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Chancery Addresses Claims That Ex-Employees of Agilent Took Trade Secrets to Start New Company

By Francis G. X. Pileggi, Esq.

Agilent Technologies, Inc. v. Kirkland, (Del. Ch., Jan. 20, 2009), read opinion here.

The common fact pattern addressed in this Chancery Court decision: ex-employee's former employer alleges that confidential data taken from former employer is being used against it by ex-employee in new business.

This case began with claims involving allegedly false statements about Agilent's products to potential partners and customers by ex-employees who started their own company with allegedly expropriated trade secrets. This decision denies a Motion to Strike and a Motion to Dismiss Counterclaims alleging the following: 

(i) unfair competition; (ii) tortious interference with prospective business relations; and (iii) violation of the Delaware Deceptive Trade Practices Act ("DTPA").  A helpful analysis for  the elements of each of the counterclaims is provided in the court's opinion.

The  elements of both unfair competition and tortious interference were discussed at page 11 and footnotes 22 to 24. A key element of tortious interference with prospective business relations is "reasonable probability of business opportunity".  At footnotes 29 to 34, the court provides authority for the position that a specific party need not  be named, but that one "must 'identify a specific party who was prepared to enter into a business relationship but was dissuaded from doing so by the defendant' and cannot rely on generalized allegations of harm."

The key point was discussed that in order to constitute a basis for an unfair competition or unfair competition claim, the contested action must be wrongful conduct. (FNs 39 to 43).

Initially, the court discussed the difference, in the context of Rule 15, between supplemental pleadings and amended pleadings. After explaining why, the court overlooked a technical error in the filing of the amended counterclaim  in light of no responsive pleading having been filed. (FNs 15 to 21).

In finding that the pleading "barely passed muster" under Rule 12 (b)(6), allowing it to proceed to trial, the court  suggested that it may have difficulty prevailing at trial, citing to the recent U.S. Supreme Court decision in Bell Atlantic v. Twombly, 127 S. Ct. 1965 (2007).

A "not well-known" element of the DTPA  emphasized by the court was that "relief under the statute is dependent on the plaintiff's entitlement to injunctive relief",  and that the DTPA is meant to address "patterns of deceptive conduct, not isolated incidents". (FNs 52 to 56).

 

 

Full post as published by Delaware Corporate and Commercial Litigation Blog on February 07, 2009 (boomark / email).