Misappropriation of Trade Secrets in Wireless Trading Sent Back For Trial on Unjust Enrichment

Case: Ajaxo, Inc. v. E*Trade Group, Inc., No H026757, H027383 (Cal. 6th App. Dist. 12/21/05)

The One Sentence Summary: The court affirmed findings that defendants E*Trade and Everypath took plaintiff Ajaxo's trade secret computer program for wireless Internet access and trading, affirmed a jury verdict for breach of a non-disclosure agreement by E*Trade, and remanded for further damages trial on the trade secret unjust enrichment claims against both defendants.



California Court of Appeal Holdings:

• The trial court properly admitted evidence that E*Trade had invested in Everypath, the company that used Ajaxo's technology. The evidence was relevant to motive for misappropriation, and denial of a motion for new trial on this issue was proper.
• The trial court properly allowed testimony that Ajaxo's principal, Sing Koo, had spoken to the FBI about unauthorized entry into Ajaxo's computer system. The evidence was relevant to explain Ajaxo's actions and was not more prejudicial than probative.
• In arguing that there was no substantial evidence to support the jury's verdict of misappropriation, defendants failed to summarize the trial court record accurately and therefore waived the issue.
• The jury properly relied on circumstantial evidence of misappropriation, and this evidence was not trumped by the direct evidence of defendants' denials of misappropriation.
• There was substantial evidence to support the jury's verdict of $1.29 million in unjust enrichment against E*Trade for breach of the non-disclosure agreement (NDA). The amount awarded by the jury was close to the evidence of the cost of development and the amount that E*Trade was willing to pay for the technology.
• The trial court properly found that Ajaxo was the prevailing party for an award of attorneys' fees under the NDA because it received a substantial verdict although it had sought more.
• The trial court improperly granted non-suit against Ajaxo on damages for Ajaxo's trade secret misappropriation claim. As to E*Trade, the same evidence that allowed an award of damages for breach of the NDA should have allowed the jury to consider damages for misappropriation of Ajaxo's trade secret. As to Everypath, the jury should have been allowed to consider evidence that it was unjustly enriched by misappropriation of the trade secret.
• The trial court properly denied Ajaxo's request for attorneys' fees incurred by its prior counsel absent evidence detailing their services and their qualifications.
• There was substantial evidence supporting the jury's finding that Everypath willfully and maliciously misappropriated Ajaxo's trade secrets by acquiring them from E*Trade, and that its management ratified the actions by turning a "blind eye" to evidence of misappropriation.