Pleading Trade Secret Misappropriation Claims

When it comes to pleading a claim of misappropriation of trade secrets under the federal Defend Trade Secrets Act (the DTSA), plaintiffs are often stuck between a rock and a hard place. The DTSA and the Federal Rules of Civil Procedure combine to require that a plaintiff sufficiently identify the information that it claims as a trade secret, such that the defendant is put on notice of what he is accused of misappropriating. The problem is, a trade secret derives its value from its secrecy, so a plaintiff must walk a fine line to prevent unintended public disclosure. Moreover, because it is often difficult to determine exactly what a defendant may have misappropriated without the benefit of discovery, a plaintiff must often plead its case based on information and belief because critical facts are in the defendant’s possession.

Courts across the country have recognized the difficulty inherent in articulating what trade secrets may have been misappropriated. Most recently, the Third Circuit Court of Appeals provided some clarity for plaintiffs facing the challenge of adequately describing that which they wish to remain secret. In Oakwood Laboratories, LLC v. Thanoo, et al., 993 F.3d 892 (3d Cir. 2021), the court made clear that pleading a DTSA claim is about plausibility, not probability. Oakwood appealed to the Third Circuit after the district court dismissed the fourth iteration of its complaint, finding that in each version of the complaint, Oakwood had failed to explain which trade secrets were misappropriated, despite Oakwood attaching more than 16 detailed exhibits identifying the allegedly misappropriated trade secrets. The Third Circuit rejected the district court’s overly stringent standard for pleading under the DTSA and held that the trade secrets identified by Oakwood were clearly the ones claimed to have been misappropriated. While the court commented 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,“ it also recognized that a “demand for further precision in the pleading is . . . misplaced and ignores the challenges a trade secret plaintiff commonly faces when only discovery will reveal exactly what the defendants are up to.”

The takeaway for plaintiffs looking to bring misappropriation claims—at least in the Third Circuit—is that while some level of specificity is required, courts understand the inherent pleading challenges that accompany trade secret litigation and will not hold plaintiffs to a pleading requirement beyond plausibility.