Courts in the District of Arizona and the Northern District of California recently ruled differently on whether employer awareness is required for pleading vicarious liability for trade secrets misappropriation under the Defend Trade Secrets Act (DTSA).
The principles of respondeat superior apply in analyzing vicarious liability for trade secret misappropriation under the DTSA because the statute does not expressly address vicarious liability. Tort statutes that are silent as to vicarious liability are interpreted in the context of and incorporate ordinary tort-related vicarious liability rules. Traditional respondeat superior principles allow an employer to be held vicariously liable for a tort committed by its employee if the employee’s acts were committed “within the course and scope of the employment.”
1. District of Arizona in Bureau Veritas v. Brosa: Awareness, Use, and Benefit to Employer Not Required at Pleading Stage for Vicarious Liability.
In Bureau Veritas, the court ruled that an employer’s awareness is not required for a DTSA claim under respondeat superior. Bureau Veritas Tech. Assessments LLC v. Brosa, No. CV-25-02339-PHX-JJT, 2026 WL 2024509, at *5 (D. Ariz. July 14, 2026). There, plaintiff provided its employee with a work laptop. One month before resigning, the employee extracted several files from his work to a flash drive and sent customer communications and documents to his personal email account. The employee retained the plaintiff’s laptop after resigning and even after joining defendant. Shortly after the employee joined defendant, plaintiff sent defendant a letter stating that the employee was under post-employment obligations but did not state that the employee possessed plaintiff’s trade secrets nor what those trade secrets were. While employed by defendant, the employee “accessed, modified, and copied material containing [plaintiff’s] trade secrets” to an external drive multiple times, including copying 6,339 files.
Analyzing these facts, the court in Bureau Veritas came to different conclusions on the direct liability and vicarious liability claims against the defendant employer. The court dismissed the misappropriation claim for direct liability because the complaint contained no allegations to show (or reasonably infer) that defendant knew or should have known that the employee had misappropriated plaintiff’s trade secrets. The court, however, reached the opposite conclusion on the vicarious liability claims against the defendant employer. The court held that awareness, use, and benefit to the defendant need not be alleged nor be reasonably inferred from the complaint to support vicarious liability claims. The court found that the employee’s repeated access, modification, and copying of plaintiff’s trade secrets “while employed by” defendant was “sufficient…to infer that he ‘used’ those files for the purpose of pleading a misappropriation claim.” In short, the employee’s acquisition, possession, and use of the trade secrets while employed by defendant alone was sufficient to support a claim for vicarious liability.
2. Northern District of California in xAI v. OpenAI: Must Plead Circumstantial Evidence Sufficient to Draw Plausible Inference of Use for Vicarious Liability.
In x.AI v. OpenAI, the court found that vicarious liability is insufficiently pled when the facts alleged do not support a plausible inference of use. x.AI Corp. v. OpenAI, Inc., 821 F. Supp. 3d 1100 (N.D. Cal. 2026). The plaintiff in x.AI alleged that several of its former employees who were hired by defendant had taken source code and other trade secrets. The court found that the complaint failed to sufficiently plead vicarious liability of trade secret misappropriation by the defendant because the facts, even if taken as true, did not provide “the circumstantial evidence necessary to draw a plausible inference that its former employees used its trade secrets [when later employed by defendant].” The court also dismissed the direct liability misappropriation claims because the plaintiff offered no non-conclusory allegations that defendant had induced plaintiff’s ex-employees to take plaintiff’s trade secrets or that defendant knew that information shared by plaintiff’s ex-employees were plaintiff’s trade secrets.
After plaintiff amended its complaint, the Court again dismissed the claims, this time without leave to amend. While the plaintiff alleged that the employee provided a presentation with slides marked “confidential material” during his interview with the defendant, the Court found the allegations insufficient to infer that the defendant knew or should have known that the slides contained plaintiff’s trade secrets.
3. Practice Tips for Protecting Trade Secrets
A company should be proactive in protecting its trade secrets by:
- monitoring extractions of files from employee work laptops;
- deactivating ports to prevent copying to external drives;
- monitoring use of personal email from work laptops or transmission of emails from work addresses to known personal addresses (e.g., addresses ending in “gmail.com”);
- require employees to return work laptops as part of an off-boarding checklist before the employee departs from the company;
- if there is any indication that employee inappropriately accessed or transferred sensitive company information (like trade secrets), immediately notify the employee’s new employer, including identifying the type and high-level description of the information; and
- routinely training employees on how to segregate, protect, and mark documents to target trade secrets, including using a strict system of internally listing trade secrets, establishing need-to-know access to each trade secret, logging access and discussions in documents, and assigning specific employees with the responsibility and know-how for identifying and marking specific pages within documents where those pages contain trade secrets.
The attorneys in our Intellectual Property and Technology Practice Group have deep experience in assisting clients with protecting trade secrets and litigating claims of misappropriation.