Tort/Negligence – Misappropriation of Trade Secrets – Lex Loci Delicti – Intellectual Property

SciGrip, Inc. v. Osae (Lawyers Weekly No. 020-010-18, 38 pp.) (Michael Robinson, J.) 2018 NCBC 10

Holding: After defendant Osae left plaintiffs’ employ, he went to work for defendant Scott Bader, Inc., in the United Kingdom. Although Osae frequently traveled between his workplace in the U.K. and his home in North Carolina, plaintiffs have not come forward with evidence that Osae misappropriated plaintiffs’ trade secrets in North Carolina; therefore, North Carolina law does not apply to plaintiffs’ claim of misappropriation of trade secrets.

The court grants in part and denies in part the parties’ motions for summary judgment. The court grants the motions to file under seal.

Under North Carolina conflict of laws principles, matters affecting the substantial rights of the parties are determined by lex loci, the law of the situs of the claim.

Even assuming, as plaintiffs argue, that the conflict of laws analysis applicable to unfair trade practices claims is also applicable to Trade Secrets Protection Act (TSPA) claims, this court recently concluded that the North Carolina Supreme Court will likely apply the lex loci rule to unfair trade practice claims based on its rejection of the modern trend towards the “most significant relationship” test in Boudreau v. Baughman, 322 N.C. 331, 368 S.E.2d 849 (1988). Therefore, the court applies the lex loci test to plaintiffs’ TSPA claim.

Misappropriation occurs when defendant acquires, discloses, or uses another’s trade secret without the owner’s consent or authority.

Plaintiffs do not contend that Osae’s acquisition of the allegedly secret components of plaintiffs’ adhesive – which undisputedly occurred in North Carolina within the authorized scope of his employment – was wrongful. Instead, plaintiffs argue that defendants misappropriated their trade secrets by using such trade secrets in Scott Bader, Inc.’s (SBI’s) European patent application and SBI products.

The SBI patent application that allegedly used plaintiffs’ trade secrets was filed in Europe. Further, SBI introduced substantial evidence that Osae did all his product development work for SBI at its headquarters and lab facilities in the U.K., and that any lab work that Osae may have done in the United States was done at SBI’s applications lab in Ohio.

The fact that Osae had a residence in North Carolina while he worked for SBI is not determinative of whether any alleged misappropriation occurred in the state. The undisputed evidence tends to show that Osae worked at SBI’s facilities in the U.K. for three years from the end of 2008 to August 2011 – the time period during which the alleged misappropriation occurred. While plaintiffs have come forward with evidence that Osae frequently traveled back and forth between the U.K. and the U.S. during that timeframe, plaintiffs have failed to come forward with sufficient evidence of misappropriation in North Carolina so as to create a genuine issue of material fact.

With regard to plaintiffs’ claim that Osae misappropriated their trade secrets after he went to work for Engineered Bonding Solutions, LLC (EBS), plaintiffs presented no evidence tending to indicate that a misappropriation occurred in North Carolina. The only evidence as to where this alleged misappropriation occurred tends to show that, at the time the EBS Patent application was filed in September 2011, Osae resided in Titusville, Florida, where he currently resides and where EBS’s lab is located.

Therefore, because the undisputed evidence demonstrates that the alleged misappropriation occurred outside the State of North Carolina, plaintiffs cannot bring a claim under the North Carolina TSPA; accordingly, the court grants summary judgment in favor of defendants on plaintiffs’ misappropriation of trade secrets claim.

Defendants contend that plaintiffs’ breach of contract claim is barred by the statute of limitations. However, there is a genuine issue of material fact as to when plaintiffs became aware that the SBI European patent application included plaintiffs’ claimed trade secrets.

Defendants argue that plaintiffs received such notice in April 2011 when plaintiffs hired Chemir Analytical Services to identify the components of a sample of an SBI adhesive. However, the Chemir report did not disclose the presence of any of the components which plaintiffs contend constitute their confidential information.

Plaintiffs contend that they learned of the SBI patent application during a meeting with a company interested in buying plaintiffs in December 2011 or January 2012, making their Dec. 1, 2014 complaint against SBI timely. Neither party is entitled to summary judgment on this issue.

Motions granted in part and denied in part.