October 22, 2020

Hooked Media Group Inc. v. Apple Inc. (2020) 55 Cal.App.5th 323

Apple Inc. explored a possible acquisition with a startup company that developed a recommendations app for mobile devices. Apple passed, but then hired three of the startup’s most important employees. The startup brought an action for misappropriation of trade secrets and other claims. The trial court granted Apple’s motion for summary judgment. The Court of Appeal affirmed, demonstrating the wide leeway that many California courts give to companies that hire a competitor’s employees.

The startup argued that circumstantial evidence raised a triable issue of fact as to whether Apple improperly used its trade secrets. There was evidence that the startup’s employees retained its technical information, accessed it while in Apple’s employ, and gave misleading statements about how much they had retained. There was also evidence that the startup’s former employees were assigned to tasks at Apple similar to the work they did at the startup and quickly produced a detailed plan for a recommendations system much like the startup’s version, with similar source code.

The Court of Appeal rejected the startup’s argument, relying largely on California’s policy favoring free mobility for employees. The Court reasoned that the startup’s evidence showed only that the employees had the trade secrets information, not that Apple improperly acquired or used it. The Court further reasoned that, pursuant to California’s longstanding rejection of the “inevitable disclosure” doctrine, evidence that Apple hired engineers with knowledge of the startup’s trade secrets and that the engineers inevitably would have relied on that knowledge in their work for Apple does not support a trade secrets claim. The Court of Appeal also rejected the startup’s other claims.