Selected Developments In Business Law — Trade Secrets Practice in California

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 November 2019 update to Trade Secrets Practice in California.  References are to the book’s section numbers.  See CEB’s BLS Landing Page for special discounts for Business Law Section members.  The most significant legal developments since the last update include developments in such important topic areas as trade secrets protection, workplace issues, trade secrets misappropriation, procedural issues in litigation, and insurance issues.

Trade Secrets Practice in California

Selected Developments

November 2019

In a case involving the defendants’ subpoenas to social media providers seeking witness e-mails, the California Supreme Court held that messages posted by a social media user that had been configured to be public may be subject to disclosure under the Stored Communications Act (SCA) (18 USC §§2701–2713). Facebook, Inc. v Superior Court (2018) 4 C5th 1245. See §§1.7, 2.18, 4A.13, 11.56, 11.68, 16.2, 16.42A.

A California court of appeal found that a misappropriation claim failed because the undisputed evidence showed that the identity and contact information of traveling nurses that the plaintiff claimed to be secret were already known to its competitor. AMN Healthcare, Inc. v Aya Healthcare Servs., Inc. (2018) 28 CA5th 923. See §§1.11, 11.94, 12.13.

Because ownership is a key element of a trade secret misappropriation case, and because ownership must be proved (see LivePerson, Inc. v [24]7.ai, Inc. (ND Cal, Oct. 26, 2018, No. 17-cv-01268-JST) 2018 US Dist Lexis 190918), a new section has been added in chap 2 discussing this requirement. See §2.32H.

In October 2018, the Department of Justice published its biannual report on the scope and effect of trade secret thefts occurring outside the United States and the federal government’s response to the issue. See https://www.justice.gov/iptf/page/file/1101901/download. See also §4A.1A.

A California court of appeal held that the receipt, retention, and dissemination of confidential information by a whistleblower’s attorney was protected under the state’s anti-SLAPP statute. MMM Holdings, Inc. v Reich (2018) 21 CA5th 167. See §4A.13.

The United States Supreme Court found retail grocery data concerning the federal Supplemental Nutrition Assistance Program (SNAP) to be confidential and therefore exempt from disclosure under the Freedom of Information Act (FOIA) (5 USC §552) because the grocery retailers did not customarily share the data and because the government had long promised grocers that it would be kept private. Food Mktg. Inst. v Argus Leader Media (2019) 588 US ___, 139 S Ct 2356. See §5.14.

A Delaware court found that Lab C §925 prevents California employers from using choice of law provisions to circumvent the protections of California labor law. NuVasive, Inc. v Miles (Del Ch 2018) 2018 Del Ch Lexis 329. See §6.21.

A California court found that the terms of an arbitration provision in a law firm’s partnership agreement requiring payment of arbitration costs and payment of attorneys fees, limiting the arbitrator’s authority to provide relief and imposing strict confidentiality obligations, rendered the provision unenforceable and void as a matter of law. Ramos v Superior Court (2018) 28 CA5th 1042. See §8.33.

Resolving a circuit split, the United States Supreme Court held that copyright owners must wait for the registration process to be completed before suing for infringement. Fourth Estate Pub. Benefit v Wall-Street.com (2019) ___ U.S. ___, 139 S Ct 881. See §§10.27, 16.44.

The 30-day period for removal to federal court is not triggered upon service on the statutorily designated agent but rather when the defendant actually receives the plaintiff’s complaint. Anderson v State Farm Auto. Ins. Co. (9th Cir 2019) 917 F3d 1126. See §11.16.

In a case concerning a government agency seeking business records, the court held that because a city attorney’s request via administrative subpoena for reports and data submitted to an agency sought information reasonably relevant to the agency’s authorized inquiry into an operator’s potential violations of state and municipal law, a protective order was sufficient to protect the operator’s privacy rights, including protection of trade secrets. City & County of San Francisco v Uber Technols., Inc. (2019) 36 CA5th 66. See §11.70.

The United States Supreme Court held that an award of full costs under the Copyright Act includes only the six categories of costs specified in the general costs statute, and that the Copyright Act does not authorize award for expenses such as expert witness fees, e-discovery expenses, and jury consultant fees. Rimini St., Inc. v Oracle USA, Inc. (2019) 586 U.S. ___, 139 S Ct 873. See §11.109.

The California legislature amended Pen C §502, which makes it illegal to gain access to or use a computer system without authorization, to clarify that “computer system” includes devices or systems located in or connected to motor vehicles. Pen C §502(b)(5). See §§11.118, 13.5.

The Fourth Circuit Court of Appeals held that a party need not establish bad faith or independently sanctionable conduct on the part of the nonprevailing party in order to be entitled to attorney fees under the Lanham Act. Verisign, Inc. v XYZ.COM LLC (4th Cir 2018) 891 F3d 481. See §12.23.

In a matter of first impression, the Fifth Circuit held that a dismissal without prejudice of a case under the Defend Trade Secrets Act (DTSA) does not support an award of prevailing party attorney fees. See Dunster Live, LLC v Lonestar Logos Mgmt. Co., LLC (5th Cir 2018) 908 F3d 948. See §12.23.

The California Rules of Professional Conduct have been revised and renumbered. See §§10.33, 11.61, 11.64, 13.1, 14.20, 15.1.

The Export Administration Act of 1979 was replaced by the Export Control Reform Act of 2018 (50 USC §§4801–4851), effective August 18, 2018. See 16.19A.

The United States Supreme Court held that a copyright owner must wait for the registration process to be complete before filing for infringement. Fourth Estate Pub. Benefit v Wall-Street.com (2019) 586 US ___, 139 S Ct 881. See §16.44.

The Federal Circuit Court of Appeals dismissed a plaintiff’s claims because they were directed to patent-ineligible subject matter of voting verification systems. Voter Verified, Inc. v Election Sys. & Software LLC (Fed Cir 2018) 887 F3d 1376, cert denied (2019) ___ US ___, 139 S Ct 813. See §16.63.