IP Law Daily, TRADE SECRETS—D. Del.: Trade Secret case can proceed against Snap and its subsidiary over map technology, (Sep 23, 2022)

By Donielle Tigay Stutland, J.D.

You Map’s amended complaint sufficiently plead facts to infer that trade secrets were misappropriated when Zenly employees covertly beta tested the YouMap app.

A case brought by You Map, Inc. alleging trade secret misappropriation can proceed against Snap, Inc. and its subsidiary Zenly, Inc. A Delaware court adopted a report by a magistrate judge, which found that You Map’s amended complaint sufficiently pleaded facts to allege that Zenly employees could have misappropriated trade secrets when they covertly signed up to be beta testers of You Map’s mobile application. The Delaware court did dismiss claims against French company Zenly S.A.S., and three of its employees who were French citizens for lack of personal jurisdiction. Additionally, the court dismissed a claim for tortious interference with contract alleged again Snap, finding that there were no facts to show that Snap had knowledge of any confidentiality agreements between the beta tester employees of Zenly and You Map (You Map, Inc. v. Snap Inc., September 22, 2022, Connolly, C.).

Background. You Map is the maker of a mobile application called YouMap, which uses mapping technology to show what is happening in an area. In 2016, YouMap offered its app to beta testers, and users had to accept certain terms when they became beta testers, including agreeing to confidentiality, non-use, and nondisclosure obligations. Zenly Inc. is a Delaware corporation and a subsidiary of Zenly S.A.S., a French limited liability company. The co-founder of Zenly sent a request to YouMap asking if Zenly employees could participate in the beta test of the YouMap app and You Map did not respond. Subsequently, six Zenly employees signed up to be beta testers, by supplying non-Zenly email addresses, and some even supplied fake names for the beta test.

You Map alleges that prior to participation in the beta testing of YouMap, Zenly’s proprietary app was not capable of geographically mapping semantic information for its users and did not use any of Plaintiff’s trade secret technology; but two days after the beta testing “Zenly released an update to its ZENLY mobile software application that contained YouMap’s Trade Secret Technology.” Shortly thereafter, Snap acquired Zenly. You Map alleges that its trade secret technology was then incorporated into the Snapchat app as part of a new mapping feature called Snap Map, which Snap released in June 2017.

In February 2021, the magistrate issued an original report and recommendation which concluded that You Map’s original complaint failed to plausibly allege a trade secret and failed to plead what about its “technologies” was a trade secret. YouMap amended its complaint and the magistrate provided another report and recommendation in July 2021.

Personal jurisdiction. The court followed the magistrate’s recommendation to dismiss the French parent corporation as well as the French citizen defendants for lack of personal jurisdiction. The court concluded that it was insufficient to allege jurisdiction based on the fact that You Map software is hosted on servers in the U.S.

Trade secret misappropriation. The magistrate’s report indicated that the amended complaint now describes the trade secrets as including YouMap’s (1) “adaptive visualization system/method/process and software algorithms”; (2) “ranking and relevancy system/method/process and software algorithms”; and (3) “interactive user interface system/method/process and software algorithms.” The magistrate’s report concluded that the amended complaint now sufficiently identifies trade secrets and the new complaint plausibly alleges misappropriation.

The complaint alleges that least one Zenly employees “downloaded, installed, and used the beta version of YouMap” and that “YouMap was able to be decrypted, reverse engineered, and analyzed using software tools.” The magistrate concluded that the complaint plausibly alleged that Zenly employees had access to the alleged trade secrets. The magistrate noted that at the pleadings stage You Map need not get into the detail of “how the individuals were able to gain access to YouMap’s code and algorithms from downloading the beta version.”

Additionally, the magistrate determined that the allegations that Zenly’s app did not have the same functionalities of the YouMap app until after the Zenly employees’ alleged participation in YouMap’s beta testing was sufficient for You Map to plausibly allege misappropriation at this stage of litigation.

The magistrate also rejected Snap’s contention that You Map failed to show it played any role in any alleged wrongdoing by Zenly employees. The magistrate noted that because Snap later obtained and used the trade secrets that are alleged to have been misappropriated by Zenly, it is sufficient that Snap is alleged to use trade secrets that it knows were obtained through improper means. The district court adopted the magistrate’s recommendations and denied the motion to dismiss against Zenly, Inc. and Snap with respect to the claim for trade secret misappropriation.

Tortious interference. The court agreed with the magistrate’s recommendation to dismiss the claim for tortious interference against Snap. To plead a claim for tortious interference with contract You Map had to show (1) a contract, (2) about which defendant knew, and (3) an intentional act that is a significant factor in causing the breach of such contract, (4) without justification, (5) which causes injury.

The court concluded that You Map did not allege any facts to show that Snap knew of the confidentiality agreements between Zenly's employees and You Map, only conclusory allegations that Snap knew of the confidentiality agreements Zenly's employees signed to participate in the beta testing of You Map's product. The court agreed with the magistrate that You Map failed to state a claim for tortious interference.

The Case is No. 20-162-CFC.

Attorneys: Stamatios Stamoulis (Stamoulis & Weinblatt LLC) for You Map, Inc. Jonathan A. Choa (Potter Anderson & Corroon, LLP) for Snap Inc.

Companies: You Map, Inc.; Snap, Inc.; Zenly S.A.S.; Zenly, Inc.

Cases: TechnologyInternet TradeSecrets DelawareNews