IP Law Daily, TRADE SECRETS—S.D. Ohio: Identity of single customer did not constitute misappropriation of a trade secret, (Sep 29, 2025)

By Linda O’Brien, J.D., LL.M.

The alleged poaching of a single customer by a credit card surcharge solutions company rather than misappropriating a competitor’s large customer list did not constitute theft of a protectable trade secret.

In a misappropriation of trade secrets and breach of contract suit by a payment processing company against a credit card surcharge minimization solution provider, the payment processor failed to identify a protectable trade secret under Defend Trade Secrets Act, the federal district court in Columbus, Ohio, Virginia has ruled. The alleged poaching of a single customer did not constitute theft of a protectable trade secret. In addition, the court declined to exercise supplemental jurisdiction over the remaining state law claims. Thus, the motion to dismiss was granted (Prospay, Inc. v. CardX, LLC, No. 2:25-cv-00140-EAS-EPD (S.D. Ohio. Sept. 25, 2025)).

Founded in Florida, Prospay, Inc. is a payment processing, banking, and financial services company serving businesses in the U.S. and Canada. Based in Illinois, CardX, LLC provides credit card surcharge compliance and minimization solutions to businesses. In 2018, Prospay and CardX entered into a Sales Partner Agreement (SPA) under which Prospay located merchants in need of technology to process credit card payments and sold CardX software to those merchants. Prospay entered into contracts with the merchants, who submitted CardX’s client application and were approved by CardX. The merchants paid fees to Prospay, which retained a percentage of those fees before transmitting the balance to CardX. Under the SPA, Prospay owned the accounts, agreements, records, and documents for each merchant and, upon the agreement’s termination, CardX was obligated to continue paying commissions to Prospay for merchants who continued to use CardX technology.

In November 2021, CardX was acquired by Stax Payments, which allowed CardX to provide processing services to merchants. CardX contacted one merchant and offered to cover the transaction fees that the merchant incurred from CardX’s coding error if the merchant agreed to terminate its contract with Prospay and instead use CardX’s processing services. In February 2025, Prospay filed suit against CardX in state court, asserting claims for breach of contract, negligence, tortious interference, conversion, and misappropriation of trade secrets under Ohio law and the federal Defend Trade Secrets Act (DTSA). CardX removed the action to the federal district court. Before the court was CardX’s motion to dismiss.

Misappropriate of trade secrets. The court found that Prospay failed to identify a trade secret that qualified for protection under the DTSA. Under the DTSA, Prospay must show the existence of a protectable trade secret and the misappropriation of the trade secret. Prospay did not allege that CardX had misappropriated its customer list. Instead, the complaint alleged that CardX had poached a single customer from Prospay. The identity of a single merchant did not constitute a protectable trade secret as only the compilation of the contact information for a large group of customers could give rise to a protectable trade secret. The complaint also included a few general assertions about trade secrets which were insufficient to plead a DTSA claim, the court explained.

State law claims. The court declined to exercise supplemental jurisdiction over Prospay’s remaining state law claims. Since Prospay’s federal DTSA claims was dismissed, the state law claims did not implicate significant federal interests that warranted the exercise of federal jurisdiction. “The values of economy, convenience, fairness, and comity combine to make it appropriate for a state court to exercise jurisdiction over Prospay’s remaining allegations,” the court concluded.

The Case is No. 2:25-cv-00140-EAS-EPD.

Judge: Sargus, Jr., E.

Attorneys: Damion M. Clifford (Arnold & Clifford LLP) for Prospay, Inc. Edward A. Marshall (Arnall Golden Gregory LLP) for CardX, LLC.

Companies: Prospay, Inc.; CardX, LLC

Cases: TradeSecrets OhioNews