Atlantic Inertial Systems, Inc. v. Condor Pacific Industries of California, Inc.

FILED
NOT FOR PUBLICATION OCT 30 2013
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
ATLANTIC INERTIAL SYSTEMS, INC., No. 11-56805
Plaintiff - Appellant, D.C. No. 2:08-CV-02947-JHN-
PJW
v.
CONDOR PACIFIC INDUSTRIES OF MEMORANDUM*
CALIFORNIA, INC.; SIDNEY I.
MELTZNER,
Defendants - Appellees.
Appeal from the United States District Court
for the Central District of California
Jacqueline H. Nguyen, District Judge, Presiding
Argued and Submitted July 8, 2013
Pasadena, California
Before: GRABER, RAWLINSON, and WATFORD, Circuit Judges.
Plaintiff Atlantic Inertial Systems, Inc., sued Defendants Condor Pacific
Industries of California, Inc., and Sidney I. Meltzner for trademark infringement
under federal law and for unfair business practices and misappropriation of trade
secrets under California law. The jury returned a special verdict in which it found,
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
as relevant here, that Defendants’ misappropriation of trade secrets did not cause or
was not a substantial factor in causing harm to Plaintiff. Plaintiff timely appeals
the district court’s denial of its post-trial motion for injunctive and monetary relief
on the state-law claims. We affirm in part, reverse in part, and remand.
1. Reviewing de novo, United States v. Bibbins, 637 F.3d 1087, 1090 (9th
Cir. 2011), we reverse the denial of a reasonable royalty on Plaintiff’s claim under
California’s Uniform Trade Secrets Act, Cal. Civ. Code §§ 3426.1–.11 (count 5).
Plaintiff did not waive its request for a reasonable royalty. It sought that
form of relief in the district court and Defendants responded to the request on the
merits. Because the court, not the jury, determines whether to award a reasonable
royalty, Cal. Civ. Code § 3426.3(b), Plaintiff’s tardiness in presenting evidence on
the issue did not prejudice Defendants.
In its sanctions order issued before trial, the district court had ruled that
Defendants were liable on count 5 for misappropriating Plaintiff’s trade secrets.
The sanctions order is not challenged on appeal. Thus, Defendants’ argument that
Plaintiff failed to establish an element of the claim on liability is beside the point.
The district court erred in ruling, at the damages stage, that the jury’s finding
of no harm precluded a reasonable royalty. The statute provides for a reasonable
royalty "[i]f neither damages nor unjust enrichment caused by misappropriation are
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provable." Cal. Civ. Code § 3426.3(b). That requirement may be met by either a
lack of sufficient evidence or an adverse jury finding with respect to those forms of
relief. Ajaxo Inc. v. E*Trade Fin. Corp., 115 Cal. Rptr. 3d 168, 172–73 (Ct. App.
2010). The jury’s finding that Defendants did not proximately cause harm to
Plaintiff is therefore consistent with the availability of a royalty under the statute.1
We remand to the district court to determine whether a royalty award is
warranted and, if so, in what amount. See id. at 183 ("[R]ecovery of a royalty is
not guaranteed even where actual losses and unjust enrichment are not provable.
[The statute] provides only that the court ‘may’ award reasonable royalties in that
situation.").
2. Reviewing de novo, Bibbins, 637 F.3d at 1090, we affirm the district
court’s denial of monetary damages and restitution on Plaintiff’s common law
claim and the statutory unfair competition claim (counts 3 and 6, respectively).
First, both claims are preempted because they rely "on the same facts" as
Plaintiff’s statutory claim for misappropriation of trade secrets. K.C. Multimedia,
1
The California Court of Appeal did not hold otherwise, in Ajaxo, when it
wrote that "if a plaintiff is unsuccessful in proving unjust enrichment before the
jury, the trial court would still have to decide whether the plaintiff suffered any
measurable loss of its own before the reasonable royalty remedy would become
available." 115 Cal. Rptr. 3d at 183. Ajaxo held only that the court must decide
whether the plaintiff suffered a loss before awarding a royalty, not that it must
determine that plaintiff did suffer such a loss. Id.
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Inc. v. Bank of Am. Tech. & Operations, Inc., 90 Cal. Rptr. 3d 247, 263 (Ct. App.
2009). Second, the jury’s verdict precludes both claims. On count 3, the finding
of no proximately caused harm precludes damages. Cal. Civ. Code § 3333;
Mitchell v. Gonzales, 1 Cal. Rptr. 2d 913, 914–15, 917, 920 (1991). The same
finding precludes Plaintiff’s statutory standing as to count 6. See Cal. Bus. & Prof.
Code § 17204 (providing standing to a private party only if the person "has
suffered injury in fact and has lost money or property as a result of the unfair
competition").
3. Reviewing for abuse of discretion, Powell’s Books, Inc. v. Kroger, 622
F.3d 1202, 1208 n.7 (9th Cir. 2010), we affirm the denial of Plaintiff’s request for
a permanent injunction. The district court permissibly determined that the jury’s
verdict weighed against an injunction on the first three eBay factors and that an
injunction against Defendants’ business was not in the public interest. See eBay
Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).
AFFIRMED in part, REVERSED in part, and REMANDED. The
parties shall bear their own costs on appeal.
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