two-year timeframe without Dr. Thanoo’s
assistance and use of” Oakwood’s trade secrets. (App. at 106,
¶ 57.) Nor could it have been developed “without [the] trade
secret information contained in the Leuprolide Memo.” (App.
at 106, ¶ 58.) That’s because “Aurobindo had not developed
[specialized microsphere products to deliver the leuprolide and
octreotide peptides] prior to the hiring of Dr. Thanoo” (App. at
106, ¶ 55), and had previously represented to Oakwood that “it
had no [other] prior experience with peptide based microsphere
products.” (App. at 103, ¶ 40.)
Despite those new allegations, the District Court again
dismissed Oakwood’s complaint. According to the Court,
Oakwood did “not specifically identify and enumerate the
secrets acquired and used by Thanoo during his employment at
Aurobindo” nor did it “set forth facts about how the specific
secrets were utilized by Thanoo at Aurobindo.” (App. at 172.)
Although the Court acknowledged Oakwood’s allegations
“review[ing] the long period of the testing [that] … led
Oakwood to develop [its] product[,]” the Court rejected the
sufficiency of those allegations because Oakwood did “not
mention the type of polymer [it] used, … provide a comparison
to any polymer allegedly used by Defendant[,]” or “include
specifics as to its findings, a comparison to what Defendants
14
utilized in their product or any evidence of misappropriation of
that data.” (App. at 172-73.)
Moreover, Oakwood’s “testing and achievement of the
data d[id] not show misappropriation by Defendants, nor d[id]
it narrow down the specific allegations of what was
misappropriated.” (App. at 173.) The Court described
Oakwood’s allegations of misappropriation as “conclusory.”
(App. at 173.) Specifically, it thought insufficient Oakwood’s
“broad” claim that “Defendants could not have developed their
product without the information known by Thanoo and/or the
information set forth in the confidential memo that was
provided to Aurobindo in the midst of their tentative business
transaction.” (App. at 173.)
Because it was “unclear” to the District Court “exactly
what [Oakwood] [was] alleging was misappropriated,” it also
found “unclear whether a contract was breached or interfered
with.” (App. at 175.) Thus, the Court thought that Oakwood
“filed this Complaint seeking broad discovery about the
products being developed for competition purposes.” (App. at
175.)
3. Second Amended Complaint and Third
Dismissal
Oakwood tried again, and its Second Amended
Complaint described its trade secrets in further detail. It
included as attachments to the new complaint eight highly
confidential exhibits to support the trade secret descriptions,
each exhibit containing a confidential chart or schematic
relating to Oakwood’s secrets associated with the Microsphere
Project. But that was still not enough to satisfy the District
15
Court. It recognized that those new allegations and supporting
evidence did “list[ ] a number of trade secrets[.]” (App. at
201.) Nevertheless, it said Oakwood “ha[d] failed to identify
which one or more of these trade secrets [D]efendants have
misappropriated.” (App. at 201.)
As the Court saw it, Oakwood’s complaint did “not
show if and how Defendants used these trade secrets” and,
therefore, the pleading suffered from “the same defects that
resulted in the dismissal of [the] first amended complaint[.]”
(App. at 202.) “At best,” the revised complaint merely alleged
“that Thanoo left [Oakwood’s] employ, and two years later,
Aurobindo announced it would be developing a Leuprolide
product.” (App. at 200-01.) That did “little to resolve the issue
of plausibility[,]” the District Court said, because the
complaint did “not allege (1) which trade secrets were
misappropriated to develop a product, (2) it d[id] not describe
the product development, and (3) it d[id] not allege that
[Oakwood’s] research is the only source for such research.”
(App. at 201.) Nor had Oakwood “shown that it has been
detrimentally affected to date, i.e. no such products have been
launched.” (App. at 201.) And because the District Court
found it “unclear exactly what” Oakwood alleged to be
misappropriated, it once again “could not discern any breach
of contract or tortious interference[,]” and dismissed those
claims too. (App. at 202.)
4. Third Amended Complaint and Fourth
Dismissal
In its fourth and final try, Oakwood attached to its Third
Amended Complaint sixteen new exhibits in support of its
amended factual allegations. This last version of the
16
Complaint elaborates on why “the Microsphere Project is not
something that could have been replicated in one-to-four
years … absent misappropriation of Oakwood’s trade secrets.”
(App. at 218, ¶ 37.) Specifically, Oakwood alleges the
implausibility of Aurobindo developing microsphere products
in that short time frame without Oakwood’s trade secret
information when (i) “Aurobindo, Aurobindo USA, and
AuroMedics had no prior experience researching[,]”
“developing[,]” “manufacturing[,]” or “selling microsphere
technology before hiring Dr. Thanoo” (App. at 225-26, ¶¶ 66-
69); and (ii) “it has taken Oakwood nearly 20 years, $130
million, and countless man-hours of 20-40 full-time employees
to do the same.” (App. at 231, ¶ 81.)
It also points out that “[i]t was Aurobindo that sought
out Oakwood” to explore the “potential collaborative working
relationship” associated with “Aurobindo USA … sell[ing] an
[active pharmaceutical ingredient] to Oakwood for its
Microsphere Project.” (App. at 219, ¶¶ 43-44.) And “[d]espite
having materially explored a business relationship with
Oakwood, Aurobindo instead recruited and hired Dr. Thanoo,”
(App. at 222, ¶ 57,) who had personally “spent more than 80%
of his tenure with Oakwood working on the Microsphere
Project” (App. at 218, ¶ 36), “thus terminating the need for a
business relationship among the companies.” (App. at 222,
¶ 57.)
While the District Court acknowledged that the “new
documents” were “far more detailed than the facts [Oakwood]
previously alleged,” it still dismissed Oakwood’s Complaint.
(App. at 6.) Referring back to its third dismissal, in which “it
indicated that ‘[Oakwood] ha[d] identified trade secrets, but
d[id] not show if and how Defendants use these trade
17
secrets[,]’” the Court said that “[t]he same holds true, once
again.” (App. at 5.) That is, the “new documents … do not
explain adequately whether Defendants acquired and
misappropriated any of the trade secrets with knowledge of
their confidentiality, if and how Defendants have used those
trade secrets, or the resulting harm that Oakwood has
purportedly suffered.” (App. at 6.) Nor do those documents
“reveal that Oakwood’s trade secrets could have been the only
source by which Aurobindo could have developed its
microsphere product.” (App. at 6.) And none “show that the
Microsphere Project was replicated, that is, that the
microsphere technology Aurobindo has been working on has
been developed using Oakwood’s trade secrets.” (App. at 6
(emphasis in original).) The Court concluded that “any alleged
harm is speculative” because the “Defendants have not
launched any products, and, according to the Third Amended
Complaint, Oakwood has not yet suffered any harm from
missed partnerships or investment opportunities.” (App. at 7.)
But, “[e]ven had Oakwood sufficiently alleged a
detriment,” the outcome would have been the same because the
District Court continued to insist that “the critical missing
component is any allegation of precisely how Defendants
misappropriated [Oakwood’s] trade secrets.” (App. at 7.) And
“[a] potential change in perception of competitive advantage”
does not mean that such “change is the result of trade secret
misappropriation” – it does not, in other words, reasonably
imply misappropriation – because it “is merely the natural
result of any new product development announcement by an
industry competitor[.]” (App. at 7.)
18
On those bases, the District Court dismissed Oakwood’s
Complaint.8 Notwithstanding its conclusion that another
opportunity to amend would be “a futile endeavor … in light
of [Oakwood’s] previous failed attempts[,]” the District Court
“dismissed without prejudice in the event that new evidence of
misappropriation arises in the future.” (App. at 8.) Treating
the Court’s fourth dismissal as final and stating that it stood
“on its complaints, as each of them was sufficient … to state a
claim” for relief, Oakwood appealed. (App. at 1-2, 10.)
II. DISCUSSION9
As with any other claim, in considering whether
Oakwood has stated a claim of trade secret misappropriation
8
In its final form, the Complaint asserts claims of trade
secret misappropriation against the Defendants under the
DTSA (Count I), and the New Jersey Trade Secrets Act
(“NJTSA”), N.J.S.A. § 56:15-1 et seq. (Count II); breach of
contract against Dr. Thanoo under his inventions agreement
(Count III) and his NDA (Count IV); breach of contract against
Aurobindo and AuroMedics under their confidentiality
agreement (Count V); and tortious interference against
Aurobindo and Aurobindo USA (Count VI).
9
It is undisputed that the District Court had subject
matter jurisdiction under 28 U.S.C. §§ 1331 and 1332(a), and
under 18 U.S.C. § 1836(c). And, contrary to the Defendants’
suggestion, the District Court dismissal of the operative
complaint without prejudice does not deprive us of appellate
jurisdiction. We retain jurisdiction under 28 U.S.C. § 1291whenever a plaintiff manifests “a clear and unequivocal intent
to decline amendment and immediately appeal.” Weber v.
19
that is sufficient to survive a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6), our analysis proceeds in
three steps.10 First, we “tak[e] note of the elements a plaintiff
McGrogan, 939 F.3d 232, 240 (3d Cir. 2019); see also
Frederico v. Home Depot, 507 F.3d 188, 192 (3d Cir. 2007)
(concluding that a district court’s order granting a motion to
dismiss “is a final order, notwithstanding its ‘without
prejudice’ modifier” because “we employ a ‘practical rather
than a technical construction’ of § 1291’s finality requirement”
and “a dismissal with leave to amend will be treated as a final
order if the plaintiff has elected to ‘stand upon the original
complaint’” (citations omitted)). Oakwood did that here. “We
review de novo a district court’s dismissal under Rule 12(b)(6)
for failure to state a claim on which relief may be granted.”
Fischbein v. Olson Research Grp., Inc., 959 F.3d 559, 561 (3d
Cir. 2020) (citation omitted).
10
Oakwood also asserts claims of breach of contract and
tortious interference with a contractual relationship, which the
Court dismissed for the same reasons it dismissed Oakwood’s
trade secret misappropriation claims. (App. at 8 (The District
Court could not “discern any breach of contract or tortious
interference because, ‘it is unclear exactly what [Oakwood] is
alleging was misappropriated. Consequently, it is unclear
whether a contract was breached or interfered with.’” (citation
omitted)).) Breach of contract and tortious interference claims
can survive even if a trade secret misappropriation claim does
not, as long as the scope of the contractually-defined
confidential information is broader than the statutorily-defined
trade secret information. See, e.g., Bro-Tech Corp. v. Thermax,
Inc., 651 F. Supp. 2d 378, 418 (E.D. Pa. 2009) (“[The]
improper use of another’s confidential information may qualify
20
must plead to state a claim.” Santiago v. Warminster Twp., 629
F.3d 121, 130 (3d Cir. 2010) (alteration in original) (quoting
as unfair competition even if the conduct is not specifically
actionable under the rules relating to … misappropriation of
trade secrets.” (second alteration in original) (internal
quotation marks and citations omitted)); Mabrey v.
SandStream, Inc., 124 S.W.3d 302, 315 (Tex. Ct. App. 2003)
(analyzing a contractual protection against disclosure on the
basis of the contract language, not the tort law on trade-secret
misappropriation where plaintiff asserted both breach-of-
contract and trade-secret misappropriation claims);
Restatement (Third) of Unfair Competition § 42 cmt. g (Am.
Law Inst. 1995) (explaining that “a nondisclosure agreement
prohibiting the use or disclosure of particular information can
clarify and extend the scope of an employer's rights” beyond
the protection afforded by trade secret statutes).
While Oakwood challenges the District Court’s
dismissal of all of its claims, its arguments are limited to the
Court’s trade secret misappropriation rulings. Oakwood has
not challenged the dismissal of its breach of contract or tortious
interference with contractual relations claims on any basis
independent of the Court’s misappropriation rulings. Any such
argument is accordingly forfeited. Halle v. W. Penn Allegheny
Health Sys. Inc., 842 F.3d 215, 230 n.17 (3d Cir. 2016) (“An
appellant waives an argument in support of reversal if he does
not raise that argument in his opening brief.” (citation
omitted)). For that reason, Oakwood’s claims of breach of
contract and tortious interference with a contractual
relationship will only survive if its misappropriation claims
survive, and we need only consider the sufficiency of
Oakwood’s claims of trade secret misappropriation.
21
Ashcroft v. Iqbal, 556 U.S. 662, 675 (2009)). Next, we
“identify allegations that … ‘are not entitled to the assumption
of truth’” because those allegations “are no more than
conclusion[s.]” Id. (quoting Iqbal, 556 U.S. at 679). Put
another way, “we disregard threadbare recitals of the elements
of a cause of action, legal conclusions, and conclusory
statements.” James v. City of Wilkes-Barre, 700 F.3d 675, 681
(3d Cir. 2012). Finally, “[w]hen there are well-pleaded factual
allegations,” we “assume their veracity,” Iqbal, 556 U.S. at
669, in addition to assuming the veracity of “all reasonable
inferences that can be drawn from” those allegations, Monroe
v. Beard, 536 F.3d 198, 205 (3d Cir. 2008), and, construing the
allegations and reasonable inferences “in a light most favorable
to the [plaintiff,]” id., we determine whether they “plausibly
give rise to an entitlement to relief.” Iqbal, 556 U.S. at 679;
see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556
(2007) (“[A] well-pleaded complaint may proceed even if it
strikes a savvy judge that actual proof of those facts alleged is
improbable and that a recovery is very remote and unlikely.”
(internal quotations omitted)).
Here, the parties agree that the plausibility standard
recited above applies to trade secret misappropriation claims,
but they dispute whether the District Court applied that
standard correctly. According to Oakwood, the Court,
influenced by “its factual skepticism” (Opening Br. at 22), and
“without acknowledging that it was doing so, applied
several … heightened standards, in a shifting landscape of
novel demands and expectations not arising from the [Federal
Rules of Civil Procedure] or the case law.” (Opening Br. at
18-19.) Meanwhile, the Defendants hang their hat on the
District Court’s correct recitation of the plausibility standard,
22
but do so without actually considering whether the Court’s
analysis applied that standard.
Underlying the parties’ dispute about the application of
the plausibility standard is a more fundamental disagreement
rooted in the parties’ opposing interpretations of the elements
of a trade secret misappropriation claim under the DTSA.11
The DTSA requires a plaintiff to demonstrate (1) the existence
of a trade secret, defined generally as information with
independent economic value that the owner has taken
reasonable measures to keep secret, 18 U.S.C. § 1839(3); (2)
that “is related to a product or service used in, or intended for
use in, interstate or foreign commerce[,]” id. § 1836(b)(1); and
(3) the misappropriation of that trade secret, defined broadly as
the knowing improper acquisition, or use or disclosure of the
secret, id. § 1839(5). See id. § 1836(b)(1), (3) (recognizing a
federal private cause of action for trade secret misappropriation
and establishing remedies). That much, the parties agree on.
They part ways primarily on the meaning and application of
the first and third elements.12 In explaining why Oakwood has
11
Because the DTSA and the NJTSA are substantially
similar as a whole and because they include identical or almost
identical definitions for each statutory term at issue here, our
analysis of the DTSA also applies to Oakwood’s claims under
the NJTSA. See, e.g., Austar Int’l Ltd. v. AustarPharma LLC,
425 F. Supp. 3d 336, 355-57 (D.N.J. 2019) (consolidating the
analysis of the DTSA and NJTSA claims).
12
It is undisputed that the information at issue, if
protected as trade secrets, relates to a product intended for use
in interstate or foreign commerce.
23
the better of the arguments on both those elements, we look
first at the level of specificity required to identify the allegedly
misappropriated trade secrets. We then consider the
sufficiency of the Complaint’s allegations of misappropriation,
and we discuss misappropriation as harm under the DTSA.
A. Oakwood sufficiently identifies its trade
secrets
To plead the existence of a trade secret in a
misappropriation claim brought under the DTSA, Oakwood
must sufficiently identify the information it claims as a trade
secret and allege facts supporting the assertion that the
information is indeed protectable as such. See 18 U.S.C.
§§ 1836(b), 1839(3). In determining whether allegations about
the identified information plausibly support its having
protected status as a trade secret, courts consider whether the
owner of the information “has taken reasonable measures to
keep … [it] secret” and whether 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[.]” Id. § 1839(3).
The District Court concluded in its dismissal of the
second amended complaint that Oakwood had adequately pled
the existence of its trade secrets but “failed to identify which
one or more of th[o]se trade secrets [D]efendants have
misappropriated.”13 (App. at 201.) In essence, it said you may
13
The Defendants do not challenge the protected status
afforded to Oakwood’s trade secret information, and they
24
have something that’s a trade secret, Oakwood, but you have
not identified what trade secret is involved in this case. When
the Third Amended Complaint was under review, the District
Court again agreed that Oakwood had sufficiently identified its
trade secrets and pled facts supporting the information’s
protected status, but it again faulted Oakwood for not
“identify[ing] which one or more of [its] trade secrets” were
misappropriated. (App. at 201.)
The District Court was correct that information alleged
to be a misappropriated trade secret must be identified with
simply reiterate the District Court’s conclusions. (Answering
Br. at 25 (“[A]lthough it contains facts about the existence of
trade secrets, the [Complaint] contains no facts showing what
information was actually disclosed or used, or when or how it
was disclosed or used. At bottom, there are no facts showing
any trade secrets were actually disclosed or used at all.”).) Put
differently, the Defendants do not dispute the sufficiency of
Oakwood’s allegations identifying the existence of its trade
secrets generally. Rather, the Defendants emphasize what they
perceive as a difference between Oakwood’s identification of
its existing trade secrets and Oakwood’s identification of its
misappropriated trade secrets. That is a perception we do not
share, since the trade secrets Oakwood has identified are the
very ones that a fair reading of the Complaint implies are the
ones that have been misappropriated. In any event, we reject
what seems to be the Defendants’ effort to blend together the
identification-of-a-trade-secret element and the
misappropriation element. Thus, we address the identification
element here to note its distinct status and to separate it from
the misappropriation element.
25
enough specificity to place a defendant on notice of the bases
for the claim being made against it. See DeRubeis v. Witten
Techs., Inc., 244 F.R.D. 676, 680 (N.D. Ga. 2007) (citation
omitted). But a plaintiff need not “spell out the details of the
trade secret to avoid” dismissal. Diodes, Inc. v. Franzen, 260
Cal. App. 2d 244, 252 (Cal. Ct. App. 1968) (citation omitted).
Rather, the subject matter of the trade secret must be described
“with sufficient particularity to separate it from matters 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 the boundaries within which the
secret lies.”14 Diodes, 260 Cal. App. 2d at 253; see also Dow
Chem. Canada, Inc. v. HRD Corp., 909 F. Supp. 2d 340, 346
(D. Del. 2012) (citation omitted).
Beyond those outer boundaries, however, deciding
“whether a plaintiff has sufficiently disclosed its trade secrets
is ‘a fact-specific question to be decided on a case-by-case
basis.’” Vesta Corp. v. Amdocs Mgmt. Ltd., 147 F. Supp. 3d
14The discussion in Diodes regarding trade secret
identification serves to explicate substantive law, not merely
procedure, as it deals with what constitutes a plausible pleading
of one of the elements of a trade secret misappropriation claim.
As such, it has been “widely adopted by federal courts.”
Pellerin v. Honeywell Intern., Inc., 877 F. Supp. 2d 983, 988
(S.D. Cal. 2012); see also Dow Chem. Canada, Inc. v. HRD
Corp., 909 F. Supp. 2d 340, 346 (D. Del. 2012)
(“[I]dentification must be particular enough as to separate the
trade secret from matters of general knowledge in the trade or
of special knowledge of persons skilled in the trade.” (citation
omitted)).
26
1147, 1155 (D. Or. 2015) (citation omitted). Admittedly,
competing policies protecting plaintiffs and defendants in trade
secret misappropriation cases “can make resolving this type of
dispute difficult.” DeRubeis, 244 F.R.D. at 681; see also id. at
680-81 (describing seven competing policies that bear on the
plausibility of trade secret claims). But, in our view, this is not
one of those difficult cases. The factual allegations in
Oakwood’s Complaint – at least the Third Amended
Complaint and arguably earlier versions as well – are plainly
sufficient to identify the trade secrets at issue and, if taken to
be true, the allegations establish the Defendants’ knowledge of
those trade secrets’ protected status and the Defendants’
incentive to access and use the secrets.15
To recap, Oakwood alleged its trade secrets to be the
information laying out its design, research and development,
test methods and results, manufacturing processes, quality
assurance, marketing strategies, and regulatory compliance
related to its development of a microsphere system for drug
delivery, including peptide-based drugs. It also identified as
trade secrets the variables that affect the development of its
microsphere products, including the data, peptide-specific
release profiles, and other discoveries associated with those
15
As explained in Section II.B.2, infra, we hold that the
Third Amended Complaint states a trade secret
misappropriation claim, so we need not review the sufficiency
of the pleading in the earlier complaints. We note, however,
that with each iteration in response to the District Court’s
shifting criticism, the allegations became increasingly detailed
and that a complaint could no doubt feature far fewer
supporting factual allegations and still survive dismissal.
27
variables, which it collected through “extensive trial and error
testing.” (App. at 213, ¶ 29.) Oakwood gave a very precise
example by pointing to a particular document, the Leuprolide
Memo, that it had disclosed to Aurobindo under a
confidentiality agreement, and it specified the contents of that
document as containing trade secrets. It attached other
documents specifying in detail secrets related to the
Microsphere Project that Oakwood accuses the Defendants of
taking and using. The Defendants here unquestionably are on
notice of the trade secret information that is at issue.
Given the allegations of the Complaint, a reasonable
inference – one might say the only reasonable inference – is
that the trade secrets identified in the Complaint are the ones
Oakwood is claiming were misappropriated. The District
Court’s demand for further precision in the pleading is thus
misplaced and ignores the challenges a trade secret plaintiff
commonly faces when only discovery will reveal exactly what
the defendants are up to. DeRubeis, 244 F.R.D. at 680 (“[I]f
the trade secret plaintiff is forced to identify the trade secrets
at issue without knowing which of those secrets have been
misappropriated, it is placed in somewhat of a ‘Catch-22’:
Satisfying the requirement of detailed disclosure of the trade
secrets without knowledge [of] what the defendant is doing can
be very difficult. If the list is too general, it will encompass
material that the defendant will be able to show cannot be trade
secret. If instead it is too specific, it may miss what the
defendant is doing.” (second alteration in original) (citations
omitted)).
While we agree with the District Court that care must
be taken to not allow a plaintiff in a trade secret
misappropriation case to make generalized claims that leave a
28
defendant wondering what the secrets at issue might be, there
was no risk of that here, given the specificity of the allegations
in the Third Amended Complaint.
B. Oakwood sufficiently alleges that the
Defendants misappropriated its trade secrets
The District Court also declared that “the critical
missing component” from Oakwood’s Complaint “is any
allegation of precisely how Defendants misappropriated
[Oakwood’s] trade secrets.” (App. at 7.) There are three ways
to establish misappropriation under the DTSA: improper
acquisition, disclosure, or use of a trade secret without consent.
18 U.S.C. § 1839(5). The District Court considered
Oakwood’s allegations inadequate to show any of those things.
It said they merely demonstrate that Aurobindo was
developing a microsphere product that involved the same two
peptides as Oakwood’s trade secret microsphere products.
According to the District Court, the allegations do not “explain
adequately whether Defendants acquired and misappropriated
any of the trade secrets with knowledge of their
confidentiality[.]” (App. at 6.) Nor do they specify “which
trade secrets were misappropriated to develop a product,”
“describe the product development,” or reveal that Oakwood’s
trade secrets are “the only source” by which Aurobindo could
have developed its microsphere product. (App. at 201 (District
Court’s dismissal of the Second Amended Complaint); see also
App. at 6-7 (repeating similar determinations in the District
Court’s dismissal of the Third Amended Complaint).) The
District Court went on to say in its decision dismissing the
Third Amended Complaint that a competitor’s announcement
of its new product development does not reasonably imply
29
misappropriation because a change in competitive advantage
naturally occurs with such an announcement.
That reasoning fails for at least two distinct reasons.
First, it excludes a broad scope of activity that amounts to
misappropriation under the DTSA, including “use” of a trade
secret.16 Second, it focuses on Aurobindo’s actual product
development and mandates a heightened level of pleading
specificity about which trade secrets were used, how they were
used, and whether they needed to be used in order for
Aurobindo to develop its product or products. We address each
error in turn.
16
While improper acquisition, disclosure, or use of a
trade secret without consent may each independently establish
misappropriation, 18 U.S.C. § 1839(5), we will focus here only
on the “use” of a trade secret. That is because all of Oakwood’s
allegations regarding acquisition and disclosure reference
events that took place prior to May 11, 2016, the date when the
DTSA became effective. Thus, those allegations may not
independently support misappropriation claims for improper
acquisition or disclosure under the DTSA. Pub. L. No. 114-
153, § 2(e) (“The amendments made by this section [§ 1836]
shall apply with respect to any misappropriation of a trade
secret … for which any act occurs on or after the date of the
enactment of this Act.”). They may, however, suffice as
support for similar claims under the NJTSA – though we do
not need to decide that here.
30
1. “Use” of a trade secret
The District Court stated that Oakwood needed to
“show that the Microsphere Project was replicated, that is, that
the microsphere technology Aurobindo has been working on
has been developed using Oakwood’s trade secrets.” (App. at
6.) In saying so, the District Court erroneously equated the
concept of “use” with replication. That singular emphasis on
actual product development – and specifically replication – is
contrary to the ordinary meaning of “use” and inconsistent with
the text of the DTSA and the broad meaning that courts have
attributed to the term “use” under state laws that address trade
secret misappropriation. See Bragdon v. Abbott, 524 U.S. 624,
645 (1998) (“When … judicial interpretations have settled the
meaning of an existing statutory provision, repetition of the
same language in a new statute indicates, as a general matter,
the intent to incorporate its … judicial interpretations as well.”
(citation omitted)).
The DTSA does not define the term “use.” “In the
absence of such a definition, we construe a statutory term in
accordance with its ordinary or natural meaning.” F.D.I.C. v.
Meyer, 510 U.S. 471, 476 (1994). “Use” ordinarily means
“[t]o employ for the accomplishment of a purpose,” Use,
BLACK’S LAW DICTIONARY (10th ed. 2014),17 or to “benefit
17
“As usual, our job is to interpret the words consistent
with their ordinary meaning … at the time Congress enacted
the statute.” United States v. Johnman, 948 F.3d 612, 617 (3d
Cir. 2020) (internal quotations omitted). “Use,” of course, had
the same meaning in 2016, when the DTSA was enacted, as in
2014 when the cited dictionary was published. Compare Use,
BLACK’S LAW DICTIONARY (10th ed. 2014), with Use,
31
from,” Use, OXFORD: LEXICO (also defining use to mean
“[t]ake, hold, or deploy (something) as a means of
accomplishing a purpose or achieving a result; employ,” or
“[e]xploit (a person or situation)”; defining “make use of” as
“[u]se for a purpose” or “[b]enefit from”) for one’s own
advantage”). See Bonkowski v. Oberg Indus., Inc., 787 F.3d
190, 200 (3d Cir. 2015) (“We look to dictionary definitions to
determine the ordinary meaning of a word.” (internal
quotations omitted)).
When interpreted specifically in the context of trade
secret misappropriation, the term “use” has been broadly
defined as
any exploitation of the trade secret that is likely
to result in injury to the trade secret owner or
enrichment to the defendant[.] … Thus,
marketing goods that embody the trade secret,
employing the trade secret in manufacturing or
production, relying on the trade secret to assist or
accelerate research or development, or soliciting
customers through the use of information that is
a trade secret … all constitute ‘use.’”
Gen. Universal Sys., Inc. v. HAL, Inc., 500 F.3d 444, 450-51
(5th Cir. 2007) (quoting Restatement (Third) of Unfair
BLACK’S LAW DICTIONARY (11th ed. 2019) (continuing to
define “use” to ordinarily mean “[t]o employ for the
accomplishment of a purpose”).
32
Competition, § 40). Numerous cases, pre-dating the DTSA,
demonstrate that understanding of the term.18
“We find the uniformity of the … judicial precedent
construing the definition significant.” Bragdon, 524 U.S. at
645. While that precedent interprets state law, those states, and
indeed a total of 48 states, had all adopted some variation of
18
See, e.g., Storagecraft Tech. Corp. v. Kirby, 744 F.3d
1183, 1186 (10th Cir. 2014) (“[T]he line between use and
disclosure is hardly as crisp as [the defendant] suggests. Can’t
disclosing a trade secret for a particular end or purpose (be it
retribution or profit or otherwise) be a way of putting it to use,
at least in a broad sense of the word?”); Stratienko v. Cordis
Corp., 429 F.3d 592, 600 (6th Cir. 2005) (“[O]nce evidence of
access and similarity is proffered, it is ‘entirely reasonable for
[the jury] to infer that [defendant] used [plaintiff’s] trade
secret.” (second, third, and fourth alteration in original)
(internal quotations omitted)); Penalty Kick Mgmt. Ltd. v. Coca
Cola Co., 318 F.3d 1284, 1292 (11th Cir. 2003) (“There are no
technical limitations on the nature of the conduct that
constitutes ‘use’ of a trade secret. … As a general matter, any
exploitation of the trade secret that is likely to result in injury
to the trade secret owner or enrichment to the defendant is a
‘use[.]’” (citation omitted)); 02 Micro Intern. Ltd. v.
Monolithic Power Sys., Inc., 399 F. Supp. 2d 1064, 1072 (N.D.
Cal. 2005) (“[I]nternal experimentation with trade secret
information can constitute use. … Employing the confidential
information in manufacturing, production, research or
development, marketing goods that embody the trade secret, or
soliciting customers through the use of trade secret
information, all constitute use.” (internal quotations omitted)).
33
the Uniform Trade Secrets Act (“UTSA”). See H.R. Rep. No.
114-529, at 198 (2016) (noting that “48 states have adopted
variations of the UTSA”). And “the legislative history of the
DTSA shows that Congress was expressly aware of the UTSA
and its structure.” Attia v. Google LLC, 983 F.3d 420, 425 (9th
Cir. 2020) (internal quotations omitted). In other words, it
“was aware of the role and limitations of the UTSA as model
legislation for the states, and it recognized the DTSA and the
UTSA as similar.” Id.Because the term “use” is incorporated into
substantively identical definitions of “misappropriation” under
the DTSA and UTSA, and because courts have consistently
interpreted the term “use” in a broad manner under the UTSA
– which also aligns with its ordinary meaning – there is every
reason to continue giving “use” that expansive interpretation.
See Bragdon, 524 U.S. at 645. Avoiding a cramped definition
of “use” is also consistent with giving trade secret owners a fair
opportunity to prove misappropriation. The implication of use,
especially at the pleading stage, can flow from circumstantial
evidence alone. See SI Handling Sys., Inc. v. Heisley, 753 F.2d
1244, 1261 (3d Cir. 1985) (“[M]isappropriation and misuse
can rarely be proved by convincing direct evidence.” (internal
quotations omitted)).
Moreover, the District Court’s equating of the term
“use” with “replicate” is inconsistent with the DTSA as a
whole. Cf. Si Men Cen v. Att’y Gen., 825 F.3d 177, 192 (3d
Cir. 2016) (explaining that courts consider “the broader
framework of the” pertinent statute because “we do not
approach statutory construction as a myopic exercise, but
rather as a holistic endeavor in which we interpret the statute
as a symmetrical and coherent regulatory scheme, and fit, if
34
possible, all parts into an harmonious whole” (internal
quotation marks omitted) (citations omitted)). The term
“replicate” is already expressly listed as a type of misconduct
amounting to “[t]heft of trade secrets” in another provision of
the DTSA, a provision that separately mandates a “fine[ ] not
more than the greater of $5,000,000 or 3 times the value of the
stolen trade secret” or “imprison[ment] not more than 10 years,
or both” for such theft. 18 U.S.C. § 1832; see id. § 1832(a)
(explaining that liability for theft of a trade secret includes
anyone “with intent to convert a trade secret … to the
economic benefit of anyone other than the [trade secret]
owner[,]” who “know[s] that the offense will[ ] injure” the
owner, when that person “knowingly” and “without
authorization copies, duplicates, … [or] replicates … such
information[,]” among other misconduct (emphasis added)).
Thus, since the DTSA includes both “use” and “replicates” as
distinct bases of culpability, the former for misappropriation
and the latter for theft, we ought not treat them as synonymous.
See Russello v. United States, 464 U.S. 16, 23 (1983)
(“[W]here Congress includes particular language in one
section of a statute but omits it in another section of the same
Act, it is generally presumed that Congress acts intentionally
and purposely in the disparate inclusion or exclusion.”
(alteration in original) (internal quotations omitted)).
Replication is surely a use, but that does not mean that use is
limited to replication.
Only giving effect to the term “use” in the narrow
context of replication or obvious incorporation of trade secret-
protected material in a competitor’s product excludes a broad
range of activity that is rightly seen as unauthorized use of a
trade secret and, therefore, misappropriation. In accordance
with its ordinary meaning and within the context of the DTSA,
35
the “use” of a trade secret encompasses all the ways one can
take advantage of trade secret information to obtain an
economic benefit, competitive advantage, or other commercial
value, or to accomplish a similar exploitative purpose, such as
“assist[ing] or accelerat[ing] research or development.” Gen.
Universal Sys., Inc., 500 F.3d at 450-51 (citation omitted).
2. Oakwood sufficiently alleges that the
Defendants used its trade secrets
With that proper, more expansive understanding of
trade secret use in mind, the question becomes whether
Oakwood has adequately pled that the Defendants used its
trade secrets. Assuming the veracity of Oakwood’s well-
pleaded factual allegations, and construing all reasonable
inferences that may be drawn from them in favor of Oakwood,
the answer to that question is yes.
As already noted, Oakwood specializes in the
development of difficult-to-synthesize microsphere products.
It invested two decades, over $130 million, and a full-time
team of many highly skilled, and presumably high-wage,
employees in its Microsphere Project to develop bioequivalent
forms of a valuable brand-name drug. We are bound to accept
the assertion that there are no approved generic versions of that
high-value drug due to the substantial difficulties in developing
and manufacturing such a product.
As of November 2013, Oakwood had developed three
leading product candidates for further development. Around
the same time, Aurobindo approached Oakwood to discuss a
business relationship, including a proposal to sell to Oakwood
an active pharmaceutical ingredient to be used in its
36
microsphere products. As a part of those discussions, and
having executed a confidentiality agreement, Aurobindo and
AuroMedics acquired some of Oakwood’s trade secret
information related to the Microsphere Project, including
through the Leuprolide Memo. Subsequently, Aurobindo
informed Oakwood that it would not pursue the Microsphere
Project collaboration “due to financial considerations.” (App.
at 222, ¶ 56.)
But, just months later, AuroMedics formed its own
group to develop microsphere products. Not coincidentally,
Aurobindo recruited Dr. Thanoo, Oakwood’s Vice President of
Product Development, who had been extensively involved
with the Microsphere Project for “more than 80% of his tenure
with Oakwood.” (App. at 218, ¶ 36.) Indeed, Aurobindo USA
hired him during the short period between when Aurobindo
approached Oakwood about a business venture related to
microsphere products and when it started its own competing
group to develop such products. Notwithstanding its complete
lack of experience working in the highly specialized
microsphere sector of the pharmaceutical industry, Aurobindo
was representing to its investors in February 2015 – less than a
year after Dr. Thanoo joined its efforts – that it was already
developing four microsphere products and expected to start
filing for FDA approval of those products at the end of 2016
and obtaining approval in 2018. The new-market-entrant,
AuroMedics, had invested just $6 million in development of
those four products, while Oakwood, having long labored in
development, had invested more than $130 million in its
microsphere products.
According to Oakwood, that was significant because
“the Microsphere Project is not something that could have been
37
replicated in one-to-four years … absent misappropriation of
Oakwood’s trade secrets.” (App. at 218, ¶ 37.) That is a
completely plausible contention and well-supported with
factual allegations concerning Aurobindo’s lack of experience
and the complexity of microsphere product development.
Again, all of those allegations are entitled to the assumption of
truth at the pleading stage. Santiago, 629 F.3d at 130. It is
uncontested that Aurobindo and AuroMedics obtained access
to certain trade secret information of Oakwood’s from the
Leuprolide Memo and confidential disclosures during the
parties’ business venture discussions. And it is reasonable to
infer that Aurobindo also obtained much more detailed access
to Oakwood’s trade secret information through Dr. Thanoo,
given the allegations about his extensive knowledge of
Oakwood’s Microsphere Project, the timing of Aurobindo’s
recruitment of him, and his own LinkedIn profile describing
his work at Aurobindo USA.
But Oakwood does not rely on Aurobindo’s access to
trade secrets alone. 19 In addition, Oakwood included as
19
In a case like this – where use is at issue and the
question arises from circumstantial evidence whether any use
has in fact occurred – it may be helpful to consider the “plus
factor” approach that we apply in antitrust claims predicated
on “parallel conduct.” In re Ins. Brokerage Antitrust Litig.,
618 F.3d 300, 321 (3d Cir. 2010). Parallel conduct, without
more, is equally consistent with lawful and unlawful conduct.
Thus, when a plaintiff “expects to rest on circumstantial
evidence of parallel behavior, the complaint’s statement of
facts must place the alleged behavior in ‘a context that raises a
suggestion of a preceding agreement, not merely parallel
38
attachments to its Complaint multiple agreements between
Oakwood and Aurobindo, AuroMedics, and Dr. Thanoo, in
which they agreed to keep confidential Oakwood’s trade secret
information and to only use such information for Oakwood’s
benefit and with its consent. Thus, if it were not already
apparent from other allegations in the Complaint, it is plain that
the Defendants acquired Oakwood’s trade secrets knowing of
their confidential nature.
This “use” of Oakwood’s trade secret information can
be readily understood from the timing of Dr. Thanoo’s
employment with Aurobindo, from Dr. Thanoo’s deception in
informing Oakwood about the work he would engage in at
Aurobindo, from Aurobindo’s lack of experience in the highly
specialized field of microsphere technology, from Aurobindo’s
access to Oakwood’s trade secret information, from its rapid
success in developing four microsphere products that took
conduct that could just as well be independent action.” Id. at
324-25.
That circumstance is not unlike a misappropriation
claim where use of a trade secret is predicated solely on a
competitor’s access to the plaintiff’s former employee.
Without more, the circumstantial evidence may leave
ambiguous the lawfulness of the competitor’s conduct. Indeed,
we could be left to speculate not only on the competitor’s
motivations for hiring the plaintiff’s former employee but also
on the former employee’s conduct itself, i.e., his willingness to
disclose or use plaintiff’s trade secrets on behalf of the
competitor. Here, however, if we accept Oakwood’s
allegations, there is no such ambiguity. Oakwood pleads facts
that go well beyond allegations of access.
39
Oakwood nearly 20 years to develop, and from the
comparatively insignificant financial investment Aurobindo
put into that development. In short, the factual allegations of
the Complaint in its latest iteration are more than sufficient to
meet Oakwood’s burden of pleading use of a trade secret. Cf.
Iqbal, 556 U.S. at 678 (“[D]etailed factual allegations” are not
required, but “more than an unadorned, the-defendant-
unlawfully-harmed-me accusation” must be pled; a complaint
must include more than just “naked assertion[s] devoid of
further factual enhancement,” conclusory statements, or a
“recitation of the elements of a cause of action.” (alteration in
original) (internal quotations omitted)).
Reaching the opposite conclusion, the District Court
erroneously rejected the veracity of Oakwood’s well-pleaded
allegations, James, 700 F.3d at 681, and the “reasonable
inferences that can be drawn from them[.]” Monroe, 536 F.3d
at 205 (internal quotations omitted). It raised doubts about the
ultimate persuasiveness of the circumstantial support that
Oakwood proffered to demonstrate that the Defendants could
not have so quickly developed microsphere products without
using Oakwood’s trade secrets. In essence, the District Court
asked for direct proof of misappropriation, without permitting
the discovery essential to uncovering the evidence for proper
consideration of the merits.
The District Court also found persuasive the absence of
any allegations “reveal[ing] that Oakwood’s trade secrets
could have been the only source by which Aurobindo could
have developed its microsphere product.” (App. at 6.) But
whether Aurobindo could have developed its microsphere
product using proper means is irrelevant. The question at the
pleading stage is simply whether Oakwood provided
40
allegations of misappropriation sufficient to “raise a right to
relief above the speculative level on the assumption that the
allegations in the complaint are true[.]” Monroe, 536 F.3d at
205 (internal quotations omitted). The District Court
erroneously applied a heightened pleading standard, one
demanding probability rather than plausibility, and further
suggested a heightened evidentiary burden, which we also
reject. See Santiago, 629 F.3d at 133 (“‘[P]ossibility’ is no
longer the touchstone for pleading sufficiency[.] …
Plausibility is what matters.”); SI Handling Sys., Inc., 753 F.2d
at 1261 (“[M]isappropriation and misuse can rarely be proved
by convincing direct evidence.” (internal quotations omitted));
Rogers v. Mo. Pac. R.R. Co., 352 U.S. 500, 508 n.17 (1957)
(“Circumstantial evidence is not only sufficient, but may also
be more certain, satisfying and persuasive than direct
evidence.”). We do not require a trade secret plaintiff to allege
that its trade secret information was the only source by which
a defendant might develop its product. Aurobindo cannot
escape discovery if Oakwood’s allegations sufficiently
indicate the plausibility of trade secret misappropriation, and
they do.
C. Misappropriation is harm
In dismissing Oakwood’s Complaint, the District Court
further faulted Oakwood for not having shown harm. In the
Court’s words, “Defendants have not launched any products,
and according to the Third Amended Complaint, Oakwood has
not yet suffered any harm from missed partnerships or
investment opportunities.” (App. at 7.) The Court, therefore,
decided that “any alleged harm is speculative.” (App. at 7.)
Not so.
41
By statutory definition, trade secret misappropriation is
harm. See 18 U.S.C. §§ 1839(3), (5). That is, trade secret
information “derives [its] 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 [that information’s]
disclosure or use[.]” 18 U.S.C. § 1839(3)(B); cf. Ruckelshaus
v. Monsanto Co., 467 U.S. 986, 1012 (1984) (“The economic
value of that property right lies in the competitive advantage
over others that [the plaintiff] enjoys by virtue of its exclusive
access to the data, and disclosure or use by others of the data
would destroy that competitive edge.”). “When someone
steals a trade secret and discloses it to a competitor he
effectively assumes for himself an unrestricted license in the
trade secret. And that bears its cost. After all, what value does
a trade secret hold when it’s no longer a secret from the trade?”
Storagecraft Tech. Corp., 744 F.3d at 1185. The trade secret’s
economic value depreciates or is eliminated altogether upon its
loss of secrecy when a competitor obtains and uses that
information without the owner’s consent. Thus, cognizable
harm is pled when a plaintiff adequately alleges the existence
of a trade secret and its misappropriation.20
20
A number of pre-DTSA trade secret cases support this
contention. See, e.g., FMC Corp. v. Taiwan Tainan Giant
Indus. Co., Ltd., 730 F.2d 61, 63 (2d Cir. 1984) (“[I]t is clear
that the loss of trade secrets cannot be measured in money
damages. A trade secret once lost is, of course, lost forever.”
(citations omitted)); Nat’l Starch & Chem. Corp. v. Parker
Chem. Corp., 530 A.2d 31, 33 (N.J. Super. Ct. App. Div. 1987)
(“[D]amages will not be an adequate remedy when the
competitor has obtained the secrets. The cat is out of the bag
and there is no way of knowing to what extent their use has
42
Accordingly, even if it is true that the Defendants have
not yet launched a competing product, that does not mean that
Oakwood is uninjured. It has lost the exclusive use of trade
secret information, which is a real and redressable harm. See
18 U.S.C. § 1836(b)(3)(B) (permitting damages for actual loss
and unjust enrichment caused by the misappropriation, or
damages measured by the imposition of liability for a
reasonable royalty for the misappropriator’s unauthorized
disclosure or use of the trade secret); Ruckelshaus, 467 U.S. at
1011 (“With respect to a trade secret, the right to exclude others
is central to the very definition of the property interest. Once
the data that constitute a trade secret are disclosed to others, or
others are allowed to use those data, the holder of the trade
secret has lost his property interest in the data.”).
And the loss of exclusivity is not the only harm. There
are other, if not yet fully realized, injuries. Aurobindo’s rapid
market entry into a sector of the pharmaceutical industry with
few competitors may well deprive Oakwood of market share.
Utilizing Oakwood’s trade secrets provides Aurobindo a
jumpstart in an industry it would otherwise not have
caused damage or loss.” (internal quotations omitted)); Miles
Inc. v. Cookson Am., Inc., No. 12,310, 1994 WL 676761, at
*10-11 (Del. Ch. Nov. 15, 1994) (The “actual or potential
independent economic value” requirement “involves the
notion of competitive advantage. It focuses on whether a
plaintiff would lose value and market share if a competitor
could enter the market without substantial development
expense.” (citing Electro-Craft Corp. v. Controlled Motion,
Inc., 332 N.W.2d 890, 900-01 (Minn. 1983))).
43
competitively joined for another decade. Aurobindo will avoid
substantial research and development costs that Oakwood has
already invested in its own product development. Those are
competitive harms recognized in the DTSA, 18 U.S.C.
§ 1836(b)(3)(B), and they represent a sample of the several
approaches by which the amount of harm – not simply the fact
of harm (which inheres in the unlawful use itself) – may be
measured.21
21
See, e.g., Rohm & Haas Co. v. Adco Chem. Co., 689
F.2d 424, 434 (3d Cir. 1982) (“New Jersey law states that a
company misappropriating a trade secret may lose the benefits
of its future independent experiments because of the difficulty
of determining how much of the improvement is attributable to
those independent efforts and how much to the information
gained by the wrongdoing. … In trying to segregate honest
efforts and ill-acquired knowledge, [e]very doubt must be
resolved against the parties to a fraudulent act.” (internal
quotation marks and citations omitted)); Bohnsack v. Varco,
L.P., 668 F.3d 262, 280 (5th Cir. 2012) (“Damages in
misappropriation cases can take several forms: the value of
plaintiff’s lost profits; the defendant’s actual profits from the
use of the secret; the value that a reasonably prudent investor
would have paid for the trade secret; the development costs the
defendant avoided incurring through misappropriation; and a
reasonable royalty. This variety of approaches demonstrates
the ‘flexible’ approach used to calculate damages for claims of
misappropriation of trade secrets.” (internal quotation marks
and citations omitted)).
44
III. CONCLUSION
Oakwood adequately pled the existence and
misappropriation of trade secrets related to products intended
for use in interstate or foreign commerce, so its claims under
the DTSA should not have been dismissed. Its breach of
contract and tortious interference claims should likewise not
have been dismissed. See supra n.10. We will therefore vacate
the District Court’s final order of dismissal and remand for
further proceedings consistent with this opinion.
45