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Tech Secrets Case|Back in State Court

SAN JOSE (CN) - A federal judge granted technology giant SanDisk's motion to remand its trade secrets lawsuit back to a California Superior Court.

SanDisk and SK Hynix both develop and make flash memory products for electronic devices. They entered into a patent cross licensing agreement in 2007. Hynix paid SanDisk a licensing fee for undisclosed rights under the agreement.

In 2008, Hynix allegedly coerced a SanDisk employee at a manufacturing facility in Japan to "access and misappropriate" 10 gigabytes of information that included SanDisk's sensitive trade secrets for NAND flash memory, U.S. District Judge Lucy Koh wrote in her heavily redacted March 26 order.

That employee, Yoshitaka Sugita, copied the requested information and promptly left SanDisk to work for Hynix, where he continued to feed the company more information about his former employer, Koh wrote in her summary of the case.

Sugita was arrested in Japan and pleaded guilty in January this year to criminal charges of misappropriating trade secrets. Koh's summary cites extensive evidence of how the scheme worked. Sugita was to be sentenced in Japan on March 9, but Koh's order does not indicate what the sentence was.

SanDisk sued Hynix on March 13, 2014 in Santa Clara County Superior Court, alleging misappropriation of trade secrets under California Civil Code and the California Uniform Trade Secrets Act.

Hynix sought removal to Federal Court in San Jose, under the Federal Arbitration Act. A week later, on Nov. 13, 2014, the company filed a motion to dismiss for forum non conveniens and a motion to compel arbitration.

SanDisk in December filed a motion to remand back to state court.

Koh granted SanDisk's motion and denied Hynix's motion to dismiss and to compel arbitration.

"The instant litigation involves a single claim of trade secret misappropriation stemming from the criminal conduct of a former Hynix employee. Moreover, the arbitration agreement invoked by Hynix is for a patent cross license, and excludes from its terms any right to [REDACTED]," Koh wrote.

"Given these circumstances, the court concludes that Hynix fails to raise a 'conceivable argument that the arbitration clause in the patent cross license agreement would impact the disposition of this case."

Koh denied Hynix's motions to dismiss and to compel arbitration without prejudice, "so that Hynix, if appropriate, may re-raise them in the Santa Clara County Superior Court."

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