Appellate panel reverses summary judgment in scathing opinion

In a highly critical opinion, a state appellate panel reversed summary judgment for defendant Cisco Systems Inc. in a lawsuit brought by another company alleging misappropriation of trade secrets.

"We are very pleased with the opinion, returning the trade secret misappropriation claim back to the lower court for trial," said Robert Muller of Cypress LLP, who argued for plaintiff Leadfactors LLC.

In the opinion issued Monday, 6th District Court of Appeal Justice Franklin D. Elia lambasted Cisco's briefing, multiple pieces of evidence, and said the trial court's summary judgment ruling was "directed at immaterial facts."

Cisco failed to sufficiently cite the record by not listing page numbers among over 3,200 pages, misrepresented facts, trumped-up irrelevant facts, and errantly cited the trial court's order instead of evidence, Elia wrote.

"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," Elia wrote.

"Nor does Cisco find purchase in repeatedly quoting the trial court's order stating what 'the evidence shows.' ... 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," he later added. Justices Nathan D. Mihara and Allison M. Danner concurred with the unanimous unpublished decision. Leadfactors, LLC v. Cisco Systems, Inc. H043081 (Cal. App. 6th. Dist. filed Dec. 14, 2018) (unpublished).

In the underlying case, Cisco reached a deal with ConnectBeam Inc. to learn more about the latter's product offerings, including social enterprise software, to determine if they might reach a vendor deal. The two companies also reached a nondisclosure agreement to protect ConnectBeam's trade secrets. During talks, ConnectBeam disclosed confidential information not for Cisco's commercial use.

After ConnectBeam became insolvent, a bank with an interest in the company appropriated its assets, including its intellectual property, as collateral. ConnectBeam's founder then created a new company, Leadfactors, and bought the assets back.

Now, Leadfactors, also represented in the appeal by Hyura Choi of Cypress LLP, alleges Cisco used information gleaned from its discussions with ConnectBeam to create major web products.

Santa Clara County Superior Court Judge Joseph Huber granted Cisco's demurrer on Leadfactors' contract breach claim based on the non-disclosure agreement with ConnectBeam and granted summary judgment on the misappropriation claim in November 2015. On appeal, the former was upheld and the latter overturned.

"We are pleased the court upheld the dismissal of Leadfactors' contract claim," Cisco spokeswoman Robyn Blum said in a statement Tuesday. "We are confident that when all the evidence regarding Leadfactors' conduct is properly before the court, it will be clear that they have no claim for misappropriation."

According to the Elia's opinion, the court upheld the demurrer to the contract claim because though Leadfactors owns the relevant ConnectBeam assets, the non-disclosure agreement's terms are restricted to the original signatories.

Elia listed numerous issues with Cisco's assertions in overturning the summary judgment. For one, he said Cisco claims that before Leadfactors sued, its own counsel acknowledged the statute of limitations expired on misappropriation.

"This claim is specious," Elia wrote. "First, Cisco offers no reference to facts in the record to support the assertion. Second, it misstates the facts." He continued that the attorney who made the alleged claim was not Leadfactors' lead counsel, made the claim based on an incorrect date, and only said the claim "may be barred" rather than acknowledged that it was.

The appellate panel was also unconvinced by Cisco's argument that the clock on that time limit expired at all. The decision says while ConnectBeam was concerned internally and externally about the exposure of its trade secrets, whether it actually asserted misappropriation, and when it did if it did, are triable matters of fact for a jury to decide.

"As the Court of Appeal's very careful, lengthy and detailed analysis shows, Leadfactors feels more strongly than ever that when the case gets to trial and to the jury, it will finally have its opportunity to show that Cisco took advantage of ConnectBeam by improperly using its fundamental trade secret technology in the design and manufacture of its products," said Muller.