On November 9, 2023, in Ho-Ho-Kus, Inc. v. Sucharski, No. 2:23-cv-01677, the United States District Court for the District of New Jersey found that Ho-Ho-Kus, Inc. (“HHK”) failed to show a trade secret existed with adequate specificity to justify granting a TRO or a preliminary injunction, but nevertheless denied a motion to dismiss arguing that the company failed to sufficiently plead the existence of a trade secret. 

Background

HHK, an aerospace design and manufacturing company, alleged its former president misappropriated its trade secrets.  HHK asserted that its former president had access to all of HHK’s proprietary information and inevitably disclosed it.  HHK provided an eight-point list with a short description of each area of proprietary information they alleged he possessed. This list included: (1) manufacturing blueprints; (2) third-party manufacturing blueprints; (3) sales blueprints; (4) work order/processing specifications; (5) material specifications; (6) computer numerical control programming; (7) proprietary tools; and (8) inspection reports. The descriptions also provided a brief, general description of the associated area.  For example, “Manufacturing Blueprints: detailed manner and method by which the component will be designed and manufactured, The Manufacturing Blueprints contain highly specific and technical information, including heat tolerance levels, load requirements.”

After the former president refused to sign a form verifying he had not misused HHK’s proprietary information, HHK terminated his employment.  Less than a week later, he started a rival aerospace company.  HHK filed suit, asserting trade secret misappropriation in violation of the Defend Trade Secrets Act and the New Jersey Trade Secrets Act.  It also filed an application for a TRO and a preliminary injunction.

TRO & Preliminary Injunction

The court denied HHK’s application for a TRO and preliminary injunction, finding HHK failed to sufficiently identify the trade secrets such that a narrowly tailored injunctive relief could be issued.  More specifically, the court found HHK failed to define the trade secrets to satisfy a “probability standard,” which requires “a plaintiff [to] define their trade secret with appropriate precision to ensure a tailored order, and to allow the Court to accurately determine if there is a likelihood of success on the claim.”  The court explained that the company’s generalized list was insufficient, as the probability standard required an indication of what documents the former employee had in his possession at the time and how these documents could be distinguished from publicly available information.

Motion to Dismiss

Still, the court held that the proprietary list HHK alleged was sufficient to show it was plausible that a trade secret existed, thus denying the former president’s motion to dismiss.  The court noted that, at the pleading stage, a plaintiff need only establish enough information to put the defendant on notice of the boundaries the trade secrets exist within.  Here, the list HHK provided sufficed when tied to how the information could have been stolen and the fact that the former president had access to it.  As to the misappropriation claim, the court found “HHK is only expected to provide circumstantial evidence at this stage of pleading, in order to allow them to allege plausible claims without the benefit of discovery.  HHK has met this burden by alleging both that [the plaintiff] had access to secret information, and that the information was used to [his new company’s] benefit.”  The court considered circumstantial evidence of the former president’s access and behavior and found that this created a plausible claim of misappropriation and inevitable disclosure.

Implications

This decision illustrates that courts may apply different standard for identifying trade secrets in the contexts of a motion to dismiss and an application for emergency injunctive relief.

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Photo of L.D. Jones L.D. Jones

Larenz Jones is an associate in the Labor Department and a member of the Employment Litigation & Counseling Group.

Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.