Apple moves forward in trade secrets clash
Dispute with startup concerns semiconductor designs | The startup stands accused of targeted recruitment and spoiling evidence.
Apple can advance its case against startup Rivos, which it accuses of stealing trade secrets relating to technology circuit designs.
On Friday, August 8, the US District Court for the Northern District of California found that Apple had identified a trade secret and alleged sufficient harm, and partly dismissed Rivos’ motion to dismiss the case.
But it found in favour of Rivos’ motion to dismiss certain claims concerning the alleged misappropriation due to insufficient evidence, giving leave to Apple to amend its claims.
Case background
Apple initiated legal proceedings against Rivos in April 2022, alleging breaches of contract and violations of the Defend Trade Secrets Act, highlighting the protection of Apple's proprietary system-on-chip (SoC) designs and sensitive trade secrets.
Apple’s products, such as the M1 laptop and A15 mobile phone, rely heavily on highly advanced System on Chip (SoC) semiconductors.
SoCs are integrated circuits that contain multiple processing components, which can provide faster and more efficient computing.
The case was brought against former Apple employees including Wen Shih-Chieh (also known as Ricky Wen), Bhasi Kaithamana, Jim Hardage, Weidong Ye, Laurent Pinot, Prabhu Rajamani, and Kai Wang.
Apple claims that Wen deleted files from his laptop that contained more than 1,700 files, including Verilog code files marked as confidential and trade-secret, and argued that this deletion was intentional and designed to eliminate evidence.
The tech giant accuses the defendants of failing to take appropriate preservation measures, alleging that they deleted evidence and data that could have been vital to the case.
Apple asserts that Rivos engaged in deceptive practices by failing to disclose evidence and misleading the court and Apple regarding their compliance with preservation obligations.
On Friday, the tech company filed a motion arguing that these actions warrant the imposition of sanctions against the defendants.
Targeted recruitment
Rivos allegedly began a targeted recruitment strategy, recruiting more than 40 former Apple engineers, many of whom possessed intimate knowledge of Apple's highly-sensitive SoC specifications and design files.
The lawsuit alleges that Rivos systematically approached these engineers, enticing them to join their ranks and take valuable proprietary information with them.
It further asserts that several former Apple employees, including Kaithamana and Wen, joined Rivos while possessing confidential information regarding Apple's SoC designs.
The former Apple employees are accused of engaging in trade secret theft by extracting gigabytes of sensitive SoC specifications and design files during their last days at Apple.
They allegedly employed various methods—such as using USB storage drives, transferring files via collaboration applications, and utilising encrypted communication apps—to facilitate the unauthorised transfer of Apple's proprietary information to personal devices.
To cover their tracks, some individuals are accused of deleting information or even wiping their Apple devices entirely, while falsely claiming to Apple that they had complied with data deletion policies.
The lawsuit contends that Rivos potentially instructed Apple employees to use encrypted communication tools to communicate without Apple's knowledge.
Apple argues that these employees retained this information despite signing confidentiality agreements that obliged them to protect and not disclose such information.
Violated agreements
The tech giant company demonstrated its protection of trade secrets and proprietary information in the lawsuit, through legally binding agreements.
Employees, including the accused, signed IP Agreements (IPAs) upon employment.
These IPAs obligate employees to maintain confidentiality even after leaving the company. Apple highlighted that breaches of these agreements could cause irreparable harm and entitle Apple to injunctive relief.
Apple alleges that Kaithamana and Wen, among others, violated their IPAs by downloading information before leaving for Rivos.
The company's internal investigations claimed that the accused employees transferred confidential files, including architectural diagrams and unreleased project details, to personal external drives and cloud storage.
Apple further claims that former employees deleted information from their Apple devices after accepting offers from Rivos, concealing their activities.
Apple is represented by Bryan Wilson, Kenneth Kuwayti, Arturo Gonzalez, and Meredith Angueira from Morrison & Foerster.
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