Trade Secrets and Other Preemption Doctrines

Readers of this blog know that we frequently discuss the doctrine of preemption under the California Uniform Trade Secrets Information Act.  That is, a claim for trade secret misappropriation will preempt any other common law claims based on the “same nucleus of facts.”  However, a recent decision in Jobscience, Inc. v CVPartners, Inc., N.D. Cal. January 9, 2014, reminds us that the doctrine of preemption may also be used to defeat a trade secret claim.Jobscience developed and licensed a recruiting software application that it claimed had been misappropriated by defendants.  Jobscience sued the defendants for both federal copyright infringement and trade secret misappropriation.  The defendants moved to dismiss the trade secret claim on the ground that it was preempted by the Copyright Infringement Act.

The Court noted that section 301(a) of the Copyright Act provides the exclusive rights and remedies within the general scope of copyright law and that “no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any state.”  A common law or state-based claim will be preempted by the Copyright Act if the content of the protected right falls within the subject matter of the Copyright Act and the rights asserted under state law are equivalent to those protected by Copyright Act.

Thus, a Court will look to see whether a claim for trade secret misappropriation is “based on the same nucleus of facts as the copyright infringement claim.”  The Jobscience court found that the plaintiff’s copyright infringement claim, i.e., which consisted of its software code, was based on the “same nucleus of facts” as plaintiff’s alleged trade secret misappropriation claim.  Essentially, Jobscience accused defendants of both infringing on the copyright protecting its software as well as “misappropriating” the software.  Given this fact, the Court granted the defendants’ motion to dismiss plaintiff’s trade secret misappropriation claim because it was preempted by the Copyright Act.

The Jobscience decision is a reminder to litigants that there are several important defenses, including preemption, in a trade secret case.  Defense counsel are reminded to examine the interplay between various theories of IP liability and whether the statutes they are premised on offer any basis for arguing preemption in a trade secret misappropriation case.