Intermedics v. Ventritex, Inc., C 90 20233 JW (WDB).

• Decision Date: 30 April 1993
• Docket Number: No. C 90 20233 JW (WDB).,C 90 20233 JW (WDB).
• Citation: 822 F. Supp. 634
• Court: U.S. District Court — Northern District of California
• Parties: INTERMEDICS, INC., a Texas corporation, Plaintiff, v. VENTRITEX, INC., a California corporation; Michael Sweeney, an individual; and Benjamin Pless, an individual, Defendants.

822 F. Supp. 634

INTERMEDICS, INC., a Texas corporation, Plaintiff, v. VENTRITEX, INC., a California corporation; Michael Sweeney, an individual; and Benjamin Pless, an individual, Defendants.

No. C 90 20233 JW (WDB).

United States District Court, N.D. California.

April 30, 1993.

COPYRIGHT MATERIAL OMITTED

Jeffrey Olson and Robert Weiss of Lyon and Lyon, Los Angeles, CA, for plaintiff.

John Keker and Jeffrey Chanin of Keker & Brockett and Henry Bunsow of Brobeck, Phleger & Harrison, San Francisco, CA, for defendants.

ORDER AND OPINION RE DEFENDANTS' MOTION FOR SUMMARY JUDGMENT ON ALL CLAIMS BASED ON DISCLOSURE OR USE OF ALLEGED TRADE SECRETS OR CONFIDENTIAL INFORMATION

BRAZIL, United States Magistrate Judge.

I. PRINCIPAL ISSUE ADDRESSED

While defendants' motion for summary judgment and plaintiff's opposition constrain us to confront many questions, by far the most difficult and significant issue that we address is this: under California law, when a cause of action accrues against a given defendant for misappropriation of some alleged trade secrets or confidential information, does the statute of limitations also begin to run from that time on possible claims against the same defendant for misappropriation of other alleged trade secrets or confidential information, without regard to whether there is evidence that the defendant has disclosed or used any of those other alleged secrets? This is an issue of first impression. We do not suggest that its resolution would be the same in all factual settings.

In the circumstances presented here, however, where all the alleged trade secrets (or confidential information) are related to one highly specialized and complex product whose features and components are interdependent, where plaintiff alleges that all the trade secrets (or confidential information) were acquired during the same period, by the same two defendants, and from the same source (plaintiff), where all the alleged misappropriations were committed in connection with the development by those same defendants of one or two similar products for a known competitor, and where misappropriation of those alleged trade secrets as to which the statute clearly has run would have constituted such a clear breach of the confidential relationship that a plaintiff who had actual or constructive knowledge of the misappropriation would have been on notice that its other confidences were at risk, we hold that when the statute of limitations began to run on claims for misappropriation of some of the alleged trade secrets it simultaneously began running as to claims for alleged misappropriations of the other, related secrets, even if no acts of misappropriation of the other secrets had yet occurred.

After describing the procedural and factual background in which we are working, we address the first and more straightforward portion of defendants' motion, i.e., the contention that, given the jury's findings, plaintiff is forever barred by the statute of limitations from litigating any claims arising out of misappropriations of any of the six design ideas (alleged trade secrets) that were the subject of the trial in November and December of 1992. We then turn to the substantially more demanding issue described in the preceding paragraph.

For reasons we detail in sections that follow, we GRANT defendants' motion for SUMMARY JUDGMENT, holding that the statute of limitations bars prosecution against these defendants of any claims arising out of or dependent on any alleged misappropriation of any of the alleged trade secrets or confidential information reached by plaintiff's claims in this litigation.

Having so held, we have no occasion to reach defendants' second contention, that the doctrine of res judicata also bars prosecution of any claim arising out of misappropriation of the alleged trade secrets or confidential information.

II. PROCEDURAL AND FACTUAL BACKGROUND

Plaintiff first sued these same defendants in 1985.¹ In that earlier litigation, plaintiff alleged that defendants Pless and Sweeney were duty bound not to disclose alleged trade secrets and confidential information about an implantable defibrillator on which Pless and Sweeney had worked while employed at Intermedics. Plaintiff further alleged that Pless and Sweeney had violated their duties to Intermedics by disclosing alleged secrets about the implantable defibrillator to Ventritex and by participating in a conspiracy with Ventritex to misappropriate those secrets. In addition, Intermedics asserted that Ventritex had induced Pless and Sweeney to breach their obligations to Intermedics by disclosing it trade secrets or confidential information about its implantable defibrillator to Ventritex and that Ventritex also was guilty of misappropriation.

In sum, the 1985 complaint alleged breaches by these same defendants of the same duties that underlie the allegations in the instant action. Moreover, those breaches purportedly arose out of misappropriations of secrets related to the same project that is the subject of this case (the implantable defibrillator project). After limited discovery, the parties to that earlier action agreed to participate in an informal audit process that was designed to give plaintiff, through a former employee (William Winstrom) and its outside counsel, an opportunity to determine whether defendants had in fact misappropriated any of the secrets to which plaintiff laid claim.² After Mr. Winstrom completed his audit, using a list of trade secrets prepared by plaintiff but somehow lost during the intervening years, plaintiff elected to dismiss its first lawsuit, with prejudice. That dismissal was effective April 10, 1986.³

More than four years later, on April 23, 1990, plaintiff filed the instant action against the same defendants, pressing claims, among others, of the same general character that plaintiff had pressed in the earlier litigation. More specifically, the complaint in this action includes causes of action for misappropriation of trade secrets and confidential information, breach of contract, breach of fiduciary duty, unfair competition, inducement to breach contractual obligations and fiduciary duties, and civil conspiracy. The viability of each of these state law claims turns on whether plaintiff can prove that certain design ideas (all of which were features or aspects of an implantable arrhythmia control device) were its trade secrets or confidential information and that defendants misappropriated them.

During the pretrial period plaintiff had some difficulty deciding how many separate design ideas it would claim as its trade secrets and how to articulate or define those ideas. In the spring of 1991 plaintiff presented a list of some 39 alleged trade secrets. In the fall of that year, however, plaintiff recrafted its list, adjusting the phraseology describing some of its alleged trade secrets and adding claims, so that the list of allegedly misappropriated trade secrets had grown to fifty (50). Later, plaintiff further refined its list by adding yet another alleged trade secret. In the Spring of 1992 plaintiff deleted two of the design ideas from the list, then, some weeks later, announced that it would pursue claims based on only 37 of the alleged trade secrets.

As the case development process proceeded it became clear to the court that the subject matter of each alleged trade secret was extremely technical (involving dimensions or features of sophisticated electronic micro-circuitry) and that resolving the issues raised by the trade secret claims would require the trier of fact to comprehend an intimidating new vocabulary as well as esoteric scientific and engineering literature. In the court's view, it was unrealistic to ask one jury in one trial to attempt to absorb, comprehend, and organize all the technical and nontechnical evidence that it would have been necessary to admit if we were to attempt to try all the different state law claims based on all the 37 alleged trade secrets in one setting.

Thus, the court ordered a staged adjudicatory process in which the first trial would be limited to the liability issues (not damages) with respect to only six of the alleged trade secrets. The court permitted plaintiff to select any four of its alleged trade secrets for this first trial; defendants selected from plaintiff's list the remaining two alleged secrets that would be the subject of the trial. Before the parties selected the design ideas for this first trial the court expressly admonished counsel that this first adjudication of the issues raised by the claims and defenses related to the six design ideas might well have preclusive effects on issues related to other design ideas or even for the patent aspects of the case. In response to pretrial motions, the court ruled that California law would control disposition of all statute of limitations issues with respect to all claims arising out of or dependent on alleged misappropriations of trade secrets or confidential information. Order, filed 10/30/92. The court also ruled that Texas law would control disposition of the substantive liability issues, e.g., would fix the definition of a "trade secret" and of "misappropriation."⁴ Id.

Results of the 1992 Jury Trial

Between November 17, 1992 and December 15, 1992, the court presided over a jury trial in which the parties litigated liability issues as to six of the alleged trade secrets (design ideas number 4, 13, 22, 25, 36, and 43). Responding to special interrogatories after all the evidence and argument had been presented, the jury made the following findings of fact:

1. Defendants had proved that William Winstrom acted as Intermedics' agent when he conducted the audit of Ventritex in March of 1986. (Special Interrogatory 1);

2. Plaintiff failed to prove that any of the six design ideas was "secret" at the time that Mr. Pless and Mr. Sweeney stopped working for Intermedics (June of 1985) (Special...