California Civil Jury Instructions (CACI) (2017)

4421. Affirmative Defense—Statute of Limitations—Three-Year Limit (Civ. Code, § 3426.6)

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4421.Affirmative Defense—Statute of Limitations—Three-Year
Limit (Civ. Code, § 3426.6)
[Name of defendant] claims that [name of plaintiff]’s lawsuit was not filed
within the time set by law. To succeed on this defense, [name of
defendant] must prove that the claimed misappropriation of [name of
plaintiff]’s trade secrets occurred before [insert date three years before
date of filing].
However, the lawsuit was still filed on time if [name of plaintiff] proves
that before [insert date three years before date of filing], [he/she/it] did not
discover, nor with reasonable diligence should have discovered, facts
that would have caused a reasonable person to suspect that [name of
defendant] had misappropriated [name of plaintiff]’s [select short term to
describe, e.g., information].
New April 2009
Directions for Use
Give this instruction if the California Unif orm Trade Secrets Act statute of
limitations is at issue. (See Civ. Code, § 3426.6.) In an action in which the
defendant is or was a customer of the initial misappropriator, modifications may be
required. (See Cypress Semiconductor Corp. v. Superior Court (2008) 163
Cal.App.4th 575 [77 Cal.Rptr.3d 685].)
It is not necessary that the plaintiff know the identity of the defendant in order to
trigger the duty to discover. (Cypress Semiconductor Corp., supra, 163 Cal.App.4th
at p. 587.) Therefore, “[name of defendant]” in the last sentence will need to be
modified if inquiry notice may have been triggered against an actual, but
unidentified, misappropriator. (See Cypress Semiconductor Corp., supra, 163
Cal.App.4th at p. 585.)
This instruction places the burden on the plaintiff to prove that it did not know nor
have any reason to suspect the misappropriation earlier than three years before
filing. (See Civ. Code, § 3426.6.) This is the rule for the burden of proof under the
nonstatutory delayed-discovery rule. (See Glue-Fold, Inc. v. Slautterback Corp.
(2000) 82 Cal.App.4th 1018, 1030 [98 Cal.Rptr.2d 661]; CACI No. 455, Statute of
Limitations—Delayed Discovery.) Certain statutes that have their own delayed
discovery language (as does Civil Code section 3426.6) have been construed to
place the burden on the defendant to prove that the plaintiff knew or should have
suspected the facts giving rise to the cause of action earlier than the limitation date.
(See, e.g., Samuels v. Mix (1999) 22 Cal.4th 1, 8–10 [91 Cal.Rptr.2d 273, 989 P.2d
701] [construing Code Civ. Proc., § 340.6 on legal malpractice]; CACI No. 610,
Affırmative Defense—Statute of Limitations—Attorney Malpractice—One-Year
Limit.) No court has construed Civil Code section 3426.6 to transfer the burden of
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proof on delayed discovery to the defendant, so presumably the burden of proof
remains with the plaintiff under the nonstatutory rule.
Sources and Authority
• Statute of Limitations. Civil Code section 3426.6.
“The unanimous conclusion of courts considering the issue—i.e., from federal
courts construing section 3426.6—is that it is the first discovered (or
discoverable) misappropriation of a trade secret which commences the limitation
period.” (Glue-Fold, Inc., supra, 82 Cal.App.4th at p. 1026.)
• “The statute is triggered when the plaintiff knows or has reason to know the
third party has knowingly acquired, used, or disclosed its trade secrets.”
(Cypress Semiconductor Corp., supra, 163 Cal.App.4th 585.)
• “[T]he misappropriation that triggers the running of the statute is that which the
plaintiff suspects, not that which may or may not actually exist.” (Cypress
Semiconductor Corp., supra, 163 Cal.App.4th at p. 587.)
• “[A] plaintiff may have more than one claim for misappropriation, each with its
own statute of limitations, when more than one defendant is involved. This is
different from saying that each misappropriation gives rise to a separate claim,
which is what section 3426.6 precludes.” (Cypress Semiconductor Corp., supra,
163 Cal.App.4th at p. 583, original italics.)
• “A misappropriation within the meaning of the UTSA occurs not only at the
time of the initial acquisition of the trade secret by wrongful means, but also
with each misuse or wrongful disclosure of the secret. But a claim for
misappropriation of a trade secret arises for a given plaintiff against a given
defendant only once, at the time of the initial misappropriation, subject to the
discovery rule provided in section 3426.6. Each new misuse or wrongful
disclosure is viewed as augmenting a single claim of continuing
misappropriation rather than as giving rise to a separate claim.” (Cadence
Design Systems, Inc. v. Avant! Corp. (2002) 29 Cal.4th 215, 223 [127
Cal.Rptr.2d 169, 57 P.3d 647], original italics.)
• “It [is appropriate] to construe section 3426.6 as meaning that a cause of action
for misappropriation against a third party defendant accrues with the plaintiff’s
discovery of that defendant’s misappropriation. Any continuing misappropriation
by that defendant constitutes a single claim.” (Cypress Semiconductor Corp.,
supra, 163 Cal.App.4th at p. 583.)
• “If someone steals a trade secret and then sells it to a third party, when does the
statute of limitations begin to run on any misappropriation claim the trade secret
owner might have against the third party? . . . We conclude that with respect to
the element of knowledge, the statute of limitations on a cause of action for
misappropriation begins to run when the plaintiff has any reason to suspect that
the third party knows or reasonably should know that the information is a trade
secret. The third party’s actual state of mind does not affect the running of the
statute.” (Cypress Semiconductor Corp., supra, 163 Cal.App.4th at p. 579,
original italics.)
CACI No. 4421 TRADE SECRETS
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• “We conclude that the trial court erred in ruling, under the stipulated facts, that
the statute of limitations did not begin to run until August 2003, when
[defendant] actually learned that the DynaSpice program contained [plaintiff]’s
trade secrets. Rather, the question is: When did [plaintiff] first have any reason
to suspect that a . . . customer [of the initial misappropriator] had obtained or
used DynaSpice knowing, or with reason to know, that the software contained
[plaintiff]’s trade secrets?” (Cypress Semiconductor Corp., supra, 163
Cal.App.4th at p. 588, original italics.)
• “[I]t is not necessary that the plaintiff be able to identify the person or persons
causing the harm. Since the identity of the defendant is not an element of a
cause of action, the failure to discover the identity of the defendant does not
postpone accrual of the cause of action. ‘ “Although never fully articulated, the
rationale for distinguishing between ignorance” of the defendant and
“ignorance” of the cause of action itself “appears to be premised on the
commonsense assumption that once the plaintiff is aware of” the latter, he
“normally” has “sufficient opportunity,” within the “applicable limitations
period,” “to discover the identity” of the former.’ In this case, therefore, the
statute began to run when [plaintiff] had any reason to suspect that the CSI
customers knew or should have known that they had acquired [plaintiff]’s trade
secrets.” (Cypress Semiconductor Corp., supra, 163 Cal.App.4th at p. 587,
internal citations omitted.)
Secondary Sources
Witkin, Summary of California Law (10th ed. 2005) Equity, § 88
3Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts,
§ 40.55 (Matthew Bender)
49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition,
§ 565.274 (Matthew Bender)
Matthew Bender Practice Guide: California Unfair Competition and Business Torts,
Ch. 8, Trade Secrets, 8.28
4422–4499 Reserved for Future Use
TRADE SECRETS CACI No. 4421
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