Calif. Court Resets Trade Secrets Clock

Calif. Court Resets Trade Secrets Clock
Calif. Court Resets Trade Secrets Clock 

By Zusha Elinson
The Recorder
June 3, 2008

A California appellate court has clarified when the clock starts ticking 
for trade secret holders to sue third parties who have acquired their 
stolen intellectual property.

Three years after filing a suit over stolen computer source code, the 
subsequently victorious plaintiff also sued the defendant's customers 
for having acquired the proprietary information. At question was when 
the three-year statute of limitations had started -- when the plaintiff 
filed its original suit, or when it won.

The San Jose-based 6th District Court of Appeal ruled that the timer 
starts when the plaintiff has "any reason to suspect" that the third 
party knows it received tainted goods. That means that software maker 
Silvaco, which sued Circuit Semantics Inc. in 2000 and won the trade 
secrets case three years later, must go back to the trial court to argue 
the facts in its subsequent suit against Cypress Semiconductor Corp. 
Silvaco, which sued Cypress in 2003, must establish when it first 
suspected that Cypress was aware it had purchased stolen IP from Circuit 

The Friday opinion caught the attention of tech companies and their 
lawyers because of the frequency of trade secret cases in the industry. 
Rebecca Edelson, a Steptoe & Johnson IP lawyer, called Judge Eugene 
Premo's 14-page ruling a mixed bag, with advantages for both sides in a 
trade secrets fight.

"If you look at trade secret holders, it's a victory in the sense that 
they can't lose the rights before they know about them," said Edelson, 
who co-edits the State Bar's book, "Trade Secret Litigation and 
Protection in California." "On the other hand, it's a victory for the 
third parties who may be misappropriating trade secrets, in the sense 
that the court is placing a burden on the trade secret holder to act."


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