Engineering and Software System Solutions, Inc. v. CusatisEngineering and Software System Solutions, Inc. v. Cusatis
- Reporters:
- Before:
- John Robert Blakey
Over the course of twenty-two years, Plaintiff Engineering and Software System Solutions, Inc. (“ES3“) developed a special purpose software––known as the “MARS Software,” for use in various research and development projects. Then, in the span of just a few months, Plaintiff‘s former employee, Gianluca Cusatis, allegedly independently developed a software that mirrors the MARS Software‘s unique functionality. Plaintiff now sues Cusatis and his company, Cusatis Computational Services, Inc. (“CCS“), for copyright infringement, trade secret misappropriation, and breach of contract. Defendants moves to dismiss all counts for failure to state a claim, see [16]. For the following reasons, this Court grants in part, and denies in part, the motion.
1. The MARS Software
ES3 is the sole and exclusive owner of MARS Software, a “special purpose computational software for simulating the mechanical response of structures under various loading conditions.” [1] ¶ 7. It took ES3 twenty-two years to write and develop the source code2 for the MARS Software. Id.
Among its “many advanced features,” MARS incorporates “the Lattice Discrete Particle Model (LDPM)” and “LDPM pre- and post-processor capability.” [1-3]. The “pre-processor takes the user‘s input of geometry and creates a model that enables the numerical simulation to be performed, and the post-processor takes the output from the numerical simulation and enables the visualization of the results.” Id. ¶ 7. The MARS Software “facilitates the solution of specific mechanical engineering problems involving structural break-ups, fragmentation, and post-failure response under extreme loading conditions.” Id.
Plaintiff uses the MARS Software in its business operations, including in the performance of contracts awarded by the U.S. Army Engineer Research and Development Center (ERDC), a research and laboratory branch of the U.S. Army
ES3 registered MARS with the United States Copyright Office under number TXu2-322-892, and “repeatedly marked” the MARS source code with a copyright notice establishing the code as ES3‘s proprietary material. [1] ¶ 7; [1-3] at 4. The MARS software includes “secret information“—ES3‘s trade secrets—“including without limitation the pre- and post-processor capabilities,” and a “large set of unique models, methods, algorithms, procedures, etc. which perform a variety of functions and capabilities.” Id. ¶ 8. To guard its trade secrets confidential, ES3 takes several measures, including: limiting access to those trade secrets to only those employees and individuals who directly worked on developing them; requiring employees and individuals with access to the trade secrets to sign agreements containing nondisclosure provisions or restrictive covenants; encrypting data and requiring password protections to further control access; and omitting the portions of the source code containing the trade secrets from the submissions to the United States Copyright Office. Id. ¶ 8.
2. Dr. Gianlucas Custatis’ Tenure at ES3
Defendant Custatis used the MARS Software from 2003 to 2019 to work on mathematical models and computer simulations, first as a university researcher, and later as an ES3 employee. [1] ¶ 9. During this time, Dr. Cusatis gained familiarity with the capabilities and commercial applications of the MARS Software, “while
In August 2017, Plaintiff hired Dr. Cusatis as an employee to assist with an ERDC contract. Id. ¶ 10. At this time, he signed a Confidentiality Agreement, pledging not to “directly or indirectly disclose or use ES3‘s confidential information,”3 except pursuant to his employment and for the benefit of ES3. [1-3] at 4.
Around June 2018, Dr. Cusatis asked ES3 to exclusively license and transfer ownership of the MARS Software to him, so he could independently modify, promote, offer for sale, and sell the MARS Software. Id. ¶ 11; [1-3] at 3. ES3 rejected Cusatis’ proposal, maintaining that ES3 would remain the sole owner and developer of the MARS Software. [1-3] at 4. Despite this, later that month, Dr. Cusatis asked for—and received, subject to his Confidentiality Agreement—a copy of the MARS source code to assist him in “performing his duties as an employee.” [1] ¶12.
3. The “MARS Derivative”
Dr. Cusatis left ES3 in July 2019, by mutual agreement, when the ERDC contract ended. Id. ¶ 13. On November 1, 2019, Dr. Cusatis informed ES3 via email that he removed the MARS Software source code from his computer. Id. ¶ 14. ES3 alleges that, some time in 2019, Dr. Cusatis began developing a software program (the “MARS Derivative“) with capabilities similar to ES3‘s MARS Software; Plaintiff
ES3 alleges that Cusatis prepared a progress report in connection with an ES3 ERDC contract using the MARS Derivative; in particular, that report included a figure (Figure 10), which could not have been generated without LDPM pre- and postprocessors. [1] ¶ 18; [1-3] at 3. No software on the market other than MARS had the ability to generate that figure. [1] ¶¶18–19; [1-3] at 3. As a result, during a conference call with the ERDC, Plaintiff‘s Chief Scientist “repeatedly” asked Dr. Cusatis to explain how he created the figure, and eventually Dr. Cusatis claimed he used software he had created. [1] ¶ 18. Plaintiff alleges that, because the MARS software‘s unique capabilities took more than twenty years to develop, Dr. Cusatis, “simply could not have developed the LDPM pre- and post-processor scripts to interface with Abaqus from scratch in a few months without making use of the MARS code.” [1-3] at 3. Plaintiff claims Dr. Cusatis “used, copied, modified, and inserted” portions of the MARS Software source code, including the pre- and post-processor capabilities, into the derivative software. [1] ¶25. And Dr. Cusatis’ failure to provide a substantive explanation for how he generated the figure in the report has only furthered Plaintiff‘s belief that he and his company are using portions of the protected MARS source code in their software. [1] ¶¶18–19; [1-3] at 4.
Dr. Cusatis and CCS have also published at least two articles with the American Society of Civil Engineers that ES3 claims use and disclose the confidential
On July 14, 2022, Plaintiff sent a letter demanding that Dr. Cusatis cease and desist his unauthorized use or sale of any software that incorporates MARS source code or any derivative thereof and his disclosure of “ES3‘s confidential and proprietary information.” Id. Defendants did not respond. [1] ¶ 21.
4. Procedural History
Plaintiff sued Dr. Cusatis and CCS on February 23, 2023, alleging copyright infringement (Count I); misappropriation of trade secrets in violation of the Defend Trade Secrets Act, and Illinois and California state law (Counts II, III, and IV), and breach of the Confidentiality and Non-Competition Agreement (Count V). See [1]. Defendants move to dismiss all counts under
B. Applicable Legal Standards
To survive a motion to dismiss under
The standard for a
Under both
In ruling on the motion, the Court may consider the complaint itself, documents attached to the complaint, documents central to the complaint and to which the complaint refers, and information properly subject to judicial notice. See Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013). The Court may also consider additional facts set forth in the non-movant‘s brief opposing dismissal, so long as those additional facts “are consistent with the pleadings.” Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1019–20 (7th Cir. 2013).
C. Discussion & Analysis
Defendants move to dismiss all claims for substantive reasons. Defendant CCS also moves to dismiss the claims against it specifically. The Court discusses the parties’ arguments below.
1. Count I: Copyright Infringement
Defendants seek to dismiss ES3’ copyright infringement claim based upon both
Defendants first argue that ES3‘s copyright claim “arises out of activities that allegedly took place in connection with a contract with the United States Government Army Corps of Engineers.” [17] at 2 (citing [1] ¶¶ 14, 16, 18). As a result, Defendants argue, this Court lacks jurisdiction to hear it.
The Court of Federal claims has exclusive jurisdiction over copyright infringement claims brought against corporations “owned or controlled by the United States” or against “a contractor, subcontractor, or any person, firm, or corporation acting for the Government and with the authorization or consent of the Government.”
The defendant infringer‘s authorization or consent from the United States government for copyright infringement may be either express or implied. Id. at 198–99. In Herbert, the district court found the government had authorized the copyright infringement even without an express contractual provision, where the government agency received two letters from the plaintiff notifying it of the defendant‘s alleged infringement and offered the defendant the option to submit the infringing report anyway. Id. at 199; see also Auerbach 829 F.2d at 177 (denying motion to dismiss where no express contractual provision authorized or assumed liability for the defendant‘s use of the plaintiff‘s copyrighted work and no other evidence existed showing the government knew about the work and wanted it copied).
Similarly, in 4DD Holdings, LLC v. United States, a copyright owner of software licensed to the federal government filed an action for copyright infringement against the government after its contractors copied and installed the software in
Nevertheless, the mere fact that the government benefits from the alleged infringement by accepting contracted goods or services, without more, is not enough to establish authorization or consent. Jetform Corp., 11 F. Supp. 2d at 792. See also Auerbach, 829 F.2d at 180 (holding “the fact that the federal government might benefit from the defendant‘s copying of architectural plans because it subsequently will have ownership of the building does not make the United States a party to the copyright violation“). In Jetform, for example, a software manufacturer brought an infringement action against its licensee, a government contractor providing the plaintiff‘s software product to the United States Coast Guard, for failing to comply with the terms of its license. Id. at 791. The district court denied the contractor‘s motion to dismiss for lack of jurisdiction, concluding that the government‘s acceptance of allegedly infringing software did not by itself signify authorization of infringement.
Here, the Complaint alleges the existence of a government contract (specifically with the United States Army Corp of Engineers) naming Plaintiff as the primary contractor, Northwestern University as a subcontractor, and Dr. Cusatis (a
Likewise, the record contains no allegations that Defendants qualify as a government entity, nor does it contain any express statements from the government accepting liability or specific actions by the Army Corp of Engineers endorsing the alleged copyright infringement. Indeed, conducting the fact-intensive determination of whether Defendants were acting with implied “authorization and consent of the government” remains inappropriate at the motion to dismiss phase. See Auerbach, 829 F.2d at 180 (explaining such evidence must be submitted to the trier of fact for evaluation of its sufficiency); see also Williams v. Columbia Broad. Sys., Inc., 57 F. Supp. 2d 961, 966 (C.D. Cal. 1999) (explaining that “where a private party is a defendant, section 1498 does not lend itself to determination on a jurisdictional motion“).6 In short, based upon the pleadings, federal subject matter jurisdiction
exists, and this Court declines to dismiss for lack of subject matter jurisdiction based upon the current record.
b. Sufficiency of the Allegations
Turning to the sufficiency of ES3‘s copyright infringement allegations, the Copyright Act grants the owner of a copyright the exclusive right to prepare derivative works based upon the copyrighted work.
Because Plaintiff‘s copyright in the MARS Software is registered with the United States Copyright Office, [1] ¶ 7; [1-1], this Court assumes without deciding that ES3 owns the software and the software is entitled to copyright protection (that is, it was created independently and satisfies the Copyright Act‘s minimal originality requirement). See
Here, Defendants argue that Plaintiff‘s copyright claim fails to plausibly allege that Defendants had access to the copyrighted work, or that Defendants’ work is substantially similar to “any subject matter” protected by Plaintiff‘s copyright. [17] at 10–11; see generally [16], [17], [24]. The Court rejects both arguments.
i. Access to Copyrighted Material
Because independent creation is a defense to copyright infringement, Plaintiff must first allege that Defendants had “access” or an actual opportunity to copy the original work. Peters, 692 F.3d at 633–34. Establishing “access” requires the Plaintiff to demonstrate “a reasonable possibility that the complaining work was available to the alleged infringer.” Selle v. Gibb, 741 F.2d 896, 901–02 (7th Cir. 1984); see also
The plaintiff may be able to introduce direct evidence of access when the work was sent directly to the defendant or a close associate of the defendant. Selle, 741 F.2d at 901; Lexington Homes, 858 F.3d at 1105; see also, e.g., Weller v. Flynn, 312 F. Supp. 3d 706, 718 (N.D. Ill. 2018) (“Courts in this district have also sustained claims of access based upon a ‘channel of communication’ or a ‘nexus’ between the parties.“); Peters, 692 F.3d at 634 (defendant closely collaborated with music producer who had copy of plaintiff‘s recording); JCW Invs., Inc. v. Novelty, Inc., 482 F.3d 910, 913–15 (7th Cir. 2007) (officer of corporate defendant admitted that he saw and perhaps photographed plaintiff‘s doll and that doll gave him idea for accused work).
Here, ES3 alleges a direct channel by which the Defendants had the “opportunity” to copy the source code. Peters, 692 F.3d at 633. Plaintiff sent a copy of the MARS Source code directly to Defendant Dr. Cusatis, at his request, in June 2018, while he was still Plaintiff‘s employee. [1] ¶ 12. The source code was in Dr. Cusatis’ possession until at least November 1, 2019. [1] ¶ 14. Sometime in or around 2019, after the code was in his possession, Dr. Cusatis purportedly began developing his own software program––the so-called MARS Derivative. Id. ¶¶ 15–18. Taken as true, Plaintiff‘s allegations plausibly allege that Dr. Cusatis had direct access to the source code for a period of at least one year, before or during the time he was developing the allegedly infringing software.
It is true that the “only copyrighted material that can properly be the subject of litigation is the material that is registered at the U.S. Copyright Office.” [24] at 7–8 (citing Fourth Est. Pub. Benefit Corp. v. Wall-Street.com, LLC, 139 S. Ct. 881, 887 (2019)). It does not follow, however, that registration is a pre-condition of copyright protection.
A single copyright registration for a computer program protects all the copyrightable expression in the work, whether it be the underlying code, the text, or the screen displays. See
Although each version of a computer program that contains new, copyrightable authorship is considered a separate work,
Defendants argue that Plaintiff must identify the “specific portions” of the source code to which Dr. Cusatis had access and differentiate it from the source code that is in the public domain. [17] at 10–11; [24] at 7–8. But such specificity is not required at this stage. See Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010) (“specific facts are not necessary“) (citing Erickson v. Pardus, 551 U.S. 89, 93 (2007)); Twombly, 550 U.S. at 556 (explaining that Rule 8(a) “simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence“); Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008). In Carter v. Pallante, the plaintiff claimed infringement, alleging that the defendants accessed the plaintiff‘s copyrighted songs and licensed them to third parties after the plaintiff revoked their rights. 256 F. Supp. 3d 791, 799 (N.D. Ill. 2017). The complaint failed to specify the third parties, the songs, or the timing of the license sales, and yet the court found the claim viable. Id. (citing Mid America Title Co. v. Kirk, 991 F.2d 417, 421 (7th Cir. 1993)); see also, e.g., Fergon Architects LLC v. Oakley Home Builders, Inc., 2014 WL 340035, at *2 (N.D. Ill. Jan. 30, 2014) (explaining “specific details as to each infringing act” are not required to “state a claim for copyright infringement“); Golden v. Nadler Pritikin & Mirabelli, 2010 WL 5373876, at *2 (N.D. Ill. Dec. 21, 2010). The Court declines to dismiss based upon any claimed lack of specificity.
ii. Substantial Similarity to Copyrighted Work
To determine if two works are substantially similar, courts ask whether the accused work and the plaintiff‘s work are so similar that an ordinary reasonable person would conclude that the defendant unlawfully appropriated the plaintiff‘s protectable expression. E.g., Lexington Homes, 858 F.3d at 1101.
Substantial similarity is evaluated from the viewpoint of the work‘s intended audience. Atari, Inc. v. North American Phillips Consumer Elecs. Corp., 672 F.2d 607, 618–19 (7th Cir.) cert. denied, 459 U.S. 880 (1982). The Court must make a qualitative judgment about the character of the work as a whole and the importance of the substantially similar portions of the work.8 Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 565 n. 8 (1985). For example, video games, unlike artistic works, appeal to an audience who “would be disposed to overlook” many subtle
Where the target audience for the work possesses specialized expertise relevant to the purchasing decision, some courts have held the substantial similarity inquiry must be done from the perspective of an objective observer with that specialized expertise. Dawson v. Hinshaw Music Inc., 905 F.2d 731, 735–36 (4th Cir. 1990); see also Kohus v. Mariol, 328 F.3d 848, 857 (6th Cir. 2003); Computer Assoc. Int‘l, Inc. v. Altai, Inc., 982 F.2d 693, 713 (2d Cir. 1992); Whelan Assocs., Inc. v. Jaslow Dental Lab., Inc., 797 F.2d 1222, 1232–33 (3d Cir. 1986). Critically, the Copyright Act protects “the particular expression of an idea” found in a given work, but not the idea itself.
The protected expression in the MARS Software includes both its literal elements (that is, its source code), and its non-literal elements (its structure, sequence, organization, and user interface). See Bucklew v. Hawkins, Ash, Baptie & Co., LLP., 329 F.3d 923, 926 (7th Cir. 2003) (recognizing copyrights in both construction and “display” of computer programs). Plaintiff may pursue infringement
When a customer purchases or uses computer software, he or she typically receives only the executable files, not the readable source code. Computer Assocs., 333 F. Supp. 2d at 692. Naturally, source code10 is often carefully guarded, and it may be necessary to rely upon “visual manifestation of the source code at issue“—to allege substantial similarity between the underlying source codes. See Whelan, 797 F.2d at 1244 (using similarities between video outputs to determine substantial similarity in underlying code); Gay v. Facebook, Inc., 2016 WL 10650825, at *2 (N.D. Cal. 2016); Digital Dream Labs, Inc. v. Living Tech, 2023 WL 121750, at *3 (W.D. Pa. Jan. 6, 2023). Cf. Computer Assocs. Int‘l, 333 F. Supp. 2d at 694 (“There does not appear to be any perfect way to compare millions of lines of source codes, especially in a case like this where the plaintiff‘s claim both literal and non-literal copying of the code.“)
Defendants’ use of their own software to produce visual simulations identical to those produced by MARS remains sufficient, at this stage of the proceedings, to show substantial similarities between the two programs, both in literal source code
Defendants argue that Plaintiff must identify what portion of its copyrighted source code is substantially similar and could produce Figure 10. [17] at 14. Not so. Complaints for copyright infringement “simply alleging present ownership by plaintiff, registration in compliance with the applicable statute, and infringement by defendant, have been held sufficient under the rules.” Mid Am. Title Co., 991 F.2d at 421–22 (citing 5 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure, § 1237). This complaint gives enough details to present “a story that holds
2. Counts II, III & IV: Trade Secrets
Defendants also seek to dismiss ES3’s trade secret misappropriation claims, arguing that ES3 has failed to state a claim upon which relief may be granted under the Defend Trade Secrets Act or under Illinois or California state law.
To state a claim for violation of the DTSA, a plaintiff must first allege facts sufficient to provide notice that the relevant information constitutes a trade secret.
(A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (B) disclosure or use of a trade secret of another without express or implied consent by a person who--(i) used improper means to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was--(I) derived from or through a person who had used improper means to acquire the trade secret; (II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or (iii) before a material change of the position of the person, knew or had reason to know that—(I) the trade secret was a trade secret; and (II) knowledge of the trade secret had been acquired by accident or mistake.
The DTSA further defines “improper means” to include “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means” but the DTSA specifically excludes from this definition “reverse engineering, independent derivation, or any other lawful means of acquisition.”
A plaintiff alleging a violation of the Illinois Trade Secrets Act (ITSA) must show: (1) the presence of a trade secret; (2) that was misappropriated; and (3) that the defendant used the trade secret in its business. Composite Marine Propellers, Inc. v. Van Der Woude, 962 F.2d 1263, 1266 (7th Cir. 1992). This analysis contains the same two elements required to show a violation of the DTSA, plus an added element: use in business, making a combined analysis appropriate. Croner, 419 F. Supp. 3d at 1071; see Aon Risk Serv. Co., Inc. v. Alliant Ins. Servs., Inc., 415 F.Supp.3d 843, 847–48 (N.D. Ill. 2019) (analyzing DTSA and ITSA claims together because the relevant definitions overlap).
Similarly, courts analyze claims brought under the DTSA and California Uniform Trade Secrets Act (CUTSA) together. InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 657 (9th Cir. 2020);
a. Existence of Trade Secrets
Defendants first argue that ES3’s Complaint fails to identify a trade secret. The DTSA defines “trade secret” to mean: “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing.”
Trade secrets are protected if: “(A) the owner thereof has taken reasonable
Here, ES3 alleges the existence of trade secrets in the MARS Software source code and “a large set of unique models, methods, algorithms, procedures, etc. (features) which perform a variety of functions and capabilities” for the MARS Software [1] ¶¶ 7–8, 8 n.1; [23] at 5. These protected “features,” in the MARS Software include: (1) analytical formulations for modeling beam and shell finite element, discrete macro-particles, interaction models between different components; (2) advanced built-in pre- and post-processors for generating models and post-processing simulation results in formats that can be used to make three-dimensional renderings; (3) unique numerical approaches for neighborhood searches used in contact detection algorithms; (4) numerical algorithms and procedures that implement Message Passing Interface (MPI) parallelization, which makes it possible to simulate very large problems on massively parallel supercomputer centers; (5) modular implementation of a Graphical User Interface (GUI); (6) a unique procedure to automatically determine the best model parameters using experimental data; and (7) implementation of a GCode interface for generating analytical models of components to be simulated. See [1] n. 1 (details of these features have not been published).
Defendants argue that this “vague list of technology features” is “broad enough
Here, rather than relying on “broad areas of technology,” Composite Marine Propellers, Inc., 962 F.2d at 1266, Plaintiff’s complaint identifies specific methods processes, and models within the MARS Software. These allegations provide as much (and in many cases more) specific information as other claims that have been allowed to proceed. See, e.g., AutoMed Techs., Inc., 160 F. Supp. 2d at 921 (allowing plaintiff’s amended complaint to continue after it “specifies Staffing Simulation software and the source code for PPS software as trade secrets” in addition to “generic references” to three research projects); Papa Johns Int’l Inc. v. Rezko, 446 F. Supp. 2d 801, 812 (N.D. Ill. 2006) (allowing plaintiffs’ ITSA claim to proceed although it is “unclear which trade secrets of the ‘Papa John‘s System’ were misappropriated” because “the allegations satisfy the liberal pleading standards“).
To show that the identified information is a trade secret, ES3 must also
For example, ES3 has alleged the MARS Software “has significant value” because it facilitates the solution of specific mechanical engineering problems and assists Plaintiff in performing research and development projects, including projects under contracts awarded by the U.S. Army Engineer Research and Development Center (ERDC). Id. ¶¶7–8. Indeed, according to an email attached to the complaint, Dr. Cusatis recognized the MARS Software’s potential economic value when he proposed a licensing agreement in the MARS Software for commercial use and subsequent transfer of ownership––a proposal ES3 ultimately rejected. [1] ¶ 11; [1-3] at 7. Dr. Cusatis’ admission that “MARS, if properly and aggressively marketed, could have a chance as a commercial code (especially in academic environments)” demonstrates the trade secrets’ economic value. Id.
The complaint also lists several specific measures ES3 used to protect the MARS trade secrets, including: (1) using agreements containing nondisclosure provisions or restrictive covenants with employees and individuals who were given access to the trade secrets; (2) limiting access to the trade secrets to only those employees and individuals; (3) using data encryption and password protection to control access; and (4) omitting the portions of the source code containing the trade secrets in the material deposited with the United States Copyright Office. [1] ¶¶ 8. Plaintiff attaches Dr. Cusatis’ signed copy of the Confidentiality and Non-
Finally, ES3 has alleged the trade secrets are “not generally known” or “readily ascertainable through proper means” by “anyone who can obtain economic value” from the disclosure or use of the information. [1] ¶ 8. Defendants challenge this point because ES3 “made no attempt to separate what is in the public domain from that which may not be publicly known,” [17] at 16. But, at this stage, the Court accepts plaintiff’s well supported allegation as true. Killingsworth v. HSBC Bank Nev., N.A., 507 F.3d 614, 618 (7th Cir. 2007). Dr. Cusatis and CCS may raise the issue on a fully developed record at the summary judgement stage. Ultimately, whether information constitutes a trade secret, or a generally known method or procedure, is an issue of fact best “resolved by a fact finder after full presentation of evidence from each side.” Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 723 (7th Cir. Cir. 2003) (quoting Lear Siegler, Inc. v. Ark–Ell Springs, Inc., 569 F.2d 286, 289 (5th Cir. 1978)). At this stage, Plaintiff’s allegations suffice.
b. Misappropriation of Trade Secrets
Defendants argue that ES3’s allegations do not demonstrate trade secret misappropriation. Most of their arguments here echo their arguments on previous counts in that they challenge the Complaint’s specificity in describing infringing acts. Specifically, Defendants argue that because Plaintiff’s misappropriation allegation is “based on” Defendants’ publication of “at least two articles with the ASCE,” the Complaint must identify the publications and Articles, and specify the confidential
In any event, ES3 does not merely allege misappropriation based upon the unauthorized disclosure of the trade secrets through the cited articles. Under the DTSA a plaintiff may show misappropriation by alleging: (1) disclosure without consent; (2) use without consent; or (3) acquisition by “improper means,” including “breach of a duty to maintain secrecy.” See
3. Count V: Breach of Contract
Defendants next move to dismiss Count V of the Complaint, which alleges breach of contract. Defendants first raise a specificity argument, and, for the reasons explained above, the Court rejects that argument.
Defendants also argue that the Confidentiality Agreement remains facially invalid because it contains a non-compete provision,12 which is prohibited under California law. [17] at 13; see
Section 16600 invalidates certain provisions13 in employment contracts if they prohibit an employee from working for a competitor after completion of his employment or imposing a penalty if he does so, unless such restrictions are necessary to protect the employer’s trade secrets. See Retirement Grp. v. Galante, 176 Cal. App. 4th 1226, 1237–38 (2009) (collecting cases). For example, former employees may be barred from soliciting existing customers to redirect their business
The contractual provision Plaintiff invokes protects its confidential information and trade secrets, [1-2] at 3. As a result, the breach of contract claim remains viable.
4. Cusatis Computational Services
Finally, because ES3’s complaint asserts all claims against both Defendants, CCS separately argues that the claims against it should be dismissed because wES3 failed to allege facts about the specific role CCS played in any of the alleged misconduct. [17] at 19. But Plaintiff alleges that each of the Defendants “was the agent, and employee of, and acted for and on behalf of, each of its co-defendants herein within the scope of his or its authority or agency.” [1] ¶ 4. This allegation suffices at this stage with respect to ES3’s copyright infringement and trade secret misappropriation claims. See Restoration Specialists, LLC v. Hartford Fire Ins. Co., No. 8-CV-644, 2009 WL 3147481, at *3 (N.D. Ill. Sept. 29, 2009) (“The question of agency typically presents an issue of fact that seldom can be resolved at the summary judgment stage,
D. Conclusion
For the reasons explained above, the Court grants in part, and denies in part, Defendants’ motion to dismiss [16]. The Court dismisses Count V as to CCS only; the motion is denied in all other respects.
Dated: March 29, 2024
Entered:
John Robert Blakey
United States District Judge