Cisco Systems, Inc. v. Chung

Background

Cisco Systems, Inc. brought a purported trade-secret misappropriation action against Wilson Chung, Plantronics Inc., Thomas Puorro, James He, and others. The order addressed a second round of motions concerning Cisco’s second amended complaint. In an earlier order, the court found that Cisco had not adequately alleged that the information allegedly taken by Chung and He had independent economic value. The court also found that Cisco had not alleged an intentional-interference-with-contract claim based on facts distinct from those supporting its trade-secret claims, and gave Cisco one opportunity to amend.

Trade-secret allegations involving Chung

The court held that Cisco adequately alleged independent economic value for some information allegedly misappropriated by Chung. This included design specifications and schematics for a pre-release video-conferencing prototype and sound-bar products, the EA document, and information about emerging business opportunities in the collaboration space. The court found that allegations about engineering work, product-component choices, manufacturing advantages, market research, customer engagement, and targeted commercial opportunities were sufficient at the pleading stage for those categories.

Cisco did not adequately allege independent economic value for information concerning its contributions to 5G technology, its communications-product portfolio, strategy and costs for a pre-release video-conferencing display product, or component specifications and competitive differentiators for other unspecified products outside the EA document. The court stated that those categories could not support Cisco’s trade-secret claims.

The court rejected Cisco’s arguments that confidentiality precautions alone established economic value or that Plantronics’ hiring of Chung and his alleged use of the information showed that others were willing to pay for all of it. The court explained that secrecy precautions could show that information was not generally known, but did not by themselves establish independent economic value.

Trade-secret allegations involving He

The court held that Cisco adequately alleged independent economic value for design documents and hardware diagrams concerning headset prototypes allegedly misappropriated by He. Cisco did not adequately allege that value for vendor product roadmaps, an unreleased Internet Protocol telephone project, or full engineering specifications for a next-generation conference-room collaboration device.

The court also rejected He’s argument that Cisco failed to allege harm. Cisco alleged that He copied confidential architectural-design documents to an external hard drive, retained the drive after leaving Cisco, accessed its contents, and used the information for his own benefit and Plantronics’ benefit. Cisco also alleged that disclosure could let competitors shorten development timelines and anticipate Cisco’s product roadmap. The court found those allegations sufficient at this stage.

Intentional interference and motion to strike

The court again found that Cisco’s intentional-interference-with-contract claim was based on the same underlying facts as its trade-secret claims. Cisco’s new allegations involved an alleged effort to pursue a Cisco business opportunity with RoomReady while a Cisco employee was still employed by Cisco. The court concluded that this was another specific example of the alleged misappropriation of sales opportunities involving Cisco’s collaboration products, rather than a distinct factual basis for intentional interference.

Because Cisco had already been given an opportunity to amend and had not identified a qualifying separate set of facts, the court dismissed the intentional-interference claim with prejudice. The court denied as moot the related request to strike the allegations supporting that claim.

The court denied Plantronics’s motion to strike the remaining allegations. Although the court found that some allegations were insufficient to support trade-secret claims, it did not find that they had no possible bearing on the litigation. The court also declined to strike allegations that Plantronics argued should have been pleaded as separate claims.

Discovery and protective orders

The court denied defendants’ request to stay discovery as moot because the order resolved the second round of dismissal motions. The court granted defendants’ alternative request for a protective order. Defendants did not have to respond to discovery until Cisco served the required disclosure identifying its alleged trade secrets under California Code of Civil Procedure section 2019.210.

The court adopted defendants’ proposed protective order, with modifications ordered by the court. It denied Cisco’s motion for entry of its proposed protective order.

Disposition

The court ruled that Plantronics’s and Puorro’s motion to dismiss was granted in part and denied in part. Chung’s motion to dismiss and He’s motion to dismiss were denied. Plantronics’s motion to strike was denied. Plantronics’s motion to stay discovery was denied, and its alternative motion for a protective order was granted. Cisco’s motion for entry of a protective order was denied.

Classification

This is a procedural order because the principal rulings were on Rule 12 motions testing whether the complaint adequately stated claims, along with discovery and protective-order requests. The court addressed the sufficiency of the allegations but did not decide the ultimate merits of the alleged trade-secret misappropriation.