“Pin Down” Your Trade Secrets So the Court Can “Do Its Job” A Case Study

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“Pin Down” Your Trade Secrets So the Court Can “Do Its Job”¹ A Case Study

Introduction

Last month, in Calendar Research LLC v. StubHub, Inc., 2:17-cv04062-SVW-SS (C.D. Cal. May 13, 2020), the Central District of California disposed of Calendar Research’s federal claims of trade secret misappropriation under the Defend Trade Secrets Act (“DTSA”) on summary judgment. The case also involves state claims of trade secret theft under the California Uniform Trade Secrets Act (“CUTSA”), as well as violation of the Computer Fraud and Abuse Act. Here, we take a look at the DTSA claims, why they were dismissed, and point to some lessons learned.

Background

The technology in this case is “Klutch,” a mobile group-scheduling application developed by a company named Calaborate. The idea behind Klutch is to provide users with a hassle-free way to schedule meetings (e.g., with friends at a café) or to discover new venues (e.g., restaurants, bars, etc.). Defendant StubHub, Inc. had previously tried to acquire Calaborate (and Klutch). Thereafter, plaintiff Calendar Research picked Calaborate up through a credit bid in a foreclosure sale.

Despite the failed acquisition by StubHub, some Calaborate employees left to work for StubHub as independent contractors, allegedly taking with them Klutch code and other proprietary information. Calendar Research subsequently sued StubHub, its parent corporation eBay, and three former Calaborate employees,[2] alleging trade secret theft (and violations of the CFAA).

No Trade Secrets

In a strongly-worded opinion, Judge Wilson explained that, ultimately, Calendar Research had failed to define any trade secret specifically enough to distinguish it from matters of general knowledge. Although four categories of trade secrets had been identified—(1) virality capabilities (2) user interface/experience (“UI/UX”) (3) venue focus and (4) integration of third-party apps—the plaintiff had not identified any trade secrets with “sufficient specificity.”

With respect to virality, which refers to an app’s ability to spread “organically” as opposed to through marketing, Calendar Research pointed broadly to know-how and techniques for tracking user engagement. But the Court explained that “a voluminous list of technical terms” was insufficient to define a trade secret, and catchall phrases such as “including without limitation,” and vague language such as “including various combinations” were exactly the types of overbroad language rejected by the Ninth Circuit.

The second category, UI/UX, was denied trade secret protection because user interface and design were “public-facing” features that were visible and readily discernible by any user. And Calendar Research did not point to any non-public UI/UX techniques. Instead, Calendar Research only pointed to generalized methods, techniques and know-how, and described them with broad “catch-all” language. Thus, the Court could not distinguish between any alleged trade secrets and “general industry knowledge.”

Finally, the Court disposed of the third and fourth categories of trade secrets (venue focus and third-party app integration) together because both were vaguely defined. Specifically, Calendar Research’s identification of “restaurants, concerts, and sporting events” as venue types was deemed both generally known and readily ascertainable, and the concept of integrating third-party apps (e.g., Facebook) was deemed a common practice in the industry.

While the Court did note that Calendar Research was limited to “post-hoc expert review” to discern its trade secrets, the Court nevertheless explained that Calendar Research had the “full machinery of the justice system at its disposal” to pursue its claims, and thus should have identified its trade secrets with more specificity. In other words, Calendar Research should have done more than just “identify a kind of technology and then invite the court to hunt through the details.”[3]

No Trade Secrets, No Misappropriation

Finding that there were no protectable trade secrets, the Court was quick to conclude there could not be any trade secret misappropriation. The former employees had been accused of stealing “private keys” that provided access to Klutch source code[4] and proprietary information, and of wrongfully backing up their Calaborate cloud accounts and subsequently accessing and downloading proprietary information after joining StubHub. However, because Calendar Research failed to establish that any of the proprietary information constituted trade secret information, the Court dismissed the DTSA claim. The Court emphasized that it was the plaintiff’s burden to demonstrate that the information at issue constituted a definable trade secret.

Lessons Learned

If you want to protect your trade secrets, pin them down—the earlier, the better. Where possible, avoid using “catch-all” phrases and stay away from vague and overbroad language. In other words, do more than just list nebulous concepts that may constitute trade secret information—point them out instead. And to overcome the long-standing tension between employee mobility and trade secret protection, take measured steps to distinguish generalized knowledge in the industry from trade secret information.

[1]“[U]nless the plaintiff engages in a serious effort to pin down the secrets a court cannot do its job.” Calendar Research LLC v. StubHub, Inc., 2:17-cv04062-SVW-SS, at *6 (C.D. Cal. May 13, 2020) (quoting IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, 583 (7th Cir. 2002)).

[2]  These included the CEO and co-founder of Calaborate, the VP of Engineering, and a Klutch app developer.

[3] Id. at *5 (citing X6D Ltd. v. Li-Tek Corps. Co., No. 10-CV-2327-GHK-PJW, 2012 WL 12952726, at *1 (C.D. Cal. Aug. 27, 2012).

[4] As to source code, the Court explained in a prior summary judgment order that the Klutch code was not trade secret. Although the Court left open the possibility that additional code may be trade secret, the plaintiff did not present evidence in this regard.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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