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Posts Tagged ‘California’

Presence of EULA Fails to Convert Reverse Engineering Into an “Improper Means” Within Definition of California Trade Secret Law

In EULA, Improper Means, Reverse Engineering on February 21, 2012 at 3:13 pm
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In an unreported case from the Central District of California, Senior District Judge Ronald S.W. Lew held that plaintiff may not maintain a trade secrets claim for reverse engineering of software code, where plaintiff alleged that a trial version of the software was properly downloaded pursuant to an end user license agreement (“EULA”).  Aqua Connect, Inc. v. Code Rebel, LLC, et al., No. CV 11 5764 RSWL (MANx), 2012 WL 469737 (C.D. Cal.  Feb. 13, 2012).

Background

Plaintiff Aqua Connect, Inc. sued Defendants Code Rebel, LLC and others.  Defendants brought a motion to dismiss plaintiff’s claim for misappropriate of trade secrets.  Id.  Plaintiff alleged that defendants downloaded a trial version of Plaintiff’s Aqua Connect Terminal Server software (“ACTS”) and subsequently reverse engineered ACTS in violation of the End User License Agreement (“EULA”), which defendants had to agree to in order to use the trial version of ACTS.  Id. Plaintiff alleged that defendants misappropriated the trade secrets within ACTS and used that information to create and distribute a competing software product.  Id.


Discussion

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50 State Noncompete Survey Shows That California Is in Rare Company

In Noncompetes on February 5, 2011 at 8:13 am
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A 50 state noncompete survey shows that California is in elite company with respect to its general prohibition against noncompete agreements.  North Dakota and Oklahoma are the only other states to disallow noncompetes.

By CHARLES JUNG

 

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In Trade Secrets Case Related to Barnes and Noble’s Nook Device: Court Grants Partial Summary Judgment Based on Disclosure of Secrets in Patent Applications, But Rejects UTSA Preemption Argument as Premature

In Disclosure of Secret in Patent Application, Motions for Summary Judgment/Adjudication, Patents and Copyrights, Preemption on January 2, 2011 at 10:03 pm
Barnes & Noble Nook e-reader is tiny!
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The Northern District of California granted partial summary judgment to a defendant in a trade secrets case on the ground that plaintiff disclosed its information to the public in its published patent applications.  Spring Design, Inc. v. Barnesandnoble.com, LLC, No. C 09-05185 JW, 2010 WL 5422556 (N.D. Cal. Dec. 27, 2010) (slip op.).  The court rejected defendant’s argument that plaintiff’s UCL claim was preempted by the UTSA because “if the confidential information is not a trade secret, then preemption would not apply because the claim would seek a civil remedy not based on the  misappropriation of a trade secret.” Id. *10.

Background

In 2006 and 2007, Plaintiff filed several patent applications which claim different variations of an eReader with a dual-display design, consisting of an electronic paper display (“EPD”) and a liquid crystal display (“LCD”).  Id. *1.  In 2009, Plaintiff and Defendant explored possible collaboration on an eReader, and the parties entered into a nondisclosure agreement (“NDA”) in which the parties agreed not to disclose, reproduce, transmit or use the other’s confidential information except to certain employees on a need-to-know basis.  Id. From February to October 2009, Plaintiff and Defendant conducted several meetings and exchanged emails regarding Plaintiff’s eReader technology.  But on October 20, 2009, Defendant announced the release of the NOOK—its Android-based, dual-screen eReader.  Id. *2.  In 2010, Plaintiff launched its competing eReader device, the Alex, which is also a dual-screen eReader. Id.

Plaintiff Spring Design, Inc. brought an action Barnesandnoble.com, LLC alleging, inter alia, misappropriation of trade secrets and violations of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code section 17200, et. seq. Id. *1.Plaintiff alleged that Barnesandnoble.com used Plaintiff’s confidential information to develop a competing eReader device, the Nook, in violation of the parties’ non-disclosure agreement. Id. The parties brought cross motions for summary judgment.

Discussion

Defendant moved for summary judgment on the UTSA cause of action on the grounds that, inter alia: Plaintiff’s information does not qualify for trade secret protection because Plaintiff disclosed its information to the public in its published patent applications.  Id. **3-4. Read the rest of this entry »

Plaintiffs Awarded Over $1 Million After Bench Trial in a Trade Secrets Case

In Judgments, Verdicts on November 2, 2010 at 11:41 am
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After a bench trial in San Francisco Superior Court, plaintiffs in a trade secrets case recovered judgment on the merits against certain defendants in the amount of $921,469, plus pre-judgment interest in the amount of $301,664, and punitive damages of $275,000.  UltraEx Inc. vs. Express It Delivery Services Inc., Case No., CGC-05-447942, 2010 WL 4260535, 44 Trials Digest 13th 5 (Cal. Sup. Ct. Verdict Date: April 1, 2010).

According to court records, on April 29, 1998, plaintiff UltraEx Inc. merged with two other corporations, Express It Courier Services Inc. (“Old Express It”) and 800 Courier Inc.  Id. *1. Plaintiff was the surviving corporation in this merger, but prior to the merger, Old Express It and 800 Courier had each been actively conducting a package delivery business in California.  Id. Defendant Express It Delivery Services Inc. (“New Express It”) was a California corporation formed in November 2004. Id. Read the rest of this entry »

Approaches to Damages in Trade Secret Cases

In Damages, Practice articles, Reasonable Royalty, Unjust enrichment on October 20, 2010 at 7:59 pm
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Once a trade secret lawsuit progress beyond the preliminary injunction stage, the key battleground usually shifts to damages.  Assessing damages can be particularly difficult in a trade secret case because of the problematic uncertainty in measuring the value of trade secrets.  Marc Pensabene and Christopher Loh summarized some of the flexible approaches that plaintiffs and defendants might pursue in arguing for and against trade secrets damages calculations.

From the plaintiff’s perspective, the authors offer the following aggressive approaches (not all of which have been accepted by California courts):

  • In calculating lost profits, argue that the amounts should include not only lost sales that were diverted from the plaintiff to the defendant, but also losses attributable to price erosion or to increased costs cause by the misappropriation, such as the costs of an advertising campaign to recoup market share stolen by defendant
  • Argue for provable future profits, overhead costs, general and administrative expenses, lost profits on reorder or spare parts or other natural follow-on items
  • Ask the court to calculate plaintiff’s lost profits by applying the defendant’s profit margins to the plaintiff’s lost sales
  • In seeking unjust enrichment, if the defendant does not incorporate the trade secret into a product but rather uses it to promote its existing products or to develop new and different products, ask for a portion from those products
  • If plaintiff is unable to prove lost profits or unjust enrichment, seek development costs (so-called “head-start” damages), the diminution of the value of the plaintiff’s business or stock, or a reasonable royalty based either on the actual royalties that have been paid to the plaintiff, or a hypothetical royalty that the litigants would have negotiated at the time of the misappropriation Read the rest of this entry »

California Trade Secrets on Holiday This Week

In Blog Status on October 18, 2010 at 4:54 pm

[Interior of Coliseum, Rome, Italy] (LOC)

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I am traveling this week, so California Trade Secrets will be updated less frequently.  I’ll resume daily updates next week, October 26, 2010.
Cheers!
Charles Jung

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Trade Secrets Basics for Small Businesses

In Seminars and MCLE on October 12, 2010 at 10:54 am
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Steve Obenski  posted a useful video directed to small business, entitled Trade Secrets for Small Businesses 101.  In the video, he discusses what a trade secret is, ways to protect trade secrets, and limitations of trade secrets compared to patent and other areas of intellectual property law.

By CHARLES JUNG

Northern District Applies California Code of Civil Procedure § 2019.210 to Federal “Misappropriation of Business Ideas” Case

In C.C.P. § 2019.210 Pre-Discovery Disclosure, Common Law Misappropriation, Discovery, Patricia V. Trumbull on October 11, 2010 at 8:20 am
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In a federal case, the Northern District of California applied a California rule of procedure, California Code of Civil Procedure 2019.210, in ordering a plaintiff to identify its allegedly misappropriated business ideas.  Interserve, Inc. v. Fusion Garage Pte Ltd., No. C-09-05812 RS (PVT), 2010 WL 3931100 (N.D. Cal. Oct. 6, 2010) (slip op.).  But after the court dismissed without leave to amend plaintiff’s tort claim for “misappropriation of business ideas”, the court rejected defendant’s challenge to the sufficiency of the disclosure as moot.  Id. *2

Background

Defendant Fusion Garage PTE, Ltd. brought a renewed motion for a protective order pursuant to California Code of Civil Procedure Section 2019.210 and Rule 26(c), contending that Plaintiffs Interserve, Inc., doing business as TechCrunch and CrunchPad. failed identify their misappropriated business ideas with any specificity.  Id. *1.  Plaintiffs alleged claims for (1) misappropriation of business ideas; (2) false advertising; (3) breach of fiduciary duty, and (4) fraud.

Defendant asserted the following deficiencies with plaintiffs disclosure: Read the rest of this entry »

Southern District Requires Plaintiffs in CUTSA Case to Post $800,000 Bond for Fees and Costs Pursuant to California Code of Civil Procedure § 1030

In Bond on September 26, 2010 at 12:25 pm
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The United States District Court for the Southern District of California required plaintiffs in a UTSA case to post an $800,000 bond for fees and costs, pursuant to California Code of Civil Procedure section 1030.  Gabriel Technologies Corporation v. Qualcomm Incorporated, No. 08 CV 1992 MMA (POR), Slip Copy, 2010 WL 3718848 (S.D. Cal. Sept. 20, 2010).

The action arose out of events related to technology licenses and related joint ventures between Plaintiffs and their predecessor in interest, and Defendants.  Id *1.  In the Fourth Amended Complaint, Plaintiffs assert claims for: (1) Breach of the Amended and Restated License Agreement; (2) Correction of Inventorship (pursuant to 35 U.S.C. § 256); (3) Declaratory Judgment of Ownership Interest in the Patents (pursuant to 28 U.S.C. § 2201); and (4) Misappropriation (pursuant to Cal. Uniform Trade Secrets Act). Id. *2. Defendants filed a motion for a cost bond under California Code of Civil Procedure section 1030. Id. The Court also has authority under Civil Local Rule 65.1.2(a) to require Plaintiffs to post a bond “where authorized by law and for good cause shown.” Read the rest of this entry »

Forgotten Provision in the California Uniform Trade Secrets Act: Uniformity

In Sister State Construction of UTSA on September 20, 2010 at 8:33 pm
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California adopted the Uniform Trade Secrets Act in 1984 after the National Conference of Commissioners on Uniform State Laws completed the UTSA in 1979.  Forty-six states and the District of Columbia have enacted trade secret legislation, the vast majority of which substantially resembles the uniform act.  Michael R. Greco writes a uselful reminder that the UTSA has an often overlooked uniform construction provision:

This Act shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this Act among the states enacting it.

This section has been adopted by California.  Cal. Civ. Code § 3426.8.

Greco notes that this clause means that an advocate should look to sister state interpretations of the UTSA: Read the rest of this entry »