California Clarifies Statute of Limitations on Trade Secret Claims
In Cypress Semiconductor Corp. v. Superior Court (Silvaco Data Systems), No. H032114 (Cal. Ct. App. May 30, 2008), the California Court of Appeals recently ruled that the Statute of Limitations begins to run on a claim for misappropriation under the California Uniform Trade Secrets Act against a third party when the Plaintiff discovers the misappropriation. A comprehensive knowledge of all facts is not necessary. A Plaintiff need only have a reason to suspect the factual basis of a claim. Instructive of this approach, the Court of Appeal stated, “[T]he plaintiff should not be expected to wait until he or she has direct proof of the defendant’s mental state before filing the lawsuit.”
In Cypress, the litigation centered around the defection of an employee from Silvaco Data Systems who misappropriated confidential information of Silvaco to develop a competing product for his new employer, Circuit Systems. Circuit then licensed its new product to its customers. Silvaco sued Circuit and the former employee, but did not sue Circuit’s customers. Eventually, Silvaco sued Cypress Semiconductor, a customer of Circuit who had licensed the new product from Silvaco–however the suit was brought more than three years after Silvaco’s claims against Circuit had ripened. On that basis, Cypress asserted that the claim was time-barred by the three year statute of limitation contained in the California Uniform Trade Secret Act. Silvaco argued that it was unaware of misuse by third parties until much later, and had therefore begun its suit against Cypress within the three limitation period.
Thus, Cypress stands for the common sense proposition that a suing party under the California Uniform Trade Secrets has three years from the discovery of each party’s misappropriation of its trade secrets. This, of course, is often a factual issue and entitled to a jury determination. Indeed, in Cypress, the Court of Appeal found that the trial court should have determined when Silvaco first had any suspicions that Circuit Systems’ customers obtained Silvaco’s trade secret information, or had reason to know, that the software licensed by Circuit Systems to its own customers contained Silvaco’s trade secrets.
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