Chancery Court Rules that Investing in Competing Businesses Does Not Constitute Misappropriation of Trade Secrets When Permitted by Governing Documents
By: Jessica Pearlman and Corinne Smith
In Alarm.com Holdings, Inc. v. ABS Capital Partners, Inc., et al. (C.A. No. 2017-0583-JTL (Del. Ch. June 15, 2018), plaintiff Alarm.com, Inc. (“Alarm”) brought suit against defendants ABS Capital Partners, Inc., ABS Partners V, LLC, and ABS Partners VII, LLC (collectively “ABS”) asserting: (1) the misappropriation of trade secrets under the Delaware Uniform Trade Secrets Act (“DUTSA”), and (2) common law misappropriation of confidential information. Both claims related to ABS’s investments and board appointments in both Alarm and one of its direct competitors. The Delaware Court of Chancery dismissed both claims for failure to state a claim pursuant to Court of Chancery Rule 12(b)(6), ruling that (1) it was not reasonably conceivable that ABS engaged in misappropriation under DUTSA, and (2) DUTSA preempts Alarm’s common law claim because it is based on the same wrongful conduct as its trade secret claim. Read More