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Alpha Pro Tech, Inc. v. VWR International LLC

United States District Court, Third Circuit

November 26, 2013

ALPHA PRO TECH, INC., Plaintiff,
v.
VWR INTERNATIONAL LLC, Defendant.

MEMORANDUM

GENE E.K. PRATTER, District Judge.

VWR International LLC ("VWR") moves to dismiss (Docket No. 29) Alpha Pro Tech, Inc.'s ("APT") Second Amended Complaint ("SAC, " Docket No. 28). For the reasons that follow, the Court will grant the motion in part and deny it in part.

I. FACTUAL AND PROCEDURAL BACKGROUND[1]

As APT alleges in its Second Amended Complaint, "this action is about two things: VWR improperly obtained [APT's] trade secrets while in a position of trust and confidence with [APT]; and VWR falsely and misleadingly advertised its products to [APT's] customers." SAC ¶ 7. APT manufactures disposable protective apparel for use in scientific laboratories and medical settings and sells its products through distributors such as VWR. APT has branded one of its product lines with its CRITICAL COVER® registered trademark, to which it owns all the rights. The manufacture of these products involves a method of covering spun bond polypropylene ("SBP") fabric with a combination of synthetic polymers; at issue here is APT's proprietary "coated SBP method, " which produces a coating superior to that found in products available elsewhere on the market. Whereas environmental stress (e.g., from wear or friction) would often cause competitors' SBP coatings to delaminate and flake off-an unwelcome result in the manufacturing, scientific, and medical environments in which such protective garments are worn-APT's proprietary SBP coating method is more durable and produces fewer particulate flakes. APT developed its particular coating method in or around 1995 after about a year and a half of, and significant sums expended on, testing multiple polymer and SBP combinations until it "successfully determined a particular combination not previously used in the protective apparel industry that provided a superior Coated SBP product." SAC ¶ 17.

Because APT's method was superior, its process gave it a competitive business advantage over competitors whose products had less effective coatings. Its products have been successful and consumers accordingly afford the CRITICAL COVER® "brand substantial goodwill." SAC ¶ 23. The value of a brand's goodwill is substantial in this market because many customers of such protective apparel require a qualification process in their clean environments that, for some larger customers, can be time- and resource-intensive. Further, to maintain the high quality of its CRITICAL COVER® line, APT guaranteed its products' performance on the products themselves and in their accompanying literature, and also maintained quality control teams at its production site.

APT's method and formula were not generally known to the public and APT took steps to protect the formula, which, it contends, is a trade secret. APT "required its employees and independent contractors working directly with the formula and method to maintain their secrecy pursuant to written and oral agreements, " SAC ¶ 20; it also included confidentiality clauses in its contracts with distributors.[2]

In 1996, APT and VWR entered into an agreement, created by two documents, a Distribution Contract and an Operations Document (SAC, Exs. B & C, respectively), pursuant to which VWR would serve as APT's exclusive distributor of APT's CRITICAL COVER®-branded products. Pursuant to this agreement, APT granted VWR an exclusive license to use the CRITICAL COVER® trademark and prepared promotion literature for VWR to use. The agreement also bound VWR to identify APT as the manufacturer and warrantor of the CRITICAL COVER® products in its product labeling and online and printed literature. Also pursuant to their agreement, APT referred CRITICAL COVER® purchase orders to VWR. And, as discussed in greater detail below, the parties' agreement bound the parties not to use, publish, or disclose information conferred, pursuant to the agreement, by one upon the other, or by a third party with a confidentiality agreement with one of the parties.[3] VWR was APT's sole CRITICAL COVER® distributor in the United States and thus depended wholly upon VWR for its sales. Both parties profited from the arrangement for over a decade.

In 2000, APT decided to move its CRITICAL COVER® manufacturing from the state of Georgia overseas to China, where it entered into a relationship with Xiantao Xinfa Plastics Company, Ltd. ("XXPC"), which was to become APT's new CRITICAL COVER® manufacturer. At the outset of the APT-XXPC relationship, only APT possessed the information necessary to utilize APT's coated SBP method. Before teaching XXPC employees its method, APT extracted an oral confidentiality agreement with XXPC and its owner, Mr. Fu Lixin ("Mr. Fu"), to maintain the confidentiality of APT's formula and not use it for other customers. And although APT shared its method and formula with XXPC, APT remained CRITICAL COVER®'s manufacturer, albeit in XXPC's plant and with its personnel, by continuing to provide all the raw materials (including the necessary polymers embodying the clandestine method-at first, APT simply provided the polymers without giving XXPC their names) and monitoring the use of raw materials and polymers with a gravimetric blender (APT kept a supervisory and quality-control team on site). Pursuant to the APT-XXPC oral agreement, the relationship was at-will but the parties understood that the formula, raw materials, and certain equipment remained APT's property and that Mr. Fu and XXPC could not use APT's method outside of XXPC's manufacturing relationship with APT even after the parties' relationship might come to an end.

Sometime in 2009 or thereafter, VWR recognized that it could capture some of APT's profitability for itself if it could compete with APT. But instead of developing its own products or attempting to reverse engineer the CRITICAL COVER® coated SBP method-and then qualifying its new products with demanding customers already using CRITICAL COVER® products they had put through the paces-VWR "sought to obtain from [APT] the composition and identity of materials used in [APT's] Coated SBP and the identity of [APT's] Chinese manufacturing plant." SAC ¶ 50. After APT communicated to VWR that the majority of this information was confidential and proprietary, VWR unleashed its own efforts to locate APT's Chinese manufacturer, and it eventually found XXPC and met with Mr. Fu in or around August 2009 to discuss XXPC's possible manufacturing of the equivalent of APT's CRITICAL COVER® products for VWR. And despite knowing that XXPC and APT had an agreement respecting confidentiality, APT alleges, "VWR induced XXPC and Mr. Fu to violate those confidentiality restrictions by manufacturing Coated SBP and Coated SBP-containing apparel for VWR using [APT's] proprietary formulae and methods." SAC ¶ 55. At the same time, VWR kept APT in the dark by pretending to renegotiate its contract with APT while in actuality making preparations to release its competing products embodying APT's method and formula. VWR then notified APT that it would not continue the parties' relationship.

Then, APT alleges, VWR set out to market its new product lines as replacements for, but nonetheless continuations of, APT's CRITICAL COVER® products. Through its marketing and promotional materials, VWR was able to induce its customers, who had brand loyalty to APT's CRITICAL COVER® products, which these customers had qualified as meeting the requirements of their environments, to believe CRITICAL COVER® products no longer existed and that they were simply being transitioned into the same or similar products by another name-supposedly VWR's knock-offs produced by XXPC. Through a number of statements, VWR was able to convince consumers that the change in products was in name only. Some statements, APT contends, were false, while others were technically true but misleading nonetheless. For instance, APT contends that VWR's statements in one of its marketing materials that, for example, "VWR Advanced and Maximum Protection apparel (the products formerly known under the VWR Critical Cover ComforTech2122 and Microbreathe2122 brands) will experience a change in raw materials, " SAC Ex. F, at 1 para. 4; SAC ¶ 70, are misleading because "VWR's statements... were not formerly known under' [APT's] trademark, " and/or they "lead[] consumers to believe that the source of the VWR products is the same as that of [APT's] CRITICAL COVER® products." SAC ¶ 70. Further examples are provided where relevant in the discussion below.

* * *

APT sued VWR on March 30, 2012. It brought claims of false designation of origin and false advertising under the Lanham Act, 15 U.S.C. § 1125(a); trade dress infringement in violation of section 43(a) the Lanham Act, § 1125(a); willful misappropriation of trade secrets in violation of the Pennsylvania Uniform Trade Secrets Act ("PUTSA"), 12 Pa. Cons. Stat. Ann. §§ 5301-5308; and tortious interference with APT's existing contractual relationship with XXPC. After VWR moved to dismiss, APT filed its first amended complaint, thereby mooting VWR's motion to dismiss. VWR then moved to dismiss APT's amended complaint, and following the parties' briefing, the Court heard oral argument. APT then sought leave to file its Second Amended Complaint, which is currently before the Court as the target of VWR's subsequent Motion to Dismiss.

In its Second Amended Complaint (Docket No. 28), APT brings claims under five counts: Count I, for VWR's alleged willful misappropriation of trade secrets under PUTSA for what APT avers was VWR's acquisition and use in manufacture of APT's coated SBP method and formula, which, APT contends, are trade secrets; Count II, for breach of the APT-VWR contract-in particular, its confidentiality provision; Count III, for VWR's unjust enrichment in retaining the benefit of APT's coated SBP method; Count IV, for VWR's tortious interference with APT's oral contract with XXPC; and Count V, for false designation of origin and false advertising under the Lanham Act for VWR's statements promoting its new line of products.

With its Motion to Dismiss (Docket No. 29), VWR tests the sufficiency of all five counts of the Second Amended Complaint. Regarding Count I, VWR disputes that APT's coated SBP method was a trade secret at the time of the alleged misappropriation. Second, VWR argues that it did not breach its contract with APT (Count II) because the confidentiality provision in the agreement applies only to information transmitted from one party or party's confidential promisee to the other party pursuant to the agreement, and the alleged theft of trade secrets at the root of this dispute occurred outside the canopy of the parties' agreement. Third, VWR disputes that APT can pursue its unjust enrichment claim because, inter alia, a claim for unjust enrichment, as a quasi-contract cause of action, may not lie where the parties have a contract, and thus Count III conflicts with Count II. VWR also raises other supposed pleading deficiencies with regard to the unjust enrichment claim. Next, VWR contends that APT's tortious interference claim must fail not only because APT has failed to state a tortious interference cause of action, but also because such a tortious cause of action is barred by the economic loss and gist of the action doctrines. Finally, VWR contests the sufficiency of APT's Lanham Act claims. VWR also argues that Counts I, III, and IV should be dismissed for APT's failure to join XXPC as a necessary party pursuant to Federal Rule of Civil Procedure 19.

For the reasons that follow, the Court will grant VWR's Motion to Dismiss with respect to Counts II and IV (breach of contract and tortious interference with contract) and deny it with respect to Counts I, III, and V (misappropriation of trade secrets; unjust enrichment; and Lanham Act false designation of origin and false advertising).[4]

II. STANDARD OF REVIEW

A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint. Although Rule 8 of the Federal Rules of Civil Procedure requires only "a short and plain statement of the claim showing that the pleader is entitled to relief, " Fed.R.Civ.P. 8(a)(2), "in order to 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) (citation omitted) (alteration in original), the plaintiff must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do, " id.

To survive a motion to dismiss, the plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Specifically, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. The question is not whether the claimant "will ultimately prevail... but whether his complaint [is] sufficient to cross the federal court's threshold." Skinner v. Switzer, 131 S.Ct. 1289, 1296 (2011) (citation and internal quotation marks omitted). Thus, assessment of the sufficiency of a complaint is "a context-dependent exercise" because "[s]ome claims require more factual explication than others to state a plausible claim for relief." W. Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 98 (3d Cir. 2010).

In evaluating the sufficiency of a complaint, the Court adheres to certain well-recognized parameters. For one, the Court "must consider only those facts alleged in the complaint and accept all of the allegations as true." ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3d Cir. 1994); see also Twombly, 550 U.S. at 555 (stating that courts must "assum[e] that all the allegations in the complaint are true (even if doubtful in fact)"); Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010) ("[A] court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents."). Also, the Court must accept as true all reasonable inferences emanating from the allegations, and view those facts and inferences in the light most favorable to the nonmoving party. See Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989); see also Revell v. Port Auth., 598 F.3d 128, 134 (3d Cir. 2010). That admonition does not demand that the Court ignore or discount reality. The Court "need not accept as true unsupported conclusions and unwarranted inferences, " Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 183-84 (3d Cir. 2000) (citations and internal quotation marks omitted), and "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft, 556 U.S. at 678; see also Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997) (explaining that a court need not accept a plaintiff's "bald assertions" or "legal conclusions" (citations omitted)). Finally, "if a [claim] is vulnerable to 12(b)(6) dismissal, a district court must permit a curative amendment, unless an amendment would be inequitable or futile." Phillips v. County of Allegheny, 515 F.3d 224, 236 (3d. Cir. 2008).

III. DISCUSSION

APT brings claims for misappropriation of trade secrets under the Pennsylvania Uniform Trade Secrets Act (Count I), breach of contract (Count II), unjust enrichment (Count III), tortious interference with an existing contractual relationship (Count IV), and Lanham Act false advertising and false designation of origin (Count V). VWR disputes each of these claims with a variety of arguments, and also argues that Counts I, III, and IV cannot proceed without XXPC, which, VWR avers, is a necessary party that must be joined pursuant to Federal Rule of Civil Procedure 19. XXPC is not presently a party in this case.

A. Misappropriation of Trade Secrets in Violation of the Pennsylvania Uniform Trade Secrets Act (Count I)

APT claims that VWR willfully misappropriated its coated SBP method and formula from XXPC and that because this method and formula constitute trade secrets, VWR is liable to it for willful misappropriation of trade secrets under the Pennsylvania Uniform Trade Secrets Act ("PUTSA"), 12 Pa. Cons. Stat. Ann. §§ 5301-5308. PUTSA permits a plaintiff to recover monetary "damages for misappropriation" of a trade secret, id. § 5304; see id. § 5302 (definitions). Under the statute, a trade secret consists of

[i]nformation, including a formula, drawing, pattern, compilation including a customer list, program, device, method, technique or process that:
(1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Id. § 5302. To make this determination, Pennsylvania courts look to a variety of factors:

(1) the extent to which the information is known outside of the company's business; (2) the extent to which the information is known by employees and others involved in the company's business; (3) the extent of the measures taken by the company to guard the secrecy of the information; (4) the value of the information to the company and its competitors; (5) the amount of effort or money the company spent in developing the information; and (6) the ease or difficulty with which the information could be acquired or duplicated legitimately by others.

Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102, 109 (3d Cir. 2010); see also Nova Chems., Inc. v. Sekisui Plastics Co., Ltd., 579 F.3d 319, 327 (3d Cir. 2009).[5]

PUTSA provides that misappropriation of a trade secret can occur through:

(1) 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
(2) disclosure or use of a trade secret of another without express or implied consent by a person who:
(i) used improper means to acquire knowledge of the trade secret;
(ii) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:
(A) derived from or through a person who had utilized improper means to acquire it;
(B) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
(C) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
(iii) before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

12 Pa. Cons. Stat. Ann. § 5302 (emphasis added). APT argues, first, that its coated SBP method and formula are trade secrets and, second, that VWR misappropriated them in such a way as to fall within the italicized language above. VWR disputes both contentions.

1. Whether APT's Coated SBP Method and Formula Constitute Trade Secrets

VWR begins by contending that this Court should dismiss Count I for its alleged misappropriation of APT's trade secrets because "no discovery could establish that the information at issue could achieve trade secret status." VWR Mot. Dismiss at 12. VWR has correctly summarized the standard to the extent that this statement recognizes that "[w]hether information rises to the level of a trade secret under PUTSA is a question of fact not appropriate for resolution on a motion to dismiss." Synthes, Inc. v. Emerge Med., Inc., No. 11-1566, 2012 WL 4205476, at *27 (E.D. Pa. Sept. 19, 2012) (citing cases); see also, e.g., Ideal Aerosmith, Inc. v. Acutronic USA, Inc., No. 07-1029, 2007 WL 4394447, at *8 (E.D. Pa. Dec. 13, 2007). Nonetheless, VWR argues that APT has failed to state a claim by arguing that APT has "baldly state[d], " without providing any factual content, the time and effort it spent to develop its coated SBP method, such that it is unclear "whether [APT's] alleged trade secret would take years or perhaps just minutes to reverse engineer"; moreover, VWR argues, APT "never explains how [its coated SBP method and formula] provided it with a competitive business advantage." VWR Mot. Dismiss at 13-14.

VWR's contentions pay lip service to the motion to dismiss standard-a theme all too prevalent throughout VWR's Motion to Dismiss. Like most other causes action, "a claim for misappropriation of trade secrets need not be pleaded with particularity." Ctr. Pointe Sleep Assocs., LLC v. Panian, No. 08-1168, 2009 WL 789979, at *3 (W.D. Pa. Mar. 18, 2009). What VWR really wants, it seems, is evidence. However, concrete evidence is not required until VWR moves for summary judgment or the case proceeds to trial. And in actuality, such a requirement, even if it existed, would make less sense here, where trade secrets are concerned because "such a requirement would result in public disclosure of the purported trade secret." Pennfield Precision, Inc. v. EF Precision, Inc., No. 00-280, 2000 WL 1201381, at *4 (E.D. Pa. Aug. 15, 2000) (quoting Leucadia, Inc. v. Applied Extrusion Techs., Inc., 755 F.Supp. 635, 636 (D. Del. 1991)).

For now, APT has adequately pleaded that its SBP method was a trade secret:

• APT has pleaded a "formula, ... method, technique or process, " 12 Pa. Cons. Stat. Ann. § 5302, in the form of its "better chemical composition of polymers for the purposes of creating coated spun bond polypropylene with a high coefficient of friction and a low level of particulates, " SAC ¶ 16;
• APT has pleaded that this "particular combination [was] not previously used in the protective apparel industry, " SAC ¶ 17-an allegation responsive to the requirement that the information "[d]erives independent economic value... from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, " 12 Pa. Cons. Stat. Ann. § 5302, or the factor regarding "(1) the extent to which the information is known outside of the company's business, " Bimbo Bakeries, 613 F.3d at 109;
• APT has pleaded that it "ex[p]ended significant time, effort, and expense to develop [these] proprietary formulations and methods, " SAC ¶ 18-an allegation responsive to the requirement that the information "not be[] readily ascertainable by proper means, " 12 Pa. Cons. Stat. Ann. § 5302;
• APT has pleaded that it spent "twelve to eighteen months... testing several different polymers and then testing approximately twelve combinations and blends of the selected polymers" to "successfully determine[] a particular combination, " SAC ¶ 17-an allegation providing information regarding "(5) the amount of effort or money the company spent in developing the information; and (6) the ease or difficulty with which the information could be acquired or duplicated legitimately by others, " Bimbo Bakeries, 613 F.3d at 109;
• APT has pleaded explicitly that its "proprietary formulations and methods for making Coated SBP, i.e., the particular combination and quantity of polymers and particular method of application to the SBP fabric, were not generally known to the public prior to their development by [APT], " SAC ¶ 19; and
• APT has pleaded facts regarding its SBP method's "value... to the company and its competitors, " Bimbo Bakeries, 613 F.3d at 109; see also 12 Pa. Cons. Stat. Ann. § 5302, by stating the inadequacies of other SBP methods: "Stress on the coated fabric (for example, from wear) causes the coating layer to delaminate and eventually flake off of the fabric. Delamination and flaking results in particulate contamination in the clean room, an undesirable result." SAC ¶ 15. By contrast, APT's coated SBP method produces a "product [that] is more durable and results in fewer particulates, " SAC ¶ 17; see also SAC ¶ 21, and has therefore made APT's "line of products... wildly successful, and relevant consumers afford [APT's] products and brand substantial goodwill, " SAC ¶ 23, because, unlike competitors' products, APT's "products were qualified for use in many of its customers' clean room environments, " SAC ¶ 24.

But even if all those things are true, VWR continues, APT's coated SBP method cannot be a trade secret for the further reason that APT fails to satisfy the second prong of section 5302's requirement that the information be "the subject of efforts that are reasonable under the circumstances to maintain its secrecy." 12 Pa. Cons. Stat. Ann. § 5302. Indeed, two of the factors that courts look at are "(2) the extent to which the information is known by employees and others involved in the company's business" and, more to the point here, "(3) the extent of the measures taken by the company to guard the secrecy of the information, " Bimbo Bakeries, 613 F.3d at 109. And all that APT allegedly did, says VWR, was enter into an oral confidentiality agreement with XXPC-about which, moreover, it has alleged insufficient facts-and this agreement, even if it existed, does "not qualify as reasonable efforts' to maintain the secrecy of [APT's] propriety formulations and methods." VWR Mot. Dismiss at 15.

But whether that is the case remains to be seen. Whether APT's efforts were reasonable is, to a large extent, a question of fact that cannot be answered at this stage. The Court does not have the necessary factual array before it to determine whether VWR's contention is correct, and the determination of whether a plaintiff's efforts to maintain the secrecy of its alleged trade secrets were reasonable is not a question susceptible of black-or-white analysis. As the Pennsylvania courts have explained, "the determination of whether the information is a trade secret must be made on a case-by-case basis." O.D. Anderson, Inc. v. Cricks, 815 A.2d 1063, 1071 (Pa.Super. Ct. 2003). For one, "what is required to maintain a trade secret action is not absolute secrecy"-but for the breach of which, one supposes, as a matter of logic, the circumstances would never give rise to actionable misappropriation of trade secrets-"but rather substantial secrecy." EXL Labs., LLC v. Egolf, No. 10-6282, 2010 WL 5000835, at *5 (E.D. Pa. Dec. 7, 2010) (citing O.D. Anderson, 815 A.2d at 1070). And ascertaining "whether a plaintiff took sufficient steps to maintain substantial secrecy of its proprietary information" requires consideration of, but not entire reliance on, confidentiality agreements, which are but one factor of the analysis. Id. at *6; accord Swift Bros. v. Swift & Sons, Inc., 921 F.Supp. 267, 277 (E.D. Pa. 1995) ("Such agreements are not necessary in every case, however, if the other precautions taken by the plaintiff are sufficient.").

VWR's citation to secondary material hardly helps to resolve this issue. First, to the extent that evaluation of a plaintiff's efforts to maintain the secrecy of its alleged trade secrets is a factbound inquiry that must be determined on a case-by-case basis, resort to secondary literature is appropriate only for the purpose of painting the background scenery rather than for stacking the building blocks of a holding. See generally, e.g., Richard A. Posner, Reflections on Judging 136-38 (2013). The issue here is not the rule for the determination of what constitutes reasonable efforts, but instead its application to a particular set of circumstances. Thus, legislative facts-such as those that might be provided in the secondary literature-are of little relevance; instead, the adjudicative facts must be determined by proof to the finder of fact and from them the issue of trade secret vel non decided.

And second, even if resort to the secondary literature cited were otherwise appropriate, those articles merely establish what Chinese, rather than Pennsylvania, law might require, [6] see J. Benjamin Bai & Guoping Da, Strategies for Trade Secrets Protection in China, 9 Nw. J. Tech. & Intell. Prop. 351, 71 (2011) (" Chinese law permits companies to contractually protect their trade secrets. Due to the high evidentiary burden in China, written agreements are vital in protecting trade secrets and confidential information." (emphasis added)); Marisa Anne Pagnattaro, Protecting Trade Secrets in China: Update on Employee Disclosures and the Limitations of the Law, 45 Am. Bus. L.J. 399, 413 (2008) (both cited in VWR Mot. Dismiss at 15); and that even where written agreements with Chinese businesses regarding trade secrets exist, they "may be poorly enforced, " such that the better strategy may be to "limit access to trade secret information to key personnel having a legitimate interest in knowing the information, " Patricia E. Campbell & Michael Pecht, The Emperor's New Clothes: Intellectual Property Protections in China, 7 J. Bus. & Tech. L. 69, 113 (2012) (relying, inter alia, on Pagnattaro, Protecting Trade Secrets in China, supra ) (cited in VWR Mot. Dismiss at 15-16). The flipside of these observations in the literature, such as the statement in The Emperor's New Clothes that written agreements may be poorly enforced, is that companies like APT take Chinese companies and the Chinese culture as they find them, such that even written agreements may be insufficient to prevent disclosure of trade secrets. The import of these observations is hardly the stuff of case-by-case adjudication. And the thrust of the reasoning in those articles, moreover, is that written agreements inherently provide documentary evidence of their existence. Whether APT can fulfill its ultimate burden of proving reasonable efforts to maintain the secrecy of its coated SBP method may well depend on whether it can show, as an evidentiary matter, that it did in fact enter into a confidentiality agreement (albeit an oral one) with XXPC. But what APT can show, and with what evidence, are not matters for the motion to dismiss stage.

In sum, the Court cannot decide at this juncture whether APT's efforts, if they were sufficiently pled, were reasonable. VWR's cannot establish that APT's efforts were insufficient as a matter of law, for VWR has not cited a single case establishing that oral confidentiality agreements are per se unreasonable or unenforceable. This Court will not invent such a rule.[7]

Instead, APT has alleged that it took efforts, which could be found to be reasonable, to protect its trade secret by pleading that:

• APT "required its employees and independent contractors working directly with the formula and method to maintain their secrecy pursuant to written and oral agreements." SAC ¶ 20;
• APT "required distributors to maintain the secrecy of any confidential information learned from [APT] or from a third party subject to a confidentiality agreement with [APT]." SAC ¶ 20;
• APT required VWR to maintain the confidentiality of such information, SAC ¶ 32 (citing the parties' contract at ¶ 9, SAC Ex. B);[8]
• "Prior to disclosing any formulae or methods, [APT executive Danny] Montgomery and Mr. Fu [for XXPC] entered into the [APT]-XXPC confidentiality agreement pursuant to which XXPC agreed to maintain the confidentiality of [APT's] trade ...

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