Opinion
H044281
10-16-2019
INTELLISOFT, LTD., Plaintiff and Appellant, v. WISTRON CORPORATION et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Santa Clara County Super. Ct. No. 114CV272381)
Appellant Intellisoft, Ltd. (Intellisoft), filed a lawsuit alleging that respondents Wistron Corporation (Wistron) and Wistron InfoComm Technology America (InfoComm) misappropriated trade secrets. The trial court sustained the Wistron defendants' demurrer to Intellisoft's complaint without leave to amend after it determined that the Wistron defendants did not exist when the trade secrets were misappropriated. Approximately four months after the trial court sustained the demurrer, Intellisoft filed a motion for leave to file an amended complaint. Construing the motion as a motion for reconsideration, the trial court denied it as untimely under Code of Civil Procedure section 1008, subdivision (a). Subsequently, the trial court entered a judgment in favor of the Wistron defendants, and Intellisoft appealed.
We collectively refer to respondents as the "Wistron defendants."
On appeal, Intellisoft argues that the demurrer should not have been sustained and that the trial court incorrectly characterized its motion for leave to amend the complaint as a motion for reconsideration. We find no merit in Intellisoft's arguments and affirm judgment.
BACKGROUND
1. The Fourth Amended Complaint
The previous four versions of Intellisoft's complaint are not included with the record on appeal.
On September 25, 2015, Intellisoft filed a fourth amended complaint against several Acer entities, the Wistron defendants, Smith Corona, and Smith Corona Acer alleging causes of action for misappropriation of trade secrets, intentional misrepresentation and concealment, breach of contract, and an accounting. The causes of action for misappropriation of trade secrets and an accounting were alleged against all defendants. The causes of action for intentional misrepresentation and concealment and breach of contract were alleged only against Acer.
Intellisoft sued several Acer entities including Acer America Corporation (AAC) and Acer Incorporated (AI). Intellisoft's allegations are largely levied against both Acer entities, which we collectively refer to as "Acer." Intellisoft's complaint alleges that Intellisoft went through several name changes through the years. Intellisoft was incorporated in 1988, changed its name to Silverware, Inc., in 1989, changed its name to Solidsoft, Inc., in 1990, and changed its name back to Intellisoft in 2010. Intellisoft GmbH was created in 1987, and Intellisoft became the sole shareholder of Intellisoft GmbH in 1988 or 1989. Intellisoft GmbH acted as Intellisoft's licensing arm. Intellisoft's complaint referred to all Intellisoft-related entities as "Intellisoft" unless otherwise stated. For clarity, we do the same here.
On appeal, Intellisoft does not make any arguments pertaining to its cause of action for an accounting.
The complaint alleged that in early 1984, Bruce Bierman developed a software technology called "Bookmark" that provided computer users with a way to return their computer to a previously saved state in the event of a power failure. Bierman was not a computer programmer; he hired software programmers to develop Bookmark into a functioning software. Around June 1986, Bierman created Intellisoft to sell and license Bookmark.
In 1990, Intellisoft approached AAC and asked if AAC would be interested in installing Intellisoft's software, including software developed from Bookmark, on Acer's products. AAC agreed to evaluate Intellisoft's products, and Intellisoft sent AAC a nondisclosure agreement (1990 NDA) and provided AAC with evaluation materials. AAC signed the 1990 NDA and sent it back to Intellisoft in September 1990. The 1990 NDA provided that the information disclosed by Intellisoft relating to its product, trademarks, and software were considered confidential information that could not be used without Intellisoft's consent. Bierman spoke with an executive of AAC, who assured him that the 1990 NDA applied to both AAC and AI.
After Acer evaluated the materials provided by Intellisoft, Acer told Intellisoft that it was not "per se" interested in Bookmark but wanted to include a "set of 'productivity-oriented tools' " in its desktop computers. Intellisoft responded that it could privately label several software processes, including Bookmark, with a different name that would be used only by Acer, making the product appear proprietary.
Shortly after Intellisoft gave Acer its confidential information, Acer began to secretly draft a patent using Intellisoft's trade secrets. Acer submitted the patent application on January 2, 1992, which included several inventions (the 713 patent). That same day, Acer signed a license agreement with Intellisoft. In August 1992, Acer asked Intellisoft to enter into a modified license agreement. Acer never mentioned to Intellisoft that it had filed a patent application on January 2, 1992. Under its licenses with Intellisoft, Acer subsequently released several computer models that included Intellisoft-developed technology.
On April 25, 1995, Acer was granted the 713 patent, which publicly published Intellisoft's confidential information in the United States. Acer subsequently filed three additional patent applications incorporating Intellisoft software; one on April 14, 1995, and two on April 3, 1997. All three patent applications were later granted. Intellisoft alleged that the grant of the 713 patent in 1995 damaged any opportunity it had to generate income based on its trade secrets.
Intellisoft's complaint alleged that AI marketed and manufactured computer products until 2000, when Wistron "became an entity that was 'spun off' from, and related to, Acer." After it became its own entity, Wistron gained the rights to the patents at issue, including the 713 patent. Thus, Intellisoft alleged that Wistron exploited the technology described in Acer's patents, gained money from the patents, and maintained a corporate or contractional relationship with Acer that subjected it to liability under Intellisoft's complaint. Intellisoft further alleged that Acer and Wistron conspired to misappropriate Intellisoft's technology, and Wistron was aware of Acer's fraudulent conduct. According to Intellisoft, Wistron had a "joint interest" with various Acer entities and InfoComm.
Intellisoft alleged that InfoComm was a corporation licensed in Taiwan and Texas. According to Intellisoft, InfoComm had a corporate and contractual relationship with Acer that subjected it to liability under Intellisoft's complaint, and InfoComm had a joint interest with Acer and Wistron in marketing and selling computers.
Intellisoft first became aware that its trade secrets had been included in Acer's patents when Wistron provided Intellisoft with a copy of a contract that purported to settle a dispute between Wistron and Toshiba in August 2012. After reviewing these documents, Intellisoft discovered that Acer was the owner and user of the 713 patent that incorporated Intellisoft's trade secrets.
2. The Wistron Defendants' Demurrer to the Fourth Amended Complaint
On October 26, 2015, the Wistron defendants demurred to Intellisoft's fourth amended complaint. The Wistron defendants argued that they could not have participated or joined in any conspiracy to misappropriate Intellisoft's trade secrets because the alleged misappropriation occurred in April 1995, before the Wistron defendants existed. In addition, the Wistron defendants argued that because the purported trade secrets were made public by the 713 patent, any alleged trade secret was no longer secret by the time the Wistron defendants existed. Thus, the Wistron defendants maintained that they could not have conspired with Acer and could not be liable for trade secret misappropriation.
Attached to the Wistron defendants' demurrer was the trial court's prior order sustaining the demurrer to Intellisoft's first amended complaint. In its prior order, the trial court granted the Wistron defendants' requests for judicial notice of Wistron's corporate record from the California Secretary of State website and InfoComm's corporate record from the Texas Secretary of State website.
Also attached to the Wistron defendants' demurrer was a printout that contained InfoComm's corporate information as reported by the Texas Secretary of State, which showed that the company was incorporated in 2007, and Wistron's company profile, taken from its website, which stated that the company was established in May 2001.
Intellisoft opposed the demurrer. Intellisoft argued that the Wistron defendants were liable under multiple theories. Intellisoft claimed that the Wistron defendants continued to be unjustly enriched through their continued and ongoing improper use of Intellisoft's trade secrets, the Wistron defendants knew or should have known that the trade secrets obtained by Acer were subject to the nondisclosure agreement signed by Intellisoft and Acer, and the Wistron defendants were liable as joint venturers since Acer created the Wistron defendants.
3. The Trial Court's Order Sustaining the Wistron Defendants' Demurrer
On May 20, 2016, the trial court sustained the Wistron defendants' demurrer to Intellisoft's fourth amended complaint without leave to amend. The trial court agreed with the Wistron defendants that the publication of Intellisoft's trade secrets in patents terminated the existence of the trade secrets. The trial court also determined that Intellisoft's conspiracy and joint venture theories of liability failed because the Wistron defendants did not exist until after the alleged trade secret misappropriation took place.
4. Intellisoft's "Motion to Allow Plaintiff Leave to Amend the Operative Complaint"
On September 5, 2016, Intellisoft filed a motion for leave to amend the fourth amended complaint. Intellisoft argued that Code of Civil Procedure sections 473, subdivision (a)(1) and 1008, subdivision (b) gave the trial court the discretionary authority to grant its motion.
Intellisoft argued that it had recently discovered evidence that showed that the Wistron defendants existed when Intellisoft's trade secrets were misappropriated. Thus, Intellisoft argued that it was asking the trial court to grant the motion based on "new facts and an entirely new legal theory."
The new evidence that was discovered included a "Hoovers.com" company profile that stated that Wistron "has manufactured by design since its founding in 1976" and a PDF file found on the Wistron website that stated that the "Wistron [Design, Manufacturing & Services] operations within Acer Inc. began in 1981."
Attached to Intellisoft's motion was a proposed fifth amended complaint. The fifth amended complaint alleged that Wistron was an "unincorporated entity" that was founded in 1976, and, commencing in 1981, operated as the "Design, Manufacturing & Services ('DMS') operations of Acer Inc." The proposed fifth amended complaint further alleged that between 1981 and 2001, Wistron "ran a clear separate line of business within and for Acer Inc.," and from 1991 through May 29, 2001, "Wistron, an unincorporated entity . . . misappropriated Plaintiff's Trade Secrets." Moreover, on May 30, 2001, "Wistron, the unincorporated entity, was incorporated into Wistron Corporation."
The Wistron defendants opposed the motion, arguing that Intellisoft's motion was "clearly a motion for reconsideration" and was therefore untimely because it was not brought within 10 days of written notice of entry of order as required by Code of Civil Procedure section 1008, subdivision (a). Furthermore, the Wistron defendants claimed that Code of Civil Procedure section 1008, subdivision (b) was inapplicable because Intellisoft was not a party who originally made an application for an order before the trial court. The Wistron defendants further argued that Intellisoft did not demonstrate diligence because the " 'new evidence' " that it had discovered was publicly available on the Internet. According to the Wistron defendants, the "Hoovers.com" profile was one of the first results listed after using Google to search the term "Wistron Corporation."
The Wistron defendants' opposition included a declaration prepared by Vivien Huang, Wistron's senior legal director. According to Huang, all Taiwanese companies, including Wistron, are required to register with the Ministry of Science and Technology in Taiwan. Attached to Huang's declaration was a certification issued by the ministry showing that Wistron registered in 2001.
In its reply to the Wistron defendants' opposition, Intellisoft argued that its motion was not a motion for reconsideration because it did not seek reconsideration of the trial court's prior order sustaining the demurrer without leave to amend. Rather, Intellisoft claimed that it was seeking a "different Order" permitting it to amend its complaint based on newly discovered evidence. Intellisoft further insisted that the trial court retained the discretionary authority under Code of Civil Procedure section 473, subdivision (a)(1) to permit amendments to a complaint. Alternatively, Intellisoft maintained that it had complied with Code of Civil Procedure section 1008, subdivision (b).
5. The Trial Court's Order and the Judgment
On November 1, 2016, the trial court denied Intellisoft's motion for leave to amend the complaint. The trial court determined that Intellisoft was seeking modification of its prior order sustaining the demurrer without leave to amend, and the motion was in effect an untimely motion for reconsideration. The trial court further found Code of Civil Procedure section 1008, subdivision (b), inapplicable.
On December 6, 2016, the trial court entered a judgment in favor of the Wistron defendants.
DISCUSSION
Intellisoft argues that the trial court erred when it sustained the demurrer because the Wistron defendants knew that Intellisoft's trade secrets had been misappropriated but continued to use the patents at issue to further their business in violation of the Uniform Trade Secret Act (UTSA) (Civ. Code, § 3426 et seq.). Intellisoft also claims that the trial court erroneously denied its motion for leave to file an amended complaint and insists that its motion should not have been construed as a motion for reconsideration.
1. The Demurrer
a. Standard of Review
We review an order sustaining a demurrer de novo, exercising our independent judgment as to whether a cause of action has been stated as a matter of law. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) The facts alleged in the pleading are deemed to be true, but contentions, deductions, and conclusions of law are not. (Hill v. Roll Internat. Corp. (2011) 195 Cal.App.4th 1295, 1300.) In addition to the complaint, we also may consider matter subject to judicial notice. (Ibid.) Facts that are subject to judicial notice are given precedence over contrary allegations in the pleadings. (Ibid.) Facts appearing in exhibits attached to the complaint are also accepted as true and are also given precedence to the extent they contradict the allegations. (Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.)
b. Trade Secrets Must be Secret
In its fourth amended complaint, Intellisoft alleged that the Wistron defendants misappropriated their trade secrets under the UTSA. Specifically, Intellisoft alleged that the Wistron defendants knew Acer fraudulently acquired trade secrets but continued to accept and retain benefits from the misappropriation. Intellisoft alleged that Wistron was "spun off" from Acer in 2000, and the trade secrets it disclosed to Acer were patented in the 713 patent in 1995. Wistron further alleged that InfoComm was a Texas corporation that was affiliated with Wistron and Acer.
Under the UTSA, "misappropriation" means "(1) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or [¶] (2) Disclosure or use of a trade secret of another without express or implied consent by a person who: [¶] (A) Used improper means to acquire knowledge of the trade secret; or [¶] (B) At the time of disclosure or use, knew or had reason or know that his or her knowledge of the trade secret was: [¶] (i) Derived from or through a person who had utilized improper means to acquire it; [¶] (ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or [¶] (iii) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or [¶] (C) Before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake." (Civ. Code, § 3426.1, subd. (b).)
The UTSA also defines a "trade secret" as "information, including a formula, pattern, compilation, program, device, method, technique, or process that: [¶] (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." (Civ. Code, § 3426.1, subd. (d).)
Intellisoft does not allege that the Wistron defendants directly misappropriated Intellisoft's trade secrets before they were patented. As alleged in the fourth amended complaint, on April 25, 1995, Acer was granted its 713 patent, which resulted in Intellisoft's confidential information being published in the United States. Acer subsequently filed three additional patent applications incorporating Intellisoft software, one on April 14, 1995 and two on April 3, 1997. Wistron gained the rights to the patents at issue in 2000, when it "became an entity that was 'spun off' from, and related to, Acer." According to information from the Texas Secretary of State, InfoComm was established in 2007.
Federal cases that have applied California law have consistently concluded that once a trade secret is publicly disclosed in a patent, the information contained in the trade secret is placed in the public domain and the trade secret is subsequently extinguished. (Forcier v. Microsoft Corp. (N.D.Cal. 2000) 123 F.Supp.2d 520, 528; Stutz Motor Car of America v. Reebok Intern., Ltd. (C.D.Cal. 1995) 909 F.Supp. 1353, 1359.) We find these federal cases persuasive and agree that once Intellisoft's trade secrets were published in a patent, the trade secrets no longer existed because they became public information. (See DVD Copy Control Assn., Inc. v. Bunner (2004) 116 Cal.App.4th 241, 251 [widespread publication of information over Internet may destroy status as trade secret] (DVD Copy Control).) As a result, Intellisoft's complaint does not allege a cause of action for trade secret misappropriation by the Wistron defendants.
Intellisoft argues that the publication of its trade secrets in patents did not extinguish the trade secrets because the patent was sought by Acer, not Intellisoft. Intellisoft argues that because it—the rightful possessor of the trade secrets—did not publicly disclose the trade secrets, they remained secret.
We disagree with Intellisoft's conclusion that its trade secrets remained secret unless Intellisoft published them to the public. The "sine qua non of a trade secret . . . is the plaintiff's possession of information of a type that can, at the possessor's option, be made known to others, or withheld from them, i.e., kept secret." (Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 220, disapproved of on a different point as stated in Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337.) Information that is made public no longer retains the essential quality of a trade secret, regardless of whether the person who made the secret public was the rightful possessor or a third party. Once a third party makes the secret public, the possessor of the secret no longer has the option to withhold the information. For example, in DVD Copy Control, the trade secret at issue was no longer considered a secret when the defendant posted it on his website because the trade secret had "appeared on the Internet sometime" before the defendant's publication. (DVD Copy Control, supra, 116 Cal.App.4th at p. 246.)
Intellisoft's reliance on cases like Altavion, Inc. v. Konica Minolta Systems Laboratory, Inc. (2014) 226 Cal.App.4th 26 is misplaced. In Altavion, the First Appellate District concluded that "[i]t is well established that ' "[i]f an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished." ' " (Id. at p. 57.) Altavion did not conclude that if someone other than the possessor of the trade secret publicly discloses the trade secret, the property right is not extinguished. Cases are not authority for propositions not considered. (In re Marriage of Cornejo (1996) 13 Cal.4th 381, 388.)
Likewise, Intellisoft erroneously relies on Syntex Ophthalmics, Inc. v. Tsuetaki (7th Cir. 1983) 701 F.2d 677, 683. In its reply brief, Intellisoft argues that the Seventh Circuit in Syntex acknowledged the distinction between a misappropriating party publishing trade secrets and a rightful possessor publishing its own trade secrets. In Syntex, the defendants, who were accused of misappropriating trade secrets and publishing them in a patent, argued that their patent deprived the plaintiff of trade secret protection. (Ibid.) The Seventh Circuit rejected this argument, noting that "the holder of the trade secret did not make an election to obtain a patent, but instead it was [the defendants] who had misappropriated the trade secrets and secured the patent." (Ibid.) The Seventh Circuit further concluded that "a wrongdoer who has made an unlawful disclosure of another's trade secrets cannot assert that publication to escape the protection of trade secret law. . . . To hold otherwise in the instant case would be to permit [the defendants] to profit from their own wrong." (Ibid.) The factual scenario contemplated in Syntex is inapplicable here. The Wistron defendants did not exist at the time Acer allegedly misappropriated Intellisoft's trade secrets, and the Wistron defendants did not seek the patents at issue. Acer is not a party to this appeal, and the Wistron defendants are not arguing that Acer is not liable under the UTSA.
Since Intellisoft's complaint alleged only that Wistron received Acer's patents and neither of the Wistron defendants existed at the time of the misappropriation, Intellisoft did not sufficiently allege a viable cause of action for trade secret misappropriation under the UTSA.
c. Liability for Continuing Misappropriation of Trade Secrets
Intellisoft argues that its fourth amended complaint alleged that when Wistron received the patents from Acer in 2000, it knew that Acer had improperly acquired Intellisoft's trade secrets and had violated the 1990 NDA with Intellisoft. Thus, Intellisoft claims that the Wistron defendants were liable for continuing to misappropriate trade secrets.
"Under the UTSA, two different wrongdoers may be liable for misappropriation of a trade secret: one, a person who actually discloses a trade secret; and two, a person who acquires a trade secret from the discloser. An 'acquirer' is not liable under the UTSA unless he knew or had reason to know that the trade secret was improperly disclosed. (Civ. Code, § 3426.1, subd. (b).)" (Ajaxo Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4th 21, 66.) Intellisoft argues that the Wistron defendants fall into the "acquirer" category of wrongdoers.
Intellisoft claims that the facts alleged in its fourth amended complaint parallel the situation contemplated in PMC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368 (PMC). In PMC, the plaintiffs appealed from a summary judgment in favor of the defendants, who were shareholders, officers, and directors of a corporation. (Id. at p. 1372.) The plaintiffs had alleged that an employee misappropriated trade secrets from their former employer, WFI, and used the misappropriated information in a new business, Paul Winkler Plastics Corporation (PWP). (Id. at p. 1373.) The plaintiffs alleged that the defendants invested in and became officers and directors of PWP after the initial misappropriation and other tortious conduct allegedly occurred, and the defendants knew or had reason to know of the wrongful conduct but refused to stop using the stolen assets and continued to participate in and authorize ongoing illegal activities. (Id. at p. 1374.) Defendants moved for summary judgment, asserting as a complete defense that they could not be held liable for the misappropriation of trade secrets committed by other individuals. (Ibid.) The plaintiffs opposed the summary judgment motion, but the trial court ultimately granted the motion in the defendants' favor. (Id. at pp. 1375, 1378.)
On appeal, the defendants in PMC argued that they could not be liable for misappropriation of trade secrets because the alleged torts occurred before they invested in or became directors of PWP. (PMC, supra, 78 Cal.App.4th at p. 1379.) The Second Appellate District rejected this argument, determining that "misappropriation is not limited to the initial act of improperly acquiring trade secrets; the use and continuing use of the trade secrets is also misappropriation." (Id. at p. 1385.) Thus, the fact that the defendants did not invest in PWP until after the initial misappropriation did not absolve the defendants of liability. (Ibid.)
Intellisoft's reliance on PMC is misplaced. By the time the Wistron defendants came into existence and the patents in question were transferred to Wistron, Intellisoft's trade secrets were no longer trade secrets. The fourth amended complaint alleges only that the Wistron defendants used the patents in question for their financial gain. There was no continuing use of trade secrets, as was the case in PMC. As a result, Intellisoft failed to adequately allege that the Wistron defendants were liable under the UTSA as a subsequent acquirer of trade secrets, or that they continued to misappropriate Intellisoft's trade secrets after the patents were transferred.
d. Acer Does Not Escape Liability
Intellisoft claims that if we conclude that Acer's publication of Intellisoft's trade secrets in patents eliminated the trade secrets, we would undermine the UTSA and effectively inoculate from legal liability subsequent users of trade secrets who were complicit in the misappropriation. Intellisoft, however, sued the Wistron defendants in addition to the Acer entities, and the demurrer to Intellisoft's fourth amended complaint was brought by the Wistron defendants, not Acer. A conclusion that Intellisoft has not sufficiently alleged a cause of action for trade secret misappropriation against the Wistron defendants does not mean that Intellisoft is precluded from pursuing its UTSA claims against Acer. Acer does not escape liability under the scenario contemplated here, and subsequent users of trade secrets also do not escape liability.
In its reply brief, Intellisoft argues that allowing claims to proceed solely against Acer will limit "Intellisoft's claims as to continuing misappropriation against [Acer], given that Acer[] will assert that its liability is limited because it no longer has access to or uses the relevant patents, and Wistron is simply a third-party who innocently acquired the patents." To the extent that Intellisoft suggests that damages from Acer's alleged misappropriation will be limited unless the Wistron defendants remain parties to the action, Intellisoft has not cited to any authority or provided any legal analysis on this issue.
2. Motion for Leave to File an Amended Complaint
a. The Motion was Properly Construed as a Motion for Reconsideration
Several months after the trial court sustained the Wistron defendants' demurrer without leave to amend, Intellisoft filed a motion for leave to file an amended complaint. Intellisoft argues that the trial court erroneously construed its motion for leave to file an amended complaint as a motion for reconsideration under Code of Civil Procedure section 1008, subdivision (a). Intellisoft insists that its motion for leave to file an amended complaint did not challenge the trial court's determination that the Wistron defendants must have existed when the misappropriation occurred to incur liability under the UTSA. Rather, Intellisoft claims that it merely sought to allege "a different factual scenario which would have no bearing on the propriety of the [trial court's] sustaining of the demurrer."
Intellisoft's characterization of its motion is illogical. Code of Civil Procedure section 1008, subdivision (a), provides that "[w]hen an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order." Intellisoft characterized its motion a motion for leave to file an amended complaint, but the name of a motion is not controlling. (Powell v. County of Orange (2011) 197 Cal.App.4th 1573, 1577 ["regardless of the name, a motion asking the trial court to decide the same matter previously ruled on is a motion for reconsideration"].) In this instance, Intellisoft's motion for leave to file an amended complaint asked the trial court to reconsider its prior ruling sustaining the demurrer without leave to amend based on newly discovered facts. The trial court reasonably concluded that the motion was a motion for reconsideration under Code of Civil Procedure section 1008, subdivision (a).
Intellisoft argues that the trial court's ruling was erroneous because asking the trial court to grant relief that was inconsistent with a prior order is not per se a motion for reconsideration, citing Standard Microsystems Corp. v. Winbond Electronics Corp. (2009) 179 Cal.App.4th 868 (Standard Microsystems), disapproved of by Even Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830, 843-844 (Even Zohar).
In Standard Microsystems, the defendants moved to set aside a default that was entered after they failed to timely respond to the plaintiff's complaint. (Standard Microsystems, supra, 179 Cal.App.4th at p. 877.) The defendants' motions cited Code of Civil Procedure section 473, subdivision (b), but the defendants' only cogent argument was that the service of the complaint had been defective. (Standard Microsystems, supra, at p. 877.) Code of Civil Procedure section 473, subdivision (b) provides for both discretionary and mandatory relief from default. Discretionary relief from default permits relief for mistake, inadvertence, surprise, or excusable neglect. The mandatory relief provision requires that the trial court grant relief when an attorney files a declaration of fault. (Code Civ. Proc., § 473, subd. (b).) The trial court in Standard Microsystems denied the defendants' motions after determining that there was no mistake, inadvertence, surprise, or excusable neglect, and that the defendants' attorney had not submitted an affidavit of fault. (Standard Microsystems, supra, at p. 879.)
Thereafter, the Standard Microsystems defendants filed another motion to vacate the default seeking mandatory relief under Code of Civil Procedure section 473, subdivision (b). (Standard Microsystems, supra, 179 Cal.App.4th at p. 880.) Accompanying this new motion to vacate was an attorney affidavit of fault prepared by the defendants' prior attorney. (Ibid.) The plaintiff opposed the motion, characterizing it as a motion for reconsideration that did not comply with Code of Civil Procedure section 1008. (Standard Microsystems, supra, at p. 881.) The trial court again denied relief on the basis that it was an improper motion for reconsideration. (Id. at p. 884.)
On appeal, this court concluded that Code of Civil Procedure section 1008 did not render the second motion to vacate invalid. (Standard Microsystems, supra, 179 Cal.App.4th at pp. 884-891.) We concluded that "merely asking the court to grant relief that is inconsistent with a prior order, whether by the same or a different judge, is not a 'motion for reconsideration.' " (Id. at p. 890.) We observed that the defendant's second motion for relief from default relied on the mandatory provisions of Code of Civil Procedure section 473, subdivision (b), and it did not ask the court to reconsider its previous order made under the discretionary provisions of the statute. (Standard Microsystems, supra, at p. 891.) In fact, "[t]he second motion rested on an entirely different legal theory, invoked a different statutory ground, and relied in very substantial part on markedly different facts. It neither asked for, nor sought by sly evasion, a determination contrary to any determination made in the first order." (Ibid.)
In Standard Microsystems, we further suggested that "[i]nsofar as . . . a conflict actually exists [between Code of Civil Procedure sections 473, subdivision (b) and 1008], it must be resolved in favor of allowing relief under section 473[, subdivision] (b), not denying it under section 1008." (Standard Microsystems, supra, 179 Cal.App.4th at p. 894.) Standard Microsystems was disapproved of by the California Supreme Court in Even Zohar, supra, 61 Cal.4th at pages 843-844. Even Zohar held that Code of Civil Procedure sections 473, subdivision (b) and 1008 do not conflict, and nothing suggested that motions from relief from default are exempt from the rules that generally apply to motions for reconsideration. (Even Zohar, supra, at p. 842.) As a result, Even Zohar disapproved of the language in Standard Microsystems that suggested a conflict existed between Code of Civil Procedure sections 473, subdivision (b) and 1008. (Even Zohar, supra, at pp. 843-844.)
Intellisoft's reliance on Standard Microsystems is misplaced. The defendants in Standard Microsystems filed two different motions for relief from default under two different provisions of Code of Civil Procedure section 473, subdivision (b). (Standard Microsystems, supra, 179 Cal.App.4th at pp. 879-880.) Seeking an order to vacate the default judgment entered under the mandatory provision of Code of Civil Procedure section 473, subdivision (b) was not seeking reconsideration of the trial court's order denying the motion for relief from default under the discretionary provisions of the same statute. In this case, the proposed amendments to Intellisoft's fourth amended complaint incorporated new legal theories and facts that allegedly demonstrate the Wistron defendants' liability for trade secret misappropriation. The relief sought by Intellisoft, however, was identical to the relief that was denied by the trial court when it denied leave to amend. Unlike the defendants in Standard Microsystems, Intellisoft sought, by "sly evasion, a determination contrary to [a] determination made in the first order." (Standard Microsystems, supra, at p. 891.)
Accordingly, we find that the trial court did not abuse its discretion when it denied Intellisoft's motion as an untimely motion for reconsideration under Code of Civil Procedure section 1008, subdivision (a). (Glade v. Glade (1995) 38 Cal.App.4th 1441, 1457 [abuse of discretion standard of review applies to trial court's ruling on a motion for reconsideration].) On May 24, 2016, Intellisoft was served with a written notice of entry of the order sustaining the demurrer without leave to amend. Intellisoft filed its motion for leave to file an amended complaint on September 5, 2016, well-after the 10-day limitations period under Code of Civil Procedure section 1008, subdivision (a) had expired.
b. The Trial Court's Inherent Authority to Reconsider Its Prior Interim Orders
Next, Intellisoft argues that the trial court erroneously failed to exercise its inherent authority to reconsider its prior interim orders because the newly discovered evidence referenced in its motion would have cured the defects in its fourth amended complaint. Intellisoft argues that the trial court's failure to exercise its discretion is illustrated by its decision to deny Intellisoft's motion for leave to amend the complaint as untimely under Code of Civil Procedure section 1008, subdivision (a).
In Le Francois v. Goel (2005) 35 Cal.4th 1094 (Le Francois), the California Supreme Court held that Code of Civil Procedure section 1008 "do[es] not limit a court's ability to reconsider its previous interim orders on its own motion" (Le Francois, supra, at pp. 1096-1097), even though it "prohibit[s] a party from making renewed motions not based on new facts or law . . . ." (Id. at p. 1096.) In general, a party's filing of a motion for reconsideration that violates Code of Civil Procedure section 1008 does not preclude the trial court from reconsidering the motion under its inherent discretionary authority. (In re Marriage of Barthold (2008) 158 Cal.App.4th 1301, 1309.)
Intellisoft, however, does not cite to any authority that suggests that a trial court must exercise its inherent discretionary authority to reconsider its prior orders. In fact, Le Francois held that "[a] court need not rule on any suggestion that it should reconsider a previous ruling and, without more, another party would not be expected to respond to such a suggestion." (Le Francois, supra, 35 Cal.4th at p. 1108.) And, contrary to Intellisoft's assertions, the record does not indicate that the trial court believed it lacked the authority to reconsider its prior order. Here, the trial court denied Intellisoft's motion to reconsider on the basis that it was untimely under Code of Civil Procedure section 1008, subdivision (a). The fact that the trial court declined to exercise its discretion to reconsider its ruling on its own motion does not demonstrate that the trial court was unaware of its inherent discretion.
Intellisoft cites to McGettigan v. Bay Area Rapid Transit Dist. (1997) 57 Cal.App.4th 1011 and Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371 and argues that these cases stand for the proposition that "even where a superior court fails to analyze a motion for reconsideration on the merits, because the motion was untimely or for any other reason, an appellate court may still consider the merits of whether the court abused its discretion in light of a 'reasonable possibility that the defect can be cured by an amendment.' " Although it is not entirely clear, it appears that Intellisoft in part argues that we must review the trial court's decision not to exercise its inherent discretion to reconsider its prior order under the same standard that we apply when we review a trial court's order sustaining a demurrer without leave to amend. (See Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1035 [trial court abuses its discretion in not granting leave to amend if there is a reasonable possibility that an amendment can cure the complaint's defects].)
Intellisoft conflates the standards of review. When a trial court does exercise its inherent discretion, "the only requirement of the [trial] court is that it exercise 'due consideration' before modifying, amending, or revoking its prior orders." (Darling, Hall & Rae v. Kritt (1999) 75 Cal.App.4th 1148, 1157.) We have not found any cases that have concluded that a trial court abuses its discretion by declining to exercise its inherent discretion to reconsider a prior interim order. The decision to reconsider its prior order on its own motion rested within the trial court's sound discretion. The trial court was not required to rule on Intellisoft's suggestion that it reconsider its prior order (Le Francois, supra, 35 Cal.4th at p. 1108), and, as a result, its decision not to do so here was not an abuse of its discretion.
In their respondent's brief, the Wistron defendants state that Intellisoft does not argue that the trial court erred in denying it leave to amend its complaint. Intellisoft, however, argues in its opening brief that leave to amend should be granted. We may review the trial court's order sustaining a demurrer without leave to amend even though no request to amend the pleading was made. (Mercury Ins. Co. v. Pearson (2008) 169 Cal.App.4th 1064, 1072; Code Civ. Proc., § 472c, subd. (a).)
Lastly, Intellisoft argues that it was an abuse of discretion to sustain the demurrer without leave to amend because there is a reasonable probability that it can amend its complaint to state a valid cause of action against Wistron.
Below, the trial court sustained the Wistron defendants' demurrer without leave to amend and entered a judgment in favor of both companies, Wistron and InfoComm. Intellisoft, however, argues only that it can amend its complaint to cure the defects related to Wistron, not InfoComm. As a result, Intellisoft has forfeited any challenge to the trial court's decision not to grant leave to amend with respect to InfoComm. (Sierra Palms Homeowners Assn. v. Metro Gold Line Foothill Extension Construction Authority (2018) 19 Cal.App.5th 1127, 1136 [appellant forfeited challenge to issue not raised on appeal].)
"When a demurrer is sustained without leave to amend, [we] must determine whether there is a reasonable probability that the complaint could have been amended to cure the defect; if so, [we] will conclude that the trial court abused its discretion by denying the plaintiff leave to amend. [Citation.] The plaintiff bears the burden of establishing that it could have amended the complaint to cure the defect." (Berg & Berg Enterprises, LLC v. Boyle, supra, 178 Cal.App.4th at p. 1035.)
Intellisoft's proposed fifth amended complaint alleged that Wistron was an "unincorporated entity" that was founded in 1976, and, commencing in 1981, operated as the "Design, Manufacturing & Services ('DMS') operations of Acer Inc." The proposed fifth amended complaint further alleged that between 1981 and 2001, Wistron "ran a clear separate line of business within and for Acer Inc.," and from 1991 through May 29, 2001, "Wistron, an unincorporated entity . . . misappropriated Plaintiff's Trade Secrets." Moreover, on May 30, 2001, "Wistron, the unincorporated entity, was incorporated into Wistron Corporation."
Intellisoft's proposed amendments do not state a valid cause of action and do not cure the defects with the fourth amendment complaint. Intellisoft proposes to amend its complaint to state that Wistron was a separate legal entity that operated within and for Acer. Intellisoft does not cite to any authority that holds that an "unincorporated entity" can exist as a separate legal entity within a corporation or company.
In its opening brief, Intellisoft cites to a 2008 declaration prepared by Brian Chong, a Wistron employee, who stated that he was "employed by Wistron Corporation for over 21 years" and "first served with Wistron when it was a division of Acer, and continued [his] employment with Wistron when it was spun-off as a separate entity from Acer in May 2001." The Wistron defendants argue that the Chong declaration is not a part of the record of appeal and was not considered by the trial court below. The fact that the declaration is not a part of the record on appeal is irrelevant. When reviewing whether leave to amend should be granted, we review whether there is a reasonable probability that the complaint can be amended. To satisfy this burden on appeal, a plaintiff must set forth factual allegations and show in what manner he or she can amend the complaint. (Rakestraw v. California Physicians' Service (2000) 81 Cal.App.4th 39, 43.) There is no requirement that Intellisoft prove its factual allegations. (Swaner v. City of Santa Monica (1984) 150 Cal.App.3d 789, 797 ["Though a plaintiff may be unable to prove his allegations, he need only plead facts showing that he may be entitled to some relief."].) The Chong declaration, however, does not aid Intellisoft. The declaration merely reiterates that Wistron was a "division of Acer" and was later "spun-off as a separate entity."
Intellisoft relies on Barr v. United Methodist Church (1979) 90 Cal.App.3d 259, and argues that "[t]he criteria applied to determine whether an entity is an unincorporated association are no more complicated than (1) a group whose members share a common purpose, and (2) who function under a common name under circumstances where fairness requires the group be recognized as a legal entity." (Id. at p. 266.) Barr, however, explained that "[g]roups which have been included as unincorporated associations in addition to labor unions [citations] and political parties are social clubs, religious organizations, environmental societies, athletic organizations, condominium owners, lodges, stock exchanges and veterans." (Ibid.) An internal division of a company or corporation is dissimilar to the types of unincorporated associations discussed in Barr. Furthermore, fairness does not require that an internal division of a company or corporation be recognized as a legal entity. Those whose rights have been violated by the internal division may file a lawsuit against the company or corporation itself.
Accordingly, we find no abuse of discretion in the trial court's decision to sustain the demurrer without leave to amend. Intellisoft has not met its burden to show that there is a reasonable probability that the defects in its complaint can be cured.
DISPOSITION
The judgment is affirmed.
/s/_________
Premo, J. WE CONCUR: /s/_________
Greenwood, P.J. /s/_________
Elia, J.