A trade secrets spat between rival self-driving car companies WeRide Corp. and AllRide.AI Inc. has ended in settlement, but not before the Northern District of California imposed terminating sanctions against the defendant AllRide for its “staggering” spoliation of evidence when it intentionally purged emails and email accounts, wiped laptops and servers, and corrupted key source code.

The suit began in late 2018, when WeRide brought claims against Jing Wang (its former CEO), Kun Huang (its former Head of Hardware Technology), and AllRide, the competing company started by Wang and Huang. The claims included trade secrets allegations under the Defend Trade Secrets Act and the California Uniform Trade Secrets Act, along with claims for defamation and intentional interference with prospective economic advantage. WeRide accused Wang, who left WeRide to launch AllRide, of soliciting Huang to join him at his new company, and accused both of stealing WeRide’s trade secrets and immediately using them at AllRide. In April 2019 the Court granted WeRide a preliminary injunction that specifically prohibited Wang, Huang, and AllRide from destroying relevant documents, and ordered Huang to make several electronic devices available for inspection by WeRide. But in October 2019, WeRide moved the Court for sanctions, claiming that AllRide had destroyed emails and key source code. Central to WeRide’s motion was the accusation that AllRide had allowed its email system to continue to implement a 90-day automatic deletion policy, resulting in the destruction of thousands of potentially relevant emails. WeRide also accused AllRide of deleting six email accounts and the source code it supposedly developed to compete with WeRide.
Continue Reading Autonomous Vehicle Competitors Resolve Trade Secrets Case Colored by “Staggering” Spoliation

When does a cause of action come close enough to a trade secret claim to become preempted by the California Uniform Trade Secrets Act (“CUTSA”)? CUTSA preempts statutory and common law claims “based upon misappropriation of a trade secret.” In other words, with some exceptions, claims predicated on trade secret misappropriation allegations may only be asserted through a CUTSA claim.

California courts have articulated two different CUTSA preemption tests: (1) the “common nucleus” test and (2) the “dependence” test. In many cases, the two tests will yield the same result. Sometimes, however, the tests will produce divergent outcomes.
Continue Reading Two Tests for Trade Secret Preemption under California Law

Last week, the California Court of Appeal issued a decision highlighting the need for employers, especially large employers with operations and employees in several states or countries, to take great care in drafting mandatory forum selection clauses and to always be aware of the relevant law in the chosen jurisdiction. In Richtek USA, Inc. v. UPI Semiconductor Corp., 2015 WL 7479125, a state Court of Appeal affirmed that a mandatory forum selection clause in an employment agreement is binding on both the employee and the employer.
Continue Reading Be Careful What You Wish For: The Importance of Forum Selection Clauses

On October 26, a U.S. District Judge for the Central District of California issued an arrest warrant for two parties in a trade secrets dispute involving a water-splitting technology and formula. The two parties violated a court order from August which required them, among other things, to appear in court on October 26, and cease using the Internet to post messages regarding their alleged knowledge of plaintiff’s trade secret.
Continue Reading Theft of Trade Secret and Flouting of Court’s Injunction Results in Arrest Warrants

Earlier this month, in Ajaxo Inc. v. E*Trade Financial Corp., Case No. 1-00-CV-793529, the long-running dispute between Ajaxo Inc. and E-Trade over Ajaxo’s proprietary stock trading software took yet another turn following a two-part trial in Santa Clara County Superior Court.   In the latest round of this fight over trade secrets related to proprietary stock trading software, the California Court of Appeal delved into when a reasonably royalty may be recovered and the proof it takes to recover them.
Continue Reading Hammering a Hard Drive Instead of a Royalty Check

Earlier this month, the District Court for the Northern District of California addressed the scope of the Computer Fraud and Abuse Act (“CFAA”), drawing a firm line between causes of action based on improper access of an employer’s computer, and causes of action based on improper use of the employer’s data.  Because of the narrow view taken within the Ninth Circuit as to the scope of claims properly falling under the CFAA, the district court held that there was no viable claim under the CFAA.
Continue Reading Access v. Use: An Important Distinction in the Computer Fraud and Abuse Act

[via Flickr user phalinn]
[via Flickr user phalinn]

Earlier this month, the Ninth Circuit rejected a “will not reapply” clause in a settlement agreement under Business & Professions Code Section 16600, the California state statute that makes most non-compete provisions unenforceable. It is unclear if the holding is limited to the particular facts or if all “will not reapply” clauses are at risk. Such clauses are typical features of settlement agreements arising from employment-based disputes. In settling such disputes, the employer does not want to risk another lawsuit on the same grounds brought by the same person in connection with another job. The employer will bargain for the “will not reapply” clause, giving the employer a contractual basis to reject future employment for that same person, and thus avoiding the risk of another suit. The Ninth Circuit decided, in the case at bar, that Section 16600 precludes such a provision as unenforceable restraint of a substantial character on the ability to work within a particular field or industry.
Continue Reading “Will Not Reapply” Clauses on Life Support in California?

Choice of law issues permeate trade secret and non-compete cases because employers are nationwide and, employees themselves are extraordinarily mobile. Many decisions begin with a discussion of relevant choice of law issues, but often avoid deciding them by finding that the result would be the same under any of the applicable state laws, which are