Thoits, Love, Hershberger & McLean Law Blog

Stop Light Texting a No-No

California law prohibits anyone driving on public roadways from using a wireless telephone unless the phone is configured for hands-free listening and talking, and is used in that manner while driving.  Carl Nelson is one person who would not willingly accept the ticket he received for using his phone while stopped at a stop-light.  And, Mr. Nelson was unfortunate to have a police-officer on a motorcycle stopped next to him.  (It is interesting to note however that he may not have been as confident in his position when he was ticketed, as he seemed in court thereafter:  When the officer stopped next to him, he immediately removed the flip-type cell-phone from his ear and closed it.) 

Mr. Nelson challenged the citation in traffic court, where he testified he was “checking his email and pushing some buttons on his phone” but only while stopped, waiting for a green light.  He lost. He then appealed to the Superior Court, and lost.  Finally, he appealed his citation to the California Court of Appeal, where he argued that he was not “driving,” and therefore the law did not apply to him. 

If you love texting while driving, don’t get your hopes up.  Even though it took the California Court of Appeals 24 pages to explain its ruling, it was clear:  when one is stopped at a stop light, he or she is still “driving.”  The ticket was confirmed, and a perceived loophole closed by a thorough Court of Appeal.  

One of the three justices wrote a concurring opinion, and while he applauded the majority’s “scholarly analysis of legislative history,” he did not think it was necessary or warranted and in less than one page concluded “…all of us are expected to stop for red lights, stop signs, crossing trains, and funeral processions.  In short, all drivers may, and sometimes must, stop.  But they do so while ‘driving.’  Just like defendant.”  Here is the decision.

Don’t text and play with your smart phone while “driving.”  (Unless, of course, the exception applies.)

Stephen C. Gerrish, Litigation Group

 

Facebook Privacy Privilege Rejected

There are no secrets.  Perhaps a wise rule to live by in an age of instant and gratuitous sharing of personal information, reinforced by a shifting culture where the boundaries of trust, privacy and discretion are fluid, and sensitivities to, and definitions of, what is "confidential" varied, and set by self-interest more than traditional community norms.  It is this latter perception that may cause many to think that the information they post on social networking sites is somehow special, protected, or private, or not part of their "real life."  Anyone that harbors such views should consider the caution of two commentators, whose work was recently cited in a judicial decision:  "...in this environment privacy is no longer grounded in reasonable expectations, but rather in some theoretical protocol better known as wishful thinking."  (Fleming and Herlihy, Department: Heads Up: What Happens When the College Rumor Mill Goes Online? Privacy, Defamation and Online Social Networking Sites, 53 B.B.J. 16 (January/February, 2009)). 

And so, as so often happens, dreams of wishful thinkers are dashed, sometimes in rather inglorious circumstances.  Take, for example, Bill McMillen, Sr., who claimed damages for personal injuries resulting from an accident he had when he was rear-ended in a stock car race.  He sued the speedway.  The speedway demanded that Bill turn over all his passwords and user names to Facebook and MySpace because it had reason to believe that information had been posted that suggested he was not injured as claimed.  Bill claimed his Facebook and MySpace passwords and user names were confidential and, more importantly, that his communications with friends on Facebook and MySpace were privileged from disclosure, much like a confidential communication between an attorney and his or her client.  The court in McMillan v. Hummingbird Speedway, Inc. (Pennsylvania Court of Common Pleas 9/9/10) rejected his contention.  After reviewing each site's terms of use and their basic structure and purpose ("...their ilk are social network computer sites people utilize to connect with friends and meet new people...they do not bill themselves as anything else."), the court noted that while millions of people join social networks, "more than a few use those sites indiscreetly" and the if they do, and those "indiscretions are pertinent to issues raised in a lawsuit in which they have been named, the search for truth should prevail."  Where there is an "indication" that relevant information may reside on a social network site, "access to those sites should be freely granted."  Bill McMillan was ordered to turn over user names and passwords to opposing counsel, who were granted free access to the contents of his accounts. 

The court pointed out that social networks are a "communication forum" useful in fostering relationships - but that confidentiality is not essential to maintain those relationships, and "while one may expect that his or her friend will hold certain information in confidence" the maintenance of the friendship does not depend on it.  A friendship is not like a relationship with a doctor, lawyer or priest.  And, when one posts information on a social network, given their terms and how they operate, he or she cannot reasonably expect that communications would remain confidential - such an expectation may be wishful thinking. 

In short, a member of Facebook or MySpace cannot maintain that his or her account is confidential.  So, anyone who claims to be injured, and is seeking compensation for those injuries, should realize that videos they post on Facebook of them jumping off cliffs, playing softball, wrestling with alligators, surfing big waves, etc. will be discovered and used to impeach their claims.  Revealed content may have other consequences, more or less consequential.  Social networking can be a wonderful way to maintain relationships and pass on information instantaneously - but if you have a secret to keep, do it the old-fashioned way. 

Stephen C. Gerrish, Employment Group

Employment Arbitration Agreements - Again

Another California court has ruled that an agreement between an employer and employee that all employment related claims must be arbitrated, instead of taken to court, is unenforceable.  In this most recent case, Trivedi v. Curexo Technology Corporation, the court found that the employer could not force the dispute into binding arbitration because:

1. The agreement was prepared by the employer;
2. The employee’s consent to the agreement was required as a condition of employment;
3. The employee was not given a copy of the arbitration rules that were recited in the agreement as governing the dispute;
4. The agreement changed the rules on the recovery of attorneys’ fees in discrimination cases, in a way favorable to the employer; and,
5. The agreement allowed either party to go to court, instead of the arbitration tribunal, to obtain an injunction, if necessary (which the court found tended to favor the employer).

Because of the first three problems, the court found the agreement “procedurally unconscionable.”  The final two reasons made the agreement “substantively unconscionable.”  The court stated that it was compelled to throw out the entire agreement, not just the problematic parts of it, because of the collective impact of the reasons, and the fact that there was more than one reason for substantive unconscionability.

What can an employer do, if anything, to create an enforceable arbitration agreement?  The first two criticisms listed above are actually quite customary and will not necessarily doom an agreement.  The third flaw can easily be prevented by paying more attention to the paperwork at the time of hiring.  The fourth flaw, by itself, may not have rendered the agreement completely unenforceable, but in any event could have been avoided by careful drafting.  The fifth flaw is well known in California as a problematical provision.  In short, had this employer followed more scrupulously the admonitions of the California Supreme Court (see, Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83) when drafting the agreement, rather than attempting to give itself some advantages, the arbitration clause may have been saved.  Further comment on the fourth and fifth flaws is useful.

Under state and federal anti-discrimination laws, an employer will not necessarily be entitled to attorneys’ fees if it is the prevailing party, even though a successful employee will be.  The law on this is well developed.  But, Curexo’s agreement provided that the “prevailing” party, whether employer or employee, was to be awarded its attorneys’ fees and costs.  The court was offended by this alteration of the balance of power, despite the employer’s argument that no matter what law governed the arbitrator had discretion to deny a successful employer an award of its attorneys’ fees.  The court was not impressed: call this strike two, after the procedural problems mentioned above.

As to the fifth and final flaw, California courts have dealt with this in the past:  it is generally agreed that the party most likely in need of going to the courthouse to obtain an injunction will be the employer.  So, adding the provision exempting such efforts from arbitration distinctly favors the employer. Strike three.

The lesson:  in an employment setting arbitration agreements must be fair and follow the admonitions of established California law. The drafting process should not be an exercise in seeing how many potentially beneficial provisions the employer can get away with.  If the employer’s considered business strategy is that requiring arbitration of employment disputes is beneficial, then an agreement should be used that assures the accomplishment of that strategy.  The Trivedi case provides additional life-lessons along that strategic pathway.

Stephen C. Gerrish, Employment Group

Oral Home Improvement Contract Enforceable

A recent case by a California Court of Appeal provides a reminder for homeowners and contractors that California’s requirement that “home improvement contracts” must be in writing does not necessarily prevent a contractor from enforcing an oral contract for payment, when fairness and justice so require; and, that a homeowner’s tactics in dealing with a contractor should be considered very carefully.

Hinerfeld-Ward, Inc. v. Lipian (Sept. 1, 2010), involved a complex home improvement project. The homeowners did not have a written contract with the contractor, as required by California law.  The Lipians retained Hinerfeld as their contractor and work proceeded for the next two years, through 19 invoices.  The Lipians’ architect approved all of these bills, which were paid by the Lipians, until April 2006, when they disputed certain charges on the twentieth invoice.  At the time, the Lipians owed their contractor over $200,000.  Because of the dispute the Lipians terminated Hinerfeld.  Hinerfeld sued for payment, even though he did not have a written contract. The Lipians asserted their own claims against the contractor for fraud, breach of contract and defective work, and, significantly, claimed they owed nothing because the oral contract with Hinerfeld was void and unenforceable.  They contended that California’s statutory requirement that all “home improvement” contracts must be in writing prevented the court’s enforcement of the “void” oral home improvement contract.  The trial court disagreed and awarded Hinerfeld damages of $202,181, plus interest of $36,232, costs of $38,953, a monthly two percent assessment of $54,736, and attorneys’ fees of $200,000.  The Lipians appealed, but the Court of Appeal also ruled against them, and affirmed the trial court judgment.

California law requires that a contract for home improvements between an owner and a contractor must be in writing and contain specific provisions. (Business & Professions Code section 7159).  The Lipians contended that an oral contract violates the statute and is void, and could not be enforced by the contractor.  The appellate court disagreed, stating that other factors established that it would be unjust to declare the contract void, including:  (i) the Lipians were sophisticated individuals, and not within the class of unsophisticated consumers intended to be protected by the statute; (ii) the contract in question, for a unique, long-term, ever evolving construction project, was not the type that California’s public policy would declare void; (iii) the owners’ relationship with their architect, as their representative, was long-term and well-established, and served to protect the owner’s interests; and, (iv) the owners had accepted the benefits of the agreement.  In summary, the court said that “…this is a compelling case warranting enforcement of the oral home improvement contract…”  All of factors combined to support enforcement in favor of the contractor.

Thus, this case was a disaster for the homeowners.  Their difficulties were compounded by how they handled the final payment application submitted by the contractor. 

California law restricts the ability of a homeowner to hold back progress payments by limiting any amount withheld to 150% of value of any disputed item.  Rather than paying the amount that was undisputed, they withheld the entire amount of the billing, thus violating the statute. (The jury actually found that the Lipians were entitled to only $1,000).  The court strictly applied the statute against the Lipians.  Their violation cost the them the additional statutory penalties and attorneys’ fees, which are authorized by the statute.  So, the aggressive tactic of withholding the entire amount of a contractor’s billing seriously back-fired on the Lipians.

In any business relationship it is important to “get it in writing.”  But, as this case shows, even if a statute requires a written contract, exceptions will always exist, especially when a strict reading of the statute would work an injustice.  This case offers a number of lessons on how to manage and document a successful home construction project – some of them strategic, some of them psychological and some of them legal.

Stephen C. Gerrish, Real Estate Group

Trademark Infringement: First Sale Doctrine No Defense

In Au-Tomotive Gold Inc. v. Volkswagen of America, Inc., 603 F.3d 1133 (9th Cir. May 6, 2010), the Ninth Circuit refused to extend the First Sale Doctrine as a defense in circumstances where a likelihood of post-sale confusion as to the origin of the accused goods exists.
 
The trademark in question was Volkswagen’s well known logo consisting of the letters “Vw” inside a circle.  Au-Tomotive Gold Inc. (“Auto Gold”) produced and sold automobile accessories, including marquee license plates with badges displaying Volkswagen’s Vw logo mounted on them.  Auto Gold claimed its use of the badges was legitimate under the “First Sale Doctrine” because it purchased the badges on the open market from an authorized Volkswagen dealer, and also included a disclaimer in the packaging of the marquee license plates that explained that the plates were not sponsored by or affiliated with Volkswagen.
 
The Ninth Circuit disagreed, ruling that the First Sale Doctrine did not apply.
 
The court distinguished a long line of cases applying the First Sale Doctrine to situations where consumers were not likely to be confused over the source of the accused goods, in large part, because labels contained on the packages diminished the likelihood of confusion as to their origin.  Rather, the court noted that people walking down the street who saw the marquee license plates would likely affiliate it with Volkswagen, having never seen the disclaimer language in the packaging.  “Indeed, customers buy marquee license plates principally to demonstrate to the general public an association with Volkswagen.  The demand for Auto Gold’s products is inexplicably tied to the trademarks themselves.”
 
The court explained that post-purchaser confusion creates a “free rider” problem:

“Auto Gold contends that in ’First Sale‘ cases, the element of free riding present in other post-sale cases disappears because the producer has paid the price asked by the trademark owner for the ride.  This contention misses the point.  When a producer purchases a trademarked product, that purchaser is not purchasing the trademark. Rather, the producer is purchasing a product that has been trademarked.  If a producer profits from a trademark because of post-purchase confusion as to the source of a new product, the producer is free riding even though it has paid for the trademarked product.”

The court’s decision makes it clear that the First Sale Doctrine will not extend to cases where a disclaimer is ineffective in eliminating potential confusion as to the origin of the goods.  In most situations where there is a benefit being derived by confusion as to the source of the goods, there exists potential liability under the Lanham Act.

Andrew P. Holland, Intellectual Property Group

Gray Market Clothing Distribution

The importation of gray market branded clothing into the U.S. and other countries has created a significant disadvantage for authorized distributors, who have to pay substantially higher prices for the same branded clothing, but which is being sold for less by gray marketers.

“Gray market” is the term used to describe the sale of new, used, surplus and refurbished products through unauthorized resellers or channels.  In the apparel industry, for example, branded clothing is often designed in the United States, manufactured abroad, and then sold to customers all over the world.  While much of the branded clothing is intended to be sold in a specific geographic territory pursuant to exclusive distribution agreements, a third party importer can circumvent this distribution channel by purchasing the clothing abroad and then reselling it.
 
Those trying to prevent the importation of gray market goods into the U.S. may invoke unfair competition, tort, patent, copyright and trademark laws, depending on the circumstances.  An overview of potential remedies was the subject of an earlier post on this site.
 
Gray marketers are successful because they can severely undercut the prices that authorized distributors can offer because the branded clothing is usually sold to the authorized distributor for a higher price than that for which it is sold to a foreign, unauthorized distributor, which usually occurs when the product can be purchased for a much lower price in another country.  This is possible because these unauthorized foreign distributors often do not need to invest the same amount of resources into branding, taxes, packaging, advertising, labor and warranties as an authorized distributor does.  It is often argued that unauthorized distributors are free-riders on the goodwill of the trademarks that the authorized distributors invest in.  In many situations, an unauthorized distributor can still make a significant profit by purchasing branded clothing from a U.S. manufacturer and then importing the branded clothing back into the U.S. to be sold at a price that significantly undercuts the prices an authorized distributor selling the same branded clothing can afford to charge.  Consumers are attracted to the lower prices and authorized distributors cannot fairly compete.  Because authorized distributors cannot fairly compete with the prices offered by gray marketers, the distribution relationships between the trademark owners and authorized distributors (who have often devoted substantial resources to creating a legitimate distribution infrastructure), can be severely disrupted.  This puts substantial pressure on manufacturers to stop the importation of gray market goods.

The Internet and on-line auction sites such as eBay have made it even easier for gray marketers to circumvent traditional distribution channels, which makes it difficult for authorized distributors and trademark owners to monitor and control the re-importation of branded clothing into the U.S.  Some companies such as Zepol and MarkMonitor have made a business out of monitoring and tracking the flow of gray market goods and assisting textile and apparel manufacturers identify counterfeiters and unauthorized distributors.  MarkMonitor, for example, claims to have saved Under Armour, a popular sports apparel manufacturer, approximately $2 million attributed to eliminating gray market sales by helping to identify and prosecute unauthorized distributors.

The largest volume of importation of counterfeit and gray market goods appears to come from countries such as China, Malaysia and India.  Moreover, the global impact of gray market importing extends to far more countries than the U.S.  Authorized apparel distributors in the E.U. and in countries such as Japan and Canada also experience significant problems with gray market importation undercutting their prices and diluting their trademarks.  Well funded organizations such as the Alliance for Gray Market and Counterfeit Abatement are devoted to stopping the importation of gray market goods, but unless a comprehensive international treaty is adopted and enforced, adequately regulating the importation of gray market branded clothing into various countries is almost impossible.

Andrew P. Holland, Intellectual Property Group

Electronic Discovery Update

In the last post on Electronic Discovery Compliance, this blog explored Judge Sheindlin’s most recent decision involving litigation opponents’ duties to preserve and produce evidence during litigation, The Pension Committee of the University of Montreal Pension Plan v. Banc of America Sec., LLC. In May 2010, Judge Sheindlin entered an important amendment to her decision. The amendment clarifies language in the original opinion that could have led to confusion. The original sentence, emphasized with underlining, read: “By contrast, the failure to obtain records from all employees (some of whom may have had only a passing encounter with the issues in the litigation), as opposed to key players, likely constitutes negligence as opposed to a higher degree of culpability.” Now, that sentence reads: “By contrast, the failure to obtain records from all those employees who had any involvement with the issues raised in the litigation or anticipated litigation, as opposed to just the key players, could constitute negligence.”

The new sentence incorporates two important concepts that have an overall softening effect on the original language used. First, with this amended text Judge Scheindlin indicated that judges expect litigants to obtain records from all employees who had any involvement with the issue, not simply all employees of an organization. This distinction makes a huge difference. If a company has 7,000 employees, but only 100 were potentially involved in the issues, a company tasked with obtaining records can obtain them from the 100, not the 7,000, without running afoul of its mandate to preserve evidence. The other change in the sentence suggests that a company’s failure to obtain records could constitute negligence, but doesn’t likely constitute negligence. Thus, in each case where there is an accusation that evidence wasn’t preserved, the judge will look at the facts of the case to determine if the failure was negligent, but won’t assume it was negligent from the start.

Erin L. McDermit, Employment Group

Plastic Bag Bans in the California Supreme Court

Many cities in California, starting with San Francisco, have enacted or are considering bans on plastic shopping bags.  The Save the Plastic Bag Coalition has been striking back.  Its case against the City of Manhattan Beach was recently accepted for review by the California Supreme Court.
 
Save the Plastic Bag Coalition claims that the City of Manhattan Beach should have conducted an environmental impact report before adopting its plastic bag ban.  The California Court of Appeal agreed with the coalition, and now the California Supreme Court will hear arguments in the case later this year or in 2011.  If the Supreme Court agrees with the appellate court, the cost and delay of implementing plastic bag bans for cities and counties could increase greatly in the short term.

While the litigation continues, though, so do new bans on plastic bags.  Santa Cruz County recently approved a ban, with the caveat that it would not go into effect until an environmental impact report is completed.  To help cities and counties considering bans with the environmental impacts, Green Cities California has made available a Master Environmental Assessment on its website (http://greencitiescalifornia.org/mea).  Check in for updates as the case progresses.

Anne E. Senti-Willis, Business Group

Employment Arbitration Dealt a Heavy Blow by the California Supreme Court

A closely-divided California Supreme Court has dealt employment arbitrations a potentially huge setback.  In a 4-3 decision, the court held that an arbitrator’s legal error warranted vacating an arbitration award where the error deprived an employee of his right to a hearing on the merits of his claim arising under California’s Fair Employment and Housing Act (“FEHA”).

 

The court attempted to limit its holding to the “particular circumstances of this case,” but the potential expansion of this ruling to future cases is clear.  Arbitration awards, even where the arbitrator gets it wrong, are supposed to be final and binding, as announced in the leading case of Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, nearly 20 years ago.  The new case that changes the landscape is Pearson Dental Supplies, Inc. v. Superior Court (Turcios) (2010 Cal. LEXIS 3685), available here.

The plaintiff, Luis Turcios, was terminated in January 2006, at the age of 67.  On October 2, 2006, within one year of being terminated, he filed a lawsuit in Superior Court claiming age discrimination and wrongful termination.

In March 2007, Pearson filed a motion to compel arbitration.  Pearson claimed the parties were bound to arbitrate any disputes by virtue of an employment arbitration agreement signed by Turcios while working at Pearson.  The agreement stated that any dispute must be submitted to binding arbitration within one year from the date the dispute arose and, if not submitted to arbitration within one year, the claim would be void and considered waived to the fullest extent allowed by law.

The court granted Pearson’s motion to compel arbitration.  The parties then selected an arbitrator to conduct binding arbitration.  Pearson filed a motion for summary judgment with the arbitrator, contending that Turcios’s claims were time-barred because they had not been submitted to arbitration within one year of plaintiff’s termination.  The arbitrator, in a brief letter ruling, held in favor of Pearson and dismissed the claims as time-barred.  Turcios, therefore, never got a full hearing on his claims – in arbitration or in court.

The California Supreme Court, however, granted him relief.  The court held for Turcios despite the usual rule that the arbitrator’s legal error is not a basis for vacating an arbitrator’s award.

By signing an arbitration agreement, the parties generally take the risk of arbitral error in return for a quick, inexpensive and conclusive resolution to their dispute.  Ever since Moncharsh, practitioners have understood that arbitrators are not necessarily bound to follow the law and may base their decisions upon broad principles of justice and equity.  The California Supreme Court has now backed off of its decision in Moncharsh, at least in cases involving claims arising under FEHA, and quite possibly, by extension, claims arising under the California Labor Code as well.

According to the court:

“We therefore hold that when, as here, an employee subject to a mandatory employment arbitration agreement is unable to obtain a hearing on the merits of his FEHA claims, or claims based on other unwaivable statutory rights, because of an arbitration award based on legal error, the trial court does not err in vacating the award.  Stated in other terms, construing the CAA [California Arbitration Act] in light of the Legislature’s intent that employees be able to enforce their right to be free of unlawful discrimination under FEHA, an arbitrator whose legal error has barred an employee subject to a mandatory arbitration agreement from obtaining a hearing on the merits of a claim based on such right has exceeded his or her powers within the meaning of Code of Civil Procedure section 1286.2, subdivision (a)(4), and the arbitrator’s award may properly be vacated.  (See Armendariz, supra, 24 Cal.4th at pages 106-107.)”

It is not difficult to imagine that many employees unsatisfied with arbitration results can point to a “legal error,” and that the Turcios argument will be made any time a FEHA-based claim, or a wage and hour claim, does not go to a full hearing on the merits but is dismissed on a pre-hearing motion or demurrer.

Arbitration remains a viable option for employers, but they must watch out for compliance with substantive and procedural nuances before and during the process that may serve to invalidate the arbitration award.

Jeffrey A. Snyder, Employment Group

Silvaco Data Systems and Misappropriation of Source Code

In the decision of Silvaco Data Systems. v. Intel Corporation (April 29, 2010), Judge Conrad Rushing of the Sixth Appellate District of the California Court of Appeal has authored a compelling and fascinating opinion.  Compelling for its holding that one who uses software (executable object code) does not thereby misappropriate trade secrets embodied in that software’s source code, which the user never possessed, acquired or used.  Fascinating for Judge Rushing’s methodical dissection of the arguments and “strained” logic advanced by Silvaco in its attempt to prove its case; fascinating also for the simplicity of the Judge’s wonderful “pie analogy,” which explains the decision in a very simple way.  In all, an informative, unambiguous, challenging and, yes, entertaining, decision.

Silvaco appealed an adverse trial court ruling throwing out its case in which it claimed that Intel was guilty of misappropriation of trade secrets because it “…had used software acquired from another software concern with knowledge that Silvaco had accused that concern of incorporating source code, stolen from Silvaco,”  The court of appeal framed the issue as follows:  “…whether a defendant can be liable for misappropriation of a trade secret which is admittedly embodied in source code, based upon the act of executing, on his own computer, executable code allegedly tainted by the incorporation of design features wrongfully derived from the plaintiff’s source code.”

The court’s answer was, no.  In the process of reaching that answer, the court addressed numerous arguments by Silvaco including that Intel had nevertheless “used” or “acquired” trade secrets, although never possessing the source code; that Intel should be liable for misappropriation whether or not it “comprehended” the trade secrets; that Intel was judicially estopped from claiming that it did not violate the California Uniform Trade Secrets Act; and, that the Act was not the exclusive remedy available to Silvaco. 

Intel argued throughout the litigation that “…it could not have misappropriated Silvaco’s trade secrets—could not have acquired, disclosed, or used them—because it never had them.”  The court found the evidence supporting this position was uncontroverted.

In his lengthy decision, Judge Rushing addressed each of Silvaco’s arguments, and more.  But ultimately, two simple concepts controlled.  The first has to do with eating the pie. Rejecting Silvaco’s argument that Intel “used” the trade secrets, the court stated:

One who bakes a pie from a recipe certainly engages in the “use” of the latter; but one who eats the pie does not, by virtue of that act alone, make “use” of the recipe in any ordinary sense, and this is true even if the baker is accused of stealing the recipe from a competitor, and the diner knows of that accusation. Yet this is substantially the same situation as when one runs software that was compiled from allegedly stolen source code. The source code is the recipe from which the pie (executable program) is baked (compiled).

Intel only ate the pie.  Judge Rushing succinctly stated the second fundamental point:  “…one cannot be said to have stolen something he never had.”

No doubt the decision on the merits will generate much discussion, as will its intriguing footnote 2, which deals with appellate practice, and is treated in another post on this site.  And, perhaps the decision will be subject to further review.  

Stephen C. Gerrish, Litigation Group