Pleading “Reasonable Measures” Under the DTSA: Confidentiality Agreements as Sufficient at the Rule 12 Stage

Commentary on Samuel Sherbrooke Corporate, Ltd. v. Mayer, No. 24‑2173 (4th Cir. Nov. 18, 2025)

I. Introduction

This published decision of the United States Court of Appeals for the Fourth Circuit squarely addresses a recurring—and practically important—question under the Defend Trade Secrets Act of 2016 (“DTSA”), 18 U.S.C. § 1836 et seq.:

At the pleading stage, what must a plaintiff allege to show that it took “reasonable measures” to keep information secret, and to plausibly allege that the information was “misappropriated”?

In Samuel Sherbrooke Corporate, Ltd. v. Mayer, the Fourth Circuit reverses a Rule 12(c) judgment on the pleadings that had dismissed a federal DTSA claim brought by a captive insurance company and its principal. The case involves allegedly proprietary risk‑pricing software used in the nursing-home insurance market, and a group of insiders (a majority shareholder’s co‑shareholders and the company’s CTO) who allegedly formed a competing insurance enterprise and used that same software to compete against their own company.

The opinion is significant for at least three reasons:

  1. It holds that, at the pleading stage, allegations that employees signed confidentiality and invention-assignment provisions can, by themselves, suffice to plead “reasonable measures” under the DTSA.
  2. It clarifies that a plaintiff need not negate hypothetical defenses (e.g., the possible presence of open‑source code) in the complaint to plausibly allege trade secret status.
  3. It confirms that misappropriation may be plausibly inferred from circumstantial allegations: insider roles, creation of a directly competing entity, and “use” of the proprietary software “to operate” that competitor.

Because the opinion is published and unanimous, it is binding precedent in the Fourth Circuit and an influential authority nationwide on DTSA pleading standards, particularly in cases involving software and internal corporate disputes.

II. Summary of the Opinion

The plaintiffs, Samuel Sherbrooke Corporate, Ltd. (“Sherbrooke”), a North Carolina captive insurance company, and its majority shareholder, Samuel Goldner, sued three individuals—minority shareholders/directors Gabriel Mayer and Joseph Queen, and Chief Technology Officer Beau Walker—along with a competing entity, Helios Risk Solutions, LLC. They alleged, among other things, that:

  • Walker, as CTO, designed and maintained proprietary software (the “Proprietary Software”) used to integrate medical records and predict risk values to price insured incidents and insurance contracts more accurately and profitably for Sherbrooke’s nursing‑home clients.
  • Mayer and Queen, as minority shareholders and directors, and Walker, as CTO, were all subject to an employment contract that included:
    • a broad confidentiality clause prohibiting disclosure or use of “Confidential Information” other than for Sherbrooke’s benefit; and
    • an Inventions Provision assigning to Sherbrooke ownership of any inventions or developments created during employment that relate to Sherbrooke’s business.
  • These agreements, along with Sherbrooke’s practices, meant the Proprietary Software “is—and always has been—the confidential property of Sherbrooke,” protected by “commercially reasonable measures.”
  • Beginning around 2022, Queen and Mayer began forming a competing insurance entity, later joined by Walker.
  • “Upon information and belief,” Walker, in coordination with Queen and Mayer, was “actively using” Sherbrooke’s confidential property, including the Proprietary Software, “to assist with operating this new competing insurance entity.”

The district court granted defendants’ Rule 12(c) motion for judgment on the pleadings on the DTSA claim, holding that Sherbrooke had not sufficiently alleged “reasonable measures” to protect the software’s secrecy. It then declined supplemental jurisdiction over the state-law claims. Plaintiffs appealed only the DTSA dismissal.

Reviewing de novo and applying the Rule 12(b)(6) plausibility standard, the Fourth Circuit:

  • Reiterated that a DTSA plaintiff must plausibly allege:
    1. ownership of a trade secret (reasonable measures + independent economic value from secrecy);
    2. misappropriation of that trade secret; and
    3. an interstate commerce nexus (not disputed here).
  • Held that Sherbrooke’s allegations about:
    • the confidentiality provisions and the Inventions Provision, and
    • the characterization of the Proprietary Software as confidential property of Sherbrooke,
    were sufficient to plead reasonable measures to protect secrecy.
  • Rejected the argument that plaintiffs were required, at the pleading stage, to allege additional, more granular technical or physical security measures (or to negate possible use of open‑source code).
  • Held that the complaint’s narrative allegations—especially that Walker created the software for Sherbrooke, that all three defendants were insiders, that they then formed a directly competing insurer, and that they are “actively using” the Proprietary Software for that competitor—collectively plausibly allege misappropriation.

Accordingly, the Fourth Circuit reversed the district court’s dismissal of the DTSA claim and remanded for further proceedings, while leaving intact the unchallenged dismissal of the state-law claims.

III. Detailed Analysis

A. Factual and Procedural Context

1. The captive insurance and the Proprietary Software

Sherbrooke was formed as a North Carolina captive insurance company in 2018. A captive insurer insures only its “captive” affiliates—in this case, nursing homes and other entities owned by Goldner through Goldner Capital Management. Sherbrooke has three shareholders:

  • Goldner – majority shareholder;
  • Mayer – minority shareholder and director; and
  • Queen – minority shareholder and director.

These three shareholders elected themselves as Sherbrooke’s directors. The complaint alleges that, in practice, Mayer and Queen exercised “complete, total, and formidable managerial control” over Sherbrooke’s operations as officers and directors.

In March 2022, Goldner hired Walker as Chief Technology Officer. Walker’s mandate was to:

  • “design[], creat[e], and maintain[]” a piece of Proprietary Software for Sherbrooke’s exclusive use;
  • enable Sherbrooke to:
    • “incorporate and utilize medical records to project and predict risk values in pricing individual covered incidents more effectively,” and
    • “more accurately price insurance contracts” for existing and potential customers;
  • thereby provide “competitive and profitable insurance policies” and “additional services” that yielded “enormous economic value due to its secrecy and proprietary nature.”

The complaint expressly alleges that:

  • the Proprietary Software is “the confidential and exclusive property of Sherbrooke,” and
  • Sherbrooke “has used all commercially reasonable measures” to ensure its confidentiality and unique value.

2. The employment contracts and ownership/confidentiality structure

Critically, the complaint alleges that each defendant was required to sign an employment contract. Those contracts included:

  • A Confidentiality Agreement under which employees:
    • “shall not, at any time hereafter, disclose Confidential Information to any Person or use or exploit Confidential Information for any purpose other than for the benefit of [Sherbrooke] … in the regular course of his engagement and within the scope of his authority.”
    • Limited carve‑outs applied where the information was already known to the employee or the recipient, or disclosure was legally compelled (with a notice requirement).
  • An Inventions Provision stating that any “invention, idea, design, process, system, procedure, improvement, development or discovery” conceived or developed by the employee during the term (or, in some cases, a restricted period after) that:
    • “incorporates, is derived from, or is based upon any Confidential Information,” and
    • is “applicable to the business of [Sherbrooke],”
      “shall become the sole and exclusive property of [Sherbrooke], whether or not patentable or registrable.”

Thus, on the face of the complaint, the CTO’s development work (including the Proprietary Software) falls squarely within the Inventions Provision and the confidentiality regime. The complaint further alleges that “[a]ny property that Walker created during or related to his employment as CTO of Sherbrooke, including but not limited to the Proprietary Software, is the confidential and exclusive property of Sherbrooke.”

3. The alleged competing entity and misappropriation

According to the complaint:

  • By around 2022, Queen and Mayer began preparations to form a competing corporate entity to provide insurance to nursing facilities across the United States—the same market Sherbrooke serves.
  • “At some time thereafter,” Walker joined this scheme.
  • “Upon information and belief,” Walker, in coordination with Mayer and Queen, is “actively using” Sherbrooke’s confidential property, “including but not limited to the Proprietary Software,” to operate this new competing insurer.
  • When Goldner discovered the scheme in December 2023, he attempted to terminate the defendants and remove Mayer and Queen as directors, but they allegedly “refused to relinquish control” of Sherbrooke and its assets.

4. District court ruling and appeal

Plaintiffs filed suit in January 2024 in the Eastern District of North Carolina, asserting:

  • a federal DTSA trade‑secret misappropriation claim; and
  • several state-law claims for corporate malfeasance and related misconduct.

Defendants moved for judgment on the pleadings under Rule 12(c). After a hearing, the district court:

  • granted judgment on the pleadings on the DTSA claim, holding that plaintiffs had not plausibly alleged that they took reasonable measures to protect the Proprietary Software’s secrecy; and
  • declined to exercise supplemental jurisdiction over the remaining state claims, which were therefore dismissed without prejudice.

On appeal, plaintiffs challenged only the DTSA ruling. The Fourth Circuit reversed, holding that:

  • the complaint plausibly alleges that Sherbrooke owned a trade secret (satisfying the “reasonable measures” element), and
  • the complaint also plausibly alleges misappropriation by the defendants.

B. Precedents and Authorities Cited

The Fourth Circuit situates its decision within existing case law on both federal pleading standards and trade‑secret law. The principal authorities are:

1. Federal pleading standards and Rule 12(c)

  • Williamson v. Prime Sports Marketing, LLC, 101 F.4th 302 (4th Cir. 2024)
    Cited for the standard of review: a grant of judgment on the pleadings under Rule 12(c) is reviewed de novo.
  • Conner v. Cleveland County, 22 F.4th 412 (4th Cir. 2022)
    Reaffirmed that courts assess Rule 12(c) motions under the same standard as Rule 12(b)(6) motions:
    • accept well‑pleaded facts as true, and
    • draw all reasonable inferences in the nonmovant’s favor.
  • Ashcroft v. Iqbal, 556 U.S. 662 (2009)
    The Supreme Court’s foundational decision on plausibility pleading: complaints must allege enough facts to state a claim that is “plausible on its face,” not merely “unadorned, the‑defendant‑unlawfully‑harmed‑me accusations.” The Fourth Circuit quotes this and applies it explicitly to DTSA claims via Sysco (below).

2. DTSA pleading framework

  • Sysco Machinery Corp. v. DCS USA Corp., 143 F.4th 222 (4th Cir. 2025)
    The court cites Sysco for a concise articulation of the DTSA pleading standard:
    • “When it is a claim for trade secret misappropriation under the DTSA…, it demands plausible allegations both that the plaintiff possessed a valid trade secret and that the trade secret was misappropriated.”
    • Sysco is also referenced for the three‑part DTSA claim structure: (1) existence of a trade secret; (2) misappropriation; and (3) nexus with interstate or foreign commerce.
    While the full Sysco opinion is not reproduced, the panel treats it as controlling Fourth Circuit authority framing DTSA claims under the Twombly/Iqbal standard.

3. Reasonable measures and confidentiality agreements

  • InteliClear, LLC v. ETC Global Holdings, Inc., 978 F.3d 653 (9th Cir. 2020)
    The Fourth Circuit adopts a key proposition from the Ninth Circuit:
    “Confidentiality provisions constitute reasonable steps to maintain secrecy.”
    This is crucial because the Fourth Circuit relies on InteliClear to hold that, at least at the pleading stage, a confidentiality agreement alone can be enough to plausibly allege reasonable efforts under the DTSA.
  • dmarcian, Inc. v. dmarcian Europe BV, 60 F.4th 119 (4th Cir. 2023)
    Cited as an example of a case in which the plaintiff alleged multiple measures to maintain secrecy (both contractual and technical) and successfully established a likelihood of success on the merits in a preliminary‑injunction context. The panel notes that many plaintiffs go further than Sherbrooke did—adding access restrictions, technical controls, and revocation of access—but makes clear there is no requirement to plead those additional measures on top of confidentiality agreements.
  • Ahern Rentals, Inc. v. EquipmentShare.com, Inc., 59 F.4th 948 (8th Cir. 2023)
    The Eighth Circuit case is cited for its recognition that trade‑secret owners’ protective measures commonly include:
    • non‑disclosure, non‑solicitation, and non‑competition agreements, and
    • policies that prohibit disclosure of trade secrets.
    The Fourth Circuit uses Ahern to demonstrate how other circuits accept robust contractual regimes as evidence of reasonable efforts.
  • Allstate Insurance Co. v. Fougere, 79 F.4th 172 (1st Cir. 2023)
    Here, the First Circuit found that the plaintiff took “multiple steps” to protect alleged trade secrets, including:
    • exclusive agency agreements identifying confidential information;
    • limiting access to certain agents;
    • password protection; and
    • revocation of access at termination.
    The Fourth Circuit discusses this case as further illustration that courts consider both contractual and technical measures in evaluating reasonableness, but again emphasizes that plaintiffs are not obliged to plead the full spectrum of such measures at the complaint stage.
  • In re Innovative Construction Systems, Inc., 793 F.2d 875 (7th Cir. 1986)
    Quoted for the proposition that:
    “What may be reasonable measures in one context may not necessarily be so in another.”
    The Seventh Circuit emphasized that juries should apply common-sense judgment to what is “reasonably adequate” under the circumstances. The Fourth Circuit uses this to underscore that “reasonable measures” is context‑dependent and resists a rigid checklist approach.

4. Statutory provisions under the DTSA

  • 18 U.S.C. § 1839(3) – Definition of “trade secret”:
    • The information must derive “independent economic value” from not being generally known or readily ascertainable.
    • The owner must take “reasonable measures” to keep it secret.
  • 18 U.S.C. § 1839(5) – Definition of “misappropriation”:
    • Includes “disclosure or use” of another’s trade secret without consent by one who knew or had reason to know that the knowledge was acquired under a duty to maintain secrecy.

C. The Court’s Legal Reasoning

1. Overarching standard: plausibility, not proof

The opinion returns repeatedly to a fundamental theme: pleading is not proving. Under Rule 12(b)(6)/12(c), Sherbrooke need only:

  • allege facts that, if true, make it plausible that:
    • it owns a trade secret, and
    • defendants misappropriated that trade secret.

The district court, by contrast, appears to have demanded something closer to evidentiary proof at the pleading stage—questioning, for example, whether the software might include open‑source code or whether all persons with access had signed confidentiality agreements. The Fourth Circuit emphatically rejects this heightened requirement.

This framing matters because it shapes each substantive holding:

  • Trade secret status is assessed in terms of plausibly alleged reasonable measures and economic value from secrecy—not whether the complaint dispels all doubts.
  • Misappropriation can be established by a plausible narrative inferred from circumstantial allegations, not just direct evidence of copying or forensic details.

2. Existence of a trade secret: “Reasonable measures” through confidentiality agreements

The district court concluded that plaintiffs had not plausibly alleged that they took reasonable steps to protect the software’s secrecy. The Fourth Circuit disagrees and holds that:

“[A]t the pleading stage, it is sufficient that Appellants allege they protected the Proprietary Software by requiring employees to sign the confidentiality agreement and Invention Provision contained in the employment contract.”

The court’s reasoning unfolds in several moves.

a. Connecting the Proprietary Software to “Confidential Information”

Defendants argued that the complaint failed to show that the Proprietary Software was actually subject to the confidentiality agreement. The Fourth Circuit rejects this as overly formalistic, pointing to the complaint’s allegations that:

  • “The Proprietary Software is—and always has been—the confidential property of Sherbrooke.”
  • The employment contract prohibited employees from disclosing or exploiting “Confidential Information.”
  • The Inventions Provision assigned to Sherbrooke the exclusive ownership of inventions created during employment that were applicable to its business.

Taking these allegations as true, the court concludes that it is a reasonable and straightforward inference that:

  • the Proprietary Software was intended to be, and treated as, Confidential Information; and
  • the employment agreements’ confidentiality and invention-assignment provisions expressly covered it.

In other words, plaintiffs were not required to use talismanic words linking “Confidential Information” and “Proprietary Software” in haec verba; the factual narrative suffices.

b. Rejecting the open‑source and enforceability objections

Defendants contended that the complaint did not enable the court to know, for example:

  • whether the Proprietary Software uses open‑source code (which could arguably undermine claims of secrecy), or
  • whether the confidentiality provision is even enforceable.

The Fourth Circuit dismisses these objections as demanding too much:

  • Plaintiffs are not required to disprove hypothetical defenses—such as the use of open‑source components—in their complaint.
  • Questions about enforceability of contract provisions or the exact technical composition of the software are merits issues to be developed via discovery, not gating requirements at the pleading stage.

The court emphasizes that, under Iqbal, the plaintiff need not “prove anything” at this stage; it need only “plausibly allege” that:

  • the software falls under the confidentiality regime, and
  • those contractual provisions were part of reasonable measures to keep it secret.
c. Are confidentiality provisions alone sufficient?

Defendants further argued that the existence of confidentiality provisions alone can never suffice as “reasonable steps” as a matter of law. The Fourth Circuit squarely rejects this proposition at the pleading stage, aligning itself with the Ninth Circuit’s InteliClear decision:

“At this stage of the proceedings, we disagree, and the Ninth Circuit has concluded similarly. In InteliClear … the Ninth Circuit held, ‘Confidentiality provisions constitute reasonable steps to maintain secrecy.’”

The opinion then contrasts the present case with others where plaintiffs alleged both:

  • confidentiality agreements, and
  • technical, access‑control, or post‑employment safeguards (e.g., dmarcian, Ahern, Allstate).

But crucially, the court states:

“But that does not mean they are required to allege more, and we see no reason to create such a requirement.”

This is arguably the central doctrinal holding of the case: at the complaint stage, a DTSA plaintiff can survive dismissal by plausibly alleging that it protected the trade secret with confidentiality and invention-assignment agreements alone, without needing to describe additional measures like password regimes, physical locks, or IT security protocols.

d. Context-dependence of “reasonable measures”

The court contextualizes its holding with a broader principle from Innovative Construction:

“Trade secrets take many forms and what may constitute ‘reasonable measures’ must be considered in light of the nature of the trade secret and the context in which it exists.”

Because “reasonable measures” are context‑specific, the complaint’s allegation that Sherbrooke “has used all commercially reasonable measures” to ensure confidentiality, coupled with the detailed contractual provisions:

  • is enough to avoid dismissal, and
  • leaves room for the parties to contest the adequacy of those measures at later stages (summary judgment, trial).

The court also rebuffs defendants’ argument that the complaint fails because it does not explicitly allege that every person with access to the software signed an employment contract. The court finds it reasonable to infer from the complaint that the employment contract applied to all employees and, by implication, to those with access to the software.

3. Misappropriation: inferring “use” from circumstantial allegations

Having found that plaintiffs plausibly alleged a trade secret, the court turns to whether the complaint plausibly alleges that defendants misappropriated that trade secret—specifically, by “use” without consent in violation of a duty of confidentiality, under 18 U.S.C. § 1839(5).

Defendants contended that the complaint contained only a single, conclusory allegation that they “are actively using” the Proprietary Software, which they claimed was insufficient. The Fourth Circuit disagrees, stressing that the complaint must be read as a whole narrative, not reduced to one sentence in isolation.

Key allegations supporting misappropriation include:

  • Walker’s role as CTO responsible for designing, creating, and maintaining the Proprietary Software.
  • The description of the Proprietary Software’s core function: integrating medical records and predicting risk values to price incidents and contracts.
  • The fact that Mayer and Queen were shareholders, directors, and officers—thus aware of and exposed to the software’s existence and value.
  • The formation of a competing insurance entity targeting the same customer base (nursing facilities across the U.S.), as alleged by “upon information and belief.”
  • The explicit allegation that Walker, “in coordination with Queen and Mayer,” is using Sherbrooke’s confidential property, “including but not limited to the Proprietary Software,” to “assist with operating this new competing insurance entity.”

The court views these allegations as more than an “unadorned” accusation. Instead, they form a plausible causal chain:

  1. Walker developed and maintained a high‑value, proprietary risk‑pricing tool for Sherbrooke.
  2. All three defendants, as insiders, had familiarity with its function and value.
  3. They then formed a competitor in the same niche market.
  4. They are alleged to be using that same software to run the competitor.

As the panel memorably notes:

“After all, what does one do with a stolen competitive pricing software except ‘use’ it, as alleged in this case, ‘to assist with operating this new competing insurance entity’?”

Thus, misappropriation is plausibly inferred from:

  • insider access and opportunity,
  • formation of a direct competitor, and
  • alleged use of the trade secret to run that competitor.

The opinion therefore reinforces that misappropriation claims do not require plaintiffs to plead:

  • forensic details about file transfers,
  • technical logs, or
  • direct admissions of copying

at the complaint stage. Circumstantial evidence and reasonable inferences suffice under the DTSA’s statutory definition, so long as the narrative is coherent and plausible.

D. Impact and Implications

1. Lowering the pleading bar for DTSA plaintiffs—within limits

This decision will be read by litigants and district courts as a plaintiff‑friendly clarification of DTSA pleading standards within the Fourth Circuit. Its practical effects likely include:

  • Fewer early dismissals of DTSA claims based solely on allegations that the plaintiff used confidentiality agreements and ownership provisions to protect trade secrets.
  • A greater focus on summary judgment and trial as the stages for contesting:
    • whether the information was truly secret;
    • whether the measures were in fact “reasonable” under all the circumstances; and
    • whether defendants actually used or disclosed the secrets.
  • A potential shift in defense strategy from attacking complaints for lack of detail about technical safeguards to developing affirmative proof (e.g., open‑source use, independent development, lack of access, or public availability) later in the case.

At the same time, the decision does not guarantee that any complaint reciting magic words like “confidential information” and “commercially reasonable measures” will survive. The complaint in Sherbrooke is:

  • fact‑specific (identifying who did what, when, and for what purpose);
  • clear about the nature and function of the trade secret (proprietary risk‑pricing software integrating medical records); and
  • supported by:
    • actual quoted contractual language, and
    • a coherent misappropriation narrative.

Plaintiffs who offer only vague references to “confidential business information” without any concrete description, or who fail to allege any protective measures at all, will still face dismissal under Iqbal.

2. Clarifying the role of confidentiality and invention-assignment agreements

The opinion will be widely cited for the proposition that:

Signed confidentiality and invention-assignment agreements can, by themselves, satisfy the “reasonable measures” requirement of the DTSA at the pleading stage.

This has immediate implications for:

  • Employers and startups – It reinforces the centrality of well‑drafted employment agreements as a baseline trade‑secret protection measure.
  • In‑house counsel and HR – It underscores the importance of:
    • ensuring that key employees sign such agreements, and
    • having clear language defining “Confidential Information” and assigning ownership of inventions.
  • Transactional lawyers – In M&A and investment contexts, due diligence may increasingly focus on:
    • whether the target has robust confidentiality and invention-assignment agreements in place,
    • as these now have recognized litigation value in preserving DTSA claims.

3. Circumstantial pleading of misappropriation—especially in insider and software cases

The court also reinforces that misappropriation can be plausibly alleged through circumstantial facts in insider scenarios, particularly involving software:

  • Defendants’ insider roles + knowledge of the trade secret;
  • Creation of a competing business in the same niche market;
  • Alleged “use” of the trade secret “to operate” that business;
  • Contextual details about the trade secret’s function and value.

This is especially important in software and algorithm cases, where direct evidence of copying is often hidden from the plaintiff before discovery. The decision makes clear that plaintiffs are not required to plead technical specifics (e.g., matching code segments, server logs) they cannot reasonably access pre‑discovery; a plausible inference of use is enough to reach discovery.

4. Alignment with other circuits and potential circuit influence

By aligning with the Ninth Circuit’s InteliClear on confidentiality provisions, and harmonizing with First and Eighth Circuit approaches in Allstate and Ahern, the Fourth Circuit helps to:

  • solidify a multi‑circuit consensus that contractual confidentiality agreements are a recognized and often sufficient form of “reasonable measures” under trade-secret law; and
  • push back against district‑court rulings that treat such agreements as categorically insufficient.

This convergence reduces the risk of stark circuit splits on DTSA pleading standards and provides litigants with a more predictable framework across jurisdictions.

E. Complex Concepts Simplified

For readers less familiar with trade-secret and federal pleading doctrine, the following explanations translate key concepts from the opinion into more accessible terms.

1. What is the Defend Trade Secrets Act (DTSA)?

The DTSA is a federal statute that:

  • creates a nationwide cause of action for trade-secret misappropriation;
  • allows trade-secret owners to sue in federal court;
  • provides for:
    • injunctive relief (to stop use or disclosure),
    • damages (including potentially double damages and attorneys’ fees in some cases), and
    • in rare situations, ex parte seizure of property used to misappropriate trade secrets.

2. What is a “trade secret”? (18 U.S.C. § 1839(3))

To qualify as a “trade secret” under the DTSA, information must:

  1. Have economic value from being secret
    It must give its owner a competitive advantage because others don’t know it and can’t easily figure it out.
  2. Be subject to reasonable measures to keep it secret
    The owner must take steps—like confidentiality agreements, access restrictions, or security controls—to prevent it from becoming generally known.

If either element is missing, the information is not a “trade secret” under the DTSA, and the statute does not apply.

3. What are “reasonable measures” to keep a trade secret secret?

“Reasonable measures” are actions a business takes to prevent its valuable information from becoming public. Examples include:

  • Confidentiality (NDA) and invention-assignment agreements with employees and contractors;
  • Limiting access to need‑to‑know personnel;
  • Password protection and IT security controls;
  • Marking documents as “confidential” or “proprietary”;
  • Secure storage (locked rooms, secure servers);
  • Revoking access when employees leave.

The key takeaway from Sherbrooke is:

At the complaint stage, alleging that employees signed confidentiality and invention-assignment agreements can be enough to plausibly plead “reasonable measures,” even if the plaintiff does not yet describe all of its technical or physical security practices.

4. What is “misappropriation”? (18 U.S.C. § 1839(5))

Under the DTSA, “misappropriation” generally means:

  • (a) Improper acquisition – obtaining another’s trade secret by theft, bribery, misrepresentation, or breach of a duty to maintain secrecy; or
  • (b) Improper use or disclosure – using or disclosing another’s trade secret without consent when you knew, or should have known, that it was acquired under a duty of confidence.

In Sherbrooke, the focus is on “use”:

  • Defendants were allegedly under a duty of confidentiality (by contract and by their roles as officers/directors/CTO); and
  • They allegedly used the Proprietary Software to operate a competing company without Sherbrooke’s consent.

5. What does “upon information and belief” mean in a complaint?

When a plaintiff pleads “upon information and belief,” it is saying:

  • “I do not yet have direct evidence, but based on the facts I do know, I reasonably believe that this allegation is true.”

Courts allow such allegations, especially when:

  • the facts are mostly within the defendants’ knowledge or control (e.g., internal operations of a competitor); and
  • the plaintiff supports the allegation with some concrete factual basis (e.g., insider roles, timing, market overlap).

Sherbrooke implicitly affirms that “upon information and belief” allegations of misappropriation are acceptable when backed by a plausible factual narrative.

6. What is a Rule 12(c) motion for judgment on the pleadings?

A Rule 12(c) motion lets a party ask the court to decide a case based solely on:

  • the pleadings (complaint and answer); and
  • documents properly attached or incorporated by reference.

It is assessed under the same standard as a Rule 12(b)(6) motion to dismiss:

  • The court accepts the plaintiff’s well‑pleaded factual allegations as true; and
  • Dismisses the case only if those facts still do not state a plausible claim for relief.

Thus, plausibility, not proof, is the touchstone at this stage.

IV. Conclusion: Key Takeaways and Broader Significance

Samuel Sherbrooke Corporate, Ltd. v. Mayer is an important addition to DTSA jurisprudence, especially in the Fourth Circuit, for three main reasons.

  1. Confidentiality and invention-assignment agreements can suffice to plead “reasonable measures.”

    The court expressly holds that, at the pleading stage, allegations that employees signed contractual confidentiality and invention‑assignment provisions, coupled with a clear assertion that the trade secret was confidential property, are enough to plausibly allege reasonable efforts under 18 U.S.C. § 1839(3).

    Plaintiffs are not obligated, at the complaint stage, to:

    • catalogue all technical or physical security measures; or
    • negate hypothetical vulnerabilities (like use of open‑source code).

  2. Misappropriation can be plausibly inferred from circumstantial facts, particularly in insider software cases.

    The opinion reinforces that a DTSA claim may survive dismissal where the complaint:

    • identifies the trade secret and its function;
    • alleges defendants’ roles and access;
    • describes the formation of a direct competitor; and
    • alleges “use” of the trade secret to run that competitor, even “upon information and belief.”

    Detailed forensic evidence is not required at the outset; a coherent, plausible narrative suffices to access discovery.

  3. The decision reinforces the Twombly/Iqbal standard in DTSA cases and corrects over-demanding pleading expectations.

    By reversing the district court’s dismissal, the Fourth Circuit underscores that Rule 12(b)(6)/12(c) is about plausibility, not proof. Demanding that a plaintiff disprove every potential defense (e.g., open‑source components, enforceability issues) at the pleading stage is incompatible with Iqbal and with the DTSA’s structure.

    This clarity should curb premature dismissals and encourage courts to reserve fine‑grained disputes about secrecy, reasonableness of measures, and actual use for later stages of litigation.

In the broader legal landscape, Sherbrooke advances a pragmatic, context‑sensitive approach to trade-secret pleading that recognizes both:

  • the central role of contractual mechanisms (confidentiality and assignment agreements) in modern trade‑secret protection, and
  • the practical need to allow plaintiffs, especially in software and insider‑misappropriation cases, to reach discovery before being required to prove the full extent of their security regimes or the defendants’ technical acts of copying.

As trade-secret disputes continue to proliferate in technology‑driven industries, this opinion will serve as a key reference point for courts, litigants, and counsel in structuring complaints, motions, and protective measures under the DTSA.