JustMed, Inc. v. Byce, 600 F.3d 1118 (9th Cir. 2010)

Michael Byce developed the source code used in the software of a digital audio larynx device that JustMed owned. JustMed contended that Byce was its employee when he developed the code and that the code, therefore, belonged to JustMed under the work-for-hire doctrine of the federal Copyright Act. Byce, however, contended he was an independent contractor and that he expected to receive shares in JustMed upon transferring ownership of the source code to JustMed. The district court found that Byce was an employee of JustMed when he wrote the software and that JustMed owned the copyright to the software under the work-for-hire doctrine. The district court also found Byce liable for misappropriation of JustMed’s trade secrets. The Ninth Circuit affirmed the district court’s judgment regarding violation of the Copyright Act, noting that although “JustMed [as a start-up company] did not comply with federal and state employment or tax laws… the remedy for these failings lies not with denying the firm its intellectual property but with enforcing the relevant laws.” However, the Court reversed the judgment insofar as the district court had determined Byce had violated Idaho’s version of the Uniform Trade Secrets Act because Byce had neither “used” nor “disclosed” JustMed’s trade secrets. The Ninth Circuit remanded the case for the district court to determine whether and in what amount JustMed could recover damages on its conversion and breach of fiduciary duty claims and whether an injunction to prevent further misappropriation was warranted. See also Thomas Weisel Partners LLC v. BNP Paribas, 2010 WL 1267744 (N.D. Cal. 2010) (company’s director breached fiduciary duty by facilitating en masse defection of 26 employees to competitor).