Suing for trade secrets theft? Your complaint’s gotta say something related to actual trade secrets.

Whenever you’re suing someone for stealing your trade secrets, you need to strike a balance in your complaint. You want to be as broad as possible (to allow wide latitude in discovery). And you want to be as generic as possible (so you don't publicly disclose your trade secrets).

But there are limits. And Vendavo, Inc. v. Price f(x) AG recognizes them.

Background on Vendavo, Inc. v. Price f(x)

Vendavo provides profit optimization and sales intelligence sollutions. Price f(x) is a startup founded by former Vendavo employees that offers competing software.

Vendavo sued two Price f(x) entities for trade secret misappropriation: Price f(x), Inc. and Price f(x) AG.

The insufficient trade secret allegations

Vendavo alleged misappropriation of trade secrets, which it defined in broad categorical terms. Specifically, it alleged its stolen trade secrets

include information not expressly covered by its patents. Such information includes its source code, customer lists and customer related information, pricing information, vendor lists and related information, marketing plans and strategic business developmentinitiatives, “negative knowhow” learned through the course ofresearch and development, and other information related to the development of its price-optimization software, including ideas and plans for product enhancements

But this wasn’t good enough. Sure, these categories “may qualify as protectable trade secrets . . . .” But they’re not “any kind of listing of particular trade secrets . . . .”

True, Vendavo didn't need to explain the details of its trade secrets. But it did need to describe them “with sufficient particularity to separate it from matters of general knowledge in the trade or of special persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.”

There complaint had another problem. It didn't distinguish between misappropriation by Price (f)x, Inc. and misappropriation by Price f(x) AG. Which is a problem because the allegations must be sufficient as to each defendant.

Given these problems, the court dismissed the complaint.

“On information and belief pleadings” won’t save you

Vendavo’s complaint alleged “on information and belief” that the former employees saved Vendavo trade secret data on USB drives before joining Price f(x). Some courts might have found this allegation enough to save a complaint.

Not this one. It still required a description of the actual trade secrets that were stolen.

There's more. The court recognized the dual nature of “on information and belief” pleadings. At best, it's surplusage. But it easily “creates a further inference that plaintiff may lack knowledge of underlying facts to support the assertion, and is instead engaging in speculation to an undue degree.”

California Code of Civil Procedure § 2019.210

Sometimes people try to use Civil Procedure Code § 2019.210 to create a higher standard for judging allegations in the complaint. Price f(x) tried this.

Yet the court wouldn’t buy it. That’s a state procedural rule for the California Uniform Trade Secrets Act. It doesn’t establish a pleading requirement in state court. So it certainly doesn’t apply in federal court when dealing with federal law.

Be careful relying on this. Some of it is dicta. And good lawyers could probably mount a strong argument coming out the other way in cases involving the California Uniform Trade Secrets.

DTSA Liability

The court also fell in line with prior courts on the scope of Defend Trade Secrets Act liability. It applies even when the misappropriation began before the law’s enactment, so long as the misappropriation continues after enactment.

The court also recognizes the geographical limitation. If a plaintiff is trying to apply it to conduct outside the US, the statute requires either

(a) that “the offender is a natural person who is a citizen or permanent resident alien of the United States, or an organization organized under the laws of the United States or a State or political subdivision thereof” or

(b) “an act in furtherance of the offense was committed in the United States.”

A complaint must allege facts showing this exists.