Seller of Trade Secrets May Still Sue Former Employee for Misappropriation
By Dan Forman
In a fascinating and lengthy opinion, a California appellate court held that a company that sells its trade secrets still has standing to sue for misappropriation that occurred prior to the sale. In Jasmine Networks, Inc. v. Marvell Semiconductor, Inc., Jasmine sued Marvell and several of Marvell's employees for misappropriation of trade secrets and related causes of action based on allegations that Marvel had wrongfully acquired Jasmine’s trade secrets and hired away key employees, destroying or greatly reducing the value of Jasmine's trade secrets. Less than 1 year later, Jasmine filed a Chapter 11 bankruptcy proceeding and, as part of its reorganization, sold substantially all of its assets, including its trade secrets and intellectual property. However, Jasmine reserved its right to pursue its claims in the lawsuit against Marvell. With an analogy to a victim of an automobile accident who does not need to keep her damaged vehicle until trial to recover for the damages caused by a negligent driver, the Court of Appeal made it clear that the sale of the trade secrets or intellectual property to a third party, after commencing a lawsuit over the harm caused by misappropriation, does not destroy the Plaintiff’s standing to pursue its case for misappropriation of trade secrets. The Jasmine Networks case is here.