United States Court of Appeals For the First Circuit

No. 23-1822

ANALOG TECHNOLOGIES, INC.; DR. GANG LIU,

Plaintiffs, Appellants,

v.

ANALOG DEVICES, INC.,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. George A. O'Toole, Jr., U.S. District Judge]

Before

Montecalvo, Lynch, and Rikelman, Circuit Judges.

Howard B. D'Amico, with whom Howard B. D'Amico, P.C. was on brief, for appellants. Alexander Paul Ott, with whom McDermott Will & Emery LLP and Annabel Rodriguez were on brief, for appellee.

June 18, 2024 LYNCH, CIRCUIT JUDGE. Appellants Analog Technologies,

Inc. ("ATI") and its CEO Dr. Gang Liu brought this federal action

alleging that appellee Analog Devices, Inc. ("ADI") is liable for

trade secret misappropriation under federal and Massachusetts law

because appellants took "reasonable measures" to maintain the

secrecy of development materials ATI had shared with ADI, and ADI

violated its obligation to limit its use of those materials.

(3)(A), (5)(B);

(2)(ii),

(4)(ii).

The district court granted ADI's motion to dismiss the

claim, holding that, under the clear terms of a written agreement

among the parties, any restrictions on ADI's use of the materials

had expired. See Analog Techs., Inc. v. Analog Devices, Inc., No.

21-cv-11334,

, at *1, *4 (D. Mass. Sept. 8, 2023).

We affirm.

I.

"When reviewing a motion to dismiss, we recount the

underlying facts as alleged in the complaint," Shash v. Biogen,

Inc.,

(1st Cir. 2023), but "disregard any conclusory

allegations," Ponsa-Rabell v. Santander Sec. LLC,

, 30

n.2 (1st Cir. 2022).

On November 18, 2000, ATI and ADI entered into a "License

and Development Agreement" ("2000 agreement"). Under this

agreement, ATI agreed to share technological developments related

- 2 - to thermo-electric cooler controllers ("TEC controllers") with ADI

so that ADI could manufacture and sell products using that

technology. ATI agreed not to license use of these developments

to other parties. The agreement required ADI to pay ATI $240,000,

as well as royalty payments based on the total sales amount of

products sold.

The 2000 agreement, in a section titled "Intellectual

Property," included a provision stating:

The parties agree that any information, technical data or know-how which is furnished to the other in written or tangible form by either party in connection with this Agreement and which is clearly marked as "Proprietary Information" or "Confidential" will be maintained by the receiving party in confidence. The obligations of confidentiality and/or non-disclosure set forth in this Section shall survive the expiration or termination of this Agreement for a period of five (5) years from the date of expiry or termination. Confidential information will not be used by the receiving party except to fulfill the receiving party's rights and obligations under this Agreement.

(Emphasis added.) The 2000 agreement also included a sunset clause

stating that "[t]he term of this Agreement, unless sooner

terminated, shall be for a period of five (5) years from the

Product silicon release date," which the agreement specified to be

on December 20, 2001.

Starting in late 2000, and continuing through 2004, ATI

provided ADI with development materials, which included ATI's

- 3 - proprietary and trade secret information related to integrated

circuit designs for TEC controllers. These materials were marked

as confidential by ATI, and were incorporated into ADI's products.

Appellants have not shared these development materials with any

other parties and ATI has relied upon non-disclosure and employment

agreements in order to protect this information from disclosure to

other parties.

ATI alleges that sometime in 2013, ADI ceased paying

royalties to ATI despite continuing to use ATI's development

materials in the sale of its products.

The parties subsequently negotiated a new agreement. In

2015, ATI and Liu entered into a "Release and License Agreement"

with ADI ("2015 agreement"). The agreement stated that it would

"supersede[] and replace[] the License and Development Agreement

dated November 18, 2000[,] between ATI and ADI." In a section

titled "Release," the agreement provided:

Gang Liu and ATI each hereby releases ADI . . . from any and all claims, causes of action, demands, damages, and expenses . . . of any kind or nature that either ever had or now has, known or unknown, against [ADI], including without limitation all claims arising out of or relating to the [2000 agreement] and/or the parties' business transactions.

In consideration of this Agreement and the release herein, ADI shall pay ATI $18,212.76 . . . . For the avoidance of doubt, this release shall survive any termination of the

- 4 - Agreement no matter the reason or circumstances of such termination.

In a section titled "Exclusive License," the 2015

agreement stated:

Gang Liu and ATI each grant to ADI an exclusive worldwide license to make, have made, reproduce, modify, enhance, prepare derivative works of, use, market, sell, have sold, and otherwise distribute any and all hardware, software, designs, documentation, know-how, or other materials provided by Gang Liu and/or ATI to ADI . . . , any products incorporating [such development materials], and any patent, copyright, mask work, trade secret, know how, or other proprietary rights associated with or relating to such [development materials or products] including, but not limited to US Patent No. 6,486,643. Gang Liu and ATI agree that they will not license or disclose the Development Materials or Intellectual Property to anyone besides ADI, nor will Gang Liu or ATI use the Development Materials or Intellectual Property to compete with ADI.

The 2015 agreement required ADI to pay ATI a royalty on the sales

revenue of products sold. The agreement was "governed and

construed in accordance with the Laws of the Commonwealth of

Massachusetts."

In May 2021, counsel for ADI notified Liu that ADI was

electing to terminate the 2015 agreement. Appellants, through

counsel, stated then that such termination would be invalid because

ADI had not alleged a breach of the agreement. ADI's counsel

responded that the termination was valid under a provision of the

2015 agreement allowing ADI to terminate the agreement for any

- 5 - reason; ADI stated that it had "terminated this agreement for at

least the reason that the patents underlying this agreement have

expired." In July 2021, appellants reiterated their position that

ADI's termination of the agreement was invalid, a position they

have abandoned in this appeal.

II.

On August 17, 2021, appellants brought this action

against ADI in the U.S. District Court for the District of

Massachusetts. The amended complaint asserts nine counts alleging

that the termination of the 2015 agreement was invalid; that ADI

breached the 2015 agreement; that ADI fraudulently induced

appellants into entering the 2015 agreement; and that in the

alternative, if the 2015 agreement was properly terminated, then

ADI misappropriated appellants' trade secrets following said

termination. Appellants argue in particular that, if the 2015

agreement was terminated, then ADI is no longer authorized to use

appellants' development materials that were shared between 2000

and 2004. Appellants allege that ADI's continued use of these

materials for sale and marketing of its products is in violation

of the Defend Trade Secrets Act ("DTSA"),

(b),

(Count VI) and the Massachusetts Uniform Trade Secrets Act

("MUTSA"),

, 42A-42G (Count VIII).

Appellants request monetary and injunctive relief.

On February 22, 2023, ADI filed a motion for judgment on

- 6 - the pleadings as to the counts asserting the termination and

alleged breach of the 2015 agreement, and a motion to dismiss as

to the remaining counts. On September 8, 2023, the court granted

ADI's motions. See Analog Techs.,

, at *1. As to

appellants' trade misappropriation claims, the court found that

"there were no trade secrets under the 2000 License Agreement still

in existence to have been misappropriated in 2021."

.

Appellants timely appeal the court's order as to the

trade secret misappropriation counts, Counts VI and VIII, allowing

the motion to dismiss. Appellants do not appeal the remainder of

the court's order, and they have conceded the court's findings

that the 2015 agreement was properly terminated and that appellants

were not fraudulently induced to enter into the 2015 agreement.

III.

A.

"We review the district court's grant of the . . . motion

to dismiss de novo and may affirm on any ground supported by the

record." Cowels v. FBI,

, 66 (1st Cir. 2019). To

survive a motion to dismiss, "[t]he complaint 'must contain

sufficient factual matter, accepted as true, to state a claim to

relief that is plausible on its face.'" Douglas v. Hirshon,

(1st Cir. 2023) (internal quotation omitted) (quoting

Ashcroft v. Iqbal,

(2009)). "A claim has facial

plausibility when the plaintiff pleads factual content that allows

- 7 - the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged."

(quoting Iqbal,

).

"The DTSA . . . provide[s] protections for individuals

and entities claiming misappropriation of their trade secrets."

Allstate Ins. Co. v. Fougere,

(1st Cir. 2023).

Under the DTSA, a trade secret is any "form[] and type[] of

financial, business, scientific, technical, economic, or

engineering information" where the owner of the information has

"taken reasonable measures to keep such information secret."1

(3)(A). A trade secret has been misappropriated if,

among other possibilities, it was disclosed or used

without express or implied consent by a person who . . . at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was . . . acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret.

§ 1839(5)(B).

Massachusetts law defines trade secret misappropriation

similarly. Under MUTSA, information constitutes a trade secret

only if "at the time of the alleged misappropriation [it] was the

1 A trade secret under the DTSA must also "derive[] independent economic value . . . from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information."

(3)(B).

- 8 - subject of efforts that were reasonable under the

circumstances . . . to protect against it being acquired,

disclosed or used without the consent of the person properly

asserting rights therein . . . ."2

(4)(ii). MUTSA defines misappropriation, among other

possibilities, as

an act of disclosure or of use of a trade secret of another without that person's express or implied consent by a person who . . . at the time of the actor's disclosure or use, knew or had reason to know that the actor's knowledge of the trade secret was . . . acquired under circumstances giving rise to a duty to limit its acquisition, disclosure, or use.

§ 42(2)(ii).

The district court held that "Massachusetts trade secret

law is nearly equivalent to the DTSA," Analog Techs., Inc.,

, at *4 (quoting Allscripts Healthcare LLC v. DR/Decision

Res., LLC,

(D. Mass. 2019)), and did not

distinguish its MUTSA and DTSA analyses. "Because neither party

challenges this framing," nor do the parties make separate

arguments under the federal and state statutes, we "will draw no

2 MUTSA also requires that, for information to constitute a trade secret, it must have, "at the time of the alleged misappropriation, provided economic advantage, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, others who might obtain economic advantage from its acquisition, disclosure or use."

(4)(i).

- 9 - distinction between the district court's misappropriation findings

under the DTSA and [MUTSA], affirming or reversing them in tandem."

Allstate Ins. Co.,

.

B.

We conclude that, on the facts alleged in the amended

complaint, ADI has not misappropriated ATI's development

materials. Appellants shared these materials with ADI in

accordance with the 2000 agreement, under which the

confidentiality obligations expired in 2011. Even if, as

appellants argue, the 2000 agreement additionally imposed

non-expiring restrictions on ADI's use of the development

materials, the 2015 agreement released ADI from any remaining use

restrictions. Furthermore, the 2015 agreement did not impose any

additional use restrictions that survived termination of that

agreement. Hence, following termination of the 2015 agreement,

ADI's continuing use of the development materials has not breached

any duty to limit said use. See Allstate Ins. Co.,

(holding that defendant misappropriated trade secrets

under federal and Massachusetts law because defendant's use of the

information was in violation of a confidentiality agreement);

Syntel Sterling Best Shores Mauritius Ltd. v. TriZetto Grp., Inc.,

(2d Cir. 2023) (holding that defendant

misappropriated plaintiff's trade secrets in violation of DTSA

because defendant's use of the information was not authorized under

- 10 - the terms of an agreement between the parties); Fail-Safe, LLC v.

A.O. Smith Corp.,

(7th Cir. 2012) (holding

that there was not trade secret misappropriation under Wisconsin

law where the information was shared without a "contractual

agreement for confidentiality"); MPAY Inc. v. Erie Custom Comput.

Applications, Inc.,

(8th Cir. 2020) (holding

that, under DTSA, defendant was not liable for trade secret

misappropriation because defendant's disclosure of the information

did not "breach[ a] duty to maintain the secrecy of the

[information]," and further holding that such a duty did not exist

at the time of the alleged misappropriation in part because a

settlement agreement between the parties negated confidentiality

obligations); Tex. Advanced Optoelectronic Sols., Inc. v. Renesas

Elecs. Am., Inc.,

(Fed. Cir. 2018) (holding

that, because the use of trade secrets "was contractually

permitted," it was "not a proper basis of liability for trade

secret misappropriation"); cf. InteliClear, LLC v. ETC Global

Holdings, Inc.,

(9th Cir. 2020) (holding that

a company took reasonable measures to maintain its information's

secrecy under DTSA in part because it only shared information with

a party who was required to keep the information "confidential

'during and after' the terms of the agreement").

We disagree with appellants' contention that the

obligations imposed on ADI by the 2000 agreement were revived by

- 11 - the 2015 agreement, thereby continuing to restrict ADI's ability

to use or disclose the development materials. The 2015 agreement

expressly "supersede[d] and replace[d]" the 2000 agreement, and

"release[d] ADI . . . from any and all claims, causes of action,

demands, damages, and expenses . . . of any kind or

nature . . . arising out of or relating to the [2000 agreement]."

Appellants' argument that the 2015 agreement "required

both parties to take 'reasonable steps to preserve the secrecy' of

the trade secrets" is undercut by the plain language of the

agreement, which merely required that "Gang Liu and ATI . . . not

license or disclose the Development Materials or Intellectual

Property to anyone besides ADI." There is no language in the 2015

agreement that ADI was under any obligation following termination

of the agreement to maintain the secrecy of, or was to limit its

use of, the development materials it obtained from ATI during the

2000 to 2004 period. See Minturn v. Monrad,

(1st

Cir. 2023) (holding that under Massachusetts law, a "contract

should be interpreted 'in a reasonable and practical way,' reading

words that are 'plain and free from ambiguity' in their 'usual and

ordinary sense'" (quoting Gen. Hosp. Corp. v. Esoterix Genetic

Lab'ys, LLC,

, 308 (1st Cir 2021))); see also

Ruckelshaus v. Monsanto Co.,

(1984) ("If an

individual discloses his trade secret to others who are under no

obligation to protect the confidentiality of the

- 12 - information, . . . his property right [in that trade secret] is

extinguished."); Connors v. Howard Johnson Co.,

(Mass. App. Ct. 1991) (holding that there was no evidence

to support a trade misappropriation claim because, while the

information "may have been a trade secret from the rest of the

world," the plaintiff did not act to restrict the defendant's use

of the information).

Appellants stretch even further and more implausibly in

their argument that ADI has misappropriated the development

materials because, even if ADI did not have any duty to limit its

use of the materials at the time of the alleged misappropriation,

such a duty did exist when the materials were acquired under the

2000 agreement. Appellants maintain that the statutory language

in the DTSA and MUTSA does not require that "a duty to . . . limit

the use of the trade secret" exist at the time of misappropriation.

See

(5)(B)(ii)(II);

(2)(ii)(B)(II).

Appellants' argument misses the mark. To start, this

argument ignores other statutory text. The text of the DTSA and

MUTSA states that use of a trade secret constitutes

misappropriation only if said use occurred "without express or

implied consent."

(5)(B);

(2)(ii). We conclude that appellants consented to ADI's use

of the development materials when they relinquished, under the

- 13 - 2015 agreement, any restrictions on such use. See Olaplex, Inc.

v. L'Oréal USA, Inc.,

, 709 (Fed. Cir. 2021)

(holding that defendant did not misappropriate trade secrets

because, under the terms of an agreement between the parties, the

plaintiff "consented to that use").

If appellants' interpretation of the statutory language

were to prevail, it would lead to the absurd result that a party

who received a trade secret by proper means, and who did not breach

any duty in using that trade secret during the time it had such a

duty, could nonetheless be held liable later for trade secret

misappropriation after any such duty had expired. See Aroostook

Band of Micmacs v. Ryan,

(1st Cir. 2007)

("[I]nterpretations of a statute which would produce absurd

results are to be avoided if alternative interpretations

consistent with legislative purpose are available." (alteration in

original) (quoting Griffin v. Oceanic Contractors,

(1982))). Moreover, appellants' interpretation has been

rejected in caselaw.3 See, e.g., MPAY Inc.,

.

IV.

We affirm the district court's decision granting ADI's

motion to dismiss.

3 Because we conclude that ADI did not misappropriate the development materials, we do not address appellants' arguments that the district court erred in concluding that the development materials did not constitute trade secrets.

- 14 -