AllRounds, Inc. v. eShares, Inc.

Background

AllRounds asserted patent and trade-secret claims against eShares, Inc., the Carta defendants, the Draper defendants, and the DFJ defendants. The defendants moved to dismiss under Federal Rule of Civil Procedure 12. The order addresses the patent claims’ eligibility under 35 U.S.C. § 101 and AllRounds’ trade-secret claims.

Patent claims

The court denied the motion to dismiss AllRounds’ patent claims as ineligible under § 101. The court expressed skepticism that either patent was valid because both appeared directed to the abstract idea of making private investment analysis more efficient and accurate. But the complaint and attachments raised potential claim-construction issues, as well as factual issues about the state of the industry when the patent applications were filed and when the allegedly infringing products entered the market. The court therefore concluded that patent eligibility was better addressed later in the case rather than resolved on a motion to dismiss.

Trade-secret claims

The court denied the motions to dismiss the trade-secret claims. It found that AllRounds identified the alleged secrets with sufficient specificity, including particular software functions rather than only broad categories of information. The complaint also plausibly alleged misappropriation based on the timing of meetings and customer agreements, the defendants’ financial relationships and investments in Carta, Carta’s product changes, and alleged similarities between Carta’s and AllRounds’ products.

The court further held that AllRounds adequately supported an indirect misappropriation theory against Carta by alleging that Carta knew or should have known the information was stolen. The statute-of-limitations argument failed because the complaint did not establish that AllRounds could prove no set of facts making the claims timely.

The court also rejected, at this stage, the argument that the alleged secrets were no longer secret because they appeared in AllRounds’ patent applications or copyright deposit. The court noted that factual disputes existed about the extent of those disclosures and what the claimed secrets covered. It found that AllRounds had identified aspects of its alleged secrets—such as specific fund-management and fund-administration functions and user permissions—that were not disclosed in the patents or copyright deposit. The court also found plausible the allegation that AllRounds shared confidential information about how its software worked and solved inefficiencies in the venture-capital industry.

Threshold Management

The court granted in part and denied in part the DFJ defendants’ motion to dismiss. It dismissed Threshold Management LLC as a party, without prejudice to AllRounds seeking permission to add it if discovery revealed evidence implicating it. The court found that the allegations that Threshold was formerly known as DFJ Venture and that the name change reflected a rebranding did not support an inference that Threshold itself committed wrongdoing or that it was liable as DFJ Venture’s successor. The court found that the complaint plausibly alleged individual culpability by the other DFJ defendants.

Disposition

The court denied the Carta defendants’ motion to dismiss and denied the Draper defendants’ motion to dismiss. It granted in part and denied in part the DFJ defendants’ motion to dismiss. The court granted the request for judicial notice. It stated that the motions to seal would be handled in a separate order. Because these were motions to dismiss, the order addressed whether the claims were sufficiently pleaded at this stage rather than finally deciding the parties’ ultimate liability.