EMI May Deflect Suit on Breach of Trade Secrets

     (CN) – A digital music company must amend claims that EMI Music and a lawyer supposedly investigating copyright infringement stole its trade secrets, a federal judge ruled.
     EMI allegedly first contacted NexTune, a Washington-based company that provides digital music to businesses, in April 2012 with a cease-and-desist letter.
     Though NexTune claimed to have a valid license for the EMI recordings it used, the company said it agreed to resolve EMI’s purported concerns by providing a detailed description of its music services and its media player, along with lists of its customers and sound recordings.
     NexTune president, Michael DuKane, then allegedly traveled to Austin, Texas, to meet with EMI’s outside counsel, Robert Buckner McKinney. But NexTune says McKinney brought a third man to the meeting and identified him only as “Chris.”
     Nextune said the meeting was wrapping up when DuKane learned the third man’s full name was Chris Harrison.
     DuKane allegedly recognized Harrison, not as the host of “The Bachelor,” but as an affiliate of DMX, not the rapper but a competing music service.
     NexTune said Harrison had brought his own copy of NexTune’s documents to the meeting, that it was evident that Harrison was well-informed as to the content of these documents and that Harrison was clearly the driving force behind the meeting.
     Claiming that Harrison is an affiliate of other direct competitors, including Pandora and Mood Media, NexTune said its trade secrets may have been compromised.
     It filed a federal complaint in Seattle against EMI, McKinney and Harrison, claiming misappropriation of trade secrets and seeking a declaration of noninfringement.
     Though the misappropriation claim arises under state law, NexTune said the noninfringement issue gives federal question jurisdiction.
     EMI and McKinney both moved to dismiss the amended complaint, and U.S. District Judge Thomas Zilly agreed Friday that NexTune failed to specifically allege a statutory basis for subject matter jurisdiction.
     Zilly also found that the company failed to state a claim against EMI.
     “While the complaint may allege facts stating a plausible claim against Mr. McKinney, it does not support a claim of trade secret misappropriation against EMI,” Zilly wrote. “NexTune speculates that Mr. McKinney may have shared the documents with EMI for an improper purpose. But speculation unsupported by any factual allegation is insufficient to survive a motion to dismiss.”
     Zilly also found that the court has personal jurisdiction over McKinney since the “facts demonstrate that Mr. McKinney engaged in an intentional act,” since this act was “expressly aimed at the forum state” of Washington, and since McKinney likely knew that the harm his actions caused would be suffered in the forum state.
     “Simply stated, but for Mr. McKinney’s contracts with Washington, would NexTune’s claim of trade secret misappropriation have risen? The answer is no,” Zilly wrote. “If Mr. McKinney had not acquired NexTune’s trade secrets and shared them with Mr. Harrison, NexTune would not have a claim for trade secret misappropriation.”
     NexTune has 30 days from the date of the order to amend its complaint.

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