Trade Secrets

Oakwood Laboratories v. Thanoo: What It Takes to Plead 'Use' Under the DTSA

After four dismissals, the Third Circuit revived a microsphere drug-development trade-secret suit and gave the broadest appellate definition yet of what it means to 'use' a trade secret.

March 10, 2025
Scientist working with vials in a pharmaceutical research laboratory
A complex injectable-microsphere program became the Third Circuit's vehicle for defining trade-secret 'use.' Shutterstock
Educational content, not legal advice. This article explains general legal concepts. It does not create an attorney–client relationship. For your specific situation, consult a licensed attorney.

In Oakwood Laboratories LLC v. Thanoo, 999 F.3d 892, No. 19-3707 (3d Cir. June 8, 2021), the Third Circuit reversed a district court that had dismissed a trade-secret complaint not once but four times. Writing on appeal from the District of New Jersey (Sheridan, J.), the court held that the plaintiff’s allegations comfortably stated a claim under the Defend Trade Secrets Act — and, in doing so, delivered what remains one of the most expansive appellate definitions of the statutory term “use.” The opinion is now a fixture in DTSA briefing precisely because it refuses to graft onto the statute a requirement that a misappropriation plaintiff prove the defendant copied a formula or shipped a competing product.

The underlying dispute is a classic departing-executive scenario layered onto an unusually difficult corner of pharmaceutical science. Oakwood spent roughly two decades and tens of millions of dollars developing what it called the Microsphere Project — technology for sustained-release injectable drugs in which peptide-based active ingredients such as leuprolide and octreotide are encapsulated in polymer microspheres and released over weeks. Dr. Bagavathikanun Thanoo was Oakwood’s Vice President of Product Development and, by the complaint’s account, spent more than eighty percent of his tenure directing that program. When he left for Aurobindo — a generic-drug manufacturer with a U.S. arm and an affiliated injectables business — Oakwood alleged that Aurobindo suddenly announced an aggressive complex-injectables initiative on a timeline that, in Oakwood’s telling, would have been impossible without the benefit of its proprietary process knowledge.

At a glance

  • Case: Oakwood Laboratories LLC v. Thanoo, 999 F.3d 892, No. 19-3707 (3d Cir. June 8, 2021), reversing and remanding a dismissal from the District of New Jersey.
  • Defendants: Dr. Bagavathikanun Thanoo; Aurobindo Pharma U.S.A., Inc.; Aurobindo Pharma Ltd.; and AuroMedics Pharma LLC.
  • Posture: Appeal from an order dismissing the third amended complaint — the fourth dismissal in the case — under Rule 12(b)(6).
  • Statute: Defend Trade Secrets Act, 18 U.S.C. § 1836 et seq.; misappropriation elements drawn from § 1839.
  • Core holding: The complaint adequately pleaded the existence of trade secrets and their misappropriation; “use” of a trade secret is broad and does not require the defendant to have replicated the secret or produced a competing product.

The four dismissals and the pleading problem

The procedural history is the heart of the case. The district court had repeatedly faulted Oakwood for failing to plead enough — most pointedly, for not alleging that Aurobindo had actually produced a microsphere product or replicated Oakwood’s specific processes. Each amended complaint added detail; each was dismissed. The Third Circuit treated that pattern as a sign that the district court had quietly raised the pleading bar above what the DTSA and the Twombly/Iqbal plausibility standard require.

The court’s framing is worth keeping in mind because it generalizes well beyond pharmaceuticals. A trade-secret plaintiff at the pleading stage rarely has discovery into what the defendant did behind closed doors. Requiring the complaint to allege the precise manner in which the secret was deployed — or to show a finished competing product — would make many meritorious claims impossible to plead, since the very information needed to satisfy that standard sits inside the defendant’s organization. The Third Circuit held that plausibility, not proof, governs the motion to dismiss, and that detailed allegations of access, opportunity, motive, and an otherwise inexplicable acceleration of a rival’s program can make misappropriation plausible.

What counts as “use”

The opinion’s enduring contribution is its reading of “use.” The DTSA defines misappropriation to include the disclosure or use of a trade secret acquired by improper means or in breach of a duty of confidence, but the statute does not define “use” itself. The district court had effectively equated use with replication. The Third Circuit rejected that, holding that “use” of a trade secret “encompasses all the ways one can take advantage of trade secret information to obtain an economic benefit, competitive advantage, or other commercial value,” including using it to accelerate research or development.

That formulation matters in two directions. First, it captures exploitation that never produces a marketable copy: a competitor that consults a rival’s stolen process data to avoid dead-end experiments, to shorten a regulatory timeline, or to decide which formulations not to pursue has “used” the secret even if its eventual product looks different. Second, it lowers the evidentiary threshold for what a plaintiff must allege about the mechanism of misappropriation. Oakwood did not have to plead that Aurobindo’s scientists were following its protocols step by step; it was enough to allege that the defendants took advantage of the information to advance their own complex-injectables program on a compressed schedule.

The interstate-commerce nexus and identification of the secret

Because the case turned on the sufficiency of the complaint, the court also walked through the DTSA’s elements as a checklist: the existence of a trade secret, a relationship to a product or service used in or intended for interstate or foreign commerce, and misappropriation by improper acquisition, disclosure, or use. The interstate-commerce nexus drew little controversy — drug-development technology intended for products sold nationally easily satisfies it — but the court’s willingness to recite the element is a reminder that the jurisdictional hook is a pleading requirement, not an afterthought.

On identification, the court accepted that Oakwood had described its claimed secrets with enough specificity to put the defendants on notice, while acknowledging that a plaintiff need not lay bare the secret itself in a public complaint. That balance — enough detail to give notice, not so much that filing the suit destroys the secret — is the same tension other courts have struggled with, and Oakwood sits comfortably on the plaintiff-friendly side of it at the pleading stage.

Open questions

Oakwood answers what a plaintiff must plead, not what it must ultimately prove. The broad definition of “use” still has to be applied to evidence: at summary judgment or trial, how much circumstantial proof of “taking advantage” of a secret is enough, and how does a plaintiff distinguish genuine use from a competitor’s independent development or lawful general skill carried in an employee’s head? The opinion also leaves unresolved how its acceleration theory interacts with damages — if the harm is a shortened timeline rather than a copied product, quantifying the benefit becomes its own contest, as later remedies decisions have shown. Finally, the decision invites the recurring question of how courts should police the line between protectable process knowledge and the experience a skilled scientist inevitably accumulates.

Implications

  • Plead access, opportunity, and inexplicable acceleration. A misappropriation complaint can survive without alleging that the defendant copied the secret or sells a competing product.
  • “Use” is exploitation, not replication. Consulting a rival’s data to save time, avoid mistakes, or sharpen strategy is actionable use.
  • Notice-level identification suffices at the pleading stage. Plaintiffs need not disclose the secret itself to state a claim, but should describe it well enough to give the defendant fair notice.
  • Don’t ignore the interstate-commerce element. Tie the claimed secret to a product or service in or intended for interstate or foreign commerce.
  • Repeated dismissals are reviewable. A district court that keeps raising the bar can be reversed for departing from ordinary plausibility pleading.

Frequently asked questions

Does a DTSA plaintiff have to prove the defendant copied the trade secret? No. Oakwood holds that “use” reaches all the ways a party takes advantage of trade-secret information for economic benefit or competitive advantage, including accelerating research or development. Replication of the secret or a finished competing product is not required.

Why did the Third Circuit reverse after four dismissals? It concluded the district court had effectively imposed a heightened pleading standard — demanding proof-like detail about how the secret was used — that neither the DTSA nor ordinary plausibility pleading requires.

Is Oakwood binding nationwide? No. It binds courts in the Third Circuit and is persuasive elsewhere, but its broad reading of “use” is widely cited across jurisdictions in DTSA litigation.

Authorities and sources