Palltronics, Inc. v. PALIoT Solutions, Inc.
2:22-cv-12854
E.D. Mich.May 20, 2025Background
- Plaintiff Palltronics, Inc. acquired all assets, including intellectual property and trade secrets, of Lightning Technologies, Inc. via a bankruptcy sale in 2021.
- Defendant PALIoT Solutions, Inc., founded by former Lightning employees, began developing a competing smart pallet product soon after the bankruptcy sale.
- Palltronics claims PALIoT misappropriated Lightning’s trade secrets and utilized them to develop their own product, in violation of the Sale Order and asset purchase agreement (APA).
- Palltronics secured a preliminary injunction, with the court finding probable misappropriation and risk of irreparable competitive harm.
- Discovery disputes arose, particularly over the form of a protective order and access to confidential information during depositions, prompting cross-motions regarding document designation and depositions.
- The court was asked to approve a two-tiered protective order with an attorneys’ eyes only (AEO) provision and to compel depositions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Should a two-tier protective order with AEO apply? | Necessary to protect highly sensitive trade secrets from a direct competitor. | No trade secrets exist; AEO is overly broad and burdensome. | Granted plaintiffs’ two-tier AEO order. |
| Has Palltronics identified protectable trade secrets? | Detailed three categories of trade secrets acquired from Lightning, previously recognized by the court. | Plaintiff has failed to specifically identify any valid trade secrets. | Plaintiff sufficiently identified trade secrets. |
| Risk of competitive harm without AEO order | Disclosure risks irreparable harm due to parties’ competition. | Claims are mere assertions, not specific evidence of harm. | Plaintiff established risk of harm. |
| Compelling depositions before protective order | Protective order needed prior to sensitive depositions. | Depositions should proceed; willing to operate under AEO pending a ruling. | Moot after protective order granted. |
Key Cases Cited
- Seattle Times Co. v. Rhinehart, 467 U.S. 20 (protective orders are within the broad discretion of the court)
- Basicomputer Corp. v. Scott, 973 F.2d 507 (Sixth Cir. 1992) (loss of customer goodwill and competitive injury supports irreparable harm for injunction)
- Nemir v. Mitsubishi Motors Corp., 381 F.3d 540 (Sixth Cir. 2004) (party seeking AEO must show probable competitive harm with specificity)
- Mallet & Co. Inc. v. Lacayo, 16 F.4th 364 (Third Cir. 2021) (specificity required for preliminary injunction orders under Rule 65(d))