Free Reply Brief - District Court of Delaware - Delaware

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THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ACCENTURE GLOBAL SERVICE GmbH ) and ACCENTURE LLP, ) ) Plaintiffs, ) ) v. ) ) GUIDEWIRE SOFTWARE INC., ) ) Defendant. )

C.A. No. 07-826 (SLR)

DEFENDANT GUIDEWIRE SOFTWARE, INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS

MORRIS, NICHOLS, ARSHT & TUNNELL LLP

Jack B. Blumenfeld (#1014) Julia Heaney (#3052) 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899 (302) 658-9200 [email protected] [email protected] Attorneys for Defendant Guidewire Software, Inc.
OF COUNSEL:

Daralyn J. Durie Clement S. Roberts Matthias Kamber JuNelle Harris KEKER & VAN NEST LLP 710 Sansome Street San Francisco, CA 94111 (415) 391-5400 March 6, 2008

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TABLE OF CONTENTS Page TABLE OF AUTHORITIES ......................................................................................................... iii INTRODUCTION ...........................................................................................................................1 I. Argument .............................................................................................................................2 A. Accenture fails to show a plausible entitlement to relief as required by Twombly ..................................................................................................................2 1. Accenture relies on the wrong pleading standard ........................................2 a. Twombly requires a plaintiff to make factual allegations supporting each claim element and that, taken together, show a plausible entitlement to relief......................3

2. 3.

The federal pleading standard is the same as Delaware's............................5 Accenture's factual allegations are insufficient to state a plausible claim for trade secret misappropriation........................................6 a. b. Accenture fails to allege that Guidewire acquired its trade secrets......................................................................................7 Accenture fails adequately to allege that Guidewire used its trade secrets.........................................................................9

4.

Accenture fails to provide factual allegations sufficient to state a plausible claim for tortious interference .................................................11 a. b. Accenture fails to provide factual allegations for each element of tortious interference with contract ...............................11 Accenture fails to provide factual allegations for each element of tortious interference with prospective contractual relations .......................................................................12

5.

Accenture's unfair competition claims are derivative of its inadequately pleaded trade secret and tortious interference claims .........................................................................................................13

B.

Accenture's tortious interference and unfair competition claims are preempted...............................................................................................................13 1. Under Twombly, Accenture cannot rely on the possibility of future discovery of undisclosed facts to save its pleading.........................14

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2.

Accenture's tortious interference and unfair competition claims would be preempted even if undisclosed facts were to show that it gave CNA some non-trade secret information ................................15 a. Accenture's tortious interference with prospective contractual relations and unfair competition claims are preempted because they are dependent upon trade secret misappropriation..................................................................16

CONCLUSION..............................................................................................................................16

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TABLE OF AUTHORITIES Page(s) CASES Allied Capital Corp. v. GC-Sun Holdings, LP, 910 A.2d 1020 (Del. Ch. 2006)................................................................................................12 Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007)...................................................................................................... Passim Brown v. Adidas, 938 F. Supp. 628 (S.D. Cal. 1996).............................................................................................9 Car Carriers v. Ford Motor Co., 745 F.2d 1101 (7th Cir. 1984) .................................................................................................11 Conley v. Gibson, 355 U.S. 41 (1957).....................................................................................................................2 Crivelli v. GMC, 215 F.3d 386 (3d Cir. 2000).....................................................................................................12 Desimone v. Barrows, 924 A.2d 908 (Del. Ch. 2007)................................................................................................ 5-6 Ethypharm S.A. France v. Bentley Pharms., Inc., 388 F. Supp. 2d 426 (D. Del. 2005)............................................................................. 13-14, 16 Kewanee Oil v. Bicron Corp., 416 U.S. 470 (1974).................................................................................................................10 Leucadia, Inc. v. Applied Extrusion Technologies, Inc., 755 F. Supp. 635 (D. Del. 1991)..............................................................................................14 Lipson v. Anesthesia Servs., P.A., 790 A.2d 1261 (Del. Super. Ct. 2001) ............................................................................... 11-12 McHugh v. Bd. of Educ., 100 F. Supp. 2d 231 (D. Del. 2000).........................................................................................12 Papasan v. Allain, 478 U.S. 265 (1986).................................................................................................................10 Phillips v. County of Allegheny, No. 06-2869, 2008 U.S. App. LEXIS 2513 (3d Cir. Feb. 5, 2008) .............................2, 4, 7, 14 Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002) ........................................................................................................15

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Savor, Inc. v. FMR Corp., C.A. No. 00C-10-249-JRS, 2001 Del. Super. LEXIS 170 (Del. Super. Ct. Apr. 24, 2001) ......................................................................................................................................7, 9 Smiley v. Daimler Chrysler, C.A. No. 07-05-SLR, 2008 U.S. Dist. LEXIS 14124 (D. Del. Feb. 21, 2008)..........................4 T.D.I. Int'l, Inc. v. Golf Pres., Inc., C.A. No. 6: 07-313-DCR, 2008 U.S. Dist. LEXIS 7427 (D. Ky. Jan. 31, 2008) ....................15 UD Technology Corp. v. Phenomenex, Inc. ("UDTC"), C.A. No. 05-842-GMS, 2007 U.S. Dist. LEXIS 642 (D. Del. Jan. 4, 2007) .. 15-16 Vincit Enters., Inc. v. Zimmerman, Case No. 1:06-cv-57, 2006 U.S. Dist. LEXIS 32323 (E.D. Tenn. May 12, 2006)....................7 STATUTES, RULES 42 U.S.C. § 1983..............................................................................................................................4 Federal Rule of Civil Procedure 12(b)(6) .............................................................................. Passim Federal Rule of Civil Procedure 8 ..........................................................................................2, 3 11 6 Del. Code § 2001(2)................................................................................................................7, 14 6 Del. Code § 2007(a)....................................................................................................................14 Delaware Rule 23.1..........................................................................................................................5 Delaware Rule 12(b)(6) ...................................................................................................................5

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INTRODUCTION Accenture premises its Opposition on the assertion that a claim can survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) unless "it is beyond a doubt that the plaintiff can prove no set of facts in support of [the] claim which would entitle him to relief." Opp. at 3 (internal quotation marks omitted). But Accenture is wrong: the Supreme Court expressly overruled the precise pleading standard on which Accenture's brief is predicated in last year's decision in Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007). Yet Accenture fails even to mention Twombly, despite the fact that Guidewire repeatedly cited Twombly in its Opening Brief. Under Twombly and its progeny, a plaintiff must do more than simply put the defendant on "notice of the claim being asserted." Opp. at 5. It must plead factual allegations that directly or inferentially support each element of each asserted claim and that plausibly suggest, rather than are merely consistent with, an entitlement to relief. Twombly, 127 S.Ct at 1966, 1969, 1974. The core factual allegations on which Accenture has founded its claims--that CNA considered both Accenture and Guidewire's products, and chose Guidewire's much cheaper software--fall far short of plausibly suggesting trade secret misappropriation, tortious interference, or unfair competition. Accenture has failed to allege, even conclusorily, numerous essential elements of its claims. Notably, Accenture has failed to allege that: · · CNA (or any other entity) passed information from Accenture to Guidewire; Guidewire received information under circumstances where it knew or should have known the information was a trade secret (or any facts supporting such a conclusion); Guidewire lacked a product at the time it began dealing with CNA (or any facts suggesting that Guidewire's development timeline was "suspiciously quick"); Guidewire's product is similar to Accenture's; CNA breached a contract with Accenture; Guidewire knew CNA had a contract and/or dealings with Accenture.

· · · ·

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Because Accenture has not met the Twombly pleading standard, it should not be permitted to drag its small competitor through the burden and expense of discovery. Indeed, the whole point of Rule 8 is to prevent precisely this kind of conduct. In addition, Accenture has failed to plead any factual allegations differentiating its tortious interference and unfair competition claims from its trade secret misappropriation claim, bringing it squarely within the preemption clause of the Delaware Uniform Trade Secrets Act. For these reasons, the Court should grant Guidewire's Motion to Dismiss. I. ARGUMENT A. ACCENTURE FAILS TO SHOW A PLAUSIBLE ENTITLEMENT TO RELIEF AS REQUIRED BY TWOMBLY 1. Accenture relies on the wrong pleading standard

Accenture's Opposition proceeds as though the leading Supreme Court case on the federal pleading standard, Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007), had never been decided. See also Phillips v. County of Allegheny, No. 06-2869, 2008 U.S. App. LEXIS 2513, at *11 (3d Cir. Feb. 5, 2008) (explaining and applying Twombly). Instead, Accenture cites and relies on the overruled "no set of facts" dismissal standard of Conley v. Gibson, 355 U.S. 41, 45-46 (1957), disregarding the Supreme Court's instruction in Twombly that "this phrase is best forgotten." Compare Opp. at 31 with Twombly, 127 S.Ct. at 1969. Indeed, Accenture relies exclusively on pre-Twombly cases to support its articulation of the federal pleading standard-- including at least one case (in addition to Conley) that has been explicitly overruled. See, e.g., Opp. at 3 (citing In re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 215-16 (3d Cir. 2002), overruled by Phillips, 2008 U.S. App. LEXIS 2513, at *9-11). As the Third Circuit observed in Phillips, after Twombly, "It is clear that the `no set of facts' language may no longer be used as part of the Rule 12(b)(6) standard." Phillips,

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2008 U.S. App. LEXIS 2513, at *12. Accordingly, Accenture's reliance on the "no set of facts" standard as both a source of law, and as a basis for its analysis, is in error. a. Twombly requires a plaintiff to make factual allegations supporting each claim element and that, taken together, show a plausible entitlement to relief

In Twombly, the Supreme Court started with the proposition that "Rule 8(a)(2) . . . requires a `showing,' rather than a blanket assertion, of entitlement to relief." 127 S.Ct. at 1965 n.3. Accenture contends that it has no obligation to allege "any . . . circumstance surrounding the misappropriation." Opp. at 7. But in Twombly, the Court held that a plaintiff must state the "circumstances, occurrences, and events in support of the claim presented," making "either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Twombly, 127 S.Ct. at 1965 n.3, 1969 (internal quotation marks omitted). Accenture also argues that "conclusory allegations are sufficient." Opp. at 5 (internal quotation marks omitted). But the Court held that "labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 127 S.Ct. at 1964-65. Instead, according to the Court, there must be "enough facts to state a claim to relief that is plausible on its face," not merely "conceivable." Id. at 1974.2 Accenture bases its claims on conclusory allegations of "suspiciously quick" development and "suspicious circumstances" and asserts "it is too early to determine the scope and nature of the facts that support" its claims. Opp. at 2, 8, 11, 14. But where, as here, the facts
1

"Dismissal under 12(b)(6) is appropriate only when it is `beyond a doubt that the plaintiff can prove no set of facts in support of [the] claim which would entitle him to relief.'" Opp. at 3 (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Twombly did not draw the distinction between "ultimate" and "evidentiary" facts cited by Accenture. See Opp. at 7. And Accenture is mistaken insofar as it suggests it can meet its burden to plead "ultimate facts" by pleading conclusions. Id. at 4-5. The two dissenting justices in Twombly, who favored a more liberal pleading standard than that adopted by the majority, still recognized that "ultimate facts" are not the same as "conclusions." 127 S.Ct. at 1976 (Steven, J., dissenting). In any case, Accenture has not alleged any facts, even conclusorily, in support of most of the required elements of its claims.

2

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alleged are not enough "to raise a right to relief above the speculative level" or "merely create[] a suspicion" of wrongdoing, a claim must be dismissed. Twombly, 127 S.Ct. at 1965. In Twombly, the Court upheld a district court's dismissal under Rule 12(b)(6) of the plaintiffs' conspiracy claim where the plaintiffs alleged instances of parallel behavior, but failed to plead additional facts "plausibly suggesting" a "preceding agreement, not merely parallel conduct that could just as well be independent action." Id. at 1963, 1966. The Third Circuit has held that Twombly's teachings, including its "plausibility paradigm," are not limited to the antitrust context. Phillips, 2008 U.S. App. LEXIS 2513, at *8, 18. In Phillips, a 42 U.S.C. § 1983 case, the court explained that the "Twombly formulation . . . `requires a complaint with enough factual matter (taken as true) to suggest' [each] required element." Id. at *20. Applying that formulation, this Court recently held that a plaintiff failed to state a claim for defamation where he alleged that, on particular dates, (1) two physicians "engaged in defamatory conduct . . . when they placed derogatory information" in his corporate medical file; and (2) a human resource specialist "maliciously stated to other employees . . . that plaintiff had forged notes from his treating physician." Smiley v. Daimler Chrysler, C.A. No. 07-05-SLR, 2008 U.S. Dist. LEXIS 14124, at *4-5 (D. Del. Feb. 21, 2008). This Court explained that the plaintiff did not allege enough facts to state all of the elements of defamation. Id. at *6-7 (citing Twombly and Phillips). Specifically, he "[did] not provide the statements" the doctors and human resource specialist allegedly made and "[did] not identify to whom the statements were made or published." Id. at *6. Moreover, the plaintiff did not allege "an understanding of the defamatory nature of the communication by the third party to whom it was communicated." Id. at *6. As discussed in Guidewire's Opening Brief, and in more detail below, Accenture's

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Complaint suffers from the same deficiency--namely it fails to make factual allegations with respect to many of the required elements of the asserted claims.3 2. The federal pleading standard is the same as Delaware's

Accenture incorrectly asserts that "Guidewire's motion conflates a heightened Delaware state pleading rule with federal notice pleading requirements." Opp. at 1. But

according to the Delaware Chancery Court, "In light of [Twombly], our nation's high court has now embraced the pleading principle that Delaware courts have long applied, which is that a complaint must plead enough facts to plausibly suggest that the plaintiff will ultimately be entitled to the relief she seeks." Desimone v. Barrows, 924 A.2d 908, 929 (Del. Ch. 2007) (emphasis added); see also id. (if a complaint "asserts mere conclusions, a Rule 12(b)(6) motion to dismiss must be granted"). In other words, post-Twombly, the Delaware pleading standard and the federal pleading standard are the same. Accenture may be confused by Desimone's discussion of Delaware Rule 23.1--a Delaware shareholder derivative rule that is different from both Delaware Rule 12(b)(6) and Federal Rule of Civil Procedure 12(b)(6). Specifically, Accenture claims that Desimone stands for the proposition that the state and federal pleading standards are different, citing to a passage that says "`[t]he difference between the 12(b)(6) and [Chancery Court Rule] 23.1 standards is in the level of detail demanded of the plaintiff's allegations. On a 12(b)(6) motion, particularity in fact pleading is not required." Opp. at 4 (citing Desimone, 924 A.2d at 928) (emphasis added in Opposition). But this statement is both true and irrelevant. Delaware Rule 23.1 requires

plaintiffs in shareholder derivative actions to plead demand excusal with particularity. Thus, while it is perfectly correct to say that Delaware Rules 23.1 and 12(b)(6) are different (because
3

See also Triad Consultants, Inc. v. Wiggins, No. 07-1007, 2007 U.S. App. LEXIS 22226, at *2-4, 8-9 (10th Cir. Sept. 17, 2007) (dismissing Computer Fraud and Abuse Act claim based on Twombly because one element of claim required defendant to "obtain anything of value" through unauthorized access to computer and plaintiff, while alleging facts

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the former requires pleading with particularity while the latter does not), that difference does not mean that the state and federal 12(b)(6) rules embody different pleading standards. Indeed, as noted in the previous paragraph, Desimone explicitly says that they are the same. Because the Delaware and federal pleading standards are substantively identical, the cases cited by Guidewire involving Delaware state courts dismissing Delaware trade secret claims as inadequately pleaded are relevant and persuasive authority in this case. 3. Accenture's factual allegations are insufficient to state a plausible claim for trade secret misappropriation

The Delaware Uniform Trade Secrets Act defines "misappropriation" of a trade secret as: a. Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or b. Disclosure or use of a trade secret of another without express or implied consent by a person who: 1. Used improper means to acquire knowledge of the trade secret; or 2. At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade was: A. Derived from or through a person who had utilized improper means to acquire it; B. Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or C. Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or 3. Before a material change of the person's position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

showing former employee improperly retained backup disks, "alleged no facts showing that [he] accessed the information" on them).

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6 Del. Code § 2001(2); see also Savor, Inc. v. FMR Corp., C.A. No. 00C-10-249-JRS, 2001 Del. Super. LEXIS 170, at *9-10 (Del. Super. Ct. Apr. 24, 2001).4 Thus, to state a claim for trade secret misappropriation, Accenture must "mak[e] a sufficient showing of enough factual matter (taken as true) to suggest the required elements" under either section (a) or section (b). See Phillips, 2008 U.S. App. LEXIS 2513, at *21. Accenture has not met its burden. a. Accenture fails to allege that Guidewire acquired its trade secrets

Accenture's core allegations--that CNA considered both its and Guidewire's products, and that CNA chose Guidewire's product, which was more than $10 million cheaper-- provide no direct or inferential support for the elements of misappropriation. Contact with a common customer, without more, cannot lead to an inference of trade secret misappropriation. Vincit Enters., Inc. v. Zimmerman, Case No. 1:06-cv-57, 2006 U.S. Dist. LEXIS 32323, at *1819 (E.D. Tenn. May 12, 2006). And Accenture has not pleaded even conclusorily that: · · CNA (or any other party) passed Accenture information to Guidewire. Guidewire knew or had reason to know that information it received was a trade secret, and/or was acquired by CNA (or another party) by improper means or under a duty not to disclose it. These deficiencies are fatal to Accenture's allegations. In particular, Accenture's failure factually to allege that Guidewire had direct access to Accenture trade secrets, let alone that it knew that it was receiving trade secrets, distinguishes this case from every other trade secret case cited in Accenture's Opposition.5 Put simply, all of the cases Accenture relies on

4

Accenture argues that because the plaintiff whose claims were dismissed in Savor, Inc. v. FMR Corp., C.A. No. 00C-10-249-JRS, 2001 Del. Super. LEXIS 170, at *9-10 (Del. Super. Ct. Apr. 24, 2001), ultimately proceeded to discovery, Accenture's claims should not be dismissed. Opp. at 4 n.2. Accenture fails to explain that the plaintiff in Savor amended its complaint after dismissal and then withstood a second motion to dismiss before proceeding to discovery. See Savor, Inc. v. FMR Corp., 812 A.2d 884, 896 (Del. 2002). These cases are, in order of their appearance in the Opposition: Savor, 812 A.2d at 89596 (plaintiff mailed information to first defendant and further explained it by telephone; first defendant's employee was then hired by second defendant); Foam Supplies, Inc. v.

5

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dealt with situations where a defendant allegedly had direct access to the plaintiff's trade secrets--usually through either the plaintiff or one of its former employees. But where, as here,

The Dow Chem. Co., 2006 WL 2225392, at *14 (E.D. Mo. Aug. 2, 2006) (plaintiff allowed defendant to "inspect and test" its trade secrets); SL Montevideo Tech., Inc. v. Eaton Aerospace, LLC, 292 F. Supp. 2d 1173, 1175-56 (D. Minn. 2003) (plaintiff revealed trade secrets to defendant); Magellan Int'l Corp. v. Salzgitter Handel GmBH, 76 F. Supp. 2d 919, 922, 927-28 (N.D. Ill. 1999) (plaintiff gave alleged trade secrets, specifications, to defendant); Greenberg v. Croydon Plastics Co., 378 F. Supp. 806, 808 (E.D. Pa. 1974) (defendant hired plaintiff's former employee); Ajaxo Inc. v. E*Trade Group, 135 Cal. App. 4th 21, 53 (2005) (plaintiff disclosed trade secrets to first defendant, which sent an employee with knowledge of them to work with second defendant on joint development project); Electro-Miniatures Corp. v. Wendon Co., 771 F.2d 23, 24 (2d Cir. 1985) (defendant hired plaintiff's former employee); Flotec, Inc. v. S. Research, Inc., 16 F. Supp. 2d 992, 999 (S.D. Ind. 1998) (plaintiff gave trade secrets to defendant's chairperson); Vincit Enters., Inc. v. Zimmerman, Case No. 1:06-cv-57, 2006 U.S. Dist. LEXIS 32323, at *7 (E.D. Tenn. May 12, 2006) (defendant, plaintiff's former employee, went to work for competitor); Brown v. Adidas, 938 F. Supp. 628, 634 (S.D. Cal. 1996) (plaintiff gave drawing alleged to be trade secret to defendant); Ethypharm S.A. France v. Bentley Pharms., Inc., 388 F. Supp. 2d 426, 428 (D. Del. 2005) (plaintiff shared trade secrets with defendant's alleged agent); Edix Media Group, Inc. v. Mahani, C.A. No. 2186-N, 2006 WL 3742595, at *4 (Del. Ch. Dec. 12, 2006) (defendant, plaintiff's former employee, started competing business); PartyLite Gifts, Inc. v. Swiss Colony Occasions, No. 3:06-CV-170, 2006 U.S. Dist. LEXIS 57616, at *1-6, 17-18 (E.D. Tenn. Aug. 15, 2006) (defendants were plaintiff's former employee and her new employer, plaintiff's competitor); Leucadia, Inc. v. Applied Extrusion Techs., Inc., 755 F. Supp. 635 (D. Del. 1991) (defendant hired plaintiff's former employees, see Leucadia, Inc. v. Applied Extrusion Techs., Inc., 998 F.2d 157, 158 (3d Cir. 1993)); Burbank Grease Servs., LLC v. Sokolowski, 717 N.W.2d 781, 789-94 (Wis. 2006) (defendant, plaintiff's former employee, was hired by second defendant, plaintiff's competitor); Stone Castle Fin., Inc. v. Friedman, Billings, Ramsey & Co., 191 F. Supp. 2d 652, 654-55 (E.D. Va. 2002) (plaintiff gave defendant alleged trade secrets); Ceneveo Corp. v. Slater, C.A. No. 06-CV-2632, 2007 WL 527720 (E.D. Pa. Feb. 12, 2007) (plaintiff alleged former employees diverted business to competitors, see Cenveo Corp. v. Slater, C.A. No. 06CV-2632, 2007 U.S. Dist. LEXIS 8281 (E.D. Pa. Jan. 31, 2007)); Callaway Golf Co. v. Dunlop Slazenger Group Ams., Inc., 295 F. Supp. 2d 430, 432-33 (D. Del. 2003) (defendant hired plaintiff's former employees); Mortgage Specialists, Inc. v. Davey, 904 A.2d 652, 656-57 (N.H. 2006) (defendants, plaintiff's former employees, went to work for competitor, then started their own business); Opteum Fin. Servs., LLC v. Spain, 406 F. Supp. 2d 1378, 1378 (N.D. Ga. 2005) (plaintiff sued former employee and his new employer, its competitor); Mediware Info. Sys., Inc. v. McKesson Info. Solutions LLC, No. 6-2391-JWL, 2007 U.S. Dist. LEXIS 22087, at *2-3 (D. Kan. Mar. 26, 2007) (defendant was hired by third-parties for purpose of extracting data from plaintiff's software); IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, 582-83 (7th Cir. 2002) (two of defendant corporation's employees, also named as defendants, were alleged to have misappropriated plaintiff's trade secrets when they came to manage data processing at a third-party that used plaintiff's software).

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Accenture alleges only that it disclosed information to a third party, it must make a "showing" that "plausibly" suggests that Guidewire: (1) actually had access to information in CNA's possession, and (2) knew or should have known that this information was Accenture's trade secrets. See Twombly, 127 S.Ct. at 1965 n.3, 1966; Savor, 2001 Del. Super. LEXIS 170, at *1213. Accenture's failure to allege anything in this regard is fatal to the sufficiency of its trade secret claim. b. Accenture fails adequately to allege that Guidewire used its trade secrets

Accenture's trade secret claim should be dismissed for the independent reason that Accenture fails to make any factual allegations directly or inferentially showing that Guidewire used its trade secrets. Notably, Accenture has not alleged any specific similarities between its product and Guidewire's product. Indeed, Accenture has not alleged similarity at all. And even if Accenture had done so, its own authority holds that product similarity will not give rise to an inference of trade secret use absent access to the trade secret, which Accenture has failed to allege. See Unfair Competition Third § 40, comment c (cited at Opp. at 6) ("[P]roof of the defendant's knowledge of the trade secret together with substantial similarities between the parties' products or processes may justify an inference of use by the defendant.") (emphases added); see also Brown v. Adidas, 938 F. Supp. 628, 634 (S.D. Cal. 1996) ("Allegations of similarity, without more, do not support a claim of misappropriation of trade secrets.").6 In its Opposition, Accenture insinuates that it suspects Guidewire of trade secret misappropriation because of unspecified similarities between Guidewire's product and Accenture's patent. Opp. at 2. But this argument fails for two reasons. First, a product can
6

See also Hutchison v. KFC Corp., 809 F. Supp. 68, 71 (D. Nev. 1992) (applying Nevada Uniform Trade Secrets Act: "[I]t is clear that Plaintiffs have not properly pleaded this cause of action. In their Complaint, Plaintiffs do not state that KFC is using their trade secret without Plaintiffs' consent. Plaintiffs also do not demonstrate that Defendant allegedly uses the same method as Plaintiffs to prepare skinless fried chicken. Plaintiffs

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infringe a patent even if it is independently developed. Kewanee Oil v. Bicron Corp., 416 U.S. 470, 475-76 (1974) (patent can be infringed by actions not constituting trade secret misappropriation). Thus, even assuming, arguendo, that Guidewire's product is somehow

similar to Accenture's patent, this allegation does not "plausibly suggest[]" that Guidewire misappropriated Accenture's trade secrets as opposed to independently developing its product. See Twombly, 127 S.Ct. at 1963, 1966. Second, the patent application was published during the relevant period--thus the information in the patent does not have trade secret status. See Compl. Ex. A at 1 (U.S. Patent No. 7,013,284 (filed May 4, 1999) (patent published in January 2003)). Accenture's "bare averment" that Guidewire could not have developed a software product without Accenture trade secrets fares no better in stating the "use" element of trade secret misappropriation. See Twombly, 127 S.Ct. at 1965 n.3; Opp. at 7, 11. This averment is not a factual allegation or reasonable inference, but rather a "legal conclusion couched as a factual allegation" that the Court should not accept as true. See Papasan v. Allain, 478 U.S. 265, 286 (1986). Accenture makes no factual allegations showing what Guidewire's product

development timeline was, let alone that it was "suspiciously quick." See Opp. at 2, 8.7 And, in

merely assert that much to their surprise, KFC began to market its own skinless chicken product in early 1991.").
7

The cases Accenture claims stand for the proposition that speed of product development can support an inference of trade secret misappropriation involved far more extensive facts about both the defendants' product development history and their access to trade secrets than Accenture has alleged here. See Ajaxo, 135 Cal. App. 4th at 50-54 (cited at Opp. at 5) (upholding jury trade secret verdict where defendant hired employee with knowledge of plaintiff's trade secrets, detailed product history showed competitor went from no product to marketable one "within weeks," and expert testified that copying was likely); Electro-Miniatures Corp., 771 F.2d at 24-26 (cited at Opp. at 6) (upholding jury trade secret verdict where defendant hired plaintiff's former employee, who possessed knowledge of its trade secrets, and within six months of employee's arrival had a wellreceived product on sale despite having been unsuccessful in producing and selling a comparable product during the prior ten-year period).

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any case, mere suspicion falls short of the "showing . . . of entitlement to relief" required by Rule 8. Twombly, 127 S.Ct. at 1965 & n.3 (internal quotation marks omitted).8 4. Accenture fails to provide factual allegations sufficient to state a plausible claim for tortious interference

Although Accenture still declines to clarify which of the two Delaware tortious interference actions it is pleading, see Opp. at 7-8, its Complaint fails to state a claim either for interference with contract or for interference with prospective contractual relations. a. Accenture fails to provide factual allegations for each element of tortious interference with contract

Under Delaware law, the elements of tortious interference with contract are: "(1) a contract (2) about which defendant knew and (3) an intentional act that is a significant factor in causing the breach of such contract (4) without justification (5) which causes injury." Lipson v. Anesthesia Servs., P.A., 790 A.2d 1261, 1284 (Del. Super. Ct. 2001).9 Accenture has failed to plead the first element--namely, any specific contract(s) with which Guidewire is alleged to have interfered. Compl. at ¶¶ 39-40. "[I]t is axiomatic that the complaint may not be amended by the briefs in opposition to a motion to dismiss." Car Carriers v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir. 1984). Nonetheless, in its

Opposition, Accenture tries to do just that by pointing to an NDA between it and CNA as the

8

For the same reasons, Accenture's conclusory assertion "[o]n information and belief" that Guidewire has "used Accenture Trade Secrets in connection with applying for and obtaining United States Patents" fails adequately to plead the "use" element of misappropriation. Compl. at ¶ 32. This assertion, which lacks any factual "showing," amounts to a naked conclusion. For example, Accenture does not allege: (1) any specific Guidewire patents or patent applications nor (2) any similarity between them and its trade secrets. Nor can this deficiency be corrected--not least because Guidewire has not obtained any United States patents. The fact that Lipson did not involve a motion to dismiss does not detract from the accuracy of its statement of the elements of tortious interference claims under Delaware law--the only purpose for which it is cited in Guidewire's Opening Brief and Reply. Cf. Opp. at 7.

9

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sole basis for its tortious interference claim. Opp. at 8 n.5. Even with this improper amendment, however, Accenture's pleading remains deficient in multiple respects: · · Accenture fails to allege that Guidewire knew about the NDA, as it must under the second element. Compl. at ¶¶ 21-23, 39-40. Accenture fails to allege that CNA breached the NDA, as it must under the third element. Id.; see also Allied Capital Corp. v. GC-Sun Holdings, LP, 910 A.2d 1020, 1036 (Del. Ch. 2006) ("To state a tortious interference claim, a plaintiff must properly allege an underlying breach of contract."). Accenture fails to allege any intentional act by Guidewire causing CNA to breach the NDA. Compl. at ¶¶ 21-23, 39-40. Accenture fails to allege that Guidewire acted without justification as required by the fourth element. Id. Because these are all essential elements of tortious interference with contract, Accenture's failure to allege even one of them should result in dismissal. b. Accenture fails to provide factual allegations for each element of tortious interference with prospective contractual relations

· ·

Under Delaware law, the elements of tortious interference with prospective contractual relations are: "([1]) the reasonable probability of business opportunity, ([2]) the intentional interference by defendant with the opportunity, ([3]) proximate causation, and ([4]) damages, all of which must be considered in light of defendant's privilege to compete or protect his business interests in a fair and lawful manner . . . ." Lipson, 790 A.2d at 1285 (internal quotation marks omitted, ellipsis in original, letters replaced with numbers). Delaware courts follow the Second Restatement of Torts in requiring that the "intentional interference" by the defendant be "improper." McHugh v. Bd. of Educ., 100 F. Supp. 2d 231, 246-47 (D. Del. 2000). "[I]llustrative examples of improper conduct" under the Restatement include "threats of physical violence, fraudulent misrepresentations, threats of unmerited civil or criminal litigation, economic pressure, and unlawful conduct." Crivelli v. GMC, 215 F.3d 386, 395 (3d Cir. 2000). In its Complaint, Accenture fails to allege, as it must under the first element, a reasonable probability that--but for Guidewire's competition--Accenture would have won any

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specific bid. Compl. at ¶¶ 39-40. Indeed, Accenture's Complaint does not identify any bid that might fall into this category--a deficiency Accenture tries to skirt by pointing generally to its dealings with CNA in its Opposition. Opp. at 7-8. Nor does Accenture provide any factual allegations in its Complaint directly or inferentially showing that Guidewire knew about Accenture's dealings with CNA, let alone that Guidewire intentionally sought to undermine them. Cf. Ethypharm S.A. France v. Bentley Pharms., Inc., 388 F. Supp. 2d 426, 435 (D. Del. 2005).10 Further, Accenture fails to allege any improper conduct by Guidewire in relation to its dealings with CNA. Id.11 And, insofar as Accenture tries to rely on trade secret

misappropriation to supply the requisite improper conduct, it still cannot meet that element both because: (a) Accenture has not adequately pleaded that predicate act; and (b) as discussed in more detail below, such a claim would be preempted by the Delaware Uniform Trade Secrets Act. 5. Accenture's unfair competition claims are derivative of its inadequately pleaded trade secret and tortious interference claims

Because Accenture concedes that its common law and statutory unfair competition claims are dependent on its claims for trade secret misappropriation and tortious interference, Accenture's failure to adequately plead those claims requires dismissal of its unfair competition claims as well. See Compl. at ¶¶ 35-38; Opp. at 8-9, 10 n.6, 13. B. ACCENTURE'S TORTIOUS INTERFERENCE AND UNFAIR COMPETITION CLAIMS ARE PREEMPTED The Delaware Uniform Trade Secrets Act "displaces conflicting tort, restitutionary and other law of this State providing civil remedies for misappropriation of a trade
10

Indeed, the only fact conceivably relevant to Guidewire's knowledge that Accenture has offered--that CNA kept Accenture in the dark about its consideration of other products-- supports the inference that Guidewire did not know about Accenture's dealings with CNA. See Compl. at ¶¶ 22-23; Opp. at 8. Accenture cannot rely on its patent infringement allegation to provide the requisite improper conduct because its patent was not granted until approximately three years after the purported interference in its dealings with CNA. See Compl. at ¶¶ 22-23, 25.

11

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secret." 6 Del. Code § 2007(a). In Leucadia, Inc. v. Applied Extrusion Technologies, Inc., 755 F. Supp. 635, 637 (D. Del. 1991), this Court explained that the act "was intended to preserve a single tort cause of action under state law for misappropriation as defined in 6 Del. C. § 2001(2) and thus to eliminate other tort causes of action founded on allegations of trade secret misappropriation." "[A]ll claims stemming from the same acts as the alleged misappropriation are intended to be displaced." Ethypharm, 388 F. Supp. 2d at 433. Therefore, "a claim can be displaced even if the information at issue is not a trade secret." Id. Accenture does not dispute these legal propositions, nor does it dispute that its tortious interference and unfair competition claims share "a common set of facts" with its trade secret claim. Opp. at 10. Nonetheless, Accenture argues it should escape dismissal because after discovery it might be able to allege unknown facts that might support tortious interference and unfair competition claims that are not congruent with its trade secret claim. Id. In essence, Accenture asks to be allowed to proceed to discovery now and to satisfy its burden to plead nonpreempted claims later. But the Federal Rules of Civil Procedure do not work that way. 1. Under Twombly, Accenture cannot rely on the possibility of future discovery of undisclosed facts to save its pleading

In Twombly, the Supreme Court anticipated and rejected an argument similar to that Accenture now makes. It held that a claim cannot survive dismissal "whenever the

pleadings le[ave] open the possibility that the plaintiff might later establish some `set of [undisclosed] facts' to support recovery." Twombly, 127 S.Ct. at 1968; see also Phillips, 2008 U.S. App. LEXIS 2513, at *14-15 (federal pleading standard does not "requir[e] judges to speculate about undisclosed facts"); cf. Opp. at 11-12 (asking for discovery because Accenture believes Guidewire won the CNA bid under "suspicious circumstances" even though it has no idea what those circumstances might have been). The Court explained, "It is no answer [to "the problem of discovery abuse"] to say that a claim just shy of a plausible entitlement to relief can, if groundless, be weeded out early in the discovery process." Twombly, 127 S.Ct. at 1967

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(internal quotation marks omitted). Thus, the fact that Accenture might be able to find facts in discovery that would allow it to plead a non-preempted claim that could survive a Rule 12(b)(6) challenge does not justify allowing it to take that discovery. If it did, the Rule 12(b)(6) standard would be entirely circular. 2. Accenture's tortious interference and unfair competition claims would be preempted even if undisclosed facts were to show that it gave CNA some non-trade secret information

Having taken the position in its Complaint that the information it disclosed to CNA constituted a trade secret, Accenture now suggests in its Opposition that some of it might not have been a trade secret after all. Compare Compl. at ¶ 25 with Opp. at 12. Even assuming, arguendo, that Accenture had alleged in its Complaint that it disclosed both trade secret and nontrade secret information to CNA, preemption is still proper. In UD Technology Corp. v.

Phenomenex, Inc. ("UDTC"), C.A. No. 05-842-GMS, 2007 U.S. Dist. LEXIS 642, at *25 (D. Del. Jan. 4, 2007), this Court rejected an argument similar to Accenture's. It held that

preemption applied even though the plaintiff had alleged that it had disclosed "`confidential information, trade secrets and patents'" to the defendant. Id. at *26-27. According to this Court, preemption was proper "[s]ince no additional facts, independent of those alleged in support of [the plaintiff's] trade secret misappropriation claim, ha[d] been averred to support" its other claims. Id. at *25. In other words, where the plaintiff made no mention of non-trade secret information in its claim for relief, the court would not preserve an only "potentially viable," "narrow, subset" of an otherwise preempted claim. Id. at 27; see also Savor, Inc. v. FMR Corp., 812 A.2d 894, 898 (Del. 2002) (holding non-trade secret claims were preempted despite plaintiff's argument that information at issue might later be discovered not to be trade secret); T.D.I. Int'l, Inc. v. Golf Pres., Inc., C.A. No. 6: 07-313-DCR, 2008 U.S. Dist. LEXIS 7427, at *17 (D. Ky. Jan. 31, 2008) (applying Kentucky Uniform Trade Secrets Act: where tortious interference claim is "based entirely upon the allegation that the Defendants disclosed

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confidential business information and trade secrets to third parties, it is preempted by the KUTSA") (emphasis added). a. Accenture's tortious interference with prospective contractual relations and unfair competition claims are preempted because they are dependent upon trade secret misappropriation

The Delaware Uniform Trade Secrets Act preempts any claim "based expressly upon the alleged misappropriation of trade secrets." UDTC, 2007 U.S. Dist. LEXIS 642, at *25; see also Ethypharm, 388 F. Supp. 2d at 433 (if "the failure of the misappropriation claim would doom [another] claim" it is preempted). While Accenture has failed to plead any improper conduct (as it must to state a claim for tortious interference), it has insinuated that Guidewire improperly interfered in Accenture's dealings with CNA by misappropriating Accenture's trade secrets. Opp. at 7-8. Accordingly, Accenture's tortious interference claim is preempted because, insofar as Accenture has alleged an improper act, that act is the alleged trade secret misappropriation. Moreover, Accenture's unfair competition claims are expressly based, and dependent, on Accenture's claims for tortious interference and misappropriation of trade secrets. Thus, they are also preempted. CONCLUSION The Court should dismiss Accenture's trade secret misappropriation, tortious interference, and unfair competition claims (Claims 2 through 5). Accenture offers only

speculation, suspicion, and conclusory statements in place of the plausible factual allegations Twombly requires. In the end, Accenture factually alleges little more than that CNA considered both its and Guidewire's products, ultimately choosing Guidewire's software, which was more than $10 million cheaper. Measured against the elements of its claims, Accenture's factual allegations, even if accepted as true, fall far short of showing it is plausibly entitled to relief. Moreover, Accenture's tortious interference and unfair competition claims are preempted by the Delaware Uniform Trade Secrets Act because, as pleaded, they stem from the

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same acts as, and are dependent upon, Accenture's trade secret claim.

Under Twombly,

Accenture should not be allowed to drag Guidewire through discovery on claims that are preempted as pleaded based on an off chance that undisclosed facts might allow it to state a claim. MORRIS, NICHOLS, ARSHT & TUNNELL LLP

/s Julia Heaney (#3052)
Jack B. Blumenfeld (#1014) Julia Heaney (#3052) 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899 (302) 658-9200 [email protected] [email protected] Attorneys for Defendant GUIDEWIRE SOFTWARE, INC. OF COUNSEL: Daralyn J. Durie Clement S. Roberts Matthias Kamber JuNelle Harris KEKER & VAN NEST LLP 710 Sansome Street San Francisco, CA 94111 Dated: March 6, 2008
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CERTIFICATE OF SERVICE I hereby certify that on March 6, 2008 I electronically filed the foregoing with the Clerk of the Court using CM/ECF, which will send notification of such filing to:. Richard L. Horwitz David E. Moore POTTER ANDERSON & CORROON LLP I further certify that I caused to be served copies of the foregoing document on March 6, 2008 upon the following in the manner indicated: Richard L. Horwitz, Esquire David E. Moore, Esquire POTTER ANDERSON & CORROON LLP 1313 North Market Street Wilmington, DE 19801 James Pooley, Esquire L. Scott Oliver, Esquire MORRISON & FOERSTER LLP 755 Page Mill Road Palo Alto, CA 94304 VIA ELECTRONIC MAIL and HAND DELIVERY

VIA ELECTRONIC MAIL

/s/ Julia Heaney (#3052)
Julia Heaney (#3052)