Jasmine Networds v. Marvell Semiconductor CA6 ( 2013 )

Filed 7/17/13 Jasmine Networds v. Marvell Semiconductor CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
JASMINE NETWORKS, INC., H036684
(Santa Clara County
Plaintiff and Appellant, Super. Ct. No. CV801411)
v.
MARVELL SEMICONDUCTOR, INC.,
Defendant and Respondent.
Appellant Jasmine Networks, Inc. (Jasmine) appeals from a judgment entered after
a jury verdict in favor of respondent Marvell Semiconductor, Inc. (Marvell). Jasmine
sued Marvell on three primary claims: misappropriation of trade secrets, breach of
contract and the implied covenant of good faith and fair dealing, and intentional
interference with contractual relations. After a trial, a jury returned a verdict in favor of
Marvell on all of Jasmine’s causes of action. On appeal, Jasmine argues that the trial
court erred in denying its motion for a judgment notwithstanding the verdict (JNOV)
because Marvell utilized Jasmine’s trade secrets as a matter of law when it discussed
potential liability for using Jasmine’s trade secrets in a recorded voicemail. Second,
Jasmine argues that the jury’s verdict should be reversed because the trial court
incorrectly failed to give preclusive effect to Marvell’s voluntary dismissal of its cross-
complaint with prejudice.
We find that the trial court did not err in denying Jasmine’s motion for a new trial
as the motion was primarily based on a legal theory not tried before the jury and premised
upon disputed facts. Furthermore, we find that Jasmine’s theory that Marvell’s voicemail
constituted “use” of a trade secret is without merit. Additionally, we determine that
Marvell’s evidence of Jasmine’s alleged wrongdoing in the development of JSLIP was
not barred under the doctrine of res judicata, and that the trial court did not err in
declining to grant Jasmine’s pretrial motion in limine to exclude the evidence.
Accordingly, we affirm the judgment.
FACTUAL BACKGROUND
Jasmine and Marvell are both technology companies with a focus on developing
semiconductor chips. Jasmine represented that it had developed a packet switch fabric.
A packet switch fabric is a code used in an Internet router that directs the flow of
information packets. There are two components to a packet switch fabric, a switch and a
scheduler. A switch directs incoming information to an outgoing link. A scheduler
determines what sequence each packet of information will be delivered so that the
information packets do not “collide,” rendering the information corrupt. A scheduler is
vitally important to a router, as the efficiency of the scheduler ultimately impacts the
router speed. Jasmine’s scheduler was named JSLIP.1
The Development of Jasmine’s JSLIP Scheduler
Prior to the development of JSLIP, Dr. Nicholas McKeown developed a scheduler
called ISLIP, which was patented by the Regents of the University of California as
McKeown developed the code as a Ph.D. student at the University of California,
Berkeley. Also prior to the development of JSLIP, McKeown developed a scheduler
called ESLIP while working at Cisco, another technology company, which Cisco then
1
The record contains various iterations of the term “JSLIP.” Some parts of the
record indicate that the code is spelled J-Slip, and others indicate that it is JSLIP. For
clarity, we will hereafter refer to the code as JSLIP.
2
patented.2 Cisco obtained a license from the Regents of the University of California for
ISLIP, because though the company owned a patent on ESLIP, using ESLIP would
invoke ISLIP technology. McKeown is now a professor at Stanford University.
Jasmine engineer Patrick Murphy and a friend, Doug Chang, a graduate student at
Stanford University, discussed methods to obtain the ESLIP and ISLIP codes when
Murphy was developing JSLIP. After some time, Chang and Murphy decided that
Murphy could download the code off of a Stanford University computer, so Murphy
visited the Stanford campus one weekend, accessed a computer, and downloaded the
ISLIP code. Murphy may have also received some sort of information about McKeown’s
other scheduler, ESLIP.3
McKeown’s testimony at trial confirmed that there were documents about ISLIP
that were freely available on the Internet, including code. However, as McKeown
described, the free availability of the code on the Internet was “different from giving
someone permission to use it.” McKeown further elaborated that “[i]t’s well-known to
any professional engineer that you would need to go and get a license for any patented
material before you would use it.”
Jasmine’s JSLIP code essentially incorporated ESLIP and ISLIP, which was
altered by Jasmine engineers to omit any reference to McKeown’s programs. Murphy
testified at trial that he sent e-mails to certain Jasmine developers instructing them to
delete references to ISLIP and ESLIP. In one e-mail, Murphy told another Jasmine
2
Like JSLIP, there are various spellings of ISLIP and ESLIP in the record. For
clarity, we will hereafter refer to the code as ISLIP and ESLIP.
3
During trial, Murphy testified that he only downloaded ISLIP code, which is
publicly available on the Internet. Nevertheless, Murphy sent an e-mail to Jasmine
executives after his trip to Stanford, in which he stated that he had made changes to
ESLIP. When asked about if he also took ESLIP code during the Stanford trip, Murphy
answered that he only had ISLIP, which was licensable, and that he never possessed the
ESLIP code. Murphy stated that ESLIP was not available on the Stanford server, and
that he did not know why he wrote the e-mail referencing ESLIP.
3
employee to go through the code and change the module names from what McKeown
used in his original codes to something else. Murphy wrote, “If we don’t do this it will
be very easy for anyone to see that all we’ve done is copy McKeown’s papers verbatim.
[¶] Sorry for all the recommendations, but this document will be see[n] by [whomever]
we partner with, and we need to make sure it’s different to some degree.”
The Deal Between Jasmine and Marvell
In March 2001, Jasmine approached Marvell about a possible business deal, as
Marvell was interested in acquiring some of Jasmine’s intellectual property and assets,
including its packet switch fabric technology. The parties signed a nondisclosure
agreement on April 12, 2001. The nondisclosure agreement included a clause that
Marvell would not “use any Confidential Information for any purpose except to evaluate
and engage in discussions concerning a potential business relationship between [Jasmine]
and Marvell.” During discussions regarding Jasmine’s packet switch fabric technology,
Marvell questioned Jasmine about the similarity of their technology with ESLIP. In one
exchange, Marvell asked: “How different is your multicast implementation [from
ESLIP]?” Jasmine answered: “We don’t know since [ESLIP] is not very well
documented. Only two paragraphs exist that explain how it’s supposed to work.”
Sometime in May 2001, Marvell’s focus shifted from developing a business
relationship with Jasmine to acquiring the entirety of Jasmine’s application-specific
integrated circuit (ASIC) division including the related intellectual property and the
associated Jasmine employees. The Jasmine technology specifically at interest to
Marvell included the packet switch fabric technology, including JSLIP, as well as a chip
called a SONET (synchronized optical network) framer.4
4
The SONET chip processes data, and was originally designed to process voice
data. Jasmine’s SONET chip was different as it concentrated on taking not only voice
data, but large quantities of data from over the Internet.
4
Marvell made an initial offer to purchase Jasmine for $30 million in cash, with a
$10 million guarantee flowing from Jasmine to Marvell for nonrecurring engineering
charges, and a $10 million earn-out, with an estimated $20 million in stock options
provided to certain Jasmine engineers. A letter was sent to Virginia Wei, senior director
of legal and business affairs at Jasmine, indicating that this initial offer was preliminarily
made without Marvell’s completion of its due diligence and was therefore not binding.
Marvell’s letter further instructed Jasmine not to solicit additional offers from
competitors at that time.
Later, Marvell lowered its bid for Jasmine’s ASIC division to $25 million after the
initial offer, and after Jasmine unsuccessfully attempted to market itself to other
companies for a competing bid.
The Voicemail
Jasmine and Marvell proceeded with negotiations regarding Marvell’s acquisition.
Marvell replaced Manuel Alba, originally in charge of the business deal, with Kaushik
Banerjee, head of Marvell’s own ASIC division, on August 15, 2001. Alba sent Banerjee
a series of e-mails that detailed the ongoing business discussions, including due diligence
issues between Jasmine and Marvell. The e-mails contained the signed nondisclosure
agreement between Jasmine and Marvell. Nonetheless, Banerjee did not see the e-mail
with the signed nondisclosure agreement, and became concerned that the two companies
may have inadvertently shared trade secrets and other confidential information without
some sort of arrangement.
Banerjee met with several other Marvell employees, including Eric Janofsky,
Marvell’s patent counsel, and Matthew Gloss, Janofsky’s supervisor and Marvell’s
general counsel. All three Marvell employees, Gloss, Janofsky, and Banerjee, gathered
together and Gloss called Jasmine executive Virginia Wei. Gloss left Wei a voicemail in
which he raised certain issues about Marvell and Jasmine’s business negotiations.
However, Gloss did not end the call correctly when he finished leaving the voicemail
5
intended for Wei, and without his knowledge the voicemail system continued to record a
conversation between himself, Janofsky, and Banerjee that was presumably intended to
be private.
In the voicemail, the three Marvell employees discussed possible repercussions,
including civil and criminal penalties, if they incorporated some of Jasmine’s trade
secrets into their technology. No specifics of any trade secrets were discussed in the
voicemail, and the voicemail did not give a clear indication of what trade secrets the
Marvell employees were discussing as part of their hypothetical situation.
The relevant part of the voicemail is as follows:
“[Gloss]: Yeah, but you know the problem is so if they’re dumping it into Tigo
now, that’s a problem.[5]
“[Janofsky]: Well, no it . . . .
“[Banerjee]: But we don’t know that for a fact.
“[Janofsky]: One, at least it’s not a criminal problem. I, you know . . . .
“[Banerjee]: Well, we don’t know that for a fact though, but we . . . .
“[Janofsky]: No, if they gave it to us it is not a criminal problem.
“[Gloss]: Yeah, but what did we induce, what did we solicit, what did we
promise, what did we say . . . .
“[Janofsky]: I don’t think--it doesn’t look--Sehat doesn’t go to jail, obviously.
“[Gloss]: Sehat doesn’t go to jail. Manuel might go to jail; Manuel gets a black
eye.[6]
“[Janofsky]: I don’t . . . .
5
“Tigo” references a group of products that were being produced by Marvell
Israel.
6
It is inferred from the voicemail that “Manuel” refers to Manuel Alba, the
Marvell executive originally working on the business deal to acquire Jasmine. It is also
inferred that “Sehat” refers to Sehat Sutardja, CEO and cofounder of Marvell.
6
“[Gloss]: Sure. Marvell VP out there promising big option grants in proposed
pending acquisitions if technology is transferred in advance to speed development time so
time to market goal can be reached. That’s what’s going on.
“[Janofsky]: I don’t see it going to a criminal level. I see it going to a severe
civil, civil layer, but not . . . .
“[Gloss]: But still hits, would still hit the financial.
“[Banerjee]: But it would be okay if we pay them and we close the deal, right?
“[Janofsky]: Once the deal closes, it’s fine, but if they realize what they’re doing
they could hold out for more. Use it as leverage, use it as blackmail.
“[Banerjee]: Right, but we don’t want to talk about it.
“[Janofsky]: No, we don’t want to talk about it . . . . But my concern twenty
minutes ago was keeping Sehat out of jail.
“[Gloss]: Right.
“[Janofsky]: That was my concern.
“[Gloss]: Ok.
“[Janofsky]: You’ve alleviated that concern. I have other concerns, but Sehat in
jail would not be a very nice thing.
“[Banerjee]: But Sehat is going to jail because he got a . . . ?
“[Gloss]: CEO . . . Command responsibility.
“[Janofsky]: CEO. If we took that IP on the pretense of just evaluating it, and put
it in our product . . . .
“[Banerjee]: But we don’t know that part.
“[Janofsky]: But they gave it to us, you know. We don’t know. But it sounded . .
..
“[Banerjee]: You are making a deduction that it’s gone into Tigo.
7
“[Janofsky]: No, no. I am just saying if it did, from what Matt was telling me . . .
we got it. You . . . . As I said, you made this story a little clearer and I don’t think it rises
to the criminal level.
“[Banerjee]: Yeah I mean, all I, if you look at it you begin to say hey look it was
part of technical due diligence. [¶] . . . [¶]
“[Gloss]: But, you know, I’m going to sit down with Mr. Alba and talk to him
about it because it was very poorly handled; there was no coordination with us, and it was
this total cowboy effort, and it has the potential to absolutely spin into something more
nefarious.”
After some time, another individual called Gloss on his phone, terminating the
voicemail recording.
The Aftermath of the Voicemail
Unsurprisingly, after Wei listened to the voicemail she grew alarmed about its
contents and about Marvell’s possible misuse of Jasmine’s intellectual property. On
August 22, 2001, Jasmine sent a letter to George Hervey, chief financial officer of
Marvell. The letter disclosed to Marvell that Jasmine had discovered, through statements
made by Marvell personnel, that Marvell had misappropriated Jasmine’s trade secrets by
incorporating Jasmine’s proprietary intellectual property into Marvell’s products.
Jasmine stated that despite Marvell’s conduct, it still wished to proceed with business
negotiations and that it would like to avoid litigation. Jasmine then proposed that
Marvell pay Jasmine $20 million in cash, net of any fees, in exchange for a release from
Jasmine for claims of trade secret misappropriation, breach of contract, and any other
civil claims arising from Marvell’s alleged misconduct. Jasmine proposed that “[t]he
transaction will be structured as an ‘as is’ asset acquisition directly from Jasmine.”7 The
7
Jasmine’s proposed price was $5 million higher in cash than Marvell’s previous
offer, which had only included $15 million in cash.
8
letter additionally specified that the offer would expire several days later, at 3:00 p.m. on
August 24.
Marvell responded to Jasmine’s accusations on August 24, 2001. In a letter,
Marvell denied Jasmine’s accusation of misappropriation by Marvell employees.
Unequivocally, the letter asserted that “[Marvell has] not and will not incorporate any of
Jasmine’s proprietary information into any of Marvell’s products without an appropriate
agreement between our two companies permitting such activity.” Marvell further denied
violating the signed nondisclosure agreement, and offered Jasmine “immediate and
reasonable access” to Marvell’s facilities and employees to corroborate its assertion.
Marvell rejected Jasmine’s offer, and urged Jasmine to initiate contact before August 27,
2001, if it still wished to continue discussions over the acquisition of Jasmine’s ASIC
division. Marvell further assured Jasmine that if discussions were not initiated, it would
return all of Jasmine’s confidential information in accordance with the nondisclosure
agreement.
Jasmine contacted Marvell on August 28, 2001, seeking to proceed with the deal
on the “old economic terms.” However, due to declining market conditions, Marvell
concluded that it could no longer proceed with the acquisition of Jasmine’s ASIC group,
and ceased discussions. Marvell sent a letter to Jasmine dated August 31, 2001, and
attached a “Certificate of Destruction and Return of Confidential Information.” Marvell
certified that it had, through due inquiry and diligence, returned all the confidential
information it held from Jasmine within its possession as listed on a schedule attached to
the certificate. Marvell asserted that the items listed on the schedule were all of the
confidential information received from Jasmine pursuant to the nondisclosure agreement,
and that it had destroyed and deleted all of the tangible confidential information from
Marvell’s manual files and nonelectronic storage, which was not otherwise returned to
Jasmine with the letter. The certificate further asserted that Marvell had destroyed all
intangible and electronic files containing the confidential information received pursuant
9
to the nondisclosure agreement. Despite the representations in the certificate, Marvell
attorney Janofsky retained some of the confidential information with the company’s legal
team.
Jasmine’s Bankruptcy
In 2001, Jasmine discovered that several of its ASIC group employees were
allegedly conspiring to leave the company and to start their own business called
“CoolComm.” In a typed business strategy, Jasmine employees, including Murphy,
indicated that they would create this company as an exclusive consulting business for
Marvell, developing ASIC chips. Based on the business plan, Marvell would pay the
employees’ salaries and indemnify them against lawsuits brought by Jasmine.
CoolComm never became a viable company of its own, and Jasmine employees never
followed through with the business strategy. It was unclear whether or not Marvell
executives possessed knowledge of this business plan, as fellow Jasmine engineer
Richard Sowell testified at trial that though Murphy presented him with the typed
business plan, Sowell rejected the idea and told Murphy not to pursue it any further.
Sowell stated on the record that to his knowledge, Murphy did not follow through with
pursuing the business plan.
In mid September of 2001, Jasmine terminated the members of its ASIC group.
Jasmine declared bankruptcy in 2002, and thereafter sold its remaining assets, including
its technology and intellectual property, to Teradiant Networks for $300,000.
PROCEDURAL BACKGROUND
The Complaint and Cross-complaint
On September 12, 2001, Jasmine filed a complaint against Marvell and several of
its former employees in its ASIC division, including JSLIP designer Patrick Murphy.
The complaint alleged that Jasmine had discovered a “conspiracy between many of its
trusted employees and Marvell Semiconductor, Inc.” to steal one of Jasmine’s trade
secrets and to undermine the multi-million dollar sale deal. The complaint cited to the
10
inadvertent voicemail left by Gloss, Janofsky, and Banerjee as evidence of Marvell’s
alleged wrongdoing. Jasmine sought relief under 11 causes of action including
misappropriation of trade secrets in violation of the Uniform Trade Secrets Act (UTSA),
Civil Code sections 3426 through 3426.11, against all defendants, breach of fiduciary
duty against Jasmine employees Richard Sowell and Murphy, breach of contract against
all defendants, and breach of the implied covenant of good faith and fair dealing against
all defendants.
On December 28, 2001, Marvell filed an application for a preliminary injunction,
seeking to enjoin Jasmine from disclosing the contents of the recorded voicemail.
Marvell characterized the voicemail as containing privileged attorney-client
communications between Marvell and its attorneys. Marvell also requested that the trial
court seal the privileged communications, and strike all portions of the first amended
complaint referring to the privileged communications. The trial court granted the
preliminary injunction the same day, and also granted Marvell’s motion to strike.8
Jasmine filed a second amended complaint on January 11, 2002. Marvell answered on
February 15, 2002, with a general denial. The answer also raised numerous affirmative
defenses, including the defense of unclean hands.9
8
Jasmine appealed the trial court’s order granting the preliminary injunction
barring Jasmine from using the contents of the voicemail in its complaint. On appeal,
this court reversed the trial court’s injunction, finding that any attorney-client
communication between Marvell and its attorneys were waived, and that regardless,
Jasmine had sufficiently shown a prima facie case of fraud that fit within the crime-fraud
exception of the attorney-client privilege. (Jasmine Networks, Inc. v. Marvell
Semiconductor, Inc. (2004) H023991, previously published at 117 Cal.App.4th 794.)
The opinion in this case was depublished after the California Supreme Court granted
review on July 21, 2004. (Ibid.) The Supreme Court later dismissed review. (Jasmine
Networks, Inc. v. Marvell Semiconductor, Inc. (2008) S124914.)
9
“The [unclean hands] doctrine demands that a plaintiff act fairly in the matter for
which he seeks a remedy. He must come into court with clean hands, and keep them
clean, or he will be denied relief, regardless of the merits of his claim.” (Kendall-Jackson
(continued)
11
In addition to its answer, Marvell filed a cross-complaint. The cross-complaint
stated causes of action for fraud, fraudulent concealment, breach of contract, breach of
the implied covenant of good faith and fair dealing. With respect to the cause of action
for fraud, Marvell alleged that Jasmine employees, including Murphy, falsely and
fraudulently represented to Marvell that Jasmine had developed a propriety program
called JSLIP. Marvell asserted that Jasmine did not develop JSLIP independently, and
that in fact Jasmine misappropriated the JSLIP program by taking information from
McKeown’s patented ESLIP and ISLIP programs. Marvell further alleged that Jasmine
breached its contract to Marvell by failing to abide by the terms of the nondisclosure
agreement, as Jasmine refused to return Marvell’s confidential information including
some of Marvell’s intellectual property. Jasmine denied all of the allegations in the
cross-complaint.
Prior to the commencement of the jury trial, Marvell sought to dismiss Jasmine’s
complaint on the basis that Jasmine forfeited its standing to pursue its claims of trade
secret misappropriation when it sold all rights to its trade secrets and all of its other
intellectual properties when it declared bankruptcy. (Jasmine Networks, Inc. v. Superior
Court (2009) 180 Cal.App.4th 980, 986.) The trial court granted Marvell’s dismissal of
Jasmine’s complaint, and Jasmine appealed. (Ibid.) This court issued a writ of mandate
directing the trial court to reverse its dismissal and to reinstate Jasmine’s causes of action
after finding that there was no “current ownership” rule when it came to trade secrets.
(Id. at pp. 986, 1010-1011.)
Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 978.) Marvell raised the
doctrine of unclean hands as an affirmative defense in its answer to Jasmine’s complaint.
Toward the end of the jury trial, Marvell requested the instruction be given to the jury,
but the trial court denied the motion and exercised its discretion not to have this equitable
defense submitted to the jury. Accordingly, no verdict was given as to whether or not
Jasmine had “unclean hands.”
12
Marvell’s Dismissal of Cross-complaint and Jasmine’s Motion in Limine
Marvell dismissed its cross-complaint for fraud and fraudulent concealment with
prejudice on September 22, 2010. On September 27, 2010, Jasmine filed a motion in
limine to exclude evidence of Jasmine’s alleged wrongdoing in its development of JSLIP.
Jasmine argued that under the doctrine of res judicata, once Marvell dismissed its cross-
complaint with prejudice, it was barred from litigating any of the claims it made in its
cross-complaint in the current action. This included any arguments and evidence Marvell
sought to introduce as part of its affirmative defenses. In its motion, Jasmine relied upon
Torrey Pines Bank v. Superior Court (1989) 216 Cal.App.3d 813 (Torrey Pines Bank)
and our court’s decision in Walsh v. West Valley Mission Community College Dist.
(1998) 66 Cal.App.4th 1532 (Walsh), for the proposition that the dismissal with prejudice
terminated all offensive claims and affirmative defenses against Jasmine that Marvell
advanced in its cross-complaint. Marvell opposed the motion and argued that Jasmine’s
alleged fraud specifically negated several essential elements of Jasmine’s claims,
including that Jasmine owned the trade secret, that the trade secret had economic value,
and that Jasmine suffered damages as a result of Marvell’s alleged misappropriation.
Therefore, Marvell argued that any evidence of fraud and fraudulent concealment
supported its general denial, not its affirmative defenses.
The trial court agreed with Marvell, stating that “I think it is [Jasmine’s] burden to
show that the plaintiff owned a trade secret; two, that the trade secrets have independent
economic value; that the theft or compromise of the trade secrets caused the plaintiff
economic damages. [¶] All of this evidence about [JSLIP], [ESLIP], you know, who
created it, who owns it[,] I think is relevant to show ownership, value, damages, and so I
understand plaintiff’s arguments, but I think this is a traverse, and I think it goes to the
general denial.” The trial court thereafter distinguished the case from Torrey Pines Bank,
and denied Jasmine’s motion in limine.
13
The Trial and Verdict
Trial lasted approximately five weeks, from September 30, 2010, to November 9,
2010, when the jury began its deliberations. At trial, Jasmine argued that Marvell
wrongfully misappropriated Jasmine’s trade secrets, harming Jasmine in the process.
According to Jasmine’s trial brief, one of the main trade secrets at issue that Marvell
allegedly misappropriated was its RTL code. “RTL” stands for “register transfer
language,” which is a general description for “any computer coding utilized to test the
functionality of computer hardware,” such as Jasmine’s ASIC chips. Jasmine argued that
its creation of the verified RTL code represented a real advance in the science of
computer networking, and was something that possessed tremendous value. Jasmine did
not list JSLIP as one of its trade secrets, but did admit that without JSLIP some of its
technology, including its packet switch fabric, would not function.
Notably, Jasmine’s trial brief never argued that the voicemail left for Wei
amounted to “use” of its trade secrets under the UTSA, but simply that the voicemail was
evidence of improper acquisition, and further suggested improper use of Jasmine’s trade
secrets. A Jasmine expert testified at trial that the damages incurred by Jasmine was in
the amount of approximately $25 million. Jasmine also argued that Marvell violated the
terms of the parties’ nondisclosure agreement when its employees failed to completely
destroy all traces of Jasmine’s confidential information. Several Marvell employees
testified that Marvell retained copies of certain documents provided by Jasmine with
Marvell’s legal department in anticipation of a possible litigation.
Marvell rejected these arguments at trial, and asserted that deteriorating market
conditions, not Marvell’s alleged misappropriation of trade secrets, was the cause of
Jasmine’s eventual bankruptcy and downfall. Further, Marvell maintained that the
voicemail at issue was not harmful to Jasmine, as it simply involved several Marvell
employees discussing hypothetical situations regarding use of Jasmine’s trade secrets.
Additionally, Marvell presented evidence that Jasmine could not have suffered any harm
14
because it did not develop the JSLIP scheduler itself, since the company fraudulently and
deceptively used McKeown’s ESLIP and ISLIP programs as the backbone of its own
JSLIP scheduler.
The trial concluded on November 9, 2010, and the jury returned a verdict after
approximately two weeks of deliberation. With regards to Jasmine’s first cause of action
for misappropriation of its trade secrets, the jury found that Jasmine did own certain
architectural design specifications used to implement its ASIC chip set, and that these
were trade secrets. The jury, however, found that Marvell did not improperly acquire or
use the trade secret.
With regards to Jasmine’s second cause of action for breach of contract, the jury
found that Jasmine did not comply with all of the significant aspects of the nondisclosure
agreement, and that Jasmine was not excused from having to comply with the
nondisclosure agreement. The jury similarly found, on Jasmine’s claim of breach of
implied covenant of good faith and fair dealing, that Jasmine failed to comply with all the
significant aspects of the nondisclosure agreement. The jury did not reach the issue of
whether Marvell failed to comply with all the significant portions of the nondisclosure
agreement for any of these two claims.
As for Jasmine’s claim of intentional interference with a contractual relationship,
the jury found that there was a contractual relationship between Jasmine and its ASIC
employees, that Marvell knew of this contractual relationship, but that it did not intend to
disrupt the performance of the contract. The trial court entered a judgment for Marvell
pursuant to the jury’s verdict on January 7, 2011.
The Posttrial Motions
Jasmine filed a motion for a partial JNOV on January 20, 2011, pursuant to Code
of Civil Procedure section 629. Jasmine argued that if a jury’s verdict is incorrect as a
matter of law, the trial court must enter a JNOV in favor of the aggrieved party.
(Oakland Raiders v. Oakland-Alameda County Coliseum, Inc. (2006) 144 Cal.App.4th
151175, 1194.) In part, Jasmine argued that the voicemail left by Gloss, Banerjee, and
Janofsky itself “constituted a misuse of Jasmine’s Misappropriated Trade Secrets.”
Jasmine also argued that because Marvell dismissed its cross-complaint with prejudice,
evidence of Jasmine’s alleged fraud should never have been admitted, and accordingly
substantial evidence did not support some of the jury’s special verdict findings.
Jasmine filed a concurrent motion for a new trial on January 20, 2011. The
motion for new trial asserted that Jasmine was entitled to a new trial because the jury’s
special verdict answers were inconsistent, that the trial court committed reversible error
by denying Jasmine’s earlier motion in limine to exclude evidence about the allegedly
fraudulent development of its JSLIP scheduler, and that Marvell’s repeated allegations
that Jasmine engaged in fraudulent activity deprived Jasmine of a fair trial.
Marvell opposed both of these posttrial motions. In its opposition to the motion
for a JNOV, Marvell argued that Jasmine was raising, for the first time in the motion for
JNOV, that Marvell’s voicemail in itself “used” Jasmine’s trade secrets.
On March 3, 2011, the trial court denied both of Jasmine’s motions. On March
14, 2011, Jasmine filed a timely notice of appeal over the judgment entered on January 7,
2011 and the trial court’s order denying its motion for JNOV on March 3, 2011.
DISCUSSION
Jasmine pursues two main arguments on appeal. First, Jasmine argues that it is
entitled to a partial JNOV because the voicemail left by Marvell employees by itself
constituted a misappropriation of its trade secrets. Second, Jasmine contends that the
judgment must be reversed because the trial court erred in failing to give Marvell’s
dismissal with prejudice of its cross-complaint the preclusive effect that was required,
which therefore allowed Marvell to erroneously introduce evidence of the allegedly
fraudulent development of Jasmine’s JSLIP scheduler, resulting in prejudicial error
against Jasmine.
16
For reasons that we will explain below, we find that neither of Jasmine’s
arguments have merit. We address both of Jasmine’s principle contentions in turn.
1. JNOV
First, Jasmine argues the trial court erred in denying its motion for a JNOV on the
basis that the voicemail left for Jasmine executive Wei constituted a misappropriation of
trade secrets. In short, Jasmine’s first argument hinges on this court’s determination of
whether or not the voicemail constituted “misappropriation” or “use” of Jasmine’s trade
secrets in violation of the UTSA. According to Jasmine, any unauthorized use of trade
secrets is a misappropriation, including transmittal of the voicemail, and accordingly the
jury’s findings that there was no misappropriation cannot be reconciled with the law.
However, we find that Jasmine waived this novel argument on appeal, as this contention
is premised on a new theory of misappropriation that was not presented to the jury or the
trial court below, and was raised for the first time in posttrial motions. Furthermore, even
if we were to entertain Jasmine’s arguments on the merits, we find that simply referring
to a trade secret in a conversation, without discussing any specifics of the trade secret or
employing the trade secret in some manner, is not a “misappropriation” or “use” of the
trade secret under the UTSA.
Standard of Review
On appeal, we review the trial court’s denial of a motion for a JNOV and examine
if substantial evidence supports the original verdict. (Sweatman v. Department of
Veterans Affairs (2001) 25 Cal.4th 62, 68.) A motion for a JNOV can only be granted by
a court if, after reviewing the evidence in the light most favorable to the prevailing party,
there is no substantial evidence to support the verdict. (Ibid.)
Overview of the UTSA
Before we turn to the merits of Jasmine’s claim, we first briefly overview the
UTSA, which sets forth guidelines on what constitutes misappropriation or improper use
of a trade secret. The UTSA is located in the Civil Code, sections 3426 through 3426.11,
17
and allows plaintiffs to recover damages for improper use or misappropriation of trade
secrets that they own. (Civ. Code, § 3426.3.) Civil Code section 3426.1 provides a
definition of a trade secret, and specifies that a trade secret is “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 other persons who can obtain economic value from its disclosure
or use; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.” (Id. § 3426.1, subd. (d).)
“A trade secret is misappropriated if a person (1) acquires a trade secret knowing
or having reason to know that the trade secret has been acquired by ‘improper means,’ (2)
discloses or uses a trade secret the person has acquired by ‘improper means’ or in
violation of a nondisclosure obligation, (3) discloses or uses a trade secret the person
knew or should have known was derived from another who had acquired it by improper
means or who had a nondisclosure obligation or (4) discloses or uses a trade secret after
learning that it is a trade secret but before a material change of position. (Civ. Code, §
3426.1, subd. (b).)” (Ajaxo Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4th 21, 66
(Ajaxo).)
In sum, under the UTSA, in order to sufficiently state a cause of action of trade
secret misappropriation, the plaintiff must demonstrate three essential elements (1) it
owned a trade secret of economic value, (2) that the defendant in question somehow
acquired, used, or disclosed the plaintiff’s trade secret through improper means as
described above, and (3) there was resulting harm. (CytoDyn of New Mexico, Inc. v.
Amerimmune Pharmaceuticals, Inc. (2008) 160 Cal.App.4th 288, 297.)
The UTSA does not define “use,” but rather “leaves their delineation to be
adjudicated in light of the purposes and other provisions of the act.” (Silvaco Data
Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 222 (Silvaco), disapproved of on
another ground in Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337.) “As it
18
appears in the act, the noun ‘use’ is surely intended in the ordinary sense, i.e., ‘[t]he act of
employing a thing for any (esp. a profitable) purpose; the fact, state, or condition of being
so employed; utilization or employment for or with some aim or purpose, application or
conversion to some (esp. good or useful) end.’ (19 Oxford English Dict. [(2d ed. 1989)]
p. 350, italics added.)” (Silvaco, supra, at p. 223.) Accordingly, a trade secret is “used”
when it is exploited for an advantage, such as if a company takes a written computer code
and incorporates it into its own program or product. (Id. at p. 224.)
Forfeiture of Claim
Preliminarily, Marvell contends that Jasmine forfeited its argument that the
voicemail constituted “use” of a trade secret because it did not raise this specific
argument below before the trial court. The theory Jasmine presented to the jury was that
the voicemail suggested that misappropriation took place, not that the voicemail itself
was misappropriation, and that Marvell breached the nondisclosure agreement when it
failed to destroy all documents related to Jasmine’s trade secrets since it retained copies
of some information with its attorneys. It is Jasmine’s position that because this new
argument rests “solely on the irrefutable fact that Marvell left the voicemail” (italics
added), it therefore presents as a question of law based on undisputed facts that this court
should consider despite the failure to raise the argument below. However, Marvell
contends that this new theory is actually premised on three disputed facts: that Marvell
knew the trade secrets, that the voicemail was likely to result in injury, and that the
voicemail discussion violated the nondisclosure agreement between the two companies.
On appeal, a litigant “may not change his or her position” and “assert a new
theory.” (Brown v. Boren (1999) 74 Cal.App.4th 1303, 1316.) The reason behind this
rationale is that doing so would be unfair to both the trial court and the opposing party, as
the opposing party would have no opportunity to present contrary arguments below to the
trial court and jury. (Ibid.) However, as the reviewing court, we retain the discretion to
consider new theories on appeal if the theory is a matter of law that simply requires
19
application to undisputed facts.10 (Ibid.) We agree with Marvell’s argument that
Jasmine’s new theory of misappropriation is based on disputed facts that were not
resolved by the jury.
From the face of Jasmine’s arguments, it appears that it is their contention that the
voicemail itself constituted “use” of Jasmine’s trade secrets. Jasmine argues that since
the existence of the voicemail is an undisputed fact, whether or not the voicemail’s
existence therefore constitutes “use” is a question of law applied to undisputed facts.
Jasmine further contends that Marvell need not have possessed actual knowledge of the
trade secrets for it to “use” Jasmine’s trade secrets, and so it is of no relevance if
Marvell’s possession of the trade secrets was a disputed fact. Jasmine argues that what
matters is that the voicemail “clearly presumed that Marvell had Jasmine’s secrets.” In
Jasmine’s own words, whether or not the participants in the voicemail actually knew of
the trade secrets in question has no direct bearing on the issue at hand.
However, any “use” of a trade secret does not necessarily amount to
misappropriation. A person only misappropriates a trade secret if the disclosure or use
was improper, such as if the use violates a nondisclosure agreement. (Ajaxo, supra, 135
Cal.App.4th at p. 66.) To that end, Jasmine contends that Marvell’s use of the trade
secrets was improper because it violated the terms of the companies’ nondisclosure
agreement, which specifies that Marvell will not “use any Confidential Information for
any purpose except to evaluate and engage in discussions concerning a potential business
relationship between [Jasmine] and Marvell.” Accordingly, Jasmine infers that the
contents of the voicemail indisputedly violated the terms of the nondisclosure agreement,
10
Jasmine did raise this issue in its posttrial motion to the court for a JNOV and a
motion for a new trial, but similarly, new theories may not be presented before the trial
court for the first time on posttrial motions unless it is also a theory based on a question
of law premised on undisputed facts. (Stevens v. Owens-Corning Fiberglas Corp. (1996)
49 Cal.App.4th 1645, 1653-1654.)
20
as Marvell did not use the trade secrets for the purpose of discussing a potential business
relationship with Jasmine. Marvell argues that whether or not the voicemail constituted a
violation of the nondisclosure agreement is actually a disputed factual issue that they
were not able to present below. We agree.
Here, Jasmine and Marvell argued before the jury about whether or not Marvell
violated the nondisclosure agreement when it failed to destroy all scintilla of confidential
information provided by Jasmine. Marvell employees testified at trial that it retained
some of the confidential information and turned it over to Marvell attorneys. Jasmine’s
theory before the jury was that Marvell’s failure to destroy all documents constituted a
violation of the nondisclosure agreement. However, the jury never reached a verdict on
whether or not Marvell violated the nondisclosure agreement, as it found that Jasmine
failed to fully comply with the nondisclosure agreement itself.11 Jasmine never asserted
that Marvell’s voicemail discussion regarding the trade secret itself constituted a
violation of the nondisclosure agreement, and in fact has raised this theory, like its theory
that the voicemail “used” trade secrets under the UTSA, for the first time on appeal. It is
a disputed fact which Jasmine’s theory relies upon.12
11
The jury’s special verdict form contained a series of questions divided into
different sections that tracked Jasmine’s claims against Marvell. Section II, titled “As to
Jasmine’s cause of action for breach of contract against Marvell,” asked: “8. Did
Jasmine do all, or substantially all, of the significant things that the contract, known as
the NDA, required it to do?” The jury put a checkmark next to “no.” The next question
read, “9. Was Jasmine excused from having to do all, or substantially all, of the
significant things that the NDA required it to do?” The jury put a checkmark next to
“no,” and was therefore instructed via the jury form to proceed to section III, skipping
over the question of whether or not Marvell partook in any activity that may be a
violation of the nondisclosure agreement.
12
Marvell also argued that whether or not it actually possessed Jasmine’s trade
secret was also a disputed fact. However, we determined that whether or not the
voicemail violated the nondisclosure agreement signed by Jasmine and Marvell is a
disputed fact. Accordingly, it is not necessary for us to address whether or not Marvell’s
(continued)
21
We therefore find that Jasmine’s new theory of misappropriation relies on
disputed facts, and is therefore not properly raised for the first time on appeal.
Additionally, even if we were to consider this argument on the merits, we find that
Jasmine’s argument that the voicemail itself constituted an inappropriate “use” of its
trade secrets fails on the merits.
Discussing a Trade Secret Is Not “Use” in this Context
As discussed ante, the UTSA does not explicitly define “use,” though case law has
interpreted “use” as the incorporation or dissemination of trade secrets for a defendant’s
own advantage, such as taking the trade secret and applying it to the defendant’s own
products or services for the defendant’s own advantage. (Silvaco, supra, 184
Cal.App.4th at pp. 222-224.) Jasmine argues that “use” under the UTSA should actually
be even more broadly defined, such that Marvell’s voicemail discussion of Jasmine’s
technology would constitute a “use.” We decline to apply such a broad definition.
In part, Jasmine relies on Syngenta Crop Protection, Inc. v. Helliker (2006) 138
Cal.App.4th 1135 (Syngenta), and argues that the holding in Syngenta is applicable in
showing that a passive use of a trade secret still violates the UTSA. However, Jasmine’s
reliance on Syngenta is misleading, as Syngenta is distinguishable on several grounds.
Syngenta was a company that invented metalaxyl, which was used as a pesticide product.
(Id. at pp. 1146-1147.) Syngenta registered the product with the United States
Environmental Protection Agency (EPA) and the state Department of Pesticide
Regulation (Department). (Ibid.) With its registration, Syngenta also submitted studies
and other information on the chemistry, health effects, and environmental impact of the
substance as required under law. (Ibid.) Syngenta stopped manufacturing metalaxyl and
informed the Department that it would not authorize the consideration of any of the data
possession of the trade secrets was also a disputed fact that was not properly raised in
front of the jury.
22
it previously submitted to support a product registration by another applicant. (Ibid.)
Gustafson, another company, also manufactured pesticide products that contained
metalaxyl and applied for registration with the Department. (Ibid.) In its registration
materials, Gustafson did not refer the Department to any of the previously-submitted
Syngenta studies, nor did it reference any of the previously submitted research. (Ibid.) In
a similar situation, Dow, another pesticide company, also invented a substance which it
submitted for registration with the Department, along with accompanying reports and
studies. (Id. at p. 1147.)
Syngenta sued Gustafson and the Department, and Dow sued the Department, in
part alleging that the Department misappropriated trade secrets when it considered past
data submitted by Syngenta and Dow in support of the new product registrations.
(Syngenta, supra, 138 Cal.App.4th at pp. 1148-1150.) All parties eventually moved for
summary judgment, and the trial court sustained summary judgment for Syngenta on one
cause of action, but sustained summary judgment for the Department and Gustafson on
the remaining causes of action including the cause of action for violation of the UTSA,
finding that the Department’s “ ‘passive consideration’ ” of the previously submitted data
did not constitute “use.” (Id. at p. 1150.) The appellate court held that this finding by the
trial court was in error, as the Department “used” data when it considered any of
Syngenta and Dow’s previously submitted information. (Id. at p. 1172.) Once the
Department considers the previously submitted data, it relieves the current applicant--
such as Gustafson--of the need to spend money to produce data results thereby
benefitting the new applicant. (Ibid.)
Jasmine is correct in asserting that the term “use” under the UTSA has been
broadly defined, as illustrated by the court’s interpretation in Syngenta. “Use” may
certainly encompass many applications of a trade secret, including passive consideration
of data. Furthermore, “[e]mploying the confidential information in manufacturing,
production, research or development, marketing goods that embody the trade secret, or
23
soliciting customers through the use of trade secret information, all constitute use.”
(PMC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368, 1383.) Federal courts have also
determined that “internal experimentation with trade secret information not resulting in a
market product can constitute use.” (02 Micro Intern. Ltd. v. Monolithic Power Systems
(N.D.Cal. 2005) 399 F.Supp.2d 1064, 1072.)
Nonetheless, Jasmine’s current theory is dissimilar to the passive consideration of
trade secrets employed by the Department in Syngenta. A passive consideration in
violation of the UTSA would, under Syngenta, be properly illustrated as “using” the data
by considering it without proper permission, thereby relieving a second company of the
responsibility of providing the same data, to the second company’s economic benefit.
(Syngenta, supra, 138 Cal.App.4th at p. 1172.) Here, Jasmine’s theory is not that
Marvell passively considered Jasmine’s trade secrets when it developed its own
technology. Rather, Jasmine argues that passive consideration or use of a trade secret
occurs when someone merely references a trade secret in a conversation.
Jasmine’s definition of “use” cannot stand under the UTSA. We cannot find law
directly on point that specifically discusses or analyzes the situation we have before us.
In short, there is no specific law that has developed that clearly holds that an internal
discussion of whether or not one company’s use of another company’s trade secret would
constitute a “use” of a trade secret in of itself. However, in considering the case we have
before us on the merits, we cannot read the UTSA in such a way that such conversations
alone would constitute a misappropriation. Here, Janofsky and Gloss engaged in a
conversation with their client, Banerjee, a Marvell employee, about a hypothetical
situation about the potential legal implications of using Jasmine’s trade secrets. No
specifics of Jasmine’s trade secrets were discussed in the voicemail, only that Jasmine
possessed trade secrets which Marvell may have misappropriated. The voicemail itself,
as Jasmine argued below to the jury, tends to suggest that Marvell may have
misappropriated and used Jasmine’s trade secrets in violation of the UTSA. The
24
voicemail itself is not a “use,” nor can it be. A discussion, in generic terms, of a
company possessing a trade secret, and a hypothetical discussion of the possible
ramifications against a company’s executives if a trade secret is somehow
misappropriated, is not “use” as contemplated by the UTSA.
An illustration of such a limitation can be found in the recently decided federal
district case, Brocade Communications Systems Inc. v. A10 Networks, Inc. (N.D. Cal.
Feb. 12, 2013) __ F.Supp. __ [2013 WL 557102; 2013 U.S. Dist. LEXIS 18870]
(Brocade). In Brocade, the federal district court contemplated the legality of an
injunction imposed against A10 prohibiting the company from further misappropriating
Brocade’s trade secrets after a jury found A10 liable for misappropriation. (Id. at p. *1.)
A10 moved to modify portions of the injunction, which the trial court granted in part.
(Ibid.) As it stood, the injunction as drafted would have prohibited A10’s attorneys from
utilizing the trade secrets during the course of the litigation before the trial court and
throughout the pendency of a future appeal. (Id. at p. *9.) A10 argued that this portion
of the injunction should be modified so that its attorneys would be allowed to have access
to the trade secrets during the course of the litigation, which Brocade conceded. (Ibid.)
However, A10 further argued that its attorneys should have ongoing access to Brocade’s
trade secrets while A10 modified its technology to design and remove the
misappropriated trade secrets. (Ibid.) Brocade disagreed, arguing that any advice given
to A10 by attorneys with knowledge of Brocade’s trade secrets would be using the trade
secrets in violation of the UTSA. (Ibid.) The district court agreed with A10, finding that
“use” under the UTSA did not extend to include an attorney advising its clients on how to
avoid practicing the trade secrets. (Ibid.)
While we are not bound by the decision of the district court, we find its reasoning
persuasive. In this instance, the voicemail left by Marvell indicated that Marvell
attorneys were speculating as to the potential penalties to be imposed if the company was
found to have misappropriated Jasmine’s trade secrets. Like the attorneys’ contemplated
25
actions in Brocade (advising its clients on how to avoid using a trade secret), Marvell’s
attorneys were advising and discussing the potential ramifications against Marvell
executives if it did use the trade secret. Extending the UTSA to prohibit an attorney,
even an attorney with knowledge of the trade secret, from contemplating the potential
legal consequences for misappropriating a trade secret, would frustrate an attorney’s
ability to serve and advise his or her clients.
The UTSA does not protect the amorphous concept of a “trade secret.” Most
technology companies possess some sort of intellectual property or trade secret not
commonly known to the public, which is the backbone of the company’s profitability and
economic viability. Therefore, the fact that Jasmine possessed some sort of trade secret is
an assumption that can be readily made. It follows that a generic conversation about the
potential misuse of some sort of trade secret, without going into specifics of the trade
secret, does not expose the listener to any confidential information, and more importantly
does not “use” the information as contemplated by the UTSA. In short, the UTSA does
not prevent misappropriation by prohibiting one company from discussing, in general
terms, the fact that another company has a trade secret. The UTSA protects a company’s
specific trade secret from misuse. In the factual situation presented before us, we find
Jasmine’s theory that the voicemail itself constituted a misappropriation of its trade
secrets flawed.
Further, Jasmine’s argument that the voicemail’s contents soured the relationship
between the two parties, thereby costing Jasmine the economic benefit of a possible
acquisition by Marvell, is similarly flawed. Certainly, the misunderstanding that
occurred as a result of the voicemail likely imparted a negative impact on the burgeoning
business relationship between the two companies. However, as Jasmine aptly
characterized the voicemail in its trial brief, the voicemail by itself only provided
evidence, or an inference, that some of Jasmine’s trade secrets may have been
misappropriated. It is possible that the voicemail caused economic harm because it
26
created panic and distrust between the two companies, but this harm was not incurred as a
result of a misappropriation of trade secrets.
As a result, we find that Jasmine’s argument that the voicemail itself constituted a
misappropriation of its trade secrets would fail on the merits, even if Jasmine had not
forfeited the argument on appeal for failing to raise it below. We therefore find no error
with the trial court’s denial of Jasmine’s motion for a JNOV.
2. Marvell’s Dismissal of its Cross-complaint and Retraxit
Jasmine’s second main argument on appeal is that Marvell’s dismissal of its cross-
complaint with prejudice should have precluded the admission of any related evidence or
claims previously raised in the dismissed cross-complaint. Jasmine argues that the trial
court incorrectly denied its motion in limine to exclude all such evidence, and
accordingly the jury trial was improperly tainted with erroneous evidence. Preliminarily,
Marvell argues that Jasmine is precluded from raising this objection on appeal because it
forfeited it below by failing to make specific objections to any of the evidence of
Jasmine’s wrongdoing presented to the trial court and to the jury. We find merit to
Marvell’s argument regarding forfeiture, and further find that even if we consider
Jasmine’s contentions on the merits, they would fail.
A. Standard of Review
Jasmine’s argument that the dismissal of the cross-complaint constituted a retraxit
and therefore acted as a bar against inclusion of any fraud-related evidence is based upon
undisputed facts. Accordingly, we review Jasmine’s argument de novo. (See Alpha
Mechanical, Heating & Air Conditioning, Inc. v. Travelers Casualty & Surety Co. of
America (2005) 133 Cal.App.4th 1319, 1326 (Alpha).)
B. Failure to Make Specific Objections to the Evidence
As previously described, Jasmine made a pretrial motion in limine to exclude all
evidence of wrongdoing stemming from Marvell’s dismissed cross-complaint.
Thisincluded evidence of Jasmine’s allegedly fraudulent development of JSLIP. No
27
specific evidence, such as a particular testimony or exhibit, was referenced in Jasmine’s
motion in limine. In support of its pretrial motion, Jasmine argued that retraxit barred
admission of the evidence, which is the same argument it makes now on appeal.13
Marvell preliminarily contends that this argument is forfeited because Jasmine failed to
make specific objections to the evidence introduced below. We agree.
Evidence Code section 353 states that a judgment or decision shall not be reversed
due to an erroneous admission of evidence unless there is a clear record of a timely
objection or a motion to exclude or to strike the evidence, and if the reviewing court
determines that it was error to admit the evidence and the error resulted in a miscarriage
of justice. A motion in limine to exclude evidence can satisfy the requirements of
Evidence Code section 353 if “(1) a specific legal ground for exclusion is advanced and
subsequently raised on appeal; (2) the motion is directed to a particular, identifiable body
of evidence; and (3) the motion is made at a time before or during trial when the trial
judge can determine the evidentiary question in its appropriate context. When such a
motion is made and denied, the issue is preserved for appeal. On the other hand, if a
motion in limine does not satisfy each of these requirements, a proper objection satisfying
Evidence Code section 353 must be made to preserve the evidentiary issue for appeal.”
(People v. Morris (1991) 53 Cal.3d 152, 190 (Morris), disapproved of on another ground
by People v. Stansbury (1995) 9 Cal.4th 824, 830.) Ordinarily, a ruling on a motion in
limine is not binding on a trial court, as it may reconsider its ruling when the
objectionable evidence is offered. (People v. Karis (1988) 46 Cal.3d 612, 634, fn. 16.) A
13
Jasmine’s opening brief on appeal and its posttrial motion before the trial court
discussed at length how Marvell’s dismissal of its cross-complaint with prejudice
amounted to a retraxit, which therefore invoked the doctrine of res judicata, barring
relitigation of any of the claims previously contained in the cross-complaint. A “retraxit”
is what is now more commonly known as a dismissal with prejudice. (Torrey Pines
Bank, supra, 216 Cal.App.3d at p. 820.)
28
failure to object to the challenged evidence at the time it is offered normally constitutes a
waiver unless it satisfies the requirements described by Morris.
The requirement at issue here is whether or not Jasmine’s motion in limine was
specific enough to preserve its objections on appeal, despite the lack of reference to any
specific testimony or exhibit. As Morris described, under Evidence Code section 353,
those contesting the admissibility of evidence must make an objection to a specific body
of evidence, such as a particular testimony or exhibit. For example, in Karlsson v. Ford
Motor Co. (2006) 140 Cal.App.4th 1202 (Karlsson), the Second District determined that
Ford’s unsuccessful motion in limine to prevent admission of evidence of its alleged
discovery abuses did not properly preserve the objection for appellate review. (Id. at pp.
1227-1228.) In Karlsson, Ford filed its motion in limine seeking to exclude evidence of
its discovery abuses prior to any sanctions being filed, and prior to the filing of the
discovery report that led to sanctions. For obvious reasons, Ford’s motion in limine
failed to reference specific passages or identify any particular comments to be excluded,
as Ford had no knowledge of what kind of evidence would be produced at the time the
motion was filed. (Ibid.) Accordingly, the court of appeal deemed Ford’s objections
waived, as the motion in limine was not sufficient under Evidence Code section 353.
(Ibid.)
Similarly, in People v. Cowan (2010) 50 Cal.4th 401 (Cowan), the California
Supreme Court considered a case where a criminal defendant made a pretrial blanket
motion to bar “ ‘any and all’ postmortem photographs” of the victims in the case. (Id. at
p. 476.) The defendant sought to exclude the evidence under Evidence Code section 352,
which is subject to the same requirements of a specific objection to maintain
appealability under Evidence Code section 353.14 In Cowan, the trial court overruled the
14
Evidence Code section 352 allows a court to exercise its discretion to exclude
any evidence if the probative value of the evidence is substantially outweighed by the
(continued)
29
defendant’s preliminary motion to exclude all photographs of the victims on the basis of
relevance, as the trial had not yet begun and therefore the court could not determine if all
photographs would be irrelevant. (Cowan, supra, at p. 476.) However, in its ruling the
court left open the possibility that upon a later objection, it would reconsider its ruling
and exclude certain photographs from admission. (Ibid.) Later, the photographs were
admitted, and defendant failed to object. (Ibid.) The Supreme Court thereafter
determined that defendant forfeited his contentions on appeal because of his failure to
object to the photographs when they were admitted. (Ibid.)
These cases illustrate that a blanket motion in limine seeking to exclude all types
of evidence, including a motion in limine to exclude all evidence in a specific category,
such as evidence of alleged discovery violations, or all postmortem photographs of
victims, is not specific enough to satisfy Evidence Code section 353. (Morris, supra, 53
Cal.3d at p. 190.) The motions made by the parties in Karlsson and Cowan identified a
category of evidence to be excluded, but failed to identify a particular and identifiable
body of evidence. We find the decision in Karlsson persuasive, and further find that the
situation contemplated by the court in Karlsson similar to the one presented here.
Jasmine, in its motion in limine before the trial court, did not specify exactly what
evidence it sought to exclude, and only in broad strokes informed the court of its desire to
exclude any evidence of its alleged fraud or wrongdoing in the development of JSLIP.
Again, no particular, identifiable body of evidence was described in the motion in limine.
Undoubtedly, since the motion was filed before commencement of the actual jury
trial began, Jasmine might not have known what kind of evidence would be presented at
trial, and under what context Marvell would seek to introduce evidence. Nonetheless,
probability that its admission would produce undue prejudice or mislead the jury, or if the
probative value is substantially outweighed by the probability that admission of the
evidence would be unduly time consuming.
30
that is why motions in limine do not always preserve an objection to the admission of
evidence on appeal. In order to preserve this objection on appeal, Jasmine would have
had to voice its objection to the specific evidence it sought to exclude during trial, which
it failed to do.
Jasmine argues that it did not forfeit its retraxit-related arguments here on appeal
because after the trial court denied its motion in limine it was futile for it to pursue
objections at trial. It is true that a party need not object when doing so would be futile.
(See People v. Arias (1996) 13 Cal.4th 92, 159; People v. Sandoval (2001) 87
Cal.App.4th 1425, 1433, fn. 1.) In this case, we do not find it unequivocal that an
objection at trial would have been futile. A trial court may reconsider its ruling on a
motion in limine during the course of the trial. (People v. Karis, supra, 46 Cal.3d at p.
634, fn. 16.) Though the court made it clear that it believed that evidence of fraud and
fraudulent concealment in the development of JSLIP was admissible on the basis that
such evidence supported Marvell’s general denial and not its affirmative defenses, it did
not make a ruling on each a specific body of evidence presented in a particular context at
trial.
In part, Jasmine relies on our decision in Burch v. Gombos (2000) 82 Cal.App.4th
352 (Burch), for its argument that an objection would have been futile and thus no
objection was necessary to preserve the argument on appeal. Burch is not wholly
applicable to the present case. In Burch, the appellant contended the trial court erred in
permitting the respondents from introducing evidence of a disputed roadway’s public use
because respondents had previously responded to a request for evidence regarding the
same issue by admitting they had no evidence of a public use. (Id. at p. 355.) Prior to the
commencement of the trial, appellants filed a motion in limine with the trial court arguing
for exclusion of all evidence of recreational use of the disputed roadway prior to 1972.
(Id. at p. 357.) During trial, a witness testified to recreational use of the roadway prior to
1972, though appellant failed to object. (Ibid.) Another witness testified to another
31
recreational use of the roadway, and appellant raised an objection and asked that her
motion in limine be addressed. (Ibid.) The trial court denied the motion in limine.
(Ibid.) At that point, this court surmised that “[w]hile [appellant] did not specifically
object to any of this testimony, her motion in limine had already been denied and it
obviously would have been futile to do so.” (Ibid.)
Jasmine claims that this case stands for the proposition that if a motion in limine is
denied, a party to an action need not raise futile evidentiary objections in order to
preserve appellate review. In the interest of judicial economy, it seems a fair rule that if
raising an objection after a failed motion in limine is futile, further objections need not be
raised before the trial court. Nonetheless, as Cowan and Karlsson illustrate, a denial of a
motion in limine does not necessarily render a future objection futile. In certain
circumstances, as discussed in Burch, a denial of a motion in limine definitively indicates
that all future objections will be futile. However, this is not always the case. In a similar
argument to Jasmine’s present contention in Karlsson, Ford argued that it was excused
from making any objections before the trial court because the trial court made it clear that
the opposing party could discuss Ford’s concealment of evidence, and because the
comments made by the trial court denying Ford’s posttrial motions for a new trial and
JNOV indicated that the court would have overruled any objections. (Karlsson, supra,
140 Cal.App.4th at p. 1229.) The appellate court determined that the statements Ford
cited did not render the company excused from making timely objections. (Ibid.)
Like the appellate court’s determination in Karlsson, we find that Jasmine was not
excused from making an objection on the basis that doing so would have been futile.
Furthermore, we find that factually, Burch is dissimilar. First, the Burch appellant did in
fact object to some of the specific pieces of contested evidence. Second, the Burch trial
court denied the motion in limine unequivocally to allow admission of all disputed
evidence. In contrast, here, Jasmine did not specifically point out what type of evidence
it sought to exclude, be it testimony or exhibits. Jasmine’s trial counsel even stated
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before the trial court’s ruling on its motion in limine that it would reserve its objections
for specific pieces of evidence for the actual trial itself. In arguing for the trial court’s
grant of its motion in limine, Jasmine’s trial counsel remarked that “[w]e are asking you
to rule that they can’t introduce evidence to prove that we’re frauds or, you know, are
guilty of unclean hands. Now, we’re not asking--we’ll save our objections as the
evidence is proffered, but the reason I filed this today was I was concerned about
[Marvell’s] opening statement.” (Italics added.) Marvell asserts, and Jasmine does not
dispute, that Jasmine never raised a specific objection to any of the theft/fraud evidence it
sought to exclude under its motion in limine.
The trial court also did not make it unequivocally clear that raising a future
objection to the evidence would be futile, only that it would deny the motion in limine
insomuch as it believed such evidence was coming in to support Marvell’s general denial.
An objection at the time the evidence was presented might have allowed the trial court to
more accurately assess, given the context, whether or not the evidence was coming in to
support a general denial or whether or not it was coming in to support an affirmative
defense. Even now on appeal, Jasmine does not specifically identify each piece of
evidence it now claims was erroneously admitted. Jasmine provides, in its brief, an
overview of certain pieces of evidence it believes was erroneously admitted, but in no
way does Jasmine provide an exhaustive list of all evidence it claims should have been
barred.
However, even if Jasmine did not forfeit this contention by failing to object below,
we determine that the trial court correctly found that evidence of Jasmine’s alleged fraud
was admissible as part of Marvell’s general denial.
C. Overview of Res Judicata and Effect of Voluntary Dismissal with Prejudice
Res judicata gives “ ‘conclusive effect to a former judgment in a subsequent
litigation involving the same controversy.’ ” (Boeken v. Philip Morris USA, Inc. (2010)
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48 Cal.4th 788, 797 (Boeken).) The doctrine of res judicata encompasses two different
forms.
First, there is claim preclusion. Claim preclusion bars a second suit between the
same parties on the same cause of action. (Boeken, supra, 48 Cal.4th at p. 797.) Second,
there is issue preclusion, or collateral estoppel. Collateral estoppel occurs when a prior
judgment in a different action acts as a bar against a second suit, and applies when certain
requirements are met: “(1) the issue to be precluded must be identical to that decided in
the prior proceeding; (2) the issue must have been actually litigated at that time; (3) the
issue must have been necessarily decided; (4) the decision in the prior proceeding must
be final and on the merits; and (5) the party against whom preclusion is sought must be in
privity with the party to the former proceeding.” (People v. Garcia (2006) 39 Cal.4th
1070, 1077.)
As our Supreme Court in Boeken stated, “for purposes of applying the doctrine of
res judicata . . . a dismissal with prejudice is the equivalent of a final judgment on the
merits, barring the entire cause of action.” (Boeken, supra, 48 Cal.4th at p. 793.) “The
statutory term ‘with prejudice’ clearly means the plaintiff’s right of action is terminated
and may not be revived. . . . [A] dismissal with prejudice . . . bars any future action on
the same subject matter.” (Roybal v. University Ford (1989) 207 Cal.App.3d 1080, 1086-
1087.) “A retraxit arising from a dismissal with prejudice thus operates as a legal fiction,
and it is given the same finality as if the matter were adjudicated and proceeded to a final
judgment on the merits.” (Alpha, supra, 133 Cal.App.4th at p. 1331.)
D. Jasmine’s Retraxit Argument
On appeal, Jasmine argues that it was error for the trial court to allow Marvell to
introduce, admit, or make reference to any evidence of Jasmine’s alleged wrongdoing or
fraudulent conduct during the development of JSLIP. Jasmine argues that since Marvell
dismissed its cross-complaint for fraud with prejudice, it should have been barred from
relitigating or bringing forth claims that were already brought in the cross-complaint. We
34
disagree with this view, and find that the trial court’s denial of Jasmine’s motion in
limine was not in error.
In some instances, dismissal of a complaint with prejudice will bar a party from
raising the same arguments again in a separate case under the doctrine of res judicata, or
collateral estoppel. Here, Jasmine argues that the Fourth District’s decision in Torrey
Pines Bank, supra, 216 Cal.App.3d 813, is applicable as evidence of Jasmine’s
wrongdoing was improperly admitted in support for Marvell’s affirmative defenses. In
Torrey Pines Bank, the Fourth Appellate District determined that dismissing a case with
prejudice effectively bars a party from asserting the same factual claims in the dismissed
case in an affirmative defense. In Torrey Pines Bank, a guarantor dismissed with
prejudice a guarantor’s case against a bank for several claims, including breach of
fiduciary duty and misrepresentation. (Id. at p. 817.) The bank had earlier filed a
complaint against the guarantor in a separate action, seeking enforcement of the
guarantor’s continuing guaranty to the bank for a loan. (Ibid.) After the guarantor
dismissed his action, the bank moved for summary judgment against the guarantor,
arguing that the guarantor’s dismissal of his action with prejudice barred him from
bringing the same claims as affirmative defenses in response to the bank’s complaint.
(Id. at p. 818.) The trial court granted summary judgment on some of the bank’s issues,
but declined to grant summary judgment on other issues, finding that the retraxit doctrine
did not bar the plaintiff’s affirmative defenses. (Ibid.) The bank petitioned for a writ of
mandate, which the Fourth Appellate District granted after finding that the guarantor’s
affirmative defenses were barred by the principles of res judicata. (Id. at pp. 819-820.)
In its reasoning, the appellate court noted that res judicata not only bars a renewed
claim over a litigated, and resolved, issue, but also bars “ ‘subsequent litigation of all
issues which were or could have been raised in the original suit.’ ” (Torrey Pines Bank,
supra, 216 Cal.App.3d at p. 821.) Accordingly, a final judgment on the merits on a
35
particular issue, such as a voluntary dismissal with prejudice, would be conclusive
between same parties. (Ibid.)
However, this court has made an important distinction that the holding in Torrey
Pines Bank is confined only to those cases where a party is asserting affirmative defenses
based upon factual claims barred by the doctrine of retraxit. In Walsh, supra, 66
Cal.App.4th 1532, we expressly stated that the Torrey Pines Bank decision held that “a
party who dismisses his or her lawsuit with prejudice may not assert affirmative defenses
in the nature of new matter where those affirmative defenses concern the same nucleus of
operative facts as were alleged in the dismissed action.” (Id. at p. 1545.)
Walsh involved a suit between Sergio Construction, Inc. (SCI) and West Valley
Mission Community College District (District). (Walsh, supra, 66 Cal.App.4th at p.
1534.) SCI contracted with the District to build a gymnasium on its college campus, a
contract that was later terminated when SCI failed to complete the construction project
within a year. (Id. at p. 1535.) SCI sued the District for breach of contract, and the
District filed a cross-complaint against SCI. (Id. at p. 1536.) The cross-complaint was
settled by SCI’s insurer and its bonding company, and the District dismissed its cross-
complaint with prejudice. (Id. at pp. 1536-1537.) SCI then moved for judgment on the
pleadings, arguing that since the District dismissed its cross-complaint with prejudice, its
dismissal acted as a retraxit which would therefore render it impossible for the District to
contest SCI’s claims. (Id. at pp. 1537, 1541.) The trial court denied the motion, and the
case proceeded to trial with a jury returning verdict for the District, granting it attorney
fees of approximately $600,000. (Ibid.) SCI appealed, and we affirmed the judgment.
(Id. at p. 1548.)
In order for SCI to prevail on its claim of breach of contract, it would have needed
to plead and prove several elements: a contract existed, SCI performed on the contract or
was excused from performance, the District breached the contract, and SCI incurred
damages. (Walsh, supra, 66 Cal.App.4th at p. 1545.) The District filed a general denial
36
to SCI’s complaint, which meant it denied, in one sentence, all allegations in the
complaint. (Ibid.) SCI’s argument, that the District should have been barred from
presenting evidence of SCI’s breach because it dismissed its cross-complaint with
prejudice, was therefore flawed. As we surmised in Walsh, this evidence went directly
towards disproving one or more of the essential elements of SCI’s complaint. (Id. at p.
1546.) In Walsh, we considered and distinguished Torrey Pines Bank. We found that the
guarantor in Torrey Pines Bank “did not deny the allegations in the bank’s complaint.
Rather, he attempted to establish a defense independent of those allegations by asserting
affirmative defenses, which brought ‘new matter’ into the lawsuit.” (Id. at p. 1547.) In
contrast, the District did not attempt to bring “new matter” into the lawsuit, but rather
presented evidence to refute the allegations brought by SCI in its complaint. (Ibid.)
Jasmine argues that we should reconsider our decision in Walsh, as our Supreme
Court’s more recent decision in Boeken, supra, 48 Cal.4th 788, holds that a voluntary
dismissal with prejudice bars any future action on the same issue. (Id. at p. 793.)
However, Jasmine misapplies the holding in Boeken. In Boeken, a wife filed suit against
cigarette manufacturer Philip Morris for loss of consortium. In a separate case, her
husband, a longtime smoker, filed suit against Philip Morris for wrongfully causing his
cancer. (Id. at p. 792.) The wife dismissed her suit for loss of consortium with prejudice
several months after filing the action, and the record remained silent on her reasons for
dismissal. (Id. at p. 793.) A year after dismissing her loss of consortium suit, and after
her husband died from cancer, the wife brought a cause of action for wrongful death
against Philip Morris. (Ibid.) Amongst her claims was a claim that she suffered from
loss of love, companionship, and comfort. (Ibid.) Philip Morris demurred to the
wrongful death cause of action, arguing that the wife’s dismissal with prejudice invoked
the doctrine of res judicata, barring her new cause of action. (Ibid.) The trial court
sustained the demurrer, and the Court of Appeal affirmed. (Ibid.)
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The California Supreme Court affirmed the Court of Appeal’s decision. (Boeken,
supra, 48 Cal.4th at p. 805.) In coming to its conclusion, the court first outlined the two
different forms of res judicata, claim preclusion and issue preclusion. (Id. at p. 797.) The
Boeken court recognized that in their particular situation they were concerned with claim
preclusion and whether or not the wife’s dismissal of her first suit for loss of consortium
acted as a bar against her second suit for wrongful death. (Ibid.) The court noted that
when it came to issues of res judicata, the phrase “cause of action” has a “more precise
meaning: The cause of action is the right to obtain redress for a harm suffered, regardless
of the specific remedy sought or the legal theory (common law or statutory) advanced.”
(Id. at p. 798.) Accordingly, a cause of action is based on the harm suffered by the
plaintiff. In the wife’s case, the Supreme Court determined the primary right involved in
both the loss of consortium suit and the wrongful death suit, insomuch as it sought
damages for loss of companionship, was the same: the right not to be permanently and
wrongfully deprived of her husband’s companionship and affection. (Id. at pp. 797, 804.)
Accordingly, the Supreme Court determined that the wife’s second suit for wrongful
death was precluded based on her dismissal with prejudice of her loss of consortium
claim, despite the fact that it was based on a completely different legal theory. (Id. at p.
804.)
The Boeken court explicitly considered the issue based upon claim preclusion, not
issue preclusion. Here, we are concerned with issue preclusion. Marvell did not attempt
to relitigate its fraud and misrepresentation claims by filing a new suit or cross-claim
against Jasmine. Jasmine conflates and confuses the two forms of res judicata in arguing
that Boeken is applicable. We are not considering whether or not a second claim can be
brought when a first claim has already been adjudicated conclusively. Here, we are
considering whether an issue, previously brought in a cross-complaint but dismissed with
prejudice, may be raised as part of a party’s general denial in a separate litigation. This
38
distinguishes this case from Boeken, and renders Jasmine’s argument on appeal similar to
the parties’ contentions found in Torrey Pines Bank and Walsh.
Accordingly, despite the fact that in this case some of the issues were previously
raised by Marvell in its dismissed cross-complaint, the doctrine of res judicata does not
necessarily bar Marvell from introducing evidence of Jasmine’s alleged wrongdoing. If
Marvell attempted to relitigate this issue by filing a new complaint against Jasmine
alleging fraud, the claims would be barred under claim preclusion. Res judicata would
also bar relitigation of this same claim if Marvell attempted to bring this action as an
affirmative defense. (Torrey Pines, supra, 216 Cal.App.3d at p. 821.) However, under
our decision in Walsh, supra, 66 Cal.App.4th at page 1545, if this evidence was brought
to support Marvell’s general denial, it is not “new matter” and is thus properly
introduced.
The issue is thus whether or not the evidence of Jasmine’s fraud and wrongdoing
was correctly characterized by the trial court as part of Marvell’s general denial, or if it
was, as Jasmine asserts, improperly introduced as part of Marvell’s affirmative defense.
We find that it was properly introduced as part of Marvell’s general denial.
The difference between an affirmative defense and a general denial, as explained
by this court in Walsh, is that “ ‘[u]nder Code of Civil Procedure section 431.30,
subdivision (b)(2), the answer to a complaint must include “[a] statement of any new
matter constituting a defense.” The phrase “new matter” refers to something relied on by
a defendant which is not put in issue by the plaintiff. [Citation.] Thus, where matters are
not responsive to essential allegations of the complaint, they must be raised in the answer
as “new matter.” [Citation.] Where, however, the answer sets forth facts showing some
essential allegation of the complaint is not true, such facts are not “new matter,” but only
a traverse.’ ” (Walsh, supra, 66 Cal.App.4th at p. 1546.)
It is true that Marvell, in its answer to Jasmine’s complaint, asserted an affirmative
defense of unclean hands, though the instructions for this defense were never given to the
39
jury. However, as the trial court noted in its denial of Jasmine’s motion in limine,
evidence of Jasmine’s wrongdoing supported Marvell’s general denial. As we discussed
earlier, a proper cause of action for trade secret misappropriation under the UTSA must
allege that the plaintiff company owned a trade secret, the defendant somehow
misappropriated and used the trade secret through improper means, and there was a
resulting harm to the plaintiff. (CytoDyn of New Mexico, Inc. v. Amerimmune
Pharmaceuticals, Inc., supra, 160 Cal.App.4th at p. 297.) The evidence Marvell
introduced at trial concerning Jasmine’s alleged wrongdoing and fraud in the
development of JSLIP goes toward disproving that Jasmine possessed a trade secret of
value, and that there was resulting harm to Jasmine as a result of the misappropriation. It
follows that if Jasmine did not actually properly own the rights to JSLIP such that it was
required to obtain a license to use the scheduler from Cisco, it would be difficult for
Jasmine to prove that its trade secrets that relied upon the JSLIP scheduler had value, and
that accordingly misappropriation of those trade secrets caused Jasmine harm.
Jasmine argues that this argument in part fails because it specifically excluded
JSLIP as one of its listed trade secrets. However, during the trial Marvell sought to prove
that many of Jasmine’s trade secrets would not function without JSLIP, including the
RTL code which it claimed was its most important trade secret.15 As Marvell described
before the court, proving that Jasmine did not own a trade secret that was of value would
be part of its general denial against Jasmine’s claim of misappropriation.
In light of the circumstances of this particular case, we therefore agree with the
trial court’s assessment that evidence of Jasmine’s alleged fraud and wrongdoing was a
vital part of Marvell’s general denial, not its affirmative defense. This evidence is
15
The RTL code is comprised of individually numbered software, starting from
No. 1 through No. 69. Numbers 2 through 39 of the software files referenced JSLIP.
Jasmine’s trial counsel described the RTL code as being one of the company’s most
valuable trade secrets in Jasmine’s trial brief.
40
inextricably linked to whether or not Jasmine actually owned trade secrets that had
monetary value, and whether or not Jasmine was therefore economically harmed by the
purported misappropriation.
We therefore find no merit to Jasmine’s argument that the jury’s verdict should be
reversed, as the trial court did not err in denying the motion in limine to exclude evidence
of Jasmine’s alleged fraud.
DISPOSITION
The judgment is affirmed. Marvell is entitled to its costs on appeal. (Cal. Rules of
Court, rule 8.278(a).)
Premo, Acting P.J.
WE CONCUR:
Elia, J.
Márquez, J.
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