OPINION AND ORDER
This mаtter comes before the court on three motions: defendant Analytical Services & Materials, Inc.’s motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), plaintiffs motion to amend the complaint pursuant to Federal Rule 15(a), and plaintiffs motion to dismiss defendant’s counterclaim pursuant to Federal Rule 12(b)(6). For the reasons set forth below, plaintiffs motion to amend the complaint is GRANTED, defendant’s motion to dismiss is GRANTED in part and DENIED in part, and plaintiffs motion to dismiss the counterclaim is DENIED.
I. Factual and Procedural History
Plaintiff Tao of Systems Integration, Inc. (“Tao”) filed the instant complaint, alleging four counts of federal and state claims against defendаnt Analytical Services & Materials, Inc. (“AS & M”). Counts One and Two allege claims for “reverse passing off’ and false advertising in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A) & (a)(1)(B) (2000). Count Three alleges a claim for misappropriation of trade secrets in violation of the Virginia Uniform Trade Secrets Act (“VUTSA”), Va.Code. Ann. § 59.1-336 to -343 (Michie 2001). Count Four alleges a claim of unjust enrichment under Virginia common law. AS & M filed a counterclaim, also alleging a claim for misappropriation of trade secrets under VUTSA.
Tao, a Virginia corporation headquartered in Williamsburg, Virginia, and AS & M, a Virginia corporation headquartered in Hampton, Virginia, both оperate in the aeronautical engineering services market. Tao’s claims stem from its allegation that AS & M misrepresented to the National Aeronautics and Space Administration (“NASA”) that AS & M owned intellectual property and expertise which actually belonged to Tao. Tao alleges that as a result of these misrepresentations, AS & M was granted a valuable services contract by NASA. Moreover, Tao alleges that because NASA has come to associate Tao’s intellectual property and expertise with AS & M, Tao has been unable to secure new contracts with NASA.
AS & M was founded in 1983 by Dr. Jalaiah Unnam. Dr. Unnam is the president of AS
&
M. From 1985 to 1994, Dr.
On March 31, 1994, Tao executed an agreement with NASA’s Langley Research Center, under which Tao would conduct flutter instrumentation testing at Langley Research Center’s Transonic Dynamic Tunnel (“TDT”). The agreement provided that Tao and NASA would share the results of the project, but that the data would be considered proprietary to Tao-. Tao conducted the flutter instrumentation testing from April 1994 through June 1994. One of the Tao engineers involved in the data analysis for this project was Dr. Sub-biah Venkateswaran. On May 24, 1994, Dr. Venkateswaran participated in a slide presentation of some of the test results to Langley Research Center. In July 1994, Dr. Venkateswaran left the employ of Tao and began employment at AS & M.
In June 1995, AS & M filed a proposal (“thе ETS Proposal”) in response to a NASA request for proposals, RFP4-00001, for an Engineering and Technical Services contract with NASA’s Dryden Flight Research Center in Edwards, California. Tao alleges that both Dr. Unnam and Dr. Venkateswaran participated in preparing in the ETS Proposal. Tao alleges that the ETS Proposal contained a number of misrepresentations in which AS & M took credit for expertise and capabilities belonging to Tao. Tao further alleges that the ETS Proposal suggested that AS & M, rather than Tao, had performed the TDT flutter testing at Langley Research Center. The ETS Proposal containеd a figure, labeled “Typical Results from Flexible Wing During Flutter,” which included data plots that Tao alleges are “substantially identical” to the data plots presented by Tao in the May 24, 1994 presentation to Langley Research Center. (Compl. ¶ 30; Am. Compl. ¶ 34.) AS & M was awarded the Engineering and Technical Services contract in 1995.
In 1998, AS & M received questionnaires called “Commercialization Metrics” from NASA headquarters, which asked the recipient to describe its efforts to commercialize innovations funded under the SBIR program. Tao alleges that AS & M responded to the questionnaire in part by providing information on projеcts that were carried out by Tao, misrepresenting Tao as a venture or subsidiary of AS & M.
Tao claims that alleged misrepresentations by AS & M had the effect of confusing NASA as to the nature of the two corporations and the services they provide. In support of this proposition, Tao points to a letter, sent by NASA headquarters in January 2002, which it alleges was addressed to “Dr. Jalaiah Unnam, President, Tao Systems/AS & M.” (Compl. ¶ 36; Am. Compl. ¶ 42.) Tao also claims that it has been told by NASA officials on several occasions that, in order to apply its own expertise .and innovations toward work with NASA, it would need to seek a subcontract from AS & M. Tao further alleges that it has been unаble to obtain any “sole-source contracts” from NASA since AS & M was awarded the ETS contract in 1995. (Compl. ¶ 37; Am. Compl. ¶ 43.)
In the late summer of 2001, Dr. Manga-lam received a copy of AS & M’s ETS
AS & M also filed a counterclaim, claiming that in acquiring a copy of AS & M’s confidential ETS Proposal, Dr. Mangalam and Tao had misappropriated AS & M’s trade secrets. Tao and Dr. Mangalam filed an answer to AS & M’s counterclaim and moved to dismiss the counterclaim for failure to state a claim. AS & M filed a response and Tao replied. Accordingly, all motions are now ripe for review.
II. Legal Standards
Leave of the court is required to amend a pleading when either a responsive pleading has been served, Fed.R.Civ.P. 15(a), or the amending party seeks to add a party,
United States v. Thomas Howell Kiewit, Inc.,
A complaint should not be dismissed pursuant to Rule 12(b)(6) for failure to state a claim unless it appears to a certainty that the nonmoving party cannot prove any set of facts in support of its claim that would entitle it to relief.
Conley v. Gibson,
Dismissal on a motion pursuant to Rule 12(b)(6) is appropriate when the face of the complaint clearly reveals the existence of a meritorious affirmative defense.
Brooks v. City of Winston-Salem,
III. Analysis
A. Tao’s Motion to Amend the Complaint
Tao seeks to file an amended complaint in order to clarify certain allegations
As the motion to amend was filed at an early stage in the litigation, permitting amendment will not result in prejudice to AS & M.
See Thomas Howell Kiewit, Inc.,
B. AS & M’s Motion to Dismiss for Failure to State a Claim
Tao’s amendment complaint consists of four counts: (1) reverse passing off, in violation of § 43(a) of the Lanham Act; (2) false advertising, in violation of § 43(a) of the Lanham Act; (3) trade secret misappropriation, in violation of the Virginia Uniform Trade Secrets Act; and (4) unjust enrichment, in violation of the common law of Virginia. AS & M seeks dismissal of each count for failure to state a claim. As the arguments raised in AS & M’s motion to dismiss can bе applied to Tao’s amended complaint, and memoranda from both Tao and AS & M have argued their merits in light of the sought amendment, the court will consider the motion as being addressed to the amended pleading. 6 Wright et al, supra § 1476, at 558.
I. Reverse Passing Off
“The typical § 43(a) Lanham Act claim is brought by a plaintiff who is in competition with the defendant, and charges the defendant with using a mark—a brand name, a word, ‘a slogan, a symbol, a combination of words and symbols, an ornamental feature, a distinctive shape, or something else intended to remind the consumer of the brand’—so similar to that of the plaintiffs that the public may be confused as to the source of the good or service.”
Advanced Res. Int’l, Inc. v. Tri-Star Petroleum Co.,
Among these, § 43(a) creates a civil cause of action for a false designation of origin made in connection with goods or services. 15 U.S.C. § 1125(a). Because “origin” refers not only to geographical origin, but also to the origin of source or manufacture, a claim of “reverse passing off’ is actionable under § 43(a) as a false designation of origin.
Id.
at 2044-46. Just as “passing off’ occurs when a producer misrepresents his own product as someone else’s, “reverse passing off’ occurs when a producer misrepresents someone else’s goods or services as his own.
Tao in Count One' does not allege a typical § 43(a) claim involving the misuse of a mark. Tao concedes as much, clarifying its general allegation of a claim under 15 U.S.C. §■ 1125(a)(1)(A) as an action for reverse passing off. (PL’s Opp’n to Mot. to Dismiss at 8-9.) The circumstances alleged by Tao, ■ however, do not support such a claim. To state a claim for reverse passing off, Tao must allege that the actual goods provided to NASA by AS & M were in fact produced by Tao, or the actual services provided to NASA by AS & M were in fact performed by Tаo. Neither Tao’s amended complaint nor any other filing in this case provides a basis for suspecting that the goods and services which AS & M contracted to provide to NASA were actually provided by Tao.
Instead, Tao alleges that defendants “made both false and misleading representations of fact in the ETS Proposal.” (Am. ComplA 48.) The ETS Proposal may be an offer to contract, an advertisement, or a promotion, but it is not a good or service. Moreover, even if the ETS Proposal arguably was a good or service, there is no allegation that Tao, rather than AS & M, was the actual producer of the ETS Proposal. Tao instead appears. to claim that AS & M, in producing its own ETS Proposal, incorporated ideas or concepts that belonged to Tao. This, however, is precisely the type of allegation which the Supreme Court rejected as the basis for a reverse-passing-off claim in
Dastar Corporation v. Twentieth Century Fox Film Corporation,
539 U.S. at -,
2. False Advertising
Section 43(a) of the Lanham Act provides a civil cause of action against a person who misrepresents the “naturе, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities” in “commercial advertising or promotion.” 15 U.S.C. § 1125(a)(1)(B). Section 43’s reach is broader than merely the “classic advertising campaign.”
Gordon & Breach Science Publishers S.A. v. Am. Inst. of Physics,
In various scenarios, courts have found that communications to a very limited number of consumers can reach the required level of dissemination to constitute commercial advertising or promotion.
E.g., Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co.,
Where it is clear, however, that the relevant market is large and that the alleged contacts are comparatively trivial, dismissal
for
failure to state a claim is appropriate.
E.g., Cavalier Tel., LLC,
AS & M raises two challenges to the sufficiency of Tao’s false advertising claim. First, AS & M argues that Tao fails to allege the two companies competed commercially. Second, AS & M argues that Tao’s allegations do not meet the legal standard of commercial advertising or promotion. However, the allegations of Tao’s amended complaint are more than sufficient to support its claim of commercial competition. Tao alleges that both it and AS & M operate in the aeronautical engineering services market (Am.Compl.1ffl 2-3), and that both companies have provided aeronautical engineering services to NASA
(id.
¶¶ 3, 12, 20). Tao further alleges that,
AS & M additionally challenges whether Tao’s allegations meet the legal standard for commercial advertising or promotion. Accepting Tao’s factual allegations as true and viewing all allegations in a light most favorable to Tao, as this court must at this juncture, it does not appear to a certainty that Tao cannot prove any set of facts in support of its false advertising claim. As already discussed, the determination whether particular- communications constitute advertising or promotion is dependant upon the industry in question. While the conduct alleged against AS
&
M—the submission of a proposal in response to a NASA request—is not advertising in the traditional sense of the term, the court cannot conclude at this time that it is insufficient to support Tao’s claim. Just as “in the context of the theatre-booking industry ... ‘services’ are ‘promoted’ by word-of-mouth and ... telephone contacts with produсers, promoters, and presenters,”
Nat’l Artists Mgmt. Co.,
Additionally, Tao has alleged sufficient dissemination of AS & M’s allegedly false statements throughout the relevant purchasing public. Although Tao does not state specific claims regarding the size of the relevant consuming public for its services, it alleges that “Tao Systems has been unable to obtain any sole-source contracts with NASA,” and that “Dr. Manga-lam was told on several occasions by NASA officials that, in order to apply his own expertise and innovation toward work with NASA, he would need to seek a subcontract from AS & M.” (Am.Compl^ 43.) While such generalized allegations alone would not be enough to survive a Rule 56 motion, they are sufficient to meet the lesser requirements of Rule 12(b)(6). Viewing these allegations in a light most favorable to Tao, it does not appear to a certainty that Tao cannot prove any set of facts to support its false advertising claim. Thus, the motion to dismiss Count Two for failure to state a claim is DENIED.
3. Misappropriation of Trade Secrets
The Virginia Uniform Trade Secrets Act provides a cause of action for misappropriation of a trade secret. Va. Code Ann. § 59.1-338 (Michie 2001). Under VUTSA, a trade secret is “information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process,” that (1) derives independent economic value from not being generally known, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Id.
§ 59.1-336. The secrecy need not be absolute; the owner of a trade secret may, without losing protection, disclose it to a licensee, an employee, or a stranger, if the disclosure is made in confidence, еxpress or implied.
Dionne v. Southeast Foam Converting & Packaging, Inc.,
Tao alleges misappropriation of three trade secrets: (1) the TDT flutter test data and analysis; (2) certain patents; and (3) enhancements, refinements, and improvements that Tao has made to those patents. For the reasons set forth below, Tao’s amended complaint states a claim for misappropriation of the TDT flutter test materials, but not for the patents or their refinements.
Tao alleges the necessary elements to state a misappropriation claim for the TDT flutter test data and analysis. Tao alleges that it made efforts to preserve the secrecy of the TDT flutter test materials. (Am.Compl^ 58.) Tao further alleges that Dr. Venkateswaran, a former Tao employee, took the TDT flutter test materials from Tao and provided them to AS & M in contravention of his duty to not reveal confidential information obtained through his employment. (Id. ¶ 64.) These allegations are sufficient to maintain a misappropriation claim for the TDT flutter test materials against Dr. Venkates-waran.
Tao can also maintain a misappropriation claim for the TDT flutter test materials against AS & M and Dr. Unnam. Tao alleges that AS & M and Dr. Unnam “used” the TDT flutter test materials by including them in the ETS Proposal. (Id. ¶ 65.) For the purposes of a motion undеr Rule 12(b)(6), it is reasonable to infer that, at the time of use, AS & M and Dr. Unnam either knew or had reason to know that Dr. Venkateswaran owed a duty to Tao to maintain the secrecy of the TDT flutter test materials. Moreover, as Dr. Venkateswaran’s employer, AS & M can be held vicariously liable for his acts of trade secret misappropriation committed within the scope of his employment. Thus, Tao has stated claims for trade secret misappropriation of the TDT flutter test materials against all three defendants.
The Tao patents, however, cannot provide the basis for a trade secret misаppropriation claim. As already noted, information must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy” in order to qualify as a trade secret. Va.Code Ann. § 59.1-336. Under federal law, files relating to a granted patent are open to the public and available for copying. 37 C.F.R. § 1.11 (2003); 37 C.F.R. § 1.13. Information which is publicly disclosed is not the subject of efforts to maintain its secrecy. Thus, the Tao patents are not trade secrets and cannot provide the basis for a trade secret misappropriation cause of action.
Although the enhancеments, refinements, and improvements that Tao has made to its patents may have been the subject of reasonable efforts to maintain their secrecy, Tao cannot maintain a mis
Accordingly, Tao’s claims of trade secret misappropriation of its patents and patent refinements are DISMISSED as to all defendants. The motion to dismiss Tao’s claim of trade secret misappropriation of the TDT flutter testing materials is DENIED.
4. Unjust Enrichment
Tao claims that by misrepresenting Tao’s technology and trade secrets as their own, defendants were unjustly enriched. Under Virginia law, an action for unjust enrichment is quasi-contractual in nature.
Acorn Structures v. Swantz,
A disappointed bidder for a government contract cannot maintain an unjust enrichment cause of action against a successful bidder for the value of that contract.
John C. Holland Enterprises, Inc. v. J.P. Mascaro & Sons, Inc.,
The three-year Virginia statute of limitations applicable to oral contracts, Va.Code Ann. § 8.01-246(4) (Michie 2000), also applies to unjust enrichment actions.
Belcher v. Kirkwood,
In this case, the unjust enrichment occurred, if at all, at the moment defendants received a benefit from Tao without paying for its value. Tao claims that defendants were conferred a benefit by misrepresenting Tao’s technology and trade secrets as their own. (Am.Compl^ 72.) AS & M
All claims for unjust enrichment against all defendants are DISMISSED.
C. Tao’s Motion to Dismiss for Failure to State a Claim
As discussed supra Part III.B.3, the Virginia Uniform Trade Secrets Act provides a cause of action for misappropriation of a trade secret. Va.Code Ann. § 59.1-338. As previously discussed, under VUTSA, a trade secret must both (1) derive independent economic value from not being generally known, and (2) be the subject of reasonable efforts to maintain its secrecy. Id. § 59.1-336. Acts of misappropriation include the acquisition of a trade secret by a person who knows or has reason to know that the trade secret was acquired by improper means. Id.
AS & M claims that, by obtaining of copy of AS & M’s ETS Proposal, Dr. Mangalam and Tao have misappropriated AS & M trade secrets. AS & M alleges that the information contained in the ETS Proposal both (1) derives value from not being generally known (Countered 12), and (2) is the subject of reasonable efforts to maintain its secrecy (id. ¶¶ 8, 18-21). Additionally, AS & M alleges that, by virtue of a notice placed on the first page of the ETS Proposal (id. ¶ 18), federal law under 18 U.S.C. § 1905 prohibiting the disclosure of confidential information by government employees (id. ¶ 20), and Dr. Mangalam’s nine years of experience working at AS & M (id. ¶22), both Dr. Mangalam and Tao had reason to know that the ETS Proposal had been acquired by improper means. AS & M even alleges a motive, claiming that Tao acquired the ETS Proposal in the late summer of 2001 (id. ¶ 9) in order to use it in preparing Tao’s own proposal in response to NASA’s re-solicitation of the ETS contract on July 11, 2001 (id. ¶ 14).
In response, Tao argues that the only tradе secrets contained in the ETS Proposal are its own trade secrets, which it cannot misappropriate. Accepting AS & M’s factual allegations as true and viewing all allegations in a light most favorable to AS & M, however, it is reasonable to infer that the ETS Proposal contains trade secrets other than those which may belong to Tao. As it does not appear to a certainty that AS & M cannot prove any set of facts in support of its claim, the motion to dismiss the counterclaim is DENIED.
IV. Conclusion
For the reasons stated above, the court GRANTS plaintiff Tao of Systems Integration, Inc.’s motion to amend the complaint. The court GRANTS defendant AS & M’s motion to dismiss Counts One and Four for failure to state a claim, DISMISSING the reverse-passing-off and unjust enrichment claims against all defendants. The court DENIES the motion to dismiss the Count Two claim of false advertising. The court GRANTS the motion to dismiss the Count Three claims of trade secret misappropriation of patents and patent refinements, DISMISSING these claims against all defendants. The court DENIES the motion to dismiss the Count Three claim of trade secret misappropriation of the TDT flutter test materials. The court DENIES the motion by Tao to dismiss the counterclaim for misappropria
The Clerk is DIRECTED to forward a copy of this Opinion and Order to all parties.
IT IS SO ORDERED.
Notes
. To the extent that the author of any idea or concept embodied in a product may have a remedy under federal law, it is to be found in copyright, patent, or the false advertising provisions of the Lanham Act.
Dastar Corp. v. Twentieth Century Fox Film Corp.,
. Although the court of appeals for the Fourth Circuit has not yet provided a test defining advertising or promotion for purposes of the