Chicago Business Litigation Lawyer Blog
A complaint alleging breach of a non-disclosure agreement and misappropriation of trade secrets was successfully dismissed for lack of jurisdiction where the defendant was not alleged to have sold a competing product within the state in which the action was filed.
Brad Diedrich worked from May 2003 through September 2017 for Mitek Corporation, an Illinois manufacturer of audio equipment. Diedrich worked as a Senior Engineering Manager for most of his time at the company. Through his work, Diedrich learned trade secrets and confidential information at Mitek. In 2016, Diedrich signed a non-disclosure agreement. The agreement also contained non-competition and non-solicitation clauses.
In April 2017, Diedrich went with Mitek’s President and CEO, John Ivey, to a Hong Kong electronics fair. At the fair, one of Mitek’s business partners, EVR, proposed to sell Mitek a digital signal processing amplifier. Ivey asked the company to send information regarding the proposal to Diedrich, but Diedrich failed to follow up on the proposal. Soon after, EVR agreed to work with a division of MTX to develop the new product. After executing a confidentiality agreement, EVR sent a prototype to MTX, which Diedrich viewed and examined.
A few months later, Diedrich resigned from Mitek and accepted a nearly identical position with one of its competitors, AFCO. After joining AFCO, Diedrich contacted EVR and asked it to sell the same amplifier it had made for Mitek to AFCO. EVR did so. Diedrich still works for AFCO, attempting to develop products that directly compete with Mitek’s offerings. Though AFCO is based in Tennessee, Diedrich works out of his home in Wisconsin, and AFCO carries out business activities in Illinois.
Mitek sued Diedrich and AFCO in federal court, alleging that Diedrich breached his non-disclosure agreement and that both Diedrich and AFCO misappropriated Mitek’s trade secrets in violation of the Defend Trade Secrets Act. Diedrich and AFCO both moved to dismiss the complaint. AFCO argued that the court lacked personal jurisdiction over it, and Diedrich argued that AFCO was a necessary party to the litigation and that once it was dismissed the complaint could not proceed in federal court.
The district court agreed with both motions. The court found that AFCO purposefully availed itself of the privilege of doing business in Illinois by selling and directing others to sell its products in Illinois. The court, however, found that Mitek had failed to allege that AFCO had successfully developed a competing product, much less had sold such a product within the state of Illinois. Mitek also argued that the court had jurisdiction over AFCO because AFCO had a feature on its website which allowed customers in Illinois to locate authorized retailers. Citing Advanced Tactical Ordinance Sys., LLC v. Real Action Paintball, Inc. the court stated that an interactive website accessible to Illinois residents, without more, was not sufficient to create personal jurisdiction.
Next, the court stated that although AFCO allegedly interfered with Diedrich’s employment contract, the acts constituting the interference were alleged to have taken place in Wisconsin and Tennessee, not Illinois. Finally, the court found that without AFCO present, the litigation could not proceed in federal court because AFCO was a necessary party under Rule 19 of the Federal Rules of Civil Procedure.
You can read the full opinion here.
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