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.