Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Five California Supreme Court justices and two visiting Court of Appeal justices scattered questions Wednesday throughout an hour-long argument in the Cadence-Avant trade secrets war, but dropped few hints on how they’re leaning in a case that could change the landscape of California’s trade secrets law. The state high court, at the request of the 9th U.S. Circuit Court of Appeals, worked to clear up whether a trade secret can be misappropriated just once or whether each misuse is separately actionable under California law. Attorneys for Cadence Design Systems Inc. argue that trade secrets are intellectual property that can be repeatedly stolen. Therefore, Cadence should be able to move forward with a 1995 civil trade secrets case despite an agreement signed a year before the suit was filed that released Avant from all civil claims. But Avant Corp.’s attorney Daniel Bookin, said case law and the legislative record is clear: Civil trade secrets misappropriation is a breach of confidence that can only occur once, so the 1994 release immunizes Avant from the trade secret actions filed afterward. “The bell cannot be unrung. Damages can be increased, but a claim for breach of confidence arises only once. The damages may mount but it’s part of the same claim,” Bookin, an O’Melveny & Myers partner, said. But Bernard Burk, a Howard, Rice, Nemerovski, Canady, Falk & Rabkin partner speaking before the court on behalf of amicus for Cadence, countered: “A punch in the nose yesterday that was settled is not license for a punch in the nose today. Future wrongful acts should be separately and individually actionable.” Wednesday’s dispute arises from a 1995 federal suit filed by Cadence against Avant. In the suit, Cadence alleges that when Cadence employees left to form Avant in 1991, they infringed Cadence copyrights and stole trade secrets. But U.S. District Court Judge Ronald Whyte of the Northern District of California — relying on the 1969 9th Circuit opinion Monolith Portland Midwest Co. v. Kaiser Aluminum & Chem Corp., 407 F 2d 288 — dismissed the trade secrets claims. He ruled that Cadence was barred from pursuing the trade secret claims because the breach of confidence occurred before a release was signed in 1994 by both parties when Vice President Gerald Hsu left Cadence to become Avant’s CEO. Cadence appealed to the 9th Circuit in 1999, which bumped the trade secrets question to the state high court. Cadence’s attorney, Jeffrey Chanin, argued Wednesday that under the 1984 enactment of the California Trade Secrets Act, trade secrets are intellectual property. “There’s no reason trade secrets should be treated differently than any other form of intellectual property,” said Chanin, a Keker & Van Nest partner. But Bookin said Monolith is still good law. Cadence is at fault for accepting the broad language of the 1994 release, he said, even though he agreed with justices that Cadence did not know about the trade secrets theft at the time. “There is not a shred of evidence in the legislative history that the Legislature wanted to enact such a monumental change,” Bookin said. Justices on Wednesday repeatedly questioned the 1994 agreement. “Couldn’t Cadence have protected itself by drafting a release contemplating this?” asked Justice Carlos Moreno. But at least one — Justice Ming Chin — expressed some doubt, saying that if Avant’s position was taken to its logical conclusion, “You would have a violation of trade secrets. You’d have a settlement and then it would be public. There could never be a violation again?” Later Chin challenged Bookin’s arguments that Avant’s stance made for better public policy, allowing for more employee mobility and stopping large companies from using multiple claims to hamper smaller competing startups. “Your argument rings a little hollow when you consider the criminal trade secrets case,” Chin said. “I am all for freedom of employee mobility but not for stealing, theft and fraud.” In 2001, Avant executives pleaded no contest and agreed to pay $27 million in fines and $195 million in restitution in a separate criminal trade secrets case in San Jose, Calif. Three Silicon Valley companies — Oracle Corp., Xilinx Inc. and 3Com Corp. — filed an amicus brief supporting Cadence’s position. Chief Justice Ronald George and Justice Kathryn Mickle Werdegar did not participate. Second District Court of Appeal Justice Michael Nott and 4th District Justice Gilbert Nares sat on the panel.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.