Investment Science LLC v. Oath Holdings Inc.

Background

Investment Science LLC brought claims under the Defend Trade Secrets Act (DTSA), a federal law protecting qualifying business information, and under New York law. It alleged that Michael Kelly shared information about Investment Science’s financial-analysis product with Oath employees Charles Goussault and Charles Hartel during meetings at Oath’s offices in December 2017. Kelly described the product, presented a Trading Plan, displayed documents from his phone, and conducted a whiteboard session. Investment Science alleged that Oath later launched Yahoo Finance Premium and that the product incorporated unique proprietary elements of Investment Science’s information.

Oath moved to dismiss the First Amended Complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not allege enough facts to state a legally sufficient claim.

DTSA Claim

To state a DTSA misappropriation claim, Investment Science had to plausibly allege both that it possessed a trade secret and that Oath misappropriated it. A trade secret must have economic value because it is not generally known and must be protected by reasonable measures to keep it secret.

The court held that the First Amended Complaint did not adequately allege reasonable secrecy measures. Investment Science acknowledged that it did not require Oath to sign a confidentiality agreement before receiving the Trading Plan. The complaint’s statements that the participants understood the information to be confidential were conclusory and did not provide supporting facts. The court also rejected Investment Science’s argument that displaying documents through a password-protected work email account was enough. Kelly gave Hartel a hardcopy of the Trading Plan, which Hartel retained, and the work-email password was not a measure specifically distinguishing the alleged trade secrets from ordinary corporate information. The Trading Plan also had no confidentiality designation.

The court separately held that Investment Science did not adequately allege independent economic value from secrecy. The complaint merely recited that the information had economic value because it was not generally known or readily ascertainable by competitors, without explaining how the Trading Plan gave Investment Science an advantage.

The court also found that the complaint did not plausibly allege misappropriation. Kelly voluntarily disclosed the information at the meetings, and the complaint did not provide sufficient facts showing that the disclosure occurred under circumstances creating a duty of secrecy. The allegations that Oath’s Yahoo Finance Premium product contained similar financial features were treated as general terms and circumstantial facts that made misuse possible but not plausible. The DTSA claims were dismissed.

New York Claims

The court dismissed Investment Science’s New York trade-secret misappropriation claim for substantially the same reasons as the DTSA claim.

The court also dismissed the New York claim for misappropriation of ideas. That claim required a legal relationship between the parties and a novel idea. The court addressed only the legal-relationship requirement because Investment Science failed to satisfy it. Investment Science relied on an alleged implied confidentiality agreement, but the complaint contained only a conclusory assertion that the information was shared with an understanding of confidentiality and restricted use. It did not allege facts showing the mutual assent and other elements needed for an implied-in-fact contract.

Investment Science withdrew its claims for injunctive relief under the DTSA, unfair competition, misappropriation of skills and expenditures, and unjust enrichment. The opinion states that those claims were dismissed. The court also explained that injunctive relief is a remedy rather than an independent claim and dismissed the related count to the extent it had not already been withdrawn.

Disposition

The court granted Oath’s motion to dismiss the First Amended Complaint. The Clerk of Court was directed to close the motion. Investment Science was permitted to submit a letter application proposing another amended complaint by August 31, 2021, if amendment would not be futile. If it did not amend, the court stated that it would enter final judgment and close the case. The opinion does not state that the dismissal was with or without prejudice.