1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7

NORTHERN DISTRICT OF CALIFORNIA

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10 ACORN BAY, 11 Plaintiff, No. C 20-05214 WHA

12 v.

13 CAMELBAK PRODUCTS, LLC, ORDER RE MOTION TO DISMISS 14 Defendant.

15 16 INTRODUCTION 17 This patent and trade secret dispute centers on water bottle bite valves. The accused 18 moves to dismiss the complaint in part. California’s Uniform Trade Secrets Act supersedes the 19 contract and unfair competition claims at issue. The motion is GRANTED IN PART. 20 STATEMENT 21 In 2011, plaintiff and patent owner Acorn Bay LLC developed a better bite valve for re- 22 usable water bottles. Early in 2012, Acorn approached defendant CamelBak Products, LLC, a 23 premier maker of outdoor water bottles and hydration packs, to discuss a licensing deal. The 24 two entered a nondisclosure agreement to limit CamelBak’s use of Acorn’s proprietary 25 information to their licensing talks. Apparently impressed, CamelBak entered an option 26 agreement in April 2012, giving it a period during which it might license Acorn’s designs. 27 After several extensions of the period, and further sharing by Acorn, CamelBak exercised 1 bite-valve designs and work, with Acorn’s continued support, to market a product by January 2 2018 in exchange for a per-item royalty and three non-refundable advances against those 3 royalties. CamelBak appears to have paid the first advance, but abruptly terminated the 4 licensing agreement just before the second came due. Nevertheless, in January 2019, using 5 (allegedly) Acorn’s technology in violation of both the NDA and licensing agreement, 6 CamelBak launched the accused Eddy+ drinking valves with its water bottles. 7 This suit followed. CamelBak moved to dismiss. Amidst briefing, a November 6 case 8 management order directed Acorn to fully disclose its asserted trade secrets before it would be 9 permitted discovery, per California Code of Civil Procedure Section 2019.210 (Dkt. No. 31). 10 Recognizing this disclosure in effect superseded the complaint, at oral argument (held 11 telephonically due to COVID-19) CamelBak withdrew its challenge to the pleading of Acorn’s 12 trade secret misappropriation and breach of NDA claims. This order follows. 13 ANALYSIS 14 Following withdrawal of the challenges to Acorn’s trade secret and breach of NDA 15 claims, the dispute remaining here is whether the California Uniform Trade Secret Act 16 supersedes Acorn’s claims for breach of the implied covenant of good faith and fair dealing 17 and violation of California Business and Professions Code Section 17200. 18 CUTSA provides the exclusive civil remedy for trade secret misappropriation claims in 19 California. It supersedes all claims, including Section 17200 claims, “based on the same 20 nucleus of facts as trade secret misappropriation.” On the pleadings, “the supersession analysis 21 asks whether, stripped of facts supporting trade secret misappropriation, the remaining factual 22 allegations can be reassembled to independently support other causes of action.” Waymo LLC 23 v. Uber Techs., 256 F. Supp. 3d 1059, 1062 (N.D. Cal. 2017) (citing Cal. Civ. Code § 3426.7; 24 Silvaco Data Sys. v. Intel Corp., 184 Cal. App. 4th 210, 236 (2010), disapproved on other 25 grounds by Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 246 P.3d 877 (2011)). 26 Limited exceptions exist. CUTSA does not supersede (1) contract remedies, based in 27 trade secret or not; (2) other civil remedies not based in trade secret misappropriation; or (3) 1 PJH, 2020 WL 513287, at *14 (N.D. Cal. Jan. 31, 2020) (Judge Phyllis J. Hamilton); Cal. Civ. 2 Code § 3426.7(b). But within its sphere, CUTSA sweeps broadly, superseding even “claims 3 based on alleged misappropriation of non-trade secret information” unless “the plaintiff’s 4 property right in the information at issue stems from some provision of positive law on 5 grounds qualitatively different from grounds upon which trade secrets are considered property, 6 or (2) allege wrongdoing materially distinct from the wrongdoing alleged in a CUTSA claim.” 7 Waymo, 256 F. Supp. 3d at 1063. CamelBak contends CUTSA supersedes both claims here. 8 This order agrees. 9 To be sure, Acorn’s implied covenant claim does not on its face implicate CUTSA. The 10 complaint alleges that under the parties’ license agreement, CamelBak should have undertaken 11 a genuine effort to commercialize a product based on the proprietary information shared by 12 Acorn. Instead, CamelBak terminated the agreement six months in and has nonetheless 13 commercialized products using the same technology contemplated by the license agreement. 14 Yet Acorn itself confirms this claim to be a tortious trade secret misappropriation claim 15 in disguise. Arguing its July 2020 suit, based on a July 2015 termination, remains timely in 16 spite of the four-year statute of limitations, Acorn contends that under California’s “discovery 17 rule,” its cause of action only accrued once it learned that CamelBak had (allegedly) 18 commercialized products using Acorn’s trade secrets. In other words, Acorn does not 19 complain of CamelBak’s termination so much as it complains of CamelBak’s continued use of 20 its trade secrets after termination. That is a superseded tortious trade secret misappropriation 21 claim. 22 True, breach of the implied covenant may be viewed in either contract or tort. Viewing 23 this claim in contract might save it from CUTSA supersession, but it would nonetheless fail as 24 superfluous. The allegations, that CamelBak used Acorn’s trade secrets following termination 25 of the license and in breach of the NDA, “do not go beyond the statement of a mere contract 26 breach.” Instead, the allegations “rely[] on the same alleged acts, simply seek the same 27 damages or other relief already claimed in [the] companion contract cause of action, [and] may 1 Security Pacific Business Credit, Inc., 222 Cal. App. 3d 1371, 1395 (1990); Gruenberg v. 2 Aetna Ins. Co., 9 Cal.3d 566, 575, 510 P.2d 1032 (Cal. 1973); Swarmify Inc. v. Cloudflare, No. 3 C 17-06957 WHA, 2018 WL 1609379 at *3 (N.D. Cal. April 3, 2018) . In either case, then, 4 the claim fails. 5 The Section 17200 claim similarly stumbles. The complaint itself admits that the charge 6 remains, at its core, that CamelBak “misappropriate[ed] Acorn Bay’s confidential and 7 proprietary information” and “acquired and used Acorn Bay’s confidential and proprietary 8 trade secret information through material misrepresentation and omissions” (Compl. at ¶¶ 130– 9 132). CUTSA, however, “bars [Section 17200] claims sounding in misappropriation of trade 10 secrets.” Silvaco, 184 Cal. App. 4th at 241. 11 Acorn responds that its Section 17200 claim escapes supersession because rests upon 12 “some other provision of positive law [that] grants a property right in that information” — its 13 breach of contract claim. See, Waymo, 256 F. Supp. 3d at 1063–64. But contract remedies 14 originate at common law and do not provide the “positive law” basis that Acorn needs. To the 15 extent that Acorn’s argument is instead that CUTSA does not bar a Section 17200 claim based 16 on breach of contract, because CUTSA does not supersede contract remedies, this argument 17 also fails. The exception specifies “contractual remedies.” A Section 17200 claim, even 18 premised on breach of contract, offers equitable remedies, not contractual damages. See 19 Nationwide Biweekly Admin., Inc. v. Sup. Ct., 9 Cal. 5th 279, 293, 462 P.3d 461 (2020); Five 20 Star, 2020 WL 513287, at *14; Cal. Civ. Code § 3426.7(b)(1) (emphasis added). Acorn’s 21 Section 17200 claim thus fails. 22 CONCLUSION 23 The motion is GRANTED IN PART AND DENIED IN PART. Acorn’s trade secret 24 misappropriation and breach of contract claims may proceed, CamelBak’s challenge having 25 been withdrawn. But CUTSA supersedes the claims for breach of the implied covenant and 26 for violation of Section 17200. CamelBak did not challenge Acorn’s patent infringement claim 27 here, that claim also proceeds. Should CamelBak contend Acorn’s trade secrets disclosure 1 remains insufficient, it should move promptly to strike, else challenges will be reserved for 2 summary judgment. 3 IT IS SO ORDERED. 4 Dated: December 24, 2020. 5 6

LIAM ALSUP

7 UNITED STATES DISTRICT JUDGE 8 9 10 11 12

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