Nos. 2013-1210, -1234 IN THE United States Court of Appeals for the Federal Circuit ________________________________ BROCADE COMMUNICATIONS, INC., and FOUNDRY NETWORKS, LLC, Plaintiffs-Appellees, v. A10 NETWORKS, INC., Defendant-Appellant, and LEE CHEN, RAJKUMAR JALAN, RON SZETO, and STEVE HWANG, Defendants. ________________________________ Appeal from the United States District Court for the Northern District of California Case No. 2:06-cv-13936, Magistrate Judge Paul Grewal ________________________________ BRIEF FOR APPELLEES ________________________________ Annette L. Hurst Denise M. Mingrone Bas de Blank ORRICK, HERRINGTON & SUTCLIFFE, LLP 1000 Marsh Rd. Menlo Park, CA 94025 Fabio E. Marino MCDERMOTT, WILL & EMERY 275 Middlefield Rd. Menlo Park, CA 94025 March 26, 2013 Neal Kumar Katyal Jessica L. Ellsworth Judith Coleman David M. Ginn HOGAN LOVELLS US LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 Tel.: (202) 637-5600 Fax: (202) 637-5910 Counsel for Appellees Case: 13-1210 Document: 46 Page: 1 Filed: 03/26/2013
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Nos. 2013-1210, -1234
IN THE
United States Court of Appeals for the Federal Circuit
________________________________
BROCADE COMMUNICATIONS, INC., and FOUNDRY NETWORKS, LLC,
Plaintiffs-Appellees,
v.
A10 NETWORKS, INC., Defendant-Appellant,
and
LEE CHEN, RAJKUMAR JALAN, RON SZETO, and STEVE HWANG,
Defendants. ________________________________
Appeal from the United States District Court for the Northern District of California Case No. 2:06-cv-13936, Magistrate Judge Paul Grewal
________________________________
BRIEF FOR APPELLEES ________________________________
Annette L. Hurst Denise M. Mingrone Bas de Blank ORRICK, HERRINGTON & SUTCLIFFE, LLP 1000 Marsh Rd. Menlo Park, CA 94025 Fabio E. Marino MCDERMOTT, WILL & EMERY 275 Middlefield Rd. Menlo Park, CA 94025 March 26, 2013
Neal Kumar Katyal Jessica L. Ellsworth Judith Coleman David M. Ginn HOGAN LOVELLS US LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 Tel.: (202) 637-5600 Fax: (202) 637-5910 Counsel for Appellees
CERTIFICATE OF INTEREST ................................................................................. i
TABLE OF AUTHORITIES ..................................................................................... v
STATEMENT OF RELATED CASES .................................................................. xii
COUNTERSTATEMENT OF THE ISSUES ............................................................ 3
COUNTERSTATEMENT OF THE FACTS ............................................................ 3
A. Foundry Develops Innovative Technologies And Captures A High End Market Niche .................................................................... 3
B. A10 Steals Foundry’s Intellectual Property And Develops Competing Products .............................................................................. 5
C. Brocade Files Suit, The Jury Finds A10 Liable, And The District Court Enjoins A10 From Continuing To Infringe And Misappropriate Brocade’s Intellectual Property ........................... 8
SUMMARY OF ARGUMENT ............................................................................... 13
I. STANDARD OF REVIEW ........................................................................... 15
II. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY ENTERING A PERMANENT PATENT INJUNCTION ...................... 16
A. The District Court Did Not Abuse Its Discretion In Holding That Brocade Would Be Irreparably Harmed Absent An Injunction ............................................................................................. 17
1. Brocade established that it would be irreparably harmed and that there was a causal nexus between the harm it faced and A10’s infringement ...................................... 18
2. In the alternative, it is not necessary to establish a causal nexus in the context of a narrowly tailored permanent injunction that does not cover an entire product ...................................................................................... 26
B. Brocade’s Remedies At Law Are Inadequate ..................................... 29
C. The Balance Of Hardships Favors Brocade ........................................ 32
D. The Injunction Serves The Public Interest .......................................... 34
III. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY ENTERING A PERMANENT TRADE SECRET INJUNCTION ................................................................................................ 38
A. Substantial Evidence Supports The District Court’s Finding That Brocade Is Entitled To An Injunction To Prevent A10’s Continuing Misappropriation Of Brocade’s Trade Secrets................. 38
1. The District Court did not clearly err in finding that Brocade’s trade secrets remain confidential ............................. 40
2. The District Court correctly rejected A10’s head-start argument in finding that the evidence in this case supported entry of a trade secret injunction .............................. 44
a. The commercial-advantage period does not “limit” the scope of an injunction on a trade secret that remains confidential ...................................... 46
b. Even if it were relevant, the commercial advantage associated with Brocade’s trade secrets has not expired .................................................... 48
B. The Equitable Factors Also Favor Injunctive Relief .......................... 51
1. A10’s ongoing use of Brocade’s trade secrets irreparably injures Brocade ....................................................... 51
Agency Solutions.Com, LLC v. TriZetto Group, Inc., 819 F. Supp. 2d 1001 (E.D. Cal. 2011) .............................................................. 54
Ajaxo, Inc. v. e*Trade Group, Inc., 2003 WL 25778061 (Cal. Super. Ct. Aug. 15, 2003) ......................................... 47
Ajaxo, Inc. v. e*Trade Group, Inc., 135 Cal. App. 4th 21 (2005) ............................................................................... 55
Am. Paper & Packaging Prods. v. Kirgan, 183 Cal. App. 3d 1318 (1986) ...................................................................... 46, 47
Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. Ill. 2012) ................................................ 10, 31, 32, 34
Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314 (Fed. Cir. 2012) .............................................................. 19, 27, 28
Apple, Inc. v. Samsung Elecs. Co., 695 F.3d 1370 (Fed. Cir. 2012) ...................................................................passim
Apple, Inc. v. Samsung Elecs. Co., 2012 WL 6569786 (N.D. Cal. Dec. 17, 2012) .............................................. 24, 25
Apple, Inc. v. Samsung Elecs. Co., 877 F. Supp. 2d 838 (N.D. Cal. 2012) ................................................................ 26
Bard Peripheral Vascular v. W.L. Gore & Assocs., 670 F.3d 1171 (Fed. Cir. 2012), modified in part on other grounds, 682 F.3d 1003 (Fed. Cir. 2012) .......................................................................... 31
Cont’l Paper Bag Co. v. E. Paper Bag Co., 210 U.S. 405 (1908) ............................................................................................ 29
Convolve, Inc. v. Compaq Computer Corp., 2011 WL 7144803 (S.D.N.Y. Oct. 6, 2011) ....................................................... 47
Dun v. Lumbermen’s Credit Ass’n, 209 U.S. 20 (1908) .............................................................................................. 31
DVD Copy Control Ass’n, Inc. v. Bunner, 75 P.3d 1 (Cal. 2003) .................................................................................... 52, 57
eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006) .....................................................................................passim
Edwards Lifesciences AG v. Corevalve, Inc., 699 F.3d 1305 (Fed. Cir. 2012) .................................................................... 23, 30
E.I. du Pont de Nemours & Co. v. MacDermid Printing Solutions, LLC, 525 F.3d 1353 (Fed. Cir. 2008) .......................................................................... 15
Fantasy Sports Properties v. Sportsline.com, 287 F.3d 1108 (Fed. Cir. 2002) .......................................................................... 37
Fid. Brokerage Servs. LLC v. McNamara, 2011 WL 2117546 (S.D. Cal. May 27, 2011) .................................................... 52
Fresenius Med. Care Holdings, Inc. v. Baxter Int’l, Inc., 2008 WL 928496 (N.D. Cal. Apr. 4, 2008) ........................................................ 23
Fresenius USA, Inc. v. Baxter Int’l, Inc., 582 F.3d 1288 (Fed. Cir. 2009) .......................................................................... 23
i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010), aff’d, 131 S. Ct. 2238 (2011) ................ 15, 34, 35
In re Oracle Corp. Sec. Litig., 627 F.3d 376 (9th Cir. 2010) .............................................................................. 42
Johnson & Johnson Vision Care, Inc., v. CIBA Vision Corp., 712 F. Supp. 2d 1285 (M.D. Fla. 2010) .............................................................. 31
Stanley v. Univ. of S. Cal., 13 F.3d 1313 (9th Cir. 1994) .............................................................................. 43
SynQor, Inc. v. Artesyn Technologies, Inc., __ F.3d __, 2013 WL 950743 (Fed. Cir. Mar. 13, 2013) ................................... 36
Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372 (Fed. Cir. 2009) .......................................................................... 16
United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) .............................................................................. 42
Vacco Indus., Inc. v. Van Den Berg, 5 Cal. App. 4th 34 (1992) ................................................................................... 51
Web Graphics, Inc. v. Jos. Hunkeler, 682 F.2d 59 (2d Cir. 1982) ................................................................................. 46
Western Directories, Inc. v. Golden Guide Directories, Inc., 2009 WL 1625945 (N.D. Cal. June 8, 2009) ...................................................... 51
Fed. R. App. P. 10(a) ................................................................................................. 3
Fed. R. Civ. P. 8(a)(3) .............................................................................................. 32
OTHER AUTHORITIES:
2 John Norton Pomeroy, A Treatise on Equitable Remedies § 1979 (2d ed. 1919) ........................................................................................... 29
C. Chien & M. Lemley, Patent Holdup, the ITC, and the Public Interest, 98 Cornell L. Rev. 1 (2012) ................................................................................ 24
Oxford English Dictionary (online ed. 2013) .......................................................... 36
Restatement (Third) of Unfair Competition § 44 cmt. b (1995) ........................ 52, 53
1. Whether the District Court abused its discretion by entering a
permanent patent injunction after the jury found that A10 had infringed four claims
in three Brocade patents and the District Court found that all the traditional
equitable factors favored an injunction.
2. Whether the District Court abused its discretion by entering a
permanent trade secrets injunction after the jury found that A10 had
misappropriated four Brocade trade secrets, the District Court found that the trade
secrets remained confidential, and A10 failed to provide any evidence that it had
independently developed the secrets.
COUNTERSTATEMENT OF THE FACTS1
A. Foundry Develops Innovative Technologies And Captures A High-End Market Niche.
Foundry is a classic Silicon Valley success story. Founded in 1996 by four
engineers, including defendant Lee Chen, Foundry invented and sold networking
communications equipment. JA12089; JA31070-71. With its introduction of
1 The joint appendix materials cited in this brief are all part of the record on appeal. Just before this brief was filed, A10 acknowledged that its brief cites to documents that were not filed in the district court. Those documents are not part of the record on appeal, see Fed. R. App. P. 10(a), and are not properly included in the joint appendix. Brocade reserves the right to seek appropriate relief from this Court once it is able to determine the extent of the problem.
complementary products, service contracts, replacements, upgrades, and parts.
See, e.g., JA122; JA10453; JA12039-41; JA30009-10.
C. Brocade Files Suit, The Jury Finds A10 Liable, And The District Court Enjoins A10 From Continuing To Infringe And Misappropriate Brocade’s Intellectual Property.
After the AX Series was released, Brocade sued A10 and the individual
defendants for (among other things) patent infringement, copyright infringement,
trade secret misappropriation, and intentional interference with contract. The case
went to trial on these claims. After a three-week trial, the jury found that A10 had
directly infringed four claims from three patents and awarded Brocade millions of
dollars in compensatory damages. JA121-22. (The exact amount is disputed and
is set for a retrial.) The jury also found that A10 had infringed Brocade’s
copyrighted source code and awarded $60,000,000 in damages. JA122-23.
In addition to finding copyright and patent infringement, the jury found that
A10 had misappropriated four of Brocade’s trade secrets. JA124-25. It awarded
one dollar in damages for that misappropriation—evidently in adherence to the
District Court’s instruction not to award duplicative damages (JA13492), which
Brocade highlighted in closing argument (JA13382-83). Finally, the jury found
both A10 and Chen liable for intentional interference with contract. It awarded
one dollar in compensatory damages, and, finding that both A10 and Chen had
weighing relevant factors or exercised its discretion based upon an error of law or
clearly erroneous factual findings.’ ” Titan Tire Corp. v. Case New Holland, Inc.,
566 F.3d 1372, 1375 (Fed. Cir. 2009) (citation omitted). Each injunction must be
reviewed separately; the invalidity of one would not affect the validity of the other.
II. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY ENTERING A PERMANENT PATENT INJUNCTION
The Supreme Court held in eBay that the decision to grant injunctive relief
in patent cases “rests within the equitable discretion of the district courts,” and that
“such discretion must be exercised consistent with traditional principles of equity.”
547 U.S. at 394. The Court gave the “traditional four-factor framework” that
governs equitable relief: “A plaintiff must demonstrate: (1) that it has suffered an
irreparable injury; (2) that remedies available at law, such as monetary damages,
are inadequate to compensate for that injury; (3) that, considering the balance of
hardships between the plaintiff and defendant, a remedy in equity is warranted; and
(4) that the public interest would not be disserved by a permanent injunction.” Id.
at 391. In this case, after affirming the jury’s verdict of infringement,3 the District
Court carefully considered each of these four factors, and found that each favored
the injunctive relief sought by Brocade. The Court’s analysis was not affected by
3 In this appeal, A10 could have challenged the merits of the infringement finding as a basis for overturning the injunction. See Helifix Ltd. v. Blok-Lok, Ltd., 208 F.3d 1339, 1345 (Fed. Cir. 2000). It elected not to do so, and as a result, no merits issues related to infringement or validity are presently before this Court.
imposed the permanent injunction for purposes of preventing that harm, not for the
purpose of preventing lost sales, as was the case in Apple II.4
That fact makes Apple II’s discussion of how the causal nexus test applies to
a lost-sales injury irrelevant. When the irreparable injury is something other than
lost sales, the particulars of how the causal nexus test was applied in Apple II will
not apply. And so, for example, if the harm at issue is loss of goodwill, a patentee
would have to show “some causal nexus” between its goodwill loss and the
infringement to get an injunction; if the harm is loss of brand-name recognition,
the causal nexus would have to be between that recognition and the infringement.
In each of these cases, the question whether “the infringing feature drives
consumer demand for the accused product” will not be relevant to establishing the
particular causal nexus.
4 Although the District Court did not rely on lost sales to issue the injunction, Brocade also showed that it was losing sales and needed an injunction to prevent that harm. The features that customers demanded in the AX devices were the very same features that A10 had stolen from Brocade. As A10 itself explained, HA was a “very critical” feature of the AX Series, and A10 would be “shut out” of the market for “the bigger fish” without GSLB. JA31104; JA31158; see JA31006-7 (GSLB is a “key strategic product” of A10). A10 implemented these “[k]ey features of the AX Series,” JA30048, by infringing Brocade’s patents. A10 then sold tens of millions of dollars in AX Series products with the infringing features to existing Foundry customers. See JA31429-39; see also JA31228-345. Though not necessary for this Court to reach, an injunction would be warranted for this reason, too. See Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1156-57 (Fed. Cir. 2011).
main competitor—even though Brocade’s business model is based on developing
and practicing its intellectual property, not licensing it. Indeed, the extensive trial
record contains no evidence of a Brocade licensing program of any kind. It would
be hard to see what is left of the Patent Act’s promised “right to exclude” if an
injunction were not appropriate in these circumstances. The patent injunction
should be affirmed.
2. In the alternative, it is not necessary to establish a causal nexus in the context of a narrowly tailored permanent injunction that does not cover an entire product.
The District Court properly sidestepped the question of whether the causal
nexus standard even applies to this case, because the standard was met here. This
Court likewise has no need to examine the issue. If, however, it does reach the
question, it should affirm the injunction on the ground that the causal nexus test is
simply inapplicable under the circumstances of this case.
This Court’s decision in Apple II is distinguishable in two crucial respects.
First, the injunction in Apple II was much broader than the injunction against A10.
The district court had enjoined Samsung from making, using, or selling the Galaxy
Nexus phone. Apple, Inc. v. Samsung Elecs. Co., 877 F. Supp. 2d 838, 918 (N.D.
Cal. 2012). Its injunction banned the entire product, not just the features of that
product that infringed Apple’s patents. Samsung’s brief in the Federal Circuit
opened with a discussion about the (over)breadth of the injunction, Appellant Br.
(Fed. Cir. 1996). A preliminary injunction is an “extraordinary remedy never
awarded as of right.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22, 24
(2008). It issues before the merits are definitively resolved. A permanent
injunction, in contrast, follows a full adjudication on the merits and a finding of
patent infringement.
Even if the causal nexus requirement is an appropriate safeguard in the
preliminary injunction context,5 it is unwarranted in the permanent injunction
context. A10 has already had an opportunity to present its case to a jury, and the
jury found that its products contained features that infringe Brocade’s patents.
Given the prevalence of complex products encompassing multiple patents, if the
Federal Circuit were to extend the causal nexus requirement to permanent
injunctions it would fundamentally alter the availability of equitable relief in patent
cases, and the Patent Act’s “right to exclude” would become illusory. Indeed, for
5 Although this panel is bound by Apple II, and this Court—like the District Court below—has no need to reach the question, Apple II was wrongly decided. The decision is inconsistent with this Court’s precedents, which have never rigidly insisted on proof of a causal nexus between lost sales and infringement as a prerequisite to injunctive relief. See, e.g., Broadcom, 543 F.3d at 702-03. It is also inconsistent with eBay, which rejected “categorical rule[s]” and “expansive principles suggesting that injunctive relief could not issue in a broad swath of cases.” 547 U.S. at 398. At most, a causal nexus requirement may be appropriate in the context of design patents, where it was first articulated, see Apple I, 678 F.3d at 1323-24. Extending that requirement to utility patents was a “major departure from the long tradition of equity practice” and should be corrected. eBay, 547 U.S. at 395 (Roberts, C.J., concurring). Brocade preserves these arguments for further review.
consequently precluded from claiming invalidity or assigning weight to that
argument as part of the public interest analysis.6
A10 next tries to smuggle a merits argument into the public interest analysis,
claiming that its devices did not infringe Brocade’s patents at all. According to
A10, the AX devices were not “configured to” perform the specified functions (as
the patent claims require) because the end user can choose whether to enable the
accused functionality. A10 Br. 38-39. It is the customers, in A10’s view, who
“configure” the devices to perform the various functions outlined in the claims.
The District Court properly rejected that cramped interpretation of the patent
claims. JA5-8; JA69-73. In ordinary speech, a product is “configured to” perform
a function if it is designed to do so—even if additional steps are necessary before
the function can actually be performed. See, e.g., Oxford English Dictionary
(online ed. 2013) (defining “configure” in the computing context to mean “[t]o
choose or design a configuration for; to combine (a program or device) with other
6 In any event, A10 paints a misleading picture of the reexamination proceedings. It is true, as A10 says, that staff members within the PTO have rejected each of the patent claims at least once. But they have also upheld three of the four claims at least once. Given the early stage of the reexamination proceedings and the many levels of review that lie ahead, see 35 U.S.C. § 307(a), it is improper to suggest that any inferences should be drawn from these conflicting results. It certainly was not an abuse of discretion for the District Court to disregard these conflicting results. Cf. SynQor, Inc. v. Artesyn Technologies, Inc., __ F.3d __, 2013 WL 950743, at *10 (Fed. Cir. Mar. 13, 2013) (district court properly excluded evidence of reexamination proceedings that were not yet final).
41 (quoting eBay, 547 U.S. at 396 (Kennedy, J., concurring)). The public interest
is served here by rewarding Brocade’s innovation and deterring A10’s theft. In
any event, nothing is actually being “held up” in this case. The District Court’s
injunction does not target all AX devices; it excludes devices owned by A10’s
current customers and targets only the infringing features of other devices. A10
says it has removed those infringing features and is already shipping redesigned
products. Assuming those representations are true, A10’s customers and potential
customers will not be denied any “highly desirable products.” A10 Br. 41-42. The
injunction merely holds A10 to its representations and legal obligations.
III. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY ENTERING A PERMANENT TRADE SECRET INJUNCTION
A. Substantial Evidence Supports The District Court’s Finding That Brocade Is Entitled To An Injunction To Prevent A10’s Continuing Misappropriation Of Brocade’s Trade Secrets.
Under the California Uniform Trade Secrets Act (CUTSA), “a successful
trade secret plaintiff is entitled to the full panoply of remedies, including injunctive
relief against further misappropriation” of its trade secrets. Cadence Design Sys.,
Inc. v. Avant! Corp., 57 P.3d 647, 653 (Cal. 2002). Specifically, a prevailing
plaintiff is entitled to a permanent injunction against “actual or threatened
misappropriation” of its trade secrets, and, even if the trade secrets “cease[ ] to
exist” at some point, “the injunction may be continued for an additional period of
time in order to eliminate commercial advantage that otherwise would be derived
1. The District Court did not clearly err in finding that Brocade’s trade secrets remain confidential.
The CUTSA authorizes a court to enjoin “actual or threatened
misappropriation” of a trade secret, although a court must terminate or modify the
injunction “when the trade secret has ceased to exist.” Cal. Civ. Code § 3246.2(a).
A10 argued to the District Court that Brocade’s trade secrets “ceased to exist” as
trade secrets because they had been made public. A10 submitted, by its own
account, “voluminous” documentary evidence purportedly demonstrating as much.
A10 Br. 57. The District Court, after reviewing this evidence (which totaled in the
hundreds of pages) and the trial record, rejected A10’s argument that Brocade’s
trade secrets had been made public:
In light of Brocade’s evidence at trial that the trade secrets were confidential and that it employed numerous strategies to retain that confidentiality and the court’s determination here that the evidence before it does not suggest any subsequent publicity of the trade secrets, the court finds that Brocade’s trade secrets remain confidential and have not become generally known.
JA41. The court enjoined A10 from using Brocade’s trade secrets, consistent with
the CUTSA, until A10 can show that it has independently developed or reverse-
engineered them. JA21-22; see also JA47 & n.122 (noting that under CUTSA
information that has been independently developed or reverse-engineered does not
qualify for trade-secret protection). The District Court thus, in effect, entered an
injunction that lasts as long as the trade secrets continue to exist as trade secrets
issues on the papers. Thus, the court was not faced with the circumstance in which
A10 had (passingly) suggested an evidentiary hearing should be held.
Accordingly, A10 has waived the issue. See Maynard v. City of San Jose, 37 F.3d
1396, 1401 (9th Cir. 1994) (appellants waived right to challenge trial court’s
failure to hold evidentiary hearing where they had suggested that motion could be
decided on the papers, made only passing reference to potential hearing, and at oral
argument on motion “never indicated that they wanted a full evidentiary hearing
with an opportunity to cross-examine witnesses.”).7
Furthermore, even if A10 had properly requested a hearing, it has never
explained what testimony it would have presented, what a live hearing would have
accomplished, or how the failure to hold one prejudiced its case. Because A10 has
failed to point to any clear error in the district court’s factfinding, or shown how a
hearing conducted on its own terms would have yielded a different result, there is
no basis for overturning the District Court’s findings that Brocade’s trade secrets
remain confidential. See 28 U.S.C. § 2111 (harmless errors must be disregarded);
United States v. Microsoft Corp., 253 F.3d 34, 102 (D.C. Cir. 2001) (evidentiary
hearing would not be warranted if parties failed to explain to the district court
7 The “invited error” doctrine also appears to apply, since A10 encouraged the District Court to decide the issues on the paper record. See, e.g., Key Pharmaceuticals v. Hercon Laboratories Corp., 161 F.3d 709, 714-716 (Fed. Cir. 1998); In re Oracle Corp. Sec. Litig., 627 F.3d 376, 386 (9th Cir. 2010).
alleged them to have been so would have conflicted with the jury’s finding that
Brocade’s trade secrets remained trade secrets as of the date they were
misappropriated. See, e.g., JA35 (rejecting testimony that TS 5 was ascertainable
in 2000 because that evidence “already has been rejected by the jury”); JA40
(rejecting testimony that TS 10 was part of industry standard in 1996 “because it
undermines the jury’s determination that at least as of A10’s creation in 2004, TS
[10] was a trade secret”).8
Because A10 has failed to point to any clear error in the district court’s
factfinding, or shown how a hearing conducted on A10’s terms would have yielded
a different result, there is no basis for overturning the district court’s findings that
Brocade’s trade secrets remain confidential.
2. The District Court correctly rejected A10’s head-start argument in finding that the evidence in this case supported entry of a trade secret injunction.
The CUTSA authorizes a court to terminate a misappropriation injunction
when the covered trade secret “has ceased to exist,” but provides that “the
injunction may be continued for an additional period of time in order to eliminate
8 In a footnote, A10 claims that Trade Secret 5 “is painfully obvious” to a person in the ADC industry. A10 Br. 59 n.17. But A10 offers no support for that claim, which happens to expressly contradict the jury’s findings that Trade Secret 5 was a protectable trade secret. See JA35. With respect to Trade Secrets 8, 10, and 11, A10 makes no argument whatsoever, except to claim that “[s]imilar errors exist.” A10 Br. 59 n.17. This vague assertion provides no reason to second-guess the District Court’s finding that Brocade’s trade secrets remain confidential.
“that Plaintiff will suffer irreparable harm if its proprietary information is
misappropriated”). Indeed, the CUTSA authorizes injunctive relief merely on the
9 In evaluating these factors, the District Court cited cases arising at the preliminary injunction stage or in other inapposite contexts. When reviewing permanent injunctions, by contrast, California courts appear not to conduct a separate review of the equities. See, e.g., Morlife, 56 Cal. App. 4th at 1528; Vacco Indus., Inc. v. Van Den Berg, 5 Cal. App. 4th 34, 53 (1992).
Second, based on the flawed premise that Brocade’s secrets are now public,
A10 argues that Brocade was “fully compensated” for A10’s prior
misappropriation. A10 Br. 46-48. Indeed, A10 seems to suggest that Brocade is
barred from seeking injunctive relief because Brocade asked for damages. A10
Br. 47. But nothing in the text of CUTSA indicates that its remedies are mutually
exclusive, and California courts have repeatedly confirmed that plaintiffs are
entitled to the “full panoply of remedies” the statute makes available. Cadence, 29
Cal.4th at 226.10 Furthermore, Brocade was awarded money damages through
2011 only, as A10 had not provided its 2012 sales records at the time of trial. And
the California Supreme Court has recognized that damages from ongoing trade
secret misappropriation are not fixed and finite: rather, “[t]he potential damages
encompassed by a continuing misappropriation claim may expand with each illicit
use or disclosure of the trade secret.” Id. Therefore, A10’s position that a single
jury award for past damages somehow adequately compensates Brocade for all
future damages lacks any foundation.
10 In Ajaxo v. e*Trade Group, Inc., cited at A10 Br. 60, a California court of appeals remanded a case for retrial with the instruction that a damages award would moot the need for injunctive relief. 135 Cal. App. 4th 21, 64 n.44 (2005). However, there is a crucial distinction: the trade secrets in that case had been publicly disclosed. Therefore, the plaintiff would have had no basis on remand to seek an injunction against future misappropriation.
Third, A10 argues that Brocade is not irreparably injured because Brocade
allegedly “conceded” that the commercial advantage associated with its trade
secrets “dissipated long before trial.” A10 Br. 48. As explained above, Brocade
made no such concession, see supra pp. 48-49, and the District Correctly found
that A10 has not independently developed or reverse-engineered Brocade’s trade
secrets. As the District Court explained, even if A10 theoretically could have
developed the trade secrets before trial, A10 would have to show that it actually
did develop those trade secrets in order to show that it was no longer
misappropriating Brocade’s trade secrets and causing Brocade irreparable injury
with each use. JA43. Accordingly, A10 has no basis to claim that the District
Court erred in finding that Brocade’s trade secrets provided the company an
ongoing commercial advantage.
Of course, the fact that Brocade sought unjust enrichment damages did not
in any way cede Brocade’s right to “injunctive relief against further
misappropriation.” Cadence, 29 Cal. 4th at 224. Nor does the jury’s $1 award
foreclose Brocade from asking for an injunction.11 To accept that view would
11 The jury did not give an explanation for its $1 award. However, the District Court instructed the jury not to award duplicative relief (JA13492), Brocade emphasized that the jury should not award double damages in its closing statement (JA13382-83), and the trade secret verdict followed patent and copyright on the verdict form (JA121-127). It is more reasonable to assume that the jury was following the court’s instruction than to assume (as A10 does) that the jury
demonstrated to the District Court that an injunction was reasonable, and
necessary, to protect its trade secrets. A10 fails to demonstrate that the District
Court abused its discretion in entering an injunction on A10’s use of the trade
secrets it misappropriated rather than forcing Brocade to effectively grant a
compulsory license and accept a reasonable royalty.12
12 The District Court suggested that “a reasonable royalty might be more appropriate than an injunction” because it believed an unqualified permanent injunction against A10 could be overly broad. JA47 n.124. The District Court correctly held, however, that California law precluded a reasonable royalty and instead modified the injunction. In so holding, the District Court mistakenly cited Cal. Civ. Code § 3426.3, which authorizes retrospective royalties (a substitute for past damages), instead of citing § 3426.2, which authorizes ongoing future royalties (a substitute for an injunction); but the court reached the correct result. See Cacique,169 F.3d at 624.
For these reasons, the district court’s entry of the two permanent injunctions
should be affirmed.
Respectfully submitted,
/s/ Neal Kumar Katyal Annette L. Hurst Denise M. Mingrone Bas de Blank ORRICK, HERRINGTON & SUTCLIFFE, LLP 1000 Marsh Rd. Menlo Park, CA 94025 Fabio E. Marino MCDERMOTT, WILL & EMERY 275 Middlefield Rd. Menlo Park, CA 94025 March 26, 2013
Neal Kumar Katyal Jessica L. Ellsworth Judith Coleman David M. Ginn HOGAN LOVELLS US LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 Tel.: (202) 637-5600 Fax: (202) 637-5910 Counsel for Appellees