Ridge Corporation v. Altum LLC

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

RIDGE CORPORATION,

:

Plaintiff,

Case No. 2:21-cv-5915

Judge Sarah D. Morrison

v.

Magistrate Judge Elizabeth A.

Preston Deavers

ALTUM LLC, et al.,

:

Defendants.

OPINION AND ORDER

This matter arises out of dispute between Plaintiff Ridge Corporation and

Defendants Dominic Grandominico, Kyle Timothy Gaines, Greg Karst (the

“Individual Defendants”) and Altum, LLC over the alleged misappropriation of

trade secrets in violation of federal and state law. It is before the Court on

Defendants’ Motion to Dismiss (ECF No. 24), to which Plaintiff responded (ECF No.

27), and Defendants replied (ECF No. 29).

For the reasons set forth below, Defendants’ Motion is GRANTED in part

and DENIED in part.

I. BACKGROUND

Plaintiff Ridge Corporation is a manufacturing and engineering company

that specializes in thermoplastics and produces, among other things, the Dual

Coated Film Product (the “Product”). (Compl., ECF No. 1, ¶¶ 9, 13–18.) The

Individual Defendants were employed by Ridge until each resigned in 2018. (Id. ¶¶

10, 27–30). On March 15, 2019, the Individual Defendants formed Altum, LLC,

which is also a manufacturing and engineering company that specializes in

thermoplastics. (Id. ¶¶ 33–34; see also Altum Articles of Inc.,1 ECF No. 1-7.)

At the center of this dispute is Ridge Corporation’s Dual Coated Film

Product, which is an apparatus and method for bonding two dissimilar materials

using a bondable film that is coated with a chemical emulsion to facilitate adhesion.

(Compl., ¶¶ 13–18.) The Product was invented by Gary Grandominico,2 Raymond

McDonald, and the Individual Defendants while each was employed by Ridge Corp.

(Id.) On October 1, 2015, each of the inventors executed patent assignments

granting Ridge Corporation exclusive rights to the Product, the patent application

for it, and any “application derivatives.” (Id. ¶ 23; see also Patent Assignment, ECF

No. 1-2.) The next day, Ridge Corporation filed a patent application with the United

States Patent and Trademark Office (“USPTO”) for the Product. (Compl., ¶ 24.)

Ultimately, the patent application was denied for lack of invention, and Ridge

Corporation allowed the patent application to lapse. (Id. ¶ 25; see also Rejection of

Patent Application, ECF No. 24-1.) According to Ridge, abandoning the patent

prosecution was a strategic decision to pursue trade secret protection for the

continued development of the Product and its underlying technology, which is now

used in almost all of its products. (Id. ¶ 25)

1 The Court may consider matters beyond the complaint when deciding a

motion to dismiss “when the document outside the complaint is referred to or

attached to the pleadings and is integral to plaintiff’s claims.” Commercial Money

Center, Inc. v. Illinois Union Ins. Co., 508 F. 3d 327, 336 (6th Cir. 2007).

2 Gary Grandominico is the President and Chief Executive Officer of Ridge

Corporation and Defendant Dominic Grandominico’s father.

Less than a year after the Individual Defendants resigned from Ridge

Corporation, the Defendants filed a patent application with the USPTO for an

invention called the “Structural Member Consisting of Dissimilar Polymer

Materials.” (Id. ¶¶ 36–37; Altum Patent Application, ECF No. 1-10, filed March 16,

2015.) According to Ridge, this invention is “wholly derivative” of the 2015-patent

application and the Product’s underlying technology—specifically, it alleges that the

combination of functional components with other adhesion promoters in the

Defendants’ patent is a direct extension of the research performed by Karst for

Ridge Corporation in March and April of 2018. (Compl., ¶¶ 36–40, 65.)

Following discovery of the Defendants’ patent application, Ridge Corporation

filed the instant suit.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim

with sufficient specificity to “give the defendant fair notice of what the claim is and

the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555

(2007) (internal alteration and quotations omitted). A complaint which falls short of

the Rule 8(a) standard may be dismissed if it fails to state a claim upon which relief

can be granted. Fed. R. Civ. P. 12(b)(6). The Supreme Court has explained:

To survive a motion to dismiss, a complaint must contain sufficient

factual matter, accepted as true, to state a claim to relief that is

plausible on its face. A claim has facial plausibility when the plaintiff

pleads factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged. The

plausibility standard is not akin to a probability requirement, but it

asks for more than a sheer possibility that a defendant has acted

unlawfully. Where a complaint pleads facts that are merely consistent

with a defendant’s liability, it stops short of the line between

possibility and plausibility of entitlement to relief.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations and quotations

omitted). The complaint need not contain detailed factual allegations, but it must

include more than labels, conclusions, and formulaic recitations of the elements of a

cause of action. Directv, Inc. v. Treesh, 487 F.3d, 471, 476 (6th Cir. 2007).

“Threadbare recitals of the elements of a cause of action, supported by mere

conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678 (citing Twombly, 550

U.S. at 555).

III. ANALYSIS

A. Counts I and II—Misappropriation of Trade Secrets

Defendants argue that Ridge’s misappropriation of trade secrets claims must

be dismissed because the only information that Ridge identifies as a trade secret is

the Product, and Ridge cannot prove that it took reasonable steps to protect that

information due to the publicly available patent application that it filed in 2015.

(Mot., ECF No. 24, PAGEID # 223–27.) In response, Ridge argues that, despite the

information disclosed in the patent application, post-2015 developments to the

Product are trade secrets and that this information is sufficiently identified in the

Complaint. (Resp., ECF No. 27, PAGEID # 254–58.)

Ridge has brought misappropriation of trade secrets claims under the

Defense of Trade Secrets Act (Count I), 18 U.S.C. § 1839, and the Ohio Uniform

Trade Secrets Act (Count II), Ohio Revised Code § 1333. Because the acts are

similar in scope and contain nearly identical definitions of statutory terms, the

claims will be addressed together.

To state a claim for trade secret misappropriation, Ridge must first establish

the existence of a “trade secret,” defined as “all forms and types of. . . scientific,

technical, or engineering information” if (1) “the owner thereof has taken reasonable

measures to keep such information secret” and (2) “the information derives

independent economic value. . . from not being generally known. . . [or] readily

ascertainable through proper means.” 18 U.S.C. § 1839(3); see also O.R.C.

1333.61(D).

Information that is generally known, publicly available, or readily

ascertainable by skilled individuals in a plaintiff’s field is not entitled protection as

trade secret information. See Hickory Specialties, Inc. v. Forest Flavors Int’l, Inc.,

No. 99-5003, 2000 WL 687681 (6th Cir. May 19, 2000); see also Caudill Seed &

Warehouse Co. v. Jarrow Formulas, Inc., 53 F.4th 368, 381 (6th Cir. 2022).

Accordingly, Ridge is required to identify the information it claims is a trade secret

“with specificity to separate the secret from general knowledge” or other forms of

unprotected information. AtriCure, Inc. v. Jian Meng, 842 F. App’x 974, 980 (6th

Cir. 2021); see also Oakwood Lab’ys LLC v. Thanoo, 999 F.3d 892, 906 (3d Cir. 2021)

(“[T]he subject matter of the trade secret must be described with sufficient

particularity to separate it from matters of general knowledge in the trade or of

special knowledge of those persons who are skilled in the trade, and to permit the

defendant to ascertain at least the boundaries within which the secret lies.”)

(quoting Diodes, Inc. v. Franzen, 260 Cal. App. 2d 244, 252 (Cal. Ct. App. 1968)).

Ridge need not spell out the details of its trade secret to avoid dismissal, but

“it must do more than allege that it had a secret.” Trandes Corp. v. Guy F. Atkinson

Co., 996 F.2d 655, 661 (4th Cir. 1993) (citations omitted). “Beyond those outer

boundaries, however, deciding whether a plaintiff has sufficiently disclosed its trade

secrets is a fact-specific question to be decided on a case-by-case basis.” Oakwood, at

906 (citations omitted).

Ridge has given Defendants sufficient notice of the trade secret information

at issue here. In addition to identifying the Product and its underlying technology

as trade secret information (which may itself sufficiently communicate the

boundaries of its claim) Ridge’s factual allegations pinpoint the polyurethane to

polypropylene bonding research conducted by then-employee Karst in March and

April 2018 as fundamental to the patent application filed by Altum. (Compl., ¶ 39.)

Next, Ridge’s factual allegations support that this information was

protectable as a trade secret. Ridge identifies specific steps that it took to secure

information about the Product and its continued development. (Compl., ¶¶ 19–22.)

For example, the testing and other information underlying the development of the

Product was limited to a small number of Ridge employees on the central

development team. (Id. ¶ 20.) Ridge also assigned code names when discussing

different development projects with those who assisted in testing but were not part

of the central team. (Id. ¶19.) In addition, Ridge Corporation’s employee handbook

prohibited employees from sharing any sensitive, proprietary, trade secret, or

confidential information learned during the course of their employment; violations

of that policy could result in termination. (Id. ¶ 22; Ridge Corp. Employee

Handbook, ECF No. 1-1.) Finally, Ridge demonstrates that the Product’s underlying

technology derives independent economic value, as it is used in almost all of its

products. (Compl., ¶ 26.)

While Defendants are correct that the information disclosed in Ridge’s 2015

patent application is not protectable trade secret information, see Novak v.

Farneman, No. 2:10-CV-768, 2010 WL 4643002, at *4 (S.D. Ohio Nov. 9, 2010)

(Marbley, C.J.), the existence of publicly disclosed information relating to the 2015-

version of the Product does not render unprotected all future developments to the

Product or innovations involving the disclosed information. See Giasson Aerospace

Sci. v. RCO Eng’g, Inc., 680 F.Supp.2d. 830, (E.D. Mich. 2010) (“‘A trade secret can

exist in a combination of characteristics 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.’”) (quoting 3M v. Pribyl, 259 F.3d

587, 595–96 (7th Cir. 2001)); Allied Erecting & Dismantling Co. v. Genesis Equip. &

Mfg., Inc., 649 F. Supp. 2d 702, 713 (N.D. Ohio 2009) (“[W]hile, as a general

proposition, there is no trade-secret protection for secrets that are disclosed in a

patent application, numerous courts have allowed trade-secret protection for

processes or specifications related to the patented device that are not disclosed in

the patent.”) (collecting cases).

Ridge must eventually prove that the misappropriated information is distinct

from that disclosed in the patent, but the mere existence of publicly available

information relating to the Product is not a fatal flaw in its pleadings. See Hickory

Specialties, 2000 WL 687681 at * 7 (holding that failure to distinguish “secret”

information from that disclosed in a patent was fatal to trade secret claim at trial).

Because Plaintiff has identified trade secret information with specificity and

alleged sufficient factual information to demonstrate it is protected as such,

Defendants’ motion to dismiss is DENIED as to Counts I and II.

B. Count III—Breach of Patent Assignment

Defendants argue that Ridge has failed to state a claim for breach of patent

assignment because their patent and patent application fall outside the scope of the

rights assigned to Ridge Corporation in the agreement. (Mot., ECF No. 24, PAGEID

# 227–29.) Ridge responds that the rights assigned to it by the Individual

Defendants include, among other things, all patents and patent applications that

derived the 2015-patent application. (Resp., ECF No. 27, PAGEID # 258–60.)

Under federal law, patents are treated as the personal property of the

patentee whose rights in their patents and patent applications are assignable by

written instrument. 35 U.S.C.A. § 261. Although claims that arise under federal

patent law fall within the exclusive jurisdiction of federal courts, 28 U.S.C. § 1338,

“state law governs contractual obligations and transfers of property rights,

including those relating to patents.” Regents of Univ. of New Mexico v. Knight, 321

F.3d 1111, 1118 (Fed. Cir. 2003) (internal quotations omitted). Thus, the Court

applies Ohio law.3

3 The forum state’s choice-of-law rules determine which state’s substantive

law will apply. Miller v. State Farm Mut. Auto. Ins. Co., 87 F.3d 822, 824 (6th Cir.

In Ohio, “[i]f a contract is clear and unambiguous, then its interpretation is a

matter of law and there is no issue of fact to be determined.” Inland Refuse Transfer

Co. v. Browning-Ferris Indus. of Ohio, Inc., 15 Ohio St. 3d 321, 322, 474 N.E.2d 271,

272 (1984). When the language of a written contract is clear and can be given a

definite legal meaning, a court need look no further than the writing itself to find

the intent of the parties. Westfield v. Galatis, 100 Ohio St.3d 216, 219, 797 N.E.2d

1256, 1261 (2003).

In context of a patent assignment, the rights that are assigned must be

“distinctly described” with any uncertainty resolved against the assignee. Beidler v.

Davis, 72 Ohio App. 27, 34, 50 N.E.2d 613, 616 (1943). Nonetheless, “common words

appearing in a written instrument will be given their ordinary meaning unless

manifest absurdity results, or unless some other meaning is clearly evidenced from

the face or overall contents of the instrument.” Shifrin v. Forest City Enters., Inc.,

64 Ohio St.3d 635, 638, 597 N.E.2d 499, 501 (1992). See also id. (“When the terms in

a contract are unambiguous, courts will not in effect create a new contract by

finding an intent not expressed in the clear language employed by the parties.”)

In the patent assignment, the Individual Defendants assigned their “entire

and exclusive rights, title and interest in the INVENTION and the APPLICATION

(and APPLICATION DERIVATIVES)” to Ridge Corporation. (ECF No. 1-2, PAGEID

1996). Where, as here, “‘neither party argues that the forum state’s choice-of-law

rules require the court to apply the substantive law of another state, the court

should apply the forum state’s substantive law.’” Wilkes Assocs. v. Hollander Indus.

Corp., 144 F. Supp. 2d 944, 949 n.4 (S.D. Ohio 2001) (Rice, C.J.) (quoting ECHO,

Inc. v. Whitson Co., Inc., 52 F.3d 702, 707 (7th Cir. 1995)).

# 93–96.) “APPLICATION DERIVATIVES” is described in the paragraph preceding

the assignment clause:

Ridge Corporation. . . is entitled to, and is desirous of acquiring, the

entire and exclusive rights, title, and interest in the INVENTION and

the APPLICATION (and all other applications and patents derived

therefrom, such as continuing applications, in and for the United

States, its territories, and all foreign countries (“APPLICATION

DERIVATIVES”)

(Id.) “APPLICATION” refers to the 2015-patent application for the Product and

“INVENTION” refers to the “invented subject matter disclosed and/or claimed” in

that application. (Id.)

Thus, Individual Defendants assigned their rights to “all other applications

and patents derived” from the 2015-patent application. The common usage of

“derive” is “to take, receive, or obtain especially from a specified source.” Derive,

MERRIAM-WEBSTER.COM DICTIONARY, https://www.merriam-

webster.com/dictionary/derive (last visited on Jan. 19, 2023). Ridge specifically

alleges that Defendants’ patent application is “wholly derivative” of the 2015-

application. (Compl., ¶ 65.) Accordingly, Ridge’s breach of patent assignment claim

will not be dismissed.

Defendants seek a different result. They first argue that the assignment of

applications derivative is expressly limited to “continuing applications.”4 (Reply,

ECF No. 29, PAGEID # 288.) Not so. This argument ignores that “continuing

4 A “continuing application” is a “[a] patent application that is filed while the

parent application is pending and that carries on prosecution of some or all of the

original application. Continuation, continuation-in-part, divisional, and reissue

applications are all forms of continuing applications.” Patent Application, Black’s

Law Dictionary (11th ed. 2019); see also 35 U.S.C.A. § 120; 37 C.F.R. § 1.53

applications” is preceded by the modifier “such as.” Rather than indicating an

exhaustive list, “such as” is “used to introduce an example or series of examples.”

Such as, MERRIAM-WEBSTER.COM DICTIONARY, https://www.merriam-

webster.com/dictionary/such%20as (last visited Jan. 19, 2023). Thus, “continuing

applications” are simply an example of a type of application derivative that the

Individual Defendants assigned to Ridge.

Defendants next argue that their patent application did not derive from the

2015-patent application because the USPTO determined that their patent

application described an invention that was not taught, anticipated, or rendered

obvious by any prior art. (Reply, ECF No. 29, PAGEID # 288–89.) While the opinion

by USPTO is given great weight on issues of patentability, it is not determinative

here. See Kawneer Co. v. Pittsburgh Plate Glass Co., 109 F. Supp. 228, 233 (W.D.

Mich. 1952). Instead, Defendants’ argument raises a heavily fact-bound inquiry that

is inappropriate for resolution at this stage.

Finally, Defendants argue that they did not convey any rights to Ridge

because the information in the 2015-patent application was deemed unpatentable

by the USPTO. (Reply, ECF No. 29, PAGEID # 289–90.) However, this argument

ignores that the Individual Defendants also assigned to Ridge their rights to all

subsequent “applications and patents derived” from the 2015-patent application.

Viewing the complaint in the light most favorable to Ridge, USPTO’s rejection of the

2015-patent application did not change the Individual Defendants’ contractual

obligations.

As such, Defendants’ motion is DENIED as to Count III.

C. Count IV—Conversion

Defendants argue that Ridge’s conversion claim should be dismissed because

it is preempted by state law. (Mot., ECF No. 24, PAGEID # 229–230.) In response,

Ridge argues that it is permitted to plead in the alternative, so dismissal based on

preemption is premature. (Resp., ECF No. 27, PAGEID # 260–61.)

Ohio Uniform Trade Secrets Act (“OUTSA”), preempts conflicting “tort,

restitutionary, and other laws” that provide “civil remedies for misappropriation of

a trade secret.” O.R.C. § 1333.67(A). Although “[t]he Ohio Supreme Court has yet to

speak to the scope of the OUTSA’s preemption clause,” the test applied by the Sixth

Circuit is “whether the claims are no more than a restatement of the same operative

facts that formed the basis of the plaintiff’s statutory claim for trade secret

misappropriation.” Stolle Mach. Co., LLC v. RAM Precision Industries, 605 Fed.

Appx. 473, 485 (6th Cir. 2015) (internal quotation omitted); see also Sal’s Heating &

Cooling, Inc. v. BERS Acquisition Co., 2022-Ohio-1756192, ¶ 50, N.E.3d 537, 547

(Ohio Ct. App. May 26, 2022) (applying the rule adopted in Stolle). If, however, “the

state-law claim has a factual basis independent from the facts establishing the

OUTSA claim, the portion of the claim supported by an independent factual basis

survives preemption.” Stolle, at 485. (internal quotation omitted). Finally, OUTSA

preempts all claims based on misappropriation of information even if that

information may not rise to the level of a “trade secret.” Miami Valley Mobile Health

Servs., Inc. v. ExamOne Worldwide, Inc., 852 F. Supp. 2d 925, 940 (S.D. Ohio 2012)

(Rice, J.) (holding that a conversion claim is preempted on a motion to dismiss).

Here, Ridge’s conversion claim is based on the same operative facts as its

trade secrets claims. The fundamental assertion in each is that, throughout their

employment, the Individual Defendants gained access to confidential and

proprietary information underlying the development of the Product and that they

used that same information to develop their own product after leaving Ridge

Corporation. (Compl., ¶¶ 55–61, 68–72.) Because Ridge does not identify an

independent factual basis for its conversion claim, the claim is preempted by

OUTSA.

Ridge is correct that plaintiffs are generally permitted to plead in the

alterative; however, courts routinely resolve OUTSA preemption issues on a motion

to dismiss where, as here, no amount of discovery would expand the factual basis

for the common law claim beyond the factual basis of the trade secrets claim. See

Cincom Sys., Inc. v. LabWare, Inc., No. 1:20-CV-83, 2021 WL 675437, at *5 (S.D.

Ohio Feb. 22, 2021) (Marbley, C.J.) (collecting cases).

Accordingly, Defendants’ motion is GRANTED as to Count IV and Ridge’s

conversion claim is DISMISSED.

IV. CONCLUSION

For the reasons stated herein, Defendants’ Motion to Dismiss (ECF No. 24) is

GRANTED as to Count IV and DENIED as to Counts I, II, and III.

IT IS SO ORDERED.

/s/ Sarah D. Morrison

SARAH D. MORRISON

UNITED STATES DISTRICT JUDGE