Cisco Systems, Inc. v. Chung

Background

Cisco Systems, Inc. and Cisco Technology, Inc. sued Wilson Chung and Plantronics, Inc., doing business as Poly, in a trade-secrets dispute. Chung previously worked for Cisco and then began working for Poly. Cisco alleged that Chung downloaded, copied, or emailed Cisco documents and files containing trade secrets during the period surrounding his move to Poly. The case was narrowed to alleged trade secrets involving Project Sunkist, a Bluetooth headset later released as the Cisco 730 Headset, and Project Polaris, a videoconferencing product later released as the WebEx Desk Pro.

The remaining claims included federal claims under the Defend Trade Secrets Act and state claims under the California Uniform Trade Secrets Act. Cisco sought only injunctive relief against Chung. Against Poly, Cisco sought injunctive relief and damages, but pursued damages only under a reasonable-royalty theory.

Both defendants moved for summary judgment, which asks whether the evidence shows no genuine dispute over an important fact and entitles the moving party to judgment as a matter of law. Cisco moved for partial summary judgment on certain defenses and filed two motions seeking sanctions for alleged destruction of electronic evidence. Poly also filed motions challenging Cisco’s experts, and the parties filed motions to seal briefing and exhibits.

Rulings on Injunctive Relief

Cisco withdrew its request for an injunction concerning Sunkist-related information. The court therefore considered only whether Cisco had standing to seek an injunction concerning Polaris-related information. To seek an injunction in federal court, Cisco had to show an actual and imminent threat of injury that a court order could likely prevent or remedy.

As to Chung, the court assumed for purposes of his motion that he possessed a hard drive containing Cisco information. Even with that assumption, the court found that Cisco had not presented evidence that Chung had shared Polaris documents or that there was an actual and imminent threat that he would misuse them. The court rejected Cisco’s reliance on speculation and on the theory that Chung’s employment would inevitably lead to disclosure. Because an injunction was the only remedy Cisco sought against Chung, the court granted Chung’s motion for summary judgment as to all claims asserted against him.

As to Poly, the court likewise found no evidence that Poly had used or possessed the Polaris documents or that Poly posed an actual and imminent threat of misappropriation. The court granted Poly’s motion for summary judgment as to Cisco’s request for injunctive relief.

Poly’s Damages Claims

The court explained that both the federal and California trade-secret statutes require proof of a trade secret, misappropriation, and resulting damages. For the reasonable-royalty damages Cisco sought, the court concluded that acquisition alone was insufficient. Under the federal statute, Cisco had to show disclosure or use; under California law, it had to show use.

The court concluded that Cisco had not shown disclosure to a third party. It also applied the rule that use requires actual commercial use that gives the defendant an unfair trade advantage. Cisco’s descriptions of Poly’s alleged use were too general and speculative. The court found no evidence that Poly incorporated Cisco’s information into its products, changed its product-development plans, pre-announced a competing product, changed its marketing strategy, or otherwise obtained an unfair trade advantage.

The court also rejected Cisco’s theories that Poly ratified Chung’s conduct or was vicariously liable for Chung’s or James He’s conduct. The evidence showed that Poly investigated the allegations, expanded its investigation to include Chung, preserved Chung’s devices, sent them to a forensic firm, and placed Chung on administrative leave. The court found no triable issue—a factual dispute requiring a jury—on ratification or vicarious liability.

The court separately found that Cisco had not shown Poly knew or had reason to know that the information in a June 4 email had been improperly obtained or was subject to a duty of secrecy. The court did not reach Poly’s arguments that Cisco failed to take reasonable steps to protect its trade secrets or that the alleged secrets lacked independent economic value. Because Cisco failed to raise a triable issue concerning Poly’s disclosure, use, or resulting damages, the court granted Poly’s motion for summary judgment as to Cisco’s damages claims.

Spoliation Sanctions

Cisco sought sanctions based on alleged deletion of data from Chung’s devices and cloud accounts and Poly’s failure to preserve certain SharePoint audit logs. The court found that Cisco had not shown the required prejudice because the deleted information would have shown, at most, access to files, while evidence of Poly’s actual use would have remained on Poly’s systems. The court also concluded that sanctions were not warranted even assuming Chung acted with an intent to deprive Cisco of information, because Cisco was not deprived of evidence showing Poly’s ultimate use or an ongoing threat of misappropriation. The court denied Cisco’s evidentiary-sanctions motions.

Other Motions and Disposition

The court denied Cisco’s motion for partial summary judgment as moot and denied the pending expert-evidence motions as moot because the defendants’ summary-judgment motions were granted as to all claims. The court denied requests to seal portions of briefs attached to dispositive motions. It denied the requests to seal exhibits without prejudice, allowing the parties to file narrower renewed requests for exhibits or portions of exhibits that met the applicable standard.

The order states: Poly’s motion for summary judgment was granted; Chung’s motion for summary judgment was granted; Cisco’s motions for evidentiary sanctions were denied; Cisco’s motion for partial summary judgment was denied as moot; the pending expert-evidence motions were denied as moot; and the sealing motions were denied as to brief material and denied without prejudice as to a narrowed set of exhibits.