LSI Corp. v. Gunnam

1

LSI CORPORATION, Plaintiff and Appellant, v. KIRAN GUNNAM et al., Defendants and Respondents.

LSI CORPORATION, Plaintiff and Respondent, v. ANNAPURNA YARLAGADDA et al., Defendants and Appellants.

H049521, H049523

California Court of Appeals, Sixth District

May 22, 2023

NOT TO BE PUBLISHED

Santa Clara County Super. Ct. Nos. 19-CV-358852, 19-CV-358852

Wilson, J.

LSI Corporation (LSI) sued its former employee Kiran Gunnam for breach of contract, alleging that he violated a confidentiality agreement when he disclosed LSI's proprietary information without authorization. LSI also sued Gunnam's wife, Annapurna Yarlagadda, for intentional interference with contract and inducement to breach contract alleging that she was aware of Gunnam's confidentiality agreement and induced him to breach it.

Gunnam and Yarlagadda filed a special motion to strike pursuant to Code of Civil Procedure section 425.16,^[1] the anti-SLAPP statute.^[2] They argued that LSI's complaint arises in its entirety from protected petitioning activity-namely, a 2018 patent and copyright infringement lawsuit against LSI filed in federal district court by TexasLDPC, a company founded and run by Yarlagadda-and that LSI could not demonstrate a probability of prevailing on the merits.

The trial court granted the motion as to the breach of contract cause of action against Gunnam, determining that the claims arise from protected activity and that LSI had failed to demonstrate the requisite minimal merit as to the damages element. However, it denied the motion as to the causes of action pleaded against Yarlagadda on the ground that the claims do not arise from protected activity. LSI and Yarlagadda appealed.

We determine that LSI's causes of action against both Gunnam and Yarlagadda arise from protected activity because the alleged injury-producing acts were undertaken preparatory to and in anticipation of, litigation. We also determine that LSI carried its burden of demonstrating that each challenged claim in its breach of contract cause of action against Gunnam has the requisite minimal merit. With respect to its claims against Yarlagadda, however, we conclude that LSI has failed to carry that burden.

Accordingly we reverse.

I. Factual and Procedural Background

A. Gunnam's employment with LSI

According to its complaint, LSI is a Santa Clara-based corporation that designs semiconductor and software solutions for accelerated storage and networking in data centers, mobile networks, and client computing.

In January 2008, LSI hired Gunnam as a development design engineer. Prior to joining LSI, Gunnam was a Ph.D. student and employee at Texas A&M University, focusing on low-density parity check code decoders (LDPC), an error-correcting technology used in connection with the transmission of digital information that allows electronic devices to transmit digital information at higher speeds and with greater accuracy.

As a condition of his employment with LSI, Gunnam signed an employee invention and confidential information agreement (agreement) on January 21, 2008. Among other things, the agreement provided: "Confidentiality. Except as authorized by the Company in writing, I agree to keep confidential and not to disclose, or make any use of, either during or subsequent to my employment, all inventions, trade secrets, proprietary or confidential information, works of authorship or proprietary matter that relate to the actual or demonstrably anticipated business, research, development, product, services, devices or activity of the Company, any of its clients, customers, consultants, licensees or affiliates . . . or the Company's employees, which I may produce, obtain or otherwise acquire during the course of my employment."

The agreement set forth examples of what constitutes proprietary information, and provided that Gunnam would not engage in any other employment or activity relating to LSI's business or conflicting with his obligations to the company. In addition, it required Gunnam to "promptly surrender and deliver to the Company all records, drawings, documents and data, in electronic or any other storage media or form pertaining to or containing any Proprietary Information as well as all tangible property of the Company that I have in my custody or control," upon termination with LSI, and expressly provided that Gunnam would "not retain copies of any Proprietary Information, whether in tangible or electronic form." It also stated that Gunnam would not disclose to LSI any confidential information belonging to anyone else.

B. Alleged breaches

On March 8, 2011, Gunnam informed LSI that he was resigning, effective March 18. According to LSI, in the last few months prior to his departure from the company, including in March 2011, Gunnam downloaded and retained LSI's confidential and proprietary material. Specifically, LSI alleges that Gunnam accessed the company's electronic file-sharing platform and data repository-the "TWiki server"-which stores documents both within the scope of, and unrelated to, Gunnam's employment. Gunnam could access the TWiki server by using a unique user ID and, according to LSI, accessed the server on March 2, 2011, to view technical documents related to LSI technology referred to as the McLaren and Spyder read channel architectures (McLaren documents). LSI also alleges that, before leaving the company, Gunnam printed and retained multiple e-mails containing LSI's confidential information.

LSI contends that Gunnam committed additional breaches of the agreement after his departure from the company. Specifically, it claims that on December 18, 2017, the confidential and proprietary information related to the design and development of semiconductor products, which Gunnam improperly retained, was posted on the publicly accessible website www.scribd.com (scribd documents). That confidential and proprietary information included documents that Gunnam authored, or which he had access to, while at LSI, such as the McLaren documents. The same month those documents were uploaded to scribd, an employee at a company called TexasLDPC Inc. (TexasLDPC), discovered them after conducting a web search for "evidence of how LSI and its parent Broadcom were using LDPC decoders in hard disk drive controller chips." LSI contends that Gunnam directly or indirectly caused the scribd documents to be posted publicly to provide a "clean path" for their subsequent use by TexasLDPC in a patent infringement lawsuit against LSI.

TexasLDPC is a Texas company, created in 2015 by Gunnam's wife, Yarlagadda, that develops and licenses intellectual property relating to error-correction coding for electronic devices, and designs and markets LDPC solutions for use in various technologies under the name Symbyon Systems. Yarlagadda created TexasLDPC ostensibly to commercialize patents owned by Texas A&M relating to LDPC technology which incorporates Gunnam's Ph.D. work. Consistent with that, the company negotiated an exclusive license to Texas A&M patents and copyrights relating to Gunnam's LDPC decoder designs.

LSI alleges that Gunnam also provided its confidential information directly or indirectly to TexasLDPC, Yarlagadda, and Fish &Richardson, a law firm representing TexasLDPC, in violation of the agreement. According to LSI, Gunnam testified that he printed copies of the e-mails containing LSI's confidential information and provided them in October 2018 to Fish &Richardson. LSI argues that Gunnam gave the e-mails to Fish &Richardson "to assist Fish in suing on behalf of TexasLDPC."

C. Delaware lawsuit

In December 2018, TexasLDPC sued LSI and its parent company Broadcom for patent infringement in federal district court in Delaware (Delaware lawsuit).^[3] It filed its first amended complaint in the Delaware lawsuit in January 2019, in which it added certain claims and defendants, and alleged that LSI's LDPC-containing products infringed six patents and four copyrights exclusively licensed to TexasLDPC.

LSI contends that TexasLDPC's complaint in the Delaware lawsuit relied on the scribd documents and the e-mails with confidential information that Gunnam had provided to Fish &Richardson and TexasLDPC. According to LSI, the Delaware complaint also relied on e-mails Gunnam had sent to LSI in 2012, 2013 and 2014, which he designated as "LSI Confidential," in which he accused LSI of infringing on Texas A&M's patents and described features of the LDPC decoder he had developed at LSI.

D. Complaint

LSI filed the complaint in this action on November 18, 2019, naming Gunnam and Yarlagadda as defendants (complaint). As to Gunnam, the complaint asserts one cause of action for breach of contract and one cause of action for breach of covenant of good faith and fair dealing. The breach of contract cause of action specifically alleges that Gunnam breached his obligations under the agreement "by using and/or disclosing, and/or causing others to use and/or disclose, LSI's confidential and proprietary information without LSI's authorization," as alleged elsewhere in the complaint, and that LSI was harmed and will continue to suffer damage as a result. The breach of covenant of good faith and fair dealing cause of action similarly alleges that Gunnam's breach unfairly interfered with LSI's right to receive the benefits of the agreement.

As to Yarlagadda, the complaint asserts one cause of action for intentional interference with contract and one cause of action for inducement to breach contract. The intentional interference with contract cause of action specifically alleges that Yarlagadda knew or should have known that Gunnam entered into the agreement and agreed to protect LSI's confidential and proprietary information from unauthorized use and...