[00:00:00] Speaker 04: The United States Court of Appeals for the Ninth Circuit is now in session. [00:00:06] Speaker 01: Good morning, counsel. [00:00:07] Speaker 01: Welcome to the Ninth Circuit. [00:00:08] Speaker 01: Before we hear our first case or argument, we have three matters to be submitted. [00:00:14] Speaker 01: They are Cardenas Ruiz versus Bondi, Alexandra Romero versus Bissignano, and Brokaw versus Bissignano. [00:00:25] Speaker 01: The first case for argument today is Group 14 Technologies versus Nexion Limited. [00:00:32] Speaker 01: And I believe that, I guess, Mr. Al-Salam, you're first, right? [00:00:40] Speaker 01: That's correct, Your Honor. [00:00:41] Speaker 01: All right, please proceed. [00:00:43] Speaker 03: Thank you, Your Honor. [00:00:45] Speaker 03: This is Ramsey Al-Salam of Perkins Couey, and I'm also accompanied by my colleague, Jesse Della Sensory, who's not on camera. [00:00:53] Speaker 03: Group 14 respectfully requests that the court vacate the District Court's grant of summary judgment on Group 14's trade secret and contract claims and remand with the instruction that Group 14 be given an opportunity for discovery. [00:01:09] Speaker 03: The court's summary judgment order. [00:01:11] Speaker 01: May I ask you this? [00:01:13] Speaker 01: Perhaps I misread this, but my review of the record suggested literally tens of thousands of pages [00:01:23] Speaker 01: of documents have already been submitted, reviewed, and this is like the third round. [00:01:30] Speaker 01: Is that wrong? [00:01:34] Speaker 03: I don't believe we obtained tens of thousands of pages from the defendant. [00:01:39] Speaker 03: What happened was we had two motions to compel discovery that were denied. [00:01:45] Speaker 03: The defendant did voluntarily produce some documents. [00:01:49] Speaker 03: No depositions were taken because we were waiting to get a full document production before we took the deposition. [00:01:55] Speaker 01: I thought three depositions were taken. [00:01:57] Speaker 01: Is that wrong? [00:01:59] Speaker 03: Oh, I apologize, Your Honor. [00:02:01] Speaker 03: I meant Group 14 did not take any depositions of the defendants. [00:02:07] Speaker 03: Defendants took depositions of plaintiff. [00:02:11] Speaker 01: But clearly this is a situation, if I understand correctly, where people weren't just sitting around twiddling their thumbs. [00:02:18] Speaker 01: There was a lot of discovery going on. [00:02:20] Speaker 01: Maybe not all on one side or the other, but there was just a lot of discovery going on for quite some period of time. [00:02:27] Speaker 01: Is that correct? [00:02:29] Speaker 03: I would dispute that characterization because plaintiff, we group 14 never had an opportunity to get fulsome discovery from the defendant in terms of either documents or depositions. [00:02:42] Speaker 03: The summary judgment motion was filed shortly after the court denied group 14's motion to compel and was decided before the end of the discovery deadline. [00:02:54] Speaker 01: And if I understand correctly, that was because when you looked at the nature of the [00:02:59] Speaker 01: inquiry, the court found it so vague, so undeterminable that they couldn't order it. [00:03:08] Speaker 01: Is that right? [00:03:10] Speaker 03: What's right, Your Honor, is the court found that group 14 had not identified with reasonable particularity its trade secrets and for that reason refused to compel discovery and then invited defendant to bring a summary judgment motion on the trade secret claims and on the contract claim to the extent it relied on trade secrets. [00:03:32] Speaker 03: Now, our largest concern and the one in my limited time is that the one of the court's principal errors [00:03:39] Speaker 03: was dismissing on summary judgment the contract claim. [00:03:44] Speaker 03: That was both internally inconsistent with the court's order, and it ignored evidence in support of other aspects of the contract claim. [00:03:55] Speaker 01: But didn't the court express that because they thought it was precluded by the UTSA? [00:04:01] Speaker 03: No. [00:04:02] Speaker 03: The court did not express that as the basis for dismissing the contract claim. [00:04:08] Speaker 03: The court did believe wrongly, we suggest, that the contract claim was premised only on trade secrets. [00:04:19] Speaker 03: It wasn't. [00:04:20] Speaker 03: The contract is much broader in at least three ways than the trade secret claim. [00:04:26] Speaker 03: First, both as a matter of law [00:04:29] Speaker 03: that a contract can protect information that doesn't rise to the level of a trade secret. [00:04:35] Speaker 03: And in this case, specifically does. [00:04:38] Speaker 03: In this case, the contract protects materials that we provided them, physical materials, which were silicon, carbon, [00:04:46] Speaker 03: composites as samples, and also protects any substances that they derive in whole or part from those materials. [00:04:55] Speaker 03: It also protects confidential information. [00:04:59] Speaker 03: And unlike a trade secret claim, it shifts the burden. [00:05:03] Speaker 03: It says, if we designate information as confidential and they don't think it is, they have to conclusively demonstrate that it's not confidential. [00:05:13] Speaker 03: When the district court dismissed the trade secret claim, the district court clearly put the burden on group 14 to establish the trade secrets that it had identified were both trade secrets and had been disclosed to the defendant. [00:05:28] Speaker 03: This is the opposite of the burden under the contract claim. [00:05:32] Speaker 03: In addition, [00:05:33] Speaker 03: Trade secret misappropriation isn't based on retaining trade secrets. [00:05:39] Speaker 03: If I find a trade secret in the street and just keep it, I have not misappropriated it. [00:05:44] Speaker 03: But the contract claim, as the district court found, requires finds that you cannot retain the materials or confidential information once the contract is terminated. [00:05:56] Speaker 01: OK, well, let's take that as a given. [00:05:59] Speaker 01: As I understand it, [00:06:04] Speaker 01: there was a point when the two, I'm going to call them CEOs or senior people on both sides, talked about a possible merger acquisition, whatever, that failed. [00:06:15] Speaker 01: And at that point, presumably, whether you call it a contract claim or a trade secret claim, there was a requirement that the Nexion folks [00:06:29] Speaker 01: We're supposed to return that to your company and they didn't do that. [00:06:34] Speaker 01: What impact does that have in your view? [00:06:40] Speaker 03: If the contract were terminated and they did not return the confidential information and materials, they were in breach of the contract. [00:06:51] Speaker 01: That put you on notice that there was a problem. [00:06:56] Speaker 03: We don't agree we were on, I'm sorry. [00:07:03] Speaker 03: I want to be clear. [00:07:05] Speaker 03: The contract is not about whether or not we were going to have an acquisition or a merger. [00:07:11] Speaker 03: That was part of the reason they were looking at our materials. [00:07:15] Speaker 03: But the contract was related to them evaluating our materials for possible combination or use. [00:07:23] Speaker 03: And the talks about a merger collapsed in January of 2018. [00:07:30] Speaker 03: But the parties continued to talk about their use of our products. [00:07:36] Speaker 03: And they even asked for more samples in August of 2018. [00:07:39] Speaker 03: So the collaboration in terms of their evaluation of our materials [00:07:46] Speaker 03: continued past the breakoff in the merger talks. [00:07:52] Speaker 03: Now, what the judge found is they ended in November of 2018, and he based that on a phone conversation on November 8, 2018, for which there is no testimony. [00:08:05] Speaker 03: He based it on the handwritten records of our executive, Mr. Luby. [00:08:12] Speaker 03: And in there, it says no sample. [00:08:16] Speaker 03: It says IP contamination. [00:08:19] Speaker 03: Even though there's no dispute, they never said, we're ending this collaboration. [00:08:25] Speaker 03: We're terminating this agreement. [00:08:28] Speaker 03: That never happened. [00:08:29] Speaker 00: What role should that play in our evaluation of the trade secret misappropriation claim? [00:08:44] Speaker 03: The Sunrise application is relevant because in the Sunrise application, it's a confidential application. [00:08:54] Speaker 03: But they said that one of the ways they were going to solve their problem and come up with the technology was to work with a US company, which nobody disputes is Group 14. [00:09:07] Speaker 03: And so they were relying on [00:09:09] Speaker 03: the use of our materials or information in connection with getting that seven million pound investment. [00:09:19] Speaker 03: But in the short time I have, I want to focus on the other more important aspect of the breach of contract. [00:09:27] Speaker 03: First of all, I do want to stress that as Judge Smith said, if [00:09:33] Speaker 03: district court is right and the agreement terminated implicitly on November 2018, then they are in breach by retaining the information to this day, retaining our materials and information. [00:09:49] Speaker 03: But the stronger and the more important breach has to do with their development of their competing product. [00:09:55] Speaker 03: It's called NSP2. [00:09:57] Speaker 03: That's the product that they develop. [00:10:00] Speaker 03: It's the product that they're talking about in the Sunrise application. [00:10:04] Speaker 03: We respectfully submit, even without a true opportunity for discovery, there is significant evidence that NSP2 was developed at least in part using our confidential information and materials. [00:10:20] Speaker 03: And in fact, I know there's a lot to go through in the record. [00:10:25] Speaker 04: I'm sorry for interrupting you because your time is running short. [00:10:30] Speaker 04: For statute of limitation purposes, there is a requirement that due diligence be exercised. [00:10:35] Speaker 04: Was there any due diligence exercise in this particular case? [00:10:40] Speaker 04: And if not, then what excuses you from that requirement? [00:10:45] Speaker 03: Okay, first of all, this statute of limitations doesn't apply to the contract claim. [00:10:52] Speaker 03: I just want to make sure everybody understands that. [00:10:54] Speaker 03: And it's the contract claim I'm focusing on more. [00:10:56] Speaker 03: In terms of due diligence, we respectfully submit that we've believed that if they intended to terminate the agreement, [00:11:05] Speaker 03: that they would have said it and they would have returned our materials. [00:11:11] Speaker 03: We did not believe that the collaboration had ended. [00:11:15] Speaker 03: And in our brief, we have cited further communications which indicated that the collaboration might continue. [00:11:23] Speaker 03: In addition, I want to emphasize this. [00:11:26] Speaker 03: Again, there's no testimony about that conversation that occurred. [00:11:30] Speaker 03: Their own internal notes, Nexion's internal notes, show that their IP director said that we don't want to sample at this time because it might contaminate our patent applications. [00:11:42] Speaker 03: Let's first file our patent applications before we get a sample. [00:11:46] Speaker 03: So in the record, there is evidence that this was just a temporary [00:11:52] Speaker 03: time that they did not want to receive a sample and that they were at least contemplating at that time getting a sample later after they had filed their IP. [00:12:02] Speaker 03: But I do want to emphasize. [00:12:04] Speaker 01: I know you have a lot to cover, but you're running out of time. [00:12:08] Speaker 01: You can go forward or save some time for rebuttal, but you have to save time for rebuttal. [00:12:13] Speaker 01: One of the things I would appreciate you doing is to addressing the fact that [00:12:17] Speaker 01: at least the District Court felt, and I feel as somebody who practiced this kind of law for many years, the definitions of trade secrets are just terrible. [00:12:27] Speaker 01: So general, so vague, so inconclusive. [00:12:32] Speaker 01: I'd like you to address that when you get to a rebuttal, if you will, please. [00:12:36] Speaker 03: Thank you, Your Honor. [00:12:37] Speaker 03: And I will say this. [00:12:40] Speaker 03: We believe that the requirement of identifying trade secrets is for discovery. [00:12:47] Speaker 03: It shouldn't be converted into a summary judgment motion where we have to prove our case. [00:12:52] Speaker 03: response to emotional appell. [00:12:53] Speaker 03: But I do want to emphasize the evidence that supports our position that there's an issue of fact as to whether or not they used our materials in connection with developing their competing product. [00:13:05] Speaker 03: And that includes their two board presentations where they said they couldn't solve the problem and they recommended to their own board that they use our materials. [00:13:15] Speaker 03: Those are at 5-ER947 at pages 948 and 966, 4-ER682 at page 684. [00:13:28] Speaker 03: It says the recommendation is to accelerate time to market by accessing a silicon composite material technology from group 14. [00:13:38] Speaker 03: There's also a board presentation in February of 2018, 6-ER-1195 at 1200. [00:13:49] Speaker 03: The recommendation was to pursue Group 14 type materials for use in their technologies. [00:13:55] Speaker 03: Then even as late as July of 2019 at 5-ER1145, they were comparing our materials with the NSP2 product they were using. [00:14:09] Speaker 03: This in itself, and we also know this, we know the same people that developed NSP2 had access to our materials and information. [00:14:17] Speaker 03: There's at least enough evidence for a jury to infer that they used our information, at least in part, [00:14:25] Speaker 03: in developing NSP2. [00:14:28] Speaker 03: So we really would like the court to emphasize or focus on whether there was sufficient evidence, because that issue was not even addressed in the district court summary of the judgment order. [00:14:39] Speaker 03: Yet it's the most important issue for my client, whether it's competitor used its confidential information in developing a competing product. [00:14:47] Speaker 03: I'll save the last minute for rebuttal. [00:14:49] Speaker 01: All right. [00:14:51] Speaker 01: Mr. Levy, please. [00:14:54] Speaker 02: Thank you, Your Honor, and may it please the Court. [00:14:57] Speaker 02: The District Court gave Group 14 multiple chances with the assistance of Discovery to define trade secrets and to separate what it claimed to be confidential information from public patents, which is consistent with multiple cases of this Court. [00:15:13] Speaker 02: It found those deficient and it then invited the parties to consider a next year on related file a summary judgment motion on those claims and any derivative claim, which is exactly what this court recently said in Kintaro should have happened. [00:15:29] Speaker 02: And so that's what did happen. [00:15:31] Speaker 02: My client moved to this for summary judgment on all the claims because the contract claims and the other claims were derivative of the trade secret claims. [00:15:39] Speaker 02: And the court entered summary judgment on all of them in the briefing below. [00:15:44] Speaker 02: The summary judgment motion says that the contract claim is fully derivative and that no confidential information independent of patents is identified. [00:15:53] Speaker 02: There's really no response in the opposition brief below. [00:15:56] Speaker 02: And on appeal here, there is no effort really to identify any confidential information separate from the public patents that would help support either a trade secret case [00:16:09] Speaker 02: or a breach of contract case. [00:16:10] Speaker 01: Do I understand correctly then from what you're saying and basically, Frank, what I read in the briefs that the district court concluded that based upon the actual language of the contract, that what was shared here was either already known or within publicly available or something of that nature or was so vague and indefinite that you couldn't enforce it. [00:16:31] Speaker 01: Is that essentially correct? [00:16:32] Speaker 02: That's exactly right. [00:16:34] Speaker 02: That's what we argued. [00:16:34] Speaker 02: That's what the district court found. [00:16:36] Speaker 02: It went through multiple occasions of reviewing the trade secret definitions and on summary judgment evaluate whether there would be a fact dispute as to whether there was any confidential material [00:16:48] Speaker 02: other than what was disclosed in patent or is so vague as to not be sufficiently protectable. [00:16:55] Speaker 02: And I note that in the briefing, my friends identified zero instances of confidential information that wasn't publicly disclosed in patents. [00:17:05] Speaker 02: They have an example of trade secret D in their brief. [00:17:08] Speaker 02: We explain in our brief why everything was already disclosed about that trade secret, and they just dropped the point on reply. [00:17:15] Speaker 02: So I think on this appeal, it's all but conceded that the trade secrets aren't adequately defined. [00:17:20] Speaker 02: So now my friend says the court should focus on the contract claims. [00:17:24] Speaker 02: As I said below, we argued that they were coterminous. [00:17:28] Speaker 02: And so defeating one would lead to defeating the other. [00:17:32] Speaker 02: My friend says that there are at least four different reasons that that's not true. [00:17:36] Speaker 02: I think he stressed those really on reply. [00:17:38] Speaker 02: The first is that they have a claim for breach of contract based on the improper retention of information. [00:17:45] Speaker 02: That was not a theory pressed below as a reason to oppose summary judgment. [00:17:51] Speaker 02: And so that's waived. [00:17:53] Speaker 02: And it's not a purely legal question. [00:17:55] Speaker 02: If they had said that the court should decline summary judgment on that question, we would have put in a response that partly factual in the reply. [00:18:03] Speaker 02: So it's not properly presented now. [00:18:06] Speaker 02: They just didn't make the argument below. [00:18:08] Speaker 04: Let me ask you this, Council. [00:18:09] Speaker 04: Let me ask you this. [00:18:10] Speaker 04: I want to make sure that I understand sort of the procedural history of this, because one of the issues raised is the denial of the 5060 for discovery. [00:18:21] Speaker 04: So the parties had about a year's worth of discovery by the time the summary judgment motion was filed. [00:18:26] Speaker 04: Because what was a little unusual to me in this case from a procedural standpoint is that the court had asked for a joint status report and the summary judgment motion was essentially filed at the same time. [00:18:38] Speaker 04: It's kind of an accelerated timeline. [00:18:41] Speaker 04: On this record, I think the appellants have some pretty tough arguments on the merits of the summary judgment. [00:18:48] Speaker 04: But I want to make sure that there's no irregularity in the way that the summary judgment timeline was handled that we should be concerned about. [00:18:58] Speaker 04: What's your response to that? [00:19:00] Speaker 02: So I have a couple of reactions. [00:19:01] Speaker 02: Number one, in the recent decision on trade secret definitions in Kintaro that my friends highlight in their reply, [00:19:09] Speaker 02: There, there was an issue of the definition and the court entered as a dismissal of trade secret case as a discovery sanction. [00:19:16] Speaker 02: The court reversed that and said what should happen in that circumstance is that the district court should invite a summary judgment motion on those issues. [00:19:25] Speaker 02: And that's what happened here. [00:19:26] Speaker 02: So the court went through this multiple iterations, gave them multiple options to opportunities to define the trade secrets, found those definitions wanting, and in, [00:19:38] Speaker 02: in the last order on the motion to compel, provided that the court that they should consider, that Nexen should consider filing a summary judgment motion. [00:19:48] Speaker 02: So it's exactly what should have happened. [00:19:51] Speaker 02: Then we did file a summary judgment motion and that triggers the rules under rule 56. [00:19:56] Speaker 02: It's their burden to come up with evidence to show there's a fact dispute. [00:20:01] Speaker 02: And if they think they need discovery, that's what rule 56D is for. [00:20:05] Speaker 02: And Rule 56D is very specific. [00:20:08] Speaker 02: And the cases of this court interpreting Rule 56D are very clear. [00:20:13] Speaker 02: It is their burden in opposing a summary judgment motion to put in an affidavit that specifically identifies particular facts that are in need of discovery, why they're essential to oppose summary judgment, and to do that in an affidavit. [00:20:30] Speaker 02: And the affidavit here, and it's in the record at 2ER40, [00:20:35] Speaker 02: It does none of those things. [00:20:37] Speaker 02: It says in paragraph 11, it identifies one to six bullet points and says that before opposing summary judgment, group 14 would ideally have preferred to have completed and or taken at least the following discovery. [00:20:52] Speaker 02: And then there's a list of broad discovery, nothing specific. [00:20:55] Speaker 04: So there's no proffer of any specificity that would normally be required under 5060. [00:21:01] Speaker 04: That's your argument, right? [00:21:03] Speaker 02: That's right. [00:21:04] Speaker 02: And so that's what they would have to show below. [00:21:07] Speaker 02: And on appeal, of course, it's reviewed for abuse of discretion. [00:21:12] Speaker 02: And given the showing that was made on the affidavit, it is not a close question. [00:21:18] Speaker 02: We have other arguments in our brief about why discovery hero would infidel anyway, because they are charged with their own knowledge of their own secrets and of how those are distinct from patents. [00:21:30] Speaker 02: And so they don't need discovery to do that. [00:21:32] Speaker 02: They also don't need discovery to explain why they met the discovery rule, which was their burden, why there was a fact dispute on that. [00:21:41] Speaker 02: And, you know, as we pointed out below, they identified nothing that happened after 2018, and they would have had to show discovery before 2019. [00:21:51] Speaker 02: So I don't think the discovery question is a close one. [00:21:55] Speaker 02: With respect to, unless Your Honor, you have more questions on discovery, I did just want to briefly address the other points on the contract. [00:22:05] Speaker 02: My friend says they also have a claim with respect to material, not just confidential information. [00:22:10] Speaker 02: The only claim that they leveled below on material, as we point out in our opposition brief, relates to sharing material with two universities, Oxford and UCL. [00:22:21] Speaker 02: The district court addressed those arguments and said that the sharing of those materials did not breach the contract. [00:22:28] Speaker 02: And it's a theory that they expressly abandoned on appeal. [00:22:31] Speaker 02: So that's the only theory they pressed below. [00:22:33] Speaker 02: I don't think they can properly raise a new argument on material on appeal. [00:22:37] Speaker 02: Same thing for material that's derived from information. [00:22:42] Speaker 02: First of all, that theory fails because if there are no confidences, then there would be nothing that would be subject to the derivation [00:22:51] Speaker 02: about provisions that they cite. [00:22:52] Speaker 02: But again, they didn't rely on this below. [00:22:54] Speaker 02: And same thing with, they say it was our burden to identify, to show that the confidences were in the public domain. [00:23:02] Speaker 02: This is also not an argument they raised below. [00:23:04] Speaker 02: And I don't think it's a close question. [00:23:06] Speaker 02: We proffered the patents. [00:23:08] Speaker 02: The court looked at everything. [00:23:10] Speaker 02: Whoever has the burden, there's no fact dispute. [00:23:13] Speaker 02: I don't think they even try to show that there's a fact dispute here. [00:23:15] Speaker 02: So these are all, I don't think these get my friends anywhere. [00:23:20] Speaker 02: Unless the court really has further questions, I think we're content to rest on our papers. [00:23:26] Speaker 02: I think the discovery issue is easily resolved by governing law and just looking at the affidavit, which is very generic. [00:23:35] Speaker 02: The trade secret definitions are vague and they don't identify confidences. [00:23:39] Speaker 02: And my friends don't even try to show otherwise. [00:23:43] Speaker 02: The only arguments they make are by the time of the reply, they're forfeited. [00:23:47] Speaker 02: Basically, they don't go back there. [00:23:48] Speaker 02: And the contract claims, they were just trying to come up with new contract claims that they didn't make below. [00:23:53] Speaker 02: So I would urge the court to affirm in all respects. [00:23:56] Speaker 01: Any other questions by my colleagues? [00:23:58] Speaker 01: Good, thank you. [00:24:00] Speaker 01: I think not. [00:24:00] Speaker 01: Okay, so Mr. Al-Salam, you have a minute, I think, roughly to rebut. [00:24:14] Speaker 01: We're not hearing you. [00:24:15] Speaker 01: Are you muted there? [00:24:17] Speaker 03: I'm sorry. [00:24:19] Speaker 01: There we go. [00:24:19] Speaker 03: The argument is being made that we waived our position that they retained our information in breach of the agreement. [00:24:28] Speaker 03: As we point out on page 26, I mean, 23 of our reply brief, the courts have said the issue on waiver is whether the district court had an opportunity to address it. [00:24:40] Speaker 03: The district court clearly addressed it. [00:24:42] Speaker 03: It relied on it. [00:24:44] Speaker 03: It relied on the fact that they had breached their contract in finding that the trade secret claim was time barred. [00:24:51] Speaker 03: So it's not a waiver of the retention claim. [00:24:55] Speaker 03: This idea that everything we gave them was in the public domain [00:24:59] Speaker 03: That doesn't even apply to materials. [00:25:02] Speaker 03: Materials, it's in the contract, first of all, they have to conclusively demonstrate that what we provided them is in the public domain. [00:25:11] Speaker 03: That burden was never applied in the summary judgment motion. [00:25:14] Speaker 03: The burden that was applied was a trade secret burden. [00:25:17] Speaker 03: And we do not agree that we did not argue that they used our materials. [00:25:23] Speaker 03: At page 638 of the record, on the summary judgment motion, we argued that they had used Group 14's materials for its own gain and for granting funding and patents. [00:25:35] Speaker 01: And we have identified... All right. [00:25:38] Speaker 01: I apologize. [00:25:39] Speaker 01: I know that you want to say a whole lot more, but your time is up. [00:25:42] Speaker 01: Let me ask my colleagues whether either has additional questions for Mr. Al-Salam. [00:25:47] Speaker 04: I don't. [00:25:48] Speaker 04: Thank you. [00:25:49] Speaker 01: All right. [00:25:49] Speaker 01: We thank both counsel for your argument. [00:25:51] Speaker 01: We realize that there's lots more you can say, but that the nature of our business here is time limited. [00:25:57] Speaker 01: So the case is here. [00:25:59] Speaker 01: The case just argued is submitted.