Cypress Semiconductor Corp. v. Superior Court

In Cypress Semiconductor Corp. v. Superior Court (2008) 163 Cal.App.4th 575, the Court rejected the contention that the accrual of the cause of action for misappropriation depends on the alleged misappropriator's actual intent. There the trade secret holder first sued and settled with a company that had misappropriated its secrets. Then the holder sued customers who had licensed software from the original misappropriator. The trial court concluded that the limitations period did not begin to run until the third party had "actual notice of the trade secret owner's claim to the information." (Id. at p. 579.) The Court disagreed, holding that the statute of limitations for misappropriation begins to run "when the plaintiff has any reason to suspect that the third party knows or reasonably should know that the information is a trade secret. The third party's actual state of mind does not affect the running of the statute." (Ibid.) The proper focus, we explained, "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." (Id. at p. 587.) In Cypress, supra, 163 Cal.App.4th 575, the Court relied on the Supreme Court's discussion in Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807 of "the interplay between accrual and the discovery rule, which delays accrual until the plaintiff discovers or has reason to discover the cause of action." (Id. at p. 586.). "As Fox explained: 'A plaintiff has reason to discover a cause of action when he or she "has reason at least to suspect a factual basis for its elements." Under the discovery rule, suspicion of one or more of the elements of a cause of action, coupled with knowledge of any remaining elements, will generally trigger the statute of limitations period. Norgart v. Upjohn Co. (1999) 21 Cal.4th 383 explained that by discussing the discovery rule in terms of a plaintiff's suspicion of "elements" of a cause of action, it was referring to the "generic" elements of wrongdoing, causation, and harm. (Norgart, supra, 21 Cal.4th at p. 397.) In so using the term "elements," we do not take a hypertechnical approach to the application of the discovery rule. Rather than examining whether the plaintiffs suspect facts supporting each specific legal element of a particular cause of action, we look to whether the plaintiffs have reason to at least suspect that a type of wrongdoing has injured them.'" (Cypress, supra, 163 Cal.App.4th at p. 586.)