## Facts

- Oakwood Laboratories, LLC developed sustained-release injectable drugs using microsphere technology, investing substantial time and money in formulation and manufacturing processes.
- Oakwood maintained confidential technical and business information on formulation, manufacturing parameters, scale-up, quality systems, stability, and regulatory strategy, and used confidentiality agreements and access controls to protect secrecy.
- Dr. Bagavathikanun Thanoo worked for Oakwood for many years in senior technical roles, signed confidentiality agreements, and allegedly had deep access to Oakwood’s microsphere process know-how.
- Oakwood disclosed certain confidential information to Aurobindo during collaboration discussions under a confidentiality agreement, including a detailed memorandum about Oakwood’s leuprolide microsphere product development; the negotiations ended without an agreement.
- Roughly six months after the failed negotiations, Aurobindo hired Thanoo, formed a microsphere development group, and began developing competing microsphere products.
- Oakwood alleged Aurobindo previously lacked microsphere experience but developed similar products unusually quickly and cheaply, supporting an inference that defendants used Oakwood’s trade secrets obtained through the NDA disclosures and/or through Thanoo.

## Issues

1. Whether Oakwood adequately identified its alleged trade secrets for pleading purposes under the Defend Trade Secrets Act (DTSA).
2. Whether Oakwood plausibly alleged “misappropriation,” including what qualifies as “use” of a trade secret at the motion-to-dismiss stage.
3. Whether Oakwood plausibly alleged cognizable harm and causation, including harm from defendants’ avoidance of research and development costs.

## Decision

- The Third Circuit vacated the dismissal of the operative complaint and remanded.
- The court held Oakwood pleaded the existence and identification of trade secrets with sufficient specificity for Rule 8.
- The court held Oakwood plausibly alleged misappropriation, including “use,” based on circumstantial allegations of access, timing, lack of prior expertise, and rapid competitive development.
- The court held that alleged avoidance of substantial R&D costs and acceleration of development is cognizable harm under the DTSA.
- Because the federal trade secret claim was adequately pleaded, the related state-law trade secret, breach-of-contract, and tortious-interference claims also should not have been dismissed at the pleading stage.

## Legal Principles

- At Rule 12(b)(6), a trade secret plaintiff must plead enough detail to make the existence of trade secrets and misappropriation plausible, but need not disclose every technical detail in public filings or meet proof-level specificity.
- A court errs by effectively requiring direct evidence of misappropriation at the pleading stage; circumstantial allegations may suffice.
- Under the DTSA, “use” of a trade secret includes taking advantage of the information to obtain economic benefit or competitive advantage, including accelerating research and development or reducing costs.
- A plaintiff need not allege the trade secret was the sole source of the defendant’s product development; it is enough to plead facts supporting a reasonable inference that the defendant exploited the information.
- Harm under the DTSA includes a defendant’s ability to avoid a plaintiff’s sunk R&D costs and gain a head start or cost advantage derived from secrecy.

## Conclusion

The Third Circuit held that Oakwood plausibly alleged DTSA trade secret misappropriation where the complaint identified protected microsphere-related know-how in substantial detail and supported an inference of “use” through access, timing, and rapid competitive development; it further recognized cost-avoidance and accelerated R&D as cognizable DTSA harm, vacating dismissal and remanding for further proceedings.


Oakwood Labs. LLC v. Thanoo, 999 F.3d 892 (3d Cir. 2021)