HotSpot Therapeutics, Inc. v. Nurix Therapeutics, Inc.

Background

HotSpot filed an action seeking declarations that it had not misappropriated trade secrets under the federal Defend Trade Secrets Act or California’s Uniform Trade Secrets Act and had not breached a contract. Nurix answered and asserted eight counterclaims against HotSpot and, for some claims, Kenneth G. Carson: federal and California trade-secret misappropriation, breach of contract, violation of the Computer Fraud and Abuse Act, breach of the implied covenant of good faith and fair dealing, intentional interference with prospective economic relations, intentional interference with performance of a contract, and unjust enrichment.

Nurix alleged that it had entered into a collaborative agreement with Macroceutics, Inc., which Carson formed; that HotSpot later acquired Macroceutics; and that Carson became an executive at HotSpot. Nurix alleged that confidential information concerning its chemistry, DNA-encoded libraries, methods, and DNATag software was used without permission.

Sealing Motions

The court applied the “compelling reasons” standard because the requested sealing concerned pleadings and briefing related to the merits. It found compelling reasons to seal portions describing the parties’ agreement and found the requests narrowly tailored. The court granted all of the related administrative motions to seal and sealed the highlighted portions identified in the order.

HotSpot’s Motion to Dismiss

HotSpot moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a pleading states a legally sufficient claim. The court accepted properly pleaded factual allegations as true for this motion but did not accept conclusory statements.

Trade-secret counterclaims. HotSpot argued that Nurix had not identified a trade secret with enough detail. The court disagreed. It found that Nurix sufficiently identified alleged trade secrets involving E3 ubiquitin ligases, DNA-encoded libraries, related methods and processes, confidential information covered by the agreement, and DNATag software. The court therefore denied HotSpot’s motion to dismiss Nurix’s first and second counterclaims for federal and California trade-secret misappropriation.

Breach-of-contract counterclaim. HotSpot argued that Nurix had not identified the confidential information allegedly disclosed under the agreement. The court found that Nurix’s allegations and the agreement sufficiently identified the confidential information. It denied HotSpot’s motion to dismiss the breach-of-contract counterclaim.

Computer Fraud and Abuse Act counterclaim. The court found that Nurix had not adequately alleged that HotSpot or Carson exceeded authorized access to a computer. Alleging that they used the PortaTech deconvolution box or DNATag software outside the collaboration did not explain that they accessed restricted files or obtained information they were not authorized to obtain. The court also found that Nurix had not pleaded facts describing qualifying losses, relying instead on a general allegation of damages. The court granted HotSpot’s motion to dismiss the Computer Fraud and Abuse Act counterclaim and granted Nurix leave to amend.

Implied-covenant counterclaim. The court found that Nurix’s implied-covenant claim was based on the same conduct as its breach-of-contract claim and sought the same relief. Because a separate implied-covenant claim cannot be based on the same alleged breach of an express contract, the court granted HotSpot’s motion to dismiss this counterclaim and granted Nurix leave to amend.

Interference counterclaims. The court found that Nurix’s claims for intentional interference with prospective economic relations and intentional interference with performance of a contract were based on the same alleged use of confidential information and violation of the agreement as the trade-secret claims. California’s trade-secret statute preempts claims based on the same underlying facts. The court therefore granted HotSpot’s motion to dismiss both interference counterclaims and granted Nurix leave to amend each one.

Unjust-enrichment counterclaim. The court found that Nurix’s unjust-enrichment claim also arose from the same alleged use of confidential information and was preempted by California’s trade-secret statute. It granted HotSpot’s motion to dismiss that counterclaim and granted Nurix leave to amend.

Carson’s Motion to Dismiss

Carson moved under Rule 12(b)(2), which allows dismissal for lack of personal jurisdiction. Nurix did not address Carson’s general-jurisdiction argument, so the court treated that argument as conceded. The court then considered specific jurisdiction, which requires a defendant’s forum-related conduct to support the claim and make jurisdiction fair and reasonable.

The court found that Nurix sufficiently alleged an intentional act, including Carson’s alleged possession, provision, or use of Nurix’s confidential information and software. But it found that Nurix had not adequately alleged that Carson expressly aimed his conduct at California. Allegations that Carson knew Nurix was based in California and had conducted business with Nurix under the agreement were insufficient by themselves. The court therefore granted Carson’s motion to dismiss Nurix’s counterclaims with leave to amend.

The court denied Nurix’s request for jurisdictional discovery because Nurix had not identified specific facts, transactions, or conduct—beyond speculative jurisdictional contacts—that could establish personal jurisdiction.

Disposition

The court granted the administrative motions to seal, granted in part and denied in part HotSpot’s motion to dismiss Nurix’s counterclaims, and granted Carson’s motion to dismiss Nurix’s counterclaims. The court granted Nurix leave to amend its counterclaims and denied jurisdictional discovery. Nurix had 21 days from the date of the order to file amended counterclaims.