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Loop AI Labs, Inc. v. Gatti

United States District Court, N.D. California

July 6, 2016

LOOP AI LABS INC, Plaintiff,
ANNA GATTI, et al., Defendants.



         Defendant IQSystem, Inc. ("IQS") filed a motion to enforce the court's December 21, 2015 order directing Plaintiff Loop AI Labs Inc. to submit a particularized trade secret disclosure. Defendant Almawave USA, Inc. ("Almawave") joins in IQS's motion. [Docket Nos. 459 (Mot.), 472.] Plaintiff timely filed an opposition. [Docket No. 541 (Opp'n).] This matter is appropriate for resolution without a hearing. Civ. L.R. 7-1(b). For the following reasons, IQS's motion is granted.

         I. BACKGROUND

         Plaintiff is a startup that develops artificial intelligence technology. In this action, Plaintiff pursues a number of claims for relief, including a claim for misappropriation of trade secrets against all Defendants based upon their alleged violation of California Civil Code section 3426, California's Uniform Trade Secrets Act ("CUTSA"). In October 2015, IQS moved to compel Plaintiff to comply with California Code of Civil Procedure section 2019.210 by identifying its alleged trade secrets with particularity. IQS also asked the court to stay all discovery until Plaintiff provided a proper trade secret disclosure. [Docket No. 232.] Section 2019.210 provides that in any action alleging misappropriation of trade secrets under CUTSA, "before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code."[1] Cal. Civ. Proc. Code § 2019.210. Plaintiff opposed the motion on the ground that section 2019.210 is a state procedural rule that does not apply in federal court. Alternatively, Plaintiff argued that if section 2019.210 applies, then Plaintiff had already complied with the statute by providing a detailed explanation of the trade secrets at issue in its pleadings and other submissions. In support of this assertion, instead of submitting a trade secret disclosure document, Plaintiff identified descriptions of trade secrets contained in specific paragraphs in its amended complaint, second amended complaint, and three declarations filed in support of two April 2015 motions.

         On December 21, 2015, the court granted in part and denied in part IQS's motion (Docket No. 331). Loop AI Labs Inc. v. Gatti, No. 15-cv-00798 HSG (DMR), 2015 WL 9269758 (N.D. Cal. Dec. 21, 2015). The court first concluded that section 2019.210 applies to CUTSA claims brought in federal court. Id. at *3. It then analyzed the sufficiency of Plaintiff's purported trade secret disclosure. Id. at *3-4. The court concluded that "Plaintiff's ersatz ‘trade secret disclosure' [was] insufficient to meet the requirements of section 2019.210, " and that its designation of certain paragraphs in previous court filings "[was] no substitute for specifically identifying and describing the actual claimed trade secrets in order ‘to permit [Defendants] to ascertain at least the boundaries within which the secret[s] lie[].'" Id. at *4 (quoting Brescia v. Angelin, 172 Cal.App.4th 133, 147 (2009)). The court ordered Plaintiff to file and serve a statement identifying the specific trade secrets at issue by a date certain. The court warned Plaintiff that its trade secret disclosure "must be thorough and complete, " and that "[a]ny future amendment to the disclosure [would] only be permitted upon a showing of good cause." Id. (citing Neothermia Corp. v. Rubicor Med., Inc., 345 F.Supp.2d 1042, 1045 (N.D. Cal. 2004)). The court also denied IQS's motion to stay all discovery, but did stay discovery as to Plaintiff's CUTSA claim until such time that Plaintiff filed a statement "identifying with reasonable particularity the trade secrets at issue in this lawsuit." Id.

         Plaintiff timely filed its trade secret disclosure on the public docket. [Docket No. 372 (Disclosure).] IQS challenges the sufficiency of Plaintiff's disclosure. It moves to enforce the court's December 21, 2015 order that Plaintiff provide a thorough and complete identification of the trade secrets that are the basis of its CUTSA claim. It also asks the court to sanction Plaintiff by precluding Plaintiff's introduction of evidence as to its CUTSA claim and/or dismissing Plaintiff's suit for failing to specify the trade secrets at issue.


         A. Legal Standards

         California Civil Code section 3426.1 defines a trade secret as follows:

"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Cal. Civ. Code § 3426.1(d). "The sine qua non of a trade secret, then, is the plaintiff's possession of information of a type that can, at the possessor's option, be made known to others, or withheld from them, i.e., kept secret." Silvaco Data Sys. v. Intel Corp., 184 Cal.App.4th 210, 220 (2010), disapproved on other grounds by Kwikset Corp. v. Superior Court, 51 Cal.4th 210 (2011). As explained by the court in Silvaco Data Systems, trade secret law protects the right to maintain the confidentiality of facts, not ideas:

A patent protects an idea, i.e., an invention, against appropriation by others. Trade secret law does not protect ideas as such. Indeed, a trade secret may consist of something we would not ordinarily consider an idea (a conceptual datum) at all, but more a fact (an empirical datum), such as a customer's preferences, or the location of a mineral deposit. In either case, the trade secret is not the idea or fact itself, but information tending to communicate (disclose) the idea or fact to another. Trade secret law, in short, protects only the right to control the dissemination of information.
It is critical to any CUTSA cause of action-and any defense-that the information claimed to have been ...

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