Intellectual Property Law

Breach of Confidence and Unfair Competition Claims Were Preempted By California's Trade Secret Act

The One Sentence Summary: The appellate panel affirmed court rulings and a jury verdict for defendant in a trade secret misappropriation case, including holding that breach of confidence and unfair competition claims arising from the same nucleus of facts as the trade secret claim were preempted.

What They Were Fighting About: Plaintiff K.C. Multimedia lost at trial on its claim that defendants misappropriated its trade secrets in a Palm application for accessing bank records.

California Court of Appeal Holdings:
The jury's finding that plaintiff did not own trade secrets was supported by substantial evidence of a license that conveyed rights to the defendant.Plaintiff forfeited its objection to the trial court's use of a motion in limine to resolve preemption, an issue of law, because plaintiff's counsel failed to object to the procedure.Use of the motion in limine to resolve the preemption issue was not error.California's implementation of the Uniform Trade Secrets Act (UTSA) has a different preemption provision than the model act. Thus, decisions from states that implemented a different version of the preemption provision will not be persuasive in interpreting California's version of the UTSA.California's version of the UTSA is broad and intended to "occupy the field."The UTSA should be read to preempt other civil remedies that are based upon misappropriation of a trade secret. The court agreed with "the federal cases applying California law, which hold that section 3426.7, subdivision (b), preempts common law claims that are 'based on the same nucleus of facts as the misappropriation of trade secrets claim for relief.' Depending on the particular facts pleaded, the statute can operate to preempt the specific common claims asserted here: breach of confidence, interference with contract, and unfair competition." The causes of action for breach of confidence and statutory unfair competition relied on the same nucleus of facts as the trade secret claim and were therefore preempted.

Full post as published by IP Law Observer on March 03, 2009 (boomark / email).