Integral Development Corp. v. TolatIntegral Development Corp. v. Tolat
- Reporters:
- Before:
- Berzon, N.R. Smith, Christensen
Integral Development Corporation (“Integral“) appeals the district court‘s grant of summary judgment in favor of Viral Tolat, Integral‘s former Chief Technology Officer. We review de novo the district court‘s grant of summary judgment. Szajer v. City of Los Angeles, 632 F.3d 607, 610 (9th Cir. 2011). We affirm in part, reverse in part, vacate in part, and remand.
1. To succeed on a claim for misappropriation of trade secrets under the California Uniform Trade Secret Act (“CUTSA“), Integral must show three things: (1) it possessed a trade secret; (2) Tolat misappropriated the trade secret; and (3) Tolat‘s misappropriation caused or threatened damage to Integral. See Silvaco Data Sys. v. Intel Corp., 184 Cal.App.4th 210, 109 Cal.Rptr.3d 27, 38 (2010), disapproved of on other grounds by Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 120 Cal.Rptr.3d 741, 246 P.3d 877 (2011). In establishing that certain information qualifies as a trade secret, a plaintiff first must clearly identify the information. See id. The plaintiff must also show that the information communicates ideas or facts to another.1 Id. Finally, a plaintiff must show that it
Integral has identified three sets of information that it claims are trade secrets that Tolat misappropriated: (1) facts about Integral‘s business that Tolat included in a resume he sent to EBS, one of Integral‘s competitors; (2) Integral‘s source code for its products; and (3) business documents containing, inter alia, customer lists and details about ongoing projects. Integral has failed to present any evidence that it suffered damages as a result of Tolat disclosing facts about Integral in his resume or as a result of Tolat copying and retaining Integral‘s business files. There is no evidence in the record that Integral suffered actual losses from these actions, or that any of Integral‘s competitors were unjustly enriched as a result of these actions. See
However, Integral‘s CUTSA claim based on the misappropriation of its source code should have survived summary judgment. First, Integral met its burden on the question of whether the source code is a trade secret under CUTSA. There is evidence in the record that Tolat copied at least a portion of Integral‘s source code on to an external hard drive, in violation of Integral‘s policies, on November 5, 2012, shortly before he planned to retire from Integral. There is also evidence that, on this date, Tolat copied only the recent updates in the source code to the external hard drive and that he tried to cover up the evidence that he had transferred the files to his personal device. Based on this evidence, a fact finder could conclude that Tolat had previously copied all of Integral‘s source code, and that he periodically copied the updates to the code. Thus, Integral has raised a question of material fact as to whether Tolat copied all of its source code. Integral has also identified specific key aspects of its source code that it claims Tolat misappropriated. Thus, Integral sufficiently identified the information it alleges is a trade secret.
Source code, which conveys facts or ideas, qualifies for trade secret protection. See Altavion, Inc. v. Konica Minolta Sys. Lab. Inc., 226 Cal.App.4th 26, 171 Cal.Rptr.3d 714, 741 (2014) (“[S]ource code is undoubtedly a trade secret.“) (citing Agency Solutions.com, LLC v. TriZetto Grp., Inc., 819 F.Supp.2d 1001, 1017 (E.D. Cal. 2011)). Finally, the parties do not dispute that Integral took steps to maintain the secrecy of the source code or that the code obtains value from being kept secret.
Second, there is enough evidence in the record to raise a question of material fact as to whether Tolat misappropriated those portions of Integral‘s source code that qualify for trade secret protection. See Whyte, 125 Cal.Rptr.2d at 289 (“‘Misappropriation’ is, generally speaking, improper acquisition of a trade secret or its nonconsensual use or disclosure.“) (citing
Lastly, there is evidence that EBS Direct cut into Integral‘s sales and that the resulting loss of revenue also caused Integral‘s equity value to decrease, satisfying Integral‘s burden as to damages. Because Integral has at least raised a question of material fact as to all necessary elements of a CUTSA claim (based on the alleged misappropriation of its source code), we reverse the district court‘s summary judgment ruling on this claim and remand.
2. CUTSA does preempt some claims, but it “does not affect ... civil remedies that are not based upon misappropriation of a trade secret.”
3. The plain language of CUTSA also provides that it does not preempt “contractual remedies, whether or not based upon misappropriation of a trade secret.”
4. “Plaintiffs must satisfy two requirements to present a prima facie case of direct [copyright] infringement: (1) they must show ownership of the allegedly infringed material and (2) they must demonstrate that the alleged infringers violate[d] at least one exclusive right granted to copyright holders under
As copyright owner, Integral has the exclusive right to “reproduce the copyrighted work in copies“; “prepare derivative works based on the copyrighted work“; and “distribute copies ... of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.”
Each party shall bear its own costs on appeal.
AFFIRMED IN PART, REVERSED IN PART, VACATED IN PART, and REMANDED.