Advanced Fluid Systems, Inc. v. Huber
28 F. Supp. 3d 306
M.D. Penn.2014Background
- AFS, a Pennsylvania hydraulic-systems contractor, designed and installed the TELHS system for the Mid-Atlantic Regional Spaceport under contract with VCSFA and kept extensive drawings, documents, and source code in password-protected servers.
- Kevin Huber was an AFS employee with access to AFS confidential materials; he resigned in October 2012 and shortly before/after formed INSYSMA. AFS alleges Huber copied and transmitted confidential files and attempted to erase company-issued devices.
- Livingston & Haven (L&H), its principals (Vann, Aufiero), and INSYSMA are alleged to have conspired with Huber, provided network access (VPN, e-mail), received files, and used AFS materials to obtain TELHS upgrade work and other government project opportunities.
- AFS sued under PUTSA (state trade-secret statute), the CFAA, the Lanham Act (false designation and false advertising), and several common-law torts including unjust enrichment, conversion, conspiracy, and tortious interference.
- Defendants moved to dismiss under Rule 12(b)(6). The court previously denied jurisdictional and transfer challenges and here resolves merits-stage pleading issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Ownership requirement for PUTSA claim | AFS: ownership not required; lawful possession and secrecy suffice | Defs: AFS assigned legal ownership to VCSFA so lacks PUTSA standing | Court: Ownership not required; lawful possession and continued confidential use is adequate; denied dismissal on this ground |
| PUTSA preemption of common-law torts | AFS: common-law claims involve conduct beyond misappropriation; premature to dismiss | Defs: PUTSA displaces overlapping tort remedies | Court: Preemption inappropriate at pleading stage because many tort allegations go beyond trade-secret misappropriation and trade-secret status not yet determined; denied dismissal |
| CFAA claims (unauthorized access, conspirators, damages) | AFS: defendants induced/assisted Huber and obtained access; suffered loss >$5,000 | Defs: CFAA covers only the direct accessor; Huber was authorized while employed; damages not pleaded adequately | Court: Claims that rely on inducing access survive as to L&H/INSYSMA/Huber post-termination access; aiding-and-abetting claim under §1030(b) dismissed; CFAA claims dismissed without prejudice for failure to plead $5,000+ loss; CFAA claims based on access predating Huber’s resignation dismissed |
| Lanham Act claims (false advertising / designation) | AFS: defendants misrepresented that they designed/installed TELHS (website, communications), harming AFS sales/reputation | Defs: AFS lacks right to sue because it assigned IP; also advertising requires public dissemination and confusion unlikely in this technical market | Court: AFS falls within Lexmark test (commercial injury/reputational harm and proximate cause); website-based claims against Huber and INSYSMA survive; claims against L&H, Vann, Aufiero for Lanham Act dismissed as to website-based allegations; private bid communications not "advertising" and dismissed |
| Tortious interference | AFS: defendants purposefully diverted government bids and supplier relationships through wrongful means | Defs: AFS only had mere hope of future contracts; privilege for competition | Court: For pleading stage, AFS adequately alleged existing and prospective relations and wrongful means (separately actionable conduct); claim survives except as to two public-works projects where allegations were too sparse |
Key Cases Cited
- DTM Research, LLC v. AT&T Corp., 245 F.3d 327 (4th Cir. 2001) (fee-simple ownership not required for trade-secret claim; possession/secrecy controls)
- Metso Minerals Indus., Inc. v. FLSmidth-Excel LLC, 733 F.Supp.2d 969 (E.D. Wis. 2010) (adopts DTM approach; trade-secret protection focuses on possession and breach of confidence)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (U.S. 2014) (§1125(a) plaintiffs must allege injury to commercial interest and proximate cause; defines statutory scope)
- Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (U.S. 2003) (§1125(a) reaches beyond trademarks but has limits; distinguishes passing-off and reverse passing-off)
- Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (U.S. 1974) (trade-secret law protects commercial ethics and encourages invention; trade secrets are property-like but distinct)
- P.C. Yonkers, Inc. v. Celebrations the Party & Seasonal Superstore, LLC, 428 F.3d 504 (3d Cir. 2005) (employers use CFAA civil remedies against former employees who misuse employer computer information)
- AT&T Co. v. Winback & Conserve Program, Inc., 42 F.3d 1421 (3d Cir. 1994) (elements of false designation claim under §1125(a))