Elite Semiconductor, Inc. v. Anchor Semiconductor, Inc.

Background

Elite Semiconductor, Inc. (ESI) sued its former employee Chin-Hsen Lin, Anchor Semiconductor, Inc., and Chenmin Hu, identified as Anchor China’s Chairman and President. ESI alleged that Lin copied patent-invention disclosures, source code, and system-architecture documents while working for ESI, transferred them to Anchor or outside devices, and helped Anchor use the information to develop competing products.

ESI’s first amended complaint asserted four types of claims: misappropriation of trade secrets under California’s Uniform Trade Secrets Act (CUTSA), misappropriation under the federal Defense of Trade Secrets Act, breach of contract against Lin, and conversion against all defendants. The order addressed the Anchor defendants’ motion to dismiss the conversion claim under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim, and Lin’s motion under Rules 12(b)(2) and 12(b)(5), which address personal jurisdiction and service of process.

Conversion claim against the Anchor defendants

The court held that CUTSA superseded ESI’s conversion claim. Under the court’s analysis, a state-law conversion claim is superseded when it is based on the same underlying wrongdoing as a trade-secret-misappropriation claim. A conversion claim may remain available for tangible property having value apart from the information it contains, but ESI did not adequately identify such separate value here.

ESI argued that its “Products and Tools” were functioning software products distinct from its trade secrets. The court rejected that argument because the amended conversion claim repeated the same factual allegations as the trade-secret claims and alleged that the defendants stole invention disclosures and proprietary software. The court concluded that the value of the Products and Tools was contained in, or “subsumed” by, the value of the alleged trade secrets. It therefore granted the Anchor defendants’ motion to dismiss ESI’s conversion claim and granted it without leave to amend, finding that amendment would be futile.

Service of process and personal jurisdiction over Lin

The court determined that ESI’s earlier attempts to serve Lin were ineffective. ESI had left papers with Lin’s adult son at a Fremont residence and mailed papers to a residence in Taiwan. In the later attempt relevant to this order, ESI delivered the summons and amended complaint to Yu-Jie Yang, a relative of Lin, at an address in Taipei, and argued that it had also served Lin through his attorney.

The court found that service through Lin’s attorney was ineffective because Lin had not authorized the attorney to accept service for him. It also found that leaving the papers with Yang did not satisfy United States or Taiwanese service rules because ESI had not shown that the Taipei address was Lin’s usual residence or that Lin lived with Yang. The court nevertheless ordered alternative service through Lin’s U.S.-based counsel under Rule 4(f)(3), finding that this method was reasonably calculated to notify Lin and was not prohibited by an international agreement.

The court separately held that it lacked general personal jurisdiction over Lin. General personal jurisdiction allows a court to hear any claim against a defendant, but for an individual it ordinarily requires that the person be domiciled in the forum or have exceptionally substantial, continuous, and systematic contacts making the person essentially at home there. The court considered ESI’s allegations that Lin had attended a California university, worked for California-area companies, owned or financed residences, maintained financial accounts, and used California resources. It concluded that these contacts, including the property-related contacts, did not make Lin at home in California. The court therefore dismissed Lin from the action and granted his motion to dismiss for lack of personal jurisdiction. The order does not state that this dismissal was with or without prejudice.

Disposition

The court granted without leave to amend the Anchor defendants’ motion to dismiss ESI’s conversion claim. It also granted Lin’s motion to dismiss for lack of personal jurisdiction and dismissed Lin from the action. ESI was ordered to refile a second amended complaint consistent with the order no later than January 24, 2022. The order was signed by United States District Judge Edward J. Davila.