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Ajaxo, Inc. v. E*Trade Financial Corp.

Court of Appeal of California, Sixth Appellate District

April 23, 2020, Opinion Filed

H042999, H043530

Opinion

PREMO, J.—A jury in 2003 found defendant E*Trade Financial Corporation (E*Trade) liable for trade secret misappropriation and for breach of a mutual nondisclosure agreement with plaintiff Ajaxo, Inc. (Ajaxo). The jury awarded damages only on the breach of contract cause of action after the trial court granted a nonsuit on the issue [*3]  of damages for trade secret misappropriation. An appeal before this court led to a remand for a second trial on damages for the misappropriation. The jury in that 2008 trial found no net damages for unjust enrichment and awarded nothing to Ajaxo. The trial court then denied Ajaxo's request to seek a reasonable royalty under the Uniform Trade Secrets Act (Civ. Code, §§ 3426–3426.11; CUTSA).1 A second appeal followed, and this court reversed. We held that the trial court had the discretion to award payment of a reasonable royalty pursuant to section 3426.3, subdivision (b), which states that “[i]f neither damages nor unjust enrichment caused by misappropriation are provable, the court may order payment of a reasonable royalty … .” We remanded the matter for the trial court to exercise its discretion under the statute. The trial court held a bench trial on remand to determine whether Ajaxo was entitled to a reasonable royalty and in what amount, if any. It ultimately declined to award any royalty to Ajaxo. It entered judgment for E*Trade and awarded E*Trade its costs as the prevailing party in the action.

On appeal, Ajaxo challenges the trial court's failure to award it a reasonable royalty for E*Trade's willful and malicious trade [*4]  secret misappropriation. Ajaxo also challenges the denial of its motion for a new trial and the award of costs in favor of E*Trade. Among the issues raised, we decide whether the trial court abused its discretion by declining to award any reasonable royalty despite the available evidence from which a reasonable royalty theoretically might have been derived. We consider the court's findings on the evidence, its application of apportionment principles from patent law, its exclusion of expert testimony and analysis of Ajaxo's royalty model, and its treatment of what are commonly called the “Georgia-Pacific factors” for determining a royalty rate in intellectual property disputes. (See Georgia-Pacific Corp. v. United States Plywood Corp. (S.D.N.Y. 1970) 318 F.Supp. 1116 (Georgia-Pacific).)

We also decide whether the trial court erred in its prevailing party determination and costs award, an issue that requires us to reconcile the meaning of a “prevailing party … in any action or proceeding” (Code Civ. Proc., § 1032, subd. (b)) with the practical effect of Ajaxo having already obtained full satisfaction of what became a separate, final judgment in its favor following the remittitur in 2006 from the first appeal, including costs awarded at that time.

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2020 Cal. App. LEXIS 331 *

AJAXO, INC., Plaintiff and Appellant, v. E*TRADE FINANCIAL CORPORATION, Defendant and Respondent.AJAXO, INC., Plaintiff and Appellant, v. E*TRADE GROUP, INC., Defendant and Respondent.

Prior History:  [*1] Superior Court of Santa Clara County, No. CV793529, Joseph Huber, Judge.

Ajaxo Inc. v. E*Trade Financial Corp., 187 Cal. App. 4th 1295, 115 Cal. Rptr. 3d 168, 2010 Cal. App. LEXIS 1506 (Cal. App. 6th Dist., Aug. 30, 2010)

CORE TERMS

royalty, trade secret, trial court, misappropriation, license, damages, wireless, costs, trading, phase, prevailing party, Wirelessproxy, models, source code, factors, software, developer, contends, disclosure, parties, value-added, customers, unjust enrichment, calculated, cause of action, first trial, hypothetical, negotiations, apportionment, technology

Trade Secrets Law, Remedies, Damages, Royalties, Business & Corporate Compliance, Trade Secrets Law, Federal Versus State Law, Uniform Trade Secrets Act, Governments, Courts, Judicial Precedent, Civil Procedure, Appeals, Standards of Review, Legislation, Interpretation, Appellate Briefs, Standards of Review, Abuse of Discretion, Evidence, Admissibility, Procedural Matters, Rulings on Evidence, Judgments, Preclusion of Judgments, Law of the Case, Discovery & Disclosure, Disclosure, Sanctions, Mandatory Disclosures, Harmless & Invited Errors, Harmless Error Rule, Civil Actions, Evidence, Appellate Jurisdiction, Final Judgment Rule, Relief From Judgments, Motions for New Trials, Prejudicial Errors, Damages, Costs & Attorney Fees, De Novo Review, Costs & Attorney Fees, Costs, Pleading & Practice, Entry of Judgments