A maker of medical devices was denied on its motion to dismiss a complaint alleging breach of a confidentiality agreement and breach of the Defend Trade Secrets Act. The court found that the plaintiff had sufficiently alleged facts showing that the defendant misappropriated confidential information to bring a rival product to market, and that the misappropriation potentially occurred after the DTSA was enacted, even though the initial disclosures occurred several years prior to the statute’s effective date. The Court’s decision did not resolve the case on the merits; it simply found that claims which could withstand a motion to dismiss had been alleged. The matter was later resolved by a Stipulated Judgment entering judgments in favor of the Defendants and against the Plaintiff.
Invado is a pharmaceutical company that developed two oral treatment products, NeutraSal and NeutraCaine. In 2014, Invado held discussions with Forward Science, an Illinois company, about the possibility of Forward Science becoming an independent sales agent for Invado. The two parties later signed a confidentiality agreement, in which Forward Science agreed to use any confidential information Invado provided only for the purpose of exploring a business relationship with Invado. After the agreement was signed, Invado disclosed proprietary information to Forward Science regarding its business models, and its processes for manufacturing, distribution, and pricing. The parties ultimately did not form a business relationship.
A year later, the president of Forward Science made a medical device filing with the Food and Drug Administration for a new oral treatment product. The filling stated that Invado’s products were predicate devices for its new product, SalivaMAX. In 2017, Forward Science announced a new oral pain relief product, SalivaCAINE. Prior to 2015, Forward Science did not manufacture or sell products in the same market as Invado.
Invado later sued Forward Science in federal court, alleging that Forward Science used confidential information it received from Invado to develop and bring its new products to market, in violation of its confidentiality agreement. Forward Science moved to dismiss Invado’s complaint, arguing that Invado did not allege sufficient facts to show that Forward Science relied on Invado’s confidential information. The district court rejected this argument, finding that Invado sufficiently alleged breach, and that its complaint put Forward Science on notice.
The court also found that Invado had alleged sufficient facts to support damages, stating that a party would clearly be damaged by another party using its trade secrets and confidential product information to create rival products. Forward Science also challenged Invado’s claim under the Defend Trade Secrets Act, arguing that Invado failed to allege a claim for actions that occurred after the statute was enacted in 2016. The court rejected this argument. The court stated that Invado needed only to show that Forward Science misappropriated confidential information after the statute was enacted, even though Invado revealed the confidential information to Forward Science before the enactment of the statute. The court pointed to Forward Science’s introduction of the SalivaCAINE product in 2017, as a potential misappropriation that occurred after the enactment of the DTSA. The court also found that Invado sufficiently alleged that its information qualified as a trade secret, stating that a party need only identify trade secrets in a general sense in order to survive a motion to dismiss.
You can view the full opinion here.
After the Court decided the motion to dismiss, the case was resolved pursuant to a Stipulated Judgment. The Stipulated Judgment, is not just a dismissal of the case. It provides “Judgment of this action in favor of all Defendants and against Plaintiff with respect to each of Plaintiff’s claims raised in the Complaint.” In addition, it states “Invado acknowledges that neither Forward Science nor any of the Jane Does Defendants are liable for any of the acts alleged in the Complaint.” You can read the Stipulated Judgment here.
According to Defendants’ counsel, the Stipulated Judgment “serves as a good example of the kind of favorable outcome that can sometimes be achieved for clients ….” who can disprove the misappropriation claims brought against them.
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