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Motorola, Inc. v. Lemko Corp.

February 11, 2009

MOTOROLA, INC., PLAINTIFF,
v.
LEMKO CORPORATION, SHAOWEI PAN, HANJUAN JIN, XIAOHUA WU, XUEFENG BAI, AND XIAOHONG SHENG, DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Motorola, Inc. has sued Lemko Corporation, Shaowei Pan, Hanjuan Jin, Xiaohua Wu, Xuefeng Bai, and Xiahong Sheng for alleged violations of the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030, and the Illinois Trade Secrets Act (ITSA), 765 ILCS 1065/3 & 4. Motorola has also sued Jin, Wu, Bai, and Sheng for alleged breaches of fiduciary duty. All defendants other than Jin have moved to dismiss Motorola's claims.*fn1 For the reasons set forth below, the Court grants the motions to dismiss in part and denies them in part.

Factual Background

When considering a motion to dismiss, the Court accepts as true the complaint's factual allegations and draws reasonable inferences in favor of the plaintiff. See, e.g., Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 617 (7th Cir. 2007). Unless otherwise indicated, references to the "complaint" are to Motorola's Amended Complaint.

Motorola is a global communications company. Its business includes a wide array of communication technologies and services. As part of its business, Motorola has developed a number of proprietary trade secrets as well as other confidential information. Motorola utilized various security measures to protect its trade secrets and other confidential information. The engineers it employed, including certain of the individual defendants, were required to sign confidentiality and employment agreements that restricted the disclosure and use of confidential information. Those restrictions are reflected in Motorola's internal policies.

Lemko is a privately held company with headquarters in Schaumburg, Illinois and additional offices in China and India. It competes with Motorola in the development and marketing of cellular infrastructure systems, voice and data services, and other wireless communication technologies.

Jin was employed at Motorola from 1998 until February 2007 as an engineer. Motorola claims that Jin secretly accepted employment with Lemko beginning in March 2005 and never disclosed to Motorola her simultaneous employment with Lemko. Motorola alleges that on a number of occasions, Jin, without authorization or in excess of her authorization, accessed Motorola's computers to obtain and transfer Motorola's trade secrets and other confidential information for the benefit of Lemko. Motorola provides several specific examples of this alleged conduct, including: (a) on March 24, 2005, Jin obtained from Motorola's computers, and transferred by e-mail to her own personal, non-secure e-mail account, Motorola's source code; (b) between February 2006 and February 2007, when she was on a leave of absence for alleged medical reasons, Jin accessed Motorola's computers to obtain confidential information and trade secrets regarding various technologies, including system architecture design, ICD specifications, push-to-talk, iDen, and WiMax; (c) Jin installed Motorola's proprietary VPN access software on a Lemko-owned computer to facilitate her unauthorized access to Motorola's computers; and (d) on February 26 and 27, 2007, Jin removed additional confidential files from Motorola's computers.

Defendants Wu and Pan are married to each other. Pan is Lemko's chief technology officer. Wu worked for Motorola as an engineer from 1995 until December 2007, when Motorola terminated her. Motorola alleges that Wu and Pan engaged in improper conduct, including: (a) in October 2006, at Pan's request, Wu obtained, without authorization or in excess of her authorization, confidential log files, dump files, and other proprietary software from Motorola computers and provided this information to Pan; (b) on December 1, 2006, Wu provided Pan with access to Motorola computers containing confidential information; and (c) Wu e-mailed Pan confidential documents from Motorola's computers on May 31, 2007.

Motorola hired Bai as an engineer in 2001 and terminated his employment in December 2007. Motorola alleges that Bai, without authorization or in excess of his authorization, accessed Motorola's computers to obtain and transfer Motorola's trade secrets and other confidential information. Motorola provides several examples of this alleged conduct, including: (a) Bai e-mailed subsidy unlock codes to Wu on October 8, 2005; (b) on April 17, 2006, Bai, in response to a request by Pan, accessed Motorola's computers to obtain a subsidy unlock code and e-mailed that information to Pan; (c) Pan asked Bai for Motorola dump files relating to W-CDMA technology that Bai obtained from Motorola computers and sent to Pan on September 1, 2006; and (d) Bai e-mailed links to Pan that provided him with access to Motorola computers containing confidential information -- links that an unidentified user later used on multiple occasions.

Sheng started working at Motorola in November 2006. Prior to that time she was an engineer for Lemko. Motorola alleges that Sheng secretly continued to work for and/or assist Lemko after she began her employment at Motorola, an allegation Motorola supports by a January 29, 2007 e-mail in which Sheng makes reference to helping Lemko. Motorola also discovered Lemko-associated source code on Sheng's Motorola laptop computer, as well as evidence that the laptop had been connected to a USB drive containing folders titled "Lemko." On July 1, 2008, Motorola told Sheng to report for a meeting with Motorola management the next day. Motorola terminated Sheng at that meeting. Motorola claims that before the meeting, Sheng accessed Motorola's computers and downloaded a large number of files containing confidential information to a non-secure USB drive.

This conduct forms the basis for Motorola's various claims against the defendants. Motorola also alleges, with respect to each of the defendants, that their conduct caused Motorola to incur substantial expenses in excess of $5,000 in a one-year period.

Discussion

The parties spend a substantial amount of space in their briefs seemingly arguing over whether Bell Atlantic Corp. v. Twombly, --- U.S. ---, 127 S.Ct. 1955 (2007), applies to suits under the CFAA. As a decision of the Supreme Court that sets forth the standard for pleading claims in federal court, Twombly necessarily applies to this case. The Seventh Circuit has emphasized, however, that even after the Supreme Court's ruling in Twombly, federal courts continue to adhere to a notice pleading standard. E.g., Tamayo v. Blagojevich, 526 F.3d 1074, 1083-84 (7th Cir. 2008). "A plaintiff must still provide only enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests . . . ." Id. at 1083 (quotation omitted); see also Limestone Dev. Corp. v. Village of Lemont, 520 F.3d 797, 803 (7th Cir. 2008) (cautioning that Twombly should not be over-read because the Supreme Court has not required "heightened fact pleading of specifics") (quotation omitted). This requirement "simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence" of a plaintiff's claims. Twombly, 127 S.Ct. at 1965.

1. Computer Fraud and Abuse Act Claims

The CFAA is primarily a criminal statute. It provides, however, for a private right of action: "Any person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief." 18 U.S.C. § 1030(g). The conduct proscribed by the statute is set forth in section 1030(a). Motorola attempts to state claims against each of the defendants under section 1030(g) for violating sections 1030(a)(2), (a)(4), and (a)(5).

a. Preliminary Issues

The parties raise two preliminary matters regarding the CFAA. First, Congress recently amended several sections of the CFAA relevant to this case, effective September 2008. Motorola implies that it is appropriate to apply the current version of the CFAA, as opposed to the version of it that was operative during the course of defendants' alleged conduct. Ordinarily, absent an express statement by Congress, amendments to a statute that are substantive in nature are not applied retroactively, though procedural or jurisdictional amendments may be. See, e.g., Turkhan v. Perryman, 188 F.3d 814, 826 (7th Cir. 1999) (citing Landgraf v. USI Film Prods., Inc., 511 U.S. 244, 273-75, 280 (1994)). Motorola has not provided any authority or legal argument indicating that the September 2008 amendments to the CFAA were merely procedural. Accordingly, the Court will apply the terms of the CFAA as they existed during the course of defendants' alleged conduct. See Teksystems, Inc. v. Modis, Inc., No. 08 C 5476, 2008 WL 5155720, at *1 n.1 (N.D. Ill. Dec. 5, 2008) (applying pre-September 2008 version of the CFAA to conduct that occurred before the recent statutory amendments). Citations to the CFAA contained in this opinion will refer to the statute as it existed prior to the September 2008 amendments.

Second, Wu and Sheng contend that the heightened pleading requirement of Federal Rule of Civil Procedure 9(b) applies to Motorola's CFAA claims. As noted earlier, Motorola has asserted claims under section 1030(g) for violation of sections 1030(a)(2), (a)(4), and (a)(5) of the CFAA. Sections 1030(a)(2) and (a)(5) do not contain any ...


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