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Molon Motor and Coil Corp. v. Nidec Motor Corp.

United States District Court, N.D. Illinois, Eastern Division

May 11, 2017



          Edmond E. Chang United States District Judge.

         Molon Motor and Coil Corporation sued Nidec Motor Corporation for, among other things, violation of the federal Defend Trade Secrets Act of 2016, Pub. L. No. 114-153, 130 Stat. 376, and the Illinois Trade Secrets Act, 765 ILCS 1065/1 et seq. R. 64, Third Am. Compl.[1] Molon contends that its former Head of Quality Control, Manish Desai, copied confidential data onto a portable data drive before taking up a new job at Molon's competitor, Merkle-Korff (which eventually became Nidec). Id. ¶¶ 58-65. Molon further alleges that Nidec, a direct competitor, has used and continues to make use of the secrets that Desai downloaded. Id. ¶¶ 66-67. Nidec now moves to dismiss the trade secrets claims (which are the only remaining counts of the complaint), [2] arguing that there was nothing unlawful about Desai copying the files while he was still a Molon employee and that there is no plausible allegation that Nidec has used the trade secrets contained on the thumb drive.[3] R. 68, Nidec's Mot. to Dismiss, at 1-2, 6-7. For the reasons stated below, Nidec's motion is denied.

         I. Background

         For purposes of this motion, the Court accepts as true the allegations in the Third Amended Complaint. Erickson v. Pardus, 551 U.S. 89, 94 (2007). Nidec is the successor corporation to Merkle-Korff Industries, Inc., which in 2016 merged with Nidec Kinetek Corporation. Third Am. Compl. ¶ 4. Nidec Kinetek then ultimately merged with Nidec Motor Corporation, the defendant in this case. Id.

         Molon makes bespoke fractional and sub-fractional electric motors and gearmotors for customers across various industries, such as manufacturers of vending machines, refrigerator ice makers, and breast pump motors. Third Am. Compl. ¶¶ 55, 66. It also makes standardized, off-the-shelf motors that are widely distributed. Id. ¶ 66. According to Molon, Nidec competes in precisely the same industries, battling for market share in both the custom and standardized motor markets. Id.

         Before June 2013, Manish Desai served as Molon's Head of Quality Control. Third Am. Compl. ¶ 58. In this position, he oversaw product liability testing, coordinated the production of engineering data, and processed quality assurance test results as well as other compliance paperwork. Id. ¶ 61. As a condition of getting that job, he signed an employment agreement which included at least one restrictive covenant banning the unauthorized use of company data. Id. ¶¶ 57, 60. According to Molon, Desai's job put him in a position to access “all of Molon's trade secrets and confidential business information” through his work computer. Id. ¶ 64.

         In June 2013, Desai left Molon for Nidec. Third Am. Compl. ¶ 58. But before leaving, he allegedly copied dozens of Molon's engineering, design, and quality control files onto a personal Kingston portable data drive.[4] Id. ¶ 65; R. 65, Appendix to Third Am. Compl. Desai downloaded motor design and engineering drawings, motor production inspection protocols, data on motor production tools, quality control test protocols, quality control testing data and reports, and communication files with customers. Appendix to Third Am. Compl.[5]

         After making these data transfers to his own thumb drive, Desai then moved to a new job at Merkle-Korff (Nidec's predecessor), taking up responsibilities similar to those he had at Molon. Third Am. Compl. ¶ 67. Without identifying specific instances, Molon alleges (on information and belief) that Desai “unlawfully disclosed” the trade secrets he took from the memory stick to Nidec and that Nidec used and continues to use that information. Id. ¶¶ 59, 67, 71, 79.

         Nidec's dismissal motion primarily argues that Molon has failed to state a plausible claim because Desai's actions, even as alleged, do not constitute “misappropriation” under either the Illinois Trade Secrets Act or the Defend Trade Secrets Act of 2016. Nidec's Mot. to Dismiss at 1-2, 6. Nidec goes on to contend that there is no ground for inferring that it accessed or used any of the information Desai pulled. Id. at 7-9. And finally, Nidec argues that even if Desai did take trade secrets and gave them to Nidec, all of that occurred before the effective date of the Defend Trade Secrets Act, so at least the federal claim must be dismissed. Id. at 9-10.

         II. Standard of Review

         Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need only include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). This short and plain statement must “give the defendant fair notice of what the … claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original) (internal quotation marks and citation omitted). The Seventh Circuit explained that this rule “reflects a liberal notice pleading regime, which is intended to ‘focus litigation on the merits of a claim' rather than on technicalities that might keep plaintiffs out of court.” Brooks v. Ross, 578 F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002)).

         “A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “[A] complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). These allegations “must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Allegations that are entitled to the assumption of truth are those that are factual, instead of mere legal conclusions. Iqbal, 556 U.S. at 678-79.

         III. Analysis

         In Count 3 of its Third Amended Complaint, Molon accuses Nidec of violating the federal Defend Trade Secrets Act of 2016. Third Am. Compl. ¶¶ 55-72. And in Count 4, Molon contends Nidec also ran afoul of the Illinois Trade Secrets Act. Id. ¶¶ 73-81. For both of these claims, Nidec says that the complaint does not adequately allege (1) that Desai downloaded the information via “improper means” under the relevant statute; or (2) that Nidec has used the alleged trade secrets. The federal and Illinois claims can be discussed together because the pertinent definitions of the two acts overlap.

         The Defend Trade Secrets Act of 2016 allows “[a]n owner of a trade secret that is misappropriated … [to] bring a civil action … if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836(b)(1).[6] For the purposes of this Act, “misappropriation” is either: “(A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means” or “(B) disclosure or use of a trade secret of another without express or implied consent” under certain conditions.[7] Id. § 1839(5). “[I]mproper means, ” in turn, is defined here as “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” Id. § 1839(6).[8]

         Similarly, the Illinois Trade Secrets Act authorizes a civil action for “[a]ctual or threatened misappropriation[s]” of trade secrets.[9] The Illinois Act defines “misappropriation, ” “improper means, ” and “trade secrets” very similarly, and for purposes of this dismissal motion, the slight differences are immaterial.”[10] Compare 765 ILCS 1065/2(a), (b), (d), with 18 U.S.C. § 1839(3), (5), (6). For both the federal and the Illinois trade secret statutes, then, the question is whether Molon has plausibly alleged that (1) there are trade secrets (2) that were misappropriated by Nidec.

         A. Trade Secrets

         For purposes of the dismissal motion, Nidec does not directly contest that what Desai allegedly put onto a thumb drive could have contained trade secrets. Nidec acknowledges that, in a sealed appendix to the Third Amended Complaint, Molon has added details-file names and summaries-of the alleged stolen trade secrets, but Nidec suggests that these additions do not ultimately change the fact that there remains no “plausible basis for alleging that [Nidec] accessed or used any alleged trade secrets.” Nidec's Mot. to Dismiss at 6.

         Although not directly contested by Nidec, for the sake of completeness, the Court notes that Molon did sufficiently allege that the downloaded files do comprise trade secrets. To be sure, alleging what trade secrets were misappropriated does require some concreteness and specificity at this stage, but the claims do not need to be as detailed as when the case is going to trial. See AutoMed Techs., Inc. v. Eller, 160 F.Supp.2d 915, 920-21 (N.D. Ill. 2001); Mobile Mark, Inc. v. Pakosz, 2011 WL 3898032, at *1 (N.D. Ill. Sept. 6, 2011). Molon's Appendix to the Third Amended Complaint-which lists out file names and summaries of motor design and engineering drawings; protocols for motor production inspection; production data; quality control protocols and testing data; and customer correspondence-provides more than enough detail to plausibly allege that what was downloaded comprises trade secrets. Appendix to Third Am. Compl. Beyond this, Nidec will be free to demand more specifics in interrogatories, and additional discovery will flesh out further facts. But at this dismissal-motion stage, the allegations plausibly assert that Manish Desai downloaded trade secrets.

         B. ...

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