WalkMe Ltd., an Israeli company v. Whatfix, Inc., a Delaware corporation

Background

WalkMe Ltd. and WalkMe Inc. compete with Whatfix, Inc. and Whatfix PL in the digital adoption platform market. WalkMe asserted three categories of claims: trade-secret claims under the federal Defend Trade Secrets Act and California’s Uniform Trade Secrets Act; computer-access claims under the Computer Fraud and Abuse Act and California Penal Code section 502; and false-advertising claims under the Lanham Act, California’s Unfair Competition Law, and California’s False Advertising Law.

Whatfix, Inc. moved to dismiss all claims against it, and Whatfix PL joined the motion. Whatfix, Inc. argued that the allegations primarily concerned Whatfix PL’s conduct. The court evaluated the challenged claims under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim. For allegations sounding in fraud, the court also applied Rule 9(b), which requires particular details about the alleged misconduct.

Rulings

Claims against Whatfix, Inc. The court GRANTED, IN PART, and DENIED, IN PART, Whatfix, Inc.’s motion to dismiss on the ground that the allegations were directed at Whatfix PL. The court found allegations that Whatfix, Inc. had some involvement in conduct underlying the trade-secret and computer-access claims, but found the allegations too conclusory to support vicarious liability for Whatfix PL’s acts. Because amendment might not be futile, the court gave WalkMe one further opportunity to amend the claims against Whatfix, Inc.

Trade-secret claims. The court GRANTED Whatfix’s motion to dismiss the trade-secret claims. To plead a claim under the federal or California trade-secret statutes, WalkMe had to identify trade secrets with enough particularity to distinguish them from generally known information and show misappropriation. The court found that WalkMe’s descriptions of its Rule Engine, Session Playback feature, customer analytics, editing tools, workflows, and customer configurations were broad categories that did not adequately identify nonpublic trade-secret information. The court also found that allegations about information available to certain customer employees and confidentiality provisions with customers did not cure the problem. The court gave WalkMe one further opportunity to amend. It stated that the allegations concerning Dipit Sharma were sufficient to plead conduct that could qualify as misappropriation if WalkMe could adequately identify the trade secrets.

Computer Fraud and Abuse Act claim. The court GRANTED, IN PART, and DENIED, IN PART, Whatfix’s motion to dismiss the Computer Fraud and Abuse Act claim. The court found most of WalkMe’s allegations insufficient because they did not show the kind of unauthorized computer access covered by that statute. Allegations that Whatfix used customer credentials in violation of customer agreements did not, by themselves, show access without authorization or access beyond authorized areas. The court found an exception concerning Dipit Sharma because WalkMe alleged that he used customer credentials after Whatfix’s work with the customer had ended. The court gave WalkMe one further opportunity to amend this claim.

California computer-access claim. The court DENIED the motion to dismiss the claim under California Penal Code section 502. The court explained that the relevant subsection requires knowing access and taking, copying, or using data without permission; it does not require unauthorized access in the same way as the federal statute. The court found WalkMe’s allegations sufficient at this stage. It also declined to conclude as a matter of law that all relevant conduct occurred outside California.

False advertising and unfair-competition claims. The court DENIED Whatfix’s motion to dismiss the false advertising claims and the California Unfair Competition Law claim. It found that WalkMe adequately alleged what Whatfix’s challenged statements were, why they were literally false, and why comparison tables were likely to deceive consumers and affect purchasing decisions. The court noted that WalkMe’s Unfair Competition Law claim was based on Whatfix’s alleged violation of the Lanham Act.

Disposition and next steps

Overall, the court GRANTED, IN PART, and DENIED, IN PART, Whatfix’s motion to dismiss. If WalkMe amended, it had to file the amended complaint by April 5, 2024, and Whatfix had to answer or otherwise respond by April 19, 2024. If WalkMe did not amend, it had to file a notice by April 5, 2024. The court also set an initial case-management conference for May 10, 2024, with the parties’ joint statement due May 3, 2024.