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Mutual Minds, LLC v. Shelly

United States District Court, M.D. Pennsylvania

March 8, 2017

MUTUAL MINDS, LLC, a California limited liability company, Plaintiff,
TRON SHELLY, an individual; RICK MILLER, an individual; iDRIVE INTERACTIVE, LLC, a Pennsylvania limited liability company; PARENTS FOR CHEAPER LIVING, LLC, a Virginia limited liability company; and DOES 1 through 10, inclusive, Defendants.

          Jones, J.


          JOSEPH F. SAPORITO, JR. United States Magistrate Judge

         This matter is before us on the motion to bifurcate discovery (Doc. 46) filed by the defendants, iDrive Interactive, LLC and Parents for Cheaper Living, LLC (collectively, the “defendants”). The plaintiff, Mutual Minds, LLC, in its first amended complaint (Doc. 25), alleges that the defendants misappropriated its trade secrets in violation of the Pennsylvania Uniform Trade Secrets Act, 12 Pa. Cons. Stat. § 5301 (“PUTSA”) by using information disclosed to the defendants in connection with their advertising relationship to establish competing websites. The motion has been fully briefed and is ripe for disposition. For the reasons set forth below, the motion will be denied.

         I. FACTS

         As we write exclusively for the parties, the facts of this litigation are known to them. We will recite only those facts necessary for a resolution of the motion. In its first amended complaint (Doc. 25), the plaintiff has alleged that it “creates and develops online communities for people that have common interests and provides those individuals with content targeted to their demographic.” (Doc. 25 ¶¶ 3, 15). Further, the plaintiff generates revenue from designated websites by partnering with advertising networks to place advertisements on plaintiff's websites. (Id.) From 2011 to 2014, the plaintiff and defendant, iDrive, entered into a business relationship whereby plaintiff would post iDrive advertisements on its websites. The plaintiff would receive a portion of the revenue generated through users clicking on iDrive advertisements from the plaintiff's websites and taking action such as purchasing the advertised products. (Id. ¶18). The process is called “conversion.” (Id. ¶1b). The conversion rates of advertisements reveal which advertisements generate the most revenue. (Id. ¶1c). Conversion rates are used to determine which attributes of plaintiff's websites are most attractive to users.

         Incident to its business relationship with the plaintiff, iDrive was given access to “a detailed description of the plaintiff's target demographics, information regarding Mutual Minds members, such as members' unique IP addresses, and detailed information regarding member preferences and the type of advertisements most likely to lead to sales as reflected in conversion rates, earnings-per-click data, complete questionnaire information for each member that converted into a sale, and back-end enrollment statistics” (the “trade secrets”). (Id. ¶ 20). This information comprises the trade secrets that plaintiff alleges defendants misappropriated.

         The plaintiff asserts that it generated these trade secrets “through its own testing, know-how, and efforts related to website design, content placement, advertisement placement, and other things.” (Id. ¶ 21). Much of the information was not submitted to iDrive by end-user customers, and plaintiff disclosed this information to iDrive only for the purposes of iDrive's advertisement delivery. (Id. ¶ 21, 23). The plaintiff stored the trade secrets “on secure, password protected servers, implement[ed] policies preventing unauthorized disclosure to third parties, and restrict[ed] access to the trade secrets to only those with a need to know.” (Id. ¶ 24). Further, plaintiff asserts that “the trade secrets were developed through plaintiff's expenditure of significant time, effort, money, and resources” and that the use of this information generated hundreds of thousands of dollars for the Defendants. (Id. ¶¶ 24, 22).

         During the summer of 2014, Rick Miller, co-founder and president of iDrive, “suggested that iDrive copy” the plaintiff's websites. (Id. ¶ 25). While still in an advertising relationship with the plaintiff, and unbeknownst to it, defendants established competing websites that “target[s] the very demographics [plaintiff] targets, communicate[s] with members the same way as [plaintiff], and cop[ies] in wholesale fashion the source code of the Websites and the timing, type, and placement of content.” (Id. ¶ 26). One example of defendants' websites is Parents for Cheaper Living, which targets single parents in the same manner of plaintiff's website, (Id. ¶ 26). The plaintiff confronted Tron Shelly, co-founder and Executive Vice President of iDrive, who “admitted that iDrive had always wanted to own [its] own site, that iDrive had copied [plaintiff's] website” and “that there was nothing that [plaintiff] could do about it.” (Id. ¶ 29).

         During the time that defendants established competing websites, defendants required that plaintiff consent to new business terms for the advertising arrangement, and refused plaintiff access to iDrive's online portal unless plaintiff assented to new terms. (Id. ¶ 27).

         Further, the plaintiff alleged that conversion rates and consumer information were given to defendant, iDrive, pursuant to a business relationship that the plaintiff regarded as confidential. (Doc. ¶¶25, 20, 23). The plaintiff alleged that the defendants used the plaintiff's trade secrets to develop a competing website without the plaintiff's consent. (Id. ¶26). The plaintiff further alleged that the defendants' use of the trade secrets caused website traffic to be diverted from plaintiff's websites and to the defendants' websites, resulting in lost revenue. (Id. ¶32).

         The defendants filed the instant motion on January 24, 2017, requesting bifurcated discovery. They believe that discovery should be bifurcated into two phases: (1) the existence and scope of plaintiff's trade secrets, and (2) whether there was misappropriation by defendants and resulting damage to the plaintiff. (Doc. 47, at 2). Further, the defendants claim that there is good cause for bifurcation because (1) the plaintiff has not identified its trade secrets; (2) bifurcation will allow for an expedient and efficient resolution of the case; (3) it will avoid prejudice to the defendants by avoiding unnecessary disclosure of the defendants' sensitive and trade secret information; and (4) the plaintiff will not be prejudiced as the proposed phases involve distinct facts.

         The plaintiff opposes the defendants' motion for bifurcation contending that (1) it has adequately described its trade secrets; (2) it will be prejudiced by needlessly duplicating legal fees; (3) granting the motion will invite unnecessary discovery disputes; (4) it will potentially delay trial on the merits; and bifurcation of discovery would not secure the just, speedy, and inexpensive determination of this action under Fed.R.Civ.P. 1. (Doc. 48, at 1-2).

         II. LE ...

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