On December 1, 2023, in Global Discovery Biosciences Corp. v. Harrington, et al., No. 2022-1132, a Vice Chancellor of the Delaware Court of Chancery ruled on the balance of a motion to dismiss brought back in June 2023 by two former CEOs-Dr. Harrington and Mr. Nuñez (together, “Defendants”)-who were accused of stealing Global Discovery Biosciences Corp.’s (“Global”) trade secrets and other company assets.

The lawsuit stems from Dr. Harrington’s formation of Global with a large investment from a seed investor in 2014. The purpose of the company purportedly was to monetize a testing procedure called “PULS,” which could identify early heart disease in patients. A dispute allegedly broke out in 2016 between Dr. Harrington and the investor as to who owned the controlling interest in Global. Apparently believing he was going to lose that dispute, Dr. Harrington allegedly transferred Global’s assets, including PULS-related testing data and proprietary algorithms, to other entities within his control, one of which was being led by Nuñez. Once Global’s assets were plundered, Dr. Harrington purportedly forced Global to file a fraudulent bankruptcy.     

In the ensuing Chancery Court suit, Global asserted eleven causes of action, including a trade secrets misappropriation claim under the Delaware Uniform Trade Secrets Act (“DUTSA”). Defendants moved to dismiss several of these causes of action based on two theories: the individual causes of action, including under DUTSA, failed to state a claim; and assuming the DUTSA claim survived, it preempted all or part of the remaining common law claims. 

With respect to the DUTSA claim, Defendants argued that the claim should be dismissed because Global identified the trade secrets at issue as the “information behind PULS,” which was allegedly insufficient. The Chancery Court found in an August 2023 bench ruling that the trade secrets misappropriation claim was sufficiently pled, and it rejected Defendants’ preemption argument without prejudice. The court, however, requested supplemental briefing regarding, among others, Global’s claims of usurpation of corporate opportunity and breach of fiduciary duty. These claims were the subject of the Chancery Court’s most recent opinion, where the court granted in part and denied in part the remainder of Defendants’ motion to dismiss. In short, the court found that Global’s claims of usurpation of corporate opportunity and breach of fiduciary duty could proceed because the former was sufficiently pled, and the latter was not collaterally estopped from being litigated in the Chancery Court action. This lawsuit underscores the value of trade secrets to a business’s overall intellectual property portfolio, while highlighting that disputes involving trade secrets often involve complex factual scenarios where cross-disciplinary legal expertise is needed. Stay tuned for further developments in this case, including whether the court rules definitively on the DUTSA preemption issue.