## Facts

- Aqua Connect, Inc. developed Aqua Connect Terminal Server (ACTS), software enabling multiple users to remotely log in to and interact with Mac OS X servers.
- Aqua offered ACTS as a free fourteen-day trial download that required users to accept a click-through end-user license agreement (EULA) before installation.
- The EULA prohibited reverse engineering, decompiling, disassembling, or attempting to derive ACTS source code.
- Aqua alleged that Volodymyr Bykov downloaded the ACTS trial and, acting for Code Rebel, LLC and its managing member Arben Kryeziu, reverse engineered ACTS despite the EULA’s restriction.
- Aqua alleged defendants used information obtained from the reverse engineering to develop and sell a competing product, iRAPP TS, with similar functionality.
- Aqua sued for, among other claims, misappropriation of trade secrets under the California Uniform Trade Secrets Act (CUTSA), breach of contract, false promise, unfair competition (Cal. Bus. & Prof. Code § 17200), and unjust enrichment.
- Defendants moved to dismiss under Rule 12(b)(6) for failure to state a claim.

## Issues

1. Whether the complaint plausibly alleged CUTSA misappropriation, including identification of the trade secrets with sufficient clarity for notice and acquisition/use by “improper means.”
2. Whether the complaint plausibly alleged formation and breach of a contract based on the click-through EULA’s anti-reverse-engineering clause.
3. Whether the derivative claims (false promise, § 17200 unfair competition, unjust enrichment) were sufficiently pleaded under federal plausibility standards.

## Decision

- The court largely denied the Rule 12(b)(6) motion.
- The court held Aqua plausibly alleged misappropriation of trade secrets under CUTSA.
- The court held Aqua plausibly alleged assent to and breach of the EULA, supporting contract-based theories.
- The court rejected the contention that reverse engineering could not be “improper means” where the conduct was alleged to be contractually prohibited by the EULA.
- The court allowed the related claims premised on the same alleged conduct to proceed at the pleading stage.

## Legal Principles

- A complaint must contain enough factual matter to state a plausible claim for relief; well-pleaded facts are taken as true and reasonable inferences are drawn for the nonmovant.
- For CUTSA pleading, a plaintiff need not publicly disclose detailed trade-secret specifics at the motion-to-dismiss stage, but must describe the subject matter with sufficient clarity to provide notice of the alleged secrets and the technology category.
- Reverse engineering may be lawful in general, but can constitute “improper means” for trade-secret misappropriation when undertaken in breach of contractual restrictions (such as a no-reverse-engineering EULA) governing access and use.
- A click-through EULA can plausibly establish contract formation and, when alleged to be violated, can support breach and help show reasonable measures to protect secrecy.
- Claims for promissory fraud (false promise), unfair competition under § 17200, and restitutionary relief may proceed when adequately tied to the same alleged misconduct that supports surviving trade-secret and contract claims.

## Conclusion

The court permitted Aqua’s trade-secret and contract-centered case to proceed past the pleadings, holding that allegations of accepting a click-through EULA that barred reverse engineering, followed by reverse engineering to build a competing product, plausibly stated misappropriation under CUTSA and breach of contract, as well as related statutory and common-law claims.


Aqua Connect, Inc. v. Code Rebel, LLC, No. CV 11-5764 RSWL (MANx), 2012 WL 469737 (C.D. Cal. Feb. 13, 2012)