Advanced Fluid Systems, Inc. v. Huber
2014 U.S. Dist. LEXIS 82562, 28 F.Supp.3d 306, 2014 WL 2770231 (2014)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under the Pennsylvania Uniform Trade Secrets Act (PUTSA), a plaintiff is not required to have formal legal ownership of a trade secret to bring a misappropriation claim. Lawful possession of the trade secret is sufficient to maintain a cause of action.
Facts:
- Advanced Fluid Systems, Inc. (AFS) designed and installed a hydraulic system (TELHS) for a rocket launch facility under a contract with the Virginia Commercial Space Flight Authority (VCSFA).
- The contract assigned 'legal ownership' of all inventions and works to VCSFA, but AFS retained physical possession and control of the thousands of engineering drawings, diagrams, and proprietary software, keeping them on password-protected servers.
- Kevin Huber was an AFS salesman and engineer with access to this confidential information. His former supervisor, Thomas Aufiero, had left AFS to become a manager at competitor Livingston & Haven, LLC (L & H).
- While still an AFS employee, Huber allegedly began working with L & H, receiving access to its private network and an L & H email address.
- In September 2012, Huber, while still at AFS, allegedly submitted an unusually high bid for AFS on a TELHS upgrade project while secretly and simultaneously submitting a much lower bid on behalf of L & H, which won the contract.
- In October 2012, after announcing his resignation, Huber allegedly downloaded significant amounts of AFS's confidential information, including project files and pending quotes, onto an external drive.
- After resigning from AFS, Huber formed his own company, Integrated Systems and Machinery, LLC (INSYSMA), and allegedly used AFS's engineering drawings and passed off AFS's TELHS project as his own on the INSYSMA website.
- Upon retrieving Huber's company laptop and phone after his departure, AFS discovered he had attempted to erase all data from the devices.
Procedural Posture:
- Advanced Fluid Systems, Inc. (AFS) filed a complaint against Livingston & Haven, LLC (L & H), its principals, former employee Kevin Huber, and his new company, INSYSMA, in the U.S. District Court for the Middle District of Pennsylvania (a court of first instance).
- AFS alleged violations of the Lanham Act, the Computer Fraud and Abuse Act (CFAA), the Pennsylvania Uniform Trade Secrets Act (PUTSA), and various common law claims.
- Defendants filed motions to dismiss the complaint for lack of jurisdiction, improper joinder, improper venue, and for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6).
- The court previously issued an order denying the defendants' motions on jurisdictional, joinder, and venue grounds.
- AFS filed an amended complaint, which became the subject of the current Rule 12(b)(6) motions to dismiss for failure to state a claim.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the Pennsylvania Uniform Trade Secrets Act (PUTSA) require a plaintiff to have legal ownership of a trade secret, rather than just lawful possession, to maintain a claim for misappropriation?
Opinions:
Majority - Chief Judge Christopher G. Conner
No. The Pennsylvania Uniform Trade Secrets Act (PUTSA) does not require a plaintiff to have legal ownership of a trade secret to bring a misappropriation claim; lawful possession is sufficient. The court's reasoning is that the value of a trade secret flows from its secrecy, not from a formal legal title. The court adopted the persuasive reasoning of the Fourth Circuit in DTM Research, LLC v. AT & T Corp., which held that a party 'owns' a trade secret when it knows of it, as long as it remains a secret. Misappropriation is not only an intrusion on property but also a breach of confidence. Since AFS alleged that it remained in physical possession of the trade secrets, continued to use them in a confidential manner, and took reasonable steps to maintain their secrecy, its lawful possession is sufficient to maintain a cause of action under PUTSA, even though legal title had been transferred to its client.
Analysis:
This decision aligns Pennsylvania law with the modern, possession-based theory of trade secret protection, following the influential Fourth Circuit precedent in DTM Research. By rejecting a strict ownership requirement, the court broadens the class of potential plaintiffs under PUTSA, enabling contractors, developers, and licensees who create and possess secret information without retaining formal legal title to protect that information from misappropriation. This ruling emphasizes that the essence of a trade secret is its secrecy and the confidential relationship surrounding it, rather than traditional property law concepts of title, which will impact future cases involving complex intellectual property assignments.
