ABB TURBO SYSTEMS AG, а Switzerland corporation, and ABB Inc., a Delaware corporation v. TURBOUSA, INC., a Florida corporation, and Willem Franken
No. 2014-1356
United States Court of Appeals, Federal Circuit
Dec. 17, 2014
979
Thus, the Dual Cam Claims are invalid under
We have considered Tyco‘s remaining arguments concerning invalidity and find them unpersuasive.
CONCLUSION
We affirm the district court‘s determination that twenty-six of the asserted claims are invalid under
AFFIRMED-IN-PART, REVERSED-IN-PART, VACATED-IN-PART
Kurt L. Glitzenstein, Fish & Richardson, P.C., of Boston, MA, argued for plaintiffs-appellants. Of counsel on the brief was William R. Trueba, JR., Espinosa | Trueba, PL, of Miami, FL.
John H. Pelzer, Greenspoon Marder, P.A., of Fort Lauderdale, FL, argued for defendants-appellees.
Before PROST, Chief Judge, NEWMAN and TARANTO, Circuit Judges.
TARANTO, Circuit Judge.
In this action, ABB Turbo Systems AG and ABB Inc. (collectively ABB) allege, among other things, state-law torts of misappropriation of trade secrets and conspiracy to misappropriate trade secrets. Before discovery was conducted or an answer filed on those allegations, the district court dismissed the complaint, under
BACKGROUND
ABB designs, produces, and sells exhaust-gas turbochargers and turbocharger parts, primarily for use in large, ocean-
After filing its original complaint, ABB received information that, it alleges, suggested that Johan (“Hans“) Franken, who is TurboNed‘s former owner and TurboUSA‘s current indirect owner, and Willem Franken, who is TurboUSA‘s current president (and the son of Hans), had collaborated in the covert misappropriation of ABB‘s trade secrets concerning the design, manufacture, servicing, and pricing of ABB‘s turbochargers and parts. Motion to Amend Complaint, ABB Turbo Sys. AG v. TurboNed Serv. B.V., No. 13-cv-60394 (S.D.Fla. May 28, 2013). ABB sought and was granted leave to amend its complaint to add claims of misappropriation of trade secrets under
ABB‘s amended complaint makes allegations of various deceptive and improper transactions—allegations that, at this stage of the case, we simply assume to be true. Thus: Hans Franken stopped working for ABB in 1986 to found TurboNed and compete with ABB in the market for parts and servicing of ABB-sold turbochargers. Amended Complaint ¶¶ 36-42. For more than twenty years, from 1986 until the sale of TurboNed to a third party in 2009, Hans Franken and employees of TurboNed paid at least one ABB employee for confidential information related to ABB parts, servicing, and pricing. Id. ¶¶ 32, 72-73. At least one such transaction occurred in the garage of a hotel in Switzerland, and оn multiple occasions TurboNed employees carried envelopes of cash to exchange for ABB‘s confidential information. Id. ¶¶ 76, 78; see also id. ¶ 82 (alleging other exchanges that occurred electronically, by mail, and in Cyprus). TurboNed employees altered confidential ABB documents in their possession to obscure references to ABB, in part to conceal the source of the information, in connection with the sale of TurboNed to a new owner in 2009. Id. ¶¶ 96-98. TurboNed soon went into bankruptcy in Euroрe. See id. ¶ 3.1
After ABB filed its amended complaint, and after ABB stipulated to the bankrupt TurboNed‘s dismissal without prejudice, the three remaining defendants filed motions to dismiss the entire amended complaint under
The district court granted the motions as to ABB‘s trade-secret and conspiracy сlaims. It held that ABB‘s trade-secret claim is “not well-formulated” with regard to two requirements of Florida trade-secret law: (1) a trade-secret claim must be brought “within 3 years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered,”
The parties subsequently agreed to settle the patent-infringement claims. Final Judgment, ABB Turbo, No. 13-cv-60394 (S.D.Fla. Feb. 21, 2014). The district court issued a final judgment approving the settlement and dismissing all remaining claims with prejudice. Id. ABB timely appealed the dismissal of its trade-secret and conspiracy claims.
We have jurisdiction under
DISCUSSION
Following the law of the regional circuit in which the case arose, we review the dismissal under
A
B
Applying those standards to the trade-secret claim here, we conclude that the district court erred in its dismissal of the amended complaint. A plaintiff claiming misappropriation of trade secrets under Florida law must allеge facts giving rise to a reasonable inference that (1) “the plaintiff possessed secret information and took reasonable steps to protect its secrecy,” Medimport S.R.L v. Cabreja, 929 F.Supp.2d 1302, 1322 (S.D.Fla.2013) (quotation marks and citation omitted); (2) “the secret it possessed was misappropriated, either by one who knew or had reason to know that the secret was improperly obtained or by one who used improper means to obtain it,” id.; see
1
The district court‘s first ground for dismissal concerns the timeliness of the complaint. But “[a] statute of limitations bar is ‘an affirmative defense, and ... plaintiff[s] [are] not required to negate an affirmative defense in [their] complaint.‘” La Grasta v. First Union Secs., Inc., 358 F.3d 840, 845-46 (11th Cir.2004) (alterations in original) (quoting Tregenza v. Great Am. Commc‘ns Co., 12 F.3d 717, 718 (7th Cir.1993)). Dismissal at the pleading stage on statute-of-limitations grounds ordinarily is improper unless it is “apparent from the face of the complaint that the claim is time-barred.” Id. (quotation marks and citation omitted). Here, to approve dismissal on timeliness grounds, we would have to conclude that ABB‘s complaint alleges facts making it apparent that ABB discovered, or “by the exercise of reasonable diligence should have discovered,” the alleged misappropriations at least three years before it sued in June 2012.
The amended complaint says nothing to identify an actual or constructive discovery before June 2009. It does not allege when or how ABB discovered the misappropriations. ABB‘s only factual allegations regarding when it learned of the alleged misappropriations appear in its motion to amend its original complaint, which state that it did not know of the misconduct until after filing its initial complaint in 2012. Even if those allegations were considered, they would not support the district court‘s conclusion: they controvert rather than indicate actual or constructive discovery before June 2009.
The district court rested its untimeliness conсlusion on the amended complaint‘s allegations that misconduct occurred over a long period and through geographically dispersed meetings. The court reasoned that ABB “should have at least had an inkling that something was amiss.” Dismissal Order at 6. We need not explore the relationship between that formulation and the governing “should have discovered” standard to conclude that the district court‘s rationale is inadequate to support dismissal.
The court‘s rationale exceeds the limits on factual assеssments appropriate when ruling on a motion to dismiss. The amended complaint alleges distinct acts of misappropriation of distinct trade secrets through clandestine communications and cash payments, with further concealment efforts undertaken after acquisition of the
2
The district court‘s second, alternative ground for dismissal is also insuf-
ficient to support the judgment. The district court held that ABB did not sufficiently allege facts showing that it reasonably protected its trade-secret information. Dismissal Order at 6-7. The court‘s analysis was too demanding of specificity and too intrusive in making factual assessments. ABB has alleged “enough facts to state a claim to relief that is plausible on its face“; it has “nudged [its] claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570; see Iqbal, 556 U.S. at 680.
ABB alleged that its secrecy-mаintenance efforts “includ[ed] imposing confidentiality and nondisclosure obligations on ABB employees that have access to ABB‘s Turbocharger Trade Secrets, marking documents constituting ABB‘s Turbocharger Trade Secrets with confidentiality designations and/or other indicia prohibiting the reproduction or dissemination of such documents or information to third parties, [and] restricting physical and electronic access by third parties to ABB‘s Turbocharger Trade Secrets.” Amended Complaint ¶ 35. The district court cited no authority suggesting that such measures are not reasonable precautions to protect trade secrets under the governing law, and other courts have held allegations of similar protective measures sufficient at the pleading stage. Sensormatic Elecs. Corp. v. TAG Co. US, 632 F.Supp.2d 1147, 1185 (S.D.Fla.2008); PartyLite Gifts, Inc. v. MacMillan, No. 10-cv-1490, 2010 WL 5209364, at *4 (M.D.Fla. Nov. 24, 2010). We follow those authorities, noting that
We see no basis in this case to deem ABB‘s direct factual allegations insufficient to nudge the claim into the realm of a plausible inference that ABB adequately protected its trade secrets. The district court reasoned that the scope of the alleged misappropriations, perhaps together with the lack of detection by ABB, made it “highly unlikely” that ABB was “actually restricting physical and electronic access to the information and taking other protective measures.” Dismissal Order at 6-7. But it is simply not implausible that adequate protections were in place and yet a series of misappropriations occurred without ABB‘s detection.
The rationale for a contrary conclusion, at least at the сomplaint stage, is not convincing. Protections may be legally adequate to confer legal status as secrets, but still not perfectly prevent misappropriation. Indeed, trade-secret law is premised on that possibility; there would be no actionable misappropriation otherwise. Moreover, once the protections are overcome by those engaged in misappropriation, detectability turns on the acts of the miscreants, such as their furtiveness and concealment еfforts. But those acts have no particular bearing on whether the actions of the secret owner in seeking to protect against disclosure were adequate.
The sheer number and scope of misappropriations, considered apart from detectability, may well have a logical bearing on assessing the reasonableness of protective measures. But that presents a classic factual question turning on the details of the misappropriations. It cannot be answered by judicial assessment at the complaint stage in this case.
ABB‘s specific factual allegations of protective measures are enough to survive a motion to dismiss. To be sure, Twombly and Iqbal indicate that, in separating conclusions from facts and deciding whether the alleged facts make affirmatively plausible the asserted basis of liability, Twombly, 550 U.S. at 557 n. 5, courts deciding a motion to dismiss for insufficient pleading may consider the strength of alternative explanations of the alleged facts. See Twombly, 550 U.S. at 567-68 (claim of parallel business conduct not enough to support conspiracy claim where no facts alleged that suggested reason something other than individual self-interest); Iqbal, 556 U.S. at 681-82 (claim of discriminatory policy insufficient where no official communications or other facts alleged beyond allegation of disproportionate effect on Arab Muslim men from investigation of 9/11 attacks carried out by Arab Muslim men). But such consideration is limited, because the court‘s role is only to determine if the factual allegations go beyond being “merely consistent with” liability to “plаusibly suggest[ing]” liability. Twombly, 550 U.S. at 557. Making that distinction requires a “context-specific” assessment of the particular complaint, Iqbal, 556 U.S. at 679, made with the recognition that “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of the facts alleged is improbable,” Twombly, 550 U.S. at 556. In this case, for the reasons given, the factual
C
TurboUSA and Willem Franken make two arguments for affirmance of the dismissal on grounds that the district court did not adopt. One is that ABB insufficiently pleaded facts to meet the legal requirement that its trade-secret information derived independent value from not being generally known or ascertainable. See TurboUSA Br. at 3-4, 12. ABB responds by, for example, pointing to allegations that its secrets include information not reasonably obtained by reverse engineering, that efforts at reverse engineering failed, that ABB made significant investments in creating the information and took steps to protect it, and that TurboNed paid for the information, all suggesting its value. The sеcond argued alternative ground for affirming dismissal is that ABB insufficiently pleaded that TurboUSA or Willem Franken had the knowledge of the misappropriations required for liability. See TurboUSA Br. at 13-19. On this issue, TurboUSA and Willem Franken stress that the majority of ABB‘s allegations refer to misconduct by TurboNed and Hans Franken. ABB responds by stressing its claims of close, longstanding relations between TurboNed, TurboUSA, Hans, and Willem—illustrated, ABB alleges, by the facts that Hans, who was central to TurboNed, was at times also an officer, director, and indirect owner of TurboUSA, and that, seemingly while Willem was President of TurboUSA, Hans exerted enough control over TurboUSA to influence the prices TurboUSA paid to TurboNed.
Because the district court did not address those alternative arguments, we do not decide whether, in light of our opinion, the claims should be dismissed for either of those reasons. We leave the matter to the district court.
We note the Supreme Court‘s recent decision in Johnson v. City of Shelby, ___ U.S. ___, 135 S.Ct. 346, 347, 190 L.Ed.2d 309 (2014) (per curiam) (“A plaintiff, [Twombly and Iqbal] instruct, must plead facts sufficient to show that her claim has substantive plausibility. Petitioners’ complaint was not deficient in that regard. Petitioners stated simply, concisely, and directly events that, they alleged, entitled them to damages from the city. Having informed the city of the factual basis for their complaint, they were required to do no more to stave off threshold dismissal for want of an adequate statement of their claim.“). We note, too, the importance of a “context-specific” application of
We reverse the district court‘s judgment and remand for further proceedings consistent with this opinion.
Costs to ABB.
REVERSED AND REMANDED