So you’ve been sued for misappropriating trade secrets: How to respond, step 2 [Gatan v. Nion]

You’ve been sued for misappropriating trade secrets. What do you do?

Step 1’s been discussed in other posts: you move to dismiss their complaint. Definitely you move to dismiss all the non-trade secret claims as preempted. Maybe you move to dismiss the trade secret claim itself as not plausible.

But what’s step 2?

Bring the fight to the plaintiff’s house. You countersue. You put the plaintiff’s skin in the game.

And the latest ruling in Gatan v. Nion is a good case to help you do that.

Here’s the gist of Gatan. Gatan sued Nion for allegedly misusing confidential information. Nion sued back. In its countersuit, Nion asserted that the noncompete in the two entities’ contract violated California’s unfair competition law because the noncompete was illegal. And Nion also asserted antitrust claims on the theory that Gatan’s trade secret case was baseless.

The court allowed these counterclaims to proceed to discovery.

With the unfair competition counterclaim, the Gatan court had previously concluded the non-compete in that action was unenforceable under California Business and Professions Code Section 16600. And now the court concluded that this illegal non-compete provides a basis for an unfair competition claim.

As for the antitrust claim, the court sets a low bar. If you can allege that the plaintiff’s suit is baseless and was brought for the purpose of restraining competition, you’ve got an antitrust claim.

Gatan is also useful if you want to allege an antitrust claim on the theory that the plaintiff entered an agreement to restrain trade. Per Gatan, we don’t need to get into any details on the harm to the competition at the outset. All you need to do is plausibly allege the existence of an agreement to restrain trade, along with a harm from the plaintiff’s exercising monopoly power. Nothing more.