Selected Developments in Business Law —California Business Litigation

Courtesy of CEB, we are bringing you selected legal developments in areas of California business law that are covered by CEB’s publications. This month’s feature is from the July 2021 update to California Business Litigation. References are to the book’s section numbers. The most significant legal developments since the last update include developments in such important topic areas as unfair competition, trade secrets, antitrust, trademarks, copyrights, patents, business torts, and unfair employment practices.

CALIFORNIA BUSINESS LITIGATION July 2021 Update

Unfair Competition

In Ixchel Pharma, LLC v Biogen, Inc. (2020) 9 C5th 1130, the California Supreme Court held that contractual restraints on engaging in a lawful trade or business are subject to a reasonableness standard. And in Quidel v Superior Court (2020) 57 CA5th 155, the appellate court followed Ixchel in confirming application of the rule of reason in determining the validity of an exclusive dealing agreement. See §§3.10, 3.16–3.17, 3.48.

In Midwest Motor Supply Co. v Superior Court (2020) 56 CA5th 702, the appellate court held a forum selection clause was voidable by an employee under Lab C §925. See §3.18.

Trade Secrets

In Attia v Google LLC (9th Cir 2020) 983 F3d 420, 425, the court concluded that “misappropriation of a trade secret prior to the enactment of the DTSA does not preclude a claim arising from post-enactment misappropriation or continued use of the same trade secret.” See §4.3A.

A party’s failure to identify a trade secret in a timely CCP §2019.210 designation may preclude that party from seeking protection for that claimed trade secret, as in Coast Hematology-Oncology Assocs. Med. Group, Inc. v Long Beach Mem. Med. Ctr. (2020) 58 CA5th 748. See §4.17B.

In Coast Hematology-Oncology Assocs. Med. Group, Inc. v Long Beach Mem. Med. Ctr., supra, the court of appeal held that employee productivity rankings could qualify for trade secret protection, even if the employees’ productivity was measured through use of standard industry metrics. 58 CA5th at 762. See §4.35.

Mere possession of another’s trade secret is not by itself actionable, as in Hooked Media Group, Inc. v Apple Inc. (2020) 55 CA5th 323. See §4.39.

In Amgen v Health Care Servs. (2020) 47 CA5th 716, disclosure of information that was compelled by statute still destroyed the information’s protection as trade secrets. See §4.52.

An employer’s failure to include in an employee agreement required notice of the DTSA’s whistleblower immunity provision will not invalidate the agreement but will preclude punitive damages or attorney fee awards to the employer. Hamilton v Juul Labs, Inc. (ND Cal, Sept. 11, 2020, No. 20-CV-03710-EMC) 2020 US Dist Lexis 166718. See §4.68.

Antitrust

In FTC v Qualcomm Inc. (9th Cir 2020) 969 F3d 974, the Ninth Circuit held Qualcomm’s “no license, no chips” policy to sell chips only to phone original equipment manufacturers (OEMs) that had licensed its patents was not anticompetitive behavior that would violate the Sherman Act but rather “hypercompetitive” behavior, which does not. See §§5.66–5.68, 5.70, 5.74.

Trademarks

The Ninth Circuit in Blumenthal Distrib., Inc. v Herman Miller, Inc. (9th Cir 2020) 963 F3d 859 found that the iconic “Eames” chair did not qualify as famous. See §6.16.

In Romag Fasteners, Inc. v Fossil, Inc. (2020) 590 US ___, 140 S Ct 1492, 1495, the Supreme Court held that when the Lanham Act is silent as to an intent or willfulness showing, no such requirement will be read into the statute. See §§6.79A, 6.87.

In Thurston v Fairfield Collectibles of Ga., LLC (2020) 53 CA5th 1231, 1241, substantial website sales into California and the sending of substantial catalogs to California residents were sufficient to establish purposeful availment for the purpose of jurisdiction. See §6.111.

The Supreme Court recently held that “Booking.com” was not generic even though the terms “booking” and “.com” might separately be, as to whether the combined term is generic or may be protected as a trademark depends on consumers’ perception of the trademark. United States Patent & Trademark Office v Booking.com B.V. (2020) 591 US ___, 140 S Ct 2298. See §6.135.

Copyrights

The Second Circuit in Castillo v G&M Realty L.P., a case involving a building with a number of significant aerosol art pieces that had been created and curated over many years, found that even temporary art works may achieve recognized statute to be protected by the Visual Artists Rights Act. Castillo v G&M Realty L.P. (2d Cir 2020) 950 F3d 155. See §7.6.

In Corbello v Valli (9th Cir 2020) 974 F3d 965, the court affirmed that the defendant’s musical, The Jersey Boys, did not infringe plaintiff’s copyrighted autobiography, in part because six of the allegedly infringing

elements were not protectable as they were based on historical figures, were common phrases describing an idea, or were based on historical facts. See §§7.19, 7.129.

Once a defendant has properly challenged the validity of a copyright registration on the merits,, the court must determine the issue of validity as a precondition. Unicolors, Inc. v H&M Hennes & Mauritz, L.P. (9th Cir 2020) 959 F3d 1194. See §7.67.

In Desire, LLC v. Manna Textiles, Inc. (9th Cir 2021) 986 F3d 1253, the Ninth Circuit limited a copyright plaintiff to a single award no matter how many infringements an individual defendant or group of jointly and severally liable defendants committed). See §7.78.

In Great Minds v Office Depot, Inc. (9th Cir 2019) 945 F3d 1106, the Ninth Circuit held that a license to use the publisher’s copyrighted math curriculum did not prohibit a licensee from employing a third party commercial printing service in furtherance of the licensee’s rights. See §7.124.

Patents

In March 2020, the Federal Circuit held that methods of preparing a cell-free DNA fraction that is enriched in fetal DNA are patent-eligible subject matter. Illumina, Inc. v Ariosa Diagnostics, Inc. (Fed Cir 2020) 967 F3d 1319, 1322 (petition for a writ of certiorari filed Dec. 30, 2020). See §8.5.

The mere presence of Google’s servers in a state does establish jurisdiction sufficient for Google to be sued in the state for patent infringement. “Regular and established place of business” requires the regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged place of business. In re Google LLC (Fed Cir 2020) 949 F3d 1338. See §8.176.

Intellectual Property and Unfair Competition on the Internet

In Janus v Freeman (9th Cir 2020) 840 Fed Appx 928, allegations and evidence that the out-of-state defendant made defamatory comments in correspondence over Facebook Messenger with employees of a California plaintiff’s company, which defendant knew to be based in California, did not sufficiently connect defendants’ conduct to California for jurisdictional purposes. See §9.12.

In Davis v Facebook, Inc. (In re Facebook Inc. Internet Tracking Litig.) (9th Cir 2020) 956 F3d 589, the Ninth Circuit adopted the First and Seventh Circuits’ understanding that “simultaneous, unknown duplication and communication of GET requests do not exempt a defendant from liability under the party exception.” 956 F3d at 608. Thus, the Ninth Circuit found that plaintiffs had sufficiently alleged that Facebook’s tracking and collection practices violated the Wiretap Act and the California Invasion of Privacy Act. See §§9.19, 9.22A.

The Communications Decency Act (CDA) did not bar strict products liability claims against online shopping website operator Amazon for its role in selling a defective product in Bolger v Amazon.com, LLC (2020) 53 CA5th 431, 465. See §9.56J.

Though the anti-SLAPP statute excludes some commercial speech from its protections, artistic works may qualify as an exception from that exclusion under CCP §425.17(c). See Serova v Sony Music Entertainment (review granted Apr. 22, 2020, S260736; superseded opinion at 44 CA5th 103). See §§9.56M, 11.127.

Business Torts

In Caliber Paving Co., Inc. v Rexford Indus. Realty & Mgmt., Inc. (2020) 54 CA5th 175, the court held that defendant who is not a party to the contract or an agent of a party to the contract may be liable in tort for intentional interference with contract, regardless of whether the defendant claims a social or economic interest in the contractual relationship. See §§11.18, 11.27, 11.32.

Unlawful Employment Practices

In Bostock v Clayton County, Ga. (2020) 590 US ___, 140 S Ct 1731, the Supreme Court held that an employer that intentionally penalizes an employee for being homosexual or transgender also violates Title VII. See §13.12.

In Babb v Wilkie (2020) 589 US ___, 140 S Ct 1168, the Supreme Court held that the plain meaning of 29 USC §633a(a) (“made free from any discrimination based on age”) demands that personnel actions be untainted by any consideration of age. See §13.28.

In Rittmann v Amazon.com, Inc. (9th Cir 2020) 971 F3d 904, Amazon delivery drivers were held to fall within the scope of the Federal Arbitration Act’s worker exemption; in Grice v U.S. Dist. Court (9th Cir 2020) 974 F3d 950, Uber drivers who take passengers and their luggage to and from the airport were not. See §13.79A.