HP Tuners, LLC v. Cannata, 3:18-cv-00527

HP Tuners, LLC (HPT) is an LLC that developed the VCM Suite software, hardware, firmware, and related algorithms; Cannata was a founding member.
HPT alleges Cannata misappropriated HPT trade secrets and shared source code and a key generator with Syked ECU Tuning after leaving the company.
The Court previously reserved ruling on HPT’s breach of fiduciary duty claim to resolve whether the shared software qualified as HPT ‘Technology’ under the Operating Agreement (i.e., derivative works, improvements, enhancements).
The Court allowed HPT a sur-reply to address that discrete issue; HPT submitted code excerpts and a declaration from Prociuk comparing original contributed Technology to the 2016 code.
Cannata moved to strike portions of the sur-reply as untimely disclosure; the Court struck specified lines/paragraphs as prejudicial and not timely disclosed.
After striking the late evidence, the Court found genuine issues of material fact about whether the shared code were improvements/derivative works of HPT’s Technology and denied summary judgment to both parties on the breach claim.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether HPT’s late-disclosed code/declaration in the sur-reply may be considered	Sur-reply evidence responded to new arguments raised in Cannata’s reply and was necessary to show derivative relationship	Evidence was not disclosed during discovery, untimely, and prejudicial	Grant in part: specified lines/paras of sur-reply and declaration stricken and not considered
Whether the software and information Cannata shared constitute HPT ‘Technology’ (improvements, enhancements, derivative works) under the Operating Agreement	The 2016 files (source code and key generator) were improvements/enhancements/derivative works of the originally contributed VCM Suite Technology	The 2016 code was an updated, non-derivative version not covered by the Operating Agreement’s ‘‘derivative works’’ grant	Denied summary judgment: disputed material facts exist; reasonable fact-finder could find the shared files were derivative/improvements
Whether HPT’s limited disclosure of code in the sur-reply destroyed trade secret status	HPT argued limited, illustrative excerpts did not waive or destroy trade secret protection	Cannata argued disclosure eliminated secrecy and thus protection	Rejected: court found the limited, out-of-context excerpts were illustrative and did not by themselves destroy trade secret status

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) (standard for evaluating summary judgment in light most favorable to nonmoving party)
Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (moving party’s initial burden at summary judgment)
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (definition of materiality and genuine dispute at summary judgment)
ABS Entm’t, Inc. v. CBS Corp., 908 F.3d 405 (9th Cir. 2018) (definition of derivative work under copyright law)
Micro Star v. FormGen Inc., 154 F.3d 1107 (9th Cir. 1998) (derivative work must substantially incorporate protected material and exist in concrete form)
Karpenski v. Am. Gen. Life Cos., LLC, 999 F. Supp. 2d 1235 (W.D. Wash. 2014) (striking late-disclosed evidence included in supplemental briefing)
Klein v. Freedom Strategic Partners, LLC, 595 F. Supp. 2d 1152 (D. Nev. 2009) (elements for LLC member/manager breach of fiduciary duty under Nevada law)