Opinion
H043081
12-14-2018
LEADFACTORS, LLC, Plaintiff and Appellant, v. CISCO SYSTEMS, INC., Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Santa Clara County Super. Ct. No. 1-13-CV-247926)
Plaintiff Leadfactors, LLC (Leadfactors) appeals from a judgment entered in favor of defendant Cisco Systems, Inc. (Cisco) in this action for misappropriation of trade secrets and breach of contract. Leadfactors contends that the court erred by sustaining Cisco's demurrer on the breach of contract cause of action without leave to amend and by summarily adjudicating the misappropriation claim. We conclude that the demurrer was properly sustained but that triable issues of fact exist which defeat the motion for summary judgment. Accordingly, we must reverse the judgment.
Background
We summarize the facts underlying this action by assuming the truth of all properly pleaded allegations of breach of contract, as it was this cause of action to which the superior court sustained Cisco's demurrer. (Heckart v. A-1 Self Storage, Inc. (2018) 4 Cal.5th 749, 753.) As to the trade secrets claim, however, the superior court granted summary judgment; accordingly, we relate the material facts based on the parties' separate statements of undisputed facts and the accompanying evidence that was in the record before the lower court. (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 716-717 (Wilson).)
Our review of this proceeding is in no way facilitated by the many errors in Cisco's assertions of fact. It frequently misrepresents facts, misquotes contract provisions, and, most egregiously, fails to support factual statements with citations to the volume and page in the record where the fact appears. Given an extensive record comprising more than 3,200 pages, we expect the parties to comply with California Rules of Court, rule 8.204(a)(1)(C), by supporting "any reference to a matter in the record by a citation to the volume and page number of the record where the matter appears." (Italics added.)
Because " '[t]here is no duty on this court to search the record for evidence' [citation], an appellate court may disregard any factual contention not supported by a proper citation to the record." (Grant-Burton v. Covenant Care, Inc. (2002) 99 Cal.App.4th 1361, 1379 (Grant-Burton), italics omitted; accord, Villanueva v. Fidelity National Title Co. (2018) 26 Cal.App.5th 1092, 1110, fn. 8 ["When a brief fails to refer to the record in connection with the points raised on appeal, the appellate court may treat those points as having been waived [citations], ignore unsupported contentions [citation], or strike portions of the brief entirely [citation.]"].) Thus, although we could deem Cisco's arguments forfeited (Alki Partners, LP v. DB Fund Services, LLC (2016) 4 Cal.App.5th 574, 589 (Alki Partners), we will instead disregard all factual assertions and arguments that are not supported by the necessary citations to the record. (Cf. Aguimatang v. California State Lottery (1991) 234 Cal.App.3d 769, 796 [rejecting appellants' references to trial briefs where they apparently expected the reviewing court "to ferret through 1,400 pages of summary judgment papers in order to locate the challenged evidence"]; Jumaane v. City of Los Angeles (2015) 241 Cal.App.4th 1390, 1406 ["Certainly, we cannot undertake an independent search of this record, which includes 17 volumes of the reporter's transcript and five volumes of the clerk's transcript"].)
The issues before the court arose from negotiations between Cisco and ConnectBeam, Inc., a startup founded in 2005 by Puneet Gupta to develop "social enterprise software." According to the third amended complaint, ConnectBeam was the first integrated social software platform that combined "social bookmarking, tagging, social networking, expertise location and live profiles, along with social search." ConnectBeam was dissolved in 2010 and replaced in that year by plaintiff Leadfactors, also formed by Gupta.
Toward the end of 2006 Cisco contacted ConnectBeam to learn more about ConnectBeam's "product offerings." ConnectBeam representatives demonstrated those "offerings" and answered several technical questions. In late 2007 or early 2008 Cisco contacted ConnectBeam again to continue discussions. At the end of April or early May of 2008, ConnectBeam and Cisco entered into a "Master Mutual Nondisclosure Agreement" (NDA), prepared by Cisco. The agreement was intended to protect confidential information from disclosure to anyone except authorized employees and contractors. Paragraph 9 of the NDA stated that the party receiving confidential information "shall not reverse-engineer, decompile, or disassemble, modify or copy (except for making a single back-up copy) any software disclosed under this Agreement. . . ." A supplement to the NDA allowed Cisco to use ConnectBeam's confidential information for the sole purpose of allowing Cisco to decide whether ConnectBeam was "a suitable vendor for Enterprise Tagging," more specifically including "Search, Tagging, social bookmarking, rating and expertise."
The term "Confidential Information" was defined to include "information regarding each Party's products, services, product designs, plans and roadmaps, prices and costs, trade secrets, know how, inventions, development plans, techniques, processes, programs, schematics, software, data, customer lists, financial information, sales and marketing plans, business opportunities, personnel data, research and development activities, and pre-release products . . . or any other information which the receiving Party ('Receiving Party') knows or reasonably ought to know is confidential, proprietary or trade secret information of the disclosing Party . . . ."
Of particular significance to the subsequent breach-of-contract claim was paragraph 13.2, which stated, "The parties are independent contractors. Neither this Agreement nor any right granted hereunder shall be assignable or otherwise transferable."
ConnectBeam was already obligated to Square 1 Bank under a "Loan and Security Agreement," executed in September 2007, and an amendment to that agreement was executed in November 2008. To secure repayment of the loan, ConnectBeam pledged a continuing security interest in its collateral. In the 2008 amendment "Collateral" was defined as "all of Borrower's right, title, and interest in and to the property described on Exhibit B attached hereto and all Negotiable Collateral and Intellectual Property Collateral to the extent not described on Exhibit B, except to the extent any such property (i) is nonassignable by its terms without the consent of the licensor thereof or another party (but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, 9406 and 9408 of the [Uniform Commercial] Code) . . . ." Exhibit B, as amended, described "Collateral" as all of ConnectBeam's personal property, including "general intangibles (including patents, trademarks, copyrights, goodwill, payment intangibles and software) . . . ." "Intellectual Property Collateral" was defined to include "(b) [a]ny and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held. . ." and "(d) [a]ny and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above . . . ."
Over the following six months Cisco and ConnectBeam attended many meetings at which ConnectBeam disclosed details of its "Trade Secret Technology" and other confidential information, including product features and methodology. Two representatives from Cisco's Network Computing Business Unit visited ConnectBeam's headquarters to learn more about ConnectBeam's technology and "product roadmap." By December 2008, however, Cisco's communications with ConnectBeam had decreased in frequency, and by early to mid-2009, Cisco had stopped communicating with ConnectBeam altogether. ConnectBeam's board of directors was unable to sell ConnectBeam's assets, and by the end of 2009 it had laid off all of its employees. Having ceased transacting business, the company was authorized for dissolution in January 2010 and was officially dissolved in December 2010. Square 1 acted on its security interest in ConnectBeam's "Intellectual Property Collateral" by storing ConnectBeam's source code and maintaining the secrecy of its confidential information.
In June 2010, Gupta attended a conference at which Cisco "officially launched" its new product, "Quad." While watching a demonstration of Quad on June 15, Gupta noticed that it had several features that "embodied and/or were derived from the Trade Secret Technology and the confidential Information that ConnectBeam had disclosed in confidence to Cisco."
Two months earlier, in April 2010, Gupta had formed Leadfactors partly as an attempt to restart ConnectBeam. On September 27, 2012, Leadfactors entered into an Asset Purchase Agreement with Square 1 in which the bank sold all of its "rights, title and interest in and to any and all ConnectBeam software source code" and specified assets of ConnectBeam. In an attachment to the bill of sale, Leadfactors and Square 1 added to the purchased property "all general intangibles, including patents, trademarks, copyrights, goodwill, payment intangibles, software and, to the extent [Square 1] has a security interest therein, any claims or causes of action for the misappropriation or improper use of same."
Leadfactors and Gupta initiated this action on June 13, 2013, alleging misappropriation of trade secrets. In a separate complaint filed July 9, 2013, they alleged breach of the NDA. Between September and December Gupta was removed as plaintiff in the first amended complaint for misappropriation of trade secrets and in the second amended complaint for breach of contract. In November 2013 the superior court consolidated the two cases.
The first amended complaint for breach of contract and the second amended complaint in the consolidated action were met with demurrers, which were sustained with leave to amend in November 2013 and February 2014 respectively. On the first occasion the court observed that Leadfactors had not alleged that it was a successor in interest to ConnectBeam, and that it had not acquired any rights to damages because assignment of those rights was precluded under the NDA. In the second demurrer ruling the court again cited paragraph 13.2, the nonassignment provision, of the NDA.
In its third amended complaint Leadfactors alleged that Cisco had "improperly used and disclosed" ConnectBeam's Trade Secret Technology and its confidential information in the design and manufacture of its Quad product and another product, WebEx Social. Leadfactors further represented that it was the successor in interest to ConnectBeam. In addition to misappropriation of trade secrets in the first cause of action, Leadfactors alleged that Cisco had breached the NDA (1) by using ConnectBeam's confidential information without ConnectBeam's consent and for an improper purpose and (2) by disclosing the confidential information to parties other than those permitted employees and contractors who had obligations to maintain confidentiality. Cisco had then launched and demonstrated Quad at the June 2010 conference and offered it (and later, its "rebrand[ed]" version, WebEx Social) for sale without ConnectBeam's consent. Leadfactors sought damages, a permanent injunction against further breach, disgorgement of Cisco's profits, and a constructive trust upon all assets and profits derived from Cisco's misappropriation of ConnectBeam's trade secrets.
Cisco again demurred, this time only to the second cause of action for breach of contract. Cisco's primary argument was that the NDA prohibited the assignment of a right to sue for breach. Leadfactors responded that under a reasonable interpretation of the nonassignment clause a cause of action for breach was excluded from the restriction. The superior court disagreed with Leadfactors, however, ruling that the nonassignment clause was unambiguous and that it applied to the right to bring suit for either damages or injunctive relief. The court further stated that Leadfactors, "hav[ing] been given several chances to amend its pleading to state a valid breach of contract cause of action," had failed to show how further amendment would cure the defective pleading.
Cisco brought its challenge to the misappropriation claim on August 31, 2015, through its motion for summary judgment. Cisco's primary argument was that the claim was barred by the three-year statute of limitations prescribed in Civil Code section 3426.6. According to Cisco, ConnectBeam's assignee could bring only those claims that were not subject to defenses that would have been available to Cisco had ConnectBeam brought the claim. Cisco asserted that it was undisputed that "ConnectBeam suspected Cisco of trade secret misappropriation as early as March 2009 and elected not to pursue its claims" because it was hoping Cisco would buy the company. Had ConnectBeam executives investigated their suspicions, they would have learned by June 2009 that Ciscopedia, an additional product identified in discovery, was (according to Gupta) " 'a blatant copy of ConnectBeam's IP.' " Yet another product identified by Gupta as embodying ConnectBeam's trade secrets, Cisco Pulse, was publicly disclosed by October 2009. And Quad itself was promoted and demonstrated in November 2009.
The superior court agreed with Cisco that the claim was barred by the statute of limitations. The court found that "by no later than March 2009 ConnectBeam management personnel suspected that Cisco had 'acquired' its trade secrets for an improper purpose" and that ConnectBeam had "failed to properly protect its trade secrets by sharing them with Cisco without any firm commitment on Cisco's part." From the ensuing judgment on November 18, 2015, Leadfactors brought this timely appeal, challenging both the demurrer ruling and summary judgment.
Discussion
1. Principles of Review
Only Leadfactors directly addresses the standards applicable to appellate review of orders sustaining demurrers and granting summary judgment. A demurrer is properly sustained when the complaint "does not state facts sufficient to constitute a cause of action." (Code Civ. Proc., § 430.10, subd. (e).) On appeal, the reviewing court examines the complaint de novo to determine whether it alleges facts sufficient to constitute a viable cause of action. As noted earlier, "we assume that the complaint's properly pleaded material allegations are true and give the complaint a reasonable interpretation by reading it as a whole and all its parts in their context. [Citations.]" (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125 (Moore).) We do not, however, assume the truth " 'of contentions, deductions, or conclusions of fact or law.' " (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) We also may take judicial notice of attached documents and admissions in prior sworn statements and pleadings that may conflict with the allegations of the complaint at issue. (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400.) Thus, "a complaint's allegations may be disregarded when they conflict with judicially noticed discovery responses." (Bockrath v. Aldrich Chemical Co. (1999) 21 Cal.4th 71, 83.)
After reviewing the allegations of the petition, the accompanying exhibits, and the matters properly subject to judicial notice, we determine whether the petition states a cause of action as a matter of law. (Cf. Moore, supra, 51 Cal.3d at p. 125.) Finally, if the lower court has sustained the demurrer without leave to amend, as here, we decide whether there is a reasonable possibility that the defect can be cured by amendment. The burden is on the plaintiff to show that an amendment would cure the defect. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)
Summary judgment rulings are likewise reviewed independently. We consider " ' " ' "all the evidence set forth in the moving and opposing papers except that to which objections were made and sustained." ' [Citation.] We liberally construe the evidence in support of the party opposing summary [adjudication] and resolve doubts concerning the evidence in favor of that party. [Citation.]" [Citation.]' " (Schofield v. Superior Court (2010) 190 Cal.App.4th 154, 156-157, quoting Wilson, supra, 42 Cal.4th at pp. 716-717; Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860 (Aguilar).) 2. Demurrer Ruling on the Contract Claim
The premise of both Cisco's demurrer and the court's ruling sustaining it was that the NDA contains an unambiguous clause precluding assignment of all rights, including the right to sue for damages or injunctive relief upon a party's breach. As the court recognized, contractual language must be interpreted in a manner that gives force and effect to every provision. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 473.) "The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties. [Citations.] The mutual intention to which the courts give effect is determined by objective manifestations of the parties' intent, including the words used in the agreement, as well as extrinsic evidence of such objective matters as the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent acts and conduct of the parties." (Id. at pp. 473-474; see (Civ. Code, § 1636 ["A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful"].)
The parties diverge even in their description of the NDA's purpose. According to Leadfactors, it was to "preserve the parties' selection of the person with whom they contract and to ensure performance by the person of their choosing." In its view, "[a]ssignment of a claim for breach of the NDA would not violate that purpose." Cisco, however, emphasizes the intent to protect its own confidential information from disclosure to third parties (such as Leadfactors): "Cisco never agreed or intended that such information, or any rights related to the NDA, could end up in the hands of another company that later purchased assets from ConnectBeam. Absent its express permission, Cisco did not want its confidential information shared with anyone." Neither party's personal motivations for entering into the NDA displace the stated purposes of the agreement, (1) to enable Cisco to decide whether ConnectBeam was a "suitable vendor for Enterprise Tagging within CBT and CCIT (Communication & Collaboration IT)" and (2) to allow ConnectBeam to offer solutions based on Cisco's needs and requirements.
The disputed provision stated, in paragraph 13.2: "Neither this Agreement nor any right granted hereunder shall be assignable or otherwise transferable." On appeal, Leadfactors renews its argument that the targeted clause applies strictly to rights granted under the NDA; and because the right to sue for breach is not granted but is "implied in every contract," ConnectBeam preserved its chose in action, which Leadfactors later acquired from Square 1. Leadfactors relies on Trubowitch v. Riverbank Canning Co. (1947) 30 Cal.2d 335, 344 (Trubowitch) and Balfour, Guthrie & Co. v. Hansen (1964) 227 Cal.App.2d 173, 186-188 (Balfour). Those cases, however, are not helpful. In Trubowitch the shareholders of a dissolved corporation carried on the business and sued the defendant seller of tomato paste to enforce an arbitration provision in the original sale contract between the seller and the corporation. A majority of the Supreme Court held that the contract provision barring assignment of the contract did not preclude assignment of a claim for damages resulting from the seller's failure to deliver the goods. Citing a treatise on contracts, the court reasoned that "in the absence of language to the contrary in the contract, a provision against assignment does not govern claims for money due or claims for money damages for nonperformance." (Trubowitch, supra, at p. 344.) Here, by contrast, as noted by the superior court in its ruling on the first demurrer, "there is language to the contrary in the contract."
Balfour pertained to a performance bond covering the defendant's construction on the owner's property of silos that turned out to be defective. It was the bond, not the contract between the owner and the defendant, that contained the language, " 'No right of action shall accrue under this bond to or for the use of any person other than the said Obligee [the owner, who assigned the claim to the plaintiffs].' " (Balfour, supra, 227 Cal.App.2d at p. 177.) That provision was held not to have precluded assignment of the owner's cause of action arising under the bond. (Id. at p. 188.) Thus, the plaintiffs were entitled to recover whatever damages the owner could have sought. (Id. at 187.)
Neither Trubowitch nor Balfour compels reversal in this case. The clause invoked by Cisco was specific: neither the contract nor any right granted thereunder was assignable or transferable. This restriction protected both of the contracting parties from unauthorized disclosure of their confidential information beyond the permitted disclosures to individuals of each party.
Leadfactors insists that the superior court gave inadequate recognition to the word "granted." Because the right to sue for nonperformance is an inherent part of any contract, it argues, that right need not be expressly granted in order to enforce the rights conveyed. Because only granted rights were nonassignable, Leadfactors believes that the right to sue remained available to it when ConnectBeam's collateral was transferred to it by Square 1. Leadfactors views the nonassignment clause as a "boilerplate" provision that barred only the exchange of contractual performance, not a claim for breach.
We are unconvinced. The NDA does grant, if impliedly, a right to recover damages: it refers to that right in paragraph 13.1, stating, "Each Party acknowledges that monetary remedies may be inadequate to protect Confidential Information and that a Disclosing Party may seek injunctive relief in the event of any threatened or actual breach of any of the obligations hereunder." Even if, as Leadfactors maintains, the right to sue is merely presumed or implied, as in every contract, the nonassignment provision did not preclude assignment of only expressly granted rights. Moreover, Leadfactors does not explain how it can enforce rights that were expressly confined to a predecessor entity. Without possession of ConnectBeam's contractual right to have Cisco keep the disclosed information confidential and adhere to its promise not to use that information for an unauthorized purpose, there is no substance to the NDA as it affects Leadfactors—and hence, nothing for Leadfactors to recover for a violation of that agreement.
Leadfactors further challenges the superior court's denial of leave to amend its third amended complaint. It acknowledges that a trial court's decision not to allow amendment was a matter within its discretion; as such, it may not be overturned absent abuse of that discretion. (Ott v. Alfa-Laval Agri, Inc. (1995) 31 Cal.App.4th 1439, 1448.) "The trial court abuses its discretion if it denies leave to amend when there is a reasonable possibility the defect in the pleading could be cured by amendment." (Bettencourt v. Hennessy Industries, Inc. (2012) 205 Cal.App.4th 1103, 1111; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 970-971.) Although amendment should be liberally allowed, it is a plaintiff's burden to demonstrate how his or her complaint can be amended to state viable causes of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; Newell v. State Farm General Ins. Co. (2004) 118 Cal.App.4th 1094, 1100.)
Leadfactors contends that the third amended complaint could have been amended to add the words "general intangibles" to several paragraphs of the pleading that describe the property transferred from Square 1 to Leadfactors. Such amendment, however, would not alter the conclusion that the nonassignment clause precluded transfer of all rights granted to ConnectBeam. As Cisco points out, "Square 1 Bank could not convey to Leadfactors what it did not have." As the suggested amendment would not have saved this cause of action, the superior court did not abuse its discretion by denying further leave to amend. 3. Summary Judgment of the Misappropriation Claim
We next consider whether the undisputed evidence produced in the moving and opposing papers compels adjudication of the cause of action for misappropriation of trade secrets as a matter of law. A trial court may grant a defense motion for summary adjudication of a cause of action if the defendant establishes as a matter of law that the period prescribed by the applicable statute of limitations has elapsed on the claim. (Code Civ. Proc., § 437c, subd. (f); Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 487.) " 'While resolution of the statute of limitations issue is normally a question of fact, where the uncontradicted facts established through discovery are susceptible of only one legitimate inference, summary judgment is proper.' " (Ibid., quoting Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112; County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 316.) On appeal, we review the record de novo and exercise our independent judgment regarding the application of the statute of limitations. (County of Santa Clara v. Atlantic Richfield Co, supra, at p. 316; see also McCoy v. Gustafson (2009) 180 Cal.App.4th 56, 107.)
As the moving party Cisco had the initial burden of showing that the misappropriation cause of action lacked merit because one or more elements could not be established or there was a complete defense to the claim. (Code of Civ. Proc., § 437c, subds. (o), (p)(2); Aguilar, supra, 25 Cal.4th at p. 850.) A defendant's failure to make this initial showing compels denial of the motion without examination of the opposing evidence. However, "if the moving papers make a prima facie showing that justifies a judgment in the defendant's favor, the burden shifts to the plaintiff to make a prima facie showing of the existence of a triable issue of material fact. Code of Civ. Proc. § 437c, subd. (p)(2); Aguilar, supra, 25 Cal.4th at p. 849." (DiCarlo v. County of Monterey (2017) 12 Cal.App.5th 468, 489.)
In determining whether the parties have met their respective burdens, "the court must 'consider all of the evidence' and 'all' of the 'inferences' reasonably drawn therefrom [citation], and must view such evidence [citations] and such inferences [citations], in the light most favorable to the opposing party." (Aguilar, supra, 25 Cal.4th at p. 843.) "There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Id. at p. 850, fn. omitted.) However, "a party 'cannot avoid summary judgment by asserting facts based on mere speculation and conjecture, but instead must produce admissible evidence raising a triable issue of fact. [Citation.]' [Citation.]" (Dollinger DeAnza Associates v. Chicago Title Ins. Co. (2011) 199 Cal.App.4th 1132, 1144-1145.)
Applying these settled precepts, we turn first to the allegations of the cause of action for misappropriation of trade secrets, since it is the pleadings that define the issues to be addressed in a summary judgment proceeding. Leadfactors alleged that the confidential information ConnectBeam provided to Cisco in 2008 included its Trade Secret Technology, which qualified as trade secrets within the meaning of Civil Code section 3426.1, subdivision (d). Knowing that it had a duty to maintain the secrecy of this technology, Cisco "improperly used and disclosed" it in the design, marketing, and sale of "at least the Cisco Quad and WebEx Social products."
"Trade secret" is defined in this provision as "information, including a formula, pattern, compilation, program, device, method, technique, or process, that: [¶] (1) Derives 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; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." (Civ. Code § 3426.1, subd. (d).)
In its motion for summary judgment Cisco relied on Civil Code section 3426.6, which allows a plaintiff three years to bring a misappropriation action "after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." Cisco asserted that it "cannot be disputed" that ConnectBeam suspected misappropriation by March of 2009, but made a "business judgment" not to pursue legal action at that time. Had ConnectBeam conducted a reasonable investigation of management's suspicions or "concerns," it would have discovered—only "a Google search away"—information about new Cisco products. According to Cisco, "In the months leading up to the June 2010 Enterprise 2.0 conference Cisco's public relations team was extensively promoting all aspects of Cisco's new collaboration technologies."
Cisco also disputed the characterization of the technology at issue as trade secrets. That argument is not renewed on appeal, however.
Cisco pointed out that a YouTube video of a demonstration of Ciscopedia was made available in June 2009, that a data sheet on Cisco Pulse was published in November 2009 describing its "tagging and tag cloud features," and that "ECP/Quad" was announced in November 2009, together with press releases and a demonstration video which was uploaded to YouTube that month. Ciscopedia and Cisco Pulse, however, were not the subjects of the misappropriation cause of action; moreover, whether those products were actually derived from ConnectBeam's trade secrets and whether Leadfactors should have discovered the similarity of their features are questions of fact that were not established in Cisco's moving papers.
To show that ConnectBeam suspected misappropriation by March of 2009 Cisco produced its "Separate Statement of Undisputed Material Facts," based on evidence derived from interrogatory responses, deposition testimony, declarations, and email correspondence between ConnectBeam and Cisco. Unfortunately, on appeal it neglects to refer us directly to that evidence, but merely cites the points and authorities in its own moving papers—if it provides a record citation at all. Those points and authorities in turn cited its separate statement of undisputed facts, which referred the court to declarations, exhibits, and transcripts. Some of that evidence is buried in the 16-volume appellant's appendix, while some important evidence does not appear to be found anywhere in the record. "[A]n assertion of fact on appeal carries no weight where the cited source is the same unsupported assertion made in the trial court, be it in the memorandum of points and authorities or stated by counsel at the hearing on the motion. An unsupported assertion below does not become a 'fact' on appeal simply by repetition." (Grant-Burton, supra, 99 Cal.App.4th at pp. 1378-1379. "Points and authorities are not presented under penalty of perjury. Matters set forth in points and authorities are not evidence . . . Evidence appears elsewhere—in deposition testimony, discovery responses, and declarations." (Alki Partners, supra, 4 Cal.App.5th at p. 590.) Even citing its statement of undisputed facts would have been insufficient; "citation to the supporting evidence is required, especially where, as here, some of the facts were disputed below." (State of California ex rel. Standard Elevator Co., Inc. v. West Bay Builders, Inc. (2011) 197 Cal.App.4th 963, 968, fn. 1.)
Nor does Cisco find purchase in repeatedly quoting the trial court's order stating what "the evidence shows." The order consists of a recitation of summary judgment standards and a factual finding that ConnectBeam personnel suspected misappropriation "by no later than" March of 2009. As our review of the motion is de novo, simply citing the trial court's statement of decision does not advance Cisco's position on appeal. "[T]he trial court's explanation of its decision—whether by order, statement of decision, judgment, oral pronouncement, or other form—is not evidence. Factual assertions on appeal cannot rest solely on citations to the decision of the trial court. It is the evidence supporting or opposing the trial court's decision that is important." (Grant-Burton, supra, 99 Cal.App.4th at p. 1379.)
In any event, we believe that the court's reasoning was directed at immaterial facts. It is immaterial, for example, that ConnectBeam personnel knew that the company's trade secrets had been revealed to Cisco; it deliberately shared that information. Thus, there is no benefit in relying on the court's finding that "Connectbeam personnel (including Mr. Gupta) knew by March 2009 that Connectbeam's trade secrets had been revealed to Cisco and they suspected at that point in time that Cisco would simply take those secrets for its own improper use rather than license them from or purchase Connectbeam. They then weighed their options and chose not to take legal action." (Italics omitted.) Based on an assumed theory of improper acquisition, the court concluded that "Cisco has shown . . . that by no later than March 2009 Connectbeam management personnel suspected that Cisco had 'acquired' its trade secrets for an improper purpose; use [sic] in the purported other avenues Cisco was going to pursue (including possibly in-house) rather than do business with or purchase Connectbeam and that Connectbeam had failed to properly protect its trade secrets by sharing them with Cisco without any firm commitment on Cisco's part."
Whether any personnel "suspected at that point in time that Cisco would simply take those secrets for its own improper use" is not the issue, because Leadfactors is not alleging misappropriation by acquisition. (Italics omitted & italics added.) As the court itself noted, it is the pleadings that define and limit the issues, "since it is these allegations to which the motion must respond." (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064; Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1258.) Leadfactors alleged that Cisco "improperly used and disclosed" ConnectBeam's Trade Secret Technology, knowing that it "had acquired the trade secret information under circumstances giving rise to a duty to maintain the secrecy of the trade secrets." This was misappropriation under Civil Code section 3426.1, subdivision (b)(2)(B)(ii), not misappropriation by improper acquisition, within the meaning of Civil Code section 3426.1, subdivision (b)(1), subdivision (b)(2)(A), or subdivision (b)(2)(B)(i).
The Uniform Trade Secrets Act defines "misappropriation" in section 3426.1 as follows: "(b) "Misappropriation" means: [¶] (1) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or [¶] (2) Disclosure or use of a trade secret of another without express or implied consent by a person who: [¶] (A) Used improper means to acquire knowledge of the trade secret; or [¶] (B) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was: [¶] (i) Derived from or through a person who had utilized improper means to acquire it; [¶] (ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or [¶] (iii) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (C) Before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake." (Italics added.)
Cisco repeatedly claims that before Leadfactors filed suit "Leadfactors' own counsel acknowledged that its claim was time-barred." This statement is specious. First, Cisco offers no reference to facts in the record to support the assertion. Second, it misstates the facts. As Leadfactors explains (with a supporting record reference), the attorney who suggested that the claim was time-barred was not Leadfactors' counsel at the time he made the statement but was only corresponding with Ian Watson. Third, the attorney's statement was based on a reported conference date that was off by one year; Gupta subsequently corrected the date of the conference from June 2009 to June 2010. Fourth, the attorney did not "acknowledge" that the claim was time-barred; he only questioned its timeliness, after being given the inaccurate date, by suggesting that it "may be barred." Fifth, an attorney's preliminary legal opinion is of no interest to the reviewing court in determining how the undisputed facts bear upon the issues raised.
Without citing material evidence supporting its position on appeal, Cisco has not convinced this court that it has a complete defense to the misappropriation cause of action or that Leadfactors would be unable to prove its allegations. What evidence we are provided (primarily by Leadfactors) does not establish that ConnectBeam suspected Cisco of having used its trade secrets without consent; an equally plausible inference is that ConnectBeam was concerned that Cisco, having "gained an extreme level of knowledge from [ConnectBeam]," might use ConnectBeam's confidential information. Charles Pendell, ConnectBeam's vice president of sales, testified on that point in his deposition: He said that he was concerned "that they were going to copy our technology. We were all concerned about it. We [i.e., the management team] talked about it a lot." Pendell therefore suggested a letter "advising that they have been exposed to our IP under nondisclosure." Cisco repeatedly characterizes this as a "cease and desist" letter, but Pendell's suggestion could just as readily have been to warn Cisco not to violate the NDA by misappropriating ConnectBeam's trade secrets. Likewise, Jim Long, chairman of the board at ConnectBeam, testified that the "fishiness" of Cisco's decision to go in-house related to "the feeling that . . . on one end that they were just—something else was going on and [sic] the other end that they were deliberately trying to, you know, suck us for information." It was, however, "just speculation, at least on my part." When asked whether he believed "that Cisco was deliberately trying to get your information so they could steal your IP," Long said he was "not in a position" to make that judgment; it was a possibility, but whether a strong or weak one, he did not know at that time. (Italics added.)
The testimony of Pendell and Long and the internal correspondence at ConnectBeam suggest that ConnectBeam executives had reason to be alarmed; ConnectBeam had shared important confidential information that they feared would be used by Cisco in violation of the NDA. Whether ConnectBeam actually suspected misappropriation that had already occurred, and whether Pendell's proposed letter was a demand to stop or only a warning, are questions of fact that remain unresolved. They are for a jury to decide, not a court on summary judgment.
Whether ConnectBeam should have discovered the alleged misappropriation is also a factual issue, which depends in part on (a) whether the alleged misappropriation had already occurred by March 2009 and (b) whether there were indications of misappropriation at that time which ConnectBeam personnel should have seen. Correspondence among ConnectBeam executives suggests that after learning that Cisco had decided to "build these capabilities in house," several questions were raised about the reasons for Cisco's decision. Jeffrey Dunn, a consultant and board member at ConnectBeam, did not seem to be suspicious on March 9, 2009, when he proposed a continued effort to persuade Cisco "to sign a deal and not do it in house." Sanjeev Sisodiya, the Chief Technical Officer of ConnectBeam, suggested that "[m]aybe the Cisco on Cisco solution has progressed to the point that it's now a viable option for them?" By late March and the beginning of April ConnectBeam was still trying to find out what had happened and whether to keep negotiating for a deal with Cisco. Dunn later advised his colleagues that Doug Dennerline of Cisco had explained to him that "there was another internal project similar to what [ConnectBeam] has with software that came to the attention of the IT group, and to stay between us, Doug said they, the IT group, was caught by surprise that this other project was going on. . . . Net net there is no opportunity in the IT Group." On March 26, anticipating a meeting the following Monday, Dunn imagined that the purpose would be to determine "whether the [ConnectBeam software] and assets could help meet Doug's Collaboration Group[']s requirements to help them get a [ConnectBeam] type product to market sooner. They must be evaluating [ConnectBeam] but I guess they must be looking at the internal [software] too." On April 1 Jim Long advised Dunn to make Dennerline aware that its internal project would not "do all the things [ConnectBeam] does." Long also suggested to his colleagues that they "see what happens on Monday" at the meeting "and then decide whether to take another stab on the IT side even though they have this other project." Although "[s]omething still doesn't smell right," Long discouraged further correspondence with "anyone on the IT side" until after the meeting.
Cisco makes much of Long's admonition to Gupta not to "play the 'you may be overlapping with our IP' card" in an upcoming meeting. Long explained in his deposition that he said that to Gupta because "we were still trying to work with them. We didn't have any—there was no real need or advantage to even bring it up . . . But, you know, we were still in the, gee whiz, maybe this isn't true. Maybe it's not dead yet, as Monty Python would say." Pendell, on the other hand, speculated that Long was "deathly afraid we'd make them mad and they wouldn't buy the company." But Pendell added, "There was no reason to raise that card. They were under a strong nondisclosure. There was no reason to really have to." Seeking clarity at Pendell's deposition, Cisco's attorney asked, "Jim Long, he was of the opinion that ConnectBeam should not press the issue with Cisco directly, warning them not to use ConnectBeam's intellectual property?" This question alone indicates that the concern was forward looking, that ConnectBeam considered issuing a warning, not a threat of action for past misconduct. And whether "overlapping with our IP" meant "stealing our trade secrets" is part of the determination a trier of fact must make.
In short, the evidence to which we are directed by Leadfactors is reasonably susceptible of a finding that ConnectBeam personnel were concerned that its trade secrets could and might be misappropriated by Cisco, but were "still trying" to work with Cisco to implement its software there. If ConnectBeam reasonably did not believe that its confidential information had already been used and disclosed improperly, then it had no duty to take legal action. It was for the trier of fact to make this determination. Because Cisco failed to meet its initial burden to show that there is no triable issue as to any material fact, it was not entitled to judgment as a matter of law.
As our Supreme Court pointed out, "It would be contrary to public policy to require plaintiffs to file a lawsuit 'at a time when the evidence available to them failed to indicate a cause of action.' [Citations.] . . . Indeed, it would be difficult to describe a cause of action filed by a plaintiff, before that plaintiff reasonably suspects that the cause of action is a meritorious one, as anything but frivolous. At best, the plaintiff's cause of action would be subject to demurrer for failure to specify supporting facts." (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 815.)
We express no opinion whatsoever about the likely success or failure of this cause of action should it reach a jury or court trial. --------
Disposition
The judgment is reversed. The trial court is directed to vacate the October 23, 2015 order granting summary judgment and enter a new order denying Cisco's motion on the first cause of action of the third amended complaint. The parties shall bear their own costs on appeal.
/s/_________
ELIA, ACTING P. J. WE CONCUR: /s/_________
MIHARA, J. /s/_________
DANNER, J.