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California's Sixth District Court of Appeal, located near FindLaw's Secret Volcano Headquarters, was clearly not pleased last week as it issued an opinion in Cypress Semiconductor Corp v. Maxim Integrated Products.
The case is about misappropriating trade secrets, but that's not really what it's about. As it turns out, Cypress was using the threat of a lawsuit to get Maxim to do what Cypress wanted, and as the Court cogently observed after turning into a giant green monster, "COURT SMASH!"
These Employees Are Much Better Poached
Cypress and Maxim are in the touchscreen business. Cypress alleged that Maxim was trying to recruit some of its employees -- and take some of its proprietary technology in the process. Maxim said it wasn't interested in Cypress' technology. Cypress threatened litigation, then filed an application for a temporary restraining order preventing Maxim from recruiting more Cypress employees and ordering Maxim to return any trade secrets.
After several different motions -- all of which the trial court denied -- Cypress abandoned its complaint. Maxim asked for attorneys fees based on Cypress' bad faith, which the trial court granted.
That's Not a Thing
What made the Sixth District so upset was Cypress' insistence that it didn't sue Maxim in bad faith. The Court of Appeal appeared to disagree: "Cypress filed a complaint that was, as we discuss below, meritless on its face, based upon theories of liability that were not merely specious, but nonsensical. The apparent purpose of the lawsuit was to cow Maxim, and perhaps other competitors, into refraining from conduct in which -- as we discuss below -- they had every right to engage."
The Court of Appeal thought that Cypress abandoned its complaint because it was afraid it would lose when the trial court ruled on the merits. Cypress disagreed, but the court called its disagreements "a kind of carnival fun house in which the facts of the case are distorted into grotesque and nearly unrecognizable shapes."
So just how meritless was the complaint? The court called it "a model of evasive, equivocal, and circumlocutory pleading. Much of the complaint consists of wholly extraneous matter. Many paragraphs read like a press release promoting Cypress's touchscreen technology. Others violate rules of pleading as old as the Field Codes."
In California, it's not unlawful to "poach" employees who aren't under contract, so long as there's no unlawful inducement. Cypress appeared to argue that Maxim was deciding which employees to recruit based on their trade secret knowledge -- except that Cypress didn't support that contention with anything more than speculation, and even if it did, didn't demonstrate that Maxim used their trade secrets. And it turns out that a "secret list" of Cypress employees was compiled using very un-secret sources like LinkedIn.
And so, said the Court of Appeal, Maxim gets its attorneys fees thanks to "dilatory and oppressive" tactics Cypress used in maintaining the case to deter Maxim from recruiting Cypress employees, which Maxim was well within its rights to do.