Image: Nuuly

Urban Outfitters is urging a federal court in Pennsylvania to decide the trade secret misappropriation lawsuit that Le Tote waged against it without a trial, arguing that it is entitled to summary judgment since the fashion rental company has failed to advance its “accusations beyond speculation.” In the complaint that it filed back in June 2020, Le Tote alleged that Urban Outfitters gained access to an array of valuable information – including “proprietary in-house tools” and “technological infrastructure and logistical functions” – under the guise of a potential acquisition. The deal never came to be, according to Le Tote, and instead, Urban launched Nuuly – a copycat rental service of its own to “compete directly with Le Tote” – using the secret info that it had “stolen” during the parties’ M&A discussions. 

Fast forward two and a half years and not only has Le Tote “fail[ed] to identify the trade secrets at issue … even after extensive discovery,” Urban Outfitters argues that it still has not “support[ed] its conclusory accusations” that Urban used such “purported trade secrets to develop Nuuly.” Urban is urging to court to grant its motion for summary judgment on the remaining claims in the case, which it characterizes as “a transparent, and revisionist, attempt by Le Tote to blame Urban for its business and financial difficulties.” (In the wake of its launch of Nuuly, Urban claims that Le Tote, “teetering on the verge of insolvency following an ill-fated business decision to acquire Lord & Taylor Holdings LLC,” filed for bankruptcy in August 2020.)

The Philadelphia-headquartered retailer relies on four key points in its push for summary judgment … 

(1) Lack of Standing – As a threshold matter, Urban argues that is entitled to judgment on Le Tote’s trade secret misappropriation claims under the Defend Trade Secrets Act (“DTSA”) and the Pennsylvania Uniform Trade Secrets Act (“PUTSA”) because Le Tote lacks standing to assert such claims. A DTSA claim is “available only to the ‘owners’ of a trade secret,” which Le Tote is not, as on the heels of filing for bankruptcy, it sold “all of its business assets – including all of the alleged trade secrets at issue here – to the Saadia Group,” which is not a party to this lawsuit. 

Le Tote similarly lacks standing under the PUTSA, per Urban, since (as a result of the sale) “it does not have the requisite ‘lawful possession’ (i.e., ‘continued use, possession, and protection’) of any claimed trade secret.” 

(2) Lack of Specificity – Even if Le Tote did have standing for its trade secret claims, summary judgment in Urban’s favor is “required,” the retailer argues because: “Le Tote has repeatedly failed to identify with any level of specificity any trade secret that Urban purportedly misappropriated; the categories of information [that it] seeks to protect as trade secrets are publicly available and generally known in the industry; and there is not a shred of evidence in the record of actual use by Urban of any so-called trade secret information.”

In order to prevail on a claim for misappropriation of trade secrets under DTSA and PUTSA, Le Tote must “show the existence of a trade secret with ‘reasonable degree of precision and specificity … such that a reasonable jury could find that the plaintiff established each statutory element of a trade secret,’” and that this identification must be “particular enough as to separate the trade secret from matters of general knowledge in the trade of or special knowledge of persons skilled in the trade.” Le Tote does neither here, Urban argues. 

Instead of identifying the trade secrets “in any level of detail,” Le Tote “listed at a high-level certain features … that it shared with Urban during the parties’ discussions,” including: “(i) its inventory management system; (ii) its RFID-driven logistics system; (iii) its algorithms; (iv) its system interaction; (v) its customer insights, roadmap, and scaling; and (vi) its financial information/modeling information.”) “None of these broad categories identifies trade secrets with any level of specificity,” Urban contends, claiming that Le Tote has “not identified code, formulas, data, software, or particularized details about these categories of information … nor could it; there is no dispute that Le Tote never shared the underlying source code or software Le Tote used to support its algorithms or any other aspect of Le Tote’s technology platform.”

And still yet, Urban maintains that Le Tote’s claims also fail because “most, if not all, of its so-called trade secrets are publicly available or otherwise widely known within the clothing rental industry.” For instance, Urban states that “there is no credible argument that the design, processes, and technologies in Le Tote’s distribution center constitute protectible trade secrets,” as videos depicting Le Tote’s distribution center, “including the flow of garments throughout the distribution center, its organization by row, shelf, and slot, the manner in which garments are electronically tracked throughout the facility, and the order picking process, have been available online—and the subject of lengthy, televised news stories—since 2016.” 

(3) Breach of Contract – Pushing back against Le Tote’s breach of contract claim, Urbans claims that it cannot survive summary judgment for a number of reasons, including because the non-disclosure agreement that it signed in connection with the parties’ M&A discussions did not bind Urban and Le Tote to a deal, and in fact, “the NDA expressly provided that Urban was free to launch its own competing rental business or acquire a competing rental business, provided that Urban otherwise complied with the NDA in doing so.” More importantly, though, Urban states that the record conatins “absolutely no evidence that Urban actually used any confidential information it learned from Le Tote in developing and launching Nuuly,” thereby, “doom[ing] Le Tote’s breach of contract claim.” 

(4) Preemption – Finally, Urban asserts that Le Tote’s unfair competition claim is “preempted as a matter of Pennsylvania law, barred as entirely duplicative of its misappropriation claims, and conclusively foreclosed by Pennsylvania’s ‘gist of the action’ doctrine, which bars [Le Tote] from recasting breach of contract claims into tort claims.”  

With the foregoing in mind, Urban argues that it is entitled to summary judgment on each of Le Tote’s remaining claims, and those claims must be dismissed with prejudice.

The retailer’s motion follows from an unsuccessful bid for dismissal in August 2020 when it filed a motion to dismiss all claims in Le Tote’s complaint for failure to state a claim. In June 2021, the court denied Urban’s motion to dismiss with respect to all claims except the unjust enrichment claim, which it dismissed due to lack of dispute between the parties. 

The case is Le Tote, Inc. v. Urban Outfitters, Inc., 2:20-cv-03009 (E.D.Penn.).