IP Law Daily, TRADE SECRETS—D. Mass.: Florida-based digital payment and software solutions companies can pursue misappropriation claims against competitor, (Nov 21, 2025)

By Carolin Dennis, B.Sc., LL.B., LL.M.

Florida-based companies providing digital payment and software solutions for the hospitality industry stated a claim for trade secret misappropriation against a competitor who employed improper means to obtain and disclose the companies’ trade secrets.

Florida-based companies Gratuity Solutions, LLC, and Gratuity, LLC (collectively, Gratuity) plausibly stated claims against its competitor Toast, Inc., for misappropriation of trade secrets, and intentional interference with contract claims, the federal district court in Massachusetts has held. In denying a motion to dismiss, the district court determined that Gratuity plausibly alleged that it possessed trade secrets, that it took reasonable steps to protect its trade secrets, and that Toast misappropriated those trade secrets. Gratuity also plausibly alleged that Toast conspired with its Customer Advisory Board members, who were also customers of Gratuity, to misappropriate Gratuity’s trade secrets, and that Toast encouraged those board members to disclose Gratuity’s trade secrets to Toast, in violation of their contractual obligations of confidentiality (Gratuity Solutions, LLC v.Toast, Inc., No. 1:25-cv-10948-JEK (D. Mass. Nov. 18, 2025)).

Background. Gratuity owns U.S. Patent No. 9,741,050 (the ’050 patent), which discloses components of a gratuity management system. Gratuity’s PayDayPortal system is its software product based on the invention claimed in that patent. The protected features include customer-specific recipes used depending on each customer’s specific equipment, requirements, needs, and preferences. Access to these purported trade secrets on Gratuity’s PayDayPortal system is restricted to customers who sign the company’s joint user agreement, which contains a confidentiality provision prohibiting the disclosure of such secrets.

Toast offers restaurant management products and services. In August 2016, Gratuity approached Toast to discuss a business partnership that would enable certain customers of Toast to use Gratuity’s platform. That same month, the companies executed a non-disclosure agreement, which facilitated their sharing of some trade secrets and other confidential information, but did not grant Toast access to Gratuity’s PayDayPortal system. The parties entered into another non-disclosure agreement. Later, Toast was no longer interested in acquiring Gratuity. Toast then launched its own gratuity management software, called “Toast Tips Manager,” in November 2021. In 2022, this software allegedly began providing certain features resembling those only available to Gratuity’s customers through its PayDayPortal system, even though Toast was not a customer of Gratuity and thus lacked access to that system. Toast also published Gratuity’s trade secrets on Toast’s website, including in videos that provide the public with detailed ‘how-to’ instructions to design and implement a gratuity management system using Gratuity’s confidential and proprietary trade secrets and know-how.

Gratuity filed a lawsuit in this court in September 2022 (2022 Massachusetts action), alleging that Toast had infringed the ’050 patent and U.S. Patent No. 10,726,436 (the ’436 patent) and had breached the two non-disclosure agreements. Gratuity also filed a lawsuit in August 2024 in the United States District Court for the Middle District of Florida asserting four claims: misappropriation of trade secrets in violation of the Defend Trade Secrets Act (DTSA), and the Florida Uniform Trade Secrets Act (FUTSA); civil conspiracy to misappropriate Gratuity’s trade secrets; and intentional interference with contract. Toast moved to dismiss that complaint for improper claim splitting, for lack of personal jurisdiction, or for failure to state a claim. Alternatively, Toast moved to transfer the case to this Massachusetts court pursuant to the first-to-file rule. The Florida Court granted Toast’s motion to transfer the action. Once the case arrived in the District of Massachusetts, Toast filed a new motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Gratuity filed a motion in the 2022 Massachusetts action to consolidate that case with this case, which was granted.

Misappropriation of trade secrets. The district court held that Gratuity sufficiently stated a claim for trade secrets misappropriation by taking steps to preserve the secrecy of its trade secrets through a non-disclosure agreement or joint user agreement. To establish a claim for misappropriation of trade secrets under Massachusetts law, a plaintiff must show that (1) the information at issue qualifies as a trade secret, (2) it took reasonable steps to preserve the secrecy of the information, and (3) the defendant used improper means, in breach of a confidential relationship, to acquire and use the trade secret. The district court also recognized that Gratuity took reasonable steps to maintain the secrecy of its PayDayPortal system by requiring a party to sign either a non-disclosure agreement or its joint user agreement, both of which contain confidentiality provisions prohibiting the disclosure of such secrets. Gratuity further safeguarded its trade secrets by employing user accounts and passwords, two-tier authentication, and encryption. Additionally, access to the trade secrets on Gratuity’s PayDayPortal system is restricted to customers who sign its joint user agreement.

The district court noted that Toast recently started offering more feature sets that are nearly identical to those found in Gratuity’s commercial product and only available through its confidential PayDayPortal system and it published information about those feature sets on its website. The district court found that Toast would not have been able to offer the nearly identical features now available on its Toast Tips Manager product without misappropriating Gratuity’s trade secrets because had Toast developed these features independently, it is unlikely that it would use nearly identical terminology, definitions, workflows and ordering of configuration steps as found in Gratuity Solutions’ PayDayPortal system. The district court also held that Gratuity’s complaint plausibly identified the source of this alleged misappropriation as its customers who also are or were members of Toast’s Customer Advisory Board. Since Gratuity sufficiently stated misappropriation claims under the DTSA and FUTSA, Toast’s motion to dismiss those claims was denied.

Common law tort claims. Additionally, the district court ruled that Gratuity sufficiently stated a claim of intentional interference with contract under Massachusetts law. According to Gratuity’s complaint, certain members of Toast’s Customer Advisory Board were required to maintain the confidentiality of Gratuity’s trade secrets pursuant to its joint user agreement. The complaint also identified fifteen of Toast’s Customer Advisory Board members, who are, or were, in the past, also customers of Gratuity. Consequently, Toast gained access to Gratuity’s highly valuable trade secrets from such members, who provided insights and feedback that help inform Toast’s product roadmap. These factual allegations support the reasonable inference that Toast knew or should have known that certain members of its Customer Advisory Board were under obligations and duties to protect Gratuity’s trade secrets. Accordingly, Toast’s motion to dismiss was denied.

The Case is No. 1:25-cv-10948-JEK.

Judge: Kobick, J.

Attorneys: Alan A. Wright (Devlin Law Firm) for Gratuity Solutions, LLC and Gratuity, LLC. Srikanth K. Reddy (Goodwin Procter, LLP) for Toast, Inc.

Companies: Gratuity Solutions, LLC; Gratuity, LLC; Toast, Inc.

Cases: TradeSecrets TechnologyInternet MassachusettsNews