SanDisk Corp. v. SK Hynix Inc.

84 F.Supp.3d 1021

SanDisk Corporation, Plaintiff

v.SK Hynix Inc., et al., Defendants.

Case No.: 14–CV–04940–LHK

United States District Court, N.D. California, San Jose Division.

Signed March 26, 2015

Jeffrey R. Chanin, Nicholas David Marais, Robert Addy Van Nest, Steven Paul Ragland, Frances Cheston Thacher, Katherine Morag Lovett, Keker & Van Nest LLP, San Francisco, CA, for Plaintiff.

Rebecca Edelson, Seong H. Kim, Steptoe & Johnson LLP, Ekwan Eric Rhow, Bird Marella Boxer et al., Terry William Bird, Bird, Marella, Boxer, Wolpert, Nessim, Drooks & Lincenberg, Los Angeles, CA, Sanjeet K. Dutta, William Frederick Abrams, Steptoe & Johnson LLP, Palo Alto, CA, William Grignard Pecau, Jeffrey Michael Theodore, Steptoe and Johnson LLP, Washington, DC, Robert Greenfeld, Steptoe & Johnson LLP, New York, NY, Elizabeth Marie Pipkin, McManis Faulkner, A Professional Corporation, San Jose, CA, for Defendants.

ORDER GRANTING MOTION TO REMAND, AND DENYING MOTION TO COMPEL ARBITRATION AND MOTION TO DISMISS

Re: Dkt. Nos. 52, 53 & 75

LUCY H. KOH, United States District Judge

Before the Court are three motions. Plaintiff SanDisk Corporation (“SanDisk”) has filed a motion to remand the instant case to Santa Clara County Superior Court. ECF No. 75 (“Mot. Remand”). Defendants SK Hynix, Inc., SK Hynix America, Inc., and SK Hynix Memory Solutions (collectively, “Hynix”) have filed a motion to compel arbitration, ECF No. 53 (“Mot. Compel”), as well as a motion to dismiss for forum non conveniens, ECF No. 52 (“Mot. Dismiss”). Having considered the parties' submissions, the record in this case, and the applicable law, the Court GRANTS SanDisk's motion to remand, DENIES Hynix's motion to compel arbitration without prejudice, and DENIES Hynix's motion to dismiss for forum non conveniens without prejudice, for the reasons stated below.

I. BACKGROUND

A. Factual Background

SanDisk is a Delaware corporation with its principal place of business in Milpitas, California. ECF No. 2–12 (“Compl.”) ¶ 9. SanDisk designs, develops, and manufactures flash memory products, such as solid-state drives, flash memory cards, and USB flash drives. Id. ¶¶ 2, 9. Flash memory is an electronic, non-volatile computer storage medium. Id. ¶ 19. SanDisk's flash memory products are used in, among other things, computers, mobile phones, and gaming devices. Id. ¶ 9.

Defendant SK Hynix, Inc. (“SK Hynix”) is a South Korean company with its principal place of business in Incheon, South Korea. Id. ¶ 10. SK Hynix manufactures various digital memory products, including flash memory, which are distributed throughout the world. Id. Defendants SK Hynix America, Inc. and SK Hynix Memory Solutions are California corporations with their principal places of business in San Jose, California.Id. ¶¶ 11–12. SK Hynix America, Inc. and SK Hynix Memory Solutions are wholly-owned North American subsidiaries of SK Hynix, and sell and distribute SK Hynix's flash memory products throughout the United States. Id.

1. The Patent Cross–License Agreement

On March 20, 2007, SanDisk and Hynix entered into a [Redacted] Patent Cross License Agreement. See ECF No. 50–2 (“PCLA”), § 6.14(dd). As part of the Patent Cross License Agreement, SanDisk granted to Hynix [Redacted] Id. § 2.1. The Patent Cross License Agreement defines [Redacted] as [Redacted] Id. § 6.14(bb). In consideration for the Patent Cross License Agreement, Hynix paid SanDisk a license fee of [Redacted]. Id. § 4.2.

The Patent Cross License Agreement includes two clauses that are of particular relevance to the instant dispute. First, the Patent Cross License Agreement contains an arbitration clause. That clause states: [Redacted] Id. § 6.10. The arbitration clause further provides that arbitration will take place in [Redacted]. Id.

Second, the [Redacted] of the Patent Cross License Agreement provides that [Redacted] Id. § 6.2(g).

2. Hynix's Alleged Misappropriation of SanDisk Trade Secrets

The instant litigation stems from SanDisk's claimed trade secrets involving SanDisk's designs, devices, processes, and recipes related to its flash memory products, including a type of flash memory known as NAND flash memory. See Compl. ¶¶ 20–21. SanDisk claims that its trade secrets related to flash memory give SanDisk a competitive edge over other its competitors, including Hynix. Id. ¶ 24.

Sometime in the 2000s, SanDisk formed a series of joint ventures with another company in the industry, Toshiba Corporation (“Toshiba”). Id. ¶ 27. SanDisk and Toshiba both contributed employees and confidential information to the joint ventures. Id. ¶ 28. SanDisk's and Toshiba's contribution of confidential information was subject to confidentiality agreements, and both SanDisk and Toshiba allegedly took reasonable measures to maintain the confidentiality of information each company contributed to the joint venture. Id. One of the SanDisk–Toshiba joint ventures projects was a consolidated semiconductor fabrication plant located in Yokkaichi, Japan, which would develop advanced flash memory devices and processes related to NAND flash memory. Id. ¶ 29.

One of the SanDisk employees hired to work at the Yokkaichi plant was Yoshitaka Sugita (“Mr. Sugita”). Id. ¶ 31. Mr. Sugita worked for SanDisk from approximately February 2003 until he resigned effective June 30, 2008. Id. Upon his resignation, Mr. Sugita went to work for Hynix. Id. ¶ 34. In or around May 2008, while working at the Yokkaichi plant and before he left to work at Hynix, Mr. Sugita allegedly accessed and misappropriated 10 gigabytes of information, including SanDisk's most sensitive trade secrets related to NAND flash memory. Id. SanDisk alleges that Hynix solicited Mr. Sugita to download these files and misappropriate SanDisk's trade secret information. Id. Mr. Sugita worked at Hynix in South Korea from July 2008 to June 2011. Id. ¶ 35.

SanDisk learned of the alleged misappropriation of its trade secrets in January 2014, from an informant who had first worked at SanDisk and subsequently at Hynix. Id. ¶ 36. This informant told SanDisk that documents containing the legend “SanDisk/Toshiba Confidential” were distributed among Hynix employees and posted on Hynix's internal database. Id. In addition, the informant reported that a document was printed on paper bearing a Hynix watermark, but it “clearly” contained evaluations, test results, technical decisions and information co-developed by SanDisk and Toshiba and bearing the legend “SanDisk/Toshiba Confidential.” Id. SanDisk and Toshiba provided the Tokyo Metropolitan Police Department with evidence supporting allegations that Mr. Sugita and Hynix misappropriated SanDisk's trade secrets. Id. ¶ 38. Japanese law enforcement detained Mr. Sugita on March 13, 2014. Id.

According to counsel for SanDisk who attended Mr. Sugita's criminal trial on January 20 and 21, 2015, Mr. Sugita testified that a Hynix director asked him to steal non-public semiconductor design information for SanDisk–Toshiba flash memory products while Mr. Sugita was employed at SanDisk. Declaration of Jeffrey Chanin in Support of SanDisk's Opposition to Motion to Dismiss for Forum non Conveniens, ECF No. 113, ¶ 15. Mr. Sugita further testified that while he was negotiating with Hynix for employment there, Mr. Sugita told Hynix that he could provide Hynix stolen SanDisk–Toshiba NAND flash memory information in exchange for director-level compensation and benefits. Id. Mr. Sugita further testified that when he was employed at Hynix, Hynix pressured him heavily to disclose additional NAND flash semiconductor information that Mr. Sugita had stolen from SanDisk. Id. ¶ 16.

According to emails submitted as evidence during Mr. Sugita's criminal trial, Ko Ahn, a Hynix director, emailed Mr. Sugita on March 18, 2008 (while Mr. Sugita was still employed at SanDisk) to arrange for Mr. Sugita to meet with the person in charge of human resources at Hynix.¹ Exhibit A to the Supplemental Declaration of Jeffrey R. Chain in Support of SanDisk's Opposition to Motion to Dismiss for Forum non Conveniens, ECF No. 129–3, at 1–2. In that email, which is written in English, Ko Ahn also states “I would like to know the information of nonon structure.” Id. at 1. According to counsel for Hynix, “nonon” refers to a “[n]itride-oxide nitride oxide nitride dielectric which can be used in certain NAND flash devices.” Supplemental Declaration of Jeffrey R. Chain in Support of SanDisk's Opposition to Motion to Dismiss for Forum non Conveniens, ECF No. 129–2, ¶ 3. In a subsequent email from April 24, 2008, Mr. Sugita emailed Ko Ahn to say that he had “[m]any useful flash memory information [ ] saved as power-point file,” and asked if Hynix will purchase PowerPoint so that Mr. Sugita can access the information on “[m]y home PC.” Id. Ex. C, at 1. Ko Ahn subsequently emailed Mr. Sugita to tell him, “We will pay for the expenses of Power[Point] software.” Id.

Mr. Sugita ultimately pled guilty to stealing SanDisk and Toshiba trade secrets. See Declaration of Ryoichi Mimura in Support of SanDisk's Opposition to Motion to Dismiss for Forum non Conveniens, ECF No. 116 (“Mimura Decl.”), ¶ 17. Mr. Sugita's sentencing was scheduled for March 9, 2015. Id.

B. Procedural History

On March 13, 2014, SanDisk filed a complaint in Santa Clara County Superior Court alleging one cause of action against Hynix for misappropriation of trade secrets under California Civil Code §§ 3426 et seq. , the California Uniform Trade Secrets Act (“CUTSA”). Compl. ¶¶ 3948. On May 20, 2014, Judge Kirwan of the Superior Court granted SanDisk's ex parte application for a temporary restraining order. ECF No. 8–4. Judge Kirwan ordered Hynix, inter alia, not to disclose any “confidential, proprietary and/or trade secret information that it currently knows or has reason to know belongs to, originates from, or was developed by, SanDisk and/or SanDisk or Toshiba in their NAND flash memory operations.” Id. at 1. Judge Kirwan also ordered Hynix to appear at a hearing on June 20, 2014 to show cause as...