IP Law Daily, TRADE SECRETS—D. Del.: Dismissal granted in part in debt management system dispute, (Oct 29, 2025)

By Kevin M. Finson, J.D.

Claims for trade secret misappropriation were dismissed as to back-end software because the alleged misappropriator was not alleged to have had access to that information.

A software company stated claims for trade secret misappropriation against a former customer as to client-facing parts of its program, the U.S. District Court in Wilmington has held. The company’s theory of the case did not include allegations that the former customer or its co-conspirator ever had access to back-end information, so those claimed secrets could not have been misappropriated (Chatham Financial Corp. v. Milhaus, LLC, No. 25-cv-00157-SB, (D. Del. Oct. 28, 2025)).

Chatham Financial Corp. (Chatham) was the developer and seller of a software platform used by companies with large real estate holdings to manage their debts. Milhaus, LLC (Milhaus) was a developer of mixed-use residential buildings and a customer of Chatham. Milhaus signed an agreement obligating it to protect Chatham’s information and to refrain from using its access to Chatham’s product to build a competitive or substitute product. Chatham contracted with Pillar Markets to develop a replacement product, and gave an employee of Pillar an account with Chatham’s service, which was allegedly used to copy Chatham’s product.

Chatham brought suit against both Milhaus and Pillar for misappropriation of trade secrets under the Defend Trade Secrets Act (DTSA) and related state law claims. Both defendants moved to dismiss.

Trade secrets. The court found that Chatham’s alleged secrets included both the outward-facing interface used by customers and the back-end or “guts” of the application, consisting of source code and private algorithms. The court held that the complaint plausibly alleged that certain elements of the interface were trade secrets; they were not accessible to just anyone, but only pre-approved users, and were subject to confidentiality provisions in the user agreements signed between Chatham and its authorized users. The back-end source code and algorithms was also properly alleged to be a trade secret, but there was no allegation in the complaint that either Milhaus or Pillar ever obtained access to the back-end. The court granted the motion to dismiss as to the back-end only.

State-law claims. The court found that the Pennsylvania misappropriation of confidential information claims were well-pleaded, noting that this cause of action had lesser requirements than trade secrets. Tortious interference claims against Pillar were dismissed because it was not alleged that Pillar caused Milhaus to breach the contract with Chatham, but rather that Milhaus had approached Pillar with the already-existing intention to breach its agreement with Chatham. Injunctive relief to cause the defendants to cease accessing the Chatham product was moot because that access no longer existed.

The court granted the motion to dismiss in part.

The Case is No. 25-cv-00157-SB.

Judge: Bibas, S.

Attorneys: Kelly E. Farnan (Richards Layton & Finger, PA) for Chatham Financial Corp. Andrew Colin Mayo (Ashby & Geddes) and Brian S. Sullivan (Dinsmore & Shohl LLP) for Milhaus, LLC and Pillar Markets Inc.

Companies: Chatham Financial Corp.; Milhaus, LLC; Pillar Markets Inc.

Cases: TechnologyInternet TradeSecrets DelawareNews