Tuesday, June 03, 2008, 6/03/2008 09:09:00 AM

Trade Secrets Statute of Limitations - California

By Todd
If someone steals a trade secret and then sells it to a third party, when does the statute of limitations begin to run on any misappropriation claim the trade secret owner might have against the third party?

The Court of Appeals for the State of California says that the clock starts ticking when the trade secret owner has any reason to suspect that the third party knows or should know that the information they've purchased is a trade secret.

The reason this case was up on appeal is because the trial court felt that the statute of limitations should run from the time the third party had actual notice of the trade secret owner’s claim to the information.

The Court of Appeals reasoned that the actual state of mind of the third party purchaser is not relevant to the running of the clock. "The proper focus, for purposes of the running of the statute of limitations, is not upon the defendant’s actual state of mind but upon the plaintiff’s suspicions. Indeed, a defendant’s bad faith is often something a plaintiff cannot prove directly. In many cases a plaintiff must allege the defendant’s tortious state of mind on information and belief. Certainly that plaintiff should not be expected to wait until he or she has direct proof of the defendant’s mental state before filing the lawsuit. The plaintiff’s subsequent inability to prove the requisite mental state means that the plaintiff cannot prevail on the merits of the claim but it does not retroactively affect the running of the statute of limitations."

Santa Clara County Super. Ct. No. CV019992. The decision was issued May 30th, 2008.

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