Oakwood Laboratories, LLC v. Thanoo, ___ F.3d ___ (3d Cir. 2021). Judge Jordan wrote this opinion. This was a trade secret case that also involved other claims. “More than two years and four iterations of its complaint later, Oakwood was unable to get past the pleading stage of litigation. The District Court dismissed each version of the complaint for failure to state a claim.”
Oakwood appealed, and the Third Circuit reversed. Judge Jordan explained that review of a ruling granting a motion to dismiss proceeds in three steps. First, the court notes the elements that a plaintiff must plead to state a claim. Next, the court identifies allegations that are no more than “threadbare recitals of the elements of a cause of action, legal conclusions, and conclusory statements,” which are not entitled to “the assumption of truth,” as a complaint’s allegations otherwise are. Finally, as to well-pleaded factual allegations, the court assumes their veracity and that of “all reasonable inferences that can be drawn from those allegations.” The court “construe[s them] in a light most favorable to the plaintiff” to see whether they “plausibly give rise to an entitlement to relief.”
The problem here was that the parties disagreed about “the requirements for pleading a trade secret misappropriation claim under the Defend Trade Secrets Act, 18 U.S.C. §1836(b) (‘DTSA’),” the central part of the case. Judge Jordan devoted much of his opinion to clarifying those elements and explaining where the District Court had gone wrong in applying them.
Among other things, the panel said, the District Court erred in requiring plaintiff to allege that its trade secrets had been “replicated” by defendants, when the DTSA required only proof that the secrets had been “used.” Judge Jordan explained at length that “used” does not require plaintiff to go that far. The District Court had also erroneously found that plaintiff had not alleged any harm, since defendants had not “launched any products” and plaintiff had not “suffered any harm from missed partnerships or investment opportunities.” But Judge Jordan emphasized that “[pm]isappropriation is harm.”
This opinion is a valuable one for its discussion of the DTSA and pleading standards related to it. Anyone involved in an DTSA needs to take account of this ruling in, on the plaintiff’s side, pleading a DTSA claim, or on the defense side, seeking to defeat such a claim. But Judge Jordan’s opinion is also an important one as regards the general standard for motions to dismiss for failure to state a claim, under Federal Rule of Civil Procedure 12(b)(6). It may become a key case to cite in briefing such motions regardless of the substantive nature of the case.