IP Law Daily, TRADE SECRETS—N.D. Cal.: Artificial intelligence data training company’s motion for a preliminary injunction granted, (Apr 15, 2026)

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

District court finds likelihood of success on merits, irreparable harm, balance of the equities, and public interest favoring granting a preliminary injunction.

In a misappropriation of trade secrets suit, the U.S. District for the Northern District of California granted the artificial intelligence data training company’s motion for a preliminary injunction against its competitor. The district court found that the company is likely to succeed on its misappropriation claims and sufficiently demonstrated the threat of irreparable harm. The district court concluded that the balance of equities and public interest favored a preliminary injunction narrowly tailored to prevent irreparable harm (Labelbox, Inc. v. Gujarati, No. 3:25-cv-10159-JSC (N.D. Cal. Apr. 10, 2026)).

Background. Labelbox, Inc. is a data annotation and management platform, providing high quality data to the world’s top Artificial intelligence (AI) laboratories developing machine learning technology. Labelbox had hired Kshitij Gujarati as a Senior Product Manager in 2024. When he began working at Labelbox, Gujarati signed a Proprietary Information and Inventions Agreement. (PIIA), which required him to hold in confidence and not disclose or, except within the scope of his employment, use any Proprietaiy Information. In March 2025, Labelbox promoted Gujarati to Head of Product and Director of Frontier AI, and he became one of Labelbox’s “most senior employees” “responsible for overseeing Labelbox’s industry-leading AI data-labeling operations and managing some of Labelbox’s largest client accounts.” Gujarati had access to Labelbox’s confidential, proprietary, and trade secret information, including “Labelbox’s internal repositories, technical system specifications, data from projects, customer lists, customer contracts, prospective customer targets, pitch decks, industry metrics, pricing information and vendor lists.”

V7 Co., V7 Ltd. (V7) “started as a data-labeling company focusing on labeling automation” but has grown into a full-stack document automation company. In April 2025, V7 began searching for a General Manager for Darwin who had existing relationships with AI labs. V7 worked with a third-party recruiter to contact Gujarati, and V7 Co-Founder and CEO Mr. Rizzoli shepherded the interview process. On July 30, 2025, V7 offered Gujarati a position “leading the Darwin business unit” beginning on September 1, 2025. Gujarati accepted V7’s job offer and informed Labelbox he was leaving, and his last day at Labelbox was September 1, 2025. Gujarati told Labelbox he was not going to a competitor and instead “was going to do contract work for a company in the electric vehicle component industry.” Meanwhile, beginning in June 2025, Gujarati began downloading and saving Labelbox documents to his personal computer, including: documents outlining Labelbox’s core technology including system architecture, software architecture, underlying data from projects, key system benchmarking data, training and process flow data, as well as customer lists with confidential revenue information, customer contact information, pricing sheets, assessments of customer projects, customer agreements, pitch decks, target customers, and other strategic business and marketing plans.

Labelbox sued (1) Gujarati and V7 for trade secret misappropriation under the Defend Trade Secrets Act (DTSA); and (2) Gujarati for breach of contract. Labelbox then filed an amended complaint adding Mr. Rizzoli as a defendant and asserting claims: (1) against all Defendants for trade secret misappropriation under the DTSA; (2) against Gujarati for breach of contract; (3) against V7 and Mr. Rizzoli for tortious interference with a contract; (4) against V7 and Mr. Rizzoli for tortious interference with prospective business advantage; (5) against V7 and Mr. Rizzoli under California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200; (6) against Gujarati for breach of the duty of loyalty; (7) against V7 and Mr. Rizzoli for aiding and abetting Gujarati’s breach of the duty of loyalty; (8) against all Defendants for conversion; and (9) against all Defendants for civil conspiracy. The court has granted Labelbox’s and Gujarati’s stipulations to stay proceedings between them until April 27, 2026 given ongoing settlement negotiations. In addition, V7 Defendants moved to dismiss the state law claims against them, and the court granted their motion with leave to amend.

Labelbox filed motion for a preliminary injunction against V7 Co., V7 Ltd., and Rizzoli (collectively, V7 Defendants). Labelbox also moved for leave to file out of time and for leave to file a motion for partial reconsideration, and V7 Defendants requested an evidentiary hearing related to the preliminary injunction motion and moved for leave to file a surreply.

Preliminary injunction. In granting a preliminary injunction, the district court applied the four-factor test from Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008), considering (1) the likelihood of success on the merits, (2) irreparable harm to the plaintiff, (3) balance of equities, and (4) public interest.

Likelihood of success on the merits. To succeed on a claim for misappropriation of trade secrets under the DTSA, a plaintiff must prove: (1) that the plaintiff possessed a trade secret, (2) that the defendant misappropriated the trade secret; and (3) that the misappropriation caused or threatened damage to the plaintiff. The district court found that Labelbox has described likely trade secret inf01mation within each of the documents V7 Defendants received. Further, V7 Defendants did not dispute Gujarati shared documents containing Labelbox’s asserted trade secrets with V7 employees, including Mr. Rizzoli, and therefore that V7 Defendants at some point acquired those documents. Labelbox also presented compelling evidence V7 Defendants knew or should have known Gujarati was breaching his duties of confidentiality to Labelbox. Thus, Labelbox was likely to succeed in proving V7 Defendants misappropriated their trade secrets at least by acquiring them from Gujarati. Accordingly, Labelbox has shown a likelihood of success on the merits of its DTSA claim.

Irreparable harm. Labelbox presented evidence that Gujarati downloaded significant confidential and likely trade secret information from Labelbox and shared at least some of it with V7 Defendants. The district court found that given such evidence, it is far better to instead put in prophylactic measures now to prevent misappropriation or further misappropriation rather than engaging in the “bonecrushing endeavor” of having to identify and enjoin parts of V7’s technology, business, and operations after trial in the absence of preliminary injunctive relief. Labelbox also showed that V7’s continued access to Labelbox’s trade secret information gives it an unfair and irreparable competitive advantage over Labelbox. In addition, in the absence of an injunction, Labelbox’s confidential and trade secret information will likely disseminate further among V7 employees and third parties, which would constitute irreparable harm. Therefore, Labelbox has shown it is likely to suffer irreparable harm absent a preliminary injunction.

Balance of equities. The district court noted that to determine whether the balance of equities weighs in favor of an injunction, courts “must balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief.” Here, Labelbox is likely to suffer irreparable harm absent an injunction and an injunction preventing V7 Defendants from using or disclosing Labelbox’s trade secrets places no burden on them beyond “what the law already requires.” Therefore, the balance of equities weighs heavily in Labelbox’s favor.

Public interest. The district court noted that public interest favors the protection of trade secrets, and because Labelbox has shown at least serious issues going to the merits of its misappropriation claims, the public has an interest in vindicating Labelbox’s rights in valid trade secrets warranting protection until trial. So, the public interest weighs in favor of an injunction.

Thus, the district court concluded that Labelbox has shown it is likely to succeed on the merits of its DTSA claim, it is likely to suffer irreparable harm absent preliminary relief, the balance of equities weighs in its favor, and an injunction is in the public interest. Labelbox was therefore entitled to a preliminary injunction narrowly tailored to prevent irreparable harm.

The district court also granted Labelbox’s motion for leave to file out of time, motion for leave to file a motion for reconsideration, and granted the V7 Defendants’ motion for leave to file a surreply. However, the V7 Defendants’ motion for an evidentiary hearing was denied.

The Case is No. 3:25-cv-10159-JSC.

Judge: Corley, J.

Attorneys: Corey D. Laplante (Steptoe LLP) for Labelbox, Inc. Benjamin Kneeland Riley (Bartko Pavia LLP) for Kshitij Gujarati.

Companies: Labelbox, Inc.

Cases: TradeSecrets CaliforniaNews AINews TechnologyInternet