We don't see too many DTSA cases here (at least in comparison to patent cases), but this one is interesting.
In Peloton Interactive v. iFIT Inc., C.A. No. 20-1535-RGA (D. Del.), a mechanic at defendant iFIT had a childhood friend who was working as a freelance prop man helping shoot some commercials for iFIT competitor Peloton.
According to the Court, the iFIT mechanic found out about his friend's work and, despite allegedly knowing the scripts for the commercials were under an NDA, convinced his friend the prop man to forward him the scripts, which he did (along with a note "Dont [sic] forward or show my name.").
The iFIT mechanic then forwarded the scripts to the hero of this story, an iFIT Vice President of Product Development, referred to in the opinion as "Mr. Willardson." Mr. Willardson immediately shut down the idea of using the competitor's information and involved in-house counsel:
On October 26, 2020, after returning to the office, Mr. Chambers printed a copy of the Scripts from his email. . . . After reading a portion of the Scripts, Mr. Chambers brought the document to his immediate supervisor, Mr. Willardson, VP of Product Development. . . . Mr. Willardson quickly flipped through the Scripts and told Mr. Chambers not to share the document with anyone. . . . Mr. Willardson then put the Scripts in a sealed envelope and gave the envelope to iFIT's in-house counsel. . . . Mr. Chambers and Mr. Willardson have both testified that they never disseminated the Scripts.
They should give this guy a bonus (the VP, not the mechanic).
Peloton discovered that iFIT had Peloton's secret commercial scripts just fifteen days after iFIT received them, after iFIT produced them as part of a document production for an unrelated dispute. Peloton (unsurprisingly) filed a DTSA trade secret misappropriation action just a week later.
No Trade Secret Misappropriation
Today, the Court granted summary judgment of no trade secret misappropriation. It found that iFIT did not use improper means to acquire the scripts, because there is no evidence that anyone directed the mechanic to acquire the scripts, and he was acting outside of the scope of his employment as a mechanic when he did so.
Likewise, the Court found that there was no misappropriation by use of the trade secrets, because there is no evidence that anyone at iFIT actually used the scripts.
Peloton alleged that iFIT's commercials made after it received Peloton's "strongly resemble" Peloton's, and that Peloton "dramatically" increased its advertising spend after it got the scripts. The Court rejected both claims.
As to the similarity of the ads, Judge Andrews primarily chalked it up to being in a similar market:
Peloton does not provide any evidence that these minor similarities are attributable to iFIT's use of Peloton's trade secret. Instead, there is nothing to suggest that the similarities are anything other than the sorts of coincidental similarities that one would expect from competitors marketing similar products to similar target audiences. The actors used by iFIT resemble the " stock" actor types that have been used many times by both iFIT and Peloton. . . . Further, the idea of having a father and his baby in a fitness equipment advertisement is not something that iFIT needed Peloton's Scripts to conceive of or to replicate. Without more, these "similarities" are insufficient to show misappropriation.
The Court also noted that the increased ad spend is easily explained by the pandemic and other factors:
Peloton also argues that iFIT " dramatically" increased its advertising spend after it acquired Peloton's trade secret. . . . Specifically, iFIT spent $37.6 million over its projected marketing spend for January/February 2021. . . . Peloton argues that based on iFIT's increase in its advertising spend and iFIT' s contradictory explanations for this increase, a reasonable juror could infer that iFIT used the Scripts to inform its advertising spend. . . . I disagree. Peloton's advertising spend theory is entirely speculative. The only "evidence" connecting this spending increase to Peloton's trade secret is the fact that iFIT received the Scripts two months earlier. But this attenuated connection is insufficient to show that iFIT used the Scripts.
Not only is there nothing to connect the Scripts to increased advertising spending, there were multiple reasons, based on undisputed facts, why iFIT increased its spending on advertising. For example, there was a high demand for fitness equipment around New Year's and due to COVID, leading to increased sales. . . . Further, in October 2020, iFIT received an investment of $200 million from the private equity firm L Catterton.
The Court also rejected the idea that iFIT's "failure to immediately notify" Peloton that it had the scripts supported misappropriation:
Peloton also argues that iFIT' s failure to immediately notify Peloton of its acquisition of the Scripts supports a finding of misappropriation. . . . I disagree. There is no evidence that iFIT actively concealed its acquisition of the Scripts from Peloton. iFIT produced to Peloton the evidence of its possession of Peloton's trade secret one week after it obtained the trade secret, albeit without realizing it was doing so. Within another week, Peloton recognized that iFIT had the trade secret.
Finally, the Court noted Mr. Willardson's actions, and that a computer forensics expert had confirmed that Peloton employees had not further disseminated the scripts. The Court therefore granted summary judgment of non-infringement:
Peloton has provided no evidence to support a finding that iFIT did anything with the Scripts. Instead, Peloton's theory of misappropriation is based on speculation. . . . Peloton's evidence—i.e., the unremarkable similarities between iFIT's ProForm advertisements and Peloton's Scripts; iFIT's increased advertising spending; iFIT's monitoring of Peloton's marketing activities; and iFIT' s failure to immediately notify Peloton of its acquisition of the Scripts—is insufficient to show that iFIT used Peloton's trade secret. Thus, I will grant iFIT's motion for summary judgment.
Peloton had apparently sought damages as a percentage of its $80 million advertising campaign that involved the scripts (the Court called that damages number "even more speculative" than the underlying misappropriation claim itself).
From the docket at least, it appears he Court's grant of summary judgment resolves the entire action; the Court entered judgment in favor of iFIT and denied the other pending motions as moot.
iFIT (Mostly) Dodged a Bullet
All told, it looks like the mechanic's idea of asking his friend for Peloton's secret commercial scripts cost iFIT a year-and-a-half long litigation, a forensic investigation, and, potentially, a coming appeal.
But iFIT at least avoided a trial and a potentially multi-million-dollar jury verdict, based in part on the mechanic's quick-thinking manager Mr. Willardson, who did the right thing and immediately involved in-house counsel. This opinion might not have come out the same way if he had instead forwarded the scripts over to the marketing folks and said "look at this!"