675 F. App'x 700
9th Cir.2017Background
- Integral Development Corp. sued its former CTO, Viral Tolat, alleging misappropriation of trade secrets (source code, business files, resume disclosures), breach of fiduciary duty, breach of contract, and copyright infringement.
- Tolat copied Integral source code to a personal external hard drive shortly before leaving Integral and joining competitor EBS; he also copied business files and sent a resume with company facts to EBS.
- EBS later released a competing product, EBS Direct, and Integral alleges EBS Direct reduced Integral’s sales and equity value.
- The district court granted summary judgment for Tolat on all claims; Integral appealed.
- The Ninth Circuit reviewed de novo and (1) affirmed summary judgment as to resume disclosures and copied business files, (2) reversed as to source-code-based CUTSA and copyright claims, and (3) vacated and remanded breach of fiduciary duty and breach of contract claims for further consideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether resume facts and copied business files are CUTSA trade secrets and caused damages | These materials contained confidential information and their disclosure damaged Integral | No evidence of actual loss or unjust enrichment from those disclosures | Affirmed for Tolat — summary judgment proper (no damages) |
| Whether source code is a trade secret and was misappropriated under CUTSA | Source code is secret, was copied to Tolat’s drive, and likely transferred to EBS causing competitive harm | Tolat disputes misuse/transfer and contends no actionable misappropriation shown | Reversed — material factual disputes exist; remanded for trial |
| Whether CUTSA preempts breach of fiduciary duty and breach of contract claims | Claims arise from misuse of confidential information but are independent of trade-secret status | CUTSA preempts claims based on trade-secret misappropriation | Vacated and remanded — CUTSA does not preempt fiduciary duty or contractual remedies not based solely on trade-secret misappropriation |
| Whether Tolat committed copyright infringement in source code | Integral owns the code and Tolat copied and possibly distributed it to EBS without authorization | Tolat disputes authority and whether distribution occurred | Reversed — ownership is established and material disputes about copying/distribution require factfinding |
Key Cases Cited
- Szajer v. City of Los Angeles, 632 F.3d 607 (9th Cir.) (standard of review for summary judgment)
- Silvaco Data Sys. v. Intel Corp., 109 Cal. Rptr. 3d 27 (Cal. Ct. App.) (elements and identification requirement for CUTSA trade secrets)
- Kwikset Corp. v. Superior Court, 246 P.3d 877 (Cal.) (noting limits of Silvaco on other grounds)
- Whyte v. Schlage Lock Co., 125 Cal. Rptr. 2d 277 (Cal. Ct. App.) (definition of misappropriation and secrecy requirements)
- Altavion, Inc. v. Konica Minolta Sys. Lab. Inc., 171 Cal. Rptr. 3d 714 (Cal. Ct. App.) (source code can be a trade secret)
- Agency Solutions.com, LLC v. TriZetto Grp., Inc., 819 F. Supp. 2d 1001 (E.D. Cal.) (source-code trade-secret protection discussion)
- Angelica Textile Servs. Inc. v. Park, 163 Cal. Rptr. 3d 192 (Cal. Ct. App.) (CUTSA does not preempt independent fiduciary-duty claims)
- Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir.) (elements of direct copyright infringement)
- A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir.) (copyright-infringement standards)