IP Law Daily, TRADE SECRETS—N.C. Super.: Drone manufacturer’s trade-secret claims largely survive former executive’s dismissal bid, (Jun 4, 2026)

By Saurabh Kashyap, B.A., M.A., LL.B., LL.M.

The company adequately alleged misuse of confidential information to disrupt investor negotiations, but certain alleged trade secrets were insufficiently pled.

A state trial court in North Carolina has largely denied a former executive’s motion to dismiss counterclaims brought by a drone manufacturer, allowing claims for breach of contract, misappropriation of trade secrets, and tortious interference with prospective economic advantage to proceed. The court concluded that the company sufficiently alleged that the former executive disclosed confidential information and trade secrets to potential investors in an effort to undermine financing transactions and company leadership. However, the court dismissed claims based on certain alleged trade secrets, found that the company failed to adequately plead an enforceable noncompete violation and dismissed the defamation claim with prejudice because the alleged statements were not pleaded with sufficient specificity (Kadah v. Paladin Drones, Inc., No. 25CV050925-590 (N.C. Super. Jun. 2, 2026)).

Background. Plaintiff and counterclaim defendant Khaled Kadah is a former executive of Paladin Drones, Inc., a Texas-based manufacturer of emergency-response drones and related software and data-management platforms for first responders. During his employment, Kadah signed a Confidential Information and Invention Assignment Agreement requiring him to protect confidential information, return company property upon termination, and comply with a one-year noncompetition covenant.

According to Paladin, Kadah later became dissatisfied with the leadership of chief executive officer Divyaditya Shrivastava and sought to influence the company’s direction. The company alleged that, despite instructions not to participate in fundraising discussions, Kadah contacted potential investors, including Canvas Ventures, Gradient Ventures, and Long Journey Ventures, and disclosed confidential information, trade secrets, and negative information about company management. Paladin claimed that those communications disrupted ongoing financing efforts, causing Canvas and Gradient to decline investment opportunities and prompting Long Journey to reduce its proposed investment terms.

After leaving Paladin and joining Flock Safety, Kadah filed suit against the company. Paladin responded with counterclaims for breach of contract, trade-secret misappropriation, tortious interference with prospective economic advantage, and defamation, alleging that Kadah used confidential information and investor relationships to damage the company and its fundraising efforts. Kadah then moved to dismiss the counterclaims.

Contract claims. Kadah conceded the agreement's validity but argued that the company failed to identify conduct constituting a breach. The court disagreed. It held that Paladin adequately alleged that Kadah engaged in unauthorized communications with Canvas, Gradient, and Long Journey, and that Kadah disclosed confidential information covered by the agreement. The company identified six categories of allegedly protected information, including customer, partner, investor, and strategic business materials. The court concluded that those allegations were sufficient to place Kadah on notice of the claimed contractual violations and therefore stated a viable breach-of-contract claim. Citing Wells Fargo Insurance Services U.S.A., Inc. v. Link, 372 N.C. 260 (2019), the court noted that claims based on breaches of confidentiality agreements need not satisfy the heightened pleading standards applicable to trade-secret claims.

The court also permitted Paladin to proceed on allegations that Kadah deleted information from his company-issued computer before resigning. Because the agreement required the return of company records and data, the court held that allegations that Kadah deleted information rather than returning it sufficiently stated a claim for breach of contract.

Noncompete claim. However, the court reached a different conclusion regarding the agreement's noncompetition provision. Applying Texas law pursuant to the contract's choice-of-law clause, the court found the covenant facially overbroad.

The agreement imposed a nationwide restriction for one year and prohibited Kadah from contributing knowledge “directly or indirectly, in whole or in part” to any competitor in the public-safety sector. Relying on Forum US, Inc. v. Musselwhite, 2020 Tex. App. LEXIS 5863 (Tex. App. July 28, 2020), the court observed that industry-wide restrictions are generally unreasonable because they restrain more activity than necessary to protect an employer's legitimate interests. The court further found that Paladin failed to plead facts concerning Kadah's responsibilities, geographic scope of work, or other information necessary to determine whether the covenant could be reformed into an enforceable restriction. It therefore dismissed, without prejudice, the breach-of-contract claim to the extent it was based on the alleged noncompete violation.

Trade secret claims. Then, the court examined whether Paladin sufficiently identified protectable trade secrets and adequately alleged misappropriation. Paladin identified six categories of purported trade secrets: customer list, prospective client list, partner list, go-to-market strategy, technology strategy, and investor list. The court evaluated each category separately under the standards articulated in Krawiec v. Manly, 370 N.C. 602 (2018), which requires trade secrets to be identified with sufficient particularity. The court found that the customer list, which allegedly included purchase histories, buying preferences, and internal customer insights, was sufficiently described to qualify as a potential trade secret. The court likewise found that Paladin adequately alleged that its go-to-market and technology strategies derived value from their confidentiality and were not readily ascertainable from public sources. The court also allowed claims based on confidential pricing information contained in the company's partner list to proceed.

However, the court dismissed claims based on the prospective client list and investor list. It found that Paladin failed to allege facts showing that those lists contained non-public information or were not readily ascertainable through independent efforts. The court also dismissed trade-secret claims based solely on the identities of Paladin's partners, finding that the company failed to explain why those identities could not be discovered through ordinary industry contacts and trade shows.

The court further held that Paladin adequately alleged misappropriation. The company asserted that Kadah had access to the information during his employment, disclosed it to potential investors without authorization, and retained confidential information after leaving the company. Citing Power Home Solar, LLC v. Sigora Solar, LLC, 2021 NCBC LEXIS 55 (N.C. Super. Ct. May 12, 2021), the court concluded that those allegations were sufficient at the pleading stage to support claims under both state and federal trade-secret statutes.

Investor interference. The court also refused to dismiss Paladin's claim for tortious interference with prospective economic advantage. Kadah argued that any communications with investors were privileged because he remained a corporate officer at the time. The court found that Paladin adequately alleged that Kadah acted outside the scope of any privilege by contacting investors after being instructed not to do so and by attempting to interfere with financing transactions for personal reasons. The company further alleged that his actions caused Canvas and Gradient to abandon potential investments and resulted in less favorable terms from Long Journey. Taking those allegations as true, the court found that Paladin sufficiently pled causation and wrongful interference.

Defamation. Finally, the court dismissed Paladin's defamation claim with prejudice. The company alleged that Kadah told investors, “in substance,” that Paladin was being financially mismanaged and that its chief executive was incompetent. The court held that those allegations failed to satisfy North Carolina's heightened pleading requirements for defamation claims.

The Case is No. 25CV050925-590.

Judge: Houston, M.

Attorneys: Mark P. Henriques (Womble Bond Dickinson (US) LLP) for Khaled Kadah. Joseph Matthew Gorga (Nelson Mullins Riley Scarborough LLP) for Paladin Drones, Inc.

Companies: Paladin Drones, Inc.

Cases: TradeSecrets NorthCarolinaNews