Drone technology and its wide applications have had a sweeping impact in military and civilian settings. They have helped even the odds for Ukraine in defending against Russia’s invasion, and become enough of a war narrative that it was big news recently when Ukraine unleashed long-range missiles on Russian manufacturers producing key drone components. Effects on the speed and reach of consumer deliveries seem not far behind.
So, it’s little surprise that businesses competing in such a burgeoning industry are developing the kinds of R&D, employment, and trade secret disputes that are the stock and trade of specialty courts like the Business Court. In Kadah v. Paladin Drones, Inc., 2026 NCBC 50, the face-off is between a manufacturer of emergency response drones used by first responders and a former employee who decamped to a surveillance equipment manufacturer that owns a drone company and is seeking to develop its own drone technology.
The Court’s opinion addresses plaintiff Kadah’s motion to dismiss Paladin’s counterclaims, which are alleged to arise from a contentious relationship between the company and him. As Judge Houston recounted, Kadah “routinely disagreed” with Paladin’s CEO over management and directional issues, and “at various times attempt[ed] to disrupt ongoing work and to oust” the executive. Those differences were so marked that Paladin alleges Kadah took steps to tank potential outside investments in Paladin, in part by sharing trade secret-protected information with investors and claiming that Paladin’s current leadership “was not competent.” Id. ¶¶ 14-16. In a mixed bag of denials and dismissals, the Court took a careful look at several pleading issues worth attention.
Trade Secret Misappropriation
The Court took issue with how Paladin alleged its claims over protection of prospective customer lists. Acknowledging that these lists can constitute trade secrets, the Court held Paladin fell short with the description that the list was “curated form a larger set of potential leads” and showed prospects “more likely to convert into paying customers in the future.” The Court noted the lack of “factual allegations that would permit a reasonable inference” that the information was non-public, confidential, or not readily ascertainable independently. In comparison, Judge Houston noted that the allegations regarding the protectability of Paladin’s actual customer list was supported by allegations regarding the “notes, insights, [and] preferences” which accompanied each identification. ¶¶ 65-67.
The Court also found allegations regarding Paladin’s list of potential investors to be lacking where it was simply alleged as including “notes and thoughts on the status of any financing discussions.” Kadah contended that “[t]he identities of potential investors and their general appetite for funding are widely accessible in the venture ecosystem.” The Court identified no alleged facts that allowed a reasonable inference that such information could not be independently developed. ¶¶ 69-71.
The Court also offered careful line-drawing advice on allegations necessary to sufficiently plead the acts which underlied the alleged misappropriation. For instance, the Court explained that allegations a defendant accessed a plaintiff’s trade secrets, became employed by a competitor, and used them to solicit plaintiff’s customers are “sufficiently specific, even if it requires ‘a significant inferential leap’ to conclude that the defendant misappropriated the plaintiff’s trade secrets.” ¶ 86 (quoting Power Home Solar, LLC v. Sigora Solar, LLC, 2021 WL 2530984, *15 (N.C. Super. Ct. June 18, 2021)). However, the Court parsed and rejected other allegations regarding Paladin’s beliefs about what Kadah did. Id. ¶ 87):
“For example, a statement that ‘Paladin believes that Kadah electronically downloaded information’ is an affirmative statement of Paladin’s belief and is a far different allegation than a statement that, ‘upon information and belief, Kadah electronically downloaded information,’ which is an affirmative allegation of Kadah’s alleged actions rather than Paladin’s belief.”
Worth Noting
- The Court dropped a footnote regarding Kadah’s motion to dismiss including an Introductory Statement “that spans nearly two full pages and six full, unnumbered paragraphs.” Noting that the approach ran afoul of N.C. R. Civ. P. 8(a)(1) – “short and plain statement of the claim” – and Rule 10(b) – averments “shall be made in numbered paragraphs” – the Court wryly observed (Id. ¶ 4):
“Pleadings are not, and should not be treated like, briefs or novellas.”
Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.
Recent Comments