Broad-Ocean Techs. v. Bo Lei, 21-11297

BROAD-OCEAN TECHNOLOGIES, LLC, Plaintiff, v. BO LEI, Defendant.

No. 21-11297

United States District Court, E.D. Michigan, Southern Division

January 9, 2023

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT

DAVID M. LAWSON, United States District Judge

Plaintiff Broad-Ocean Technologies, an automotive supplier that specializes in designing and manufacturing electric drive motors, filed this lawsuit accusing defendant Bo Lei, a software engineer and former employee, of stealing trade secrets when he left his employment with the plaintiff and engaging in extraordinary and sophisticated measures to cover up the theft. Broad-Ocean brings claims based on federal and Michigan trade secrets law; breach of the employment contract, which included a number of confidentiality provisions; and breach of fiduciary duty. Lei moves for summary judgment, alleging, among other things, that Broad-Ocean has not identified its trade secrets with sufficient particularity to move forward on its claims. The Court disagrees. Although Broad-Ocean's description of its intellectual property is sketchy, there is enough information in the record for it to withstand summary judgment on that argument. However, the evidence does not show that Lei had a fiduciary relationship with his employer and the claim of breach of fiduciary duty is unsupported and will be dismissed.

I.

Broad-Ocean is headquartered in Novi, Michigan. It serves customers across North America, designing and developing advanced electric motors, inverters, motor controllers powertrain systems, and supervisory controllers. It alleges that it invests significant time, effort, and money developing and acquiring intellectual property, including complex mechanical designs, computer-aided design (CAD) models, electrical schematics, simulations, printed circuit board fabrication data, and other data. It says that it has committed millions of dollars in investments to develop next-generation fuel cell technology to replace internal combustion engines.

Defendant Bo Lei began working at Broad-Ocean around October 3, 2016. As a Senior Software and Control Engineer, he was responsible for developing control software for Fuel Cell Control Units and Belt Starter Generators, and he was granted access to Broad-Ocean's intellectual property, trade secrets, and other confidential information.

Broad-Ocean requires its personnel to execute an Employee Confidentiality and Assignment of Intellectual Property Agreement. Id. at ¶ 15, PageID.4. The Confidentiality Agreement expressly prohibits personnel from disclosing any intellectual property, trade secrets, or other confidential information, including but not limited to

experimental research work; technical and business methodologies, processes, and tools; machinery; formulae drawings; business development plans; software development plans; source and object codes; suppliers; customers technology; know-how; products; business data; licensors; licensees; contractors; subcontractors; trade secrets and inventions (whether or not subject to a pending patent application), and other forms of intellectual property or proprietary information.

Confidentiality Agreement, ¶ 1(a), ECF No. 1-2, PageID.37. Employees agree to maintain the confidentiality of all such information during and after the termination of their employment, and to “immediately return” to Broad-Ocean all materials in their possession or control. Id. at ¶¶ 2, 11, PageID.39-40. When defendant Bo Lei signed a copy of the Confidentiality Agreement on October 3, 2016, he acknowledged that it restricted his right to “disclose or use” Broad-Ocean's confidential information subsequent to his employment. Id. at PageID.42. The Confidentiality Agreement contains a choice-of-law provision stating that it will be governed by and construed according to the laws of the State of Michigan. Id. at ¶ 14(b), PageID.41.

In addition to signing Broad-Ocean's Confidentiality Agreement, Lei signed a Non-Compete Agreement that prohibited him from accepting a position with a direct competitor for one year after leaving Broad-Ocean. He also signed an offer letter that conditioned his employment on his acceptance of all confidentiality obligations.

Broad-Ocean also invests significant resources in protecting its intellectual property in order to maintain an advantage over its competitors. One way is by storing its information and trade secrets on a private, confidential system hosted on a private internal server. Only authorized personnel may access the server, using login credentials provided by Broad-Ocean's information technology department. The credentials are tailored to individual users, so that different personnel are permitted to access only those portions of the server based on their respective job duties. Broad-Ocean records each employee's file downloads, manipulations, and deletions in real time. After an employee separates from Broad-Ocean, the company reviews his or her file activity to ensure that the secrecy and confidentiality of all material is maintained.

On January 26, 2021, Lei told Broad-Ocean's president, Terry Zhang, that he had received employment offers from other companies and was unsure whether he would accept them. Lei expressed the same uncertainty when he and Zhang spoke again on March 21, 2021. Zhang reminded Lei that, although he was permitted to seek outside opportunities, he could not accept a position with a direct competitor for one year and could not take any intellectual property with him or use it anywhere else. Lei confirmed that he would not do so.

On April 2, 2021, Lei tendered his resignation letter to Broad-Ocean. Zhang immediately called Lei to confirm his decision and reiterated his confidentiality obligations, and Lei again confirmed that he understood. Finally, Zhang met with Lei on April 15, 2021, his second-to-last day of employment, to review Lei's Non-Compete and Confidentiality Agreements one last time. During that meeting, Zhang presented Lei with a letter confirming their discussion. Lei signed the letter, acknowledging his conversations with Zhang and his obligation to maintain the confidentiality of Broad-Ocean's trade secret and other information, and verifying that he was not in possession or control of any confidential information.

After Lei separated from Broad-Ocean, the company conducted its routine review of his company-issued laptop and server activity. The review revealed that Lei accessed a significant amount of Broad-Ocean intellectual property on April 2 and 3, 2021, the day of and day after his resignation; transferred the information to various external spaces; and then attempted to wipe the evidence from his hard drive. Most notably, on April 2, 2021, at 10:51 a.m., Lei created a folder named “taxinfo” on his hard drive. He then spent 25 minutes renaming and copying documents and files into the folder, including numerous documents related to the Fuel Cell Control Unit. Then, at 11:07 a.m., Lei uploaded the “taxinfo” folder to his personal, cloud-based Google Drive, and deleted the “taxinfo” folder from his hard drive. The record contains a spreadsheet, filed under seal, that lists the files Lei uploaded into the “taxinfo” folder. See Taxiinfo Spreadsheet, Ex. C, ECF No. 4-2, PageID.163 (sealed). The spreadsheet contains source file and pathway information, most of which include the notations “XXL,” “1040,” and “BOTFCU.” The names and contents of the files otherwise are unclear.

Broad-Ocean retained a third-party forensic analysis expert, Spectrum Computer Forensics & Risk Management, to assess Lei's information technology equipment. Spectrum's founder and managing member, J. Stott Matthews, imaged Lei's computer hard drive on April 22, 2021. His examination revealed that, from March 29 to April 3, 2021, Lei downloaded more than 610 files from Broad-Ocean's corporate server, totaling more than 1.8 GB of data. It confirmed that Lei moved confidential files into the “taxinfo” folder, compressed the folder, then moved the folder into his personal Google Drive. And it further revealed that Lei had undertaken significant efforts to erase data from his hard drive to inhibit any future analysis, including installing the antiforensics application 360Safe on his laptop on April 2, 2021. Matthews surmised that Lei used the application to attempt to wipe the artifacts created by his transfer of proprietary data from Broad-Ocean's server. Lei used the command line - not Windows file explorer - to delete 360Safe from his laptop, likely in an effort to evade detection of such activity. Id. at ¶ 11, PageID.54; see also Deletions Spreadsheet, Ex. F, ECF No. 4-4, PageID.189 (sealed) (containing a list of source files apparently connected to 360Safe). Matthews also noted that Lei used a Toshiba USB-storage device on March 2, 2021 and routinely sent information to his personal Gmail account. However, because Lei used the 360Safe application, Matthews could not identify what data Lei transferred to the USB drive.

Of the hundreds of files Lei apparently downloaded from Broad-Ocean's server, Broad-Ocean says that most were 3D computer-aided design files of fuel cell systems, which typically are used by system or mechanical engineers, not software engineers like Lei. It produced a spreadsheet of 821 source files it says Lei downloaded, some of which contain part names and some of which are identified only by a series of letters and numbers. See Downloads Spreadsheet Ex. 3, ECF No. 4-3, PageID.175 (sealed). Lei denies that the files he downloaded are trade secrets. He says that he used his Google Drive with Broad-Ocean's knowledge and consent, deleted all of Broad-Ocean's files from his possession before leaving its...