brocade v. a10 - appeal brief

Nos. 2013-1210, -1234

IN THE

United States Court of Appeals for the Federal Circuit

________________________________

BROCADE COMMUNICATIONS, INC., and FOUNDRY NETWORKS, LLC,

Plaintiffs-Appellees,

v.

A10 NETWORKS, INC., Defendant-Appellant,

and

LEE CHEN, RAJKUMAR JALAN, RON SZETO, and STEVE HWANG,

Defendants. ________________________________

Appeal from the United States District Court for the Northern District of California Case No. 2:06-cv-13936, Magistrate Judge Paul Grewal

________________________________

BRIEF FOR APPELLEES ________________________________

Annette L. Hurst Denise M. Mingrone Bas de Blank ORRICK, HERRINGTON & SUTCLIFFE, LLP 1000 Marsh Rd. Menlo Park, CA 94025 Fabio E. Marino MCDERMOTT, WILL & EMERY 275 Middlefield Rd. Menlo Park, CA 94025 March 26, 2013

Neal Kumar Katyal Jessica L. Ellsworth Judith Coleman David M. Ginn HOGAN LOVELLS US LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 Tel.: (202) 637-5600 Fax: (202) 637-5910 Counsel for Appellees

Case: 13-1210 Document: 46 Page: 1 Filed: 03/26/2013

i

CERTIFICATE OF INTEREST Counsel for appellees Brocade Communications Systems, Inc. and Foundry

Networks, LLC certifies the following:

1. The full name of every party or amicus represented by me is:

Brocade Communications Systems, Inc. and Foundry Networks, LLC.

2. The name of the real party in interest represented by me is: Brocade

Communications Systems, Inc. and Foundry Networks, LLC.

3. All parent corporations and any publicly held companies that own 10

percent or more of the stock of the party or amicus curiae represented by me are:

None.

4. The names of all law firms and the partners or associates that

appeared for the party or amicus now represented by me in the trial court or agency

or are expected to appear in this court are: Hogan Lovells US LLP (Neal Katyal,

Jessica Ellsworth, Judith Coleman, David Ginn); Orrick Herrington &

Sutcliffe LLP (Matthew Poppe, Annette Hurst, Bas de Blank, Christina Marie

Von Der Ahe, Denise Mingrone, Elizabeth McBride, Gary Weiss, Siddhartha

Venkatesan); Skadden Arps Slate Meagher & Flom, LLP (Allen Ruby);

McDermott Will & Emery (Fabio Marino, Nitin Gambhir, Teri Nguyen).

Dated: March 26, 2013 /s/ Neal Kumar Katyal


ii

TABLE OF CONTENTS

Page

CERTIFICATE OF INTEREST ................................................................................. i

TABLE OF AUTHORITIES ..................................................................................... v

STATEMENT OF RELATED CASES .................................................................. xii

COUNTERSTATEMENT OF THE ISSUES ............................................................ 3

COUNTERSTATEMENT OF THE FACTS ............................................................ 3

A. Foundry Develops Innovative Technologies And Captures A High End Market Niche .................................................................... 3

B. A10 Steals Foundry’s Intellectual Property And Develops Competing Products .............................................................................. 5

C. Brocade Files Suit, The Jury Finds A10 Liable, And The District Court Enjoins A10 From Continuing To Infringe And Misappropriate Brocade’s Intellectual Property ........................... 8

SUMMARY OF ARGUMENT ............................................................................... 13

ARGUMENT ........................................................................................................... 15

I. STANDARD OF REVIEW ........................................................................... 15

II. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY ENTERING A PERMANENT PATENT INJUNCTION ...................... 16

A. The District Court Did Not Abuse Its Discretion In Holding That Brocade Would Be Irreparably Harmed Absent An Injunction ............................................................................................. 17

1. Brocade established that it would be irreparably harmed and that there was a causal nexus between the harm it faced and A10’s infringement ...................................... 18


TABLE OF CONTENTS – Continued

Page

iii

2. In the alternative, it is not necessary to establish a causal nexus in the context of a narrowly tailored permanent injunction that does not cover an entire product ...................................................................................... 26

B. Brocade’s Remedies At Law Are Inadequate ..................................... 29

C. The Balance Of Hardships Favors Brocade ........................................ 32

D. The Injunction Serves The Public Interest .......................................... 34

III. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY ENTERING A PERMANENT TRADE SECRET INJUNCTION ................................................................................................ 38

A. Substantial Evidence Supports The District Court’s Finding That Brocade Is Entitled To An Injunction To Prevent A10’s Continuing Misappropriation Of Brocade’s Trade Secrets................. 38

1. The District Court did not clearly err in finding that Brocade’s trade secrets remain confidential ............................. 40

2. The District Court correctly rejected A10’s head-start argument in finding that the evidence in this case supported entry of a trade secret injunction .............................. 44

a. The commercial-advantage period does not “limit” the scope of an injunction on a trade secret that remains confidential ...................................... 46

b. Even if it were relevant, the commercial advantage associated with Brocade’s trade secrets has not expired .................................................... 48

B. The Equitable Factors Also Favor Injunctive Relief .......................... 51

1. A10’s ongoing use of Brocade’s trade secrets irreparably injures Brocade ....................................................... 51


TABLE OF CONTENTS – Continued

Page

iv

2. The other equitable considerations also favor relief ................. 57

C. There Is No Basis To Award A10 A Reasonable Royalty .................. 58

CONCLUSION ........................................................................................................ 59

CERTIFICATE OF COMPLIANCE

CERTIFICATE OF SERVICE


v

TABLE OF AUTHORITIES

Page(s)

CASES:

ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d 1312 (Fed. Cir. 2012) .......................................................................... 25

Acumed LLC v. Stryker Corp., 551 F.3d 1323 (Fed. Cir. 2008) .................................................................... 20, 30

Agency Solutions.Com, LLC v. TriZetto Group, Inc., 819 F. Supp. 2d 1001 (E.D. Cal. 2011) .............................................................. 54

Ajaxo, Inc. v. e*Trade Group, Inc., 2003 WL 25778061 (Cal. Super. Ct. Aug. 15, 2003) ......................................... 47

Ajaxo, Inc. v. e*Trade Group, Inc., 135 Cal. App. 4th 21 (2005) ............................................................................... 55

Am. Paper & Packaging Prods. v. Kirgan, 183 Cal. App. 3d 1318 (1986) ...................................................................... 46, 47

Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. Ill. 2012) ................................................ 10, 31, 32, 34

Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314 (Fed. Cir. 2012) .............................................................. 19, 27, 28

Apple, Inc. v. Samsung Elecs. Co., 695 F.3d 1370 (Fed. Cir. 2012) ...................................................................passim

Apple, Inc. v. Samsung Elecs. Co., 2012 WL 6569786 (N.D. Cal. Dec. 17, 2012) .............................................. 24, 25

Apple, Inc. v. Samsung Elecs. Co., 877 F. Supp. 2d 838 (N.D. Cal. 2012) ................................................................ 26

Bard Peripheral Vascular v. W.L. Gore & Assocs., 670 F.3d 1171 (Fed. Cir. 2012), modified in part on other grounds, 682 F.3d 1003 (Fed. Cir. 2012) .......................................................................... 31


TABLE OF AUTHORITIES – Continued

Page(s)

vi

BBA Nonwovens Simpsonville, Inc. v. Superior Nonwovens, LLC, 303 F.3d 1332 (Fed. Cir. 2002) .......................................................................... 39

Beckman Instruments, Inc. v. Cincom Sys., Inc., 165 F.3d 914 (9th Cir. 1998) .............................................................................. 51

Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683 (Fed. Cir. 2008) ................................................................ 25, 28, 29

Cacique, Inc. v. Robert Reiser & Co., Inc., 169 F.3d 619 (9th Cir. 1999) .............................................................................. 58

Cadence Design Sys., Inc. v. Avant! Corp., 57 P.3d 647 (Cal. 2002) .......................................................................... 38, 55, 56

Celsis In Vitro, Inc. v. CellzDirect, Inc., 664 F.3d 922 (Fed. Cir. 2012) ...................................................................... 20, 54

Central Valley Gen. Hosp. v. Smith, 162 Cal. App. 4th 501 (2008) ............................................................................. 52

ClearOne Comm’ns, Inc. v. Bowers, 643 F.3d 735 (10th Cir. 2011) ............................................................................ 45

Coca-Cola Co. v. Reed Indus., 864 F.2d 850 (Fed. Cir. 1988) ............................................................................ 54

Cont’l Paper Bag Co. v. E. Paper Bag Co., 210 U.S. 405 (1908) ............................................................................................ 29

Convolve, Inc. v. Compaq Computer Corp., 2011 WL 7144803 (S.D.N.Y. Oct. 6, 2011) ....................................................... 47

Dun v. Lumbermen’s Credit Ass’n, 209 U.S. 20 (1908) .............................................................................................. 31

DVD Copy Control Ass’n, Inc. v. Bunner, 75 P.3d 1 (Cal. 2003) .................................................................................... 52, 57



Page(s)

vii

eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006) .....................................................................................passim

Edwards Lifesciences AG v. Corevalve, Inc., 699 F.3d 1305 (Fed. Cir. 2012) .................................................................... 23, 30

E.I. du Pont de Nemours & Co. v. MacDermid Printing Solutions, LLC, 525 F.3d 1353 (Fed. Cir. 2008) .......................................................................... 15

Fantasy Sports Properties v. Sportsline.com, 287 F.3d 1108 (Fed. Cir. 2002) .......................................................................... 37

Fid. Brokerage Servs. LLC v. McNamara, 2011 WL 2117546 (S.D. Cal. May 27, 2011) .................................................... 52

Fresenius Med. Care Holdings, Inc. v. Baxter Int’l, Inc., 2008 WL 928496 (N.D. Cal. Apr. 4, 2008) ........................................................ 23

Fresenius USA, Inc. v. Baxter Int’l, Inc., 582 F.3d 1288 (Fed. Cir. 2009) .......................................................................... 23

Helifix Ltd. v. Blok-Lok, Ltd., 208 F.3d 1339 (Fed. Cir. 2000) .......................................................................... 16

i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010), aff’d, 131 S. Ct. 2238 (2011) ................ 15, 34, 35

In re Oracle Corp. Sec. Litig., 627 F.3d 376 (9th Cir. 2010) .............................................................................. 42

Johnson & Johnson Vision Care, Inc., v. CIBA Vision Corp., 712 F. Supp. 2d 1285 (M.D. Fla. 2010) .............................................................. 31

Key Pharms. v. Hercon Labs. Corp., 161 F.3d 709 (Fed. Cir. 1998) ............................................................................ 42

Lermer Germany GmbH v. Lermer Corp., 94 F.3d 1575 (Fed. Cir. 1996) ............................................................................ 27



Page(s)

viii

Lillge v. Verity, 2007 WL 2900568 (N.D. Cal. Oct. 2, 2007) ...................................................... 54

Litton Systems, Inc. v. Sundstrand Corp., 750 F.2d 952 (Fed. Cir. 1984) ............................................................................ 57

Maynard v. City of San Jose, 37 F.3d 1396 (9th Cir. 1994) .............................................................................. 42

Microsoft Corp. v. i4i Ltd. P’ship, 131 S. Ct. 2238 (2011) ........................................................................................ 35

Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012) .............................................................................. 31

Mikohn Gaming Corp. v. Acres Gaming, Inc., 165 F.3d 891 (Fed. Cir. 1998) ............................................................................ 15

Morlife, Inc. v. Perry, 56 Cal. App. 4th 1514 (1997) ........................................................... 39, 45, 50, 51

Novozymes A/S v. Genencor Int’l, Inc., 474 F. Supp. 2d 592 (D. Del. 2007) .................................................................... 22

Presidio Components, Inc. v. Am. Technical Ceramics Corp., 702 F.3d 1351 (Fed. Cir. 2012) .................................................................... 29, 30

ReadyLink Healthcare v. Cotton, 126 Cal. App. 4th 1006 (2005) ........................................................................... 52

Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302 (Fed. Cir. 2002) .......................................................................... 19

Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142 (Fed. Cir. 2011) .............................................................. 21, 22, 25

Ruckelhaus v. Monsanto Co., 467 U.S. 986 (1984) ............................................................................................ 52



Page(s)

ix

Stanley v. Univ. of S. Cal., 13 F.3d 1313 (9th Cir. 1994) .............................................................................. 43

SynQor, Inc. v. Artesyn Technologies, Inc., __ F.3d __, 2013 WL 950743 (Fed. Cir. Mar. 13, 2013) ................................... 36

Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372 (Fed. Cir. 2009) .......................................................................... 16

United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) .............................................................................. 42

Vacco Indus., Inc. v. Van Den Berg, 5 Cal. App. 4th 34 (1992) ................................................................................... 51

Web Graphics, Inc. v. Jos. Hunkeler, 682 F.2d 59 (2d Cir. 1982) ................................................................................. 46

Western Directories, Inc. v. Golden Guide Directories, Inc., 2009 WL 1625945 (N.D. Cal. June 8, 2009) ...................................................... 51

Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443 (2002) ........................................................................... 47

Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7 (2008) ................................................................................................ 28

Wyndham Resort Dev. Co. v. Bingham, 2010 WL2720920 (E.D. Cal. Jul. 8, 2010) ......................................................... 54

STATUTES:

28 U.S.C. § 2111 ...................................................................................................... 42

35 U.S.C. § 282 ........................................................................................................ 35

35 U.S.C. § 307(a) ................................................................................................... 36

Cal. Civ. Code § 3246.2(a) ...................................................................................... 40



Page(s)

x

Cal. Civ. Code § 3426 .............................................................................................. 45

Cal. Civ. Code § 3426.1 ........................................................................................... 39

Cal. Civ. Code § 3426.2 ..................................................................................... 39, 51

Cal. Civ. Code § 3426.2(a) .......................................................................... 45, 46, 52

Cal. Civ. Code § 3426.2(b) ...................................................................................... 58

Cal. Civ. Code § 3426.3 ........................................................................................... 58

RULES:

Fed. R. App. P. 10(a) ................................................................................................. 3

Fed. R. Civ. P. 8(a)(3) .............................................................................................. 32

OTHER AUTHORITIES:

2 John Norton Pomeroy, A Treatise on Equitable Remedies § 1979 (2d ed. 1919) ........................................................................................... 29

C. Chien & M. Lemley, Patent Holdup, the ITC, and the Public Interest, 98 Cornell L. Rev. 1 (2012) ................................................................................ 24

Oxford English Dictionary (online ed. 2013) .......................................................... 36

Restatement (Third) of Unfair Competition § 44 cmt. b (1995) ........................ 52, 53


xi

STATEMENT OF RELATED CASES

No appeal in or from the same proceeding in the lower court was previously

before this Court or any other appellate court.

The same parties are involved in a different lawsuit, the appeal from which

is currently pending before this Court: A10 Networks, Inc. v. Brocade

Communications Systems, Inc., No. 2012-1542 (Fed. Cir.).


IN THE

United States Court of Appeals for the Federal Circuit

___________________________________

BROCADE COMMUNICATIONS SYSTEMS, INC., and FOUNDRY NETWORKS, LLC, Plaintiffs-Appellees,

v.

A10 NETWORKS, INC., Defendant-Appellant.

and

LEE CHEN, RAJKUMAR JALAN, RON SZETO, and STEVE HWANG, Defendants.

___________________________________

Appeal from the United States District Court for the Northern District of California Case No. 2:06-cv-13936

Magistrate Judge Paul S. Grewal ___________________________________

BRIEF FOR APPELLEES ___________________________________

This appeal arises from a textbook case of intellectual property theft, found

by a properly instructed jury after an extensive trial. Appellee Brocade

Communications Systems and its subsidiary, Foundry Networks, design and

manufacture advanced network components. Beginning in 2004, several high-

level employees left Foundry and later started a competing business—A10

Networks, the defendant below and appellant here. Rather than developing a new

product from scratch, the former employees stole the technology they had worked

on while at Foundry and used it to build competing products. Brocade later


2

discovered the theft and sued A10 for misappropriation of trade secrets, patent

infringement, copyright infringement, and other business torts. After a three-week

trial, a jury found A10 liable on all theories tried. The District Court, after

considering the trial record and additional evidence submitted by A10, then entered

two narrow permanent injunctions—one enjoining A10’s ongoing use of Brocade’s

trade secrets and the other enjoining A10’s patent infringement.

A10 now appeals entry of both injunctions in an effort to continue its

misappropriation, claiming that the District Court erred in its careful application of

the traditional equitable factors. None of the complaints A10 raises has merit, let

alone demonstrates that the District Court abused its discretion. To the contrary,

the District Court properly concluded that Brocade will be irreparably injured if

A10 is allowed to continue using the intellectual property that it stole, and the court

properly concluded that the equities favored an injunction. The facts of this case

fall within the heartland of the Patent Act’s domain. If these facts do not justify an

injunction (particularly the narrowly crafted injunction the District Court entered),

it is hard to imagine facts that would. Similarly, the District Court’s trade secret

injunction is supported by substantial evidence—especially the District Court’s

well-supported factual finding that Brocade’s trade secrets remain just that, secret.

This Court should affirm the District Court’s entry of both injunctions.


3

COUNTERSTATEMENT OF THE ISSUES

The issues presented are:

1. Whether the District Court abused its discretion by entering a

permanent patent injunction after the jury found that A10 had infringed four claims

in three Brocade patents and the District Court found that all the traditional

equitable factors favored an injunction.

2. Whether the District Court abused its discretion by entering a

permanent trade secrets injunction after the jury found that A10 had

misappropriated four Brocade trade secrets, the District Court found that the trade

secrets remained confidential, and A10 failed to provide any evidence that it had

independently developed the secrets.

COUNTERSTATEMENT OF THE FACTS1

A. Foundry Develops Innovative Technologies And Captures A High-End Market Niche.

Foundry is a classic Silicon Valley success story. Founded in 1996 by four

engineers, including defendant Lee Chen, Foundry invented and sold networking

communications equipment. JA12089; JA31070-71. With its introduction of

1 The joint appendix materials cited in this brief are all part of the record on appeal. Just before this brief was filed, A10 acknowledged that its brief cites to documents that were not filed in the district court. Those documents are not part of the record on appeal, see Fed. R. App. P. 10(a), and are not properly included in the joint appendix. Brocade reserves the right to seek appropriate relief from this Court once it is able to determine the extent of the problem.


4

ServerIron, Foundry created the market for a new type of networking device

known as an application delivery controller, or ADC. ADCs accelerate large,

geographically dispersed networks by ensuring that content is delivered as

efficiently and reliably as possible. Foundry’s ServerIron became known for its

speed and availability, JA10448, and met with great success in the marketplace.

The product captured a high-end niche of customers with stringent performance

needs, including financial institutions, hospitals, and internet service providers.

JA10444.

ServerIron’s success was due in substantial part to the inventions—both

patents and trade secrets—at issue in this lawsuit. Foundry’s patents covering

Global Server Load Balancing (GSLB) and High Availability (HA) techniques

proved to be market differentiators, and were the result of substantial research and

development expense. JA10443; JA10373-94; JA10395-401. The GSLB patents

at issue in this case (numbers 7,454,500 and 7,581,009) differentiated the

ServerIron product line by permitting more intelligent handling of incoming

network requests, leading to more efficient server usage and an improved user

experience. JA10385; JA10387. The HA patent (number 7,558,195) successfully

reduced lost data and interruptions in service—extremely important attributes for

Foundry’s high-end customers. See, e.g., JA10395-97; JA10449. Foundry and

Brocade developed their entire product marketing strategy around these high


5

performance features, positioning ServerIron for the “high performance niche in

the markets.” JA10444; JA10467. Brocade’s customers continue to seek out

ServerIron for its patented features today. JA10385; JA10387; see also JA10400-

01; JA10816-17; JA10829-30; JA10846; JA10855; JA10862; JA10873; JA11373,

JA11414-16.

Foundry’s trade secrets also substantially improve the speed, security,

reliability, and other critical aspects of ServerIron. JA10641; JA10646-48;

JA10661. The trade secrets at issue here differentiate Foundry’s technology from

that of its competitors and were created over the course of many years. See, e.g.,

JA10659; JA10674; JA10619.

B. A10 Steals Foundry’s Intellectual Property And Develops Competing Products.

Chen and another defendant—Rajkumar Jalan—were the lead architects

who developed ServerIron for Foundry. JA11213; JA12093-95. After working on

ServerIron for many years, Chen decided in 2004 to “go out and have [his] own

business.” JA12109. He told Foundry’s CEO that he planned to build a “security

product” that would not compete with ServerIron. Id. But only a few months

later, Chen and the new company he founded upon leaving Foundry—now called

A10 Networks2—were covertly developing a product called the AX Series to

compete directly with ServerIron. Indeed, A10’s internal sales plan for the AX 2 A10 was originally called Raksha Networks.


6

Series described “[t]arget[ing] Foundry customers” and “attacking” ServerIron

accounts. JA31066-67; see JA12039-40. The “security product” that Chen had

referenced as his reason for leaving Foundry was a commercial failure. JA12020.

To develop the AX Series as a competing product to ServerIron, Chen

recruited other Foundry employees to join him at A10. All of the other individual

defendants in this case were hired by A10 in the months after Chen left Foundry.

See JA31533-34. This team of alumni built the AX Series for A10 using

intellectual property they took with them from Foundry. JA31540-43.

A10 hired Ron Szeto, for example, to work as the Director of Software

Engineering. JA11600. While at Foundry, Szeto had unbridled access to

Foundry’s source code repository. JA11570. Two days before leaving Foundry

for A10, he downloaded thousands of source code files—including files containing

Foundry’s trade secrets—to his work computer and apparently transferred them to

a USB drive. JA11718-19; see also JA11594. There were still Foundry source

code files on his laptop while he was using it at A10 to “develop” the AX Series.

JA11572-76; JA11594-95.

In a similar fashion, Liang Han checked out hundreds of source code files

from Foundry’s repository just days before leaving Foundry for A10. The

downloaded files contained both trade secrets and copyrighted source code.

JA11733-34; see JA10583; JA10594; JA10639-40; JA10674. Han later accessed


7

his personal e-mail account from the Foundry computer where he had downloaded

the files. JA11734. And he testified at trial that he had copied and pasted a “large

portion” of one of those downloaded files (containing copyrighted code) directly

into the source code of the AX Series. JA10974.

As these examples and others presented at trial show, A10 did not develop

the AX Series on its own. It was able to cobble together a passable competitor to

Foundry’s ServerIron products quickly only because it stole Foundry’s patented

inventions, copyrighted source code, and trade secrets.

A10 then used Foundry’s intellectual property to invade the high-end market

niche Foundry had created. A10 “[t]arget[ed] * * * Foundry customers” and

“attack[ed]” both “ServerIron accounts” and “Foundry.” J31066-67. Chen agreed

that A10’s plan was to “attack Foundry and target its customers who have the

Foundry ServerIron.” JA12039-40; see also JA31066-67; JA10467; JA12456;

JA31226-27. Foundry’s inventions covered (in A10’s words) “key features” that

allowed A10 to appeal to that market segment. See JA30048; JA30462; See, e.g.,

JA10844-45; JA10871; JA12356-58; JA12373; JA12461-62. All told, A10 sold

tens of millions of dollars in AX Series products to existing Foundry customers.

See JA31429-39; see also JA31228-345. In addition to cutting into Brocade’s

sales of ServerIron, that unfair competition has caused enormous—but difficult to

quantify—downstream harm by depriving Brocade of sales opportunities for


8

complementary products, service contracts, replacements, upgrades, and parts.

See, e.g., JA122; JA10453; JA12039-41; JA30009-10.

C. Brocade Files Suit, The Jury Finds A10 Liable, And The District Court Enjoins A10 From Continuing To Infringe And Misappropriate Brocade’s Intellectual Property.

After the AX Series was released, Brocade sued A10 and the individual

defendants for (among other things) patent infringement, copyright infringement,

trade secret misappropriation, and intentional interference with contract. The case

went to trial on these claims. After a three-week trial, the jury found that A10 had

directly infringed four claims from three patents and awarded Brocade millions of

dollars in compensatory damages. JA121-22. (The exact amount is disputed and

is set for a retrial.) The jury also found that A10 had infringed Brocade’s

copyrighted source code and awarded $60,000,000 in damages. JA122-23.

In addition to finding copyright and patent infringement, the jury found that

A10 had misappropriated four of Brocade’s trade secrets. JA124-25. It awarded

one dollar in damages for that misappropriation—evidently in adherence to the

District Court’s instruction not to award duplicative damages (JA13492), which

Brocade highlighted in closing argument (JA13382-83). Finally, the jury found

both A10 and Chen liable for intentional interference with contract. It awarded

one dollar in compensatory damages, and, finding that both A10 and Chen had


9

“acted with malice, oppression, despicable conduct or fraud,” awarded $500,000 in

punitive damages against each of them. JA127.

A10 moved for judgment as a matter of law or a new trial. The District

Court affirmed all the jury’s findings with respect to copyright and trade secrets.

JA56-68; JA85-94. And it agreed with Brocade that there was substantial evidence

supporting the jury’s verdict of patent infringement. JA68-75. The District Court

concluded, however, that a new trial on patent damages was necessary because the

jury’s verdict form was inconsistent and it was unclear how the jury had

apportioned damages between reasonable royalties and lost profits. JA85. The

District Court also ordered a new trial on punitive damages against A10 and Chen,

because—even though Brocade “produced substantial evidence that a punitive

damages award is warranted”—the ratio between the jury’s compensatory damages

award and its punitive damages award was too high to sustain it. JA102. The new

jury trial on patent and punitive damages is set to begin on May 20, 2013.

The District Court then entered two permanent injunctions: one to protect

against further patent infringement and one to protect against further trade secret

misappropriation. The patent injunction was a “narrowly tailored injunction to

protect [Brocade’s] rights to exclusivity against A10’s infringement.” JA120.

Noting that “there is no presumption in favor of an injunction in patent


10

infringement cases,” the court carefully applied the four factors enumerated by the

Supreme Court in eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006). JA106.

In addressing the irreparable harm factor, the court expressed doubt that the

“causal nexus” standard articulated by this Court in Apple, Inc. v. Samsung

Electronics Company (Apple II), 695 F.3d 1370, 1376 (Fed. Cir. 2012), applied to

every request for a permanent injunction in every context. JA108. But the court

concluded that it did not need to decide whether that standard should apply here.

The court assumed it applied, and then held that Brocade had “proven a sufficient

nexus between the established infringement and irreparable harm from the loss of

its exclusive right to practice its patents.” JA109. The court explained how, in the

specific circumstances of this case, Brocade’s loss of exclusivity constituted

irreparable harm: “In a situation such as this, where Brocade has shown that it

practices its patent, that A10 is a direct competitor, and that Brocade does not

license its patents, Brocade has shown that it suffers the type of irreparable harm

that a permanent injunction is intended to remedy.” JA111. The District Court

also found that all of the other eBay factors favored a permanent injunction.

JA111-15.

In determining the appropriate scope of the patent injunction, the District

Court found that a narrow injunction was warranted. JA116. In particular, the

court opted not to indiscriminately bar sales of the AX Series, reasoning that “a


11

patentee may exercise her exclusivity rights only over her patented invention.”

JA117. The court therefore only enjoined sales of “AX series devices that include

the software and hardware * * * that the jury found infringes claim 25 of the ‘500

Patent, claims 13 and 24 of the ‘009 Patent, and claim 1 of the ‘195 patent.” Id.

The court also “clarifie[d] that the injunction applies only to future sales and use,”

so that existing customers who already owned infringing AX Series devices would

“not be affected.” JA118.

The second permanent injunction the District Court entered was to prevent

further use and misappropriation of Brocade’s trade secrets. In considering

whether this injunction should issue, the court “employ[ed] California law”

because the injunction would “affect[ ] the substantive rights of the parties.” JA26.

Though arguably not mandated, the court required Brocade to demonstrate

irreparable harm under California law by showing “that remedies at law are

inadequate, and that other equitable considerations warrant entry of an injunction.”

JA28. It found that Brocade satisfied this standard. Surveying the trial evidence,

the court found that “Brocade showed that the trade secrets improve performance

of the ServerIron product and thus aid in Brocade’s pursuit of sales to customers.”

JA44. Under California law, “[c]ommercial advantage is grounds for finding

irreparable harm.” Id. In addition, A10’s continued use of the trade secrets

effectively “dissolve[ed] the trade secret status of Brocade’s features,” a harm that


12

money damages alone could not remedy. Id. Based on these and other equitable

considerations, the court entered a “narrowly tailored” injunction that would not

prohibit A10 from reverse engineering the trade secrets in a clean room.

The District Court considered and rejected the two arguments A10 offered

against a trade secrets injunction: that the trade secrets had become public and that

A10 could have independently developed the trade secrets by now if it had tried.

As to the first argument, the court exhaustively considered the evidence A10

submitted in opposing the injunction, but concluded that it did not prove the trade

secrets were now public. Just the opposite, “Brocade’s trade secrets remain

confidential and have not become generally known.” JA41. The court rejected the

second argument as well. Even granting the legally incorrect premise—that

evidence a party could have developed a trade secret independently, rather than

evidence it actually did so, is a basis to refuse an injunction—the court explained

that A10 did not even show that it could have developed the trade secrets at issue.

A10 pointed only to the testimony of Brocade’s damages expert. But, as the court

explained, “A10 conflates [the expert’s] head start testimony regarding the

minimum amount of time it would have taken A10 to independently develop the

trade secrets with evidence that A10 could have” developed them in the same

amount of time. JA42 (emphasis added). In other words, A10 was treating the

minimum like a maximum. The District Court thus entered a “narrowly tailored”


13

injunction to prevent A10’s continuing use of the misappropriated trade secrets.

JA49.

A10 moved to stay or modify both injunctions. The District Court denied

A10’s motions to stay, but it modified the trade secret injunction to “allow A10 to

continue possession and use of the trade secrets for the sole purpose of providing

service to its current customers.” JA18. The court also clarified that the trade

secret injunction did not apply to “A10’s attorneys and litigation counsel,” and

provided a more specific description of Trade Secret 11. JA19-21.

This appeal followed.

SUMMARY OF ARGUMENT

The District Court’s thorough opinions explain why the narrowly tailored

injunctions it crafted to fit the facts of this case are justified. Brocade’s former

employees stole their employer’s intellectual property and used it to develop

competing products. The jury found their new company, A10, liable for both

patent infringement and trade secret misappropriation. And the District Court

found that A10’s continued infringement and misappropriation would irreparably

injure Brocade. After carefully assessing these facts in light of the traditional

equitable factors, the District Court concluded that injunctive relief was warranted

to restore Brocade’s control over its intellectual property.


14

A10’s scattershot efforts in this Court to cast doubt on the District Court’s

reasoning are wholly unavailing. The District Court did not “ignore” Apple II, as

A10 suggests; to the contrary, it applied the decision and properly found a causal

nexus between A10’s infringement and the harm targeted by the injunction:

Brocade’s loss of its exclusive right to practice its patents. This Court need not,

therefore, address whether the causal nexus standard applies in this case. If,

however, the Court decides to reach the question, it should find that the causal

nexus test does not apply because (1) the District Court entered a “narrowly

tailored” injunction that does not cover an entire product, and (2) the case involves

a permanent, rather than a preliminary, injunction.

The District Court also correctly concluded that the equities favor an

injunction. A10 has represented to the public and this Court that it has already

redesigned its products to remove the infringing features. Because the District

Court’s injunction targets only those features, A10 is free to sell its redesigned

products without them. The substantial harm that continued infringement would

cause Brocade in the absence of an injunction heavily outweighs whatever minimal

harm the injunction may cause A10. And the public interest favors an injunction

too. The District Court’s carefully circumscribed injunction protects Brocade’s

intellectual property rights and fosters innovation without unduly burdening third

parties.


15

A10’s challenge to the trade secret injunction is likewise flawed. The

District Court found that Brocade’s trade secrets remain secret, and A10 has not

cast doubt on that finding. Brocade thus has a continuing interest in preventing

A10 from using its intellectual property. That continuing interest will not expire

until the trade secrets become public. A10’s contrary argument is based on a

fundamental misreading of settled California law. Finally, for reasons similar to

those justifying the patent injunction, the equities favor an injunction to halt A10’s

continued misappropriation of Brocade’s trade secrets.

Both of the District Court’s injunctions should be affirmed.

ARGUMENT

I. STANDARD OF REVIEW

The District Court’s two injunctions are reviewed only for abuse of

discretion. i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 861 (Fed. Cir. 2010),

aff’d, 131 S. Ct. 2238 (2011). Within that overall rubric, underlying findings of

fact must be upheld unless they are clearly erroneous, E.I. du Pont de Nemours &

Co. v. MacDermid Printing Solutions, LLC, 525 F.3d 1353, 1358 (Fed. Cir. 2008);

pure questions of law are reviewed de novo, id.; and judgment calls are entitled to

substantial deference, Mikohn Gaming Corp. v. Acres Gaming, Inc., 165 F.3d 891,

895 (Fed. Cir. 1998). Ultimately, abuse of discretion is “a deferential standard of

review that requires a showing that ‘the court made a clear error of judgment in


16

weighing relevant factors or exercised its discretion based upon an error of law or

clearly erroneous factual findings.’ ” Titan Tire Corp. v. Case New Holland, Inc.,

566 F.3d 1372, 1375 (Fed. Cir. 2009) (citation omitted). Each injunction must be

reviewed separately; the invalidity of one would not affect the validity of the other.

II. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY ENTERING A PERMANENT PATENT INJUNCTION

The Supreme Court held in eBay that the decision to grant injunctive relief

in patent cases “rests within the equitable discretion of the district courts,” and that

“such discretion must be exercised consistent with traditional principles of equity.”

547 U.S. at 394. The Court gave the “traditional four-factor framework” that

governs equitable relief: “A plaintiff must demonstrate: (1) that it has suffered an

irreparable injury; (2) that remedies available at law, such as monetary damages,

are inadequate to compensate for that injury; (3) that, considering the balance of

hardships between the plaintiff and defendant, a remedy in equity is warranted; and

(4) that the public interest would not be disserved by a permanent injunction.” Id.

at 391. In this case, after affirming the jury’s verdict of infringement,3 the District

Court carefully considered each of these four factors, and found that each favored

the injunctive relief sought by Brocade. The Court’s analysis was not affected by

3 In this appeal, A10 could have challenged the merits of the infringement finding as a basis for overturning the injunction. See Helifix Ltd. v. Blok-Lok, Ltd., 208 F.3d 1339, 1345 (Fed. Cir. 2000). It elected not to do so, and as a result, no merits issues related to infringement or validity are presently before this Court.


17

any error, clear or otherwise. Its faithful application of the eBay factors and this

Court’s post-eBay precedents to the facts of this case should be affirmed.

A. The District Court Did Not Abuse Its Discretion In Holding That Brocade Would Be Irreparably Harmed Absent An Injunction.

The District Court’s irreparable harm analysis principally focused on three

facts. First, Brocade’s own ServerIron products practice the four claims of the

three patents that A10 was found to infringe. JA110. There was ample testimony

at trial to substantiate that fact. E.g., JA10384-85; JA10816-17; JA10846;

JA11373. Second, there was no “evidence that Brocade licenses any of the

technology in the patents to other parties.” JA110. Brocade’s business model is to

develop and practice its intellectual property, not to license it. Third, Brocade and

A10 are “in direct competition.” JA111. Indeed, Chen himself testified that A10

and Brocade are “definitely competitors.” JA12039. And the District Court

credited the testimony of a Brocade employee that the “ ‘high performance’

products Brocade and A10 offer” should be “distinguished” from “products offered

by companies with a larger market share.” JA111 (citing JA10444). Brocade’s

expert identified 165 customers who purchased the infringing product after having

been Brocade customers. JA111 (citing JA12337; JA12363). Thus, Brocade and

A10 were not just competitors—they were fierce competitors within a niche

market.


18

In light of these three facts, the District Court concluded that Brocade has

suffered “irreparable harm from the loss of its exclusive right to practice its

patents.” JA109. The Court explained: “In a situation such as this, where

Brocade has shown that it practices its patent, that A10 is its direct competitor, and

that Brocade does not license its patents, Brocade has shown that it suffers the type

of irreparable harm that a permanent injunction is intended to remedy.” JA111;

see also JA12. The District Court acted well within its discretion in determining

that these circumstances warranted a “narrowly tailored” injunction, JA120, and

A10’s challenges to the injunction are meritless.

1. Brocade established that it would be irreparably harmed and that there was a causal nexus between the harm it faced and A10’s infringement.

A10 first contends that “it was legal error for the district court not to apply

the causal nexus test.” A10 Br. 31. The premise of that argument is false:

Although the court did register “doubt” that a causal nexus “should be required for

all irreparable harms,” it expressly stated that it did not “have to decide this

broader question.” JA108-09. That was because, as the District Court explained,

Brocade had satisfied the causal nexus requirement by establishing a link between

A10’s infringement and the particular harm targeted by the injunction—that is,

Brocade’s loss of its right to exclude a direct competitor from using its patents,

patents that Brocade practices and does not license. See JA109-10. A10 is


19

therefore flat wrong to assert that the District Court “directly ignore[d] this Court’s

mandate.” A10 Br. 31. To the contrary, the Court applied that mandate to the

circumstances of this case and, finding the standard satisfied, entered an injunction

accordingly.

A10’s argument does not improve from this first misstep. Instead, it

continues with a series of mistaken assertions about what the causal nexus

requirement is and how it applies. In Apple I and Apple II, this Court explained

that a patentee of a product component is only entitled to injunctive relief if the

patentee shows that it will be irreparably harmed absent an injunction and that the

injury it would incur is causally related to infringement of its patent by the

defendant. Apple, Inc. v. Samsung Elecs. Co. (Apple I), 678 F.3d 1314, 1324 (Fed.

Cir. 2012); Apple II, 695 F.3d at 1374. Although framed as a “causal nexus”

requirement in Apple I and Apple II, the underlying principle appears to be a

longstanding one: that injunctions must be narrowly tailored to “fit the specific

adjudged violations.” Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302, 1311

(Fed. Cir. 2002). For instance, if a patentee claims an injunction is necessary to

prevent irreparable harm in the form of a loss of market share, it makes sense for a

court to ask whether the patentee will lose market share as a result of the

defendant’s illegal conduct (in which case an injunction is appropriate) or as a

result of some other factor, like poor management (in which case it is not).


20

The only “irreparable harm” that Apple asserted was lost sales, see Apple

Br. 19-24, Apple, Inc. v. Samsung Elecs. Co., No. 2012-1507, 2012 WL 3875603

(Fed. Cir. July 20, 2012), and so the Court addressed how a causal nexus inquiry

applied to that particular context. The Court held that, when the alleged harm is

“[s]ales lost to an infringing product,” the patentee must show that the “infringing

feature drives consumer demand.” Apple II, 695 F.3d at 1374-75 (citation

omitted). This requirement follows from the nature of the lost sales inquiry: To

prove that the patentee would have made a sale but for the infringement, it

generally is necessary to show that the patented features motivated the consumer’s

decision to buy from the infringer. If the consumer would have purchased the

product regardless of the infringing features, it can hardly be said that the

infringement caused the patentee to lose the sale.

But lost sales are not the only kind of irreparable harm that a patentee may

face. This Court has routinely recognized that injunctions are appropriate to

prevent many types of irreparable harm, such as loss of goodwill, injury to

reputation, loss of brand-name recognition, loss of exclusivity, and market

saturation. See, e.g., Celsis In Vitro, Inc. v. CellzDirect, Inc., 664 F.3d 922, 930

(Fed. Cir. 2012); Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1328 (Fed. Cir.

2008). Here, for example, the harm the District Court identified was Brocade’s

loss of exclusivity in connection with practicing its patents. The District Court


21

imposed the permanent injunction for purposes of preventing that harm, not for the

purpose of preventing lost sales, as was the case in Apple II.4

That fact makes Apple II’s discussion of how the causal nexus test applies to

a lost-sales injury irrelevant. When the irreparable injury is something other than

lost sales, the particulars of how the causal nexus test was applied in Apple II will

not apply. And so, for example, if the harm at issue is loss of goodwill, a patentee

would have to show “some causal nexus” between its goodwill loss and the

infringement to get an injunction; if the harm is loss of brand-name recognition,

the causal nexus would have to be between that recognition and the infringement.

In each of these cases, the question whether “the infringing feature drives

consumer demand for the accused product” will not be relevant to establishing the

particular causal nexus.

4 Although the District Court did not rely on lost sales to issue the injunction, Brocade also showed that it was losing sales and needed an injunction to prevent that harm. The features that customers demanded in the AX devices were the very same features that A10 had stolen from Brocade. As A10 itself explained, HA was a “very critical” feature of the AX Series, and A10 would be “shut out” of the market for “the bigger fish” without GSLB. JA31104; JA31158; see JA31006-7 (GSLB is a “key strategic product” of A10). A10 implemented these “[k]ey features of the AX Series,” JA30048, by infringing Brocade’s patents. A10 then sold tens of millions of dollars in AX Series products with the infringing features to existing Foundry customers. See JA31429-39; see also JA31228-345. Though not necessary for this Court to reach, an injunction would be warranted for this reason, too. See Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1156-57 (Fed. Cir. 2011).


22

So too here. The harm to which the injunction is addressed is Brocade’s loss

of exclusivity. As the District Court explained, that harm flows from the fact that

Brocade practices its patents, does not license its patents, and competes directly

against A10. JA12; JA111. Because those findings were amply supported, see,

e.g., JA10384-85; JA10444; JA10816-17; JA10846; JA11373; JA12039; JA12337;

JA12363, it was not an abuse of discretion for the District Court to find that

Brocade’s loss of its exclusive right to practice its own patents was irreparable

harm. And the “causal nexus” between that harm and the infringement, as that

court found, is direct and unmistakable.

A10’s chief response is to claim that “loss of exclusivity” can never qualify

as irreparable harm to a patentee. A10 Br. 28-30. But that contention is exactly

the sort of “categorical rule” that the Supreme Court rejected in eBay, a case that

A10 cites (at 28-29) but does not heed. As courts have recognized when faced

with similar arguments, eBay “d[oes] not state that loss of the right to exclude

could not be irreparable harm.” Novozymes A/S v. Genencor Int’l, Inc., 474 F.

Supp. 2d 592, 612 (D. Del. 2007). In fact, this Court has repeatedly emphasized

that “it does not follow [from eBay] that courts should entirely ignore the

fundamental nature of patents as property rights granting the owner the right to

exclude.” Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1149 (Fed. Cir.

2011). Rather, “[a] patentee’s right to exclude is a fundamental tenet of patent


23

law.” Edwards Lifesciences AG v. Corevalve, Inc., 699 F.3d 1305, 1314 (Fed. Cir.

2012). That is why, “[a]bsent adverse equitable considerations, the winner of a

judgment of validity and infringement may normally expect to regain the

exclusivity that was lost with the infringement.” Id. Given this legal landscape,

the District Court did not abuse its discretion by finding that Brocade’s loss of its

exclusive right to practice its patents was irreparable harm.

This Court has already held as much. In Fresenius Medical Care Holdings,

Inc. v. Baxter International, Inc., 2008 WL 928496 (N.D. Cal. Apr. 4, 2008), the

district court had held that the loss of “the legal right to exclude, including the right

to control the terms of any licensing arrangement,” is an “irreparable injury” that

“favors an injunction.” Id. The infringer appealed the grant of the permanent

injunction, claiming that the district court’s opinion did not comport with eBay.

The Federal Circuit rejected this argument: “The district court performed the

appropriate analysis required by eBay.” Fresenius USA, Inc. v. Baxter Int’l, Inc.,

582 F.3d 1288, 1302 (Fed. Cir. 2009). The same is true here.

A10 responds with the argument that “loss of exclusivity” can be shown

“whenever infringement is found,” and so the District Court’s analysis in this case

“revert[s] back to the pre-eBay days.” A10 Br. 29. This argument entirely ignores

what the District Court actually did: The District Court did not say that loss of the

right to exclude would qualify as irreparable harm in every case. Its holding was


24

much narrower: “In a situation such as this,” the District Court stated—where (1)

Brocade has shown that it “practices its patent,” (2) “A10 is a direct competitor” in

a niche market, and (3) “Brocade does not license its patents”—Brocade has

suffered an irreparable injury, because “A10’s infringement prevents it from

practicing its patents exclusively.” JA110-11. This is exactly the sort of case-

specific, discretionary decision that eBay authorizes district courts to make. In

many patent cases, one or more of those three conditions will not be met. For

example, loss of exclusivity might not qualify as irreparable harm to a patent

assertion entity. See C. Chien & M. Lemley, Patent Holdup, the ITC, and the

Public Interest, 98 Cornell L. Rev. 1, 10 (2012) (since eBay was decided, patent

assertion entities have been denied injunctions in over 90 percent of cases when the

injunctions are contested). And loss of exclusivity may not qualify if the infringer

is not a direct competitor, or if the patentee has a licensing program.

That last fact distinguishes this case from the situation in Apple v. Samsung.

As the district court noted in that case, “Apple’s licensing activity suggests that

Apple does not believe that these patents are priceless.” Apple, Inc. v. Samsung

Elecs. Co., 2012 WL 6569786, at *10 (N.D. Cal. Dec. 17, 2012). Apple had

licensed, to competitors such as Nokia and IBM, the exact patents it sought to

enjoin Samsung from infringing. Id. It had even licensed patents to Samsung

before. Id. Indeed, Apple’s top licensing executive testified that Apple had


25

licensed intellectual property covering its “unique user experience.” Id. These

facts demonstrated that Apple “felt that money was a fair trade for the right to

practice its patents, and that Apple has in the past been willing to extend license

offers to Samsung.” Id.

Brocade feels and acts differently, and those differences matter. This Court

recognized as much in Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683 (Fed. Cir.

2008), where it held that the district court had not abused its discretion when it

“considered [the patentee’s] general policy of not licensing its patents and the harm

that would ensue from a compulsory license to its most significant competitor.” Id.

at 702. That same principle applies with force here.

A10’s claim, at bottom, is simply an argument for a broad, “categorical rule”

that the loss of the exclusive right to practice a patent, even by a practicing patent

owner, can never qualify as irreparable harm in any circumstances. That sweeping

claim would require this Court to “ignore the fundamental nature of patents as

property rights granting the owner the right to exclude.” Bosch, 659 F.3d at 1149,

and to forget that the right to exclude is the “heart of the patent grant.”

ActiveVideo Networks, Inc. v. Verizon Comm’ns, Inc., 694 F.3d 1312, 1341 (Fed.

Cir. 2012). As a result, A10’s request is directly foreclosed by eBay and this

Court’s cases. To deny an injunction here would effectively amount to a

compelled license from Brocade to an adjudged infringer—and the company’s


26

main competitor—even though Brocade’s business model is based on developing

and practicing its intellectual property, not licensing it. Indeed, the extensive trial

record contains no evidence of a Brocade licensing program of any kind. It would

be hard to see what is left of the Patent Act’s promised “right to exclude” if an

injunction were not appropriate in these circumstances. The patent injunction

should be affirmed.

2. In the alternative, it is not necessary to establish a causal nexus in the context of a narrowly tailored permanent injunction that does not cover an entire product.

The District Court properly sidestepped the question of whether the causal

nexus standard even applies to this case, because the standard was met here. This

Court likewise has no need to examine the issue. If, however, it does reach the

question, it should affirm the injunction on the ground that the causal nexus test is

simply inapplicable under the circumstances of this case.

This Court’s decision in Apple II is distinguishable in two crucial respects.

First, the injunction in Apple II was much broader than the injunction against A10.

The district court had enjoined Samsung from making, using, or selling the Galaxy

Nexus phone. Apple, Inc. v. Samsung Elecs. Co., 877 F. Supp. 2d 838, 918 (N.D.

Cal. 2012). Its injunction banned the entire product, not just the features of that

product that infringed Apple’s patents. Samsung’s brief in the Federal Circuit

opened with a discussion about the (over)breadth of the injunction, Appellant Br.


27

at 1, Apple Inc. v. Samsung Elecs. Co., No. 2012-1507, 2012 WL 3134431 (Fed.

Cir. July 16, 2012), and the Court’s opinion highlighted this point as well.

Apple II, 695 F.3d at 1373. The Court’s discussion of the need for a causal nexus

was designed to ensure that the scope of the injunction was appropriately tailored

to the scope of the patented claims—and accordingly, to prevent the harm that

flowed from infringement of those claims.

That same concern does not arise here, where the District Court’s narrow

and well-tailored injunction does not ban sales of the AX Series device altogether.

JA115-19. The Court enjoined only sales of any AX Series device “that includes

features that infringe” the relevant patent claims. JA120. Indeed, the Court

specifically narrowed the injunction to ensure that Brocade’s “exclusivity” would

not “extend[]” to “features that are not covered by [the] patent,” thereby addressing

the underlying concern animating the Court’s decisions in Apple I and Apple II.

JA117. The narrowness of the injunction ensures that Brocade is not attempting to

“leverage its patent for competitive gain.” Apple II, 695 F.3d at 1375. And it

renders the causal nexus test both unnecessary and irrelevant.

Second, the causal nexus requirement was articulated in the context of a

preliminary injunction. But preliminary and permanent injunctions “are distinct

forms of equitable relief that have different prerequisites and serve entirely

different purposes.” Lermer Germany GmbH v. Lermer Corp., 94 F.3d 1575, 1577


28

(Fed. Cir. 1996). A preliminary injunction is an “extraordinary remedy never

awarded as of right.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22, 24

(2008). It issues before the merits are definitively resolved. A permanent

injunction, in contrast, follows a full adjudication on the merits and a finding of

patent infringement.

Even if the causal nexus requirement is an appropriate safeguard in the

preliminary injunction context,5 it is unwarranted in the permanent injunction

context. A10 has already had an opportunity to present its case to a jury, and the

jury found that its products contained features that infringe Brocade’s patents.

Given the prevalence of complex products encompassing multiple patents, if the

Federal Circuit were to extend the causal nexus requirement to permanent

injunctions it would fundamentally alter the availability of equitable relief in patent

cases, and the Patent Act’s “right to exclude” would become illusory. Indeed, for

5 Although this panel is bound by Apple II, and this Court—like the District Court below—has no need to reach the question, Apple II was wrongly decided. The decision is inconsistent with this Court’s precedents, which have never rigidly insisted on proof of a causal nexus between lost sales and infringement as a prerequisite to injunctive relief. See, e.g., Broadcom, 543 F.3d at 702-03. It is also inconsistent with eBay, which rejected “categorical rule[s]” and “expansive principles suggesting that injunctive relief could not issue in a broad swath of cases.” 547 U.S. at 398. At most, a causal nexus requirement may be appropriate in the context of design patents, where it was first articulated, see Apple I, 678 F.3d at 1323-24. Extending that requirement to utility patents was a “major departure from the long tradition of equity practice” and should be corrected. eBay, 547 U.S. at 395 (Roberts, C.J., concurring). Brocade preserves these arguments for further review.


29

more than a century, the Federal Circuit and Supreme Court have often affirmed

permanent injunctions for patents that do not cover every feature of an accused

product. E.g., Presidio Components, Inc. v. Am. Technical Ceramics Corp., 702

F.3d 1351 (Fed. Cir. 2012) (abuse of discretion to refuse permanent injunction

where patent covered only features of a capacitor); Broadcom, 543 F.3d at 701-702

(affirming permanent injunction where patents covered features of chipsets used in

mobile radio devices); Cont’l Paper Bag Co. v. E. Paper Bag Co., 210 U.S. 405,

406, 430 (1908) (affirming permanent injunction where patent covered only an

“improvement in paper bag machines”). Such “a major departure from the long

tradition of equity practice” should be rejected. eBay, 547 U.S. at 391.

B. Brocade’s Remedies At Law Are Inadequate.

The District Court also correctly found that Brocade’s loss of the right to

exclude A10 from using its inventions cannot be remedied by money damages.

The right granted by a patent “is not to practice the invention, but to exclude others

from practicing it.” 2 John Norton Pomeroy, A Treatise on Equitable Remedies

§ 1979, p. 4495 (2d ed. 1919). And that right “can only retain its attribute of

exclusiveness by a prevention of its violation. Anything but prevention takes away

the privilege which the law confers upon the patentee.” Cont’l Paper Bag Co., 210

U.S. at 430. That is why it has been long recognized that the “obvious method” of


30

protecting the right to exclusivity “is by an injunction.” Pomeroy, supra, § 1979,

p. 4495.

A number of this Court’s recent decisions underscore that money damages

often cannot adequately compensate a patent holder for a loss of the right to

exclude. In Edwards Lifesciences, for example, the Court characterized the right to

exclude as a “fundamental tenet of patent law” and held that, absent countervailing

equitable considerations, “the winner of a judgment of validity and infringement

may normally expect to regain the exclusivity that was lost with the infringement.”

699 F.3d at 1314. The Court echoed this point in Presidio, where it observed that

the “historical practice of protecting the right to exclude through injunctive relief is

not surprising given the difficulties of protecting this right solely with monetary

relief.” 702 F.3d at 1362. Simply put, it is difficult to protect the statutory “right

to exclude through monetary remedies that allow an infringer to use an invention

against the patentee’s wishes.” eBay, 547 U.S. at 395 (Roberts, C.J., concurring)

(emphases in original); see also Acumed, 551 F.3d at 1328 (in light of patentee’s

right to exclude, “infringement may cause a patentee irreparable harm not

remediable by a reasonable royalty”).

The Court’s recognition of this basic point in those cases (and others) does

not mean that an injunction will automatically issue after a judgment of

infringement. In many cases, the balance of harms or the public interest will weigh


31

against an injunction. See, e.g., Dun v. Lumbermen’s Credit Ass’n, 209 U.S. 20,

23-24 (1908) (affirming denial of copyright injunction based on balance of harms);

Bard Peripheral Vascular v. W.L. Gore & Assocs., 670 F.3d 1171, 1192-93 (Fed.

Cir. 2012) (affirming denial of patent injunction based on public interest), modified

on other grounds, 682 F.3d 1003 (Fed. Cir. 2012); Johnson & Johnson Vision

Care, Inc., v. CIBA Vision Corp., 712 F. Supp. 2d 1285, 1293 (M.D. Fla. 2010)

(denying patent injunction based in part on public interest). Nor does this mean

that courts should inevitably presume irreparable harm based solely on the loss of

exclusivity, regardless of the circumstances. Some patentees place little value on

the right to exclude others from using their inventions, and so would have little

room to complain when that right is diminished. For example, a patentee who has

promised to license his invention to all comers on reasonable and

non-discriminatory terms (e.g., Microsoft Corp. v. Motorola, Inc., 696 F.3d 872,

875-77 (9th Cir. 2012)) would have difficulty arguing that a reasonable royalty is

insufficient to make him whole.

This last point distinguishes the District Court’s injunction from the situation

in Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. Ill. 2012) (cited at A10

Br. 34, 35, 36, 37). There, Motorola had committed to license its patents on fair,

reasonable, and non-discriminatory terms. Id. at 914. The court treated that

commitment as an implicit acknowledgement that “a royalty is adequate


32

compensation for a license to use that patent.” Id. Brocade, of course, has made

no such commitment; on the contrary, it has never licensed the intellectual property

at issue in exchange for a royalty.

A10’s other arguments are equally unavailing. The fact that Brocade

requested damages for past harm does not bar it from also seeking an injunction to

prevent future harm. See Fed. R. Civ. P. 8(a)(3) (a party may request relief in the

alternative or different types of relief). And the injunction covers harms that

cannot be remedied or undone by a money judgment—particularly the loss of

Brocade’s right to practice its patent exclusively and the accompanying loss of

product differentiation. JA112. A10’s argument that other types of harm (lost

market share, lost downstream sales) can be remedied by a money judgment is

simply beside the point. The parties are still litigating the extent of those harms,

and the District Court’s injunction accordingly did not rest on that basis.

C. The Balance Of Hardships Favors Brocade.

The balance of hardships tips heavily in Brocade’s favor. As the District

Court explained, Brocade would be substantially injured without an injunction.

The technology covered by the patents is a critical component of Brocade’s overall

marketing strategy. Yet without an injunction, Brocade cannot “exclusively

practice its patents” and preclude “a direct competitor” from infringing. JA113. If


33

Brocade continues to be denied its exclusive right to use that technology, its entire

business model will be undermined.

A10, by contrast, is caused no harm by the narrowly tailored injunction.

A10 has crowed to the public in press releases that “the ruling will have no

material negative impact on [its] business or financial strength” because it claims

to have “completed development and testing of applicable, non-infringing elements,

and will ship AX Series products with the redesigned software immediately.”

JA30003; JA30005 (emphasis added). It has thus assured the public that it has

removed the infringing features from its products. Assuming those assurances are

true, the injunction will not impede A10’s sales or “imperil its business,” as A10

claim below, because the injunction covers only those removed features.

A10 says it must bear the cost of “deploying the redesign” and “explaining

to customers what impact the injunction would have.” A10 Br. 35. But it has

never attempted to quantify or substantiate those costs (the majority of which have

already been incurred), leaving the District Court and this Court with no basis for

determining how they should weigh in the balance of equities. A10’s complaint

about the “looming threat of contempt proceedings,” A10 Br. 35, is likewise

entitled to no weight. The threat of contempt is a necessary incident of every

injunction. If it were enough to tip the balance of hardships, injunctions could

never issue.


34

Finally, A10 contends that the patents cover only “a few minor features” of

its devices, suggesting that the injunction imposes costs on A10 that are

“disproportionate both to the benefits to [A10] of having infringed and to the

harm” to Brocade. A10 Br. 36 (quoting Apple, 869 F. Supp. 2d at 917). But that

argument merely highlights the minimal impact of the injunction on A10: Because

of the patents’ narrow scope, A10 states that it was able to design around them

quickly and easily. JA10; JA13. That distinguishes this case from Apple v.

Motorola, where the court worried that a preliminary injunction would “force

Motorola to remove lucrative products from the market for as long as it took to

remove the infringing features * * * from its products, or to invent around the

infringing features.” 869 F. Supp. 2d at 917. Whether or not such a worry was

justified in Apple v. Motorola, it is unjustified here because A10 claims to have

already designed around the patented features. The harm Brocade would suffer in

the absence of an injunction thus far outweighs any negligible harm the injunctions

may cause A10.

D. The Injunction Serves The Public Interest.

The District Court correctly concluded that an injunction was in the public

interest, too. The key question here is “whether an injunction, both in scope and

effect, strikes a workable balance between protecting the patentee’s rights and

protecting the public from the injunction’s adverse effects.” i4i Ltd. P’ship, 598


35

F.3d at 863. And there can be no doubt that the patent injunction does just that.

As the District Court explained, the public will still have access to A10’s products

because the injunction does not cover existing customers and because A10 has

allegedly developed non-infringing software to sell to new customers. JA13;

JA117-118. The public will also continue to have access to the patented inventions

through Brocade’s own products. The injunction thus protects Brocade’s

intellectual property rights and fosters innovation without unduly burdening third

parties. Just as in i4i, “the narrow scope of the injunction[s] and the public’s

general interest in upholding patent rights favor injunctive relief.” 598 F.3d at 863.

A10 offers several reasons why it believes the injunction is contrary to the

public interest, but none has merit. It first contends that Brocade’s patents are “of

dubious validity,” implying that it will prevail in various pending reexamination

proceedings before the Patent and Trademark Office. A10 Br. 38. In A10’s view,

the possibility that the PTO will declare Brocade’s patents invalid weighs against

an injunction. But that argument is foreclosed at this stage. Brocade’s patents

must be presumed valid in the absence of clear and convincing evidence to the

contrary, 35 U.S.C. § 282; Microsoft Corp. v. i4i Ltd. P’ship, 131 S. Ct. 2238,

2242 (2011); and moreover, the District Court held that A10 is barred from

presenting such evidence under the doctrine of assignor estoppel. JA114 n.55.

A10 does not dispute the District Court’s ruling on that point, and it is


36

consequently precluded from claiming invalidity or assigning weight to that

argument as part of the public interest analysis.6

A10 next tries to smuggle a merits argument into the public interest analysis,

claiming that its devices did not infringe Brocade’s patents at all. According to

A10, the AX devices were not “configured to” perform the specified functions (as

the patent claims require) because the end user can choose whether to enable the

accused functionality. A10 Br. 38-39. It is the customers, in A10’s view, who

“configure” the devices to perform the various functions outlined in the claims.

The District Court properly rejected that cramped interpretation of the patent

claims. JA5-8; JA69-73. In ordinary speech, a product is “configured to” perform

a function if it is designed to do so—even if additional steps are necessary before

the function can actually be performed. See, e.g., Oxford English Dictionary

(online ed. 2013) (defining “configure” in the computing context to mean “[t]o

choose or design a configuration for; to combine (a program or device) with other

6 In any event, A10 paints a misleading picture of the reexamination proceedings. It is true, as A10 says, that staff members within the PTO have rejected each of the patent claims at least once. But they have also upheld three of the four claims at least once. Given the early stage of the reexamination proceedings and the many levels of review that lie ahead, see 35 U.S.C. § 307(a), it is improper to suggest that any inferences should be drawn from these conflicting results. It certainly was not an abuse of discretion for the District Court to disregard these conflicting results. Cf. SynQor, Inc. v. Artesyn Technologies, Inc., __ F.3d __, 2013 WL 950743, at *10 (Fed. Cir. Mar. 13, 2013) (district court properly excluded evidence of reexamination proceedings that were not yet final).


37

elements to perform a certain task or provide a certain capability”). A new hair

dryer, for instance, is “configured to” dry hair even though the end user must

enable that functionality by connecting the device to a power source, choosing the

appropriate mode, and so forth. A10’s narrower interpretation robs the patent

claims of meaning, for all software must to some degree be activated by the end

user.

The phrase “configured to” must therefore be read naturally and in context—

as the District Court recognized—to cover software that is designed to perform the

accused functions. It is irrelevant whether the end users must enable the patented

features before using them; either way, A10 has infringed the patents by

manufacturing and selling protected software. Activating and deactivating certain

features does not change the underlying configuration of the software. See

Fantasy Sports Properties v. Sportsline.com, 287 F.3d 1108, 1118 (Fed. Cir. 2002)

(“although a user must activate the functions programmed into a piece of software

by selecting those options, the user is only activating means that are already

present in the underlying software”).

Finally, A10 claims that the injunction amounts to “holdup” because

Brocade’s patents cover only “minor” features in the AX devices that “do not drive

demand.” A10 Br. 40. But this case between direct competitors is a far cry from a

patent troll’s use of injunctions to gain “undue leverage in negotiations.” A10 Br.


38

41 (quoting eBay, 547 U.S. at 396 (Kennedy, J., concurring)). The public interest

is served here by rewarding Brocade’s innovation and deterring A10’s theft. In

any event, nothing is actually being “held up” in this case. The District Court’s

injunction does not target all AX devices; it excludes devices owned by A10’s

current customers and targets only the infringing features of other devices. A10

says it has removed those infringing features and is already shipping redesigned

products. Assuming those representations are true, A10’s customers and potential

customers will not be denied any “highly desirable products.” A10 Br. 41-42. The

injunction merely holds A10 to its representations and legal obligations.

III. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY ENTERING A PERMANENT TRADE SECRET INJUNCTION

A. Substantial Evidence Supports The District Court’s Finding That Brocade Is Entitled To An Injunction To Prevent A10’s Continuing Misappropriation Of Brocade’s Trade Secrets.

Under the California Uniform Trade Secrets Act (CUTSA), “a successful

trade secret plaintiff is entitled to the full panoply of remedies, including injunctive

relief against further misappropriation” of its trade secrets. Cadence Design Sys.,

Inc. v. Avant! Corp., 57 P.3d 647, 653 (Cal. 2002). Specifically, a prevailing

plaintiff is entitled to a permanent injunction against “actual or threatened

misappropriation” of its trade secrets, and, even if the trade secrets “cease[ ] to

exist” at some point, “the injunction may be continued for an additional period of

time in order to eliminate commercial advantage that otherwise would be derived


39

from the misappropriation.” Cal. Civ. Code § 3426.2; see Morlife, Inc. v. Perry,

56 Cal. App. 4th 1514, 1528 (1997).

Decisions regarding the propriety and scope of injunctions are “firmly

within the discretion of the district court.” BBA Nonwovens Simpsonville, Inc. v.

Superior Nonwovens, LLC, 303 F.3d 1332, 1346 (Fed. Cir. 2002) (reviewing

injunction granted under identical provision of South Carolina trade secret

law). Here, the District Court properly exercised its discretion and reached the

result compelled by California law. After the jury found that A10 had

misappropriated four Brocade trade secrets, the District Court carefully reviewed

the trial record and the additional evidence submitted by the parties and determined

that those trade secrets “remain confidential.” JA23; JA41. Accordingly, the

District Court entered an injunction barring A10 from using Brocade’s still-

confidential trade secrets until A10 could show it had independently derived or

reverse-engineered those trade secrets for itself. JA21-22. See also Cal. Civ. Code

§ 3426.1 (“misappropriation” includes any unauthorized “use” of trade

secrets). Because substantial evidence supports the District Court’s findings and

the resulting injunction precisely follows California law, there was no abuse of

discretion.


40

1. The District Court did not clearly err in finding that Brocade’s trade secrets remain confidential.

The CUTSA authorizes a court to enjoin “actual or threatened

misappropriation” of a trade secret, although a court must terminate or modify the

injunction “when the trade secret has ceased to exist.” Cal. Civ. Code § 3246.2(a).

A10 argued to the District Court that Brocade’s trade secrets “ceased to exist” as

trade secrets because they had been made public. A10 submitted, by its own

account, “voluminous” documentary evidence purportedly demonstrating as much.

A10 Br. 57. The District Court, after reviewing this evidence (which totaled in the

hundreds of pages) and the trial record, rejected A10’s argument that Brocade’s

trade secrets had been made public:

In light of Brocade’s evidence at trial that the trade secrets were confidential and that it employed numerous strategies to retain that confidentiality and the court’s determination here that the evidence before it does not suggest any subsequent publicity of the trade secrets, the court finds that Brocade’s trade secrets remain confidential and have not become generally known.

JA41. The court enjoined A10 from using Brocade’s trade secrets, consistent with

the CUTSA, until A10 can show that it has independently developed or reverse-

engineered them. JA21-22; see also JA47 & n.122 (noting that under CUTSA

information that has been independently developed or reverse-engineered does not

qualify for trade-secret protection). The District Court thus, in effect, entered an

injunction that lasts as long as the trade secrets continue to exist as trade secrets


41

under California law. See JA20 n.93 (holding that injunctions terminate when “the

trade secrets no longer retain their confidential status”).

The District Court’s finding that Brocade’s trade secrets are non-public was

supported by substantial evidence. A10 does not point to any error—let alone

clear error—in the District Court’s analysis of the evidence presented at trial and

submitted with the post-trial briefing. Instead, A10 raises two complaints about

the District Court’s process: that the court erred by not granting A10’s request for

an evidentiary hearing, and that the court did not conduct an “obviousness-type

analysis” of the evidence. A10 Br. 55-57. Neither of these arguments has merit.

A10’s criticism of the District Court for not holding a trial-like evidentiary

hearing (A10 Br. 58) is unavailing. A10 never moved for an evidentiary hearing or

informed the District Court that it wanted to present live testimony. In fact, the

only reference A10 made to an evidentiary hearing was a qualified, passing

comment tucked away in its opposition to Brocade’s motion to strike A10’s

documentary evidence. There, A10 stated that there was a “sufficient written

record to enable the Court to conclude that the alleged trade secrets have become

public” but that the District Court should hold an evidentiary hearing if “the Court

were to determine that this is a disputed factual issue that cannot be resolved on the

papers.” JA20299. The District Court denied Brocade’s motion to strike, fully

considered the evidence A10 had submitted, and concluded that it could resolve the


42

issues on the papers. Thus, the court was not faced with the circumstance in which

A10 had (passingly) suggested an evidentiary hearing should be held.

Accordingly, A10 has waived the issue. See Maynard v. City of San Jose, 37 F.3d

1396, 1401 (9th Cir. 1994) (appellants waived right to challenge trial court’s

failure to hold evidentiary hearing where they had suggested that motion could be

decided on the papers, made only passing reference to potential hearing, and at oral

argument on motion “never indicated that they wanted a full evidentiary hearing

with an opportunity to cross-examine witnesses.”).7

Furthermore, even if A10 had properly requested a hearing, it has never

explained what testimony it would have presented, what a live hearing would have

accomplished, or how the failure to hold one prejudiced its case. Because A10 has

failed to point to any clear error in the district court’s factfinding, or shown how a

hearing conducted on its own terms would have yielded a different result, there is

no basis for overturning the District Court’s findings that Brocade’s trade secrets

remain confidential. See 28 U.S.C. § 2111 (harmless errors must be disregarded);

United States v. Microsoft Corp., 253 F.3d 34, 102 (D.C. Cir. 2001) (evidentiary

hearing would not be warranted if parties failed to explain to the district court

7 The “invited error” doctrine also appears to apply, since A10 encouraged the District Court to decide the issues on the paper record. See, e.g., Key Pharmaceuticals v. Hercon Laboratories Corp., 161 F.3d 709, 714-716 (Fed. Cir. 1998); In re Oracle Corp. Sec. Litig., 627 F.3d 376, 386 (9th Cir. 2010).


43

“ ‘what new proof they would present’ ” at the hearing (citation omitted)). Cf.

Stanley v. Univ. of S. Cal., 13 F.3d 1313, 1326 (9th Cir. 1994) (“In this circuit, the

refusal to hear oral testimony at a preliminary injunction hearing is not an abuse of

discretion if the parties have a full opportunity to submit written testimony and to

argue the matter.”).

A10’s newly minted fallback position that the District Court should have

conducted an additional “obviousness-type analysis” to consider whether

Brocade’s trade secrets would have been obvious to its competitors is just as

lacking. A10 Br. 58. In opposing entry of an injunction, A10 never presented an

“obviousness-type” theory. Instead, A10 relied exclusively on the theory that

Brocade (and its affiliates) had publicly disclosed the trade secrets. JA20436-39.

A10 thus forfeited any argument that the injunction should have been denied

because the trade secrets were obvious.

Wholly apart from forfeiture, this argument fails for a separate reason: A10

does not demonstrate—or even attempt to demonstrate—that if it had presented an

argument based on an “obviousness-type analysis” of the evidence, the District

Court would have reached a different conclusion. And that failure is readily

explainable because any argument to the contrary would have required persuading

the District Court to contradict the jury’s verdict. A finding that any of Brocade’s

trade secrets had been readily ascertainable or “obvious” at any of the times A10


44

alleged them to have been so would have conflicted with the jury’s finding that

Brocade’s trade secrets remained trade secrets as of the date they were

misappropriated. See, e.g., JA35 (rejecting testimony that TS 5 was ascertainable

in 2000 because that evidence “already has been rejected by the jury”); JA40

(rejecting testimony that TS 10 was part of industry standard in 1996 “because it

undermines the jury’s determination that at least as of A10’s creation in 2004, TS

[10] was a trade secret”).8

Because A10 has failed to point to any clear error in the district court’s

factfinding, or shown how a hearing conducted on A10’s terms would have yielded

a different result, there is no basis for overturning the district court’s findings that

Brocade’s trade secrets remain confidential.

2. The District Court correctly rejected A10’s head-start argument in finding that the evidence in this case supported entry of a trade secret injunction.

The CUTSA authorizes a court to terminate a misappropriation injunction

when the covered trade secret “has ceased to exist,” but provides that “the

injunction may be continued for an additional period of time in order to eliminate

8 In a footnote, A10 claims that Trade Secret 5 “is painfully obvious” to a person in the ADC industry. A10 Br. 59 n.17. But A10 offers no support for that claim, which happens to expressly contradict the jury’s findings that Trade Secret 5 was a protectable trade secret. See JA35. With respect to Trade Secrets 8, 10, and 11, A10 makes no argument whatsoever, except to claim that “[s]imilar errors exist.” A10 Br. 59 n.17. This vague assertion provides no reason to second-guess the District Court’s finding that Brocade’s trade secrets remain confidential.


45

commercial advantage that otherwise would be derived from the

misappropriation.” Cal. Civ. Code § 3426. Thus, a CUTSA injunction properly

extends for the life of the trade secret—i.e., the time until the secret “cease[s] to

exist”—plus any “additional period” necessary to compensate the plaintiff for the

commercial advantage wrongly obtained by the defendant. See Morlife, 56 Cal.

App. 4th at 1528 (explaining that the CUTSA allows for extension of injunction

“even after the trade secret has been lawfully disclosed”); see also ClearOne

Commc’ns, Inc. v. Bowers, 643 F.3d 735, 753 (10th Cir. 2011) (explaining that

Utah statutory provision identical to § 3426.2(a) “expressly provides for the

imposition of injunctive relief during the life of the trade secret at issue”). Because

the District Court correctly found that Brocade’s trade secrets “remain

confidential” (JA41) and accordingly have not “ceased to exist,” the court properly

enjoined A10 from future misappropriation of the trade secrets.

A10’s argument on appeal is that the duration of an injunction is limited to

whatever “commercial advantage” (or “head start”) the plaintiff could have had

absent the misappropriation. A10 Br. 48-56. This argument is simply wrong: the

plain language of the statute makes the period of “commercial advantage” relevant

only to determining how long an injunction extends after a trade secret “cease[s] to

exist.” Cal. Civ. Code § 3426.2(a). Where—as here—the trade secrets continue to


46

exist, the commercial-advantage period has no relevance whatsoever. All of A10’s

arguments about head-start periods are simply beside the point.

a. The commercial-advantage period does not “limit” the scope of an injunction on a trade secret that remains confidential.

A10 contends that a CUTSA injunction should last “only for so long as it

would have taken the defendant to independently develop the misappropriated

technology,” and, here, according to A10, that period has “ended.” A10 Br. 51.

A10’s argument ignores that, under the CUTSA, the period of commercial

advantage determines the length of the injunction only when “the trade secret has

ceased to exist.” Cal. Civ. Code § 3426.2(a). And here, the district court correctly

found that Brocades’s trade secrets do exist and remain confidential. See supra 40-

44.

A10 cites several decisions that it says support its view of the statute, A10

Br. 45, but none of them does. For example, in American Paper & Packaging

Products v. Kirgan, 183 Cal. App. 3d 1318, 1326 (1986), the court held that the

plaintiff was not entitled to preliminary injunction because its customer list was not

a protectable trade secret. Similarly, in Web Graphics, Inc. v. Jos. Hunkeler, 682

F.2d 59, 60 (2d Cir. 1982), the plaintiff was not entitled to a preliminary injunction

because it had disclosed the trade secret in a patent application, and the head start

period had expired. (The expiration of the head start period was relevant in Web


47

Graphics because even if a trade secret ceases to exist, an injunction may extend

for the duration of the commercial advantage or head start period.) A10’s other

citations are similarly off-base. Ajaxo, Inc. v. e*Trade Group, Inc., 2003 WL

25778061, slip op. 6-7 (Cal. Super. Ct. Aug. 15, 2003) (trade secrets had been

“publicly disclosed” in court hearings and the head-start periods had expired);

Convolve, Inc. v. Compaq Computer Corp., 2011 WL 7144803, at *25-*26

(S.D.N.Y. Oct. 6, 2011) (injunction was sought to protect “former” trade secrets

where head-start periods had expired); Whyte v. Schlage Lock Co., 101 Cal. App.

4th 1443, 1451-52 (2002) (reviewing claim that appeal had become moot).

A10’s reliance on American Paper & Packaging Products is especially

misleading. In that case, the appellate court affirmed the district court’s finding

that the customer list at issue was not a protectable trade secret. See 183 Cal. App.

3d at 1326. The court observed, in dicta (because there was no injunction to

review), that injunctive relief generally “should only last as long as is necessary to

preserve the rights of the parties,” and “only as long as is necessary to eliminate

the commercial advantage that a person would obtain through misappropriation.”

Id. at 1326. “Thus,” the court continued, “an injunction should terminate when

what once might have been a trade secret becomes known to good faith

competitors,” because at that point “it is not a protectable trade secret.” Id. A10

conveniently omits this context, even though it shows exactly why American


48

Paper is not applicable to this case: Brocade has four trade secrets that continue to

be secret and are not “known to good faith competitors.”

b. Even if it were relevant, the commercial advantage associated with Brocade’s trade secrets has not expired.

Even under A10’s tortured reading of the statute to limit a CUTSA

injunction to the length of the plaintiff’s hypothetical “head start,” the District

Court’s injunction would have to be upheld here because A10 has not

demonstrated that Brocade’s head-start over A10 has ended. A10 did not submit

direct evidence showing that it had developed Brocade’s trade secrets

independently or reverse-engineered them, and A10 has not shown by

circumstantial evidence that it necessarily must have done so. A10 has therefore

failed to show that Brocade has lost its commercial advantage over A10 or that the

District Court abused its discretion in enjoining A10 until it could prove that it had

independently developed the trade secrets. In other words, the District Court was

well within its discretion to enjoin A10 from using Brocade’s trade secrets until

A10 can show that it has, through its own research and development work,

dissolved Brocade’s commercial advantage.

A10’s argument to the contrary rests on a thin reed: it repeatedly insists that

Brocade and its expert witness “admitted” or “conceded” that Brocade’s period of

commercial advantage has ended. See, e.g., A10 Br. 48, 52, 60. That is not a


49

remotely accurate characterization, as the District Court recognized in rejecting

this argument. JA41-43. This Court should reject it as well. According to A10,

Brocade’s damages expert calculated the period of “head start” A10 gained by

misappropriating Brocade’s trade secrets and these head-start periods conclusively

determine the extent of Brocade’s commercial advantage.

That is not the case. Brocade’s expert “calculated the minimum time he

believed it would have taken A10 to develop the trade secrets.” JA41-42

(emphasis added). That estimate was in turn based on the amount of time it had

taken Foundry to develop them in reality. Id. As the District Court correctly

noted, Brocade’s expert “never asserted how much time A10 actually would need

to develop the trade secrets” or “that A10 inevitably would have developed them”

before trial. JA43 (emphasis added). Brocade’s expert evidence showed that A10

saved at a minimum many years of research and development expenses, and that

this amount of saved time could serve as an appropriate measure of A10’s unjust

enrichment for purposes of a compensatory damages award. The evidence does

not include a “concession” that Brocade’s advantage over A10 would have

“ended” prior to trial.

Other than this non-existent Brocade “concession,” A10 cites only to

testimony from its trial witnesses—including two of the individual defendants—

who claimed that A10 had independently developed the technologies in “one of”


50

Brocade’s trade secrets and otherwise would have had to include the same features

that Brocade offered in order to stay competitive in the market. A10 Br. 54-56.

A10’s reliance on this testimony is misplaced, for multiple reasons, including that

A10 did not rely on this testimony in the District Court, see JA20431-35, that the

jury necessarily rejected the testimony claiming A10 independently developed

Brocade’s trade secrets, and that general allegations about competition in the

market and what is “key for a successful start-up,” A10 Br. 55, do not prove that

A10 developed the specific trade secrets at issue in this case. A10’s belated

invocation of this testimony cannot salvage its argument.

The District Court reviewed the evidence and found that Brocade’s trade

secrets remain confidential and that A10 has not independently derived those

secrets for itself. That finding was not clearly erroneous. The District Court went

on to emphasize that if A10 does ever independently develop the trade secrets,

such that Brocade’s commercial advantage has ended, A10 may apply for

termination of the injunction and submit evidence to support that showing. A10

has failed to demonstrate that the District Court abused its discretion in enjoining

A10 from misappropriating Brocade’s trade secrets until A10 derives those secrets

for itself, if it ever does. See Morlife, 56 Cal. App. 4th at 1528 (holding that

injunction allowing for termination after disclosure of trade secret conformed to

California law and was not an abuse of discretion).


51

B. The Equitable Factors Also Favor Injunctive Relief.

Although the CUTSA does not require a plaintiff to satisfy the traditional

four-factor test for injunctive relief, see Cal. Civ. Code § 3426.2, the District Court

applied that test anyway and concluded that it supported entry of an injunction.9

There is no basis to disturb that conclusion.

1. A10’s ongoing use of Brocade’s trade secrets irreparably injures Brocade.

The District Court found that Brocade is irreparably injured by A10’s

“continued use” of Brocade’s trade secrets and that “[m]oney damages alone

cannot protect against [that loss of trade secret status.]” JA44. Those findings are

not clearly erroneous and should be affirmed.

For starters, it is well-established that the ongoing, unlawful use of a trade

secret—standing alone—constitutes irreparable injury. See Beckman Instruments,

Inc. v. Cincom Sys., Inc., 165 F.3d 914 (9th Cir. 1998) (“Once lost, [a trade secret]

is lost forever. The harm is irreparable.”); Western Directories, Inc. v. Golden

Guide Directories, Inc., 2009 WL 1625945 (N.D. Cal. June 8, 2009) (presuming

“that Plaintiff will suffer irreparable harm if its proprietary information is

misappropriated”). Indeed, the CUTSA authorizes injunctive relief merely on the

9 In evaluating these factors, the District Court cited cases arising at the preliminary injunction stage or in other inapposite contexts. When reviewing permanent injunctions, by contrast, California courts appear not to conduct a separate review of the equities. See, e.g., Morlife, 56 Cal. App. 4th at 1528; Vacco Indus., Inc. v. Van Den Berg, 5 Cal. App. 4th 34, 53 (1992).


52

threat of misappropriation. Cal. Civ. Code § 3426.2(a); see also ReadyLink

Healthcare v. Cotton, 126 Cal. App. 4th 1006, 1023-26 (2005) (defendant’s

continuing possession and future use of trade secret threatened irreparable injury);

Central Valley Gen. Hosp. v. Smith, 162 Cal. App. 4th 501, 527 (2008) (“actual

possession [of trade secrets] by someone who misused the information in the

past * * * justif[ies] injunctive relief”); Fid. Brokerage Servs. LLC v. McNamara,

2011 WL 2117546, at *5-*6 (S.D. Cal. May 27, 2011) (injunction warranted

where defendant possessed protected client information, misused that information

in the past, and refused to return it).

Moreover, it is a firmly established principle of trade-secret law that ongoing

use of a trade secret vitiates the property interest in its entirety, because a trade

secret’s value flows directly from the right to exclude others. See DVD Copy

Control Ass’n, Inc. v. Bunner, 75 P.3d 1, 84 (Cal. 2003) (“[P]rohibiting the

disclosure of trade secrets acquired by improper means is the only way to preserve

the property interest created by trade secret law.”); Ruckelhaus v. Monsanto Co.,

467 U.S. 986, 1011 (1984) (“Once the data that constitute a trade secret are

disclosed to others, or others are allowed to use those data, the holder of the trade

secret has lost his property interest in the data.”). That is why the “continuing or

threatened use or disclosure of a trade secret normally justifies an award of

injunctive relief.” Restatement (Third) of Unfair Competition § 44 cmt. b (1995).


53

Brocade’s actual loss of its trade secrets to A10, and A10’s ability to continue to

use those trade secrets in its products, was more than sufficient proof of irreparable

injury for the District Court to enter injunctive relief.

It was not all the District Court relied on, however. Brocade also

demonstrated that it would be irreparably injured by A10’s ongoing use of its trade

secrets insofar as they directly advance its business and provide other intangible

benefits that cannot be compensated with money damages. The District Court

found that Brocade’s trade secrets enhance the performance of ServerIron and help

to promote Brocade’s sales. JA44. And Brocade’s trade secrets allow it to

differentiate itself in a competitive market and contribute to its reputation as an

innovator. Id. In addition, sales of ServerIron create additional opportunities for

Brocade to sell attendant products and services and establish lasting relationships

with customers. See, e.g., JA10453; JA10463-64; JA12039-41; JA30009-10.

Based on all of this evidence, the District Court found that A10’s misappropriation

of Brocade’s trade secrets hurts Brocade’s commercial advantage and ability to

differentiate itself.

A10 does not dispute that loss of sales, goodwill, and reputation constitute

irreparable harm, and it offers no evidence countering Brocade’s expert’s trial

testimony proving that Brocade will suffer these unquantifiable injuries as a result

of A10’s misappropriation. The injunction can be upheld on these theories of


54

irreparable harm as well. Indeed, courts have often done so. See Celsis In Vitro,

664 F.3d at 930 (“There is no effective way to measure the loss of sales or

potential growth—to ascertain the people who do not knock on the door or to

identify the specific persons who do not reorder because of the [wrongdoer].”);

Agency Solutions.Com, LLC v. TriZetto Group, Inc., 819 F. Supp. 2d 1001, 1031

(E.D. Cal. 2011) (“With regard to competitive advantage and loss of market status

and goodwill, there is no dispute that such harms, where they occur or threaten to

occur, do warrant injunctive relief because such harms are inestimable.”). See

also, e.g., Coca-Cola Co. v. Reed Indus., 864 F.2d 150, at *2 (Fed. Cir. 1988)

(unpublished); Wyndham Resort Development Co. v. Bingham, 2010 WL2720920,

at *6 (E.D. Cal. Jul. 8, 2010); Lillge v. Verity, 2007 WL 2900568 (N.D. Cal. Oct.

2, 2007).

A10 raises three objections to the District Court’s finding of irreparable

harm. All three boil down to the same flawed claim that Brocade’s trade secrets

are no longer secret.

First, as described above, A10 argues that Brocade is not irreparably injured

by A10’s use of its trade secrets because Brocade’s trade secrets have been

publicly disclosed. A10 Br. 57-59. For the reasons explained above, that

argument fails because the district court did not clearly err in concluding that

Brocade’s trade secrets remain confidential. See supra pp. 40-44.


55

Second, based on the flawed premise that Brocade’s secrets are now public,

A10 argues that Brocade was “fully compensated” for A10’s prior

misappropriation. A10 Br. 46-48. Indeed, A10 seems to suggest that Brocade is

barred from seeking injunctive relief because Brocade asked for damages. A10

Br. 47. But nothing in the text of CUTSA indicates that its remedies are mutually

exclusive, and California courts have repeatedly confirmed that plaintiffs are

entitled to the “full panoply of remedies” the statute makes available. Cadence, 29

Cal.4th at 226.10 Furthermore, Brocade was awarded money damages through

2011 only, as A10 had not provided its 2012 sales records at the time of trial. And

the California Supreme Court has recognized that damages from ongoing trade

secret misappropriation are not fixed and finite: rather, “[t]he potential damages

encompassed by a continuing misappropriation claim may expand with each illicit

use or disclosure of the trade secret.” Id. Therefore, A10’s position that a single

jury award for past damages somehow adequately compensates Brocade for all

future damages lacks any foundation.

10 In Ajaxo v. e*Trade Group, Inc., cited at A10 Br. 60, a California court of appeals remanded a case for retrial with the instruction that a damages award would moot the need for injunctive relief. 135 Cal. App. 4th 21, 64 n.44 (2005). However, there is a crucial distinction: the trade secrets in that case had been publicly disclosed. Therefore, the plaintiff would have had no basis on remand to seek an injunction against future misappropriation.


56

Third, A10 argues that Brocade is not irreparably injured because Brocade

allegedly “conceded” that the commercial advantage associated with its trade

secrets “dissipated long before trial.” A10 Br. 48. As explained above, Brocade

made no such concession, see supra pp. 48-49, and the District Correctly found

that A10 has not independently developed or reverse-engineered Brocade’s trade

secrets. As the District Court explained, even if A10 theoretically could have

developed the trade secrets before trial, A10 would have to show that it actually

did develop those trade secrets in order to show that it was no longer

misappropriating Brocade’s trade secrets and causing Brocade irreparable injury

with each use. JA43. Accordingly, A10 has no basis to claim that the District

Court erred in finding that Brocade’s trade secrets provided the company an

ongoing commercial advantage.

Of course, the fact that Brocade sought unjust enrichment damages did not

in any way cede Brocade’s right to “injunctive relief against further

misappropriation.” Cadence, 29 Cal. 4th at 224. Nor does the jury’s $1 award

foreclose Brocade from asking for an injunction.11 To accept that view would

11 The jury did not give an explanation for its $1 award. However, the District Court instructed the jury not to award duplicative relief (JA13492), Brocade emphasized that the jury should not award double damages in its closing statement (JA13382-83), and the trade secret verdict followed patent and copyright on the verdict form (JA121-127). It is more reasonable to assume that the jury was following the court’s instruction than to assume (as A10 does) that the jury


57

unlawfully convert the jury’s award into a compulsory license—a result the

California Supreme Court has expressly forbidden. See id. at 226 (under the

CUTSA, “a trade secret infringer is by no means rewarded for its infringement

with a license to the misappropriated technology”).

2. The other equitable considerations also favor relief.

A10 does not present any other equitable basis for overturning the trade

secret injunction. It does not raise or argue that the balance of the hardships favors

A10, and it does not raise or argue that the public interest does either. It has

therefore waived any right to do so. In any event, however, these factors also favor

Brocade. See Litton Systems, Inc. v. Sundstrand Corp., 750 F.2d 952, 959 (Fed.

Cir. 1984) (“[a]n injunction against use and disclosure of a trade secret that has

been shown to have been misappropriated * * * preserve[s] * * * the proper status

quo under the law”); DVD Copy Control Ass’n, 75 P.3d at 13-14 (explaining that

trade secret injunctions under the CUTSA serve “significant government interests”

in promoting fair competition and commercial ethics).

believed $1 was appropriate compensation for trade secret misappropriation spanning six years.


58

C. There Is No Basis To Award A10 A Reasonable Royalty.

A10 intimates that the District Court should have “h[e]ld an evidentiary

hearing on an appropriate royalty.” A10 Br. 19. To the extent A10 presents that

claim as a ground for reversal, it should be rejected. As a general matter, appellate

courts are not in the business of blue-penciling the terms of an injunction, and

certainly not when the injunction entered by the District Court was not an abuse of

discretion. Moreover, a reasonable royalty is only available under California law

when an injunction would be “unreasonable” and when damages and unjust

enrichment are “unprovable.” Cal. Civ. Code § 3426.2(b); see Cacique, Inc. v.

Robert Reiser & Co., Inc., 169 F.3d 619, 624 (9th Cir. 1999). Brocade

demonstrated to the District Court that an injunction was reasonable, and

necessary, to protect its trade secrets. A10 fails to demonstrate that the District

Court abused its discretion in entering an injunction on A10’s use of the trade

secrets it misappropriated rather than forcing Brocade to effectively grant a

compulsory license and accept a reasonable royalty.12

12 The District Court suggested that “a reasonable royalty might be more appropriate than an injunction” because it believed an unqualified permanent injunction against A10 could be overly broad. JA47 n.124. The District Court correctly held, however, that California law precluded a reasonable royalty and instead modified the injunction. In so holding, the District Court mistakenly cited Cal. Civ. Code § 3426.3, which authorizes retrospective royalties (a substitute for past damages), instead of citing § 3426.2, which authorizes ongoing future royalties (a substitute for an injunction); but the court reached the correct result. See Cacique,169 F.3d at 624.


59

CONCLUSION

For these reasons, the district court’s entry of the two permanent injunctions

should be affirmed.

Respectfully submitted,

/s/ Neal Kumar Katyal Annette L. Hurst Denise M. Mingrone Bas de Blank ORRICK, HERRINGTON & SUTCLIFFE, LLP 1000 Marsh Rd. Menlo Park, CA 94025 Fabio E. Marino MCDERMOTT, WILL & EMERY 275 Middlefield Rd. Menlo Park, CA 94025 March 26, 2013

Neal Kumar Katyal Jessica L. Ellsworth Judith Coleman David M. Ginn HOGAN LOVELLS US LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 Tel.: (202) 637-5600 Fax: (202) 637-5910 Counsel for Appellees


CERTIFICATE OF COMPLIANCE

1. This brief complies with the type-volume limitations of Federal Rule

of Appellate Procedure 32(a)(7)(B) because it contains 13,954 words.

2. This brief complies with the typeface requirements of Federal Rule of

Appellate Procedure 32(a)(5) and the typestyle requirements of Federal Rule of

Appellate Procedure 32(a)(6) because it has been prepared in a proportionally

spaced typeface using Microsoft Office Word in Times New Roman 14-point font.

/s/ Neal Kumar Katyal


CERTIFICATE OF SERVICE

I hereby certify that on this 26th day of March 2013, I caused a copy of the

foregoing Brief for Appellees to be served by electronic means via the Court’s

CM/ECF system on all counsel registered to receive electronic notices.

/s/ Neal Kumar Katyal


brocade v. a10 - appeal brief

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