Cypress Semiconductor Corp. v. Superior Court, 163 Cal. App. 4th 575 (2008)

The trade secret owner in this case, Silvaco Data Systems, develops and licenses electronic design automation software. In late 1998, a former Silvaco employee, working for Circuit Systems, Inc. (“CSI”), incorporated Silvaco’s “SmartSpice” trade secrets into CSI’s product, “DynaSpice.” Silvaco sued the employee as well as CSI and in 2003 entered into a settlement agreement and stipulated judgment. CypressSemiconductor (“Cypress”), one of CSI’s customers that had purchased DynaSpice, learned of the judgment against CSI in August of 2003. In September 2003, Silvaco contacted Cypress directly and demanded that it cease its use of Silvaco’s trade secrets (as incorporated in the DynaSpice software). When Cypress continued to use the product after receiving notice from Silvaco, the latter company sued the former for trade secret misappropriation under the California Uniform Trade Secrets Act (“CUTSA”). Cypress defended in part based on CUTSA’s three-year statute of limitations, which it contended commenced running in 2000 when Silvaco discovered CSI’s misappropriation. Silvaco, however, argued that because Cypress did not know of CSI’s misappropriation until August of 2003, the statute of limitations did not commence running until that date because one of the elements of a trade secret misappropriation claim is the defendant’s knowledge of the wrongfulness of its conduct. The Court of Appeal held that a plaintiff may have more than one claim for misappropriation, each with its own statute of limitations, when more than one defendant is involved. However, the Court further held that the statute commences running when the plaintiff knows or has reason to know the third party has knowingly acquired, used or disclosed its trade secrets. In this case, the Court held that Cypress was entitled to a jury trial to determine when Silvaco first had reason to know that a CSI customer such as Cypress had obtained or used DynaSpice knowing, or with reason to know, that the software contained Silvaco’s trade secrets.