RoadRunner Recycling, Inc. v. Recycle Track Systems, Inc.

Background

RoadRunner Recycling, Inc. provides waste and recycling metering technology. Its predecessor-in-interest, Compology, Inc., allegedly spent substantial resources developing the technology. RoadRunner acquired Compology in 2022 and assumed its intellectual-property rights and contractual obligations.

In 2017, Compology entered into a pilot contract with RecycleSmart Solutions, Inc., which the opinion describes as a wholly owned subsidiary and predecessor-in-interest of Recycle Track Systems, Inc. RoadRunner alleged that Compology provided confidential and proprietary information under that agreement. RoadRunner later alleged that the defendants used its trade secrets to develop a competing product called the Pello system and breached the parties’ terms by disclosing, copying, adapting, modifying, or creating derivative works from the technology.

RoadRunner asserted trade-secret claims under the federal Defense of Trade Secrets Act and the California Uniform Trade Secrets Act. The defendants moved under Rule 12(b)(6), which allows dismissal when a complaint does not adequately state a legally valid claim.

Analysis

For both trade-secret statutes, the court explained that a plaintiff must show that it possessed a trade secret, that the defendant misappropriated it, and that the misappropriation caused or threatened harm. Before reaching misappropriation or harm, the plaintiff must identify the trade secret and show that it exists.

The court held that RoadRunner did not identify its alleged trade secrets with sufficient particularity. RoadRunner referred to “Waste and Recycling Metering Confidential Information,” which it defined by referring broadly to confidential information that included trade secrets. The court characterized this as a circular description that did not identify specific tangible trade-secret material or distinguish it from information generally known in the industry.

The court separately rejected or questioned several other descriptions. It stated that the arrangement and configuration of RoadRunner’s smart cameras could not qualify as secret because the arrangement was publicly visible and publicly disclosed. It found that RoadRunner’s references to an artificial-intelligence system were too broad and did not identify any specific, non-public aspect of the system. The court also noted that RoadRunner appeared to be adding allegations about a machine-learning model and image database in its opposition brief rather than in the amended complaint. The court expressed skepticism about those potential allegations and directed RoadRunner, if it sought to amend, to address whether access to application programming interfaces provided access to the underlying model, source code, or training data, as well as California Code of Civil Procedure Section 2019.210.

Disposition

The court granted defendants’ motion to dismiss the trade-secret claims. The order did not decide whether the defendants misappropriated trade secrets or caused damage because it found that RoadRunner had not adequately alleged possession of identifiable trade secrets. The court stated that RoadRunner could seek leave to amend by motion, with a proposed redlined complaint, by Tuesday, January 16, at noon. Defendants’ answer was also due at that time. Judge William Alsup signed the order.