CACI No. 4407. Misappropriation by Use

Judicial Council of California Civil Jury Instructions (2020 edition)

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4407.Misappropriation by Use
[Name of defendant] misappropriated [name of plaintiff]’s trade secret[s]
by use if [name of defendant]
1. used [it/them] without [name of plaintiff]’s consent; and
2. [did any of the following:]
2. [insert one or more of the following:]
2. [acquired knowledge of the trade secret[s] by improper means][./;
or]
2. [at the time of use, knew or had reason to know that [his/her/
nonbinary pronoun/its] knowledge of [name of plaintiff]’s trade
secret[s] came from or through [name of third party], and that
[name of third party] had previously acquired the trade secret[s]
by improper means][./; or]
2. [at the time of use, knew or had reason to know that [his/her/
nonbinary pronoun/its] knowledge of [name of plaintiff]’s trade
secret[s] was acquired under circumstances creating a legal
obligation to limit use of the [select short term to describe, e.g.,
information]][./; or]
2. [at the time of use, knew or had reason to know that [his/her/
nonbinary pronoun/its] knowledge of [name of plaintiff]’s trade
secret[s] came from or through [name of third party], and that
[name of third party] had a duty to [name of plaintiff] to limit use
of the [e.g., information]][./; or]
2. [before a material change of [his/her/nonbinary pronoun/its]
position, knew or had reason to know that [it was/they were] [a]
trade secret[s] and that knowledge of [it/them] had been acquired
by accident or mistake.]
New December 2007; Revised December 2010
Directions for Use
Read this instruction with CACI No. 4401, Misappropriation of Trade
Secrets - Essential Factual Elements, if the plaintiff claims that the defendant’s use
of the information alleged to be a trade secret is a misappropriation.
If consent is at issue, CACI No. 1302, Consent Explained, and CACI No. 1303,
Invalid Consent, may also be given.
In element 2, select the applicable statutory act(s) alleged to constitute
misappropriation by use. (See Civ. Code, § 3624.1(b)(2).) If only one act is selected,
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omit the words “did any of the following.”
If either of the first two acts constituting misappropriation by disclosure is alleged,
give also CACI No. 4408, Improper Means of Acquiring Trade Secret.
Sources and Authority
• “Misapproriation” Defined. Civil Code section 3426.1(b)(2).
• Constructive Notice. Civil Code section 19.
• “Under the plain terms of the Uniform Trade Secrets Act, defendants may be
personally liable if: they used, through the corporation, [plaintiff]’s trade secrets;
at the time of the use of the confidential information they knew or had reason to
know that knowledge of the trade secrets was derived from or through a person
who had improperly acquired the knowledge, or the secrets were obtained by a
person who owed a duty to plaintiffs to maintain the secrecy. Employing the
confidential information in manufacturing, production, research or development,
marketing goods that embody the trade secret, or soliciting customers through
the use of trade secret information, all constitute use. Use of a trade secret
without knowledge it was acquired by improper means does not subject a person
to liability unless the person receives notice that its use of the information is
wrongful.” (PMC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368, 1383 [93
Cal.Rptr.2d 663], internal citations omitted.)
• “Under the UTSA, simple disclosure or use may suffice to create liability. It is
no longer necessary, if it ever was, to prove that the purpose to which the
acquired information is put is outweighed by the interests of the trade secret
holder or that use of a trade secret cannot be prohibited if it is infeasible to do
so.” (Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1527 [66 Cal.Rptr.2d
731].)
• “One clearly engages in the ‘use’ of a secret, in the ordinary sense, when one
directly exploits it for his own advantage, e.g., by incorporating it into his own
manufacturing technique or product. But ‘use’ in the ordinary sense is not
present when the conduct consists entirely of possessing, and taking advantage
of, something that was made using the secret. One who bakes a pie from a
recipe certainly engages in the ‘use’ of the latter; but one who eats the pie does
not, by virtue of that act alone, make ‘use’ of the recipe in any ordinary sense,
and this is true even if the baker is accused of stealing the recipe from a
competitor, and the diner knows of that accusation. Yet this is substantially the
same situation as when one runs software that was compiled from allegedly
stolen source code. The source code is the recipe from which the pie (executable
program) is baked (compiled). Nor is the analogy weakened by the fact that a
diner is not ordinarily said to make ‘use’ of something he eats. His metabolism
may be said to do so, or the analogy may be adjusted to replace the pie with an
instrument, such as a stopwatch. A coach who employs the latter to time a race
certainly makes ‘use’ of it, but only a sophist could bring himself to say that
coach ‘uses’ trade secrets involved in the manufacture of the watch.” (Silvaco
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Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 224 [109 Cal.Rptr.3d
27].)
• “Liability under CUTSA is not dependent on the defendant’s ‘comprehension’ of
the trade secret but does require ‘knowledge’ of it. So far as the record shows,
[defendant] did not know and had no way to get the information constituting the
trade secret. It therefore could not, within the contemplation of the act, ‘use’ that
information.” (Silvaco Data Systems,supra, 184 Cal.App.4th at p. 229.)
• “ ‘Knowledge,’ of course, is ‘[t]he fact or condition of knowing,’ . . . and in this
context, ‘[t]he fact of knowing a thing, state, etc. . . .’ (8 Oxford English Dict.,
supra, p. 517.) To ‘know’ a thing is to have information of that thing at one’s
command, in one’s possession, subject to study, disclosure, and exploitation. To
say that one ‘knows’ a fact is also to say that one possesses information of that
fact. Thus, although the Restatement Third of Unfair Competition does not
identify knowledge of the trade secret as an element of a trade secrets cause of
action, the accompanying comments make it clear that liability presupposes the
defendant’s ‘possession’ of misappropriated information.” (Silvaco Data Systems,
supra, 184 Cal.App.4th at pp. 225-226, original italics.)
• “When a competitor hires a former employee of plaintiff who is likely to
disclose trade secrets, ‘[i]t is a question of fact whether the competitor had
constructive notice of the plaintiff’s right in the secret.’ ” (Ralph Andrews
Productions, Inc. v. Paramount Pictures Corp. (1990) 222 Cal.App.3d 676,
682-683 [271 Cal.Rptr. 797], internal citation omitted.)
• “Our Supreme Court has previously distinguished solicitation - which is
actionable - from announcing a job change - which is not: ‘Merely informing
customers of one’s former employer of a change of employment, without more,
is not solicitation. Neither does the willingness to discuss business upon
invitation of another party constitute solicitation on the part of the invitee.
Equity will not enjoin a former employee from receiving business from the
customers of his former employer, even though the circumstances be such that
he should be prohibited from soliciting such business.’ ” (Hilb v. Robb (1995) 33
Cal.App.4th 1812, 1821 [39 Cal.Rptr. 2d 887], internal citation omitted; but see
Morlife, Inc., supra, 56 Cal.App.4th at p. 1527, fn. 8 [“we need not decide
whether the ‘professional announcement’ exception . . . has continued vitality in
light of the expansive definition of misappropriation under the UTSA”].)
• “[T]o prove misappropriation of a trade secret under the UTSA, a plaintiff must
establish (among other things) that the defendant improperly ‘used’ the plaintiff’s
trade secret. Thus, under Evidence Code sections 500 and 520, the plaintiff bears
the burden of proof on that issue, both at the outset and during trial.” (Sargent
Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1668 [3 Cal.Rptr.3d
279], internal citation omitted.)
• “[I]nformation relative to customers (e.g., their identities, locations, and
individual preferences), obtained by a former employee in his contacts with them
during his employment, may amount to ‘trade secrets’ which will warrant his
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being enjoined from exploitation or disclosure after leaving the employment. [¶]
It is equally clear, however, that the proscriptions inhibiting the ex-employee
reach only his use of such information, not to his mere possession or knowledge
of it.” (Golden State Linen Service, Inc. v. Vidalin (1977) 69 Cal.App.3d 1, 7-8
[137 Cal.Rptr. 807], internal citations omitted.)
• “Since these ‘Marks’ likely encompass any trade secrets, it is reasonable to
conclude that one party’s use of the trade secrets that affects the other party’s
rights in the mark would constitute the misappropriation of the trade secrets ‘of
another.’ ” (Morton v. Rank Am., Inc. (C.D. Cal. 1993) 812 F.Supp. 1062, 1074
[one can misappropriate trade secret jointly owned with another].)
Secondary Sources
3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts,
§ 40.53[1][b] (Matthew Bender)
49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition,
§ 565.103[4][c] (Matthew Bender)
Edelson & Kay, eds., Trade Secret Litigation and Protection in California (State Bar
of California 2009) Chs. 2, 6, 12
Gaab & Reese, California Practice Guide: Civil Procedure Before Trial - Claims &
Defenses, Ch. 10(II)-A ¶ 10:250 (The Rutter Group)
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