We will be discussing one Federal Circuit case and one California Court of Appeals case during our weekly SoCal IP Institute meeting on Monday, July 23, 2012. Brief synopses are presented below.

Wi-Lan, Inc. v. LG Electronics, Inc., Case No. 2011-1626 (Fed. Cir. July 13, 2012) (attached).

Wi-LAN’s attorneys at Kilpatrick Townsend (formerly Townsend & Townsend) prepared a letter analyzing the scope of LG’s infringement of Wi-LAN’s patent, which allegedly reads on the “V-chip” technology in television sets.  Wi-LAN forwarded the Townsend letter containing the analysis to LG in hopes of convicing LG to pay royalties. When LG refused to pay royalties, Wi-LAN sued for patent infringement.  Once litigation started, LG requested that Kilpatrick disclose documents and testimony relating to the Townsend letter.  Kilpatrick refused based upon its argument that the requested information was protected by attorney-client privilege.  LG argued that any privilege was waived by Wi-LAN’s voluntary disclosure of the letter.  The district court for the Northern District of California sided with LG and held Kilpatrick in contempt-of-court when they failed to produce the information.

On appeal, the Federal Circuit asserted jurisdiction to review the district court’s contempt order in an ancillary proceeding to a patent infringement case.  The Federal Circuit determined that Ninth Circuit law controls in reviewing the district court’s ruling and then tried to predict how the Ninth Circuit would decide the issue.  In vacating the district court’s decision, the Federal Circuit held that the district court applied the wrong standard in determining the scope of waiver and stated that a fairness balancing is required.  The Federal Circuit vacated the district court’s orders and remanded for further proceedings.  The court also vacated the entry of contempt sanctions.

SASCO v. Rosendin Electric, Inc., Case No. G045229 (Cal.App.4th July 11, 2012) (attached).

SASCO sued Rosendin and three of its employees, who were formerly SASCO employees, claiming that the employees had misappropriated trade secrets and used the trade secrets to win a bid for a contract for the Verizon Tustin Project.  During discovery, the two sides had several disputes and the court had to enter at least three orders pertaining to the discovery disputes.  SASCO was unable to find sufficient evidence that the former employees misappropriated any trade secrets and dismissed its claims rather than respond to a motion for summary judgment by defendants.  The defendants then sought attorney fees, claiming that the action had been brought in bad faith.

The trial court found that SASCO had brought the case in bad faith under California’s version of the UTSA. The trial court stated that SASCO only had a suspicion that its former employees had taken other trade secrets, but lacked a sufficient basis for asserting the claim and faulted SASCO for not conducting a thorough investigation before filing the lawsuit.  The trial court granted the defendants’ motion for attorney fees and costs, awarding a total of $484,943.46.

The California Court of Appeals affirmed the award of attorney fees and costs, holding that the trade secret claims were “objectively specious” which it defined as an action that superficially appears to have merit but for which there is a complete lack of evidence to support the claim.  The defendants had submitted declarations by the former employees and the general contractor on the Verizon Tustin Project attesting that they did not provide Rosendin with any trade secrets from SASCO.   The Court stated that the defendants were not required to conclusively prove a negative.  Instead, under the “objectively specious” standard, it was enough for defendants to point to the absence of evidence of misappropriation in the record.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, July 23, 2012 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Attalla by 9 am Monday morning.