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Waiting too long to bring a trade secrets case against a defendant could be fatal.

In 2011, Alta Devices, Inc. was the world’s only known manufacturer of thin-film solar technology. LG Electronics, Inc. expressed an interest in this technology which prompted the two companies to enter into discussions about possible business opportunities and ultimately sign a mutual non-disclosure agreement. In mid-2016, Alta learned that LGE might be developing similar solar film technology in competition with Alta and requested the return of confidential information pursuant to their non-disclosure agreement. Two years later, Alta sued LGE for allegedly misappropriating its trade secrets and violating their non-disclosure agreement.

Last week, U.S. District Court Judge Lucy H. Koh of the Northern District of California dismissed trade secrets claims against LGE with prejudice on statute of limitations grounds after focusing on the terms of LGE and Alta’s non-disclosure agreement which required LGE to return Alta’s confidential information at the end of the disclosure period. The Court found that Plaintiff acknowledged the three year statute of limitations under the California Uniform Trade Secrets Act and Federal Defend Trade Secrets Act which is triggered on the date on which misappropriation was discovered (“actual notice”) or reasonably should have been discovered (“inquiry notice”). The Court found that Alta had inquiry notice that LGE had potentially misappropriated its trade secrets starting on June 13, 2012 – the end of the disclosure period under the non-disclosure agreement –when LGE failed to return immediately Alta’s confidential information and dismissed the trade secret misappropriation claims as time barred.

This case provides important reminders for companies charged with protecting trade secrets: draft your non-disclosure agreements carefully and promptly investigate claims of potential misappropriation.