United States: California Federal Court Finds CUTSA Preemption On Unfair Competition Claim In Uber Row

Uber's ongoing battle with Waymo in the Northern District of California federal court over technology used in self-driving cars provided another significant decision concerning the broad scope of trade secret preemption under California state law.

Waymo accused Levandowski (a former employee) of taking more than 14,000 company files before leaving Waymo and starting his own self-driving truck company (which Uber bought for $680 million). Waymo asserted several claims against Uber for misappropriation of trade secrets under the federal Defend Trade Secrets Act ("DTSA") and the California Uniform Trade Secrets Act ("CUTSA"). In addition to the trade secret claims, Waymo asserted four claims for patent infringement and one claim for violation of section 17200 of California's Business and Professions Code.

Waymo's section 17200 claim, or Unfair Competition Law ("UCL") claim was based on alleged theft of "confidential information," which the court found to be vague and not sufficiently distinct or independent from Waymo's trade secrets claim. Thus, Waymo v. Uber presents us with another California federal court decision in the mix where the court refused to permit a plaintiff to proceed on a UCL claim based on theft of "confidential information."

In the Order granting Uber's Motion to Dismiss the UCL claim, the court noted that "Under California law, CUTSA provides the exclusive civil remedy for conduct falling within its terms and supersedes other civil remedies based upon misappropriation of a trade secret... It therefore supersedes claims—including Section 17200 claims—based on the same nucleus of facts as trade secret misappropriation." Order Granting Motion to Dismiss Unfair Competition Law Claim at 3, Waymo LLC v. Uber Techs., Inc., No. C 17-00939 WHA (N.D. Cal. Jun. 8, 2017) (citations omitted).

While the court ultimately dismissed Waymo's UCL claim, the court was confronted with the "preemptive sweep" of Silvaco Data Sys. v. Intel Corp., 184 Cal.App.4th 210 (2010), disapproved on other grounds by Kwikset Corp. v. Super. Ct., 51 Cal.4th 310 (2011). In Silvaco, the court established that CUTSA not only supersedes claims based on trade secret information, but also supersedes claims based on alleged misappropriation of non-trade secret information, unless some other provision of positive law grants a property right in that information.

Waymo attempted to avoid Silvaco and escape CUTSA supersession by arguing for a definition of "property right" used in another case, but the court observed that Silvaco expressly rejected that argument because it was irrelevant to CUTSA. The court then clarified the scope for exemption of non-trade secret information claims to CUTSA supersession following Silvaco as applying in two circumstances: if the claims "(1) allege facts showing that the plaintiff's property right in the information at issue stems from some provision of positive law on grounds qualitatively different from grounds upon which trade secrets are considered property, or (2) allege wrongdoing materially distinct from the wrongdoing alleged in a CUTSA claim." Order at 5, Waymo LLC v. Uber Techs., Inc., No. C 17-00939 WHA (N.D. Cal. Jun. 8, 2017) (citations omitted).

Following Silvaco was easier for the court here because Waymo's UCL claim did not fall into one of the above circumstances and according to the court, instead was a "transparent attempt to evade the strictures of CUTSA," which is barred by Silvaco. The court also pointed out that "neither the amended complaint nor Waymo's opposition brief attempts to distinguish its trade secrets from non-trade secret 'confidential information'... Rather, the court reasoned that Waymo accused defendants of blanket "misappropriation" of "confidential information," apparently intending to use its Section 17200 claim as a fallback for any information that ultimately fails to qualify for trade secret protection as this litigation progresses. Order at 6, Waymo LLC v. Uber Techs., Inc., No. C 17–00939 WHA (N.D. Cal. Jun. 8, 2017).

For more information about CUTSA preemption, see our post on Seyfarth's California Peculiarities Employment Blog.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.