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PDC Machines Inc. v. Nel Hydrogen A/S

United States District Court, E.D. Pennsylvania

June 15, 2018

PDC MACHINES INC.
v.
NEL HYDROGEN A/S formerly known as H2 LOGIC A/S, et al.

          MEMORANDUM

          Juan R. Sánchez, Judge

         Plaintiff PDC Machines Inc. (PDC) brings claims pursuant to the federal Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836(b), and state law against Nel Hydrogen A/S (Nel), a longtime PDC customer, and Joshua Andrew Adams, a former PDC project engineer who is currently employed by Nel, arising out of Defendants' alleged misappropriation of PDC's trade secrets and other sensitive, confidential, and proprietary information relating to PDC's proprietary high pressure gas diaphragm compressor technology. Defendants have filed a partial motion to dismiss, seeking dismissal of five of the nine counts asserted in PDC's Complaint, including the DTSA claim. PDC has agreed to withdraw one of the five counts, but otherwise opposes the motion. For the reasons set forth below, the motion to dismiss will be granted as to the withdrawn count and denied as to the remaining counts.

         BACKGROUND

         PDC is a technology design and manufacturing company that provides engineered solutions for the specialty gas and chemical processing industries worldwide. According to the Complaint, PDC has spent 40 years and millions of dollars developing its proprietary high pressure gas diaphragm technology, and is the only company in the world that has developed a commercially successful high pressure gas compressor using a diaphragm technology. In 2008, PDC entered into a contractual relationship with Nel, a “global, dedicated hydrogen company” based in Denmark, whereby PDC agreed to develop high pressure hydrogen gas diaphragm compressors for Nel. See Compl. ¶¶ 25-26. The parties' relationship was subject to a nondisclosure agreement (NDA) which prohibited Nel from engaging in any analysis, replication, or reverse-engineering of the PDC compressors. Pursuant to the NDA, PDC has shared many trade secrets with Nel, including customer versions of PDC's proprietary computer software, schematic drawings, 3D models, calculations, descriptions of compressor features, technology and product performance data, and the PDC compressors themselves, which embody numerous trade secrets ascertainable only by reverse engineering or other analysis prohibited by the NDA. Adams has also been privy to PDC's trade secrets and other confidential and proprietary information, having been integrally involved in the research, development, and design of PDC's high pressure hydrogen diaphragm compressors as a PDC project engineer from October 2007 until June 2011. As part of his employment with PDC, Adams was subject to an NDA, which prohibits him from publishing, disclosing, disseminating, or using any of PDC's confidential information, including PDC's trade secrets, without PDC's express written consent.

         PDC recently discovered that Adams is now working for Nel and that Nel has filed at least one patent application, on which Adams is listed as the inventor, claiming a high pressure diaphragm hydrogen compressor to be used in hydrogen refueling stations. The compressor described in Nel's patent application is the same as PDC's hydrogen gas diaphragm compressor except for the shape of the gas chamber. Although the patent application does not disclose the confidential processes and know-how needed to design and operate a high pressure hydrogen diaphragm compressor suitable for use in industrial applications, PDC understands that Nel professes to have designed such a compressor and is seeking to market hydrogen fueling stations incorporating this technology to potential customers. PDC also understands that Defendants have attempted to recruit other PDC employees to work for Nel on its diaphragm compressor technology.

         Given the investment of time and resources it took for PDC to develop its high pressure diaphragm compressor technology, and the inability of any of PDC's competitors to commercialize such technology despite decades of effort to do so, PDC believes Nel could not have independently developed a high pressure diaphragm compressor technology in the space of just a few years without making use of the PDC trade secrets in its possession. Similarly, PDC believes Adams could not have purported to invent the technology claimed in the Nel patent application without making unauthorized use and disclosure of the PDC trade secrets he learned either during his employment with PDC or through his subsequent employment with Nel. PDC thus maintains that Defendants have made, and continue to make, unauthorized use of PDC's trade secrets in designing, developing, manufacturing, and selling or offering for sale their high pressure hydrogen gas diaphragm compressors. See Compl. ¶¶ 50-52, 55-56.

         In December 2017, PDC filed this action against Nel and Adams, asserting claims against both Defendants for violations of the DTSA, the Pennsylvania Uniform Trade Secrets Act (UTSA), 12 Pa. Cons. Stat. Ann. §§ 5301-5308, and the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), 73 Pa. Cons. Stat. Ann. §§ 201-1 et seq., and for conversion, unjust enrichment, conspiracy, and breach of contract. PDC also asserts a claim for breach of fiduciary duty of loyalty against Adams. Defendants have moved to dismiss PDC's statutory claims under the DTSA, the UTSA, and the UTPCPL, as well as PDC's conspiracy and breach of fiduciary duty claims. PDC has agreed to withdraw the UTPCPL claim, but opposes the balance of Defendants' motion.

         DISCUSSION

         To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), “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 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the facts pleaded “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The requirement that a claim be facially plausible “is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. The plaintiff must allege “enough facts to raise a reasonable expectation that discovery will reveal evidence” of the necessary elements of the plaintiff's claims. Phillips v. Cty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).

         Both the DTSA and the UTSA define misappropriation to include the “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 the “disclosure or use of a trade secret of another without express or implied consent.” 18 U.S.C. § 1839(5); 12 Pa. Cons. Stat. Ann. § 5302. Relying primarily on Bioquell, Inc. v. Feinstein, No. 10-2205, 2010 WL 4751709 (E.D. Pa. Nov. 23, 2010), Defendants argue PDC has failed to state a claim for misappropriation under either statute because the Complaint fails to identify the particular trade secret or secrets that Defendants allegedly misappropriated. The Court disagrees. In Bioquell, two employees of a supplier of hydrogen peroxide decontamination equipment and services left the company and went to work for a competitor, notwithstanding the non-compete provisions of their employment agreements. See Id. at *1-3. The former employer then sued the employees for, inter alia, violating the UTSA by wrongfully misappropriating confidential and proprietary information which the former employer contended qualified as trade secrets. See Id. at *6. The former employer also alleged the employees' new employer had induced the employees to engage in the misappropriation. See id. The defendants moved to dismiss the action, and the district court granted the motion as to the UTSA claims, observing:

Not once does Plaintiff identify these trade secrets nor discuss how said secrets were allegedly wrongfully misappropriated. Moreover, Plaintiff fails to allege in what manner [the competitor] allegedly induced [the employees] to violate the Act. Plaintiff makes no effort to identify what conduct [the employees] engaged in which leads it to this conclusion that [Plaintiff's] proprietary information has been and will continue to be used for [the competitor's] benefit.

Id.

         In this case, in contrast, the Complaint identifies in general terms the proprietary processes and designs that constitute PDC's trade secrets and alleges that both Nel and Adams had access to these trade secrets in the context of their business and employment relationships with PDC and pursuant to their respective NDAs with PDC. Although the Complaint does not specifically identify which of these trade secrets Defendants misappropriated, it explains how PDC believes Defendants used its trade secrets-i.e., to develop a high pressure hydrogen gas diaphragm compressor-and provides a factual basis for that belief, alleging that based on PDC's experience with the investment of time and resources necessary to develop a high pressure gas diaphragm compressor technology, and the inability of competitors who lack access to PDC's trade secrets to develop such technology despite decades of effort, it is implausible that Nel could have developed such technology in only a few years without exploiting PDC's trade secrets. These allegations are sufficient, at the pleading stage, to state a plausible misappropriation claim. Cf. DeRubeis v. Witten Techs., Inc., 244 F.R.D. 676, 680 (N.D.Ga. 2007) (recognizing a trade secret plaintiff “may have no way of knowing what trade secrets have been misappropriated until it receives discovery on how the defendant is operating”).

         Defendants also argue PDC's claims for violations of the DTSA should be dismissed because the Complaint does not allege any specific acts of misappropriation on or after the statute's May 11, 2016, enactment date. Again, the Court disagrees. As Defendants note, the DTSA applies to “any misappropriation of a trade secret . . . for which any act occurs on or after the date of enactment of this Act.” Defend Trade Secrets Act of 2016, Pub. L. No. 114-153, § 2(e), 130 Stat. 376, 381-82 (2016); see also, e.g., Brand Energy & Infrastructure Servs., Inc. v. Irex Contracting Grp., No. 16-2499, 2017 WL 1105648, at *3 (E.D. Pa. Mar. 24, 2017). Although the statute does not reach misappropriation occurring entirely before the May 11, 2016, enactment date, it has been widely interpreted to reach a defendant's continued use of trade secrets after the enactment date, even if the secrets were acquired earlier. See, e.g., Teva Pharm. USA, Inc. v. Sandhu, 291 F.Supp.3d 659, 674-75 (E.D. Pa. 2018) (observing that “one who acquired and used a trade secret before enactment of the DTSA and continues to use it after enactment is liable”); Quintiles IMS Inc. v. Veeva Sys. Inc., No. 17-177, 2017 WL 4842377, at *4 (D.N.J. Oct. 26, 2017) (holding “allegations of pre-enactment acquisition of a trade secret coupled with post-enactment continued use are sufficient to sustain a claim under the [DTSA] at the motion to dismiss phase” (citation omitted)); Cave Consulting Grp., Inc. v. Truven Health Analytics Inc., No. 15-2177, 2017 WL 1436044, at *4 (N.D. Cal. Apr. 4, 2017) (‚ÄúNothing suggests that the DTSA forecloses a use-based theory [of misappropriation] simply because the trade secret being used was misappropriated before the DTSA's ...


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