District of Massachusetts Rules No Preemption Under the MUTSA

In a case of first impression, the District of Massachusetts considered whether the recently enacted Massachusetts Uniform Trade Secrets Act (MUTSA) preempts claims based on confidential or proprietary information that does not necessarily rise to the level of a trade secret. Relying on the text of the MUTSA, the legislative history, and the guidance of courts in other jurisdictions that had considered the issue in the context of the Uniform Trade Secrets Act, Judge Casper held that the MUTSA did not, in fact, preempt such claims.

The Massachusetts Uniform Trade Secret Act

The MUTSA became effective on October 1, 2018. It largely tracks the language of the Uniform Trade Secrets Act (UTSA). The MUTSA provides a statutory definition of trade secret, which requires specificity, economic advantage, and secrecy.

The MUTSA states that it “supersede[s] any conflicting laws of the commonwealth providing civil remedies for the misappropriation of a trade secret” and does “not affect other civil remedies to the extent that they are not based upon misappropriation of trade secret”  Mass. Gen. L. c. 93 § 42F(a) and (b)(3).

Neural Magic v. Facebook

Neural Magic, a deep learning company, filed suit against Facebook and Dr. Aleksandar Zlateski, a former Neural Magic employee, asserting claims for misappropriation of trade secrets under the MUTSA and the Defend Trade Secrets Act, unfair competition, unjust enrichment, tortious interference and other state law claims.

Defendants moved to dismiss the claims, in part on the grounds that the MUTSA preempts the unfair competition claim, the unjust enrichment claim, and the tortious interference claim, since these claims relate to the allegation that Zlateski stole and used its trade secrets. Defendants argued that the MUTSA should therefore be the only avenue for relief. Neural Magic countered that because the MUTSA applies only to trade secrets, it should not preempt claims based in part on confidential or proprietary information that does not rise to the level of a trade secret.

The Question of Preemption

In its decision, the Court noted the current split among courts interpreting similar statutory provisions. Courts in California, for example, have found that claims regarding information not rising to the level of a trade secret are nevertheless preempted, while courts in Arizona and Virginia have found no preemption for these types of information.

Defendants argued that the MUTSA was adopted after years of interpretation of the UTSA in other states, and that the majority position at the time of adoption was that the preemption provision displaces any claim regarding theft or misuse of confidential proprietary, or otherwise secret information falling short of trade secret. The Court, however, was not swayed by this argument, noting that where a split in authority exists at the time of adoption, it cannot be presumed that the legislature intended to incorporate one position over another in adopting similar language. If the legislature had in fact intended to preempt certain causes of action, they would have explicitly done so in the language of the statute.

Ultimately, the Court held “Given that the MUTSA is silent about uniformity with respect to confidential information that may not constitute a trade secret, the text of Section 42F which limits preemption to civil remedies for the misappropriation of trade secrets, the split in authority on the scope of preemption of similar UTSA provisions and the lack of authority in Massachusetts, the Court does not conclude that MUTSA preemption applies to the state law claims that Defendants now challenge where these claims rely upon the alleged the theft of alleged confidential and information.” The Court did grant Defendants’ motion to dismiss the unjust enrichment claim on the grounds that Neural Magic had an adequate remedy at law.

Takeaway

Judge Casper’s decision preserves for the time being additional avenues in Massachusetts for the protection of confidential and proprietary information. Perhaps most critically, claims for unfair competition under Massachusetts Chapter 93A may be pursued when appropriate, opening the door for treble damages and attorneys’ fees.