Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County. No. KC 047205 Peter J. Meeka, Judge.
Fink & Abraham, Stephen E. Abraham and Steven A. Fink for Plaintiff and Appellant.
Schadrack & Chapman and Mark A. Schadrack for Defendants and Respondents.
WOODS, J.
Plaintiff Injen Technology Co., Ltd. (Injen) appeals from the judgment in favor of defendants Ryan Takashima, Jay Kim, and K&B Air, Inc. dba Fujita Air (Fujita). Injen contends Takashima violated his duties as a director by soliciting employees to leave Injen, Takashima wrongfully retained and used Injen information following his departure from Injen, and Takashima wrongfully converted Injen’s valuable trade secrets. We affirm.
FACTUAL AND PROCEDURAL SYNOPSIS
I. Procedural Background
Injen filed a verified complaint with 19 causes of action. Subsequently, Injen added a twentieth cause of action for violation of the federal Computer Fraud and Abuse Act (Computer Fraud Act). (18 U.S.C. § 1030.)
The case was tried to the court over about 10 days. Toward the end of trial, Injen dismissed four of its causes of action. After the matter was submitted, the court issued a statement of intended decision ruling against Injen on its remaining causes of action, and judgment was entered in favor of defendants.
Injen filed a timely notice of appeal from the judgment.
II. Factual Background
A. Injen
In 1998, the Delgado family, father Manuel and sons Louie and Ranulfo (Ron), owned RD Metal, a metal polishing business. RS Akimoto was a seller of automotive aftermarket products that used RD Metal’s polishing services. Takashima was in charge of sales at Akimoto where he sold air intake systems.
The air intake system is a simple product. It is basically a metal tube with an air filter attached to the end. For instance, when Paul Ho, the head of Injen’s research and development (R&D) department, first starting making air intakes, he purchased tubes from a muffler shop and simply welded the pieces together. Ho did not have any engineering background; he worked in the shipping department at Injen before he started making intakes. Injen’s R&D department consisted of two people.
Air intake systems are purchased primarily by car owners who like to “soup up” their cars. Besides Injen and Fujita, a few other companies also make air intake systems. In many instances, more than one manufacturer sells air intakes to the same customer (i.e., the automotive parts dealer).
In late 1997, Louie asked Takashima if he was interested in starting an air intake company with the Delgados. Takashima eventually agreed, and Injen was formed in April 1998. Takashima was issued 12,000 shares in exchange for his skill and service. The other 48,000 shares were issued to Manuel. In April 1999, Takashima, Louie and Ron were elected as directors, and Takashima was elected as vice president.
When Manuel resigned, Ron became the president and received the majority of the company’s shares (43,200). Louie received the remaining shares (4,800). The first air intakes sold by Injen were produced by copying Akimoto’s product line. Injen also copied air intakes made by another company.
B. Agreements
In January 2000, Takashima signed a buy-sell agreement. In consideration for the 12,000 shares of Injen stock, Takashima agreed not to dispose of his shares without obtaining the prior written consent of Injen and all other shareholders, unless written notice was first given to Injen.
In February 2000, Takashima signed a confidentiality and nondisclosure agreement (NDA). Takashima agreed: “The Employee will not, either during the period of employment or thereafter, except as authorized by [Injen] in writing, disclose to others, use for his own benefit or otherwise appropriate, copy or otherwise reproduce, or make notes of any trade secrets, confidential information, or any other knowledge or information (other than that which is public knowledge) or relating to any of the following.” The NDA described the types of information it covered.
Under the NDA, upon termination of the relationship between Injen and Takashima, he was obligated to “deliver to [Injen] all records, data, memoranda, models, manuals, notes and other materials of any nature” that were in his possession or control that related to the matters specified in the NDA. Takashima also agreed to keep in “strictest confidence” the information he came to possess during his employment. The NDA provided for equitable relief as well as the recovery of attorney’s fees and costs of legal action initiated in response to a violation of its terms.
C. Takashima’s Decision to Leave Injen
After Injen was formed, Takashima became more and more dissatisfied with his position there. Ron was difficult to work with. Takashima was concerned that the Delgados were engaging in illegal conduct, which he described as tax fraud, making a fraudulent insurance claim and funneling income away from Louie so he could evade his child support obligations. At the beginning of 2005, Takashima decided to leave Injen as it was not a place where he wanted to stay.
When Takashima decided to leave Injen, it was not his goal to start a competing company. Rather, his desire was to sell his shares and start an internet-based exporting company in Japan. To that end, Takashima registered a domain name for the company (JAPANTOYOU.COM) on January 14, 2005, and his brother Russell prepared logos and a sample web page for that company in January and February respectively.
Takashima disclosed his plans to sell his shares and leave Injen to Greg Gill, a friend in the automotive industry. In March 2005, Gill told Takashima that Jay Kim, a friend of Gill’s, might be interested in buying the shares. After talking with Kim on the phone on March 10, Takashima met Kim for the first time at a trade show in Kansas City on about March 20. Although Takashima and Kim discussed the possibility of forming an air intake company, there was no agreement to start a new intake company. Takashima resigned from Injen when he returned from the trade show on March 22.
Takashima hoped Ron would pay a fair price for his shares so he could pursue his goal of starting the exporting company in Japan. The negotiations were not successful. As a result, Takashima did not have the capital to move to Japan and start the exporting company. Takashima considered two options -- working for an established company (such as K&N) or starting a new intake company.
D. Fujita
Jay Kim is the sole owner of Fujita. Fujita is a company that competes with Injen. The decision to start Fujita was an evolving process. Even though Takashima and Russell quickly registered proposed domain names and logos to show their interest and ability to Kim, there was no commitment by Kim to start an intake company until several weeks after Takashima left Injen. At one point, Russell was so unsure of Kim’s commitment, Russell took a job at a clothing company. Takashima continued to pursue other options (such as interviewing with K&N on April 19) before Kim committed to going forward.
Kim also owned Tornado, another company that sells automotive products. Although Tornado was a named defendant, the court granted its motion for summary judgment and entered judgment in its favor before trial.
When Takashima left Injen, Fujita did not exist; its articles of incorporation were not filed until mid-April 2005. Fujita did not obtain its premises until May or June of 2005, and it did not start to sell air intake systems until that October.
E. Computer Information
Takashima regularly worked at home using a desktop computer there. Takashima also used a laptop computer when he worked on the road and occasionally used the laptop when he worked at home. Ron knew Takashima used his home computers to conduct business on behalf of Injen. As administrator for the e-mail accounts at Injen, Takashima had access to other employee’s e-mails. Both Ron and Louie exchanged work-related e-mails with Takashima while he was out of the office. At no time did anyone from Injen request Takashima to remove any Injen information from his home computers.
The court found there was nothing inappropriate about Takashima’s use of home computers for Injen-related work. Because Takashima worked at home, he connected his work computer to his home computers. The court found not credible Ron’s claim he was not aware of that arrangement. The court also found not credible the claim the Delgados were shocked by the extent of the information Takashima had on his home computers.
After Takashima resigned from Injen, Injen hired Michael Bandemer, a forensic computer expert, to examine the two home computers (laptop and desktop) used by Takashima. Takashima had turned his home computers over to Injen to examine. The home computers contained thousands of Injen e-mails dealing with every aspect of its business. Many of the e-mails were UPS tracking documents.
DISCUSSION
I. Introduction
Injen contends: Takashima violated his director duties by soliciting employees to leave Injen; Takashima wrongfully retained and used Injen information following his departure from Injen; Takashima wrongfully converted Injen’s valuable trade secrets; Takashima’s subsequent production of a copy of Injen’s information did not absolve him of liability for his wrongdoing; Injen was entitled to recover damages from all defendants; and Injen is entitled to other relief as a result of defendants’ wrongful conduct.
“Generally, appellate courts independently review questions of law and apply the substantial evidence standard to a superior court’s findings of fact. The substantial evidence standard for review has been described by our Supreme Court as follows:¶ ‘Where findings of fact are challenged on a civil appeal, we are bound by the “elementary, but often overlooked principle of law, that . . . the power of an appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted,” to support the findings below. We must therefore view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor in accordance with the standard of review so long adhered to by this court.’ [¶] The substantial evidence standard applies to both express and implied findings of fact made by the superior court in its statement of decision rendered after a nonjury trial.” (Citations & fn. omitted.) (SFPP v. Burlington Northern & Santa Fe Ry. Co. (2004) 121 Cal.App.4th 452, 461-462.)
Injen does not contend the court’s factual findings are not supported by substantial evidence; rather it claims uncontroverted evidence supports its arguments. As did defendants, we experienced difficulty in determining which of its 16 causes of action Injen claims the court erred in deciding. During the trial, the court asked Injen to provide it with an index to its causes of action and direction on what Takashima wrongfully copied. Presumably Injen did so in its closing argument, but that argument is not included in the record on appeal.
We remind Injen that: “This court is not required to discuss or consider points which are not argued or which are not supported by citation to authorities or the record.” (MST Farms v. C. G. 1464 (1988) 204 Cal.App.3d 304, 306; see also People v. Stanley (1995) 10 Cal.4th 764, 793 [If no legal authority “‘is furnished on a particular point, the court may treat it as waived, and pass it without consideration.’”]).) Injen’s brief is replete with conclusionary factual descriptions not supported by reference to the record.
II. Soliciting employees
Citing Bancroft-Whitney Co. v. Glen (1966) 64 Cal.2d 327, Injen claims Takashima violated his duties as an officer and director by offering the two R&D persons jobs with more salary with his new company. In Bancroft-Whitney, the court held a corporate officer who supplied a competitor with a list of the corporation’s employees and their salaries so the competitor could recruit those employees breached his fiduciary duties. (Id., at pp. 347, 350-351.) Bancroft-Whitney is inapposite. In the case at bar, the court found Takashima owed a fiduciary duty to Injen which ended when he resigned in March 2005. There was no evidence that while Takashima was a director he supplied a list of Injen employees to Fujita, which did not exist at that time. As stated in Bancroft-Whitney, “The mere fact that the officer makes preparations to compete before he resigns his office is not sufficient to constitute a breach of duty. It is the nature of his preparations which is significant.” (Id., at p. 346.)
In its summary of facts, Injen identifies the two solicited employees as Byron Leggett and Paul Ho. Takashima admitted he had talked to those employees about leaving Injen. However, in order to prove a breach of fiduciary duty, Injen had to prove “damage proximately caused by that breach.” (Mosier v. Southern Cal. Physicians Ins. Exchange (1998) 63 Cal.App.4th 1022, 1044.) Neither employee left Injen. Accordingly, as found by the trial court, Injen was not injured.
In its fact summary, Injen lists Takashima’s attempts to sell his shares as a breach of his fiduciary duties, but it does not raise that issue in its discussion. Takashima did not sell his shares and still owned them at the time of trial. The court found that neither Takashima’s discussions with Leggett and Ho nor his attempts to sell his shares constituted a breach of his fiduciary duty.
III. Injen Information
Injen claims that by wrongfully retaining and using Injen information after his departure from Injen, Takashima violated his duties under the NDA, violated his fiduciary duties, and violated the Computer Fraud Act.
A. The NDA
Injen argues the court’s conclusion Takashima did not breach the NDA does not hold up because he used Injen information to completely replicate Injen’s intake line without the benefit of an R&D department. It is difficult to discern the specific information to which Injen is referring.
Injen does not cite any evidence to support its conclusion that Fujita completely replicated Injen’s intake line. In addition, whether viewed as confidential information which Takashima agreed not to disclose under the NDA or a trade secret, the essential ingredient is that the information was not known to the public. In discussing trade secrets, the court listed as alleged trade secrets customer lists, pricing lists and air intake systems.
By finding Injen’s client list was on its website and in trade journals and Injen’s discount prices were provided to dealers, the court found those lists were public knowledge. On appeal, Injen claims the court ignored its secret client list. The court expressly ruled Injen could not adduce evidence of such a list, supposedly obtained from Takashima’s computers, because Injen had stated it was not going to introduce a client list. Injen refers to a call Ron received from one customer on its “secret list.” Ron stated the customer was listed on Injen’s website, but the name and phone number of the individual who contacted him were not. Injen claims that besides its retail and manufacturers’ discounts, it offered steeply discounted prices to specific dealers, but there was no evidence of what those special discounted prices were or that Fujita used them. Ron admitted Injen changed it prices after Takashima left.
The only evidence cited by Injen that Takashima used Injen’s vendor information was exhibits 785 and 556 which pertain to Rep Connection, a company which solicited Injen’s business and from which Fujita later purchased decals. Ron claimed neither Takashima nor Russell gave him the information about that vendor. Russell testified when he was contacted by Rep Connection, which had better prices for decals than Injen’s current vendor, he passed that information on to Ron.
In sum, Injen did not establish that Takashima used Injen’s customer, pricing or vendor lists.
The court found that air intake systems are simple, uncomplicated products that improve a car or truck slightly and that sales and marketing are more important than R&D in the air intake business.
The parties stipulated Fujita developed 15 of its intakes by reverse engineering Injen products; a practice that Injen itself had used when it started in business as the court noted. (See Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1669 [“Proof that defendant’s use resulted from independent derivation or reverse engineering is evidence that there was no improper use on its part.”]; People v. Gopal (1985) 171 Cal.App.3d 524, 533 [“‘[R]everse engineering’ is an accepted and lawful practice in industry. It involves starting with a known product and working backwards to discover the process by which it was developed and manufactured.”]; Badger Meter, Inc. v. Grinnell Corp. (7th cir. 1994) 13 F.3d 1145, 1155 [“Competitors are generally privileged to copy one another’s products because consumers benefit from the option to buy a copy that has ‘some added premium (e.g., faster delivery, cheaper pricing)’ provided by the competitor. In general, protection from copying is extended only when competitor’s freedom to copy would in some way harm consumers.” (Citations omitted.)].)
Fujita had over 100 air intake applications.
Injen asserts Takashima did not comply with the NDA because he did not deliver all the information on his computers to Injen after his termination and the offending conduct was admitted or uncontroverted. Injen does not identify the allegedly offending conduct. The court found Ron knew Takashima used his home computers for work and no one from Injen asked Takashima to remove any information from his computers. The documents on the computers were work-related, e.g., including thousands of e-mails, many of which were UPS tracking documents. However, the NDA was limited to confidential matters, and Injen does not specify what particular documents on Takashima’s computers were covered by the NDA.
The court and Injen describe that information as consisting of 10,000 e-mails.
Once the lawsuit was under way, Injen asked Takashima not to delete the information on his computers. The NDA required Takashima to deliver information upon termination, and the court found he did so by turning over his computers to Injen for examination. Now, not having established Takashima retained any confidential information, Injen is not entitled to an order for Takashima to return that unidentified information.
B. Fiduciary Duty
Citing Daniel Orifice Fitting Co. v. Whalen (1962) 198 Cal.App.2d 791, Injen argues Takashima violated his duties as a director and officer because it was undisputed he used Injen information to benefit Fujita and because he secreted information after he decided to leave Injen. Daniel Orifice is inapposite; in that case, the court concluded an officer violated his fiduciary duties because he had designed an improvement to his employer’s product, but had not disclosed the improvement to his employer, and then used the improved version to start a competing company. (Id., at pp. 797, 800.) Fujita’s competing air intake systems were developed after Takashima left Injen.
Injen does not identify the allegedly secreted information nor cite any evidence Takashima secreted information after he decided to leave. In addition, the court impliedly rejected the argument Takashima secreted information instead finding he stored work-related Injen information on his computers as part of his duties at Injen. The court also found Injen knew Takashima used his home computers for work and did not ask him to remove any information.
C. Computer Fraud Act
Injen claims Takashima violated the Computer Fraud Act because he acted in excess of his authority by accessing information (via his home computers) he did not need to perform his duties. (18 U.S.C., § 1030(a)(4).) Injen suggests the unauthorized access is shown by the fact Takashima quit when that access was terminated and he later erased the trail of the information he transferred by deleting the Injen profile from his computers rendering impossible the task of reconstructing. Takashima’s access was terminated after he announced his resignation. Takashima deleted the profile so he would not continue to receive Injen e-mails. Deleting the profile did not delete the e-mails already on his computers. The court impliedly found Takashima’s access was not unauthorized, but necessary because he was a director/officer and by the nature of his sales position.
Moreover, Injen does not point to any foundational evidence that the Computer Fraud Act was applicable. In order to bring a civil action under the Act, the party bringing the action has to prove the computer was used in interstate or foreign commerce/communication and involved an interstate or foreign communication. (18 U.S.C. § 1030(e)(2)(B); § 1030(a)(2)(C).)
IV. Conversion of Trade Secrets
“[T]he definition [of a trade secret] consists of three elements: (a) information (b) which is valuable because unknown to others and (c) which the owner has attempted to keep secret.” (ABBA Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 18.) A customer list can be a trade secret. (Ibid.) Civil Code section 3426.1, subdivision (d)(1) defines “trade secret” as information that “[d]erives 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.”
Injen contends Takashima wrongfully converted its trade secrets by taking its customer list and confidential customer information, its discount pricing, sales and financial information and using that information to “knock off” or clone Injen’s applications and sell those applications to Injen’s customers using its pricing information. As evidence for that proposition, Injen claims the exhibits reveal Fujita created its product line and established its prices before it had an R&D department.
Witnesses testified the air intakes of Injen and Fujita were similar; another witness testified the air intakes were different. Paul Ho testified Fujita used different filters, clamps and hoses. Brian Dawson, a witness for Injen under Evidence Code section 776, testified how he developed the air intakes for Fujita. Noticeably missing from Injen’s case was any expert testimony to assist the court in determining whether the intakes had been improperly duplicated much less whether such a duplication would involve the use of a trade secret. When Injen started its business, it also reversed engineered some of its air intakes.
The court found Injen did not prove the existence of any trade secret used by Takashima. As discussed above, the alleged trade secrets were generally known to the public or to others in the industry.
V. Other Issues
As Injen has not shown on appeal that the court erred in entering judgment for defendants, we need not address his contentions Takashima’s production of a copy of Injen’s information (by turning over his computers to Injen) did not absolve him of liability for wrongdoing, defendants conspired to unlawfully compete with Injen, and Injen proved it was entitled to damages and other relief.
DISPOSITION
The judgment is affirmed. Defendants to recover costs on appeal.
We concur: PERLUSS, P.J. ZELON, J.