Opinion
21-cv-03074-JST
02-12-2024
HOPE CHUNG, et al., Plaintiffs, v. INTELLECTSOFT GROUP CORPORATION, et al., Defendants.
ORDER GRANTING-IN-PART AND DENYING-IN-PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
RE: ECF NO. 167
JON S. TIGAR UNITED STATES DISTRICT JUDGE
Before the Court is Defendants and Counterclaimants Intellectsoft LLC (“Intellectsoft”) and Intellectsoft Group Corporation's (“IGC”) (collectively, “Defendants”) motion for summary judgment. ECF No. 167 (“Mot”). For the reasons below, the Court will grant the motion in part and deny the motion in part.
I. BACKGROUND
A. Factual Background
Plaintiff Hope Chung (“Chung”) is the founder and CEO of Plaintiff Picture Mandarin, LLC (“Picture Mandarin”) (collectively, “Plaintiffs”). ECF No. 51 (“SAC”) ¶¶ 1-2. In late 2015, Plaintiffs approached Intellectsoft with the idea of developing a website, mobile application, and other software-related work product for Chung that would serve as a part of an educational program intended to teach Mandarin to children. See SAC ¶¶ 12, 13; ECF No. 160 (“Answer”) ¶¶ 12, 13. After some discussion, on January 4, 2016, Plaintiffs executed a Statement of Work with Intellectsoft relating to the “Picture Mandarin” project. ECF No. 168-3 at 237-43 (the “PM SOW”). Per the PM SOW, the Picture Mandarin project “aim[ed] to teach Mandarin to children ages 4-10 from a parent/teacher directed self-learning program and license schools willing to use the system” and featured a “Tablets (iPad) native application for children” that contained functions such as “Pronunciation Basics,” “Mandarin Phonetics,” “Word Learning: Dictionary Function,” “Let's Paint: Writing Basics,” “Reading Adventure: Read-A-Long or Sing-A-Long,” “In-app Purchases,” and “Learner's Profile,” among others. PM SOW at 3-4. The PM SOW estimated that the Phase 1 of the Picture Mandarin project would involve 1654 hours of work, totaling a budget of $104,230. Id. at 9. On or about April 21, 2016, Intellectsoft requested that Plaintiffs approve an additional 2,078 hours of work relating to Phase 2 of the Picture Mandarin Project, at an additional cost of approximately $126,000. See SAC ¶ 33; Answer ¶ 33. Between February 3, 2016 and June 1, 2016, Intellectsoft sent Plaintiffs invoices totaling $77,269.40 relating to the Picture Mandarin project. ECF 51-4.
For ease of reference, the Court refers to the page numbers of the PM SOW in lieu of the ECF page number of the ECF No. 168-3.
As a result of financial difficulties, on June 15, 2016, Plaintiffs informed Intellectsoft that the Picture Mandarin project was on hold, and that Intellectsoft should work on another project -the “Friendship Diary” project. See SAC ¶ 43; Answer ¶ 43. Plaintiffs and Intellectsoft then executed another statement of work relating to the Friendship Diary project. ECF 168-3 at 244-74 (the “FD SOW”) (collectively with the PM SOW, the “SOWs”). The FD SOW described the Friendship Diary project as a “[s]ocial platform project that enables users to set goals” and included an extensive list of features and functions. FD SOW at 3-5. The FD SOW estimated that the Friendship Diary project would require approximately 4,789 hours and $260,110 of work, broken down into four platforms: “Android,” “iOS,” “Front End Web,” and “Back End.” Id. at 25. Between May 2016 and November 2017, Defendants sent Plaintiffs ten invoices totaling $227,655.30 for work relating to the Friendship Diary project. ECF No. 51-5. On or around June 21, 2016, Plaintiffs also requested that Intellectsoft resume work on the Picture Mandarin project. See SAC ¶ 52, Answer ¶ 52.
For ease of reference, the Court refers to the page numbers of the FD SOW in lieu of the ECF page number of the ECF No. 168-3.
The parties' business relationship ultimately broke down, culminating on April 29, 2017, when Plaintiffs formally notified Intellectsoft that it was terminating the SOWs. See SAC ¶ 67; Answer ¶ 67; ECF 168-3 at 346-47. In the termination letter, Chung stated that Intellectsoft had failed to “provide either source code or document” substantiating their work and was unable to deliver “usable apps” by May 10, 2017. ECF 168-3 at 346. Defendants acknowledged the termination and delivered Plaintiffs the source code for both the Picture Mandarin and Friendship Diary projects by May of 2017. See SAC ¶¶ 64, 68; Answer ¶¶ 64, 68. In total, Plaintiffs paid Intellectsoft $323,924.75 for work relating to the Picture Mandarin and Friendship Diary projects. See SAC ¶ 124; Answer ¶ 124.
B. Procedural Background
Plaintiffs filed its original Complaint on April 27, 2021, naming only IGC as a defendant. See ECF No. 1. Intellectsoft was added as a defendant in the Second Amended Complaint, filed on October 8, 2021. See SAC. Plaintiffs alleged eight claims in the Second Amended Complaint: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) negligent misrepresentation, (4) unfair business practices under Cal. Bus. & Prof. Code § 17200, et seq. (“UCL”), (5) theft of trade secrets under the Federal Defend Trade Secrets Act, 18 U.S.C. § 1832, et seq. (“DTSA”), (6) misappropriation of trade secrets in violation of the California Uniform Trade Secrets Act, Cal. Civ. Code § 3426, et seq. (“CUTSA”), (7) intentional interference with prospective economic advantage, and (8) negligent interference with prospective economic advantage. Id. Defendants subsequently moved to dismiss the Second Amended Complaint. ECF No. 52.
On July 13, 2022, the Court granted in part Defendants' motion to dismiss the Second Amended Complaint. ECF No. 67. The Court dismissed without prejudice Plaintiffs' claims for negligent misrepresentation, and intentional and negligent interference with prospective economic advantage. Id. The Court also dismissed with prejudice Plaintiffs' unfair business practices claim, to the extent that claim was based on allegations pertaining to trade secret misappropriation. Id. The Court denied the motion to dismiss as to all other claims. Id. Plaintiffs elected not to file a further amended complaint, so Plaintiffs' remaining claims in this case are for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) unfair business practices under the UCL (only to the extent not predicated on its trade secret claims), (4) theft of trade secrets under the DTSA, and (5) trade secret misappropriation under the CUTSA.
Defendants now move for summary judgment as to those remaining claims.
II. LEGAL STANDARD
Summary judgment is proper when a “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A dispute is genuine only if there is sufficient evidence for a reasonable trier of fact to resolve the issue in the nonmovant's favor, and a fact is material only if it might affect the outcome of the case. Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2014) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986)). The court must draw all reasonable inferences in the light most favorable to the nonmoving party. Johnson v. Rancho Santiago Cmty. Coll. Dist., 623 F.3d 1011, 1018 (9th Cir. 2010).
Where the party moving for summary judgment would bear the burden of proof at trial, that party “has the initial burden of establishing the absence of a genuine issue of fact on each issue material to its case.” C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000). Where the moving party would not bear the burden of proof at trial, that party “must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). If the moving party satisfies its initial burden of production, the nonmoving party must then produce admissible evidence to show that a genuine issue of material fact exists. Id. at 1102-03. If the nonmoving party fails to make this showing, the moving party is entitled to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
III. DISCUSSION
First, Defendants argue that IGC is entitled to summary judgment on Plaintiffs' claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair business practices because IGC is not a party to any contracts with Plaintiffs, and Plaintiffs have produced no evidence of unfair business practices as to IGC. Mot. at 11-14. Second, Defendants argue that Intellectsoft is entitled to summary judgment on Plaintiffs' claims for breach of contract, breach of the implied covenant of good faith, and unfair business practices because those claims are barred by the statute of limitations. Id. at 14-17. Third, Defendants argue they are entitled to summary judgment on Plaintiffs' claims for trade secret misappropriation under the DTSA and CUTSA, breach of contract, and breach of the implied covenant of good faith and fair dealing because Plaintiffs do not have enough evidence to carry their ultimate burden of persuasion at trial as to essential elements of those claims. Id. at 17-28, 30. Finally, Defendants argue that Plaintiffs' damages are limited as a matter of law by the SOWs. Id. at 28-30.
A. Claims Against IGC
The Court begins with Plaintiffs' claims against IGC. Defendants argue that summary judgment should be entered as to Plaintiffs' claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair business practices against IGC, because IGC is not a party to any of the SOWs and Plaintiffs have produced no evidence of unfair business practices by IGC. Mot. at 11-14. Plaintiffs do not dispute that IGC was not a signatory to the SOWs, but argue that IGC should nonetheless be liable because (1) IGC assumed the obligations of the SOWs such that privity of contract existed between IGC and Plaintiffs and/or (2) Intellectsoft was an alter ego of IGC. ECF No. 175 (“Opp.”) at 7-11.
1. Assumption of Contract
Under California law, “[b]reach of contract cannot be made the basis of an action for damages against defendants who did not execute it and who did nothing to assume its obligations.” Gold v. Gibbons, 178 Cal.App. 2d 517, 519 (1960). In order to determine whether a party has assumed the obligations of a contract, the Court looks to “the intent of the parties as indicated by their acts, the subject matter of the contract or their words.” Enter. Leasing Corp. v. Shugart Corp., 231 Cal.App.3d 737, 745 (1991). “Assumption of obligations may be implied from acceptance of benefits under the contract.” Id. (citing Cal. Civ. Code § 1589).
Plaintiffs offer no evidence to demonstrate that IGC intended to assume the obligations of Intellectsoft under the SOWs. Unlike the cases upon which they rely, here Plaintiffs have produced no evidence that IGC accepted any of the benefits under the SOWs, or that IGC communicated an intent to assume the obligations of the SOWs. Cf. Impulse Mktg. Grp., Inc. v. Nat'l Small Bus. All., Inc., No. 05-CV-7776 (KMK), 2007 WL 1701813, at *6 (S.D.N.Y. June 12, 2007) (“DCM's statements to Plaintiff that DCM was ‘the real party in interest [,]' coupled with DCM's three payments to Plaintiff points strongly to the fact that DCM and Plaintiff shared similar interests, which suggests that the Parties were in privity.”); Johnson v. Comptoir Franco Belge D'Exportation Des Tubes D'Acier, 135 Cal.App. 2d 683, 688 (1955) (finding privity of contract where non-signatory sent invoice to and accepted letter of credit from party to contract).
Plaintiffs' only evidence that IGC intended to assume the obligations of the contract is that three of the individuals who interacted with Plaintiffs in the course of their business-Igor Trandafilov, Anastasia Tur, and Rustam Gumerov-indicated they were affiliated with “Intellectsoft Group” in their email signature blocks. See Opp. at 8. However, Plaintiffs have produced no evidence demonstrating that these individuals were employees or agents of IGC, or acting as such in their interactions with Plaintiffs, such that those interactions would indicate that IGC intended to assume the obligations of the SOWs with Plaintiffs. Absent such evidence, the Court concludes that Plaintiffs have not met their burden of demonstrating a genuine issue of material fact as to whether IGC intended to assume the contracts with Plaintiffs such that there would be privity of contract between IGC and Plaintiffs.
2. Alter Ego Liability
Plaintiffs assert that IGC should be liable for Intellectsoft's acts under the alter ego doctrine. Alter ego liability “is an extreme remedy, sparingly used.” Sonora Diamond Corp. v. Superior Ct., 83 Cal.App.4th 523, 539 (2000). California law requires that a party seeking to pierce the corporate veil and invoke the alter ego doctrine bears the burden of establishing two elements: “‘(1) that there is such unity of interest and ownership that the separate personalities of the two entities no longer exist and (2) that failure to disregard [their separate identities] would result in fraud or injustice.'” Ranza v. Nike, Inc., 793 F.3d 1059, 1073 (9th Cir. 2015) (quoting Doe v. Unocal Corp., 248 F.3d 915, 926 (9th Cir. 2001)); see also Leek v. Cooper, 194 Cal.App.4th 399, 417 (2011).
The Court finds that Plaintiffs' alter ego claim against IGC fails as a matter of law, because Plaintiffs have failed to carry their burden of producing evidence sufficient to demonstrate a genuine issue of material fact as to the first element-that “there is such unity of interest and ownership that the separate personalities of [IGC and Intellectsoft] no longer exist.” Ranza, 793 F.3d at 1073. In order to satisfy the first element, a plaintiff must make “a showing that the parent controls the subsidiary to such a degree as to render the latter the mere instrumentality of the former.” Id. (quoting Unocal, 248 F.3d at 926). Here, Plaintiffs assert that “Intellectsoft, LLC acts as a marketing conduit for IGC (which owns Intellectsoft LLC), apparently with the intention to shield IGC from liability.” Opp. at 10. However, the only evidence Plaintiff produces to support this assertion is that IGC and Intellectsoft share email domains and physical addresses, that Plaintiffs had business interactions with individuals who were possibly affiliated with IGC, and that Intellectsoft's co-founder Artem Kozel is also a director of IGC. See ECF No. 178 at 7173 (“Kozel Decl.”) ¶ 1; ECF No. 175-1 (“Chung Decl.”) ¶ 3; ECF No. 173-10 (“Kozel Depo.”) at 123:4-9, 150:18-19. Plaintiffs identify no evidence to rebut Kozel's declaration that IGC and Intellectsoft are separate entities that did not comingle funds, that IGC did not hold itself out as liable for the debts of Intellectsoft, and that IGC was not a shell for the affairs of Intellectsoft. See Kozel Decl. ¶ 5-8. Moreover, Plaintiffs produce no evidence “that [Intellectsoft] is undercapitalized, that the two entities fail to keep adequate records or that [IGC] freely transfers Intellectsoft's assets, all of which would be signs of a sham corporate veil.” Ranza, 793 F.3d at 1074. Nor have Plaintiffs shown that IGC “‘dictates every facet of [Intellectsoft's] business,' including ‘routine matters of day-to-day operation.'” Id. (quoting Unocal, 248 F.3d at 926). At best, Plaintiffs' evidence demonstrates that IGC and Intellectsoft share some employees or directors, or that Intellectsoft used some of IGC's subcontractors to perform services, but this falls short of demonstrating “such domination of finances, policies and practices that [Intellectsoft] has, so to speak, no separate mind, will or existence of its own and is but a business conduit of [IGC]” Toho-Towa Co. v. Morgan Creek Prods., Inc., 217 Cal.App.4th 1096, 1107 (2013) (internal quotes omitted). Accordingly, even drawing all reasonable inferences in their favor, the Court finds that Plaintiffs have not identified or produced evidence sufficient to avoid summary judgment on its theory of alter ego liability.
3. UCL Claim
Defendants also argue that IGC is entitled to summary judgment against Plaintiffs' unfair business practice claim because Plaintiffs' claim is predicated upon false representations Defendants allegedly made to Plaintiffs, and Plaintiffs have produced no evidence that IGC made any such representations. Mot. at 14. In support, Defendants cite to deposition testimony from Chung, which indicates that the alleged representations were made by Intellectsoft, not IGC. Id., see ECF 168-3 at 21-28 (“Chung Depo”) at 85:1-5. Plaintiffs, in their opposition, fail to identify any evidence to rebut this argument, and instead fall back on their theory of alter ego liability, which the Court has rejected. Accordingly, Plaintiffs have failed their burden and the Court finds IGC is also entitled to summary judgment as to Plaintiff's unfair business practice claim.
Because Plaintiffs have failed to produce evidence sufficient to demonstrate a genuine issue of material fact that either IGC assumed the obligations of the SOWs or that Intellectsoft was an alter ego of IGC, the Court grants Defendants' motion for summary judgment as to Plaintiffs' claims against IGC for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair business practices.
B. Statute of Limitations
Defendants argue that Plaintiffs' claims against Intellectsoft for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair business practices are barred by the relevant four-year statutes of limitations. Mot. at 14-17. Plaintiffs counter that (1) Intellectsoft waived its statute of limitations defense by failing to raise it in its answer to the Second Amended Complaint; and (2) Plaintiffs' Second Amended Complaint naming Intellectsoft should relate back to the filing of the original complaint under Fed.R.Civ.P. 15 and California law. Opp. at 11-17. Plaintiffs also argue that (3) as to their claims for breach of the confidentiality provisions of the SOWs, they did not discover Intellectsoft's purported breaches until 2020. Id. at 17.
1. Waiver Under Fed. R. Civ. P 8(c)
Federal Rule of Civil Procedure 8(c) requires that, “[i]n responding to a pleading, a party must affirmatively state any avoidance or affirmative defense, including: . . . statute of limitations ....” Fed.R.Civ.P. 8(c); see also Eyster v. City of Los Angeles, 131 F.3d 146, 146 (9th Cir. 1997) (“The general rule is that a defendant should assert in his first responsive pleading that the plaintiff has failed to comply with the statute of limitations.”). However, the Ninth Circuit has softened this requirement, such that a defendant “may raise an affirmative defense for the first time in a motion for summary judgment only if the delay does not prejudice the plaintiff.” Magana v. Com. of the N. Mariana Islands, 107 F.3d 1436, 1446 (9th Cir. 1997), as amended (May 1, 1997); see also Jelin v. San Ramon Valley Unified Sch. Dist., No. 16-CV-05986-EDL, 2018 WL 11234174, at *13 (N.D. Cal. July 5, 2018) (Courts “may permit a party to raise an affirmative defense for the first time on summary judgment but ‘only if the delay does not prejudice the plaintiff.'”).
The Court finds Defendants have failed to demonstrate that Intellectsoft's failure to plead its statute of limitations in its answer did not prejudice Plaintiffs, and therefore that Intellectsoft has waived that defense. Defendants argue that Plaintiffs could not have suffered prejudice because “discovery is closed” and “Plaintiff [Chung] made a deliberate decision to sue IGC instead of Intellectsoft.” ECF No. 182 (“Reply”) at 6. These arguments do not convince. Plaintiffs' decision to sue IGC and not Intellectsoft at the outset of this case, intentional or otherwise, bears no relevance on Intellectsoft's failure to plead relevant defenses in its answer. And Intellectsoft's failure to raise these statute of limitations defenses until after the close of discovery only exacerbates the prejudice to Plaintiffs, who now cannot conduct discovery into these defenses. Intellectsoft's delay in asserting a statute of limitations defense has deprived Plaintiffs of the opportunity to fully litigate the issue. See Lopez v. G.A.T. Airline Ground Support, Inc., No. 09-CV-2268-IEG, 2010 WL 2839417, at *8 (S.D. Cal. Jul. 19, 2010) (finding waiver appropriate where “Plaintiffs did not have notice of [the affirmative defense] until after the parties had already taken depositions and produced requested documents, and Plaintiffs were prejudiced by their inability to conduct discovery on this issue.”).
Defendants also argue that they did not waive a statute of limitations defense as to Plaintiffs' claims for breach of contract, breach of the implied covenant, or unfair business practices, because they asserted the defense as to Plaintiffs' other claims. Reply at 6 (“Defendants did not waive this defense and, in fact, have brought up the timeliness of Plaintiffs' various causes of action since the inception of this case. In fact, the statute of limitations was a central issue in both Defendants' motions to dismiss.” (citation omitted)). Defendants cite no authority for this proposition, and it defies logic and common sense. If anything, faced with Defendants' election to assert a statute of limitations defense only against certain claims, Plaintiffs were entitled to assume that Defendants had decided not to assert that defense against the remaining claims. Cf. Black's Law Dictionary 661 (9th ed. 2009) (defining expressio unius est exclusio alterius, the canon of interpretation that “to express or include one thing implies the exclusion of the other, or of the alternative”).
Finally, the Court finds Defendants' argument that it preserved the relevant statute of limitations defenses by pleading a general “failure to state a claim” defense unpersuasive. Rule 8 is clear that a party must “affirmatively plead” affirmative defenses such as statute of limitations. Fed.R.Civ.P. 8(c). Failure to state a claim is not an affirmative defense, but rather, asserts a defect in a plaintiff's prima facie case. See Martinez v. Cnty. of Sonoma, No. 15-CV-01953-JST, 2016 WL 1275402, at *2 (N.D. Cal. Apr. 1, 2016). The general assertion of such a defect does not absolve a defendant of Rule 8(c)'s express requirement to affirmatively plead its affirmative defenses. See Lopez, 2010 WL 2839417, at *8 (“Defendants' general denial of liability under the FLSA in the Answer was insufficient to put Plaintiffs on notice of this particular defense.”).
For the foregoing reasons, the Court finds that Intellectsoft, by failing to plead its statute of limitations defenses in a responsive pleading, has waived any such defense to Plaintiffs' claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair business practices. As such, the Court denies Defendants' motion for summary judgment as to its statute of limitations defense, and bars them from asserting that defense at trial.
C. Trade Secret Claims
Defendants next argue that they are entitled to summary judgment on Plaintiffs' claims for trade secret theft and misappropriation under the DTSA and CUTSA. “Courts have analyzed [DTSA and CUTSA] claims together because the elements are substantially similar.” InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 657 (9th Cir. 2020). Under both the CUTSA and DTSA, trade secrets are defined as information which must (1) derive independent economic value, actual or potential, from not being generally known in the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. See Cal. Civ. Code § 3426.1(d); 18 U.S.C. § 1839(3). To prevail on a claim under the DTSA or CUTSA, “a plaintiff must prove: (1) that the plaintiff possessed a trade secret[;] (2) that the defendant misappropriated the trade secret; and (3) that the misappropriation caused or threatened damage to the plaintiff.” InteliClear, 978 F.3d at 657-58 (citing 18 U.S.C. § 1839(5)); see also, Integral Dev. Corp. v. Tolat, 675 Fed.Appx. 700, 702 (9th Cir. 2017) (stating identical requirements under the CUTSA). Defendants argue that they are entitled to summary judgment because Plaintiffs have failed to produce enough admissible evidence to carry its ultimate burden of persuasion at trial as to each of these essential elements. See Mot. at 9.
1. Ownership of Protectable Trade Secrets
Defendants first argue that Plaintiffs have failed to produce evidence establishing a genuine issue of material fact that they in fact possess or own any protectable trade secrets. “To prove ownership of a trade secret, plaintiffs ‘must identify the trade secrets and carry the burden of showing they exist.'” InteliClear, 978 F.3d at 658 (quoting MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 522 (9th Cir. 1993)). Identification of trade secrets requires that a plaintiff “describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons skilled in the trade.” Imax Corp. v. Cinema Techs., Inc., 152 F.3d 1161, 1164 (9th Cir. 1998) (internal quotes omitted). Thus, “[p]laintiffs must ‘clearly refer to tangible trade secret material' instead of referring to a ‘system which potentially qualifies for trade secret protection[]'” and “may not simply rely upon ‘catchall' phrases or identify categories of trade secrets they intend to pursue at trial.” InteliClear, 978 F.3d at 658 (quoting Imax, 152 F.3d at 1167). Moreover, to defeat summary judgment, a plaintiff's description of its purported trade secrets “must do more than just identify a kind of technology and then invite the court to hunt through the details in search of items meeting the statutory definition.” Id. at 660 (quoting and holding consistent with IDX Systems Corp. v. Epic Systems Corp., 285 F.3d 581, 583-84 (7th Cir. 2002)).
a. Description of Trade Secrets with Sufficient Particularity
Plaintiffs identify their purported trade secrets in their Amended Second Supplemental Response to Defendants' Interrogatory No. 1. ECF No. 168-3 at 9-40. In this response, Plaintiffs provide an approximately 30-page description of Chung's ideas for an educational program and ecosystem to teach children Mandarin, including various software applications, functions, and features, as well as the Picture Mandarin and Friendship Diary source code. Id. The Court finds that with the exception of the source code, this description fails to carry Plaintiffs' burden of describing their purported trade secrets with sufficient particularity.
Plaintiffs do not dispute that they must describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge. It is well established that publicly known information, including information that is disclosed in a published patent or patent application, cannot be protectable as a trade secret. See Hong Kong uCloudlink Network Tech. Ltd. v. Simo Holdings Inc., No. 18-CV-05031-EMC, 2019 WL 1767329, at *1 (N.D. Cal. Apr. 22, 2019). Plaintiffs do not dispute that their interrogatory response contains information that is not trade secret, such as information relating to Chung's background and motivations, as well as information that Plaintiffs disclosed publicly in U.S. Patent No. 10,586,297 (the “'297 Patent”). See ECF No. 148-4 at 16 (stating that Plaintiffs' interrogatory response contains information beyond “mere identification of trade secrets”); Opp. at 20 (arguing that the “vast bulk” of the information identified in Plaintiffs interrogatory response was not disclosed in the '297 Patent). Plaintiffs' only effort to satisfy their burden is to submit a declaration from Chung, in which she identifies various sections of Plaintiffs' interrogatory response that were not disclosed in the '297 Patent. See Chung Decl. ¶¶ 10-11. The mere fact that something was not disclosed in a patent does not make it a trade secret.
Even drawing all reasonable inferences in the light most favorable to Plaintiffs, their identification of purported trade secrets fails to separate them from matters of general knowledge. For example, Defendants' expert David Howell identifies many passages from Plaintiffs' interrogatory response that, even if not disclosed in the '297 Patent, are matters of general knowledge or common practice among software application developers, such as integration of CRM and ERP systems, tracking progress through data collection, loyalty rewards points, and voting. See e.g., ECF No. 177-3 (“Howell Decl.”) ¶¶ 17-18. Plaintiffs do not dispute that many of these features are indeed generally known or common practice, and instead assert that Howell failed to consider all the specifics of Plaintiffs' implementation of these features into their ecosystem. See e.g., ECF 199-4 (“Chung Reply Decl.) ¶ 5 (asserting that Howell failed to consider “specific content” such as “commission split feature” and “student-questionnaire feature”); ¶ 6 (asserting that Howell failed to consider features such as “location tracking, in-app book advertising, cloud data storage, and video-streaming features”); ¶ 9 (asserting that “[a]gain, Mr. Howell does not address the details of Plaintiffs' system for integrating its Education Ecosystem, including its Voting for Rewards platform, into other systems.”).
Plaintiffs' arguments improperly attempt to shift the burden. It is not Defendants' obligation to affirmatively demonstrate that every possible permutation of features in Plaintiffs' 30-page long trade secret description is publicly known. Rather, it is Plaintiffs who must provide the Court with a precise, “concrete identification” of what features or combinations of features it alleges are separate from matters of general knowledge. See Inteliclear, 978 F.3d at 658 (“Courts and juries also require precision because, especially where a trade secrets claim ‘involves a sophisticated and highly complex' system, the district court or trier of fact will not have the requisite expertise to define what the plaintiff leaves abstract.” (quoting Imax, 152 F.3d at 1167)). Instead, Plaintiffs force the Court to “parse through” their vague and overinclusive description “to determine what seemed valuable and generally unknown” instead of making that determination themselves, as they are required to do under Ninth Circuit law. Inteliclear, 978 F.3d at 658. Faced with a similar lack of specificity, courts in this circuit have not hesitated to grant summary judgment. See Princess Cruises, Inc. v. Amrigon Enterprises, Inc., 51 Fed.Appx. 626, 628 (9th Cir. 2002) (“Amrigon's generalizations concerning its database components are insufficient to establish the necessary distinctions between its work and general knowledge in the trade. Amrigon's failure to properly specify its asserted trade secrets rendered summary judgment on its counterclaim appropriate.”); Freeman Inv. Mgmt. Co., LLC v. Frank Russell Co., 2016 WL 5719819, at *10 (S.D. Cal. Sept. 30, 2016), aff'd, 729 Fed.Appx. 590 (9th Cir. 2018) (granting summary judgment on trade secret claim where “Plaintiff's disclosure resembles an effort to categorize every piece of information or know-how that could potentially have value to the company” and “impermissibly . . . shifts its burden onto [Defendant] (and the Court) to sift through' voluminous documents in order ‘to ascertain [its] trade secret.”).
Plaintiffs also attempt to avoid summary judgment by arguing that Magistrate Judge Westmore already found their trade secret disclosure sufficient in a prior discovery order. The argument misrepresents the breadth of Judge Westmore's order. In that order, Judge Westmore ruled that Plaintiffs' trade secret disclosures satisfied California Code of Civil Procedure § 2019.210's requirement of “reasonable particularity” such that the parties could commence further discovery. See ECF No. 161 at 2. However, that order did not absolve Plaintiffs of the higher substantive burden of describing those trade secrets with “sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons skilled in the trade.” Imax, 152 F.3d at 1164. Indeed, Judge Westmore explicitly deferred ruling on whether Plaintiffs had satisfied that burden, finding that “such arguments are merits issues that are not appropriate at the discovery stage.” ECF No. 161 at 2.
However, as to the Picture Mandarin and Friendship Diary source code, the Court finds that Plaintiffs have met their burden of describing these purported trade secrets with sufficient particularity. There is no dispute from Defendants that the source code is secret and not generally known, and Plaintiffs have clearly denoted the bounds of the information that they allege to be trade secret such that “a jury properly instructed can make the determination of what trade secrets exist[.]” InteliClear, 978 F.3d at 660.
b. Independent Economic Value
In addition to describing its trade secrets with sufficient particularity, a plaintiff seeking to prove ownership of a protectable trade secret must also demonstrate that its purported trade secrets derive independent economic value, actual or potential, from not being generally known in the public or to other persons who can obtain economic value from its disclosure or use. See Cal. Civ. Code § 3426.1(d); 18 U.S.C. § 1839(3). This element requires that “the information alleged to be a trade secret ‘is valuable because it is unknown to others.'” Altavion, Inc. v. Konica Minolta Sys. Lab'y, Inc., 226 Cal.App.4th 26, 62 (2014). Thus, in order to be a protectable trade secret, the information must be “sufficiently valuable and secret to afford an actual or potential economic advantage over others.” Yield Dynamics, Inc. v. TEA Sys. Corp., 154 Cal.App.4th 547, 564 (2007), as modified on denial of reh'g (Sept. 21, 2007) (quoting Rest. 3d, Unfair Competition, §39). This advantage “‘need not be great', but must be ‘more than trivial.'” Id. (quoting Rest. 3d, Unfair Competition, §39). Independent economic value may be established by either direct evidence (e.g., the content of the secret and its impact on business operations) or circumstantial evidence (e.g., resources invested by plaintiff to produce the information, willingness of others to pay for access to the information, and the precautions taken by the plaintiff to protect the secrecy of the information). Altavion, 226 Cal.App.4th at 62. Such evidence is necessary because “[t]he factfinder is entitled to expect evidence from which it can form some solid sense of how useful the information is [.]” Yield Dynamics, 154 Cal.App.4th at 565 (emphasis in original).
Here, Plaintiffs fail to carry their burden as to any of their purported trade secrets. In their opposition, Plaintiffs identify only one category of evidence as demonstrating the independent economic value of their purported trade secrets-“the cost to Plaintiff in developing [the purported trade secrets], which includes the money Plaintiff paid Intellectsoft and others to implement the trade secrets.” Opp. at 18-19; see also ECF No. 175-19 at 21 (identifying the value of the claimed trade secrets as “the cost to Plaintiff in developing them, which includes the money Plaintiff paid Intellectsoft and others to implement the trade secrets”); id. at 25 (identifying “Plaintiffs' costs to develop the confidential information” as being “over $500,000”). It is correct that the “actual or potential value from the information being secret” “can be shown . . . by circumstantial evidence of the resources invested in producing the information.” Religious Tech. Ctr. v. Netcom On-Line Commc'n Servs., Inc., 923 F.Supp. 1231, 1253 (N.D. Cal. 1995). But Plaintiffs' evidence does not concern the cost of developing an alleged trade secret itself; rather, it shows the cost of developing something that was intended to use the trade secret. Plaintiffs' position is like that of a restauranteur arguing that his recipe is independently valuable as a trade secret, but presenting evidence only of how much it costs to construct a kitchen.
Such evidence is insufficient to carry Plaintiffs' burden. See Cisco Sys., Inc. v. Chung, 462 F.Supp.3d 1024, 1050-51 (N.D. Cal. 2020). In Cisco, defendant Chung was a former Cisco employee who allegedly misappropriated “source code, schematics, design details and specifications, user feedback, design documentation, and features relating to Cisco's existing and future products, as well as Cisco business information such as marketing strategy, cost and pricing information, and payment information.” Id. at 1050. In its complaint, Cisco alleged that these trade secrets derived independent economic value because “Cisco has invested significant resources to design, build, and sell its robust collaboration platform, which includes unified communications and video conferencing software and collaboration endpoints.” Id. at 1052-53. The Court held this was insufficient to allege independent economic value because Cisco's “allegations only generally relate to [Cisco's] collaboration platform. They say nothing about the economic value of the categories of information purportedly misappropriated by Chung . . . that concern the handful of subject matter that plaintiff alleged with sufficient particularity.” Id. at 1053 (emphasis added). Likewise here, what Plaintiffs may have paid to develop software using their alleged trade secrets tells the Court nothing about the cost to develop the secrets themselves and is therefore irrelevant to the ultimate question of what independent economic value, if any, the alleged trade secrets derive from not being generally known.
No relation to Plaintiff Chung.
The Picture Mandarin and Friendship Diary source code suffers from an additional problem, which is that Plaintiffs' own expert witness, Andy Borgman, opined extensively as to the lack of value in the delivered source code. For example, Mr. Borgman opined that the Friendship Diary and Picture Mandarin source code were “not in a useable state” and that he could not get any of the source code to compile/build/run in any useable fashion. See ECF No. 173-3 (“Borgman Decl.”) ¶¶ 10, 14-15. Mr. Borgman also opined that much of the source code was not Intellectsoft's original work but instead a conglomeration of publicly available coding libraries. See id. ¶ 16. In fact, much of the rest of Plaintiffs' case relies on evidence of precisely how valueless the source code was. See e.g., ECF No. 173-6 (Plaintiff Chung describing the source code as “not usable,” “useless” and “non-profitable”); Chung Depo at 131:19-20 (describing source code as “a useless piece of junk”). In light of this direct evidence, including from Plaintiffs' own expert witness, the Court concludes that no reasonable jury could find that “there was value in the secrecy of [the Picture Mandarin or Friendship Diary source code]” such that they would qualify as protectable trade secrets. Direct Techs., LLC v. Elec. Arts, Inc., 836 F.3d 1059, 1071 (9th Cir. 2016) (affirming summary judgment on trade secret claim where plaintiff failed to present “any evidence that there was value in the secrecy of its design.”).
Because Plaintiffs have failed to describe their non-source code trade secrets with sufficient particularity, and have failed to produce evidence demonstrating a genuine issue of material fact that any of their purported trade secrets derive independent economic value from not being known, the Court concludes that Plaintiffs cannot carry their ultimate burden of persuasion as to this essential element of their trade secret misappropriation claims. Accordingly, the Court need not reach Defendants' arguments as to the other elements of these claims, and grants Defendants' motion for summary judgment as to Plaintiffs' claims for trade secret misappropriation under the DTSA and CUTSA.
D. Breach of Contract
Defendants argue that they are entitled to summary judgment on Plaintiffs' breach of contract claim because Plaintiffs have insufficient evidence to prove essential elements of the claim. In particular, Defendants argue that (1) “Plaintiffs cannot prevail on any of their breach of contract claims against Intellectsoft LLC because they cannot prove that there was a breach of the [SOWs] or the [SOWs'] confidentiality provisions, nor can they prove that any purported breach caused Plaintiffs damages” and (2) “Plaintiffs have waived their rights to recover for breach of contract during 2016 based on their acceptance of the deliverable provided by Intellectsoft.” Mot. at 25.
1. Confidentiality Provisions
Defendants argue that Plaintiffs have not produced any evidence demonstrating that Intellectsoft either breached the confidentiality provisions of the SOWs, or that Plaintiffs suffered any damages as a result. Mot. at 25-26. Section 4.2 of the SOWs provide that “[t]he Party receiving Confidential Information will not at any time disclose to any person or use for its own benefit or the benefit of anyone, Confidential Information of the other Party without the prior written consent of said Party. Each Party shall limit disclosure of Confidential Information to its employees or agents who have a need to know related to the Parties' business relationship.” PM SOW at 12, FD SOW at 27. Section 4.3 further provided that, “[u]pon termination of a Services Schedule or this Agreement, the recipient of Confidential Information shall promptly deliver to the other Party or destroy any and all such information in its possession or under its control, and any copies made thereof which the recipient of said information may have made, except as the Parties by prior express written permission have agreed to retain.” Id.
In support of its claims for breach of the confidentiality provisions, Plaintiffs point to testimony from Intellectsoft's representative that Intellectsoft did not destroy or return Plaintiff's confidential information after termination of the SOWs. Kozel Depo. at 130:6-8; 199:11-201:17. Plaintiffs further proffer evidence that Intellectsoft “continued to provide access and distribute Plaintiff's confidential information, long after termination, to dozens of non-employee subcontractors outside the United States” Opp. at 21, and “Plaintiffs' discovery that changes were made to documents associated with the FD project in 2020, more than two years after the FD agreement was terminated.” Opp. at 22; see also, e.g., ECF Nos. 175-18-20; (screenshots showing Defendants' retention of and granting access to Google Drive containing Plaintiffs' materials); 174-7 (screenshot showing edits to Friendship Diary Google spreadsheet on January 16, 2020).
A1lthough Plaintiffs succeed in raising a dispute of material fact regarding breach, they have failed to produce admissible evidence demonstrating a genuine issue of material fact that they suffered any damages. Even if Defendants breached the SOWs by failing to destroy Plaintiffs' confidential information and subsequently sharing it with non-employee subcontractors, Opp. at 23, Plaintiffs have produced no evidence that any harm resulted from these actions apart from bare speculation that its confidential information was then used in Defendant's other projects. See id. at 22 (Plaintiffs speculating that “since there was no reason for Defendants to make changes to Plaintiffs' documents at that time, it suggests that Defendants were using Plaintiffs' materials in connection with other projects.”). Similarly, in their Second Supplemental Response to Interrogatory No. 2, Plaintiffs describe how a number of third party applications share similar features or design with their ideas, and then assert that they “believe” that Defendants misappropriated their confidential information. See e.g., ECF No. 168-3 at 158 (“Plaintiff believes that Defendant stole Plaintiff's system architecture setup to implement the same event-driven architecture to collect data for personalized ad targeting.”); 159 (“Plaintiff believes that Defendants misappropriated trade secret use wishlist item, based on the number of people booked buffet for buffet reward, to predict how much seafood and meat the restaurant had to prepare beforehand to have better inventory control.”); 161 (“Plaintiff believes Defendants used Plaintiff's source codes and/or other trade secrets to update Wynn Slott features”). Such statements are speculation, not evidence, and do not raise a genuine issue of fact sufficient to defeat summary judgment. See Insalaco v. Fire Ins. Exch., No. 20-CV-00664-JST, 2022 WL 17968763, at *6 (N.D. Cal. July 15, 2022). “A breach of contract is not actionable without damage.” Bramalea California, Inc. v. Reliable Interiors, Inc., 119 Cal.App.4th 468, 473 (2004). Accordingly, the Court grants Defendants' motion for summary judgment as to Plaintiffs' claims for breaches of the confidentiality provisions of the SOW.
2. Breach of the Substantive Terms the SOWs
Beyond the alleged breach of the confidentiality provisions of the SOWs, Plaintiffs allege that Defendants breached the substantive terms of the SOWs in three respects: “by failing to correct the deficiencies in the Deliverables, leaving Picture Mandarin with useless source code at a cost of more than $320,000,” Opp. at 26; by failing to “perform the services in good faith and in a timely and professional manner,” id.; and by failing to “supply professional services in accordance with the Work Breakdown Estimate to achieve the Key Milestones,” id. Specifically, as to the last point, Plaintiffs allege that the SOWs identify “a total number of hours and a specific dollar amount for specific work that was described in the Development Breakdown,” and Defendants failed to meet those milestones. Defendants have no answer for this argument, see Reply, and the Court finds that there is a dispute of material fact as to Plaintiffs' breach of contract claim.
3. Waiver
Defendants argue that Plaintiffs waived their rights under the SOWs because they failed to object to any deliverable in 2016, and only objected to the Picture Mandarin and Friendship Diary source code in 2017, which Defendants argue are not deliverables under the SOWs. Mot. at 2627; ECF No. 204 (“Sur-Reply”) at 5-6. Specifically, Defendants cite to Section 3.4 of the SOWs, which set forth a specific procedure wherein Plaintiffs were required to “review completely all services, documents, and/or data delivered by Intellectsoft (‘Deliverables') ....[and to] notify Intellectsoft of every failure to confirm to the requirements of this Agreement . . . or any other complaints about Intellectsoft Services within a reasonable amount of time after delivery.” PM SOW at 11; FD SOW at 27. Section 3.4 further provided that failure to notify Intellectsoft of any complaints “will be deemed conclusive that Intellectsoft provided the Intellectsoft Services and the Deliverables as required by this Agreement or any addendum incorporated herein; that Client accepted all Deliverables; and that Client did not reject any of the Deliverables.” Id.
Defendants' arguments overstate the impact of Section 3.4. Defendants assert that a functional app or source code was not a deliverable under the SOWs, but Plaintiffs have identified sufficient evidence to demonstrate at least a question of material fact as to this issue. For example, Intellectsoft agreed in the SOWs to “provide professional services in accordance with the Work Breakdown Estimate to achieve the Key Milestones.” PM SOW at 2; FD SOW at 2. The Work Breakdown Estimate and Development Breakdown of the SOWs set forth specific tasks such as design and development of specific features. PM SOW at 5-9; FD SOW at 7-24. Finally, in Section 6.5 of both SOWs, Intellectsoft represented that “Intellectsoft shall perform the Intellectsoft Services in good faith and in a timely and professional manner” and that “Intellectsoft shall exercise the same level of professional care commonly found in the services business in carrying out the terms of this Agreement.” PM SOW at 12, FD SOW at 28. Even if Defendants are correct in that the SOWs were only agreements for services and did not obligate Intellectsoft to deliver final completed products, there is still a question of whether the services were provided in good faith and in a timely and professional manner, and in accordance with the Work Breakdown Estimate and Key Milestones of the SOWs. Drawing all reasonable inferences in favor of Plaintiffs, the Court finds that there is at least a genuine issue of material fact whether Defendants' failure to deliver a usable or functional application was a breach of these provisions of the SOWs.
Defendants' citation to Copart, Inc. v. Sparta Consulting, Inc., 277 F.Supp.3d 1127 (E.D. Cal. 2017) does not compel a different result. In Copart, the court found that the plaintiff's acceptance of certain milestone related deliverables, with a written acknowledgement of the incompleteness of those deliverables, waived the defendants' right to sue for any defects within the deliverables associated with those milestones. 277 F.Supp.3d at 1140. However, Copart does not stand for the proposition that acceptance of those deliverables waived all of the plaintiffs' rights to sue for breach of contract, which is what Defendants urge now. At best, Plaintiffs' acceptance of a deliverable would waive their right to sue for any defects within those deliverables. Moreover, such waiver would only occur where the evidence shows that Plaintiffs were aware of the alleged defect. Whitney Inv. Co. v. Westview Dev. Co., 273 Cal.App. 2d 594, 603 (1969) (“When the injured party with knowledge of the breach continues to accept performance from the guilty party, such conduct may constitute a waiver of the breach.”). Plaintiffs have presented evidence that they were unaware of any breach until they received the source code from Intellectsoft. See Chung Decl. ¶¶ 4-6. Thus, to the extent that Plaintiffs allege that Defendants breached the SOWs by failing to provide services “in good faith and in a timely and professional manner” and “in accordance with the Work Breakdown Estimate to achieve the Key Milestones”, or by failing to “exercise the same level of professional care commonly found in the services business,” the Court finds that Plaintiffs have demonstrated a genuine issue of material fact sufficient to avoid summary judgment.
Similarly, the Court does not credit Defendants' argument that Plaintiffs' failure to dispute the amount of any invoices waived their rights to recover for breach of the SOWs. Section 2.5 of the SOWs only required Plaintiffs dispute the amount of any invoice within 15 days of receipt, and Plaintiffs are not alleging that those amounts were inaccurately calculated.
E. Breach of Implied Covenant of Good Faith and Fair Dealing
Defendants argue they are entitled to summary judgment on Plaintiffs' claim for breach of the implied covenant of good faith and fair dealing because “Plaintiffs have not produced any evidence demonstrating that any of [Intellectsoft's] conduct prevented Plaintiffs from receiving the benefits under the contract or that Intellectsoft did not act in good faith.” Mot. at 30.
“The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made.” Guz v. Bechtel Nat. Inc., 24 Cal.4th 317, 349 (2000). Because the implied covenant “cannot ‘be endowed with an existence independent of its contractual underpinnings,'” “it cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” Id. (quoting Waller v. Truck Ins. Exch., Inc., 11 Cal.4th 1, 36 (1995)).
The Court finds that Plaintiffs have proffered sufficient evidence to demonstrate a genuine issue of material fact that Intellectsoft's conduct prevented Plaintiffs from receiving the full benefit of the SOWs. As discussed above in Sections III(D)(2)-(3), supra, the Court finds that there is a genuine question whether Intellectsoft performed its services in good faith in accordance with the stated goals of the SOWs. Accordingly, the Court denies Defendants' motion for summary judgment as to Plaintiffs' claim for breach of the implied covenant of good faith and fair dealing.
F. Limitation on Damages
Finally, Defendants move for summary judgment on the grounds that, as a matter of law, Plaintiffs' damages are limited under the SOWs. Section 6.6 of the SOWs states, in the relevant part, that “Intellectsoft's liability for damages to Client for any cause whatsoever, and regardless of the form of action, whether in contract, tort or other theory of liability, including negligence, will be limited to the aggregate sum of payments made to Intellectsoft by Client for the Intellectsoft Services directly related to any claim.” PM SOW at 13; FD SOW at 29.
Plaintiffs argue that this limitation on damages is unenforceable as to the “bulk of Plaintiffs' claims [which] allege intentional acts by Defendant.” Opp. at 29. This argument refers to the rule that “contractual releases of future liability for fraud and other intentional wrongs are invariably invalidated” under California law. Farnham v. Superior Ct. (Sequoia Holdings, Inc.), 60 Cal.App.4th 69, 71 (1997) (citing Cal. Civ. Code § 1668). However, for the reasons discussed above, the Court has granted summary judgment as to Plaintiffs' claims for trade secret misappropriation, which means that Plaintiffs' only remaining claims are for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair business practices under the UCL. Thus, to the extent that California law prohibits limitations of liability clauses for intentional torts, that concern is no longer relevant in this case. See Darnaa, LLC v. Google Inc., 236 F.Supp.3d 1116, 1123 (N.D. Cal. 2017), aff'd sub nom. Darnaa, LLC v. Google LLC, 756 Fed.Appx. 674 (9th Cir. 2018) (upholding limitation of liability clause as to claims for breach of contract and breach of implied covenant of good faith and fair dealing); United States, for the Use of Integrated Energy, LLC v. Siemens Gov't Techs., Inc., No. SACV 15-01534-JVS, 2017 WL 10562969, at *4 (C.D. Cal. May 19, 2017) (same); Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 179 (1999) (recovery for UCL unfair business practice claims limited to injunctive relief and restitution); Chowning v. Kohl's Dep't Stores, Inc., 735 Fed.Appx. 924, 925-26 (9th Cir. 2018), amended on denial of reh'g, 733 Fed.Appx. 404 (9th Cir. 2018) (“Nonrestitutionary disgorgement is unavailable in UCL actions”). Therefore, the Court grants Defendants' motion for summary judgment to the extent that Plaintiffs' claim for damages are limited to the aggregate sum of payments made by Plaintiffs to Intellectsoft under the SOWs.
CONCLUSION
For the foregoing reasons, the Court grants Defendants' motion for summary judgment on all of Plaintiffs' claims against IGC, and on Plaintiffs' claims for trade secret misappropriation under the DTSA and CUTSA against Intellectsoft. The Court further grants Defendants' motion for summary judgment on Plaintiffs' claim for breach of contract against Intellectsoft to the extent predicated on breach of the confidentiality provisions of the SOW, and to the extent Plaintiffs seek damages in excess of the aggregate sum of payments made by Plaintiffs to Intellectsoft under the SOWs. The Court denies Defendants' motion for summary judgment on all other grounds.
IT IS SO ORDERED.