Top 2020 California Trade Secrets Decisions
| Publication year | 2021 |
| Author | By Tyler M. Paetkau |
By Tyler M. Paetkau
Tyler M. Paetkau, partner, Procopio, Cory, Hargreaves & Savitch LLP, Silicon Valley (tyler.paetkau@procopio.com). Mr. Paektau represents employers and management in all aspects of labor and employment law, including trade secrets matters. He is a former Chair of the Labor & Employment Law Section and a current member of the Editorial Board.
Despite the raging pandemic, 2020 produced several important trade secrets decisions by California courts, including the following (selective and subjective) "top," caes in chronological order:
Techno Lite, Inc. v. Emcod, LLC, 44 Cal. App. 5th 462 (2020)
Techno Lite employees entered into an agreement not to compete with their employer while they were still employed by that company. Later, Techno Lite sued plaintiffs for "siphoning off accounts" and "diverting the business" of Techno Lite to their own company, Emcod. Techno Lite sued its former employees and their new company, alleging breach of fiduciary duty, interference with contractual relationships, intentional and negligent interference with economic advantage, conversion, fraud and unfair competition. The trial court found in favor of Techno Lite on the interference, fraud and unfair competition claims. The Court of Appeal affirmed, holding that a promise not to compete with an employer while employed is not void under Cal. Bus. & Prof. Code § 16600. Therefore, the employees were properly found liable for fraud based upon a false promise.
The lesson from Techno Lite is that section 16600 does not invalidate contractual covenants and promises by current employees not to compete.
WeRide Corp. v. Huang, No. 5:18-CV-07233-EJD, 2020 WL 1967209 (N.D. Cal. April 16, 2020)
WeRide sued its former CEO and former Head of Hardware Technology, their new company AllRide, and its corporate alter-ego for trade secret misappropriation under the federal Defend Trade Secrets Act (18 U.S.C. § 1836) and California's Uniform Trade Secrets Act (Cal. Civ. Code § 3426 et seq.) arising out of the alleged misappropriation of WeRide's trade secret source code. Based on the former CEO's alleged false and damaging statements to WeRide's investors and potential investors, WeRide sued him for defamation and intentional interference with prospective economic advantage. WeRide also sued the former CEO for breach of contract and intentional interference with contract. WeRide sued the former Technology Head for breach of fiduciary duty and duty of loyalty, and breach of contract arising from his alleged theft of source code and other confidential material belonging to WeRide, and from his alleged solicitation of WeRide employees to join AllRide. WeRide sued AllRide and its alter ego for actual fraudulent transfer (Cal. Civ. Code § 3439.04(a)(1)), constructive fraudulent transfer (Cal. Civ. Code §§ 3439.04(a)(2) and 3439.05), and common law fraudulent conveyance stemming from AllRide's alleged fraudulent transfer of its business.
U.S. District Judge Edward J. Davila's lengthy opinion discussed remarkable and abundant evidence of the defendants' spoliation of relevant evidence.
Judge Davila issued terminating sanctions under Rule 37(b) and Rule 37(e), making it unnecessary to resolve the parties' dispute whether the court had inherent authority to grant WeRide's sanctions motion. Rule 37(b) provides that a court may sanction a party for failure to comply with a court order. Rule 37(e) allows for sanctions where a party fails to...
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