Opinion
Civil Action 20-2970
09-29-2021
SMH ENTERPRISES, L.L.C. v. KRISPY KRUNCHY FOODS, L.L.C., ET AL.
SECTION “R” (2)
ORDER AND REASONS
SARAH S. VANCE UNITED STATES DISTRICT JUDGE
Before the Court is plaintiff SMH Enterprises, L.L.C.'s (“SMH”) motion under Federal Rule of Civil Procedure 72 for review of a Report and Recommendation (“R&R”) issued by Magistrate Judge Donna Phillips Currault. Defendants, Krispy Krunchy Foods, L.L.C. (“KKF”), Parthenon Software Group, Inc. (“Parthenon”), and Andrew Schmitt, oppose the motion. In the R&R, Magistrate Judge Currault recommends denying plaintiff's Rule 56(d) motion to lift the stay of discovery, and deny or continue the motion for partial summary judgment. The R&R further recommends granting in part and denying in part defendants' motion for partial summary judgment. For the following reasons, the Court adopts the R&R as to its recommendations that the Court (i) deny plaintiff's 56(d) motion, and (ii) grant defendants' motion for partial summary judgment on Trade Secrets #8 and #14, and deny defendants' motion for partial summary judgment on Trade Secrets #1-7, #9-13. The Court does not adopt the R&R insofar as it characterizes the “feature” aspects of plaintiff's trade secrets as distinct from their “implementation.” Accordingly, the Court denies plaintiff's Rule 56(d) motion, and grants in part and denies in part defendants' motion for partial summary judgment.
R. Doc. 150.
R. Doc. 157.
R. Doc. 142.
Id.
I. BACKGROUND
This case arises from an alleged misappropriation of trade secrets. Plaintiff, SMH, is a software company that developed an employee-training software platform, known as the Spectrum Engine, which provides online training software for employees in various industries. Defendant, KKF, sells products to numerous Krispy Krunchy Chicken fast food restaurants, and commissioned SMH to customize its employee-training software platform to KKF's requirements. KKF intended to use the platform to train food service workers in the over 2, 500 convenience stores, gas stations, and other retail locations that serve Krispy Krunchy Chicken.
R. Doc. 1 ¶ 5; R. Doc. 68 ¶ 3; R. Doc. 142 at 2.
R. Doc. 1 ¶ 6.
R. Doc. 117-37 at 4.
On August 7, 2015, the parties entered into an agreement, the “Scope of Work, ” describing the parameters of the training platform SMH would prepare for KKF. The Scope of Work contains no confidentiality provision.Between November 2015 and July 2016, SMH and KKF used a pilot version of the employee-training software in Malaysia. After the Spectrum Engine's limited roll-out from August 6 through September 9, 2016, SMH fully released the platform to all of KKF's stores on November 14, 2016. In December 2016, the parties amended their Scope of Work agreement under a document entitled “Terms and Conditions, ” which included a confidentiality provision. Though the confidentiality provision is broad, it expressly does not apply to information which is “already known to the recipient, ” or “disclosed to a third party without restriction” and states it does not apply to “Spectrum Intellectual Property.”
R. Doc. 117-4 at 2-6.
See id. at 1-6 (Scope of Work Agreement); R. Doc. 142 at 34 (“A review of the SOW reflects that it does not contain a confidentiality provision or otherwise address the confidentiality of anything, including Spectrum Engine.”).
R. Doc. 1 ¶ 14; R. Doc. 124-4 ¶ 2.
R. Doc. 124-4 ¶¶ 5-6.
R. Doc. 117-6 at 2-7.
R. Doc. 117-6 at 4.
KKF and SMH both acknowledge that on several occasions users experienced technical problems with the platform. KKF sought help with these recurring issues from defendant Parthenon, a third-party software vendor that provided IT services for KKF. SMH and Parthenon worked together to address these issues, but problems with the platform persisted.Despite these complications, KKF continued to use the Spectrum Engine until November 2019, at which point it switched to a training platform developed by Parthenon.
R. Doc. 1 ¶ 25; R. Doc. 117-37 at 4-5.
R. Doc. 117-37 at 5.
R. Doc. 1 ¶ 25; R. Doc. 117-3 ¶ 14.
Doc. 1 ¶ 27; R. Doc. 117-37 at 5.
Following KKF's termination of its contract with SMH, SMH partner Conway Solomon logged on to KKF's platform and accessed Parthenon's new training program. Based on Solomon's observations about the similarity between the Spectrum Engine and Parthenon's new training platform, SMH filed suit against defendants on November 2, 2020. According to SMH's complaint, KKF, working with defendants Parthenon and Andrew Schmitt, misappropriated information from SMH's software and used that information to develop its own, competing employee-training platform.SMH sued KKF, Parthenon, and Schmitt for alleged violations of federal and Louisiana law, including for claims of trade secret misappropriation under the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. §1836, et seq., and the Louisiana Uniform Trade Secrets Act (“LUTSA”), La. Rev. Stat. § 51:1342, et seq.
R. Doc. 1 ¶ 29.
R. Doc. 1.
Id. ¶¶ 29-31.
See id. ¶¶ 34-69.
On December 11, 2020, Magistrate Judge Donna Phillips Currault issued an identification of trade secrets order, requiring that plaintiff file a “Notice of Identification of Trade Secrets” to “allow the court to control the scope of discovery and determine the appropriate case management.”Without objection, plaintiff filed its responsive “Trade Secret Identification Statement” (“TSI Statement”) on December 21, 2020. Parthenon and KKF objected to the sufficiency of the plaintiff's TSI Statement.
R. Doc.
R. Doc.
R. Docs. 40 & 41.
At a hearing on January 7, 2021, Magistrate Judge Currault ordered KKF to file an amended TSI Statement. She required that, in the amended statement, plaintiff “identify its alleged trade secrets with specificity and the required detail necessary for the court and defendants to understand its alleged trade secrets, rather than simply the categories within which its trade secrets may fall.” Plaintiff responded to this order on January 13, 2021, with its first amended TSI Statement, and with leave of court, filed a second amended TSI Statement on January 15, 2021.
R. Doc.
Id. at 5.
R. Doc. 62.
R. Doc. 68.
Based on numerous discovery disputes, and defendants' continued objections to plaintiff's TSI Statement, the Court held a status conference on January 25, 2021. Because the parties were still at odds as to the sufficiency of the TSI Statement, the Court set a briefing schedule for defendants to move for partial summary judgment on the issue of whether the trade secrets identified in the TSI Statement qualify as trade secrets.
See, e.g., R. Docs. 53, 58, 59, 71, 72, 73, 74, 77, 78, 79, 80.
R. Doc. 81.
R. Doc. 90.
R. Doc. 90 at 3.
In its second amended TSI Statement, plaintiff lists 14 purported trade secrets related to its employee-training software program. They are as follows:
Trade Secret #1: Layout for video player
The Spectrum Engine contains “certain audio/video learning and entertainment software permitting end-users to “play” audio/video content from their desktops and/or mobile devices and future updates or new versions of such software.” This trade secret in the Spectrum Engine is comprised of source code, user interface, user experience, and an architectural design to accomplish such functionality. As shown in the figure below, the video player was designed so that the text panel on the right hand side matched the video being played. The video player is scalable across multiple industries (e.g., medical, oil/gas, public safety). In the specific implementation for KKF, it is used to train 17, 000 food service workers located in over 2, 000 restaurants. Included below are specific examples of the user interface and the enabling source code for this trade secret . . ..
Trade Secret #2: Video hot spots
This trade secret in the Spectrum Engine is comprised of source code, user interface and software architecture to implement hot spots (text that may appear at specific times and in specific locations to highlight important content). As shown below, this scalable feature provides the ability to add more hot spots (i.e., times and locations within videos). The hot spots are linked to a database where content (photo, quiz question, additional text, or a document) is stored and organized. Included below are specific examples of the user interface and the enabling source code for this trade secret ....
Trade Secret #3: Integrated quizzes and surveys
This trade secret in the Spectrum Engine is comprised of source code, architectural design, user interface, and user experience to integrate quizzes and surveys into video content (see example below). The appearance of each quiz is customizable. Quizzes may appear throughout the video or at the end of each video. The completion of the quizzes is stored as progress in the Spectrum Engine database for each user,
thereby generating data analytics about each user's progress. Included below are specific examples of the user interface and the enabling source code for this trade secret ....
Trade Secret #4: Language control
This trade secret in the Spectrum Engine is comprised of source code, architectural design, user interface, user experience, and database that gives employees the option to choose between English or Spanish instructional and testing materials. In the particular KKF implementation, this functionality gives more food service workers access to the training materials. It also avoids the need to maintain separate training systems for each language and makes it scalable by providing the capability to add more languages. Included below are specific examples of the user interface and the enabling source code for this trade secret ....
Trade Secret #5: Playlist
This trade secret in the Spectrum Engine is comprised of source code, architectural design, user interface, and user experience. Based on specific training needs, this enables the display of different video playlists (shown in the example below). In the specific KKF implementation, the training needs differ based on whether employees work with certain food fryers. KKF uses Resfab19 fryers in some of its restaurants and generic fryers in others. Depending on which restaurant a KKF employee works in, the playlist presented to them by the Spectrum Engine may include a Resfabspecific video. All other employees would be presented with a playlist of videos related to a generic food fryer. The rules associated with the specific playlist that an employee is provided with are stored in the database and provide scalability to add more fryers, equipment, or playlists. In addition, the architectural design of the Spectrum Engine gives administrators the ability to establish rules about the order in which the videos should be watched ....
Trade Secret #6: Playlist progress indicator This trade secret in the Spectrum Engine is comprised of source code, data visualization and a database to provide feedback on the employee's progress of the training and use the progress as criteria for completing the training. While video progress indicators are generally known, the Spectrum Engine goes beyond by integrating database information that unlocks quizzes related to the video content and converts the results into data analytics that are stored in an employee's record. The rules programmed in the Spectrum Engine define the criteria for completing the training (e.g., user must watch entire video and complete all related quizzes before unlocking the final exam). The playlist progress data generated by the Spectrum Engine is also part of this trade secret ....
Trade Secret #7: Quiz results
This trade secret in the Spectrum Engine is comprised of source code and data analytics about each employee's performance on quizzes which are stored in a database. This provides scalability by making quiz results available to different levels of management depending on their level of access as stored in the Spectrum Engine database. Multiple levels of access of quiz results are programmed in the Spectrum Engine (i.e., employees can see their quiz scores, store managers can only see quiz scores of employees in their store, district managers can only see quiz scores of employees in their district, and executives at corporate headquarters can see everyone's quiz scores). The quiz results data generated by the Spectrum Engine is also part of this trade secret ....
Trade Secret #8: Testing Layout
This trade secret in the Spectrum Engine is comprised of source code, architectural design, user experience, and user interface that allow easy to read tests. In the KKF implementation, the testing interface provides an identical experience for all KKF employees that is easily scalable as new
questions and multiple languages are needed (e.g., English and Spanish) as shown in the example below ....
Trade Secret #9: Certificate generation
This trade secret in the Spectrum Engine is comprised of source code, data analytics, database, and user experience that enable the creation of certificates of completion for employees who meet certain criteria. In the KKF implementation, an employee who fulfills certain conditions (i.e., completes the playlist assigned to them, passes the quizzes associated with each video, and passes the final test with a certain score) receives a certificate generated by the Spectrum Engine. The following information is retrieved from the employee record in the Spectrum Engine database and is used to populate the certificate of completion: KKF branding, employee name, and training completion date. The certificate generation provides scalability by allowing the addition of new employees and new data fields to the certificate. The certificate generation data in the Spectrum Engine is also part of this trade secret ....
Trade Secret #10: Final test
This trade secret in the Spectrum Engine is comprised of source code, user interface, data analytics, and database that generates a final test at the end of the training. In the KKF implementation, each KKF employee is provided with the appropriate playlist for their restaurant (see “playlist trade secret” above). Upon the completion of the required videos and quizzes, a final test is provided. The content of the final test is dependent on the employee's use of a Resfab or generic food fryer, which is stored in the Spectrum Engine database. The Spectrum Engine provides scalability through multiple levels of access to the final test results (i.e., employees can see their test scores, store managers can only see test scores of employees in their store, district managers can only see test scores of employees in their district, and executives at corporate headquarters can see everyone's test scores). The final test data
generated by the Spectrum Engine is also part of this trade secret ....
Trade Secret #11: Completion progress
This trade secret in the Spectrum Engine is comprised of source code, data analytics, a database, and user interface to provide the completion progress of each employee. In the KKF implementation, data analytics are captured for each trainee, stored in the database, and displayed using data visualization (see example below). Specific rules are programmed in the Spectrum Engine (e.g., employees cannot proceed unless they achieve a certain score within certain number of attempts) which allows for scalability as new employees are added and new rules are created. The completion progress data generated by the algorithms in the Spectrum Engine is also part of this trade secret. Included below are specific examples of the algorithms that are part of this trade secret ....
Trade Secret #12: Dashboard
This trade secret in the Spectrum Engine is comprised of source code, architectural design, user interface, and database to generate a dashboard. The dashboard provides a user experience through the visualization of data collected for each employee within a manager's jurisdiction. In the KKF implementation, this allows for scalability through rules that determine permissions for restaurant managers, district managers, and executives. The visualization of the data residing in the Spectrum Engine can be displayed by store, region, or across the entire company as shown in the example below. The data displayed by the algorithms in the Spectrum Engine Dashboard is also part of this trade secret. Included below are specific examples of the algorithms that are part of this trade secret ....
Trade Secret #13: Application Programming Interface This trade secret in the Spectrum Engine is comprised of source code, architectural design and an Application Programming Interface that connects with multiple databases. The Spectrum Engine interfaces with KKF's Tracker system in two ways. First, every 15 minutes an update of new KKF employees is uploaded and stored in a database. This is a scheduled event that occurs automatically and provides scalability as new employees are added. Second, when an authenticated KKF user logs on to the training system (and their credentials are validated in the database), the Spectrum Engine provides access according to predetermined rules associated with the employee's level of permissions. This is intentional and is triggered by a valid sign on ....
Trade Secret #14: Combination of Trade Secrets 1-13
The Spectrum Engine includes a unique combination of the above mentioned trade secrets (i.e., source code, algorithms, etc.). In the specific KKF implementation, the combination of trade secrets enable the delivery of KKF's content and tracking of progress of each employee. This Learning Management System provides scalability as KKF adds more employees, monitors employee progress, and introduces new content as training needs evolve
R. Doc. 68 at 5 (citation omitted) (emphasis in original).
Id. at 7-8 (emphasis in original).
Id. at 9 (emphasis in original).
Id. at 11 (emphasis in original).
Id. at 15 (emphasis in original).
Id. at 17-18 (emphasis in original).
Id. at 20-21 (emphasis in original).
Id. at 24 (citation omitted) (emphasis in original).
Id. at 26 (emphasis in original).
Id. at 28 (emphasis in original).
Id. at 30-31 (emphasis in original).
Id. at 33 (emphasis in original).
Id. at 36 (emphasis in original).
Id. at 37 (emphasis in original).
II. MOTION TO LIFT A STAY ON DISCOVERY AND CONTINUE A MOTION FOR SUMMARY JUDGMENT
A. Legal Standards
1. Standard of Review for Nondispositive Motions
A magistrate judge may consider both nondispositive and dispositive matters. See Fed.R.Civ.P. 72; see also 28 U.S.C. § 636(b)(1). Rule 72 provides that a magistrate judge may issue an order on a “pretrial matter not dispositive of a party's claim or defense.” See Fed.R.Civ.P. 72(a). To determine whether a matter is dispositive or nondispositive, courts have referred to 28 U.S.C. § 636(b)(1)(A). See Vaquillas Ranch Co. v. Texaco Expl. & Prod., Inc., 844 F.Supp. 1156, 1162 (S.D. Tex. 1994). Section 636(b)(1)(A) lists the motions that a magistrate judge may not “hear and determine.” 28 U.S.C. § 636(b)(1)(A). By referring to the list of motions in the statute, courts have concluded that a motion that is not in the § 636(b)(1)(A) list, nor analogous to a motion on the list, is a nondispositive matter. See Vaquillas Ranch, 844 F.Supp. at 1161 (citing Maisonville v. F2 Am., Inc., 902 F.2d 746, 748 (9th Cir. 1990)). Rule 56(d) motions to defer consideration of a motion for summary judgment are not specifically listed in § 636(b)(1)(A) and are therefore considered nondispositive. See 28 U.S.C. § 636(b)(1)(A); see also Knapp v. Cate, No. 08-01779, 2013 WL 150013, at *1 (E.D. Cal. Jan. 14, 2013) (describing a Rule 56(d) motion to lift a stay on discovery and continue a motion for summary judgment as “nondispositive”).
A magistrate judge's ruling on a nondispositive civil motion may be appealed to the district court. Fed.R.Civ.P. 72(a). When a timely objection is raised, the district judge must review the magistrate judge's ruling and “modify or set aside any part of the order that is clearly erroneous or contrary to law.” Id. The court reviews the magistrate judge's “‘factual findings under a clearly erroneous standard,' while ‘legal conclusions are reviewed de novo.'” Moore v. Ford Motor Co., 755 F.3d 802, 806 (5th Cir. 2014) (quoting Alldread v. City of Grenada, 988 F.2d 1425, 1434 (5th Cir. 1993)). A factual finding is clearly erroneous when, “although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948). A legal conclusion is contrary to law “when the magistrate fails to apply or misapplies relevant statutes, case law, or rules of procedure.” Ambrose-Frazier v. Herzing Inc., No. 15-1324, 2016 WL 890406, at *2 (E.D. La. Mar. 9, 2016); Bruce v. Hartford, 21 F.Supp.3d 590, 594 (E.D. Va. 2014).
2. Standard for Rule 56(d) Motions
Federal Rule of Civil Procedure 56(d) governs requests for additional time for discovery before consideration of a pending motion for summary judgment. It permits a district court to deny or defer consideration of a motion for summary judgment, allow time to take discovery, or “issue any other appropriate order” when “a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition.” See Fed.R.Civ.P. 56(d). Such requests are “broadly favored and should be liberally granted.” Raby v. Livingston, 600 F.3d 552, 561 (5th Cir. 2010) (quoting Culwell v. City of Fort Worth, 468 F.3d 868, 871 (5th Cir. 2006)).
Nonetheless, the party seeking a continuance “may not simply rely on vague assertions that additional discovery will produce needed, but unspecified, facts.” Raby, 600 F.3d at 561 (quoting SEC v. Spence & Green Chem. Co., 612 F.2d 896, 901 (5th Cir. 1980)). Instead, the party seeking to continue a motion for summary judgment to obtain further discovery must demonstrate (1) “why he needs additional discovery” and (2) “how the additional discovery will create a genuine issue of material fact.” Krim v. BancTexas Grp., Inc., 989 F.2d 1435, 1442 (5th Cir. 1993) (emphasis removed). In other words, “[t]he Rule 56(d) movant ‘must set forth a plausible basis for believing that specified facts, susceptible of collection within a reasonable time frame, probably exist and indicate how the emergent facts, if adduced, will influence the outcome of the pending summary judgment motion.'” McKay v. Novartis Pharm. Corp., 751 F.3d 694, 700 (5th Cir. 2014) (quoting Raby, 600 F.3d at 561).
B. Discussion
On March 24, 2021, after KKF's motion for partial summary judgment had been submitted, SMH filed a Rule 56(d) motion before Magistrate Judge Currault, requesting that the Court lift the stay of discovery, and deny or continue KKF's motion pending discovery. Plaintiff contended that, before the motion for summary judgment could be considered, discovery was necessary as to three categories of information: (1) KKF's precautions- including the nature of any contractual relationship between KKF and its partner stores-toward maintaining the confidentiality of the software; (2) the parties' intended meaning of a provision in the Terms and Conditions; and (3) the source code of Parthenon's competing platform. Magistrate Judge Currault recommended denying the Rule 56(d) motion. She determined that SMH failed to demonstrate that it needed any specific fact discovery to identify its own trade secrets. The Court finds that this conclusion is neither “clearly erroneous or contrary to the law.” See Fed.R.Civ.P. 72(a).
R. Doc.
R. Doc.
R. Doc. 135-1 at.
R. Doc. 142 at 26-28.
Id.
First, plaintiff requested additional discovery regarding the contracts and other agreements between KKF and its partner stores to determine whether KKF put reasonable security measures in place. In the R&R, Magistrate Judge Currault found that information regarding KKF's relationships with its partner stores was irrelevant because KKF itself was under no confidentiality obligation, so SMH could not impute any such obligation onto KKF's partners. The Magistrate's assessment is correct. Plaintiff fully released its platform to KKF and its 17, 000 partner stores in November 2016 with no confidentiality provision in place either between SMH and KKF, or between SMH and KKF's partner stores and employees.Although the Terms and Conditions signed by the parties in December 2016 included a confidentiality provision, the provision expressly does not apply to the Spectrum Engine, and does not apply to information already “disclosed to a third party without restriction.” Therefore, based on the “contract history and plain language of the contracts at issue, ” SMH failed to show that specific discovery was required on whether KKF took reasonable precautions to protect SMH's purported trade secrets.
R. Doc. 135-1 at 5 (“[T]here are issues of fact and law as to whether KKF's partner stores and employees are bound by the . . . Terms and Conditions.”); R. Doc. 150-4 at 6 (stating that discovery of any “contracts and other agreements between KKF and its partner stores and their employees” is needed “before the Court can rule that there were no reasonable security measures in place”).
R. Doc. 142 at 27.
Id. at 35.
Id.; R. Doc. 123-5 at 13.
R. Doc. 142 at 35.
Second, plaintiff requested additional discovery about the meaning of the language in the Terms and Conditions. Magistrate Judge Currault correctly found that extrinsic evidence as to the meaning of the Terms and Conditions was irrelevant under Louisiana law. The confidentiality provision that SMH relies on in the Terms and Conditions plainly states that “‘confidential information' does not include Spectrum Intellectual Property (as defined below).” “Spectrum Intellectual Property” is “defined below” as “[a]ll pre-existing or customizable developed code modules utilized by Spectrum in the [audio/video learning and entertainment software (“AVC”)] or Spectrum Engine is and shall be owned by the Spectrum.” The same provision further states that Spectrum will continue “utilizing its Spectrum Intellectual Property (including providing AVC and customized Spectrum Engine platforms)” in service of its other clients.
R. Doc. 135-1 at 8-9.
R. Doc. 123-5 at 13.
Id.
Id. at 14.
Plaintiff disputes this reading of the Terms and Conditions and argues that the confidentiality provision does not cover “the code modules, ” a component of the Spectrum Engine, but does cover the platform itself.Plaintiff never explains why “[a]ll . . . code modules utilized by Spectrum in the . . . Spectrum Engine” would not include the Spectrum Engine itself. Nor does plaintiff square its reading with the plain language of the contract that includes “customized Spectrum Engine platforms” under the umbrella of “Spectrum Intellectual Property.” The Magistrate Judge did not err in rejecting plaintiff's efforts to defeat the plain language of the agreement that the confidentiality provision did not cover the Spectrum Engine.
R. Doc. 150-4 at 19.
R. Doc. 123-5 at 13.
Id. at 14.
But even if the confidentiality provision did not expressly exclude the Spectrum Engine, the contract states that the confidentiality provision “shall not apply to information which is (i) publicly known, (ii) already known to the recipient, (iii) disclosed to a third party without restriction.” Based on SMH's disclosure to KKF of the Spectrum Engine at least a month before the parties signed the Terms and Conditions, the platform was not covered by the confidentiality provision's unambiguous terms.
Id. at 13.
R. Doc. 142 at 35.
Magistrate Judge Currault was therefore correct that the language of the confidentiality provision plainly does not cover the Spectrum Engine. And given the clear language of the contract, there is no error in Magistrate Judge Currault's finding that under Louisiana law any further discovery of extrinsic evidence regarding intent would be improper. See La. Civ. Code art. 2046 (“When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent.”); Liberty Mut. Ins. Co. v. Pine Bluff Sand & Gravel Co., 89 F.3d 243, 246 (5th Cir. 1996) (“When the terms of a contract are unambiguous and lead to no absurd consequences, we interpret them as a matter of law.”).
Id. at 27.
Finally, plaintiff requested additional discovery of Parthenon's source code, explaining that it was “vital to showing whether additional trade secrets exist and need to be identified.” Magistrate Judge Currault correctly found that Parthenon's source code would have no relevance to the summary judgment motion because SMH failed to show that a side-by-side comparison would help it identify trade secrets which, by definition, would be held by SMH. Instead, she found SMH's assertion that it had to inspect Parthenon's code before it could identify its own trade secrets as “counterintuitive and baseless.” Magistrate Judge Currault's conclusion that “[k]knowledge of the existence and identity of [SMH's] own trade secrets should rest entirely with SMH” is correct.
R. Doc. 135-1 at 10.
R. Doc. 142 at 26.
Id.
Id. at 28.
In sum, the Court finds that Magistrate Judge Currault correctly determined that SMH failed to satisfy Rule 56(d)'s requirements for a denial or a continuance of the motion for partial summary judgment. Although SMH has pointed to specific categories of discovery it seeks, the sought-after information would have no bearing on the Court's analysis of defendant's partial motion for summary judgment. See Krim, 989 F.2d at 1442 (requiring the party seeking additional discovery under Rule 59(d) to demonstrate “how the additional discovery will create a genuine issue of material fact”). The only issue defendants' partial summary judgment addresses is whether SMH has demonstrated the existence of legally protectable trade secrets. However, as the Magistrate correctly points out, “SMH does not even articulate how [its proposed areas of discovery] bear on the adequacy of its identification of its own trade secrets” as required by Rule 59(d). See McKay, 751 F.3d at 700.
R. Doc. 142 at 20.
Id. at 26.
In its objections to the Magistrate's R&R, SMH merely rehashes the arguments it made in the Rule 56(d) motion. It again fails to show that the discovery it seeks would impact the Court's analysis on SMH's identification of trade secrets. Instead, SMH's opposition misses the mark by stating that the Magistrate's “Report concedes that side by side comparison of software source code is relevant to the misappropriation issue in this case.” The misappropriation issue is not implicated in defendants' partial motion for summary judgment. The Court thus finds that Magistrate Judge Currault's opinion as to the Rule 56(d) motion is neither clearly erroneous nor contrary to law. See Fed.R.Civ.P. 72(a). Accordingly, the Court adopts the Magistrate's recommendation, and plaintiff's Rule 56(d) motion is denied.
R. Doc. 150-4 at 6-7.
Id. at 7 (emphasis added).
III. MOTION FOR SUMMARY JUDGMENT
A. Legal Standards
1. Standard of Review for Dispositive Motions
Rule 72 provides that a magistrate judge may issue only a recommendation on a “pretrial matter dispositive of a claim or defense.” See Fed. R. Civ. P. 72(b)(1). Motions for summary judgment, specifically listed in 28 U.S.C. § 636(b)(1)(A), are dispositive. See Vaquillas Ranch, 844 F. at 1162 (discussing cases in which courts have used § 636(b)(1)(A) to define dispositive). A magistrate judge addressing a dispositive motion under Rule 72(b) must prepare a “recommended disposition, ” to which the parties can object. The district judge then “must determine de novo any part of the magistrate judge's disposition that has been properly objected to.” Fed.R.Civ.P. 72(b)(3). The Court “may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions.” Id.
2. Standard for Summary Judgment
Summary judgment is warranted when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam). “When assessing whether a dispute to any material fact exists, [the Court] consider[s] all of the evidence in the record but refrain[s] from making credibility determinations or weighing the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness Ins., 530 F.3d 395, 398-99 (5th Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but “unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and conclusions of law' are insufficient to either support or defeat a motion for summary judgment.” Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985) (quoting 10A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2738 (2d ed. 1983)); see also Little, 37 F.3d at 1075. “No genuine dispute of fact exists if the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party.” EEOC v. Simbaki, Ltd., 767 F.3d 475, 481 (5th Cir. 2014).
If the dispositive issue is one on which the moving party will bear the burden of proof at trial, the moving party “must come forward with evidence which would ‘entitle it to a directed verdict if the evidence went uncontroverted at trial.'” Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991) (quoting Golden Rule Ins. v. Lease, 755 F.Supp. 948, 951 (D. Colo. 1991)). “[T]he nonmoving party can defeat the motion” by either countering with evidence sufficient to demonstrate the “existence of a genuine dispute of material fact, ” or by “showing that the moving party's evidence is so sheer that it may not persuade the reasonable fact-finder to return a verdict in favor of the moving party.” Id. at 1265.
If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by pointing out that the evidence in the record is insufficient with respect to an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See id. at 324. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue for resolution. See, e.g., id.; Little, 37 F.3d at 1075 (“Rule 56 ‘mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'” (quoting Celotex, 477 U.S. at 322)).
3. Standard for the Existence of a Trade Secret
To succeed on its claims for trade secret misappropriation under the DTSA, SMH must show: (1) the existence of a trade secret; (2) misappropriation of the trade secret by another; and (3) the trade secret's relation to a good or service used or intended for use in interstate or foreign commerce. Complete Logistical Servs., LLC v. Rulh, 350 F.Supp.3d 512, 517 (E.D. La. 2018) (citing 18 U.S.C. § 1836(b)(1)). Similarly, to recover damages under the LUTSA, SMH must prove: (1) the existence of a trade secret; (2) misappropriation of the trade secret by another; and (3) actual loss caused by the misappropriation. Source Prod. & Equip. Co., Inc. v. Schehr, No. 16-17528, 2017 WL 3721543, at *5 (E.D. La. Aug. 29, 2017).
At issue in defendants' motion is the first element of the trade secret misappropriation claims: whether plaintiff has shown the existence of a trade secret. The DTSA defines “trade secret[s]” as:
[A]ll forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if-
(A) the owner thereof has taken reasonable measures to keep such information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information[.]18 U.S.C. § 1839(3). LUTSA's definition is substantially the same. See La. Rev. Stat. § 51:1431(4).
Plaintiff bears the burden of “identif[ing] the trade secrets” and “showing that they exist.” Source Prod. & Equip. Co. v. Schehr, No. 1617528, 2019 WL 4752058, at *5 (E.D. La. Sept. 30, 2019) (citing Mfg. Automation & Software Sys., Inc. v. Hughes, No. 16-8962, 2018 WL 3197696, at *14 (C.D. Cal. June 25, 2018)); see also InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 655 (9th Cir. 2020) (“This appeal involves the requisite particularity with which trade secret misappropriation plaintiffs must define their trade secrets to defeat a motion for summary judgment.”). Plaintiff must “describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons . . . skilled in the trade.” InteliClear, 978 F.3d at 658 (quoting Imax Corp. v. Cinema Techs., Inc., 152 F.3d 1161, 1164 (9th Cir. 1998)).
This requires that the plaintiff “clearly refer to tangible trade secret material” rather than a “system which potentially qualifies for trade secret protection.” Id. “[C]atchall” phrases or mere “categories” of trade secrets are inadequate. Id. However, the Fifth Circuit has never required that trade secrets “be pled with extreme specificity.” C&M Oilfield Rentals, LLC v. Location Illuminator Technologies, LLC, No. 18-39, 2020 WL 5745833, at *6 (W.D. Tex. Aug. 3, 2020) (quoting Wellogix, Inc. v. Accenture, LLP, 716 F.3d 867, 874 (5th Cir. 2013)).
Further, a plaintiff may not “cite and incorporate by reference hundreds of documents that purportedly reference or reflect the trade secret information.” InteliClear, 978 F.3d at 658 (citing X6D Ltd. v. Li-Tek Corps., No. 10-2327, 2012 WL 12952726, at *6 (C.D. Cal. Aug. 27, 2012)). To the extent that a plaintiff relies on such documentation, the plaintiff must “separate the trade secrets from other information” and cannot simply “identify a kind of technology and then invite the court to hunt through the details in search of items meeting the statutory definition.” IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, 583-84 (7th Cir. 2002).
At the summary judgment stage and beyond, “precision” is required “because, especially where a trade secrets claim ‘involves a sophisticated and highly complex' system, the district court or trier of fact will not have the requisite expertise to define what the plaintiff leaves abstract.” InteliClear, 978 F.3d at 658 (quoting Imax, 152 F.3d at 1167); see also Am. Student Fin. Grp., Inc. v. Aequitas Cap. Mgmt., Inc., No. 2-2446, 2015 WL 11237638, at *9 (S.D. Cal. Feb. 12, 2015) (noting that “numerous courts have granted or affirmed summary judgment in a defendant's favor where a plaintiff fails to identify its trade secret with sufficient particularity” and citing cases from the Ninth and Seventh Circuits) (citing Imax, 152 F.3d at 1167; IDX Sys., 285 F.3d at 583-84).
Additionally, “[i]t is self-evident that the subject matter of a trade secret must be secret.” Tewari De-Ox Sys., Inc. v. Mountain States/Rosen, L.L.C., 637 F.3d 604, 611 (5th Cir. 2011) (citing Luccous v. J.C. Kinley Co., 376 S.W.2d 336, 338 (Tex. 1964)) (applying Texas law). While generally known information, standing alone, cannot be a trade secret, “a combination of” disclosed technologies may qualify. See Metallurgical Indus., Inc. v. Fourtek, Inc., 790 F.2d 1195, 1202 (5th Cir.1986)) (“[A] trade secret can exist in a combination of characteristics and components each of which, by itself, is in the public domain, but the unified process, design and operation of which in unique combination, affords a competitive advantage and is a protectible secret.”). Finally, as the relevant statutes require, whether a purported trade secret qualifies as such depends on whether the information's owner takes “reasonable measures” to protect it. 18 U.S.C. § 1839(3)(A); La. Rev. Stat. § 51:1431(4)(b); see also Gen. Universal Sys., Inc. v. Lee, 379 F.3d 131, 150 (5th Cir. 2004) (per curiam).
B. Discussion
1. The Report and Recommendation
In their motion for partial summary judgment, defendants raise three grounds on which they contend plaintiff's trade secrets fail: (1) SMH failed to adequately identify its trade secrets at the summary judgment stage; (2) SMH failed to take reasonable measures to protect the secrecy of its purported trade secrets; and (3) the information does not derive value from not being generally known or readily ascertainable.
In considering these arguments, Magistrate Judge Currault separated plaintiff's purported trade secrets into two categories: the outward-facing “feature” trade secrets, and the “implementation” trade secrets. The Magistrate defined the “feature” trade secrets as the 14 identified “general functions of the Spectrum Engine (e.g., video layouts, hot spots, progress bar, multiple language, certificate generation upon completion) that are outward facing features with which end-users interact.” Separately, the Magistrate considered “implementation” trade secrets as SMH's “specific source code excerpts, interface/user experience screen shots, and architecture design diagrams” that reflected “the implementation of the outward facing ‘feature' trade secret.”
R. Doc. 142 at 30-38.
Id. at 39-43.
Id. at 30.
Id.
Magistrate Judge Currault first evaluated plaintiff's 14 identified “features.” Although she found that plaintiff adequately identified the feature aspect of each of its trade secrets, she concluded that plaintiff failed to create issues of material fact as to whether the majority of its identified features were general knowledge, and whether plaintiff took reasonable measures to protect the secrecy of those features. Specifically, after considering the parties' evidence, she found that no issue of material fact remained as to the viability of the “feature” component of plaintiff's Trade Secrets # 1-12, and # 14. As to Trade Secret # 13, the “API Interface, ” a backend component of the training platform with no outward-facing components, defined by SMH as “a computing interface that defines interactions between multiple pieces of software, ” the Magistrate found that summary judgment was inappropriate because a fact issue remained regarding whether plaintiff or Parthenon developed the software component.
Id. at 30-38.
Id. at 38.
Id. at 38.
The Magistrate then considered whether issues of material fact remained as to SMH's “implementation” of the 14 identified trade secrets. Limiting plaintiff to the specific excerpts of source code, architectural design, database structure, and algorithms identified in its TSI statement, Magistrate Judge Currault recommended that the Court find that Trade Secrets #1-7 and #9-13 survive summary judgment. For Trade Secrets #8 and #14, Magistrate Judge Currault found that plaintiff had not identified specific implementation means. In other words, she found that these two purported trade secrets consisted of outward-facing features only, and that summary judgment was therefore appropriate.
Id. at 39-43.
Id. at 41-42.
Id.
2. The Court's Analysis of the Trade Secrets
As an initial matter, plaintiff objects to the Magistrate's characterization of the “feature” aspect of its trade secrets as distinct from their “implementation.” It argues that this distinction runs afoul of Fifth Circuit precedent that courts must look beyond a purported trade secret's individual “components” and determine whether a “combination of [the secret's] characteristics and components” create a protectable trade secret. See Tewari De-Ox Sys., Inc. v. Mountain States/Rosen, L.L.C., 637 F.3d 604, 613 (5th Cir. 2011).
R. Doc. 150-4 at 7-8, 22.
SMH did not divide its trade secrets into “features” and “implementation” in its TSI Statement. Although plaintiff's description of its trade secrets in its briefing created some ambiguity on this point, the Court finds that the Magistrate erred in treating plaintiff's trade secret designations as identifying separate “feature” and “implementation” trade secrets. The Court finds that the proper interpretation of plaintiff's TSI Statement is to construe each numbered trade secret as a whole and evaluate whether the features, as implemented, are protectable trade secrets. This is plainly what is suggested by the trade secret identifications themselves, which suggest no intended bifurcation between the function of the trade secret and the implementation of the trade secret.
See R. Doc. 68; R. Doc. 150-4 at 22.
The Court's identification order states that “broad identification of the categories within which the trade secret information may fall” will be insufficient identification without more particularity. The order required plaintiff to “include[e] as much detail as possible” such as, “the exact identity, scope, boundaries, constitutive elements, and content of each alleged trade secret, including any asserted combinations.” The order does not suggest that the Court would evaluate the identified components of a purported trade secret separately from the overall function identified. Moreover, the Fifth Circuit has recognized that a trade secret can exist “in a combination of characteristics and components” that by themselves would not be protected, thus suggesting a holistic interpretation of claimed trade secrets. See Metallurgical Indus. Inc. v. Fourtek, Inc., 790 F.2d 1195, 1202 (5th Cir. 1986).
R. Doc. 27 at 2.
Id. (emphasis added).
Nonetheless, Magistrate Judge Currault was correct in limiting plaintiff to the specific implementation method it identified in its trade secret identification, i.e., the source code, architectural design, database structure, and algorithms listed in its TSI Statement. This limitation effectively confined plaintiff's trade secret misappropriation claims to specific, protectable types of information cognizable under the statutes. Moreover, this limitation is well within the Magistrate's authority because “unless the plaintiff engages in a serious effort to pin down the secrets[, ] a court cannot do its job.” IDX Sys., 285 F.3d at 583-84 (holding that the plaintiff's 43-page description of its software was not specific enough because it left “mysterious exactly which pieces of information are trade secrets”). Courts have also held that such limitations are necessary to prevent plaintiffs from describing “trade secrets differently at each stage of the litigation.” See, e.g., Next Comms., Inc. v. Viber Media, Inc., 758 Fed.Appx. 46, 49 (2d Cir. 2018); see also Quest Sol., Inc. v. RedLPR, LLC, No. 19-437, 2021 WL 1688644, at *1 (D. Utah Apr. 28, 2021) (“Because of the unique aspects of trade secrets, it ‘raises the possibility that the trade secret owner will tailor the scope of the trade secret in litigation to conform to the litigation strategy.'” (quoting TLS Mgmt. & Mktg. Servs., LLC v. Rodriguez-Toledo, 966 F.3d 46, 51 (1st Cir. 2020))).
R. Doc. 142-1 at 41 (“SMH's implementation trade secret claim is thus limited to the specific source code, software architecture, algorithms and database structures identified in Nos. 1-7 and 9-13 of its Amended TSI Statement.”); id. at 44 (finding that only the “specifically cited methods (not any additional code, database structure or other information buried in the 3, 000+ pages of exhibits) are identified with reasonable particularity”).
Accordingly, the Court finds that plaintiff's objection to the Magistrate's decision to consider the “feature” trade secrets as separate from their “implementation” is valid. See Fed.R.Civ.P. 72(b)(3). But the result that Magistrate Judge Currault ultimately recommends is unaffected by her bifurcated analysis of plaintiff's trade secrets. Plaintiff can still move forward with its argument that it has trade secrets in the “features” of the Spectrum Engine, as specifically implemented in its TSI Statement. The only restriction the Magistrate's recommendation places on plaintiff is that plaintiff cannot argue that broad categories of public-facing features are by themselves trade secrets, or that any unidentified mode of implementation is a covered trade secret. Having set aside the Magistrate Judge's bifurcated analysis, the Court now considers plaintiff's 14 identified trade secrets to determine if issues of material fact remain in dispute as to whether the features, as implemented, constitute protectable trade secrets.
i. Trade Secrets #8 and #14
The Report recommended dismissing SMH Trade Secrets #8 (“Testing Layout”) and #14 (“Combination of Trade Secrets 1-13”) because plaintiff failed to provide any specific information in its TSI Statement about how these outward-facing features were implemented. In its TSI Statement, for every trade secret, SMH “listed the names of components (e.g., source code) that build the trade secret.” However, SMH's use of generic software categories, by themselves, is insufficient to establish a trade secret without reference to the specific codes, interfaces, and designs it used in the Spectrum Engine. See InteliClear, 978 F.3d at 659 (holding that there was a genuine issue of material fact whether the plaintiff identified its trade secrets with sufficient particularity when plaintiff, rather than “using ‘catchall' phrases or merely identifying categories of information . . . specified the program processes, tables, columns, and account identifies” it considered to be trade secrets).
R. Doc. 142 at 39.
Id. at 8; see also R. Doc. 68.
For Trade Secrets #1-7 and #9-13, SMH included excerpts of the specific source code, software architecture diagrams and tables, and database structure it claimed constituted a trade secret, whereas for Trade Secrets #8 and #14, SMH merely provided a generic list of components that it asserted comprised the trade secrets.
Id.
For Trade Secret #8, plaintiff stated that the testing layout consists of “source code, architectural design, user experience, and user interface.”But plaintiff never provided excerpts or screen shots of the actual source code or architectural design it used to implement this feature. Instead, plaintiff provided screenshots only of how its testing interface appears to end-users of the platform. Similarly, plaintiff's TSI Statement for Trade Secret #14 stated that the Spectrum Engine “includes a unique combination of the above trade secrets” through its “specific KKF implementation.” Again, plaintiff fails to meet its burden of describing its trade secrets with sufficient particularity, because it does not identify the specific implementation methods or combinations it used to create the Spectrum Engine. See IDX Sys., 285 F.3d at 583-84 (noting that a plaintiff cannot simply “identify a kind of technology and then invite the court to hunt through the details in search of items meeting the statutory definition”).
R. Doc. 68 at 24.
R. Doc. 68 at 24-25.
Id. at 37.
The Magistrate correctly found because plaintiff has not identified any “information” protected by the DTSA or the LUTSA as to these two purported trade secrets, plaintiff has failed to adequately identify the means by which it implemented these purported trade secrets. See 18 U.S.C. § 1839(3); La. Rev. Stat. § 51:1431(4); IDX Sys., 285 F.3d at 584 (“According to [plaintiff] ‘a 43-page description of the methods and processes underlying and the inter-relationships among various features making up [plaintiff's] software package' is specific enough. No, it isn't.”).
The Magistrate also correctly found that plaintiff failed to create an issue of material fact regarding whether it took reasonable measures to protect these outward-facing features. Courts have found that outward-facing software features “can be a trade secret so long as the only people who can access them are bound by a duty to keep them confidential.” Broker Genius, Inc. v. Zalta, 280 F.Supp.3d 495, 515 (S.D.N.Y. 2017). Notably, between November 2016 when the Spectrum Engine platform was released and December 2016 when the Terms and Conditions amendment was signed, “no confidentiality provision of any type” was in place. SMH disputes this and asserts that the confidentiality provision in the parties' Terms and Conditions agreement retroactively applied to the outward-facing features. But the Terms and Conditions agreement does not state that it applies retroactively, nor does it contain any other provision that suggests retroactive application. The Magistrate Judge was therefore correct that based on the plain language of the agreement, no confidentiality provision covered the Spectrum Engine from November 2016 to December 2016. See La. Civ. Code art. 2014. Moreover, even if the confidentiality provision did retroactively apply, it explicitly did not cover the Spectrum Engine, and did not cover information already disclosed without restriction to third parties.Given that SMH had already disseminated the Spectrum Engine to KKF and 17, 000 third-party workers, the confidentiality provision did not protect the platform's outward-facing features already disclosed to KKF and partner store employees.
R. Doc. 142 at 27.
R. Doc. 150-4 at 17-19.
R. Doc. 142 at 34-35.
R. Doc. 123-5 at 13.
Id.; R. Doc. 124-4 ¶¶ 5-6.
SMH also contends that its use of account and password requirements to access the training platform constitutes a reasonable measure to protect the secrecy of its outward facing features. But the use of account names and passwords does not impose an independent legal duty to maintain the confidentiality of the visible features observed by a software's users. Plaintiff has not introduced any evidence showing that it took any measures to prevent the approximately 17, 000 users from disclosing the visible aspects of the Spectrum Engine to third parties. The Court accordingly finds that no issue of material fact remains as to whether plaintiff took reasonable measures to protect the secrecy of the outward-facing features of the Spectrum Engine.
R. Doc. 150-4 at 20.
The Court concludes that plaintiff's objections to Magistrate Judge Currault's findings of fact and conclusions of law on Trade Secrets #8 and #14 lack merit. See Fed.R.Civ.P. 72(b)(3). Accordingly, the Court adopts the Magistrate's opinion as to its recommendation to grant partial summary judgment on Trade Secrets #8 and #14.
ii. Trade Secrets #1-7 and #9-13
For the remaining Trade Secrets, the Magistrate found that fact issues remain as to whether these identified features, by their implementation, constitute protectable trade secrets. In the TSI Statement, plaintiff provided specific excerpts of source code, architectural design, database structure, and/or algorithms used to implement these purported trade secrets. By pointing to “tangible trade secret material, ” the sort of “information” protected under the DTSA and LUTSA, plaintiff has satisfied the requirement that it identify the alleged trade secret with “sufficient particularity.” See 18 U.S.C. § 1839(3); La. Rev. Stat. § 51:1431(4); InteliClear, 978 F.3d at 658.
R. Doc. 68 at 5-23, 26-37.
Neither party has introduced evidence to show whether the specified implementation methods involve open source code, are commonly known to someone skilled in the industry, or whether they are purely proprietary. But in his affidavit, Dr. Valerdi attests that SMH's manner of implementing each of the trade secrets “is not something that is widely available in any generally known format in the industry.” As Magistrate Judge Currault correctly found, this evidence is sufficient to create an issue of material fact on the question of whether the implementation methods of the remaining trade secrets were generally known, and, accordingly, whether they amount to protectable trade secrets.
R. Doc. 123-8 ¶ 21.
Unlike Trade Secrets #8 and #14, the remaining trade secret identifications provide the implementing source code, architectural design, database structure, and/or algorithms that are not outward-facing material, and are not visible to all the end-users of the training platform. While SMH's credentialing requirements for accessing the platform (i.e. user accounts and passwords) did not provide reasonable protection of outward-facing material (supra at 40), the same is not true with respect to the specifically identified implementation methods embodied in Trade Secrets #1-7, and #9-13. As to these trade secrets, Dr. Valerdi's affidavit, which states that the credential requirements for accessing the training platform were “reasonable” to protect this system is sufficient to create an issue of material fact as to whether SMH took reasonable measures to protect the secrecy of its Trade Secrets #1-7 and #9-13. He reasoned that these requirements provided reasonable protection of these trade secrets “because it provides SMH with the capability to keep a record” of the active users and the information they accessed.
Id. ¶ 9.
Id.
The Court, having reviewed de novo the record, the applicable law, the Magistrate Judge's R&R, and SMH's objections to the R&R, adopts the Magistrate Judge's opinion as to her recommendation to deny summary judgment on Trade Secrets #1-7 and #9-13, which consist of the identified features only as specifically implemented in each numbered trade secret statement. See Fed.R.Civ.P. 72(b)(3).
IV. CONCLUSION
For the foregoing reasons, the Court DENIES plaintiff's Rule 56(d) motion. The Court GRANTS in part, and DENIES in part, defendants' motion for partial summary judgement. The Court grants summary judgment on plaintiff's trade secret claims as to its Trade Secrets #8 and #14. The Court denies summary judgment on plaintiff's claims as to Trade Secrets #1-7 and #9-13.