Header graphic for print
Trading Secrets A Law Blog on Trade Secrets, Non-Competes, and Computer Fraud

Connecticut Court Has Jurisdiction Over Canadian Defendant Charged With Misappropriation of Canadian Company’s Trade Secret Emails

Posted in Trade Secrets

The Second Circuit Court of Appeals has reversed a Connecticut federal court’s order dismissing for lack of personal jurisdiction a Connecticut corporation’s complaint for misappropriation of trade secrets by a Canadian employee of the plaintiff’s Canadian subsidiary. The complaint alleged her knowledge that her employer’s emails were stored on its parent corporation’s servers in Waterbury, Connecticut. Therefore, the claim that she purposefully engaged in activities in Connecticut, by downloading confidential emails from her employer’s computer to her personal computer, was adequately pleaded. MacDermid, Inc. v. Deiter, No. 11-5388-cv (2nd Cir., Dec. 26, 2012), rev’g No. 3:11-CV-0855-WWE (D. Conn., Dec. 1, 2011).

Connecticut’s long-arm statute provides, in relevant part, that a non-resident is subject to the state’s jurisdiction for lawsuits alleging misuse of “a computer, as defined, . . . located within the state.” The statutory definition of the word “computer” includes “an electronic . . . device . . . that, pursuant to . . . human instruction . . . can automatically perform computer operations with . . . computer data and can communicate the results to another computer or to a person [or is a] connected or directly related device . . . that enables the computer to store, retrieve or communicate . . . computer data . . . to or from a person, another computer or another device.” According to the Second Circuit, “a computer server meets the Connecticut long-arm statute’s definition of computer.”

In support of her successful motion to dismiss in the district court, the defendant noted that she did not work in the U.S. and that she had no reason to expect that a suit against her would be heard anywhere other than in Canada. The trial court’s Memorandum of Decision observed that she was not alleged to have engaged in a persistent course of misconduct or to have derived any revenue from the supposed misappropriation. That court stressed that the “defendant’s tortious conduct occurred, if at all, when defendant transferred plaintiff’s proprietary information onto her home computer from her work computer, a transaction that occurred exclusively in Canada.”

According to the Court of Appeals, however, “It is not material that [the defendant] was outside of Connecticut when she accessed the Waterbury servers. The statute requires only that the computer . . ., not the user, be located in Connecticut.” While recognizing that many internet users probably do not know the location of servers where emails are stored, this defendant allegedly was aware that the servers were in Connecticut, and at the motion to dismiss stage, well pleaded factual allegations are assumed to be true. In light of the interest of a company with its principal place of business in Connecticut in obtaining redress for alleged wrongs and the public interest of the state in which the company is based, and because “efficiency and social policies against computer-based theft are generally served by adjudication in the state from which computer files have been misappropriated,” the Connecticut federal court could properly exercise jurisdiction.

The decision in this case constitutes a warning to all persons misappropriating confidential emails. No matter where in the world the defendant downloads the emails, he or she may be sued in Connecticut — or in any other state with a similar statute — for trade secrets misappropriation where the emails are stored on servers in the forum state, particularly if the plaintiff does business there and the defendant is alleged to have known the location of the servers. Check out Kenneth Vanko’s blog for a quick analysis of the case.

See also our prior post where a California federal district court examined the issue of personal jurisdiction in an international trade secret misappropriation and breach of contract dispute between an American company and a European distributor based out of Ireland.