Apple Inc. v. Rivos, Inc.

Background

Apple sued Rivos, Inc. and seven individual defendants. The Second Amended Complaint asserted two claims: breach of contract against the individual defendants, and trade-secret misappropriation under the Defend Trade Secrets Act against Rivos and six individual defendants, excluding Kai Wang.

The case involved Apple’s system-on-a-chip designs, source code, specifications, roadmaps, technical analyses, and related information. Apple alleged that former employees took or retained confidential information when leaving Apple for Rivos. The individual defendants relevant to the order were Shih-Chieh (“Ricky”) Wen, Jim Hardage, Weidong Ye, Laurent Pinot, Prabhu Rajamani, and Kai Wang. The opinion states that Bhasi Kaithamana had previously been voluntarily dismissed.

All Apple employees, including the individual defendants, had signed an Intellectual Property Agreement. The agreement required departing employees to deliver Apple documents and materials and prohibited them from taking documents, materials, or copies containing Apple proprietary information.

Legal standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts and a legally recognized theory of relief. At this stage, the court generally accepts well-pleaded facts as true and views reasonable inferences in the plaintiff’s favor, but it need not accept unsupported legal conclusions.

Trade-secret claim

To state a claim under the Defend Trade Secrets Act, Apple had to allege that it possessed a trade secret, that the defendants misappropriated it, and that the misappropriation caused or threatened harm.

The court held that Apple identified its alleged trade secrets with sufficient particularity. The allegations identified specific chip specifications and designs, including designs for the A14, M1, and unreleased chips; related component designs; development roadmaps; technical analyses; and source code. The court also considered declarations incorporated into the complaint that provided examples and additional detail.

The court found that Apple plausibly alleged threatened disclosure or use by Wen, Rajamani, and Hardage. The complaint alleged that they transferred substantial amounts of Apple information to external or personal drives shortly before leaving and then took substantially similar roles at Rivos, which was also developing system-on-a-chip technology. The court therefore denied the motion to dismiss the DTSA claim against Wen, Rajamani, and Hardage.

The court reached a different conclusion for Pinot and Ye. As to Pinot, the allegations showed that he possessed regular backups of his Apple laptop but did not show that he disclosed or used the information at Rivos or acquired it by improper means. As to Ye, the allegations showed that Apple source-code repositories were saved on his iCloud drive and remained accessible, but did not say when or how the information had been saved. The court held that these allegations did not plausibly establish misappropriation.

The court also dismissed the DTSA claim against Rivos. It held that Apple had not alleged a legally sufficient basis to attribute the individual defendants’ alleged acquisition of information to Rivos. The allegations that Rivos advised former Apple employees about departure procedures, advised them not to retain Apple information, hired them, and knew or should have known that they possessed Apple information did not establish that Rivos itself induced a breach or acquired the information by improper means. The court also rejected Apple’s ratification theory because the alleged acquisition occurred before the individual defendants became Rivos employees, and the complaint did not allege that they later used or disclosed the information while working for Rivos.

The court found that Apple adequately pleaded harm as to all defendants. It stated that harm generally is presumed once trade-secret misappropriation is adequately alleged and noted Apple’s allegations about the competitive harm that disclosure of its chip designs could cause.

The DTSA claims against Rivos, Pinot, and Ye were dismissed with leave to amend. The court stated that amendment would not be futile because Apple had indicated that it possessed additional facts.

Breach-of-contract claim

The court held that Apple adequately stated a contract claim against Wen, Pinot, Rajamani, Hardage, and Wang. The allegations and incorporated forensic declarations identified specific files and information allegedly transferred, downloaded, or retained by Wen, Pinot, Rajamani, and Hardage. The court found that the allegations plausibly showed that these defendants breached the agreement’s prohibition on taking Apple proprietary information. As to Wang, the complaint alleged that he acknowledged Apple files remained in two folders on his iCloud drive, which sufficiently identified the information and the alleged breach.

Although the court found the allegations insufficient to support DTSA misappropriation by Pinot, it held that the allegations about his weekly backups were sufficient to plausibly allege breach of the Intellectual Property Agreement. The court also found that Apple adequately alleged injury from the alleged breaches, including the harm described in the agreement and in the supporting declaration.

The court dismissed the contract claim against Ye because the allegation that he continued to access Apple source-code repositories was too unclear to support a reasonable inference that he took documents or materials containing Apple proprietary information. The dismissal was with leave to amend.

Disposition

Judge Edward J. Davila granted in part and denied in part the defendants’ motions to dismiss. Specifically:

- The DTSA claim against Rivos, Pinot, and Ye was dismissed with leave to amend. - The breach-of-contract claim against Ye was dismissed with leave to amend. - The motion to dismiss the DTSA claim against Wen, Rajamani, and Hardage was denied. - The motion to dismiss the breach-of-contract claim against Wen, Pinot, Rajamani, Hardage, and Wang was denied. - Any amended complaint had to be filed no later than 21 days after entry of the order.