Keeping Tabs on the Ninth Circuit
December 17, 2020 - This Week at the Ninth

This Week at the Ninth: Secrets and Specialties

U.S. Congress Introduces Bill that Would Require Mandatory 24 Hour Cyber Breach Notification for Government Agencies, Contractors, and Operators of Critical Infrastructure

This week, the Ninth Circuit resolves a novel question about continuing violations under the Defend Trade Secrets Act, and invalidates an agency’s conclusion that computer programmers are not entitled to “specialty occupation” visas.

As a matter of first impression, the Court holds that the Defend Trade Secrets Act applies to post-enactment misappropriation that began prior to enactment of that statute, but that the plaintiff’s trade secret protection here was extinguished by publication in a patent application.

Panel:  Judges Wallace, Tashima, and Bade, with Judge Wallace writing the opinion. 

Key highlight:   “Unlike the [Uniform Trade Secrets Act], the DTSA does not contain an anti-continued use provision. This omission suggests that the DTSA is not limited to misappropriation that only began after enactment of the DTSA.”

Background: Beginning in 2010, Google partnered with Eli Attia and his architectural firm to develop a new technology called “Engineered Architecture” and an implementing program called “Project Genie.”  After signing an Inbound Services Agreement and a Statement of Work Agreement, Attia disclosed his Engineered Architecture trade secrets to Google with the understanding that he would be compensated if the program were successful. Google filed patent applications with the Patent and Trademark Office that were published in 2012, and it showed a prototype of the technology to investors. But according to Attia, Google then locked him out of the project and used his technology to create a new venture called “Flux Factory.” 

Attia brought state law trade secret and contract claims in December 2014.  Three years later, Attia amended his pleading to add federal racketeering and trade secret claims under the Defend Trade Secrets Act, which allows plaintiffs to assert federal claims for misappropriation occurring on or after May 11, 2016, and under which criminal misappropriation became a predicate act under the Racketeer Influenced and Corrupt Organizations Act.  Google removed to federal district court, which dismissed Attia’s federal claims with prejudice and declined to exercise supplemental jurisdiction over his state law claims.  The district court concluded that Google’s published patent applications had extinguished Attia’s trade secrets, Attia lacked standing to assert DTSA or RICO claims, and that those statutes did not apply retroactively. 

Result: The Ninth Circuit affirmed.  It began by tackling an issue of first impression in the Ninth Circuit:  whether “the pre-enactment disclosure of a trade secret forecloses the possibility of a DTSA claim arising from the continued use of the trade secret after enactment.”  As the Court explained, the DTSA is different from other trade secret statutes in how it deals with misappropriations occurring both before and after the statute’s enactment.  Unlike the Uniform Trade Secrets Act, the DTSA does not have a provision expressly clarifying that the statute does not apply to continuing misappropriation that occurs after the statute’s effective date.  Because Congress was aware of such provisions and consciously omitted a similar one from the DTSA, the Court held that the DTSA applies to post-enactment misappropriation that began prior to enactment.

Attia’s DTSA claims, however, were not out of the woods just yet.  The Court next turned to whether Google’s 2012 patent application publications extinguished Attia’s trade secrets. As the Court explained, the protected status of a trade secret depends on “the degree to which the secret information confers a competitive advantage on its owner.”  It is thus “well-settled that publication of information in a patent application eliminates any trade secrecy.”  And Attia could not point to any “implementation details and techniques beyond what was disclosed in his patent.”  For that reason, his trade secrets had been extinguished and the district court had properly dismissed Attia’s DTSA claim.  The Court rejected Attia’s argument that Google was equitably estopped from relying on the 2012 publication as an unlawful disclosure because Attia had authorized Google to develop the idea. And in any event, it was unclear whether the Court “could ignore the trade secrets’ nonexistence after the DTSA’s enactment or any time after 2012.”

Finally, the Court concluded that the district court properly dismissed Attia’s RICO claims.  Attia failed to establish a pattern of racketeering, the Court said, “because he has not identified two sufficiently related predicate acts.” And Attia had not even alleged any relevant acts by the individual defendants or Flux Factory.  

The Court deems arbitrary and capricious a U.S. Citizenship and Immigration Services decision concluding that computer programmers are not entitled to H-1B “specialty occupation” visas.

The panel:  Judges Owens, Paez, and England Jr., with Judge Owens writing the opinion. 

Key highlight:  “While it is theoretically possible that there is ‘space’ between normally, most, and typically, that space is at best molecular, and nowhere near big enough for the doublespeak freight train that USCIS tries to drive through it.” 

Background:  Innova Solutions sought to hire a citizen of India to work in the United States as a computer programmer.  It petitioned U.S. Citizenship and Immigration Services (USCIS) for a H-1B “specialty occupation” visa.  The governing regulations require an employer seeking to secure such a visa to show, among other things, that “[a] baccalaureate or higher degree or its equivalent is normally the minimum requirement for entry into the particular position.”  The Department of Labor’s Occupational Outlook Handbook says that “most” computer programmers have a bachelor’s degree, and it describes that degree as the “typical level of education that most workers require.”  Nevertheless, USCIS denied Innova’s application, reasoning that this Handbook did not say that a bachelor’s degree is “normally a requirement” to be a computer programmer, and that employers may value “experience” that can be gained through internships. 

Innova then challenged the USCIS’s denial as arbitrary and capricious under APA.  The district court rejected that challenge at summary judgment, stating that “at least some Computer Programmer positions may be performed by someone with an associate’s degree.”

Result:  The Ninth Circuit reversed, concluding that USCIS’s denial was arbitrary and capricious.  As the Court emphasized, the Occupational Outlook Handbook expressly states that a bachelor’s degree was “typical[lly]” needed.  Focusing on UCSIS’s central contention that “typically” is somehow different from the governing regulation’s requirement of “normally,” the Court declared:  “USCIS’s contrary reasoning is beyond saving.” The Court also rejected the agency’s reliance on the Handbook’s statements that “some employers hire worked with an associate’s degree,” noting that this was “entirely consistent with a bachelor’s degree ‘normally [being] the minimum requirement for entry.’”

The Court also dismissed USCIS’s related argument that because the Handbook said that an associate’s degree might sometimes be sufficient, Innova was required to prove that the particular computer programmer position it sought to fill required a bachelor’s degree.  As the Court explained, whether a position requires a particular degree is considered categorically—i.e., computer programmers generally—and requiring Innova to show that its particular position would require that degree would improperly convert “normally required” into “actually required.”  Finally, the Court criticized the underlying USCIS decision for mischaracterizing a portion of the Handbook to suggest that most employers require either a bachelor’s or an associate’s degree, and for failing to directly address the key language in the Handbook stating the that a bachelor’s degree was the “typical level of education” needed—both flaws it deemed to be independently arbitrary and capricious.