Third Circuit
Subscribe to Third Circuit's Posts

A Lesson in Laches: You Waited Too Long to Start Your Kar

After the district court, on remand, held that laches did not bar relief, the US Court of Appeals for the Third Circuit again determined that the district court abused its discretion by not properly applying the presumption in favor of laches and issued an order to vacate and remand with instructions to dismiss a charity’s trademark infringement claims with prejudice. Kars 4 Kids Inc. v. America Can!, Case Nos. 23-1273; -1281 (3rd Cir. Apr. 17, 2024) (Bibas, Porter, Fisher, JJ.)

Kars 4 Kids and America Can! Cars for Kids are charities that sell donated vehicles to fund children’s education programs and have been engaged in a trademark dispute since 2003. Both parties have alleged federal and state trademark infringement, unfair competition and trademark dilution over their respective KARS 4 KIDS and CARS FOR KIDS trademarks. The parties were last before the Third Circuit in 2021, when the Court held that America Can was first to use its CARS FOR KIDS trademark in Texas, and Kars 4 Kids waived any challenge to the validity of America Can’s marks. In that 2021 decision, the Third Circuit also vacated the district court judgment in part and remanded the case for the district court to reexamine its laches and disgorgement conclusions, which had been decided in favor of America Can.

The Lanham Act does not contain a statute of limitations. Instead, it subjects all claims to the principles of equity. To determine whether laches bars a claim, a court considers two elements: whether the plaintiff inexcusably delayed in bringing suit, and whether the defendant was prejudiced as a result of the delay. With respect to the burden of proof for the laches claim at issue, America Can and Kars 4 Kids agreed that their Lanham Act claims were properly analogous to New Jersey’s six-year fraud statute. Therefore, because America Can first discovered the Kars 4 Kids trademark in Texas in 2003 and did not bring counterclaims until 2015, America Can was subject to a presumption that its claims were barred by laches unless it was able to prove both that its delay in filing suit was excusable and that it did not prejudice Kars 4 Kids.

On the issue of delay, the Third Circuit found that the district court erred because it did not find that America Can met its burden of establishing that its delay in bringing suit was excusable and that a reasonable person in its shoes would have waited to file suit. Instead, the district court improperly placed the burden on Kars 4 Kids to establish whether its advertisements in Texas were viewed by a sufficient number of Texans so as to put America Can on notice. As the Third Circuit explained, this was error. The district court should have held America Can to the burden of persuasion to show that it was not sufficiently aware of Kars 4 Kids’s use of its mark in Texas and to show what it did to identify and stop any potentially [...]

Continue Reading




read more

Sorry—No Finality, No Injunction, No Appellate Jurisdiction

The US Court of Appeals for the Third Circuit dismissed an appeal from the denial of a motion under the Defend Trade Secrets Act (DTSA) for an ex parte seizure order, explaining that such orders are not final, not effectively injunctive and that the DTSA does not independently provide appellate jurisdiction to review such orders. Janssen Prod., L.P. v. eVenus Pharms. Lab’ys Inc., Case No. 22-2426 (3d Cir. Oct. 17, 2023) (Porter, Freeman, Fisher, JJ.)

In 2015, the US Food & Drug Administration (FDA) approved Janssen’s drug Yondelis—a stable, injectable version of the cancer drug trabectedin—for use in certain cancer patients. Janssen asserts that its data, specifications and methods for manufacturing Yondelis are trade secrets. After Janssen received FDA approval for Yondelis, eVenus sought FDA approval for a generic version of Yondelis. Janssen filed a lawsuit against eVenus (under the Hatch-Waxman Act) for patent infringement. During discovery, Janssen obtained documents that allegedly demonstrated that eVenus misappropriated Janssen’s trade secrets. Janssen then filed the current lawsuit against eVenus seeking relief for eVenus’s alleged trade secret misappropriation under the DTSA.

During discovery, Janssen found that eVenus spoliated evidence. In response, Janssen filed a motion for an ex parte seizure under the DTSA, requesting that the district court order the seizure of eVenus’ network servers and stored data, and the laptops and cell phones of certain eVenus employees and ex-employees. The district court denied Janssen’s ex parte seizure motion. Janssen appealed.

The Third Circuit dismissed the appeal, concluding that it lacked jurisdiction over Janssen’s appeal for two reasons.

First, the Third Circuit found that it lacked appellate jurisdiction because the district court’s denial of Janssen’s ex parte seizure motion was not a final judgment and did not meet any of the limited exceptions to the final judgment rule.

One limited exception to appellate jurisdiction under the final judgment rule is review of a lower court’s refusal to order injunctive relief. However, as the Third Circuit explained, an ex parte seizure order under the DTSA is not effectively injunctive and therefore does not fall under the injunction exception. The Court explained that refusal to grant an ex parte seizure order does not satisfy the first two prongs of the Court’s three-part functional injunction test, which require that an order be “directed to a party” and may be enforced by contempt. Regarding the first prong, the Court noted that DTSA seizure orders are not “directed to a party” because the DTSA requires law enforcement officials—and not a party—to execute any ex parte seizure order. Regarding the second prong, no party can be held in contempt for failing to comply with an order that does not direct it to do anything. Therefore, the district court’s order did not effectively deny an injunction.

Second, the Third Circuit analogized DTSA seizure orders with seizure orders under the Lanham Act in terms of statutory construction. As the Court explained, in the Lanham Act, ex parte seizure provisions are part of its “injunctive relief” section. In contradistinction, Congress did not [...]

Continue Reading




read more

Watermelon Sugar: Candy Shape and Color Deemed Functional

The US Court of Appeals for the Third Circuit upheld a district court’s decision that a candymaker cannot trademark the shape and colors of watermelon candy, finding that the combined colors and shape of the candy are functional because they help signal to consumers that the candies have a watermelon flavor. PIM Brands Inc. v. Haribo of America, Inc., Case No. 22-2821 (3rd Cir. Sept. 7, 2023) (Chagares, Bibas and Matey, JJ)

PIM is a leading confectionary company that introduced its Sour Jacks Wedges, a chewy gummy candy, in the early 2000s.

PIM obtained a federal trademark registration in “the shape of a wedge for candy, with an upper green section with white speckles, followed by a narrow middle white section and followed by a lower red section with white speckles.”

Haribo, a well-known German confectionery company, introduced its own watermelon-flavored sweet treat in 2019. Like the Sour Jacks Wedges, Haribo’s candy is red, white and green, with an elongated watermelon wedge shape. PIM sued Haribo for trademark and trade dress infringement under the Lanham Act and for unfair competition under New Jersey common law, alleging that Haribo copied PIM’s Sour Jacks Wedges design.

Haribo countered that PIM’s trade dress was functional and requested that the district court cancel PIM’s trademark. Haribo claimed that it designed its chewy candy’s shape and colors to match its flavor (watermelon) and that PIM’s trademark should not have been granted since it closely resembled an actual slice of watermelon. The district court agreed, finding that PIM’s trademark design was functional and not protectable since PIM’s combination of colors and shape helps identify the candy’s watermelon flavor. PIM appealed.

PIM acknowledged that the coloring of its watermelon candy was functional since it identified the candy’s flavor. However, PIM argued that the candy’s wedge shape identified the brand and challenged the district court’s decision because it did not consider the wedge shape in isolation from the colors when assessing functionality.

The Third Circuit rejected PIM’s argument, concluding that each feature of the candy’s trade dress serves a single function, which is to identify its flavor, and therefore is ineligible for trademark protection. The Court explained that a design is functional if it is useful for anything beyond branding. The Court cited to its 2021 decision in Ezaki Glico v. Lotte International America, explaining that “[e]ven if the design chosen both promotes a brand and also ‘makes a product work better,’ it is functional and unprotectable.” The Court went on to explain that if design choices (e.g., shape and color) serve the same function (e.g., identifying the flavor), they should be considered together.

PIM further argued that its Sour Jacks Wedges do not match exactly with watermelon, noting that the bottom could be more curved and have a thinner band of darker green, the wedge could be wider, the point could be sharper and a deeper red, and there could be black seeds. The [...]

Continue Reading




read more

A Window into Trade Secret Damages: R&D Costs Can Quantify Unjust Enrichment

The US Court of Appeals for the Third Circuit affirmed a district court’s finding of damages in a trade secrets case under Pennsylvania’s version of the Uniform Trade Secrets Act. The Third Circuit explained that it is appropriate to quantify damages under the unjust enrichment standard by considering the trade secret owner’s research and development costs as an indicator of the research and development costs that the defendant avoided but would have incurred if not for its misappropriation. PPG Indus. Inc. v. Jiangsu Tie Mao Glass Co. Ltd. et al., Case No. 21-2288 (3rd Cir. Aug. 30, 2022) (Jordan, Porter, Phipps, JJ.)

PPG is the maker of OpticorTM, a novel plastic for airplane windows. PPG sued Jiangsu Tie Mao Glass (TMG), asserting trade secret misappropriation, among other things. PPG alleged that TMG persuaded a former PPG employee to provide TMG with a treasure trove of trade secrets and that TMG used the trade secrets to begin making plans to produce Opticor-quality windows and to build a factory to manufacture its product. After TMG failed to appear in the case for more than a year, the district court entered a default judgement for PPG. Only then did TMG show up. The district court declined to set aside the default judgment and ultimately awarded damages for TMG’s unjust enrichment totaling about $9 million, which it then trebled to $26.5 million, and issued a permanent injunction against TMG. TMG appealed.

The Third Circuit began by analyzing whether TMG was unjustly enriched as a result of its acts. Trade secret damages are commonly determined either by calculating actual loss to the plaintiff or by quantifying the defendant’s unjust enrichment from the use of the trade secret. The Court found that although TMG did not sell products containing the Opticor technology, TMG was unjustly enriched by its use of the trade secrets. For example, TMG used PPG’s proprietary drawings (minus PPG’s name and logo) to ask a subcontractor to “manufacture for TMG the same molds that it did for PPG.” TMG also was building, or had plans to build, a production facility to manufacture its version of the Opticor technology. The Court determined that TMG was unjustly enriched because TMG used PPG’s trade secrets to completely skip the research and development phase of its version of the Opticor technology and instead move directly to the phase of preparing for production.

Next, the Third Circuit considered whether the damages amount awarded to PPG was appropriate. Unjust enrichment requires the defendant to pay the plaintiff the value of the benefit conferred from the use of plaintiff’s trade secrets. This benefit can be a cost that was avoided and may include development costs. The Court found it appropriate to consider the research and development costs PPG incurred in developing the Opticor technology as an indicator of the research and development costs TMG would have sustained to develop its own version of the Opticor technology in the absence of misappropriation. In short, “[t]he costs a plaintiff spent in development [...]

Continue Reading




read more

Rebuttal Presumption of Irreparable Harm Still Alive When Assessing Trademark Preliminary Injunctions

In one of the first decisions to construe the Trademark Modernization Act of 2020 (TMA), the US Court of Appeals for the Third Circuit found that a district court properly applied the TMA’s rebuttal presumption of irreparable harm when it denied a trademark owner’s motion for a preliminary injunction. Nichino America, Inc. v. Valent U.S.A., LLC, Case No. 21-1850 (3rd Cir. Aug. 12, 2022) (Bibas, Matey, Phipps, JJ.)

Nichino and Valent sell pesticides for farming. Since 2004, Nichino has offered a trademarked product known as CENTAUR. Valent trademarked a competing product called SENSTAR in 2019, giving it a logo resembling CENTAUR’s colors, fonts and arrow artwork. Both pesticides are used in the same geographic areas against many of the same insects, and both are sold to farmers through distributors. SENSTAR is a liquid and uses a unique combination of two active chemicals. It costs $425 per gallon and ships in cases containing four one-gallon containers. CENTAUR is manufactured as a solid and sold by the pallet, with each pallet containing 622 pounds of pesticide packed into bags and cases. CENTAUR costs $24 per pound.

Nichino sued Valent for trademark infringement and sought a preliminary injunction against SENSTAR’s launch, arguing that Valent’s use of the SENSTAR mark would create confusion among consumers. The district court found that Nichino narrowly demonstrated that its infringement claim would likely succeed but explained that “there is not an abundance of evidence of likelihood of confusion” between the products. As part of its injunction analysis, the district court applied the TMA to presume Nichino would suffer irreparable harm without an injunction. However, the court noted that the presumption was rebuttable. The court credited Valent’s evidence of a sophisticated consumer class that makes careful purchases and noted the lack of any evidence of actual consumer confusion. The court also found that Nichino failed to proffer any affirmative evidence that it would suffer irreparable harm. Accordingly, the district court found that the presumption of irreparable harm was rebutted, and therefore denied the injunction request. Nichino appealed.

Nichino argued that the TMA precluded the district court from finding no irreparable harm. The Third Circuit, however, found that the district court “admirably navigated” the TMA’s rebuttable presumption by finding that Valent rebutted the presumption and Nichino did not independently show irreparable harm. The Court explained that the three-step process for applying the TMA’s rebuttable presumption requires the following:

  1. The court must assess the plaintiff’s evidence only as it relates to a likelihood of success on the merits.
  2. If the plaintiff’s evidence establishes likely trademark infringement, the TMA is triggered, and the burden of production shifts to the defendant to introduce evidence sufficient for a reasonable factfinder to conclude that the consumer confusion is unlikely to cause irreparable harm.
  3. If a defendant successfully rebuts the TMA’s presumption by making this slight evidentiary showing, the presumption has no further effect.

The Third Circuit found that the district court correctly followed this three-step analysis in finding that Valent rebutted the TMA’s [...]

Continue Reading




read more

Copyright Claim in Digital Message Format Fizzles Out

The US Court of Appeals for the Third Circuit found that digital message formats and messages generated using those formats were not copyrightable and thus vacated a preliminary injunction against an alleged infringer marketing a competing product using the same format and messages. Pyrotechnics Management Inc. v. XFX Pyrotechnics LLC et al., Case No. 21-1695 (3d Cir. June 29, 2022) (Hardiman, Nygaard, Fisher, JJ.)

Pyrotechnics, a manufacturer of hardware and software for fireworks displays, developed a system for controlling fireworks displays. The system contains a control panel that accepts user input and creates messages that it sends to field modules, which decode the messages and perform the desired task (e.g., igniting a firework). FireTEK reverse-engineered Pyrotechnics’ hardware to learn its communication protocol and, in 2018, developed a router that could send the same messages to Pyrotechnics’ field modules as the Pyrotechnics control panel. FireTEK marketed its router as a replacement for Pyrotechnics’ control panel.

In 2019, Pyrotechnics filed a deposit copy document with the US Copyright Office describing the communication protocol used in its fireworks control panel. Pyrotechnics’ communication protocol includes three components: a custom digital message format, specified individual messages that conform to the format and communicate specific information and a transmission scheme describing how individual digital messages are converted into a format that can be sent over the wires that connect the control panel to the field modules. The deposit copy also identified four specific messages (each a series of 12 bytes) that used Pyrotechnics’ digital message format. The Copyright Office issued a certificate of registration.

Pyrotechnics filed suit against fireTEK for copyright infringement, claiming that fireTEK violated Pyrotechnics’ copyright in the communication protocol it uses to control fireworks displays. Pyrotechnics sought and received a preliminary injunction from the district court enjoining fireTEK from selling or distributing its allegedly infringing router. FireTEK appealed.

FireTEK contested the district court’s likelihood of success finding, arguing that Pyrotechnics’ copyright in its communication protocol was invalid. The Third Circuit agreed, finding that neither the digital message format used by Pyrotechnics in its communication protocol nor the individual messages conforming to that format were copyrightable.

Turning first to Pyrotechnics’ digital message format, the Third Circuit found that the format was an uncopyrightable idea, not a protectable expression of ideas. Relying heavily on its 1986 decision in Whelan Assocs. v. Jaslow Dental Lab’y, the Court explained that “the purpose or function of a utilitarian work is the work’s idea.” For Pyrotechnics’ communication protocol, the purpose and function of the protocol (and therefore its idea) was to enable Pyrotechnics’ control panel and field modules to communicate with each other. As the Court explained, the digital message format created by Pyrotechnics was an essential part of that idea, and there was no other means of achieving the purpose of the communication protocol (permitting communication between the control panel and field modules) without using Pyrotechnics’ digital message format. Therefore, the Court determined that Pyrotechnics’ digital message format was part of an uncopyrightable idea.

The Third Circuit also [...]

Continue Reading




read more

The Plot Plot Thickens: Trade Secret, Tortious Interference, Fiduciary Duty Claims Survive Motion to Dismiss

A judge from the US Court of Appeals for the Third Circuit sitting by designation in the US District Court for the District of Delaware denied a motion to dismiss claims of misappropriation of trade secrets, tortious interference and breach of fiduciary duty, finding that the plaintiff plausibly pled facts supporting each claim. Park Lawn Corp. v. PlotBox Inc., Case No. 20-cv-01484-SB (D. Del. Oct. 29, 2021) (Bibas, J., sitting by designation).

Park Lawn and PlotBox are competitors in the cemetery business. In 2018, Park Lawn began developing software to automate various cemetery management tasks to cut costs. Park Lawn also hoped to generate revenue by licensing the software to competitors. Park Lawn’s CEO, however, had been leaking information to PlotBox about the software, its unique features and Park Lawn’s strategy for licensing. The CEO also helped PlotBox in its efforts to recruit Park Lawn’s chief technology officer, who had been overseeing the software project. The CEO acted despite having signed confidentiality, non-compete and non-solicitation agreements. Park Lawn ultimately discovered the CEO’s involvement with PlotBox and fired him. Soon after, the CEO became PlotBox’s chairman. Park Lawn sued PlotBox for stealing its trade secrets, interfering with the CEO’s employment agreements and helping the CEO breach his fiduciary duty to Park Lawn. PlotBox moved to dismiss.

The district court denied the motion. As to the trade secret claims, PlotBox argued that it did not misappropriate any trade secrets since the CEO never actually gave PlotBox any information. The court found that the complaint alleged otherwise. In particular, the court noted the complaint alleged:

  • The CEO and PlotBox exchanged compromising emails discussing the “status,” “developments in ‘death-tech,’” and the CEO’s interest in becoming PlotBox’s chairman.
  • The CEO invited PlotBox executives to his home to discuss a “Park Lawn Update” and “Technical Presentation.”

The court found that these allegations plausibly alleged that the CEO could have disclosed a trade secret.

PlotBox argued that even if it did learn something from the CEO, it never knew that the CEO obtained that information through improper means. The district court again disagreed, finding that PlotBox should have known something was amiss since the CEO broke a promise to keep quiet. While the court acknowledged that PlotBox may have never read the CEO’s confidentiality agreement, PlotBox should have reasonably inferred that it was improper for the CEO of a competitor to disclose his company’s innovations.

PlotBox also argued for dismissal because any information it received from the CEO did not count as a trade secret under the Defend Trade Secrets Act. Once again, the district court disagreed, explaining that Park Lawn alleged that the information provided was technical in nature (e.g., unique features of software and strategy of selling it to rivals), Park Lawn took adequate measures to protect the information by only allowing a few employees who signed confidentiality agreements to access the software and the information was valuable because it was secret. The court thus permitted the trade secret claim to proceed.

The [...]

Continue Reading




read more

No Immunity: State Right of Publicity Law is § 230 “Law Pertaining to Intellectual Property”

The US Court of Appeals for the Third Circuit held that § 230 of the Communications Decency Act, 47 U.S.C. § 230(c), does not preclude claims based on state intellectual property laws, reversing in part a district court’s dismissal of a plaintiff’s state law claims for violation of her right of publicity. Hepp v. Facebook, Case Nos. 20-2725; – 2885 (3d Cir. Sept. 23, 2021) (Hardiman, J.) (Cowen, J., concurring in part and dissenting in part).

In 2018, Karen Hepp, a Philadelphia newscaster, discovered a photo of herself making its way around the internet. The picture, taken without Hepp’s knowledge or consent, depicts her smiling in a convenience store and was posted in two locations online. The first post was a Facebook advertisement promoting a dating service, which encouraged users to “meet and chat with single women near you.” The second post was to Imgur and was subsequently linked to a Reddit thread, where it spurred a flurry of indecent user commentary. Hepp sued Facebook, Imgur and Reddit for violations of Pennsylvania’s right of publicity statute. The district court dismissed Hepp’s claims with prejudice, holding that all three companies were entitled to immunity as internet service providers under § 230(c). Hepp appealed.

The Third Circuit found that the district court lacked personal jurisdiction over Imgur and Reddit on a “purposeful availment” minimum contacts basis and affirmed dismissal of the claims against those parties.

With respect to Facebook, the Third Circuit considered whether it was immune under § 230(c). Section 230 of the Communications Decency Act was intended to promote the internet, specifically by preserving “the vibrant and competitive free market …unfettered by Federal or State regulation.” Accordingly, § 230(c) provides Good Samaritan protection for internet service providers, encouraging them to host and moderate third-party content by immunizing them from some publisher liability regarding certain moderation decisions. However, pursuant to § 230(e)(2), such immunization does not “limit or expand any law pertaining to intellectual property.”

The first question addressed by the Third Circuit was whether § 230(e)(2) can apply to state law claims generally. The Court acknowledged that precious few cases interpreting § 230’s intellectual property provision exist, and that the existing cases present a clear split on whether § 230(e)(2) applies only to federal intellectual property claims. The Court, adhering to what it regarded as the most natural reading of § 230(e)(2), (i.e., that a state law can be a “law pertaining to intellectual property law”) determined that application of § 230(e)(2) was not limited to federal claims. The Court was not persuaded by Facebook’s policy arguments regarding a purported increase in uncertainty regarding the contours of § 230(c) immunity if state law intellectual property claims, which vary from state to state, were exempt from such immunity.

The second question the Third Circuit addressed was whether Hepp’s right of publicity claim arose from a “law pertaining to intellectual property.” In finding that it did, the Court relied on a survey of legal dictionaries and determined that the term “intellectual property” [...]

Continue Reading




read more

Third Circuit Orders Second Look at Delays and Disgorgement of Profits

In a long-running trademark dispute between two charitable organizations, the US Court of Appeals for the Third Circuit found that the appellee did not preserve its challenge to the district court’s denial of summary judgment on its trademark cancelation claims, the appellant waived any challenge to the validity of the defendant’s mark and the district court did not abuse its discretion by declining to award enhanced monetary relief or prejudgment interest. Kars 4 Kids Inc. v America Can!, Case Nos. 20-2813; -2900 (3rd Cir., August 10, 2021) (Shwartz, J.) The Court also vacated-in-part and remanded for the district court to reexamine its laches and disgorgement conclusions under applicable law.

As charitable organizations that sell donated vehicles to fund children’s programs, both America Can (as CARS FOR KIDS) and Kars 4 Kids have used similar trademarks since their respective starts in the early- to mid-1990s. In 2003 and 2013, America Can sent cease and desist letters to Kars 4 Kids after seeing its advertisements in the state of Texas. In 2014, Kars 4 Kids sued America Can for federal and state trademark infringement, unfair competition and trademark dilution claims. Less than one year later, America Can filed its own suit—alleging the same claims—plus a petition to cancel a Kars 4 Kids trademark registration and seeking a nationwide injunction and financial compensation.

Both parties appeal from a denial of their respective summary judgment motions as well as (1) the jury finding that Kars 4 Kids willfully infringed America Can’s trademark rights in Texas, (2) the rejection of America Can’s petition for cancellation of a KARS FOR KIDS trademark registration finding that the registration was not knowingly procured by fraudulent means, (3) the conclusion that laches did not apply against America Can’s claims, (4) disgorgement of Kars 4 Kids profits in Texas totaling about $10.6 million, (5) rejection of enhanced monetary relief and (6) an injunction against Kars 4 Kids with respect to use of its trademark in Texas and from using the carsforkids.com domain name. On appeal, Kars 4 Kids also renewed its motion for judgment as a matter of law, including an argument that America Can’s trademark is invalid.

The Third Circuit rejected Kars 4 Kids’ effort to overturn the jury’s liability verdict, concluding that Kars 4 Kids failed to preserve its challenge to the validity of the CARS FOR KIDS trademark when it left that issue out of its Rule 50(a) motion. Instead, evidence of America Can’s continuous use of the CARS FOR KIDS mark well prior to 2003 predated Kars 4 Kids’ first use of its trademark in Texas in 2003 and established America Can’s ownership of the CARS FOR KIDS trademark in Texas.

However, after examining the laches claim, the Third Circuit explained that it considered (1) the plaintiff’s inexcusable delay in bringing suit and (2) prejudice to the defendant as a result of the delay. With no statute of limitations under the Lanham Act, the parties agreed that their claims are properly analogized to New Jersey’s six-year [...]

Continue Reading




read more

What Does it Take to Plead Trade Secret Misappropriation Under the DTSA?

Addressing the pleading standard under the Defend Trade Secrets Act (DTSA) and New Jersey Trade Secrets Act (NJTSA), the US Court of Appeals for the Third Circuit vacated the district court’s dismissal of a third amended complaint for trade secrets misappropriation and remanded for further proceedings. Oakwood Labs. LLC v. Thanoo, Case No. 19-3707 (3d Cir. May 8, 2021) (Jordan, J.)

Thanoo was a key player in Oakwood Laboratories’ Microsphere Project, a 20-year, $130 million project to develop injectable sustained-release drug products using a complex and rare microsphere technology. In 2013, Aurobindo approached Oakwood about a possible collaboration, specifically to involve Aurobindo’s manufacture of an active pharmaceutical ingredient for Oakwood. Subject to a nondisclosure agreement, Oakwood shared with Aurobindo confidential information, including a 27-page memorandum describing the Microsphere Project. Ultimately, Aurobindo declined to proceed, citing financial considerations. Aurobindo subsequently hired Thanoo. Although Thanoo told Oakwood that he was going to Aurobindo to work on standard injectable drugs and not microspheres, he immediately set up a research and development program concerning microspheres for Aurobindo. Aurobindo, which had no previous experience in microspheres, announced that it would have products ready for clinical testing in just one to four years, despite a relatively small investment of only $6 million. Oakwood sued Thanoo and Aurobindo for trade secret misappropriation under the DTSA and NJTSA, and for breach of contract and tortious interference.

On Thanoo’s motion, the district court dismissed Oakwood’s complaint, finding that it failed to provide specific allegations of what trade secrets were allegedly misappropriated and how Aurobindo allegedly used the trade secrets. Oakwood filed first, second and third amended complaints, each alleging with greater specificity the trade secrets associated with the Microsphere Project and expanding on the allegation that Aurobindo could not have proceeded so quickly from no experience to announcing near-complete development of microsphere products without using Oakwood’s trade secrets. Nonetheless, the district court dismissed each complaint as being insufficiently specific as to which particular trade secrets were allegedly misappropriated and the particular way in which Aurobindo allegedly used the trade secrets. The district court also held that, absent any product launch from Aurobindo, any harm from the alleged misappropriation was too speculative to support a claim. After dismissal of the third amended complaint, Oakwood appealed.

The Third Circuit reversed, concluding that Oakwood’s complaint sufficiently pled a claim for trade secret misappropriation under either the DTSA or the NJTSA. The Court explained that Oakwood had sufficiently identified its trade secrets by its allegation that information laying out its design, research and development (including identification of variables that affect the development), test methods and results, manufacturing processes, quality assurance, marketing strategies and regulatory compliance related to its development of a microsphere system were trade secrets. Oakwood had also identified a specific memorandum disclosed to Aurobindo under a confidentiality agreement as containing trade secrets, and attached other documents specifying in detail secrets related to the Microsphere Project.

The Court further found that Oakwood had sufficiently alleged misappropriation. Although there are several ways to [...]

Continue Reading




read more

BLOG EDITORS

STAY CONNECTED

TOPICS

ARCHIVES