September 18, 2020

Volume X, Number 262

September 18, 2020

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Staggering Amount of Spoliation Leads to Quick Conclusion of Trade Secrets Lawsuit

A recent decision issued by the U.S. District Court for the Northern District of California, San Jose Division, presents a stark example of what can result when a defendant accused of trade secret misappropriation is careless in preserving electronically stored information (“ESI”) relevant to the lawsuit.

Silicon Valley-based autonomous car startup WeRide Corp. and WeRide Inc. (collectively, “WeRide”) sued rival self-driving car company AllRide.AI Inc. (“AllRide”), along with two of its former executives and AllRide’s related companies, asserting claims for misappropriation under the federal Defendant Trade Secrets Act and the California Uniform Trade Secrets Code, along with numerous other claims.  WeRide secured a preliminary injunction from the Court, directing AllRide not to use or disclose WeRide’s confidential information and trade secrets, and specifically directing defendants not to destroy evidence.

Discovery showed that the defendants did not heed the Court’s injunction, instead engaging in what the Court called a “staggering” amount of spoliation, much of which AllRide conceded.  The spoliation included:

  • Failure to disable a 90-day automatic deletion of emails in AllRide’s computer system;
  • Destruction of email accounts assigned to or used by the individual defendants;
  • Destruction of the source code alleged to have been stolen; and
  • Wiping clean one laptop and deleting files from another laptop.

Evaluating defendants’ actions under Federal Rules of Civil Procedure 37(b) and 37(e), the Court issued terminating sanctions against AllRide and the individual defendants, striking their answers and entering defaults against them, and holding that they must pay WeRide’s attorneys’ fees relating to discovery and motion practice regarding the spoliation.

Although an extreme example, this decision serves as a reminder of the importance of preserving ESI, even when litigation is a possibility.

©2020 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume X, Number 121

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About this Author

David J. Clark Attorney, Epstein Becker Green, Labor and Employment Law Attorney
Member of The Firm

David J. Clark is a Member of the Firm in the Litigation and Employment, Labor & Workforce Management practices in Epstein Becker Green’s New York office. His practice concentrates on litigating complex commercial and employment-related disputes before state and federal courts and arbitration tribunals. Mr. Clark represents clients in a wide range of industries, including financial services, advertising and media, accounting, banking, insurance, managed care, and retail brands.

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