Wednesday, April 29, 2015
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Court Upholds Fee Award in Withdrawn Technology Suit
By a MetNews Staff Writer
A technology company whose competitor filed, then dropped, a trade secrets misappropriation suit was properly awarded attorney fees, the Sixth District Court of Appeal ruled yesterday.
The panel upheld Santa Clara Superior Court Judge Peter Kirwan’s ruling under Civil Code §3426.4, which authorizes such an award to the prevailing party where a claim for misappropriation of trade secrets is found to have been made in bad faith.
The plaintiff, Cypress Semiconductor Corp., contended that the award should not have been made because it voluntarily dismissed its suit without prejudice and because it did not act in bad faith.
Cypress claimed in its complaint that the defendant, Maxim Integrated Products, had attempted to steal Cypress’s touchscreen technology by soliciting a key employee through a headhunter. Maxim responded that it had no interest in the technology, and that it had solicited the employee for an unrelated position.
In a December 2012 press release, Cypress announced that it had dropped the suit, but might file suit “again in the future if necessary.”
The company’s president was quoted in the release:
“We are well aware that our people are our greatest asset. We will not tolerate unfair attempts to lure our employees away in order to gain access to our trade secrets. In this case, Maxim has been unsuccessful, both in hiring our people and in making inroads in the touchscreen market, allowing us to drop the suit. However, we will file again if we perceive more unfair efforts to hire away our employees.”
On appeal, Cypress again insisted that it had dropped the suit because it had accomplished its objective. But Presiding Justice Conrad Rushing, writing for the Court of Appeal, said there was substantial evidence that Cypress knew it was going to lose the action.
The presiding justice wrote:
“It bears emphasis that despite the repeated references to ‘unfair’—not illegal—hiring practices, Cypress at no time pointed to any information whatever tending to show that Maxim was doing anything more than seek the most qualified candidates for openings in its own enterprise. It is of course true that any technicians hired from Cypress might possess trade secrets they could not lawfully share with their new employer. But as Rodgers himself wrote to [Maxim president] Doluca, hiring such employees posed an inherent risk to Maxim as well. If Maxim succeeded in engaging Cypress employees laden with such secrets, he wrote, it would run the risk that they might ‘contaminate your touchscreen products with an IP liability.’ When he specifically linked this risk to Maxim’s potential hiring of Employee 60XX, Doluca acknowledged the risk but deemed it manageable, writing that Employee 60XX would ‘not be working on touch technology at all,’ and adding, ‘I will make sure he does not contaminate our touch technology.’ In continuing to insist that the mere attempt to hire that employee and others warranted judicial relief, Cypress is revealed as relying entirely on the generic risk that employees knowledgeable in a given specialty may give a new employer the benefit not only of their expertise but also of trade secrets acquired in a previous employment….[T]his is a de facto invocation of the ‘inevitable disclosure’ doctrine, which courts in this state have rejected.”
The case is Cypress Semiconductor Corp. v. Maxim Integrated Products, Inc., H038555.
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