DiscoverOrg Data, LLC v. Bitnine Global, Inc.

Background

DiscoverOrg Data, LLC alleged that Bitnine Global, Inc. accessed DiscoverOrg’s database without a paid subscription or authorization. According to the complaint, Bitnine used login credentials belonging to two DiscoverOrg subscribers, downloaded at least 273,000 records, and used the information in sales and marketing efforts, including an email campaign.

DiscoverOrg alleged six claims: (1) trade-secret misappropriation under the federal Defend Trade Secrets Act; (2) trade-secret misappropriation under the California Uniform Trade Secrets Act; (3) common-law misappropriation; (4) copyright infringement and circumvention of copyright-protection systems; (5) unjust enrichment; and (6) negligence. Bitnine was personally served on February 4, 2020, but did not answer by the deadline or otherwise participate in the case. The clerk entered default on March 12, 2020.

Jurisdiction and Default-Judgment Standard

The court concluded that it had subject-matter jurisdiction over DiscoverOrg’s federal claims and supplemental jurisdiction over the related state-law claims. It also found personal jurisdiction because Bitnine was incorporated in California, had its principal place of business in California, and was properly served by delivery of the summons and complaint to the head of the company.

Under Federal Rule of Civil Procedure 55, a court may enter default judgment after the clerk enters default. The court applied the seven factors identified in Eitel v. McCool, including possible prejudice, the merits and sufficiency of the claims, the amount at stake, the likelihood of factual disputes, whether the failure to appear was excusable, and the policy favoring decisions on the merits. The court treated well-pleaded allegations about liability as true, but required evidence supporting damages.

Claims Receiving Default Judgment

The court found that DiscoverOrg adequately alleged federal and California trade-secret claims. It found that the database contained information with economic value because it was not generally known, and that DiscoverOrg took reasonable steps to keep it secret, including password protection, restrictive license agreements, mail monitoring, and list protection. The court also found that DiscoverOrg adequately alleged unauthorized acquisition, resulting damage, and use of the information.

The court also found that DiscoverOrg adequately pleaded copyright infringement by alleging ownership of a copyright protecting the database and unauthorized copying. It separately found that DiscoverOrg adequately pleaded circumvention of copyright-protection systems by alleging that Bitnine bypassed password protection to access the database.

Claims Denied Default Judgment

The court denied default judgment on the common-law misappropriation claim because the California Uniform Trade Secrets Act preempts common-law claims based on the same underlying facts as a trade-secret claim.

The court denied default judgment on unjust enrichment because, under California law as described in the opinion, unjust enrichment is not an independent cause of action. It also denied default judgment on negligence because DiscoverOrg acknowledged that it lacked discovery needed to prove actual loss.

Damages, Fees, and Costs

DiscoverOrg sought actual damages, exemplary damages, and attorneys’ fees and costs for the trade-secret claims. The court approved a reasonable royalty as actual damages because DiscoverOrg lacked discovery to prove actual loss or unjust enrichment. The amount of the actual-damages award is redacted in the public version of the opinion.

The court found that the alleged use of other subscribers’ credentials and the downloading and marketing use of hundreds of thousands of records adequately supported a finding of willful and malicious misappropriation. It therefore awarded exemplary damages. The amount of that award is also redacted in the public version.

The court awarded $4,570.65 in attorneys’ fees and $951.71 in litigation costs. The opinion states that the requested amounts were reasonable and supported by billing and cost records.

Disposition

The court granted in part and denied in part DiscoverOrg’s motion for default judgment. It granted the motion as to Claim 1, federal trade-secret misappropriation; Claim 2, California trade-secret misappropriation; and Claim 4, copyright infringement and circumvention of copyright-protection systems. It denied the motion as to Claim 3, common-law misappropriation; Claim 5, unjust enrichment; and Claim 6, negligence. The court awarded redacted amounts of actual and exemplary damages, plus the stated attorneys’ fees and costs.