Trade Secrets Do Not Need to Be in Writing

Legal Pad, pen and law book5. Trade Secrets do Not Need to be in Writing

Trade secrets need not be in writing. (Morlife, Inc, 56 Cal.App.4th at 1522 (“to afford protection to the employer, the information need not be in writing but may be in the employee’s memory”); Brocade Communications Systems, Inc. v. A10 Networks, Inc., 873 F.Supp.2d 1192, 1215 (N.D. Cal. June 12, 2012) (“It is this combination of elements that makes the information valuable and not generally known to the public. Moreover, the mere fact that the information is not in a written list is not dispositive of sufficient particularity.”) Here, many trade secret Defendants attempt to make much of the fact that some of the information in contention was in the Defendant’s “head.” However, as cited above, this is not dispositive and, at best, raises an issue of material fact as to what exactly was in the Defendant’s head and what combination of facts, whether in his head or not, fall under the Trade Secret claim.

What if the information is “generally known,” can that still be a trade secret? The next post will cover this question.

Eric Papp, Esq.

Public Information as a Trade Secret

Private Property - public info4. Public Information as a Trade Secret
Importantly, a trade secret may consist of public information and/or elements, combined with information and/or elements that are not generally known, as long as the combination is unknown, kept secret, and has independent economic value. (Altavion, Inc., 226 Cal. App. 4th at 48 (“even if some or all of the elements of [the plaintiff’s] design were in the public domain and thus unprotectable, the combination was a protectable trade secret if it was secret and had independent economic value”) (original italics); 02 Micro Int’l Ltd. v. Monolithic Power Sys., Inc., 420 F.Supp.2d 1070, 1089-1090 (N.D. Cal. March 9, 2006) (court affirmed jury instruction which stated, “Combinations of public information from a variety of different sources when combined in a novel way can be a trade secret. It does not matter if a portion of the trade secret is generally known, or even that every individual portion of the trade secret is generally known, as long as the combination of all such information is not generally known.”); SkinMedica, Inc. v. Histogen Inc., 869 F.Supp.2d 1176, 1194 (S.D. Cal. April 23, 2012) (“A trade secret may be comprised of partly or entirely non-secret elements and still merit protection.”) Often, the Defendants in a trade secret case, as those in the San Jose Const. case, complain that the information sought to be protected by Plaintiff was, in some manner, public. But, again, that is not fatal to a trade secret case. Rather, it is about having all the pieces of the puzzle to the exclusion of all others.

Must Trade Secrets be in writing? The next post will cover this topic

Eric Papp, Esq.

“Information” as a Trade Secret

Hand in the cookie jarImportantly, “Whether information is a trade secret is ordinarily a question of fact.” ( San Jose Const., Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1537 citing: In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 300; Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425, 1430; and Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1521, 66 Cal.Rptr.2d 731.) As the San Jose Const. Inc. case held, “Whether that information actually constituted a trade secret is a factual issue for the jury or court to determine at trial, as did the trial court in Morlife.” (San Jose Const., Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1540, citing Morlife v. Perry, supra, 56 Cal.App.4th 1514 at 1521.)

1. Facts as Trade Secrets
Trade secrets can consist of facts. (See Silvaco Data Systems v. Intel Corp., (2010) 184 Cal.App.4th 210, 220-221, as modified on denial of reh’g (May 27, 2010) disapproved of on other grounds by Kwikset Corp. v. Superior Court (2011) 51 Cal. 4th 310 (“Indeed a trade secret may consist of something we would not ordinarily consider an idea (a conceptual datum) at all, but more a fact (and empirical datum), such as a customer’s preferences, or the location of a mineral deposit. In either case, the trade secret is not the idea or fact itself, but information tending to communicate (disclose) the idea or fact to another. Trade secret law, in short, protects only the right to control the dissemination of information.”) (original italics) (Bold emphasis added).)

2. Ideas as Trade Secrets
Trade secrets may relate to ideas, even potentially patentable ideas, as well. (Altavion, Inc. v. Konica Minolta Systems Laboratory, Inc. (2014) 226 Cal.App.4th 26, 54-55 (“[I]t has been held that a trade secret in the broad sense consists of any unpatented idea which may be used for industrial and commercial purposes . . . . In conclusion, it is clear that if a patentable idea is kept secret, the idea itself can constitute information protectable by trade secret law.”) (italics omitted); Mattel, Inc. v. MGA Entertainment, Inc., 782 F.Supp.2d 911, 961-962 (C.D. Cal. Jan. 5, 2011.) Here, for example, if the ideas were kept secret, then, in short, the Plaintiff had all the pieces of the puzzle to the exclusion of all other competitors.

3. Negative Information as Trade Secrets
Trade secrets can consist of “negative information,” or information that results from failed efforts or experiments, because such “dead ends” in research or marketing may have value. (See, e.g., Cal. Civ. Code § 3426.1 comment (“The definition of trade secret . . . includes information that has commercial value from a negative viewpoint, for example the results of lengthy and expensive research which proves that a certain process will not work could be of great value to a competitor.”) (original italics); Courtesy Temporary Service, Inc. v. Camacho (1990) 222 Cal.App.3d 1278, 1287 (“The broader definition in the proposed Act . . . includes information that has commercial value from a negative viewpoint, for example the results of lengthy and expensive research which proves that a certain process will not work could be of great value to a competitor.”) (original italics) citing legis. committee com., Cal. Civ. Code § 3426.1, p. 108.) Here, for example, this is an important observation. Imagine a trade secret defendant who would declines to bid any job they know the Plaintiff is already supplying or that the Plaintiff can supply cheaper.”

This is exactly the type of secret, competitive information that anyone would like to have. Information that allows you to not waste your time, money and energy bidding and quoting and competing with an entity you know you cannot beat on certain jobs or, obversely, know you can beat on others. Oftentimes, the only way to know these competitive outcomes for certain, would be be to use the Plaintiff’s trade secret information, that is, to have all the pieces to the puzzle that the Defendant could use to bid jobs in order to beat the Plaintiff or to avoid other jobs altogether.

The next post will cover “Public” information as trade secrets.

Eric Papp, Esq.

Trade Secrets

 Watch out for snakes

“There’s no art to find the mind’s construction in the face: He was a gentleman on whom I built an absolute trust.” Macbeth ( 1.4.12-14)

“Trade secret law also helps maintain ‘standards of commercial ethics….’[Citation.] … By sanctioning the acquisition, use, and disclosure of another’s valuable, proprietary information by improper means, trade secret law minimizes ‘the inevitable cost to the basic decency of society when one … steals from another.’ [Citation.] In doing so, it recognizes that ‘good faith and honest, fair dealing, is the very life and spirit of the commercial world.’” (Altavion, Inc. v. Konica Minolta Systems Laboratory Inc. (2014) 226 Cal.App.4th 26, 42 citing DVD Copy Control Assn., Inc. v. Bunner (2003) 31 Cal.4th 864, 881.) This is exactly what is at stake in most trade secret cases – honesty, ethics and fair dealing

Most trade secret cases are is not about the formula to Coke, but rather, as in the San Jose Const., Inc. case, it is about having all the pieces to the puzzle. (San Jose Const., Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1539.) In this regard, California’s version of the Uniform Trade Secret Act (“UTSA”) defines a “trade secret” as “information, including a … compilation … that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (Civ.Code, § 3426.1, subd. (d).) (San Jose Const., Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1537.)

However, as shown below, each of these elements involve a questions of fact.

Additionally, the statute includes a nonexclusive list of certain types of “information,” which includes, but is not limited to, “a formula, pattern, compilation, program, device, method, technique, or process.” As discussed below, the term “information” is not a significant limitation, as trade secrets may consist of any and all types of facts, ideas, devices, methods, or combinations thereof, regardless of whether it is novel or inventive, as long as the other requirements for establishing a trade secret are satisfied, i.e., that the “information” is secret and has independent economic value.

As the Altavion, Inc. case held,

‘Information’ has a broad meaning under the [UTSA].” (Trade Secrets Practice in Cal., supra, § 1.4, p. 1–5; see also Forro Precision, Inc. v. International Business Machines Corp. (9th Cir.1982) 673 F.2d 1045, 1057. “The definition of trade secret is … unlimited as to any particular class or kind of matter…“[A] trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” (Emphasis added) (Altavion, Inc. v. Konica Minolta Systems Laboratory Inc. (2014) 226 Cal.App.4th 26, 53.)

It is exactly this compilation of information that is at issue in many trade secret cases.

The Completed Puzzle
“Even still, you’re not going to divulge everything.”

The San Jose Construction case is worthy of a close examination. In San Jose Construction, the employer, San Jose Construction (“SJC”), filed suit against its former employee, Foust, and Foust’s new employer, South Bay Construction Company (“S.B.C.C.”), for among other things, Misappropriation of Trade Secrets. Foust gathered information, contacted clients and had contracts and projects moved to his new employer while he was still fully employed by SJC. Foust was not an officer, director nor owner of SJC. In San Jose Construction, the Defendant filed summary judgment claiming that there could be no trade secrets because the information in contention was public, was created by and/or published to third parties and much of it was created by Foust while he worked at SJC. Moreover, the defendants argued that the information could not be trade secrets because third parties were free to share it with anyone they chose. However, the San Jose Construction Court reversed summary judgment noting that,

As SJC describes it, “only SJC had the completed puzzle for each project, contained in the Project Binders…. No third party had it. The subcontractors each had a piece, and the owners had a piece, but no one except SJC had it all.” (San Jose Const., Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1538-1539.)

In many cases, only the trade secret Plaintiff has the “completed puzzle” for what constitutes the trade secrets, to the exclusion of any competitors.

The next few posts will examine the question of what can be trade secrets

Eric Papp, Esq.

When is the Jury “Impaneled and Sworn” for Purposes of the Five Year Rule of CCP § 583.310, et seq.

Jury impaneled and sworn

The case of RUTH McCLAMMA STUEVE et al., v. BUCHALTER NEMER et al., answered this very question. The Stueve case stated: Generally, an action must be “brought to trial” within five years of the filing of a civil complaint. (Code Civ. Proc., § 583.310, et seq.) 1 If the time period is not tolled by statute, the case must be dismissed. (§§ 583.340, 583.360.) “In an action tried to a jury, the action is brought to trial when the jury is impaneled and sworn.” (Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cal.4th 717, 723) (Bruns), italics added.) Here, with just three days remaining before the fifth anniversary of the filing of a civil complaint, a panel of 75 prospective jurors assembled in a courtroom for jury selection (voir dire). The court clerk administered an oath and the panel swore to give truthful answers. Seven days later, while voir dire was still in progress, defendants moved to dismiss under the five-year dismissal statute. The trial court granted the motion, finding that the jury had not yet been “impaneled and sworn.” We reverse. The jury was “impaneled” when the panel of prospective jurors assembled in the courtroom for voir dire. The panel was “sworn” when the prospective jurors took an oath to respond truthfully. Accordingly, the action was, in fact, “brought to trial” within five years of the filing of the civil complaint. Thus, the trial court should not have granted defendants’ motion to dismiss.

The Court noted that when the jury is assembled in the courtroom for voir dire, they are given the “oath of truthfulness.”  However, once selected, the jury is sworn a second time to “try the cause.”

In this regard, the Stueve Court held:

The word “impaneled” is not defined within the Act, but generally means: “The act of the clerk of the court in making up the list of jurors who have been selected for the trial of a particular cause. All the steps of ascertaining who shall be the proper jurors to sit in the trial of a particular case up to the final formation.” (Black’s Law Dict. (6th ed. 1990) p. 752, cols. 1 & 2.)The word “sworn” is similarly not defined within the Act, but generally means providing an affirmative response to an oath or affirmation. (§ 2093 [a judge or a court clerk may “administer oaths or affirmations”].)  Based on the foregoing, we conclude that a jury is impaneled when the jury trial panel of prospective jurors is assembled in a courtroom for the purposes of voir dire. We note that the word “panel” is used consistently throughout the statutes and refers exclusively to the “prospective juror[s],” not the final “trial jurors.” Further, we conclude that a panel is sworn when the court (usually the court clerk) administers the initial oath of truthfulness and the panel collectively responds, “I do.” Although the actual trial jurors will ultimately be sworn again—this time to try the cause—that does not negate the fact that the panel was sworn at the beginning of voir dire. Accordingly, in this case the jury was impaneled and sworn on September 21, 2015, at the beginning of voir dire.

Eric Papp, Esq.

Perpetrators Can No Longer Use a Loop Hole In CCP § 1002 to Hide Their Sex Abuses Under the Cloak of Confidentiality

dirty little secrets ccp 1002An Amendment to California Code of Civil Procedure Section 1002 Prevents Hiding Certain Sex Abuses Behind Confidentiality Clauses

As of January 1, 2017, a bill amending California Code of Civil Procedure §1002 would prohibit a confidentiality or secrecy provision in a settlement agreement in a civil action for an act of childhood sexual abuse or an act of sexual assault against an elder or dependent adult and would prohibit a court from entering an order restricting access to or disclosure of any information obtained through discovery.
Moreover, the bill would make a confidential settlement agreement, as specified, void as a matter of law and against public policy, and would create a presumption that an attorney who advises a client to sign such an agreement has committed an act involving moral turpitude and subject to professional discipline.  The  bill would require the State Bar of California to investigate and take appropriate action against such an attorney.
However, the amendment will not preclude the parties from keeping confidential any amounts paid in settlement of the underlying claims.
So, the take away is that no longer can a previous loop hole in CCP  § 1002 be used to hide certain sexual abuses behind confidentiality clauses in settlement agreements.  Importantly, the court cannot enter any such orders restricting the disclosure of the information and any attorney who advises his client to sign such an agreement is subject to State Bar discipline.
Eric Papp, Esq.


5 Things You Should Know About Your Contractor

Who is your contractor

My Contractor seemed like a nice guy.

Do you really know who your Contractor is?

Is your house a “Money Pit” like the Tom Hanks classic?  Well, before you sign on the dotted line, always make sure you check off these 5, simple, easy items.  If you do, you might just rest a little easier.

1. Check the Contractor’s License.

I know, this seems obvious, but we are constantly surprised to see otherwise intelligent and sophisticated people failing to take this incredibly simple step of checking their contractor’s license.  Anyone acting in the capacity of a contractor in the State of California must have a California Contractor’s License. (Business & Professions Code § 7028)  The Contractor’s State License Board (CSLB) allows consumers to check a contractor’s license on line here. It really can’t be any easier than that.  If your contractor is not licensed, you can force them to pay back all of the money you paid them, also known as “disgorgement.”  (Business & Professions Code § 7031)

2. Get at Least 3 Current, Local References

We have no doubt that your contractor is a nice guy – probably the nicest guy ever. However, even so, check out at least three of his last jobs.  Be sure the references are not his brother, his drinking buddy and/or his dad.  If at all possible, go check the jobs out.  If he has other jobs going right now, go check them out. Ask about messiness, change orders, delays, clean ups, misunderstandings and the like. Don’t be afraid to ask the the hard questions.  You can only regret it later if you don’t.

3. Get Copies of your Contractor’s Insurance Information

It’s one thing to be told, “Yeah, sure, I got insurance.”  But, it’s another to get a copy of your contractor’s Commercial General Liability Insurance (CGL) declarations page to prove it.  This type of insurance generally covers property damage and/or personal injuries the contractor may cause while working on your project.  And, always, check the dollar limits.  Additionally, only because we have seen it for ourselves in the past, you should also actually call the agent and confirm the policy.  We have seen fake ones in the past and, on more than one occasion, to boot.

If the contractor has workers, day laborers or “subcontractors” (you have never seen or heard of before), it is also critically important to get proof of your contractor’s worker’s compensation insurance.  Again, check the CSLB’s website to see if your contractors is claiming to have employees or not and whether he maintains worker’s compensation insurance.  If your contractor does not carry workers compensation and one of his “workers” is injured on your  property, you might be left holding the bag as the property owner.  Failure to carry worker’s compensation insurance will result in the automatic suspension of the contractor’s license. (Business & Professions Code § 7125.2)

4.  10% down or $1,000, whichever is less.

That’s the law. (Business & Professions Code § 7159.5) You might hear a lot of sob stories about materials, labor, down payments and the like, but don’t be swayed.  Never pay more than 10% down or $1,000 on the contract, whichever is less, to start.  If your contractor is that broke, that might be a clue for you to consider.  Don’t pay in cash and don’t let your progress payments get ahead of the completed work, regardless of the hard luck story.

5. Don’t Forget About Google and Yelp

Again, this seems obvious, but you will be surprised what a basic Google and a Yelp search will turn up. Don’t be hesitant to follow up on those leads and information.  And, don’t be afraid to ask your contractor about what you find.

Keep these 5 simple and easy steps in mind before you sign the contract.  As the old saying goes, “An ounce of prevention is worth a pound of cure.”  This is especially true when it comes to hiring a contractor.

Eric Papp, Esq.


Experts Need To Produce Files 3 Business Days BEFORE their deposition

As of January 1, 20expert file, ccp 2034.41517, a deponent who is served with a deposition notice or subpoena calling for electronically stored information to provide a means of gaining direct access to, or a translation into a reasonably usable form of, any information that is password protected or otherwise inaccessible. The bill would also require an expert who is served with a deposition notice, as specified, to produce any materials or category of materials, including any electronically stored information, no later than 3 business days before his or her deposition. (AB-2427)

The text of the law provides: An expert described in subdivision (b) of Section 2034.210 whose deposition is noticed pursuant to Section 2025.220 shall, no later than three business days before his or her deposition, produce any materials or category of materials, including any electronically stored information, called for by the deposition notice. (California Code of Civil Procedure § 2034.415).

No more are the days of the expert showing up with numerous banker’s boxes filled with materials.  Tip: because the timing requires “business days,” take advantage of that language and set the depo on a Monday and get two extra days for free.

Eric Papp, Esq.


California Employees Cannot be forced into Foreign Courts by Employer

Far far away

California employees cannot be forced to litigate their employment claims far, far away.

Far Far Away

California has always been protective of its citizens.  However, with the ever increasing mobility of employees, some employers will insert a “choice of law” provision into employment contracts, either for convenience of the employer or for favorable (pro-employer) “forum shopping.”  Either way, as of January 1, 2017, California employees cannot be dragged into a foreign court quite so easily to litigate employment claims.

California Labor Code Section 925

California Senate Bill SB-1241 provides that after January 1, 2017,  an employer would be prohibited from requiring an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would require the employee to adjudicate outside of California a claim arising in California or deprive the employee of the substantive protection of California law with respect to a controversy arising in California. The bill would make any provision of a contract that violates these prohibitions voidable, upon request of the employee, and would require a dispute over a voided provision to be adjudicated in California under California law. The bill would specify that injunctive relief is available and would authorize a court to award reasonable attorney’s fees. The bill would provide that adjudication includes litigation and arbitration for purposes of these provisions. The bill would except from these provisions a contract with an employee who was represented by legal counsel, as specified.

Read the text of the law here: SB-1241 Employment contracts: adjudication: choice of law and forum.

Two notes: 1. the award of attorney’s fees is a huge hammer for the employee; and 2. the protection will not apply if the employee is represented by counsel when signing the contract.

Eric Papp, Esq.