OPINION OF THE COURT
JORDAN, Circuit Judge.
In 2017, Oakwood Laboratories, L.L.C. ("Oakwood") sued its former Vice President of Product Development, Dr. Bagavathikanun Thanoo, as well as Dr. Thanoo's current employer, Aurobindo Pharma U.S.A., Inc. ("Aurobindo USA"), the parent of that company, Aurobindo Pharma Ltd. ("Aurobindo"), and a sister company, AuroMedics Pharma LLC ("AuroMedics") (collectively, "the Defendants"), asserting claims of trade secret misappropriation, breach of contract, and tortious interference with contractual relations. More than two years and four iterations of its complaint later, Oakwood was unable to get past the pleading stage of litigation. The
After each dismissal, Oakwood endeavored to address the problems the District Court perceived. Those efforts culminated in a Third Amended Complaint (generally referenced herein simply as the "Complaint") so factually detailed that, on appeal, we conclude it easily meets the pleading requirements of the Federal Rules of Civil Procedure and pertinent substantive law. We will, therefore, vacate the District Court's dismissal and remand the case for further proceedings. In doing so, we endeavor to clarify the requirements for pleading a trade secret misappropriation claim under the Defend Trade Secrets Act, 18 U.S.C. § 1836(b) ("DTSA").
A. Factual Background
According to its Complaint, "Oakwood is a technology-based specialty pharmaceutical company focused on hard-to-develop generic and quasi-generic, sustained-release, and small molecule injectable drugs," including "the research and development of sustained release injectable drugs involving microsphere systems (collectively, the `Oakwood Products')."
Accordingly, when Oakwood hired Dr. Thanoo in 1997 as its Senior Scientist "principally responsible for the development of the Oakwood Products" (App. at 212, ¶ 28), it required him to sign an NDA and related inventions agreement "[a]s a condition of [his] employment and to protect Oakwood from misuse and/or disclosure of proprietary information[.]" (App. at 210, ¶ 23.) As Senior Scientist and later as Vice President of Product Development, Dr. Thanoo "directly designed Oakwood's microsphere process technology" and "had extensive involvement in and knowledge of the design, development, and implementation of the Oakwood Products." (App. at 212-13, ¶ 28.) He "spent more than 80% of his tenure with Oakwood working on [what the company calls] the Microsphere Project" (App. at 218, ¶ 36), a project focused on "the design, research and development, and test methods for leuprolide and octreotide sustained released products, and other products, that rely on microsphere
Oakwood had invested more than $130 million, two decades, and the efforts of dozens of full-time employees in its Microsphere Project. By the fall of 2013, it had developed three lead product candidates based on that work. (App. at 219, ¶ 45.) All three of those products, which we will refer to as the "Leuprolide Products," are bioequivalent to a valuable brand-name drug called Lupron Depot®. (App. at 212 n.1, 219, ¶ 45.) At the time, there were "no approved generic versions of [Lupron Depot] in the US due to the high level of difficulty in developing and manufacturing such specialized products." (App. at 219, ¶ 45.)
Around the same time, Aurobindo "sought out Oakwood" to discuss an opportunity to collaborate on the Microsphere Project.
(App. at 221, ¶ 51.)
Aurobindo's CEO also "visited Oakwood's headquarters [in November 2013] ... to discuss Aurobindo's and Aurobindo USA's capabilities[,]" during which he spoke with Dr. Thanoo. (App. at 220, ¶ 46.) Two days later, Aurobindo's CEO "connected via email Dr. Thanoo and ... [the] Vice President of Aurobindo, noting that the two were old friends and `batch mate[s] at Madras University.'" (App. at 220, ¶ 48 (alteration in original).) Ultimately, however, after "having materially explored a business relationship with Oakwood," (App. at 222, ¶ 57), "Aurobindo informed Oakwood that it was not interested in pursuing the Microsphere Project and the Leuprolide Products with Oakwood due to financial considerations." (App. at 222, ¶ 56.)
But talks evidently continued with Dr. Thanoo, because within about six months, in April 2014, Aurobindo USA hired him. According to Oakwood, the Aurobindo companies used him to misappropriate Oakwood's trade secrets relating to microsphere products. Dr. Thanoo had assured Oakwood that he "was going to Aurobindo USA to develop standard generic injectable drugs" and "that his work ... would not include microsphere system technology." (App. at 222, ¶ 59.) To the contrary, though, his work at Aurobindo USA does in fact include microsphere technology.
"Within months" of Aurobindo USA hiring Dr. Thanoo, AuroMedics had "formed a group in the United States to develop microsphere technology" and, more specifically, microsphere-based injectable products that Oakwood alleges are "substantially similar to and competitive with Oakwood's Microsphere Project using Oakwood's trade secret information[.]" (App. at 224-25, 231, ¶¶ 64-65, 82; see also App. at 672.) By May 2015, Aurobindo's managing director and AuroMedics's CEO were telling the companies' investors that AuroMedics was "currently working on" four microsphere products
Besides boasting of a short development period for its new products, AuroMedics said that, by the end of the fiscal year, it expected to have invested about $6 million in the microsphere products, for an "addressable market" of "$3 billion in the US." (App. at 224-25, ¶¶ 64-65.) According to Oakwood, that $6 million investment is remarkably small for the scientific advances claimed, especially since Aurobindo, Aurobindo USA, and AuroMedics had no prior experience developing, manufacturing, or selling microsphere technology before hiring Dr. Thanoo. (App. at 226, ¶¶ 67-69.) Oakwood further asserts that, without prior experience and given the more difficult nature of developing specialized microsphere products compared to other products, "the Microsphere Project is not something that could have been replicated in one-to-four years ... absent misappropriation of Oakwood's trade secrets."
Moreover, during that same May 2015 investor call, Aurobindo emphasized that AuroMedics's microsphere "products would have limited competition unlike the typical products." (App. at 225, ¶ 65; see also App. at 299.) AuroMedics later explained, during an August 14, 2015 investor call, that "[n]ot every company can do these, but we have some very good experts working on these development projects and we are making significant progress." (App. at 226-27, ¶ 70; see also App. at 323.) Thus, in Oakwood's words, "AuroMedics had already built a team around Dr. Thanoo and was capitalizing on his microsphere experience gained at Oakwood on the peptide area[.]" (App. at 226, ¶ 70.) Dr. Thanoo was one of those "very good experts" AuroMedics referenced in its investor call and he was "engaged in the same type of work, research and/or development for Aurobindo, Aurobindo USA, and AuroMedics that he worked on for over 16 years at Oakwood[.]" (App. at 223, 226-27, ¶¶ 62, 70.) All of that is confirmed, says Oakwood, by Dr. Thanoo's LinkedIn profile, in which he lists his "[s]pecialties" as "[p]roduct and process development of sustained release injectable drugs," including "[m]icrospheres," and includes the "[d]evelopment of complex generic injectable drugs" under his job description as Aurobindo USA's Vice President of R&D Injectables.
Based on the foregoing factual allegations, Oakwood asserts that the "Defendants could not [have] develop[ed] [its] product within the rapid timeframe set forth above without Dr. Thanoo's assistance and his use of Oakwood's ... trade secret information related to the Microsphere Project." (App. at 232, ¶ 83.) Nor could they have done so "without Oakwood's trade secret information contained in the Leuprolide Memo that Oakwood sent to Aurobindo and AuroMedics" for the limited purpose of discussing a "potential business venture[.]" (App. at 232, ¶ 84.) Oakwood accordingly claims that the Defendants are liable for trade secret misappropriation, breach of contract, and tortious interference with contractual relations.
B. Procedural Background
Although it is the District Court's fourth order dismissing the Complaint that we address and vacate, a review of the several amended complaints highlights Oakwood's efforts to address issues the District Court identified. It also provides a more complete view of the District Court's construction of trade secret law and how it led to the dismissal of the last version of the Complaint.
1. Initial Complaint and First Dismissal
On July 12, 2017, Oakwood filed its Initial Complaint, asserting that its research,
2. First Amended Complaint and Second Dismissal
Oakwood's First Amended Complaint incorporated several new factual allegations regarding its trade secrets, in response to the deficiencies the Court had said were in the Initial Complaint. Oakwood identified the trade secrets contained in the Leuprolide Memo, supra Section I.A., which Aurobindo had obtained under a confidentiality agreement. Oakwood also emphasized the confidential status of its Microsphere Project information and the high value of that information. Specifically, it highlighted the difficult and time-consuming nature of developing its trade secrets, which required "extensive experimentation" to produce a drug with "the correct release profile[.]" (App. at 100-01, ¶ 31.) Oakwood had "spent roughly 20 years developing bioequivalent microsphere-based versions of leuprolide and octreotide peptides[,]" both of which are central to the Microsphere Project. (App. at 100-01, ¶ 31.) And that project "required Oakwood to design formulations based on a number of variables [that] were finally determined after extensive trial and error testing[,]" (App. at 99, ¶ 29 (identifying those variables and describing each one respectively),) each of which may "interact with the other, and each can dramatically affect the release profile of the product and are proprietary to Oakwood." (App. at 100-01, ¶ 31.) "None of [that] information was generally known" and, therefore, "[g]iven the competitive nature of the microsphere-based sustained release injectable drug industry, that ... information derived ... independent economic value from" its confidential status. (App. at 100-01, ¶¶ 30, 33; see also App. at 96, ¶ 21.)
In addition to better specifying and explaining the confidential information Oakwood claims as trade secrets, the First Amended Complaint also gave a more detailed description of Dr. Thanoo's access to and acquisition of those trade secrets during his employment with Oakwood, as well as Aurobindo's access to and acquisition of the same through its successful recruitment efforts of Dr. Thanoo and via the confidential Leuprolide Memo. (App. at 98, ¶¶ 27-28.) Dr. Thanoo "was principally responsible for the development of the Oakwood Products" and "directly designed Oakwood's microsphere systems technology, including ... the `Microsphere Project[.]'" (App. at 98-99, ¶ 28.) And "[d]uring the period of 2013," prior to joining Aurobindo, he had "instructed subordinates to send to his personal email Oakwood's trade secret information regarding Oakwood Products, including trade secret information related to the testing and processing
Oakwood further alleged in the First Amended Complaint that Aurobindo "us[ed] Oakwood's trade secret information, including secrets related to the Leuprolide Products," to develop a product competitive with the products Oakwood was working on in the Microsphere Project. (App. at 106, ¶ 56.) That competing product could not have been developed "within a two-year timeframe without Dr. Thanoo's assistance and use of" Oakwood's trade secrets. (App. at 106, ¶ 57.) Nor could it have been developed "without [the] trade secret information contained in the Leuprolide Memo." (App. at 106, ¶ 58.) That's because "Aurobindo had not developed [specialized microsphere products to deliver the leuprolide and octreotide peptides] prior to the hiring of Dr. Thanoo" (App. at 106, ¶ 55), and had previously represented to Oakwood that "it had no [other] prior experience with peptide based microsphere products." (App. at 103, ¶ 40.)
Despite those new allegations, the District Court again dismissed Oakwood's complaint. According to the Court, Oakwood did "not specifically identify and enumerate the secrets acquired and used by Thanoo during his employment at Aurobindo" nor did it "set forth facts about how the specific secrets were utilized by Thanoo at Aurobindo." (App. at 172.) Although the Court acknowledged Oakwood's allegations "review[ing] the long period of the testing [that] ... led Oakwood to develop [its] product[,]" the Court rejected the sufficiency of those allegations because Oakwood did "not mention the type of polymer [it] used, ... provide a comparison to any polymer allegedly used by Defendant[,]" or "include specifics as to its findings, a comparison to what Defendants utilized in their product or any evidence of misappropriation of that data." (App. at 172-73.)
Moreover, Oakwood's "testing and achievement of the data d[id] not show misappropriation by Defendants, nor d[id] it narrow down the specific allegations of what was misappropriated." (App. at 173.) The Court described Oakwood's allegations of misappropriation as "conclusory." (App. at 173.) Specifically, it thought insufficient Oakwood's "broad" claim that "Defendants could not have developed their product without the information known by Thanoo and/or the information set forth in the confidential memo that was provided to Aurobindo in the midst of their tentative business transaction." (App. at 173.)
Because it was "unclear" to the District Court "exactly what [Oakwood] [was] alleging was misappropriated," it also found "unclear whether a contract was breached or interfered with." (App. at 175.) Thus, the Court thought that Oakwood "filed this Complaint seeking broad discovery about the products being developed for competition purposes." (App. at 175.)
3. Second Amended Complaint and Third Dismissal
Oakwood tried again, and its Second Amended Complaint described its trade secrets in further detail. It included as attachments to the new complaint eight highly confidential exhibits to support the trade secret descriptions, each exhibit containing a confidential chart or schematic relating to Oakwood's secrets associated with the Microsphere Project. But that was still not enough to satisfy the District
As the Court saw it, Oakwood's complaint did "not show if and how Defendants used these trade secrets" and, therefore, the pleading suffered from "the same defects that resulted in the dismissal of [the] first amended complaint[.]" (App. at 202.) "At best," the revised complaint merely alleged "that Thanoo left [Oakwood's] employ, and two years later, Aurobindo announced it would be developing a Leuprolide product." (App. at 200-01.) That did "little to resolve the issue of plausibility[,]" the District Court said, because the complaint did "not allege (1) which trade secrets were misappropriated to develop a product, (2) it d[id] not describe the product development, and (3) it d[id] not allege that [Oakwood's] research is the only source for such research." (App. at 201.) Nor had Oakwood "shown that it has been detrimentally affected to date, i.e. no such products have been launched." (App. at 201.) And because the District Court found it "unclear exactly what" Oakwood alleged to be misappropriated, it once again "could not discern any breach of contract or tortious interference[,]" and dismissed those claims too. (App. at 202.)
4. Third Amended Complaint and Fourth Dismissal
In its fourth and final try, Oakwood attached to its Third Amended Complaint sixteen new exhibits in support of its amended factual allegations. This last version of the Complaint elaborates on why "the Microsphere Project is not something that could have been replicated in one-to-four years ... absent misappropriation of Oakwood's trade secrets." (App. at 218, ¶ 37.) Specifically, Oakwood alleges the implausibility of Aurobindo developing microsphere products in that short time frame without Oakwood's trade secret information when (i) "Aurobindo, Aurobindo USA, and AuroMedics had no prior experience researching[,]" "developing[,]" "manufacturing[,]" or "selling microsphere technology before hiring Dr. Thanoo" (App. at 225-26, ¶¶ 66-69); and (ii) "it has taken Oakwood nearly 20 years, $130 million, and countless man-hours of 20-40 full-time employees to do the same." (App. at 231, ¶ 81.)
It also points out that "[i]t was Aurobindo that sought out Oakwood" to explore the "potential collaborative working relationship" associated with "Aurobindo USA... sell[ing] an [active pharmaceutical ingredient] to Oakwood for its Microsphere Project." (App. at 219, ¶¶ 43-44.) And "[d]espite having materially explored a business relationship with Oakwood, Aurobindo instead recruited and hired Dr. Thanoo," (App. at 222, ¶ 57,) who had personally "spent more than 80% of his tenure with Oakwood working on the Microsphere Project" (App. at 218, ¶ 36), "thus terminating the need for a business relationship among the companies." (App. at 222, ¶ 57.)
While the District Court acknowledged that the "new documents" were "far more detailed than the facts [Oakwood] previously alleged," it still dismissed Oakwood's Complaint. (App. at 6.) Referring back to its third dismissal, in which "it indicated that `[Oakwood] ha[d] identified trade secrets, but d[id] not show if and how Defendants use these trade secrets[,]'" the Court said that "[t]he same holds true, once again." (App. at 5.) That is, the "new documents ... do not explain adequately whether Defendants acquired and misappropriated any of the trade secrets with knowledge of their confidentiality, if and
But, "[e]ven had Oakwood sufficiently alleged a detriment," the outcome would have been the same because the District Court continued to insist that "the critical missing component is any allegation of precisely how Defendants misappropriated [Oakwood's] trade secrets." (App. at 7.) And "[a] potential change in perception of competitive advantage" does not mean that such "change is the result of trade secret misappropriation" — it does not, in other words, reasonably imply misappropriation — because it "is merely the natural result of any new product development announcement by an industry competitor[.]" (App. at 7.)
On those bases, the District Court dismissed Oakwood's Complaint.
As with any other claim, in considering whether Oakwood has stated a claim of trade secret misappropriation that is sufficient to survive a motion to dismiss under Federal Rule of Civil Procedure
Here, the parties agree that the plausibility standard recited above applies to trade secret misappropriation claims, but they dispute whether the District Court applied that standard correctly. According to Oakwood, the Court, influenced by "its
Underlying the parties' dispute about the application of the plausibility standard is a more fundamental disagreement rooted in the parties' opposing interpretations of the elements of a trade secret misappropriation claim under the DTSA.
A. Oakwood sufficiently identifies its trade secrets
To plead the existence of a trade secret in a misappropriation claim brought under the DTSA, Oakwood must sufficiently identify the information it claims as a trade secret and allege facts supporting the assertion that the information is indeed protectable as such. See 18 U.S.C. §§ 1836(b), 1839(3). In determining whether allegations about the identified information plausibly support its having protected status as a trade secret, courts consider whether the owner of the information "has taken reasonable measures to keep ... [it] secret" and whether the "information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information[.]" Id. § 1839(3).
The District Court concluded in its dismissal of the second amended complaint that Oakwood had adequately pled the existence of its trade secrets but "failed to identify which one or more of th[o]se trade secrets [D]efendants have misappropriated."
The District Court was correct that information alleged to be a misappropriated trade secret must be identified with enough specificity to place a defendant on notice of the bases for the claim being made against it. See DeRubeis v. Witten Techs., Inc., 244 F.R.D. 676, 680 (N.D. Ga. 2007) (citation omitted). But a plaintiff need not "spell out the details of the trade secret to avoid" dismissal. Diodes, Inc. v. Franzen, 260 Cal.App.2d 244, 252, 67 Cal.Rptr. 19 (Cal. Ct. App. 1968) (citation omitted). Rather, the subject matter of the trade secret must be described "with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies."
Beyond those outer boundaries, however, deciding "whether a plaintiff has sufficiently disclosed its trade secrets is `a fact-specific question to be decided on a case-by-case basis.'" Vesta Corp. v. Amdocs Mgmt. Ltd., 147 F.Supp.3d 1147, 1155 (D. Or. 2015) (citation omitted). Admittedly, competing policies protecting plaintiffs and defendants in trade secret misappropriation cases "can make resolving this type of dispute difficult." DeRubeis, 244 F.R.D. at 681; see also id. at 680-81 (describing seven competing policies that bear on the plausibility of trade secret claims). But, in our view, this is not one of those difficult cases. The factual allegations in Oakwood's Complaint — at least the Third Amended Complaint and arguably
To recap, Oakwood alleged its trade secrets to be the information laying out its design, research and development, test methods and results, manufacturing processes, quality assurance, marketing strategies, and regulatory compliance related to its development of a microsphere system for drug delivery, including peptide-based drugs. It also identified as trade secrets the variables that affect the development of its microsphere products, including the data, peptide-specific release profiles, and other discoveries associated with those variables, which it collected through "extensive trial and error testing." (App. at 213, ¶ 29.) Oakwood gave a very precise example by pointing to a particular document, the Leuprolide Memo, that it had disclosed to Aurobindo under a confidentiality agreement, and it specified the contents of that document as containing trade secrets. It attached other documents specifying in detail secrets related to the Microsphere Project that Oakwood accuses the Defendants of taking and using. The Defendants here unquestionably are on notice of the trade secret information that is at issue.
Given the allegations of the Complaint, a reasonable inference — one might say the only reasonable inference — is that the trade secrets identified in the Complaint are the ones Oakwood is claiming were misappropriated. The District Court's demand for further precision in the pleading is thus misplaced and ignores the challenges a trade secret plaintiff commonly faces when only discovery will reveal exactly what the defendants are up to. DeRubeis, 244 F.R.D. at 680 ("[I]f the trade secret plaintiff is forced to identify the trade secrets at issue without knowing which of those secrets have been misappropriated, it is placed in somewhat of a `Catch-22': Satisfying the requirement of detailed disclosure of the trade secrets without knowledge [of] what the defendant is doing can be very difficult. If the list is too general, it will encompass material that the defendant will be able to show cannot be trade secret. If instead it is too specific, it may miss what the defendant is doing." (second alteration in original) (citations omitted)).
While we agree with the District Court that care must be taken to not allow a plaintiff in a trade secret misappropriation case to make generalized claims that leave a defendant wondering what the secrets at issue might be, there was no risk of that here, given the specificity of the allegations in the Third Amended Complaint.
B. Oakwood sufficiently alleges that the Defendants misappropriated its trade secrets
The District Court also declared that "the critical missing component" from Oakwood's Complaint "is any allegation of precisely how Defendants misappropriated [Oakwood's] trade secrets." (App. at 7.) There are three ways to establish misappropriation under the DTSA: improper acquisition,
That reasoning fails for at least two distinct reasons. First, it excludes a broad scope of activity that amounts to misappropriation under the DTSA, including "use" of a trade secret.
1. "Use" of a trade secret
The District Court stated that Oakwood needed to "show that the Microsphere Project was replicated, that is, that the microsphere technology Aurobindo has been working on has been developed using Oakwood's trade secrets." (App. at 6.) In saying so, the District Court erroneously equated the concept of "use" with replication. That singular emphasis on actual product development — and specifically replication — is contrary to the ordinary meaning of "use" and inconsistent with the text of the DTSA and the broad meaning that courts have attributed to the term "use" under state laws that address trade secret misappropriation. See Bragdon v. Abbott, 524 U.S. 624, 645, 118 S.Ct. 2196, 141 L.Ed.2d 540 (1998) ("When ... judicial interpretations have settled the meaning of an existing statutory provision, repetition of the same language in a new statute indicates, as a general matter, the intent to incorporate its ... judicial interpretations as well." (citation omitted)).
The DTSA does not define the term "use." "In the absence of such a definition, we construe a statutory term in accordance with its ordinary or natural meaning." F.D.I.C. v. Meyer, 510 U.S. 471,
When interpreted specifically in the context of trade secret misappropriation, the term "use" has been broadly defined as
Gen. Universal Sys., Inc. v. HAL, Inc., 500 F.3d 444, 450-51 (5th Cir. 2007) (quoting Restatement (Third) of Unfair Competition, § 40). Numerous cases, pre-dating the DTSA, demonstrate that understanding of the term.
"We find the uniformity of the ... judicial precedent construing the definition significant." Bragdon, 524 U.S. at 645, 118 S.Ct. 2196. While that precedent interprets state law, those states, and indeed a total of 48 states, had all adopted some variation of the Uniform Trade Secrets Act ("UTSA"). See H.R. Rep. No. 114-529, at 198 (2016) (noting that "48 states have adopted variations of the UTSA"). And "the legislative history of the DTSA shows that Congress was expressly aware of the UTSA and its structure." Attia v. Google LLC, 983 F.3d 420, 425 (9th Cir. 2020) (internal quotations omitted). In other words, it "was aware of the role and limitations
Because the term "use" is incorporated into substantively identical definitions of "misappropriation" under the DTSA and UTSA, and because courts have consistently interpreted the term "use" in a broad manner under the UTSA — which also aligns with its ordinary meaning — there is every reason to continue giving "use" that expansive interpretation. See Bragdon, 524 U.S. at 645, 118 S.Ct. 2196. Avoiding a cramped definition of "use" is also consistent with giving trade secret owners a fair opportunity to prove misappropriation. The implication of use, especially at the pleading stage, can flow from circumstantial evidence alone. See SI Handling Sys., Inc. v. Heisley, 753 F.2d 1244, 1261 (3d Cir. 1985) ("[M]isappropriation and misuse can rarely be proved by convincing direct evidence." (internal quotations omitted)).
Moreover, the District Court's equating of the term "use" with "replicate" is inconsistent with the DTSA as a whole. Cf. Si Men Cen v. Att'y Gen., 825 F.3d 177, 192 (3d Cir. 2016) (explaining that courts consider "the broader framework of the" pertinent statute because "we do not approach statutory construction as a myopic exercise, but rather as a holistic endeavor in which we interpret the statute as a symmetrical and coherent regulatory scheme, and fit, if possible, all parts into an harmonious whole" (internal quotation marks omitted) (citations omitted)). The term "replicate" is already expressly listed as a type of misconduct amounting to "[t]heft of trade secrets" in another provision of the DTSA, a provision that separately mandates a "fine not more than the greater of $5,000,000 or 3 times the value of the stolen trade secret" or "imprison[ment] not more than 10 years, or both" for such theft. 18 U.S.C. § 1832; see id. § 1832(a) (explaining that liability for theft of a trade secret includes anyone "with intent to convert a trade secret ... to the economic benefit of anyone other than the [trade secret] owner[,]" who "know[s] that the offense will injure" the owner, when that person "knowingly" and "without authorization copies, duplicates,... [or] replicates ... such information[,]" among other misconduct (emphasis added)). Thus, since the DTSA includes both "use" and "replicates" as distinct bases of culpability, the former for misappropriation and the latter for theft, we ought not treat them as synonymous. See Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983) ("[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." (alteration in original) (internal quotations omitted)). Replication is surely a use, but that does not mean that use is limited to replication.
Only giving effect to the term "use" in the narrow context of replication or obvious incorporation of trade secret-protected material in a competitor's product excludes a broad range of activity that is rightly seen as unauthorized use of a trade secret and, therefore, misappropriation. In accordance with its ordinary meaning and within the context of the DTSA, the "use" of a trade secret encompasses all the ways one can take advantage of trade secret information to obtain an economic benefit, competitive advantage, or other commercial value, or to accomplish a similar exploitative purpose, such as "assist[ing] or accelerat[ing] research or development." Gen. Universal Sys., Inc., 500 F.3d at 450-51 (citation omitted).
2. Oakwood sufficiently alleges that the Defendants used its trade secrets
With that proper, more expansive understanding of trade secret use in mind, the question becomes whether Oakwood has adequately pled that the Defendants used its trade secrets. Assuming the veracity of Oakwood's well-pleaded factual allegations, and construing all reasonable inferences that may be drawn from them in favor of Oakwood, the answer to that question is yes.
As already noted, Oakwood specializes in the development of difficult-to-synthesize microsphere products. It invested two decades, over $130 million, and a full-time team of many highly skilled, and presumably high-wage, employees in its Microsphere Project to develop bioequivalent forms of a valuable brand-name drug. We are bound to accept the assertion that there are no approved generic versions of that high-value drug due to the substantial difficulties in developing and manufacturing such a product.
As of November 2013, Oakwood had developed three leading product candidates for further development. Around the same time, Aurobindo approached Oakwood to discuss a business relationship, including a proposal to sell to Oakwood an active pharmaceutical ingredient to be used in its microsphere products. As a part of those discussions, and having executed a confidentiality agreement, Aurobindo and AuroMedics acquired some of Oakwood's trade secret information related to the Microsphere Project, including through the Leuprolide Memo. Subsequently, Aurobindo informed Oakwood that it would not pursue the Microsphere Project collaboration "due to financial considerations." (App. at 222, ¶ 56.)
But, just months later, AuroMedics formed its own group to develop microsphere products. Not coincidentally, Aurobindo recruited Dr. Thanoo, Oakwood's Vice President of Product Development, who had been extensively involved with the Microsphere Project for "more than 80% of his tenure with Oakwood." (App. at 218, ¶ 36.) Indeed, Aurobindo USA hired him during the short period between when Aurobindo approached Oakwood about a business venture related to microsphere products and when it started its own competing group to develop such products. Notwithstanding its complete lack of experience working in the highly specialized microsphere sector of the pharmaceutical industry, Aurobindo was representing to its investors in February 2015 — less than a year after Dr. Thanoo joined its efforts — that it was already developing four microsphere products and expected to start filing for FDA approval of those products at the end of 2016 and obtaining approval in 2018. The new-market-entrant, AuroMedics, had invested just $6 million in development of those four products, while Oakwood, having long labored in development, had invested more than $130 million in its microsphere products.
According to Oakwood, that was significant because "the Microsphere Project is not something that could have been replicated in one-to-four years ... absent misappropriation of Oakwood's trade secrets." (App. at 218, ¶ 37.) That is a completely plausible contention and well-supported with factual allegations concerning Aurobindo's lack of experience and the complexity of microsphere product development. Again, all of those allegations are entitled to the assumption of truth at the pleading stage. Santiago, 629 F.3d at 130. It is uncontested that Aurobindo and AuroMedics obtained access to certain trade secret information of Oakwood's from the Leuprolide Memo and confidential disclosures during the parties' business venture discussions. And it is reasonable to infer
But Oakwood does not rely on Aurobindo's access to trade secrets alone.
This "use" of Oakwood's trade secret information can be readily understood from the timing of Dr. Thanoo's employment with Aurobindo, from Dr. Thanoo's deception in informing Oakwood about the work he would engage in at Aurobindo, from Aurobindo's lack of experience in the highly specialized field of microsphere technology, from Aurobindo's access to Oakwood's trade secret information, from its rapid success in developing four microsphere products that took Oakwood nearly 20 years to develop, and from the comparatively insignificant financial investment Aurobindo put into that development. In short, the factual allegations of the Complaint in its latest iteration are more than sufficient to meet Oakwood's burden of pleading use of a trade secret. Cf. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ("[D]etailed factual allegations" are not required, but "more than an unadorned, the-defendant-unlawfully-harmed-me accusation" must be pled; a complaint must include more than just "naked assertion[s] devoid of further factual enhancement," conclusory statements, or a "recitation of the elements of a cause of action." (alteration in original) (internal quotations omitted)).
Reaching the opposite conclusion, the District Court erroneously rejected the veracity of Oakwood's well-pleaded allegations, James, 700 F.3d at 681, and the "reasonable inferences that can be drawn from them[.]" Monroe, 536 F.3d at 205 (internal quotations omitted). It raised doubts about the ultimate persuasiveness of the circumstantial support that Oakwood proffered to demonstrate that the Defendants could not have so quickly developed microsphere products without using
The District Court also found persuasive the absence of any allegations "reveal[ing] that Oakwood's trade secrets could have been the only source by which Aurobindo could have developed its microsphere product." (App. at 6.) But whether Aurobindo could have developed its microsphere product using proper means is irrelevant. The question at the pleading stage is simply whether Oakwood provided allegations of misappropriation sufficient to "raise a right to relief above the speculative level on the assumption that the allegations in the complaint are true[.]" Monroe, 536 F.3d at 205 (internal quotations omitted). The District Court erroneously applied a heightened pleading standard, one demanding probability rather than plausibility, and further suggested a heightened evidentiary burden, which we also reject. See Santiago, 629 F.3d at 133 ("`[P]ossibility' is no longer the touchstone for pleading sufficiency[.] ... Plausibility is what matters."); SI Handling Sys., Inc., 753 F.2d at 1261 ("[M]isappropriation and misuse can rarely be proved by convincing direct evidence." (internal quotations omitted)); Rogers v. Mo. Pac. R.R. Co., 352 U.S. 500, 508 n.17, 77 S.Ct. 443, 1 L.Ed.2d 493 (1957) ("Circumstantial evidence is not only sufficient, but may also be more certain, satisfying and persuasive than direct evidence."). We do not require a trade secret plaintiff to allege that its trade secret information was the only source by which a defendant might develop its product. Aurobindo cannot escape discovery if Oakwood's allegations sufficiently indicate the plausibility of trade secret misappropriation, and they do.
C. Misappropriation is harm
In dismissing Oakwood's Complaint, the District Court further faulted Oakwood for not having shown harm. In the Court's words, "Defendants have not launched any products, and according to the Third Amended Complaint, Oakwood has not yet suffered any harm from missed partnerships or investment opportunities." (App. at 7.) The Court, therefore, decided that "any alleged harm is speculative." (App. at 7.) Not so.
By statutory definition, trade secret misappropriation is harm. See 18 U.S.C. §§ 1839(3), (5). That is, trade secret information "derives [its] independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from [that information's] disclosure or use[.]" 18 U.S.C. § 1839(3)(B); cf. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1012, 104 S.Ct. 2862, 81 L.Ed.2d 815 (1984) ("The economic value of that property right lies in the competitive advantage over others that [the plaintiff] enjoys by virtue of its exclusive access to the data, and disclosure or use by others of the data would destroy that competitive edge."). "When someone steals a trade secret and discloses it to a competitor he effectively assumes for himself an unrestricted license in the trade secret. And that bears its cost. After all, what value does a trade secret hold when it's no longer a secret from the trade?" Storagecraft Tech. Corp., 744 F.3d at 1185. The trade secret's economic value depreciates or is eliminated altogether upon its loss of secrecy when a competitor obtains and uses that information without the owner's consent. Thus, cognizable harm is pled when a plaintiff adequately alleges the existence of
Accordingly, even if it is true that the Defendants have not yet launched a competing product, that does not mean that Oakwood is uninjured. It has lost the exclusive use of trade secret information, which is a real and redressable harm. See 18 U.S.C. § 1836(b)(3)(B) (permitting damages for actual loss and unjust enrichment caused by the misappropriation, or damages measured by the imposition of liability for a reasonable royalty for the misappropriator's unauthorized disclosure or use of the trade secret); Ruckelshaus, 467 U.S. at 1011, 104 S.Ct. 2862 ("With respect to a trade secret, the right to exclude others is central to the very definition of the property interest. Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data.").
And the loss of exclusivity is not the only harm. There are other, if not yet fully realized, injuries. Aurobindo's rapid market entry into a sector of the pharmaceutical industry with few competitors may well deprive Oakwood of market share. Utilizing Oakwood's trade secrets provides Aurobindo a jumpstart in an industry it would otherwise not have competitively joined for another decade. Aurobindo will avoid substantial research and development costs that Oakwood has already invested in its own product development. Those are competitive harms recognized in the DTSA, 18 U.S.C. § 1836(b)(3)(B), and they represent a sample of the several approaches by which the amount of harm — not simply the fact of harm (which inheres in the unlawful use itself) — may be measured.
Oakwood adequately pled the existence and misappropriation of trade secrets related to products intended for use in interstate
While Oakwood challenges the District Court's dismissal of all of its claims, its arguments are limited to the Court's trade secret misappropriation rulings. Oakwood has not challenged the dismissal of its breach of contract or tortious interference with contractual relations claims on any basis independent of the Court's misappropriation rulings. Any such argument is accordingly forfeited. Halle v. W. Penn Allegheny Health Sys. Inc., 842 F.3d 215, 230 n.17 (3d Cir. 2016) ("An appellant waives an argument in support of reversal if he does not raise that argument in his opening brief." (citation omitted)). For that reason, Oakwood's claims of breach of contract and tortious interference with a contractual relationship will only survive if its misappropriation claims survive, and we need only consider the sufficiency of Oakwood's claims of trade secret misappropriation.
That circumstance is not unlike a misappropriation claim where use of a trade secret is predicated solely on a competitor's access to the plaintiff's former employee. Without more, the circumstantial evidence may leave ambiguous the lawfulness of the competitor's conduct. Indeed, we could be left to speculate not only on the competitor's motivations for hiring the plaintiff's former employee but also on the former employee's conduct itself, i.e., his willingness to disclose or use plaintiff's trade secrets on behalf of the competitor. Here, however, if we accept Oakwood's allegations, there is no such ambiguity. Oakwood pleads facts that go well beyond allegations of access.