Opposition_to_ex_parte_for_troOppositionCal. Super. - 4th Dist.July 26, 2018~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 STEPHENS FRIEDLAND LLP John B. Stephens, Bar No. 142718 Timothy A. Spivey, Bar No. 269084 2603 Main Street, Suite 350 Irvine, CA 92614 Telephone: (949) 468-3200 Facsimile: (949) 468-3201 Attorneys for Defendant C2 Wireless and Accessories LLC ELECTROMICALLY FILED Superior Court of Califarnia, County of Orange 08/23/2018 at 11:59:00 AM Clerk of the Superior Court By Sarah Loose, Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE, CIVIL COMPLEX CENTER INCIPIO, LLC Plaintiff, VS. C2 WIRELESS AND ACCESSORIES, LLC, a California Limited Liability Company, LUIS ECHEGARAY, VALENTINE LOPEZ, and KRISTEN RONEY, individuals, and DOES 1 through 25, inclusive, Defendants. CASE NO. 30-2018-01008219-CU-BT-CXC Assigned to: Hon. Peter J. Wilson DEFENDANT C2 WIRELESS AND ACCESSORIES LLC’S OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER, ORDER TO SHOW CAUSE RE PRELIMINARY INJUNCTION, AND EXPEDITED DISCOVERY DATE: August 23, 2018 TIME: 1:30 p.m. DEPT: CX102 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O N n e A W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IL III. TABLE OF CONTENTS Page INTRODUCTION Loot ee sae seers eee sae sree 1 STATEMENT OF FACTS ooo cesses 2 A. C2’s Business and HiStOTY .....cc.coiiiuiiiiiiiiiiiiiniiieeieee sce 2 B. C2 Begins Developing, Designing, and Manufacturing Its Own IPCC) csvset eos sass 5 5 RA SE SAR SS A 3 Cc. Former Employees Leave Incipio for C2 Because Incipio Was in Dire Financial Condition and Their Jobs Were Not Safe .......ccccccooeeviiiieiiininnicciecee. 3 D. C2 Repeatedly Instructs the Former Incipio Employees to Not Use Any Confidential or Proprietary Information of InCIpio .........ccccevveinieeiiiiiiniieniccieeee, 3 E. C2 Is Notified by Incipio that Confidential or Trade Secret Information May Have Been Taken and C2 Immediately Begins Investigation and Quarantine Efforts ........cccuvvieiiiiieiciiieee eee e e eee eee e e 4 F. C2 Continuously Assures Incipio that It Has Not Used, Nor Will It Ever Use, Any Incipio Confidential Trade Secret Information ..........c.cccoceevieeneenen. 5 INCIPIO’S TRO APPLICATION MUST BE DENIED ......cccccoviiiiiiiiiniienieciececeee e 6 A. Incipio Has Not Shown Exigent Circumstances Justifying Ex Parte REET cn se sss swum so xamsman aman so sums acs am ass iss'ss 3a 245055450 S558 55.45 55358 S05 48 FRE SFE 43 5 6 B. Incipio Is Not Entitled to a TRO or Other Injunctive Relief Because C2 Did Not Commit Any WIrongdoing .........ccceeevuierriiemnieennieeeniieeenieee niece sine sse esas 7 1. The Information At-Issue Does Not Constitute Trade Secrets ...................... 7 2. C2 Has Not Used Any Incipio Trade Secrets ........ccoocueeueereinvieenieenecneenneenne 8 3. Incipio Cannot Prevail on Its Penal Code § 502 Claim Because C2 Did Not Access Incipio’s Computers Without Authorization .................. 9 4. Incipio Cannot Prevail on Its Unfair Competition Claim Because C2 Is Competing Lawfully .......cccooveeiiiiiiniiiniiiieeccecen 10 5. Incipio Cannot Prevail on Its Conversion and Interfaces Claims Because Incipio Did Not Present Any Evidence or Argument in IS TITIDIEL, cccsvsmrwnsoss eos 4 R54 A A 5 SARA SA SSH ER GR RE 5 11 C- The Order Incipio Seeks Would Violate California Public Policy ........c..cccceeneeee 12 D. The Balance of Equities Favors C2, suessasasssesnsmsssssmmen smnsess msss en som m sn ess sess 13 E, C2 Is Notified by Incipio that Confidential or Trade Secret Information May Have Been Taken and C2 Immediately Begins Investigation and Quarantine Efforts .........oeiiiiiiiiieciie cec eee eee eee eee seer ees 14 CONCLUSION cco este sree settee estes shee sabe eae esses saae sane ese enneens 15 TABLE OF CONTENTS ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Cases Page(s) Application Group. Inc. V. Hunter Group. Inc. (1998) 61 Cal. App.4th 881 ......cccovviivriiiniiiennen. 12 Central Valley General Hospital v. Smith (2008) 162 Cal. App.4th 501 ......ccccoviiiiiiiinniiiiieene 8, 10 City of Torrance v. Transitional Living Centers for Los Angeles, Inc. (1982) 30 Cal.3d 516........... 6 Continental Car-Na-Var Corp. v. Moseley (1944) 24 Cal.2d 104 ........cccovieeeeiiiieieeiieeeeen, 11,13 Edwards v. Arthur Anderson LLP (2008) 44 Cal.4th 937 .....ccoovouirieieeieeeeceeeee ee eee 11-13 Facebook, Inc. v. Power Ventures, Inc. (9th Cir. 2016) 844 F.3d 1058 .....ccvvvveeieiiieiiiieeeeeeeeeeees 9 FLIR Sys., Inc. v. Parrish (2009) 174 Cal. App.4th 1270 ......ccooiiiiiiiiiiiiiiieeieeeee c c 8, 10 Henry Schein, Inc. v. Cook (N.D.Cal. June 10, 2016) 191 F.Supp. 1072 .....cooviiiiiniinniirieens 12-13 O'Connell v. Superior Court (2006) 141 Cal. App.4th 1452 o.oo 6 Les Concierges, Inc. v. Robeson (ND Cal, April 27, 2009) 2009 WL 1138561 *2.....cccevvveinuneannen 8 LVRC Holdins LLC v. Brekka (9th Cir. 2009) 581 F.3d 1127 ..coeiiiiiiiiiniieecccieceseeece 9-10 Metro Traffic Control. Inc. v. Shadow Traffic Network (1994) 22 Cal. App.4th 853 .......ccocveennee. 12 Morlife, Inc. v. Perry (1997) 56 Cal. App.4th 1514 oii 7 ReadyLink Healthcare v. Cotton (2005) 126 Cal. App.4th 1006 ........ccoooviiriiiiiniiiiiiiieieeeieeeieeee 7 SASCO v. Rosedein Elc., Inc. (2012) 207 Cal. App.4th 837 ....uviiiiiiiiiiieeieeeeiteeeeere e 10 Schafer v. Superior Court (1986) 180 Cal. App.3d 305 ..cocumiiiiiiieiieeeee eee e 14 Silvaco Data System v. Intel Corp. (2010) 184 Cal. App.4th 210 ...oooviiiiiiiiiiiieeeeeee 7 Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425 o.com eee 7 Ware v. Merrill Lynch, Pierce Fenner & Smith, Inc. (1972) 24 Cal. App.3rd 35 ....ccooviiiiiiiiniienne 12 Whyte v. Schlage Lock Co. (2002) 101 Cal. App.4th 1443 ooo 8 Youngblood v. Wilcox (1989) 207 Cal.AppP.3d 1368 ......ooiiiiiieeiieieteeeeeteeeeee ee e 6 Statutes CIV. COE § 3426 oii sate sheets ee eae sate sees 7-8, 14 Code of Civil Procedure SECtion 526 ........c.cccoveeriiiiiiiiiiniienie eects sree sree sever enna 3,6 Code of Civil Procedure section 2019.210......c...couiiiiiniiinieiiecieeeee cece eee 14 Business and Professions Code section 16000 ...........cccccerviirriiinieiieiniiniie n eces seee eve eeeseeene 3 Penal Code SECTION S02 ......oouiiiiiiiiiiie eect eters eect cerca sabes ee sree sabe cease 3 TABLE OF AUTHORITIES ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 I. INTRODUCTION. Incipio, LLC’s (“Incipio”) Ex Parte Application for Temporary Restraining Order (the “Application”) is a transparent attempt to prevent a competitor, C2 Wireless and Accessories LLC (“C2”), from fairly competing in the upcoming Apple iPhone launch. Specifically, Incipio wants to prevent 13 former employees from making a living in their chosen field. Incipio’s requests are contrary to settled California law. To prevent C2 from competing, Incipio bases its Application on two false premises: (1) C2 has not previously been involved in manufacturing cellphone accessories, and (2) C2 is using Incipio’s confidential and trade secret information to start a new manufacturing operation. In truth, C2 has been designing cell phone cases since 2013 and manufacturing and selling cellphone accessories under its own brands since 2014. It has its own network of manufacturing plants, vendors and customers for its own products because C2 has been in the wireless business for ten years, and its CEO first started in the wireless business in 1994. C2 has no need for Incipio information to conduct its business, and C2 has not used any Incipio trade secrets. Indeed, upon being hired, the former Incipio employees were presented no-conflict policies in which they were specifically instructed not to use any confidential information from their former employer. Moreover, on June 28, 2018, C2’s CEO met with the former Incipio employees and instructed them not to use confidential information of Incipio. Further, since Incipio notified C2 that the former Incipio employees may be in the possession of Incipio confidential information, C2 hired a forensics expert to image all C2 laptops and desktops used by the former Incipio employees. C2’s attorneys have assured Incipio’s attorneys in writing that any Incipio protected information would not be used and has not been used. C2’s attorneys even proposed a stipulation that C2 would not use any Incipio protected information. Incipio does not inform the Court of these assurances. But preventing the use of Incipio’s trade secrets is not Incipio’s objective. Instead, it wants to restrain lawful competition. Incipio wants to stop C2 from competing in the iPhone launch through an improper and unsupported TRO. The requested TRO is a disguised competition prohibition that is contrary to California law. Incipio’s former employees are entitled to 1 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 employment of their choice. A prohibition on their working on any products that compete with Incipio would be tantamount to a non-compete restraint, which is per se illegal in California. Such a restraint would leave C2 shorthanded and greatly impact C2’s sales, design and manufacting units. There is no basis for such overbroad ex parte provisional relief. The Application must be denied. In addition, Incipio has not established any emergency justifying ex parte relief. Nor has it supported its generalized request for expedited discovery. Incipio has not identified its trade secrets as CCP 2019.210 requires prior to discovery, and it has not specified the discovery it seeks. II. STATEMENT OF FACTS. A. C2’s Business and History. C2’s founder, Jay Sachdeva (“‘Sachdeva”), has been involved in the wireless products industry for approximately 25 years. (Sachdeva Decl., 2.) Starting in 1994, Sachdeva began operating a retail wireless store that carried cell phone accessories. (Id.) Sachdeva has been involved with companies that have been a master distributor of AT&T products as well as operating 200 retail stores that sold cell phone accessories. (Id.) In the early 2000s, he was involved in a wireless accessory company that manufactured and sourced cell phone accessories from factories in China. (Id.) In 2007, Sachdeva moved to California and started C2 in 2008. (Sachdeva Decl., 3.) He first began selling C2 products door-to-door but eventually began distributing products for other companies. (Id.) Incipio was the first brand C2 distributed. (/d.) In 2009, Sachdeva first met defendant Valentine Lopez (“Lopez”), who worked for Incipio. (Id.) Sachdeva and Lopez would communicate two or three times per year over the years, often at trade shows, CES and industry get-togethers. (Id.) Sachdeva also had frequent contact with Joe Echegaray and his brother, defendant Luis Echegaray, who was the Incipio employee responsible for the C2 account. (/d.) From 2008 to 2012, C2’s revenues grew steadily. (Sachdeva Decl., 4.) In time, C2 became one of the world’s largest distributors of Samsung accessories in the United States. (Id.) 2 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 B. C2 Begins Developing, Designing, and Manufacturing Its Own Products. C2 has been in the business of selling its own branded product lines long before C2 hired the former Incipio employees. (Sachdeva Decl., 5.) In 2013, C2 hired an industrial designer and manufactured its own branded line of cellphone cases. (/d.) The brand was called Avivo, and C2 sells these products today. (/d.) C2 launched the Avivo products in 2014 and, since 2016, the revenue on the Avivo products has been around $1.9 million. (/d.) C2 also promoted an employee to director of product development to work on C2’s branded product. (I/d.) In January 2018, C2 hired a marketing firm to develop two additional brands for C2. (Id.) C. Former Employees Leave Incipio for C2 Because Incipio Was in Dire Financial Condition and Their Jobs Were Not Safe. As stated in more detail in the opposition filed by defendants Valentine Lopez, Kristen Roney, and Luis Echegaray (“Individual Defendants”), Incipio was experiencing major financial challenges, including being unable to meet customer product delivery schedules, inability to pay vendors, struggling to meet weekly operations costs, and laying off employees. C2 was also aware of Incipio’s struggles through its industry contacts and Incipio was late in filling C2’s orders. (Sachdeva Decl., 6.) In April 2018, Lopez approached Sachdeva about the possibility of he and other Incipio employees joining C2. (Sachdeva Decl., 6.) Given Incipio’s financial state, Sachdeva was not surprised Incipio employees were looking for other opportunities. (/d.) After a number of interviews and meetings, C2 extended offers to Lopez and 13 other former Incipio employees. These former Incipio employees started working at C2 on or about June 28, 2018. (/d.) D. C2 Repeatedly Instructs the Former Incipio Employees to Not Use Any Confidential or Proprietary Information of Incipio. As part of on-boarding, the former Incipio employees were presented C2’s No Conflict Policy, which specifically prohibits C2 employees from using confidential or proprietary information of former employers: [Y]ou understand that C2 Wireless and Accessories LLC expects you not to use any confidential information of any other party, including that of any former employers, 3 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 in the performance of your duties. That would include confidential marketing strategies, financial information and other proprietary information of any prior employer. Further, C2 Wireless and Accessories LLC does not engage in any unfair trade practices and requires that all its employees abide by that same code of conduct in the performance of their duties for C2 Wireless and Accessories LLC. If you have any questions as to whether a direction by C2 Wireless and Accessories LLC may cause you to violate any legal obligations you may have with respect to any duties of confidentiality you may have to any other person or company, or to violate any business codes of conduct applicable to you, you are required to contact the President of C2 Wireless and Accessories LLC immediately. (Sachdeva Decl., 18, Ex. 1.) On June 28, 2018, Sachdeva led an all-hands meeting with the former Incipio employees who were brought on board at that time. (Sachdeva Decl., 9.) During that meeting, Sachdeva specifically directed the employees not to use any confidential information obtained at Incipio or to bring any documents or data obtained at Incipio into C2. (Id.) All of the employees were provided with new C2 laptops, and Sachdeva made it clear that no Incipio data was to be uploaded on to the C2 laptops. (/d.) E. C2 Is Notified by Incipio that Confidential or Trade Secret Information May Have Been Taken and C2 Immediately Begins Investigation and Quarantine Efforts. On July 19, 2018, C2 received a letter from Incipio’s counsel, which identified the former Incipio employees who joined C2. (Nadolenco Decl., Ex. A.) That letter identified 13 former Incipio employees: Carlos Del Toro, Elva Huang, Fred Ghaderpanah, Jenni King, Joe Echegaray, Kevin Kin, Kristen Roney, Luis Echegaray, Mervin Madolora, Peter Moeini, Tim Hemesath, Tim Jou, Tomas Strekowski, and Valentine Lopez. (Id.) The letter accused the former Incipio employees of misappropriating Incipio’s confidential and trade secret information and demanded C2 cease and desist from using any such information, including prohibiting C2 employees from performing their day-to-day tasks. (Id.) On July 24, 2018, C2 received another letter from Incipio’s counsel with the same accusations and demands. (Nadolenco Decl., Ex. B.) C2 took these accusations very seriously. On July 24, 2018, Sachdeva again met with the former Incipio employees and reiterated that they were not to use any confidential information 4 OPPOSITION TO PLAINTIFF’S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 obtained while they worked at Incipio. (Sachdeva Decl., 10.) Sachdeva followed up that meeting on July 31, 2018 with the following notice to these employees: NOTICE AND DIRECTIVE REGARDING PRESERVATION AND NON-USE OF DATA All, This notice confirms what we discussed at our meeting on July 24, 2018. We have received correspondence from Incipio’s counsel placing a “litigation hold” on all data relating to Incipio. Accordingly, as we discussed at the meeting, you are hereby directed to preserve all data relating to Incipio, including, without limitation, emails, texts and any other documents or electronically stored information. This directive applies to your C2 computers and devices, and your personal computers and devises. In addition, as stated in your offer letter, you are not to use any confidential information you received while at Incipio in connection with your duties for C2. You are also directed not to download any information you received while at Incipio onto C2’s servers, computers or devices. Please confirm receipt of this notice by reply email. (Id., Ex. 2.) F. C2 Continuously Assures Incipio that It Has Not Used, Nor Will It Ever Use, Any Incipio Confidential or Trade Secret Information. On July 25, 2018, C2’s counsel sent a letter to Incipio’s counsel stating that C2 had not used nor intends to use any Incipio confidential or proprietary information. (Nadolenco Decl., Ex. C.) C2’s counsel also detailed the investigation and evidence preservation C2 was undertaking to ensure C2 did not have any of Incipio’s information. (Id.) C2 declined Incipio’s demand that the former Incipio employees stop work on products that compete with Incipio. (Id.) Incipio filed the Complaint on July 25, 2018. Shortly thereafter, C2 engaged Stephens Friedland LLP. In an effort to resolve this matter quickly, John Stephens wrote to Incipio’s counsel to notify Incipio that C2 was in the process of hiring a forensic expert to preserve evidence and ensure C2’s system has not been contaminated with any Incipio data. (Stephens Decl., 2, Ex. 7.) Stephens also offered for C2 and Incipio to work together with their respective forensic consultants to develop an agreed-upon protocol to sequester and preserve Incipio data. (Id.) On August 9, 2018, counsel for C2, Incipio, and the Individual Defendants, along with the forensic experts, had a conference call. (Stephens Decl., {{5-7.) Incipio’s counsel seemed less 5 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 interested in the protocol than in extracting a non-competition agreement. (Stephens Decl., 8.) C2’s counsel was unwilling to agree to a non-compete and the call ended without an agreed protocol. (Id.) III. INCIPIO’S TRO APPLICATION MUST BE DENIED. A. Incipio Has Not Shown Exigent Circumstances Justifying Ex Parte Relief. To prevail, Incipio must show that absent the injunctive relief, it will suffer an imminent threat of irreparable injury. See City of Torrance v. Transitional Living Centers for Los Angeles, Inc. (1982) 30 Cal.3d 516, 526; Code Civ. Proc. § 526(2).) It cannot do so. Delay in moving for a TRO may be considered in determining whether the claimed injury is imminent. See O'Connell v. Superior Court (2006) 141 Cal. App.4th 1452, 1481 (collecting cases.) Unreasonable, unexplained delay in seeking the extraordinary relief of an injunction compels the conclusion that an imminent threat of irreparable injury does not exist. Here, Incipio waited over two months before seeking a temporary restraining order. The former Incipio employees resigned from Incipio on June 18, 2018. (Fathollahi Decl., 17.) Incipio filed the Complaint on July 26, 2018 and did not seek a TRO until August 21, 2018. Thus, over two months elapsed from the date the former Incipio employees resigned and the date of this TRO. Presumably, Incipio has investigated the electronic files of all 13 employees that left Incipio. But there are no allegations against any of the other employees except the Individual Defendants. Because Incipio has not brought claims against the other employees, the court should infer that Incipio does not contend the other employees possess any confidential or trade secret information. Incipio’s failure to seek relief for over two months contradict Incipio’s contention that it will suffer irreparable, imminent harm if a temporary restraining order does not issue. Accordingly, Incipio’s TRO request must be denied. See Code Civ. Pro. §§ 526-527; Youngblood v. Wilcox (1989) 207 Cal.App.3d 1368, 1376. Moreover, Incipio’s vague statement that the Apple launch will “in a handful of weeks” does not justify an emergency ex parte TRO. 6 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 B. Inicipio Is Not Entitled to a TRO or Other Injunctive Relief Because C2 Did Not Commit Any Wrongdoing. To succeed on the TRO Application, Incipio must demonstrate: (1) the likelihood that Incipio will prevail on the merits of the case at trial; and (2) the interim harm that it is likely to sustain if the restraining order is denied as compared to the harm that C2 is likely to suffer if the court grants a preliminary injunction. See ReadyLink Healthcare v. Cotton (2005) 126 Cal.App.4th 1006, 1016. 1. The Information At-Issue Does Not Constitute Trade Secrets. Incipio has not adequately identified the information claimed to have been misappropriated. Code of Civil Procedure section 2019.210 requires a plaintiff to describe each trade secret with “reasonable particularity” before a plaintiff can conduct any discovery. “It is crucial to any CUTSA cause of action -and any defense - that the information claimed to have been misappropriated be clearly identified.” Silvaco Data System v. Intel Corp. (2010) 184 Cal.App.4th 210, 221. Contractual designation of certain information as trade secrets in an agreement is not dispositive. Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425, 1430. A court must make an independent legal determination under the California Uniform Trade Secrets Act (“CUTSA”) two- pronged test that the information (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(d); Morlife, Inc. v. Perry (1997) 56 Cal. App.4th 1514, 1523. In the Application, Incipio has not identified with reasonable particularity what trade secrets it contends C2 has misappropriated or why that information is a trade secret. Incipio concludes, without evidence, that C2 has engaged in misappropriation because unidentified customers, vendors and manufacturers were contacted by the former Incipio employees. Incipio does not provide evidence or argument regarding how the identities of vendors, customers or 7 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 manufacturers are confidential, let alone a trade secret, or how any confidential or trade secret information was used in contacting them. Indeed, the identities of vendors and customers is generally known in the industry and to C2 before any former Incipio employees joined C2. (Sachdeva Decl., [{ 12-13.) As established in the Declaration of Jay Sachdeva, customers, vendors, and manufacturers of cellphone accessories are widely known through trade shows. (Id.) Because C2 is a large player in the cellphone accessories market, vendors and manufacturers are constantly contacting C2 to obtain its business. (Id., Ex. 5.) 2, C2 Has Not Used Any Incipio Trade Secrets. For the first prong, at a minimum, Incipio must establish use or threatened use of trade secrets in order to obtain injunctive relief. See Civ. Code § 3426.2(a). ‘““Threatened misappropriation’ means a threat by defendant to misuse trade secrets, manifested by words or conduct, where evidence indicates imminent misuse.” FLIR Sys., Inc. v. Parrish (2009) 174 Cal.App.4th 1270, 1279. To prevail on a claim for threatened misappropriation, a plaintiff must establish the following: “(1) trade secrets (2) remain in the possession of a defendant (3) who actually has misused or disclosed some of those trade secrets in the past.” See Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501, 527. California does not recognize the “inevitable disclosure doctrine,” which permits trade secret owners to prevent former employees from working for a competitor “by demonstrating the employee's new job duties will inevitably cause the employee to rely upon knowledge of the former employer's trade secrets.” Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1446. “[A] plaintiff must submit evidence beyond the former employee’s knowledge of trade secrets and subsequent change of employers.” Les Concierges, Inc. v. Robeson (ND Cal, April 27, 2009) 2009 WL 1138561 *2. Here, Incipio’s Application is based on pure speculation that the former Incipio employees “could” use Incipio confidential or trade secret information. The Application does not present any evidence that such information has actually been used or will imminently be used. Indeed, the evidence is to the contrary. As soon they started working for C2, C2 instructed the former Incipio 8 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 employees orally and in writing that they were not to use or bring into C2 any Incipio confidential or trade secret information. (Sachdeva Decl., {{ 8-9, Ex. 1.) There is no current, past or future danger to Incipio that C2 will do anything unlawful. 3. Incipio Cannot Prevail on Its Penal Code § 502 Claim Because C2 Did Not Access Incipio’s Computers without Authorization. Penal Code section 502 imposes liability on a person who “[k]nowingly accesses and without permission takes, copies, or makes use of any data from a computer, computer system, or computer network, or takes or copies any supporting documentation, whether existing or residing internal or external to a computer, computer system, or computer network.” Pen. Code § 502(c)(2). The term “without authorization” has been interpreted to mean “when the person has not received permission to use the computer for any purpose (such as when a hacker accesses someone's computer without any permission) or when the [computer owner] has rescinded permission to access the computer and the defendant uses the computer anyway.” LVRC Holdins LLC v. Brekka (9th Cir. 2009) 581 F.3d 1127, 1135; see Facebook, Inc. v. Power Ventures, Inc. (9th Cir. 2016) 844 F.3d 1058, 1066. For example, in Facebook, defendant third-party social networking company accessed plaintiff Facebook’s website to send unsolicited and commercial e-emails to Facebook users. Facebook, 844 F.3d at 1063. To generate more users and traffic to its site, defendant encouraged users to share with their friends through clicking on an icon. Id. Defendant would then generate an automatic message to the user’s friends on Facebook to join defendant’s site and share with their friends. Id. After learning of defendant’s activities, Facebook sent a cease and desist letter, with which defendant refused to comply. Id. Facebook brought an action against defendant for violation of Penal Code Section 502 and the Computer Fraud and Abuse Act (“CFAA”), among other things. Id. Facebook moved for summary judgment, which was granted. Id. at 1063-1064. The Ninth Circuit reversed, in part, the grant of summary judgment on the Penal Code section 502 claim. Id. at 1070. The court reasoned that defendant had implied permission to access Facebook’s website until that permission was revoked through the cease and desist letter. Id. To support its reasoning, the court found that the analysis of accessing a computer “without 9 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 permission” was similar to “without authorization” under the CFAA. Id. In its analysis of the CFAA claim, the court likened the case to LVRC Holdings LLC v. Brekka where an employee did not violate the CFAA when the employee accessed and forwarded emails to himself to start a competing business. Id. at 1066. The same principles apply to this case. As to the former Incipio employees, Incipio has not established that they accessed any Incipio files after leaving Incipio. Nor has Incipio proven that the former Incipio employees accessed any files which they did not have permission to access. Incipio has also not presented evidence that C2 employees, at any time while employed by C2, ever accessed, or attempted to access, Incipio computers after they left Incipio’s employment. Because Incipio has not, and cannot show, any of the defendants accessed Incipio computers “without permission,” the reasoning of Facebook and Brekka apply, and Incipio cannot prevail on the merits of its Penal Code section 502 claim. 4. Incipio Cannot Prevail on Its Unfair Competition Claim Because C2 Is Competing Lawfully. Incipio contends that C2 has unfairly competed with Incipio in violation of Business & Professions Code section 17200 because some former Incipio employees allegedly downloaded files before leaving. As noted above, possession of confidential and trade secret information, without use or threatened use, does not constitute a misappropriation and cannot be an unfair business practice. See FLIR Sys., Inc. v. Parrish (2009) 174 Cal. App.4™ 1270, 1279; Central Valley Gen. Hosp. v. Smith (2008) 162 Cal. App.4™® 501, 528. Further, Incipio has not presented any evidence that C2 has possession of Incipio confidential or trade secret information. C2 has done everything in its power to ensure it does not receive or use any such information. And C2 has provided repeated written assurances to Incipio that it has not and will not use protected information. (Sachdeva Decl., {[8-11.) Moreover, it is legitimate and lawful for C2 to hire at-will employees of a competitor like Incipio and it is legitimate and lawful for those employees to leave. See SASCO v. Rosedein Elc., Inc. (2012) 207 Cal.App.4th 837, 848. Once those employees leave, they are free to solicit customers of their former employer as long as the competition is “fairly and legally conduct.” 10 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 Continental Car-Na-Var Corp. v. Moseley (1944) 24 Cal.2d 104, 110. Customer non-solicitation agreements are considered a form of a covenant not to compete and therefore unenforceable under Business and Professions Code section 16600. See Edwards v. Arthur Anderson LLP (2008) 44 Cal.4th 937, 948. While C2 is competing lawfully, it is notable that Incipio has included unlawful non-solicit and non-compete provisions in its employee agreements: 5. Non-solicitation Obligation. During the term of Employee’s employment by the Company and for a period of one (1) year thereafter, Employee shall not solicit or contact any customer of the Company during the term of Employee’s employment, in any capacity or for any party, for the purpose of or in any manner related to the sale, lease or license or other disposition of any product of the nature or performing the same function as any product distributed by the Company during the term of Employee’s employment. (Fathollahi Decl., Ex. A.) Employee agrees that during the period of employment by Company (i) and for one year thereafter, Employee will not encourage or solicit any employee or consultant of Company to leave Company for any reason and (ii) Employee will not engage in any activity that is in any way competitive with the business or demonstrably anticipated business of Company, and Employee will not assist any other person or organization in competing or in preparing to compete with any business or demonstrably anticipated business of Company. (Fathollahi Decl., Ex. C.) These provisions are void and unenforceable per se and they serve to invalidate the remainder of the agreements. See Edwards v. Arthur Anderson LLP (2008) 44 Cal.4h 937,948. Accordingly, because Incipio cannot show C2 engaged in any unlawful or unfair activity, Incipio is not likely to prevail on its unfair competition claim. 5 Incipio Cannot Prevail on Its Conversion and Interference Claims Because Incipio Did Not Present Any Evidence or Argument in Support. Incipio is not likely to prevail on its conversion, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, and Intentional interference with contractual relations claims. Because Incipio’s requested relief does not independently rely on any of these causes of action, C2 will not address these claims in further depth. 11 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 C. The Order Incipio Seeks Would Violate California Public Policy. Incipio seeks an Order which contravenes the strong California public policy against restrictions on an employee’s right to pursue lawful employment of his or her choice. This established public policy is codified in Business and Professions Code section 16600, which provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade or business of any kind is to that extent void.” See also Ware v. Merrill Lynch, Pierce Fenner & Smith, Inc. (1972) 24 Cal.App.3rd 35, 42-43 (1972) (holding that section 16600 invalidated a clause stripping pension benefits if the employee went to work for a competitor). “California courts have consistently declared this provision an expression of public policy to ensure that every citizen shall retain the right to pursue any lawful employment and enterprise of its choice.” Application Group. Inc. v. Hunter Group. Inc. (1998) 61 Cal. App.4th 881, quoting Metro Traffic Control. Inc. v. Shadow Traffic Network (1994) 22 Cal. App.4th 853, 859. Although Incipio contends it seeks a narrow restraint, this is untrue. Moreover, in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th at 945, the California Supreme Court specifically abolished the “narrow restraint” doctrine. Incipio’s requested Order requires that the former Incipio employees be prohibited from working on unspecified “products that compete with Incipio.” Incipio’s request is unworkable because there is no way for C2 to know what Incipio believes is a competing product. Incipio’s and C2’s product lines substantially overlap. (Sachdeva Decl., | 14, Ex. 6.) Designing, manufacturing selling and marketing cellphone accessories 1s the entire job of the former Incipio employees. (Sachdeva Decl., 15.) The requested Order would put them out of work for six months. Therefore, the requested injunction would bar the employees from working for C2. This would likely lead to the termination of 13 C2 employees. Incipio’s cited case law is inapposite. In Henry Schein, Inc. v. Cook (N.D.Cal. June 10, 2016) 191 F.Supp. 1072, the defendant former employee was temporarily restrained from using confidential information of the former employee and contacting customers she was assigned to while working at her former employer. Id. at 1076. The employee had downloaded and accessed information from her former employer after she had resigned and visited former customers to 12 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 delete her former employer’s information from the customer’s computers. /d. Under those circumstances (which are not present here), defendant was not restrained from doing her entire job, as Incipio requests here, but was temporarily restrained from soliciting customers she was assigned to while working for her former employer. Notably, when the court two weeks later revisited the same case for purposes of deciding a preliminary injunction, the court in Henry Schein, Inc. v. Cook (N.D.Cal. June 22, 2016) 2016 WL 3418537 refused to enjoin defendant from soliciting former employer’s customers and, instead, only enjoined her from using trade secret information. Id. at *10. The court held that restraint from solicitation violates Business and Professions Code section 16600, which, as interpreted by the California Supreme Court in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 947, prohibits employers from restraining former employees from working in the same field after employment. 2016 WL 3418537 at *6. The court rejected plaintiff’s argument that the non- solicitation must be enforced because defendant must have used trade secrets in contacting the customers. Id. The court noted that plaintiff had not presented evidence showing defendant had used any such trade secrets, only that customers were contacted, which is lawful. Id. Here, Incipio wants to restrain the former Incipio employees from doing any work on any “competing products,” a restraint that is not supported by Incipio’s own authority. Not only is this restraint broader than that in the Schein cases, it is illegal and specifically forbidden by California Supreme Court precedent. See Edwards, supra, 44 Cal.4th at 945. D. The Balance of Equities Favors C2. Incipio gives short shrift to the equities, concluding that it will suffer irreparable harm simply because “its former employees are allowed to continue working on competitive C2 products.” (Application, 15:3-4.) This is Incipio’s improper motivation for filing this case and the Application. It has nothing to do with confidential or trade secret information; C2’s and the Individual Defendants’ counsel have already repeatedly assured Impio that such information would not be accessed or used. This case is about preventing C2 from fairly competing and depriving former Incipio employees of their livelihood, particularly in connection with the 2018 Apple launch. 13 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 Incipio cannot be irreparably harmed here because fair competition is lawful. Continental Car-Na-Var Corp., 24 Cal.2d at 110. On the other hand, C2 and the former Incipio employees would be irreparably harmed if the former Incipio employees were restrained for six months from working on “competing products.” First, as mentioned above, Incipio does not specify what products it deems “competing products.” There is no way for C2 to comply with this order as written. In reality, Incipio’s and C2’s product lines are virtually identical. (Sachdeva Decl., 14, Ex. 6.) Such an order would prevent 13 employees from working for C2. (Sachdeva Decl., | 15.) C2 would likely be forced to terminate them because they would be wholely unproductive. (Id.) As Incipio highlights in the Application, the purpose of this restraint is to prevent C2 from competing in the new iPhone launch. That is not a legitimate basis for requesting or granting a TRO because such a restraint would contravene Bus. & Prof. Code Section 16600. In sum, the balance of hardships weighs heavily in favor of C2, which only seeks to compete in the marketplace and keep its employees working. E. Incipio is Not Entitled to Expedited Discovery. “In any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act (Title 5 (commencing with Section 3426) of Part 1 of Division 4 of the Civil Code), before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code.” Code Civ. Pro. § 2019.210. Incipio has not identified any of the alleged trade secrets and, thus, has no right to any discovery, expedited or otherwise. A party must show good cause to expedite discovery. See Schafer v. Superior Court (1986) 180 Cal.App.3d 305, 308 (finding that showing of “good cause” includes a showing of specific facts justifying discovery and reversing trial court’s grant of leave to take deposition on five days’ notice based upon showing of “financial need.”) Incipio also has not specified the discovery it wishes to take for good cause or such discovery in the 15-22 days before a preliminary injunction hearing. 14 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 If expedited discovery is granted, it must be reciprocal. C2 would like to conduct the following discovery: deposition of Incipio’s PMK and each of Incipio’s declarants and reasonable document requests in the deposition notices. C2 also wants to take PMK depositions of Incipio’s lenders and venture capital investors. IV. CONCLUSION The TRO should be denied because: (1) C2 has not used Incipio’s trade secrets; (2) A non-compete TRO is contrary to settled law; (3) A TRO will substantially harm C2 and 13 employees; (4) There is no emergency justifying ex parte relief; and (5) Incipio has not complied with CCP § 2019.210, nor has it specified the expedited discovery it seeks. Dated: August 23, 2018 STEPHENS FRIEDLAND LLP By: /s/ JohwvB. Stephens John B. Stephens Timothy A. Spivey Attorneys for Defendant C2 WIRELESS AND ACCESSORIES LLC 15 OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TRO ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 1 22 23 24 25 26 27 28 PROOF OF SERVICE I am employed in the County of Orange, State of California. I am over the age of 18 and not a party to the within action. My business address is 2603 Main Street, Suite 350, Irvine, California 92614. On August 23, 2018, I served the following document(s) described as: DEFENDANT C2 WIRELESS AND ACCESSORIES LLC’S OPPOSITION TO PLAINTIFF'S EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER, ORDER TO SHOW CAUSE RE PRELIMINARY INJUNCTION, AND EXPEDITED DISCOVERY on the interested parties, by placing a true and correct copy thereof enclosed in a sealed envelope addressed as follows: MAYER BROWN LLP John Nadolenco, Esq. (jnadolenco@mayerbrown.com) Ruth Zadikany, Esq. (rzadikany @mayberbrown.com) Daniel D. Queen, Esq. (dqueen @mayerbrown.com) 350 S Grand Ave, 25" Floor Los Angeles, CA 90071 Telephone: (213) 229-9500 Facsimile: (213) 625-0248 [ 1 @BYU.S.MAIL) I am “readily familiar” with the firm’s practice of collection and processing correspondence for mailing. Under that practice it would be deposited with U.S. Postal Service on that same day with postage thereon fully prepaid at Irvine, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. [x] (BY E-FILE SERVICE) I caused these documents to be served by requesting one of the court approved electronic filing service providers electronically serve them. [ 1 (BY OVERNIGHT DELIVERY) Ienclosed the documents in an envelope or package provided by an overnight delivery carrier and addressed to the person(s) shown above and placed the envelope or package for collection and overnight delivery at an office or a regularly utilized drop box of the overnight delivery carrier. I declare under penalty of perjury under the laws of the State of California that the above is true and correct and was executed on August 23, 2018, at Irvine, California. le] Carolyn McHardy Peca Carolyn McHardy Peca 1 PROOF OF SERVICE
