MEMORANDUM
Plaintiff Advanced Fluid Systems, Inc. (“AFS”) filed the above-captioned action seeking injunctive relief and compensatory and punitive damages based upon violations of the Lanham Act, 15 U.S.C. § 1051 et seq., the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the Pennsylvania Uniform Trade Secrets Act, 12 Pa. Cons.Stat. § 5301 et seq., along with various common law claims. Before the court are two motions filed by Livingston & Haven, LLC (“L & H”), Clifton B. Vann IV, and Thomas Aufiero, (Doc. 28), and Kevin Huber and Integrated Systems and Machinery, LLC (“INSYSMA”) (Doc. 33),
1. Factual Background and Procedural History
A. Parties
Plaintiff AFS is a Pennsylvania corporation that designs, assembles, and installs hydraulic systems that use pressurized fluids to move heavy machinery for complex operations. (Doc. 65 ¶ 1). Relevant to the instant action, AFS created the Transporter/Erector/Launcher/Hydraulic System (“TELHS”)' for the Mid-Atlantic Regional Spaceport (“MARS”) on Wallops Island, Virginia, pursuant to a contract with the Virginia Commercial Space Flight Authority (“VCSFA”) dated September 30, 2009. (Id.) Under the TELHS contract, VCSFA hired AFS to “provide the complete specification, engineering drawings, analyses, testing requirements, operating descriptions, interfaces with other launch facility systems and all related engineering and professional design services to develop the final and complete design for the Antares’ [sic] rocket[’s] hydraulic motion control system.” (Id. ¶ 26).
Orbital is the developer of the Antares rocket and agreed to launch the rocket from the MARS facility upon construction of the facility and the purchase of certain hardware, including TELHS. (Id. ¶ 25). AFS successfully designed, assembled, and installed TELHS at the MARS facility, and the first test launch of the Antares rocket took place in February 2013. (Id. ¶¶ 29-31). In the process of completing the contract, AFS generated substantial internal documentation, including thousands of engineering drawings and diagrams and proprietary software code, which are kept in password-protected electronic files on AFS’s server. (Id. ¶ 36). VCSFA acquired “legal ownership to all inventions or works” created under the contract, but AFS remained in physical possession and control of the trade secrets and continued to used them in a confidential manner to fulfill its obligations. (Id. ¶ 37). When necessary, AFS provided Orbital with certain confidential information to help integrate TELHS with the Antares rocket. (Id.)
During AFS’s performance of the TELHS contract, defendant Kevin Huber served as AFS’s main point of contact with Orbital. (Id. ¶ 44). From November 2006 until October 26, 2012, AFS employed Huber as a full-time salesman and engineer. (Id. ¶ 2). Defendant Thomas Aufiero, the head of AFS’s sales force and a key member of AFS’s management team, hired and supervised Huber until Aufiero resigned from AFS in January 2011. (Id. ¶¶ 40-41). Aufiero is now the hydraulic sales manager for defendant L & H, a North Carolina company that also designs, assembles, and installs hydraulic fluid systems and competes with AFS in the national market. (Id. ¶¶ 4, 6, 39). In his capacity as a salesman and engineer, Huber had access to AFS’s confidential information, including complete sets of drawings, diagrams, and other documents generated in connection with numerous projects. (Id. ¶ 43).
On October 9, 2012, Huber announced his resignation from AFS and officially left his position on October 26, 2012. (Id. ¶ 45). When AFS finally retrieved Huber’s company-issued laptop computer and cell phone, AFS determined that Huber had attempted to erase all data from both devices. (Id. ¶¶ 45-46). Upon restoring the deleted information, AFS ostensibly discovered that Huber was working with the L & H defendants as early as January 2012 while he was a full-time AFS employee. (Id. ¶ 47).
B. Conspiracy Among Defendants
AFS avers that defendants conspired to gain access to AFS’s confidential information through Huber and to use that confidential information for the purpose of diverting business from AFS. (Id. ¶¶ 10, 40). According to AFS, Huber first accessed AFS’s server and email system in November 2011 to send L & H photographs and videotapes of the Antares rocket test launches using TELHS. (Id. ¶ 66). In January 2012, L & H granted Huber access to L & H’s private network through a Virtual Private Network (“VPN”) connection and password. (Id. ¶ 49). L & H also set up an email address for Huber in its internal email system. (Id. ¶ 51). On April 12, 2012, Huber organized a secret meeting at the MARS facility with L & H, including Clifton Vann, president of L & H, and Aufiero. (Id. ¶¶ 5, 52). According to several deleted emails, the purpose of the meeting was to discuss future upgrades to TELHS. (Id. ¶¶ 52-55). In its pleadings, AFS sets forth detailed allegations regarding actions taken by defendants in furtherance of the conspiracy.
C. Stealing Confidential Information
AFS asserts that, beginning in September 2012, Huber accessed AFS’s server and downloaded numerous files that did not correlate to any project on which he was working. (Id. ¶ 56). In October 2012, after he announced his resignation, Huber began saving significant amounts of confidential information to an external drive. (Id. ¶ 58). In particular, AFS discovered that Huber stored information abоut two of his past projects- — the Passaic NJ Valley Sewer and New York Power projects — as well as a folder containing all pending AFS quotes. (Id. ¶¶ 58, 92 — 93). AFS alleges that Huber transmitted this confidential information to L & H. (Id. ¶¶ 56, 58).
On October 18, 2012, Huber formed a company called INSYSMA with offices in New York and Connecticut. (Id. ¶¶ 3, 57). AFS claims that Huber duplicated at least four AFS drawings of engineering plans and re-signed them for INSYSMA with his own initials. (Id. ¶ 64). The INSYSMA website displays a photograph of a successful launch of the Antares rocket using TELHS on September 18, 2013. (Id. ¶ 74). The website does not attribute TELHS to AFS. (Id.) Rather, the website states that INSYSMA is currently working with Orbital in support of current and upcoming launches, thereby falsely implying to viewers that INSYSMA designed and installed TELHS. (Id.)
Lastly, AFS asserts that, in February or March 2012, L & H attempted to recruit AFS’s top electrical engineers, Tom Reiker- and Larry Quickel. (Id. ¶¶ 95-97). L & H called Reiker in York, Pennsylvania and offered him a position, which Reiker declined. (Id. ¶ 95). Huber also spoke in person with Quickel, AFS’s chief electrical engineer, on multiple occasions to entice him to leave AFS and join L & H. (Id. ¶ 96). In April 2013, after the successful launch of the Antares rocket, Huber called
D. Usurping Business Opportunities
In addition to stealing confidential information, AFS avers that the purpose of the alleged conspiracy was to divert AFS’s business opportunities related to TELHS and other projects. (Id. ¶ 40). AFS details each of these attempts in its amended complaint.
i. Business Related to TELHS
AFS claims that, in September 2012, Huber submitted an unusually high bid on behalf of AFS for upgrades to TELHS’s gripper arms. (Id. ¶ 60). According to AFS, Huber secretly and simultaneously submitted a substantially lower bid on behalf of L & H for the same project. (Id. ¶ 61). As a result, L & H and INSYSMA received Orbital’s contract for the gripper arms upgrade. (Id. ¶ 67). When Orbital later decided to move forward with a $4 million upgrade to the entire TELHS system, (see id. ¶ 68), Huber sent Orbital an informal quote on behalf of L & H and INSYSMA, as agent of the S3 Group at L & H. (Id. ¶¶ 61-63, 69). AFS alleges that Jim Vaughn, president of AFS, repeatedly informed Orbitál that AFS wanted to bid on all upgrades and all training and maintenance contracts. (Id. ¶ 71). Unsurprisingly, L & H and INSYSMA were awarded the contract for the complete TELHS upgrade. (Id. ¶ 71).
As part of the complete upgrade, Huber contacted Maritime Hydraulic, a cylinder manufacturer with whom AFS maintains a non-disclosure agreement. (Id. ¶ 65). Huber sought a quote on new cylinders. (Id. ¶ 72). Kim Carruthers, the owner of Maritime Hydraulic, informed Huber that all information related to the cylinders for TELHS was AFS’s proprietary information. (Id.) Notwithstanding this response, INSYSMA placed an order with Maritime Hydraulic for two new cylinders for the TELHS upgrade. (Id. ¶ 73). According to the amended complaint, the cylinders are now close to completion. (Id.) In light of these events, AFS alleges that it has been shut out of all future work with Orbital at other launch sites as well as VCSFA’s plan to further develop the MARS facility for Orbital and other commercial space clients. (Id. ¶¶ 75-76; see also id. ¶¶ 22, 34, 38).
ii. Other Business Opportunities
AFS also alleges that defendants usurped several non-TELHS business opportunities. (Id. ¶ 77). First, as early as November 2011, Huber emailed L & H regarding plans for a potential bid on a U.S. Army TACOM Hydraulic Manifold and suggested submitting the bid proposal through Rexroth, L & H’s principal supplier and AFS’s largest competitor. (Id. ¶ 91). Second, in December 2011, Huber and Aufiero at L & H exchanged emails regarding a U.S. Navy Hydraulic Test Stand project. (Id. ¶¶ 85-86). Huber subsequently sent numerous communications to the U.S. Navy as well as an independent engineering-and testing laboratory on behalf of L & H. (Id. ¶¶ 87-89). Huber requested extensive information in support of a potential bid on the Navy Hydraulic Test Stand projeсt from Harry Kahn Associates, who submitted a presentation under the mistaken impression that AFS had requested the information. (Id. ¶ 90).
Finally, in June 2012, Huber sent L & H a detailed bid proposal for a U.S. Air Force Hydraulic Test Stand, listing Huber as the project manager for L & H. (Id. ¶ 78). Huber listed Orbital as a reference
E. Procedural History
On December 24, 2013, AFS filed a complaint against defendants, alleging violations of the Lanham Act, 15 U.S.C. § 1051 et seq., the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the Pennsylvania Uniform Trade Secrets Act, 12 Pa. Cons.Stat. § 5301 et seq., in addition to various common law claims. (Doc. 65). On February 14, 2014, AFS requested a preliminary injunction to prevent defendants from working on upgrades to TELHS and constructing additional hydraulic launch systems using AFS’s alleged trade secrets. (Doc. 29). Defendants simultaneously filed the instant motions to dismiss. (Does. 28, 33). The court denied the motions to dismiss on jurisdictional and compulsory joinder grounds and the motion to transfer, but reserved ruling on the motions to dismiss pursuant to Rule 12(b)(6). (Docs. 53-54). AFS filed the now operative amended complaint on May 29, 2014. (Doc. 65).
II. Legal Standard
The court’s jurisdiction in the instant matter is premised on both its power to decide questions of federal law and to hear claims by parties of diverse citizenship for amounts in controversy exceeding $75,000. See 28 U.S.C. §§ 1331, 1332(a). The court may also exеrcise supplemental jurisdiction over the state law claims because they are related to and share a common nucleus of operative facts with the federal law claims, thus forming part of the same case or controversy. See id. § 1367; also Lyon v. Whisman,
Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for the dismissal of complaints that fail to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). When ruling on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court must “accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Gelman v. State Farm Mut. Auto. Ins. Co.,
Federal notice and pleading rules require the complaint to provide “the defendant fair notice of what the ... claim is
III. Discussion
Defendants set forth five principal arguments in their Rule 12(b)(6) motions. First, defendants assert that AFS cannot pursue a claim for misappropriation of trade secrets because it no longer owns the trade secrets at issue. Second, defendants argue that Pennsylvania’s trade secret statute preempts AFS’s common law claims for unjust enrichment, unfair competition, conversion, conspiracy, and aiding and abetting a breach of fiduciary duty. Third and fourth, respectively, defendants contend that AFS does not adequately allege claims under the federal Computer Fraud and Abuse Act or the Lanham Act. Finally, defendants argue that AFS cannot maintain a common law claim for tortious interference with contractual relations. The court addresses each of these issues seriatim.
A. PUTSA and Trade Secret Ownership Requirements
In its amended complaint, AFS asserts a statutory claim for misappropriation of trade secrets under the Pennsylvania Uniform Trade Secrets Act (“PUT-SA”), 12 Pa. Cons.Stat. § 5301 et seq., averring that defendants willfully misappropriated, retained, and used AFS’s trade secrets,, namely “drawings, diagrams, and documentation” used in AFS’s projects. (Doc. 65 ¶¶ 98-102). Defendants assert that AFS cannot maintain a misappropriation claim because AFS assigned “legal ownership to all inventions or works” created under the TELHS contract to VCSFA. (See Doc. 35 at 10-12, 15; Doc. 43 at 4-5). According to defendants, this assignment vitiates any interest AFS purportedly had in the subject trade secrets. (See Doc. 35 at 10-12, 15; Doc. 43 at 4-5). AFS responds that “ownership,” in its traditional sense, is not a prerequisite to a successful PUTSA claim. (Doc. 47 at 23-28). The parties concede that few courts have spoken on the issue. Neither the Commonwealth’s courts nor the Third Circuit Court of Appeals have addressed the question.
Information, including a formula, drawing, pattern, compilation including a customer list, program, device, method, technique or process that:
1. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other person who can obtain economic value from its disclosure or use.
2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Id. On its face, the statute does not ascribe defendants’ suggested ownership limitation to its definition of “trade secret”; it merely proscribes misappropriation of the “trade secret of another.. ” Id. (emphasis added). Neither the commentary to the uniform law nor PUTSA’s legislative history include any specific reference tо legal ownership of the trade secrets as a prerequisite to a cause of action.
The parties thus turn to judicial interpretations of PUTSA (and its corresponding provisions as adopted by other jurisdictions) for support. AFS directs the court to a decision of the Fourth Circuit Court of Appeals as support for its contention that ownership is not required to sustain a PUTSA claim. In DTM Research, LLC v. AT & T Corp.,
AT & T defended the suit by asserting that DTM itself had misappropriated all or
The Fourth Circuit Court of Appeals agreed that fee simple ownership is not a prerequisite to recovery for misappropriation. Id. at 332-33. Expounding upon the nature and purpose of trade secret laws, the panel observed ás follows:
[T]he question of whether “fee simple ownership” is an element of a claim for misappropriation of a trade secret may not be particularly relevant in this context. While trade secrets are considered property for various analyses, the inherent nature of a trade secret limits the usefulness of an analogy to property in determining the elements of a trade-secret misappropriation claim. The conceptual difficulty arises from any assumption that knowledge can be owned as property. The “proprietary aspect” of a trade secret flows, not from the knowledge itself, but from its secrecy. It is the secret aspect of the knowledge that provides value to the person having the knowledge. While the information forming the basis of a trade secret can be transferred, as with personal property, its continuing secrecy provides the value, and any general disclosure destroys the value.
Id. at 329 (internal citations omitted). In other words, it is the possession of the secret, not the possession of some abstract or academic legal right of ownership in the secret, which is proprietary and which entitles the possessor to trade secret protection.
Several courts have followed DTM in the thirteen years since the opinion issued. For example, in Metso Minerals Industries, Inc. v. FLSmidth-Excel LLC,
The district court, like the DTM court, framed the question as presented to the court sub judice: whether the statute “requires that a plaintiff ‘own’ the trade secret in order to bring suit for the trade secret’s misappropriation.” Id. at 972. To answer this question, the court first turned to the statutory language and noted that the phrase “of another” does not necessarily connote ownership. Id. at 972-73 (observing that “the phrase ‘of another’ on its face simply describes the relationship between the misappropriator and the trade secret — namely, that the trade secret belongs to one other than the misappropriator”). Finding no helpful resolution in the language of the statute, the court turned to an analysis of easelaw in reaching its ultimate conclusion.
The Metso court ultimately applied DTM. It rejected defendants’ arguments that trade secret law must necessarily mirror patent infringement law, which precludes non-exclusive licensees from bringing an infringement suit. Id. at 976-78. The court’s analysis speaks compellingly to the nature of a trade secret claim, and the reason that traditional property law ownership concepts are rejected by trade secret law: it observed that “misappropriation of a trade secret is not only an intrusion on property, it is also a breach of confidence.” Id. at 977 (emphasis added) (citing Kewanee Oil Co. v. Bicron Corp.,
As the Metso court observed, several other courts have echoed DTM’s holding. Id. (citing Fast Capital Mktg., LLC v. Fast Capital LLC, No. H-08-2142,
Defendants respond to the caselaw offered by AFS with reliance on the common law principles of ownership that marked the law of misappropriation prior to the enactment of PUTSA. (Doc. 48 at 4 (citing Varo, Inc. v. Corbin Mfg. Co.,
Defendants also direct the court to Blue-Earth Biofuels, LLC v. Hawaiian Elec. Co., No. 09-00181 DAE-KSC,
The BlueEarth decision is immediately distinguishable from the matter sub judice
In sum, the court adopts the Fourth Circuit’s decision in DTM, joining the several district courts across the country which have directly addressed the issue. The court concludes that ownership, in the traditional sense, is not prerequisite to a trade secret misappropriation claim. See DTM,
B. PUTSA Preemption
In the alternative, defendants argue that, if the court does not dismiss AFS’s statutory misappropriation claim, it must dismiss Counts V, VI, VII, VIII, IX, and X of AFS’s amended complaint because PUTSA preempts AFS’s common law tort claims. {See Doc. 43 at 13-14). AFS responds that it is premature at this juncture to dismiss its common law tort claims on the assumption that trade secret misappropriation forms the entire basis of each claim. (Doc. 47 at 55-57).
The parties ostensibly agree that PUT-SA expressly “displaces conflicting tort, restitutionary and other law of this Commonweаlth providing civil remedies for misappropriation of a trade secret.” 12 Pa. Cons.Stat. § 5308(a). The Act excepts only three categories of claims from the scope of its preemption power: contractual and criminal remedies, “whether or not based upon misappropriation of a trade secret,” and other civil remedies “not based upon misappropriation of a trade secret.” Id. § 5308(b). Consequently, any tort claims which have their basis in the alleged misappropriation of a trade secret are preempted as a matter of law. Id. § 5308(a).
Preemption exists only to the extent that plaintiffs common law tort claim is “based on the same conduct that is said to constitute a misappropriation of trade secrets.” Youtie,
Defendants’ arguments also fail the second preemption contingency. The record at present does not establish whether all of the information purportedly taken by defendants does, in fact, constitute trade secrets. The parties ostensibly assume, for purposes of Rule 12(b)(6), that the documents taken were trade secrets as defined by statute. As in Cunningham, the court is disinclined to make such a determination without the benefit of a fully developed record. See Alpha Pro Tech, Inc. v. VWR Int’l LLC,
C. The Computer Fraud and Abuse Act
In Count II, AFS asserts claims against Huber for violation of Sections 1030(a)(2)(C) and 1030(a)(5)(A) through (C) of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030. (Doc. 65 ¶¶ 103-113). AFS further asserts that “L & H and Orbital aided, abetted and conspired with Huber” in violation of Section 1030(b).
(2) intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains—
(C) information from any protected computer;
[or] ...
(5)(A) knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer;
(B) intentionally accesses a protected computer without authorization, and as a result of such conduct, recklessly causes damage; or
(C) intentionally accesses a protected computer without authorization, and as a result of such conduct, causes damage and loss.
18 U.S.C. §§ 1030(a)(2)(C), 1030(a)(5)(A)-(C). To.state a civil claim for violations of the CFAA, AFS must allege: (1) damage or loss “to 1 or more persons during any 1-year period ... aggregating at least $5,000 in value”; (2) caused by; (3) violation of one of the substantive provisions-of §§ 1030(a) or (b). Sealord Holdings, Inc. v. Radler, No. 11-6125,
Defendants move to dismiss the CFAA claims, contending that AFS does not allege sufficient facts to establish that: (1) L & H “accessed” a protected computer
L&H asserts that the amended complaint does not include any allegations that it accessed a protected computer; rather, the amended complaint -alleges that Huber accessed AFS’s protected computer and forwarded the information obtained to L&H. (Doc. 35 at 17-18). In essence, L & H posits that because it was’ merely an end user of information unlawfully accessed by another, the CFAA does not contemplate a cause of action against it. The court disagrees.
L & H relies heavily upon a recent decision issued by the district court for the Eastern District of Pennsylvania, Dresser-Rand Co. v. Jones,
Contrary to L & H’s assertions, the amended complaint does not allege that it was merely a passive recipient of information improperly obtained by Huber. Indeed, the amended complaint states that L&H knowingly instigated and conspired with Huber to access AFS’s protected computer. (See Doc. 65 ¶¶ 106, 112). L & H’s access to AFS’s protected computer was not direct access, but it acquired access through Huber. The plain language of the CFAA requires only “access” — “no modifying term suggesting the need for ‘personal аccess’ is included.” Synthes,
AFS avers that L&H installed a VPN profile on AFS’s protected computer which allowed Huber to initiate a “point-to-point connection” between the protected computer and L & H’s network. (Doc. 47 at 34-35). To the extent L&H disputes that it required access to AFS’s protected computer to set up the VPN profile, the court must accept the truth of the detailed allegations in the amended complaint. See, e.g., Santiago,
L & H persuasively argues that AFS fails to state a valid claim under Section 1030(b). The CFAA does not create a cause of action for aiding and abetting. See Flynn v. Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP, No. 3:09-CV-00422,
Notably, however, the amended complaint also alleges that L & H knowingly instigated and conspired with Huber to access AFS’s protected computer. (Doc. 65 ¶¶ 106, 112). Defendants contend that AFS simply makes legal conclusions and that the facts alleged in the amended complaint do not support this claim. The court disagrees. As noted supra, AFS has sufficiently set forth detailed allegations that L & H conspired with Huber to gain access to confidential information stored on AFS’s server and use the information to divert AFS’s business. Accordingly, the court will deny the motions to dismiss Count II on these grounds.
2. Access in Excess of Authorization
Huber moves to dismiss the CFAA claims on grounds that AFS cannot show that he accessed the protected computer either “without authorization” or that he “exceeded authorized access.” See 18 U.S.C. § 1030. The CFAA defines “exceeds authorized access” as accessing a computer “without authorization” and using “such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter.” Id. § 1030(e)(6). The statute does not define the term “without authorization.” Application of precedent is problematic in that there is a split of authority regarding interpretation of this phrase.
Under the narrow view adopted by the Fourth and Ninth Circuits, an employee granted access to a computer in connection with his employment is “authorized” to access that computer under the CFAA regardless of his or her intent or whether internal policies limit the employee’s use of the information accessed. See Dresser-Rand,
The Third Circuit has yet to address the meaning of “without authorization.” District courts in Pennsylvania have largely adopted the narrow interpretation. See Dresser-Rand,
The court’s holding is limited in one significant respect. AFS alleges not only that Huber misused his access authorization during his employment, but also that Huber continued to unlawfully access AFS information through his company-issued laptop subsequent to leaving employment with AFS on October 26, 2012. (Doc. 65 ¶¶ 42, 45, 58). Such claims fall squarely within the ambit of the narrow approach to authorization adopted by the court herein. See, e.g., Synthes,
3. Economic Damages or Loss in Excess of $5,000
Huber also contends that AFS fails to allege cognizable damages for which a civil remedy is available under the CFAA. (Doc. 43 at 8-9). Section 1030(g) requires AFS to show that it sustained economic damage or loss “aggregating at least $5,000 in value” as a result of the
The CFAA defines “damage” as “any impairment to the integrity or availability of data, a program, a system, or information.” 18 U.S.C. § 1030(e)(8). It defines “loss” as “any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service.” Id. § 1030(e)(11). Courts within the Third Circuit have held that to fall within the statutory definition of “loss,” the alleged loss “must be related to the impairment or damage to a computer or computer system.” Brooks v. AM Resorts, LLC,
In its amended complaint, AFS avers that Huber’s improper conduct “caused damage to AFS in an amount aggregating more than $5,000 during a one-year period.” (Doc. 65 ¶ 111). The amended complaint does not state that the improper conduct impaired the integrity or availability of AFS’s data, programs, or system, nor does it include allegations that AFS incurred any costs in responding to the conduct, conducting a damage assessment, or restoring any data, programs, or the system to its prior condition. See Car
D. Lanham Act
The Lanham Act provides, in pertinent part, as follows:
Any person who, on or in connection with any goods or services, or any contаiner for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, -connection, or association of such person with another person, or as' to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
15 U.S.C. § 1125(a)(1). In Count III of its amended complaint, AFS asserts a claim pursuant to § 1125(a)(1) against all defendants, alleging that they “have falsely attributed to themselves the design, manufacture and installation of the Antares lift and launch retract system.” (Doc. 65 ¶ 115). AFS’s Lanham Act claims appear to take two forms: false advertising and false designation of origin. {Id.) Raising an argument similar to their PUTSA ownership defense, defendants contend that AFS has no remedy in the Lanham Act for misuse of a trademark or design that it does not own. (Doc. 35 at 19-20; Doc. 43 at 10). Both AFS and defendants conflate AFS’s advertisement and designation claims in their arguments. The court addresses AFS’s claims, and the defendants’ respective challenges thereto, individually.
As a threshold matter, defendants contend that AFS lacks “stаnding” to bring a Lanham Act claim because AFS admits assigning the TELHS system and associated intellectual property to the VCSFA. (See Doc. 35 at 19-20; Doc. 43 at 10). Defendants blend two similar, but distinct, inquiries: (1) whether AFS has constitutional or prudential standing to assert a Lanham Act claim, and (2) whether AFS is among the class of persons which Congress sought to vest with a civil remedy under the Lanham Act. In Lexmark Int’l, Inc. v. Static Control Components, Inc., — U.S. -,
Lexmark International produces the only toner cartridges which work with the company’s printers. Id. at 1383. Once Lexmark’s cartridges enter the market, “remanufacturers” can acquire and refurbish the empty cartridges for resale in competition with those sold by Lexmark. Id. In an effort to maintain its market share, Lexmark developed a “prebate” program to encourage customers to purchase directly from it, offering discounted cartridges to customers who agreed to return used cartridges to the company. Id. Lexmark installed a microchip in its discounted cartridges in order to deactivate them when empty. Id. Defendant Static Control, a maker of component parts for refurbished Lexmark cartridges, developed a similar microchip, and Lexmark sued for copyright infringement. Id. Stat-. ic Control counterclaimed for false advertising in violation of § 1125(a), alleging that Lexmark had undertaken a mass lettering campaign advising its customers that it is illegal to purchase Static Control’s refurbished cartridges. Id.
The parties framed the issue of whether Static Control had a cause of action under the Lanham Act as one of “prudential standing.” Id. at 1386. The Court found, however, that Static Control had sufficiently alleged lost sales and damages to its business, satisfying the injury-in-fact requirement and establishing standing for purposes of Article III jurisdiction. Id. (quoting Lujan v. Defenders of Wildlife,
A comprehensive discussion of congressional intent followed. Ultimately, the Court concluded that those plaintiffs who fall within the statutory zone of interests and establish proximate causation are authorized to bring suit under Section 1125(a). Id. at 1388-91. The Court held
This court concludes that AFS’s allegations fall squarely within the two-prong test articulated by the Court in Lex-mark. AFS alleges that it suffered an injury to its commercial interest in its reputation and a decrease in sales as a result of defendants’ misrepresentation that defendants, and not AFS, designed and installed TELHS at Wallops Island. (E.g. Doc. 65 ¶¶ 74-75 (INSYSMA’s website and defendants’ concerted misrepresentations caused defendants to obtain contracts that AFS was eligible for)). AFS also alleges that, but for the misde-signation and deceptive advertising of TELHS’s origin, AFS would have continued to receive upgrade contracts from VCSFA and new contracts from other potential customers. (See id. ¶ 76). AFS sufficiently alleges that it falls within the scope of entities authorized to bring suit under Section 1125(a).
2. False Advertising
Having concluded that AFS falls within the class of persons authorized to bring a Section 1125 claim, the court turns to the merits of AFS’s allegations. To prevail on its claim for false advertising, AFS must plead that: (1) defendants made false or misleading statements about their own products or AFS’s products; (2) “there is actual deception or at least a tendency to deceive a substantial portion of the intended audience”; (3) “the deception is material in that it is likely to influence purchasing decisions”; (4) “the advertised goods traveled in interstate commеrce”; and (5) “there is a likelihood of injury to the plaintiff in
Courts routinely limit what constitutes an “advertisement” for purposes of a Section 1125(a) claim to “commercial advertising,” consistent with the statutory language. See 15 U.S.C. §. 1125(a)(1)(B). Numerous district courts have concluded that purely private communications and other messages that are not publicly disseminated are not “advertising” or “promotion” as contemplated by Section 1125(a)(1)(B). See, e.g., Nw. Strategies, Inc. v. Buck Med. Servs.,
AFS also asserts that Huber and INSYSMA engaged in false advertising violative of the Lanham Act by displaying a photograph of TELHS on the IN-SYSMA website without attributing the system’s design to AFS. (Doc. 65 ¶ 74). An internet website is a broad advertising medium, offering wide-ranging and instantaneous dissemination of the false information. It clearly satisfies the narrow version of “advertising” adopted by the court above. The website, in its ambiguity, invites the logical inference that defendants, not AFS, designed and installed TELHS. (See id.) A statement need not be direct and false in order to fall within the ambit of Section 1125(a)(1)(B), and defendants who intentionally create false impressions may be liable under the Lanham Act. Alpha Pro Tech, Inc.,
AFS’s claim for false designation also largely survives defendants’ Rule 12(b)(6) motions. To state a false designation claim pursuant to 15 U.S.C. § 1125(a) of the Lanham Act, AFS must allege: (1) that defendants used a false designation of origin; (2) that the use of the false designation of origin occurred in interstate commerce in connection with goods or services; (3) that the false designation is likely to cause confusion, mistake or deception as to the origin, sponsorship or approval of AFS’s goods and services by another person; and (4) that AFS has been or is likely to be damaged as a result. See AT & T Co. v. Winback & Conserve Program, Inc.,
AFS grounds its false designation claim, like its false advertising claim, on defendants’ representations to prospective consumers and the general public that it designed and manufactured the TELHS system installed at Wallops Island. AFS contends that Huber and INSYSMA have misdesignated and marketed the TELHS system on their website as their own product. (Doc. 65 ¶¶ 74-75). AFS alleges that defendants have accomplished this by placing a photograph of the TELHS system on their website and failing to attribute the system to AFS, implicitly branding the TELHS system as their own. (Id.)
In addition to the ownership arguments addressed supra, defendants contend that AFS has failed to establish that any alleged misdesignation is “likely to cause confusion” among target audiences. (Doc. 43 at 11). Defendants argue that the TELHS system is complex and expensive and, consequently, potential consumers exercise heightened care in making purchasing decisions. Defendants posit that, given this heightened scrutiny, “it may be presumed that it is, in fact, unlikely that [AFS’s] customers or potential customers would be confused by [defendants’] use of [AFS’s] mark or marks.... ” (Doc. 43 at 11 (citing Checkpoint Sys. v. Check Point Software Techs., Inc.,
Huber lastly contends that AFS fails to allege that it suffered any damages as a result of alleged Lanham Act violations. Both false advertising and false designation claims required a plaintiff to plead a likelihood of commercial injury to the plaintiff flowing from the false representation or designation. Pernod Ricard USA,
E. Tortious Interference with Contractual Relationships
Defendants seek dismissal of AFS’s claim under Pennsylvania common law for tortious interference with contractual relationships. To prevail on a tortious interference claim under Pennsylvania law, a plaintiff must plead:
“(1) the existence of a contractual or prospective contractual or economic relationship between the plaintiff and a third party; (2) purposeful action by the defendant, specifically intended to harm an existing relationship or intended to prevent a prospective relation from occurring; (3) the absence of privilege or justification on the part of the defendant; (4) legal damage to the plaintiff as a result of the defendant’s conduct; and (5) for prospective contracts, a reasonable likelihood that the relationship would have occurred but for the defendant’s interference.”
Acumed LLC v. Advanced Surgical Servs., Inc.,
1. Actual or Prospective Contractual Relations
The first and third elements require a plaintiff to establish either the current existence of a contractual or economic business relationship or, in the case of prospective relationships, a reasonable likelihoоd that the relationship would have occurred. Acumed LLC,
Defendants, underscore the tenuity of AFS’s alleged prospective relationships. In support of this claim, AFS asserts that it had a reasonable expectation of continued contractual relationships with VCSFA in light of its successful performance of its existing contractual relationship. (Doc. 65 ¶ 22 (“Historically, AFS has received substantial revenue from upgrading and servicing hydraulic systems after they are placed in the field.”)). AFS also contends that it had a reasonable expectation to be awarded contracts with the Air Force, Navy, and Army and that defendants intentionally interfered with those relationships. (See id. ¶¶ 77-84 (Huber and L & H diverted Air Force bid to L & H and deprived AFS of opportunity to bid); ¶¶ 85-90 (same, in context of Navy bid); ¶ 91 (same, in context of Army bid)).
The court concludes that, for purposes of Rule 12(b)(6), AFS sufficiently alleges a reasonable expectation of realizing these prospective contracts. The courts of the Commonwealth have held that “prospective contractual relations” contemplate something “more than a 'mere hope there will be a future contract” but “less than [an existing] contractual right.” Acumed,
It is true that there could be no guarantee of [the prospective contractor’s] reaction to any offer that might be submitted, and it of course was under no compulsion to deal with either appellants or appellee. But anything that is prospective in nature is necessarily uncertain. We are not here dealing with certainties, but with reasonable likelihood or probability. This must be something more than a mere hope or the innate optimism of the salesman.
Glenn,
2. Privilege or Justification
Pennsylvania law also requires tortious interference plaintiffs to prove that defendants’ interference with existing or prospective contracts was not justified or privileged under the circumstances. Acumed,
AFS has accomplished exactly that. AFS alleges that defendants’ actions went beyond fair competition and were unlawful from the outset. According to AFS, Huber, at the other defendants’ behest and encouragement, intentionally
IV. Conclusion
For all of the foregoing reasons, the court will grant in part and deny in part defendants’ motions to dismiss (Docs. 28, 33) as fully explained herein. An appropriate order follows.
ORDER
AND NOW, this 18th day of June, 2014, upon consideration of the Rule 12(b)(6) motions to dismiss by Livingston & Haven, LLC (“L & H”), Clifton B. Vann IV, and Thomas Aufiero, (Doc. 28), and Kevin Huber and Integrated Systems and Machinery, LLC (“INSYSMA”) (Doc. 33), seeking dismissal of plaintiff Advanced Fluid System’s (“AFS”) amended cоmplaint (Doc. 65) in its entirety, and for the reasons set forth in the accompanying memorandum, it is hereby ORDERED that:
1. The motion (Doc. 32) by Orbital Sciences Corp. is DENIED as moot.
2. The motion (Doc. 28) by L & H, Vann, and Aufiero is GRANTED in part and DENIED in part to the following extent:
a. The motion is GRANTED to the extent L & H, Vann, and Aufiero seek dismissal of AFS’s claim in Count II for aiding and abetting violations of the Computer Fraud and Abuse Act (“CFAA”);
b. The motion is further GRANTED to the extent L & H, Vann, and Aufiero seek dismissal of AFS’s remaining CFAA claims in Count II for failure to properly plead damages;
c. The motion is further GRANTED to the extent L & H, Vann, and Aufiero seek dismissal of AFS’s claim in Count III for violations of the Lanham Act; and
d. The motion is DENIED in all other respects.
3. The motion (Doc. 33) by Huber and INSYSMA is GRANTED in part and DENIED in part to the following extent:
a. The motion is GRANTED to the extent Huber seeks dismissal of AFS’s claim for violations of the CFAA predating Huber’s resignation;
b. The motion is further GRANTED to the extent Huber seeks dismissal of AFS’s remaining CFAA claims in Count II for failure to properly plead damages; and
c. The motion is DENIED in all other respects.
4. The following claims are dismissed with prejudice:
a. Count II, to the extent AFS states a claim for aiding and abetting violations of the CFAA pursuant to 18 U.S.C. § 1030(b); and
b. Count II, to the extent AFS states a claim for CFAA violations predating Huber’s resignation from AFS.
5. The following claims are dismissed without prejudice:
a. Count II, to the extent not preju-dicially dismissed in ¶ 4 above;
b. Count III, to the extent AFS states a claim against L & H, Vann, andAufiero; and
c. Count IV, to the extent AFS states a claim pertaining to the two public works projects in New York and New Jersey identified in AFS’s pleading.
6. Plaintiff is granted leave to amend those claims dismissed in ¶ 5 above within twenty (20) days of the date of this order. If AFS fails to file an amended pleading within that time, the claims identified in ¶ 5 shall be dismissed with prejudice.
7. The parties are DIRECTED to meet and confer regarding a proposed pre-trial schedule, to include discovery and Rule 56 motion deadlines, and jointly file the same with the court within twenty (20) days of the date of this order.
Notes
. Orbital Sciences Corporation ("Orbital") also filed a motion to dismiss. (Doc. 32). On May 21, 2014, AFS filed a stipulation of dismissal advising the court that AFS hаs settled the action with Orbital alone and seeking dismissal with prejudice of Orbital as a defendant. (Doc. 37). On May 22, 2014, the court approved the stipulation and dismissed all claims against Orbital. (Doc. 62).
. In accordance with the standard of review for a Rule 12(b)(6) motion to dismiss, the court will "accept all well-pleaded facts in the complaint as true and view them in the light most favorable” to AFS. Carino v. Stefan,
. In fact, the commentary to the uniform law contemplates multiple owners of a single trade secret, specifically observing that when “more than one person is entitled to trade secret protection with respect to the same information, only that one from whom misappropriation occurred is entitled to a remedy.” Uniform Trade Secrets Act §§ 2, cmt. 3 (2005).
. As a practical matter, the court notes that a contrary holding would preclude any technical business for hire from protecting its know-how under PUTSA. By their very nature, such businesses grow from maintaining and building upon their past contracts with their customers. Requiring legal ownership of the intellectual property stemming from these relationships would vitiate the purpose of PUT-SA.
. The Metso court considered the ownership issue to be jurisdictional and approached it from a standing perspective. This court has previously concluded that the parties' ownership arguments are more appropriately considered pursuant to Rule 12(b)(6) as part of the court’s merits analysis.
. The'relevant language of the uniform state laws at issue in DaimlerChrysler and Parking Co. directly tracks the language of the PUTSA at issue here. Compare Mich. Comp. Laws § 445.1902(d); R.I. Gen. Laws § 6-41-1(4) with 12 Pa. Cons.Stat § 5302. New York and Texas had not adopted the uniform act at the time of their state court's respective decisions, which are based on common lаw definitions of the term "trade secret.”
. The court notes with interest that Choice-Intersil was decided with reliance on Avtec Sys. v. Peiffer,
. The court also rejects defendants' reliance on another post-PUTSA case: Transportation Compliance Associates, Inc. v. Hammond, No. 2:11-cv-1602,
. Defendants also contend that AFS failed to take reasonable steps to protect the secrecy of its proprietary information. (See Doc. 35 at 16). PUTSA defines the "trade secrets” as information which, inter alia, “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” 12 Pa. Cons.Stat. § 5302. Because the amended complaint plainly alleges that AFS maintained its trade secrets in password-protected electronic files on an internal server and granted access to Orbital only as needed for purposes of integrating the TELHS system, (Doc. 65 ¶¶ 36-37), the court rejects this argument.
. Many of our sister courts have determined that resolution of PUTSA preemption challenges at the Rule 12(b)(6) stage is premature. Kimberton Healthcare,
. Vann and Aufiero argue that the amended complaint does not set forth any specific allegations against them for violations of the CFAA. (Doc. 35 at 17-18). To the contrary, AFS alleges that Vann and Aufiero, as principals of L & H, instigated, encouraged, and/or directed all of Huber’s actions. (See Doc. 65 ¶ 13 (Vann and Aufiero "directed the illegal actions” of Huber)). Thus, these defendants may be held liable as participants in the CFAA violations. See Synthes, Inc. v. Emerge Med., Inc., No. 11-1566,
. The CFAA defines a "protected computer” as a computer:
(A) exclusively for the use of a financial institution or the United States Government, or, in the case of a computer not exclusively for such use, used by or for a financial institution or the United States Government and the conduct constituting the offense affects that use by or for the financial institution or the Government; or (B) which is used in or affecting interstate or foreign commerce or communication, including a computer located outside the United States that is used in a manner that affects interstate or foreign commerce or communication of the United States.
18 U.S.C. § 1030(e)(2).
. AFS argues that Section' 1030(g) permits civil actions broadly for compensatory damages and equitable relief. (Doc. 47 at 40). This argument is inapposite. AFS may seek compensatory damages or equitable relief, including an injunction or an accounting, if and only if AFS meets the pleading requirements for a civil cause of action under the CFAA. According to Huber, AFS does not adequately plead the element of economic damages or loss exceeding $5,000 in a one-year period. (Doc. 43 at 8-9).
. In its opposition brief, AFS asserts that defendants should also be liable under Section 1030(a)(4) for obtaining something of value through unauthorized access to a protected computer with the intent to defraud. (Doc. 47 at 32, 37). The amended complaint does not allege a violation of Section 1030(a)(4). (See Doс. 50 at 2). "[I]t is axiomatic that the complaint may not be amended by [a] brief[] in opposition to a motion to dismiss.” Pennsylvania v. Proctor, No. 1:12-CV-1567,
. Defendants cite to a handful of district court cases which have observed in passing that false designation or advertising claims require trademark ownership as a prerequisite element to Section 1125(a) liability. (See Doc. 43 at 10 (citing Brown & Brown, Inc. v. Cola,
. Given the court's leave to amend AFS's CFAA claim, the court will also grant AFS leave to amend its pleading with respect to the Lanham Act claims against L & H, Vann, and Aufiero.
. The amended complaint also makes referencе to two public works projects in New York and New Jersey which belonged to AFS. AFS alleges that both projects were located in Huber’s territory, that both generated - substantial revenue for AFS, and that Huber stored information regarding these projects on an external hard drive which he did not return to AFS. (Doc. 65 ¶¶ 92-94). The amended complaint offers no other allegations establishing that defendants interfered with these existing relationships. (See id.) The court is therefore compelled to grant defendants’ motion to dismiss AFS’s tortious interference claim to the extent it relates to the New York and New Jersey projects without prejudice to AFS’s right to amend these claims in any amended pleading it may file.
. In any event, given the necessarily subjective nature of a reasonable expectations inquiry, resolution of this issue most appropriately awaits a more developed record.
. Defendants cite Acumed as support for their contention that AFS’s “mere hopes” of receiving Air Force, Navy, and Army contracts are too attenuated to support its tortious interference claim. Acumed is distinguishable for three crucial reasons. First, that case was decided by a jury on a full record, permitting a more comprehensive inquiry into the reasonable likelihood question. Acumed,