IP Law Daily, TRADE SECRETS—D. Kan.: Orizon Aerostructures’ Defend Trade Secrets Act claim dismissed, (May 16, 2023)

By Thomas K. Lauletta, J.D.

The plaintiff failed to show that it possessed trade secrets, as required by DTSA.

A U.S. District Court in Wichita, Kansas granted summary judgment against the plaintiffs’ DTSA claim. The court stated that to the extent that the plaintiffs’ unique processes had value, they were not secrets. To the extent they were not widely known, the plaintiffs offered no evidence that these processes were not readily ascertainable by others in the aerostructures industry. With dismissal of the federal DTSA claim, the court declined to exercise supplemental jurisdiction over the plaintiffs’ state law claims (Orizon Aerostructures, LLC v. Crumley, May 11, 2023, Melgren, E.).

Plaintiff Orizon and plaintiff Orizon Management Incentive (OMI) are competitors in the aerostructures industry with the defendants. Defendant Crumley had been employed by Orizon from 2016 through January 27, 2023. In order to purchase shares of Orizon the defendant signed a non-compete agreement that restricted him from working for any competitors in the aerostructures industry.

After leaving Orizon, Crumley was hired by Valence Surface Technologies as the general manager of its parts processing facility. Valence is a service provider in the aerostructures industry that specializes in processing parts for higher tier companies. Contending that Crumley violated the noncompete agreement, the plaintiffs brought six state law claims and one claim for violation of the DTSA, which conferred federal jurisdiction. The plaintiffs also moved for a preliminary injunction to prevent Crumley from working for Valence.

On May 2, 2023, the Court held a hearing on plaintiffs’ motion for a preliminary injunction. At the hearing, the court instructed the parties to address two issues in particular: (1) whether plaintiffs had any “trade secrets” as defined by the DTSA and (2) whether Crumley’s employment at Valence caused unfair competition. At the hearing the plaintiff listed items that it argued were trade secrets: (1) the structure, organization, business initiatives, goals, and very existence of OMI; (2) the use of augmented reality in de-masking parts; (3) the process by which Orizon hangs parts during conductivity testing; (4) Orizon’s use of “statistical process controls” and “scoreboarding” techniques provided by Birst, a third-party business cloud software; (5) Orizon’s business goals and initiatives; (6) use of 3D printing; (7) Orizon’s “way to go to market” as a multi-layer aerostructures company; (8) the layout of Orizon’s facility; (9) racking techniques; (10) masking techniques; (11) Orizon’s customers; (12) pricing; (13) Orizon’s “lines of machining”; and (14) Orizon’s further undefined processes. The defendants argued that none of the above listed items qualified as trade secrets under the DTSA.

DTSA claim. The plaintiffs argued that their claim for violation of the DTSA would establish federal question jurisdiction under 28 U.S.C. § 1331, with supplemental jurisdiction under § 1367 extending to their state law claims. A core requirement of the DTSA is the existence of a trade secret that was violated. The court concluded that none of the plaintiffs’ proffered proprietary information qualified as a trade secret under DTSA. In so ruling the court found that to the extent Orizon’s unique processes had value, they were not secret. To the extent that they were not widely known, the plaintiffs offered no evidence that these processes were not readily available to others in the aerostructures industry. Further, the plaintiffs offered no evidence that its listed secrets possessed independent economic value.

The court stated that evidence offered at the hearing established that third party consultants and vendors were involved in creating or providing the processes involving 3D printing, scorekeeping and statistical process controls, use of augmented reality, racking techniques, and lines of machining. Because these processes stemmed from third parties and there is no evidence of exclusivity or confidentiality between those parties and Orizon, it appeared that these processes were readily ascertainable.

The court concluded that OMI’s operating agreement was not a trade secret because the plaintiffs’ complaint and amended complaint attached the agreement to court filings without sealing the document, thereby disclosing it to the public. The court also rejected the plaintiffs’ claim that Orizon’s business initiatives and goals constituted a trade secret for two reasons: that the plaintiffs presented no evidence that the proffered trade secrets possessed independent economic value and they presented no evidence that Crumley had disclosed the information to Valence, the second requirement under DTSA.

Based on the evidence the court concluded that the plaintiff failed to show that there was a genuine issue of material fact showing that the plaintiffs had any trade secrets and that Crumley disclosed that information to Valence. Accordingly, the court on its own initiative (sua sponte) granted summary judgment to the defendants on the plaintiffs’ DTSA claim.

State law claims. The court noted that the dismissed DTSA claim was the sole basis for federal jurisdiction. Because the court declined to exercise supplemental jurisdiction over the plaintiffs’ state law claims, these claims were dismissed.

Court action. The court granted summary judgment in favor of the defendants relating to the complaint’s DTSA and state law claims. The plaintiffs’ motion for a preliminary injunction was denied as moot.

The Case is No. 2:23-cv-02069-EFM.

Attorneys: Grace Colato Martinez (Bryan Cave Leighton Paisner, LLP) for Orizon Aerostructures, LLC and Orizon Management Incentive, LLC. Gary L. Ayers (Foulston Siefkin LLP) for Justin J. Crumley.

Companies: Orizon Aerostructures, LLC; Management Incentive, LLC

Cases: TradeSecrets KansasNews