When it comes to determining liability for stolen trade secrets used by unsuspecting third parties, the question in litigation often becomes who knew what when? It has not always been clear when the statute of limitations for these third-party lawsuits begins ticking. Does it start when the trade-secret owner realizes its stolen intellectual property has been licensed to third parties? Does it begin when the trade-secret owner files a lawsuit against the company that stole the secrets and then licensed them to others? Or does it only begin counting down when third-party users are notified that they possess stolen IP?
In a recent case closely watched in the high tech industry, the California Court of Appeal clarified when the three-year statute of limitations countdown begins. According to the unanimous ruling in Cypress Semiconductor Corp. v. Superior Court, the “statute of limitations on a cause of action for misappropriation begins to run when the plaintiff has any reason to suspect that the third party knows or reasonably should know that the information is a trade secret.” The appellate court’s conclusion overturned a trial court’s decision that found the statute of limitations began when the third party had actual notice of the trade-secret owner’s claim.
