ALTAVION, INC. V.KONICA MINOLTA SYSTEMS

Filed 5/8/14

CERTIFIED FOR PARTIAL PUBLICATION *

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

Trade secret protection “ ‘promotes the sharing of knowledge, and the efficient operation of industry,’ ” by “ ‘permit[ting] the individual inventor to reap the rewards of his labor by contracting with a company large enough to develop and exploit it.’ [Citation.]” ( DVD Copy Control Assn., Inc. v. Bunner (2003) 31 Cal.4th 864, 878 (DVD Copy Control).) Trade secret law allows the inventor to disclose an idea in confidential commercial negotiations certain that the other side will not appropriate it without compensation. “[T]he holder of the secret, [may] disclose information he would otherwise have been unwilling to share, and [this] permits business negotiations that can lead to commercialization of the invention or sale of the idea, serving both the disclosure and incentive functions of [intellectual property] law.” (Lemley, The Surprising Virtues of Treating Trade Secrets as IP Rights (2008) 61 Stan. L.Rev. 311, 336-337, fns. omitted.)

Appellant and defendant Konica Minolta Systems Laboratory, Inc. (KMSL) is a research and development subsidiary of a multinational corporation that, among other things, manufactures multifunction printers (also known as multifunction peripherals) (MFP’s) and other devices with printing, scanning, and copying functionalities. Respondent and plaintiff Altavion, Inc. (Altavion), is a small company that invented a process for creating self-authenticating documents through the use of barcodes that contain encrypted data about the contents of the original documents. The trial court concluded that KMSL misappropriated trade secrets disclosed by Altavion during negotiations aimed at exploiting Altavion’s technology. The negotiations were subject to a nondisclosure agreement and centered around the possibility of embedding Altavion’s invention in one of KMSL’s MFP’s. During the negotiations, the invention was described as Altavion’s “digital stamping technology” (DST). After the negotiations failed, Altavion discovered KMSL had filed for patents encompassing Altavion’s DST. Altavion brought suit and, following a bench trial, the trial court found KMSL misappropriated Altavion’s trade secrets—both Altavion’s DST concept as a whole and specific DST design concepts. The court awarded Altavion damages, prejudgment interest, and attorney fees.

On appeal, KMSL contends it was improper for the trial court to base its ruling on misappropriation of Altavion’s DST concept as a whole, and any other trade secrets the court found misappropriated were not adequately identified in the court’s decision. KMSL further contends Altavion’s DST was not protectable as a trade secret, either as a combination secret or as particular design concepts, because ideas and design concepts are not protectable trade secrets. Moreover, KMSL contends Altavion did not show the ideas were kept secret or had independent economic value. KMSL also challenges the trial court’s award of damages, prejudgment interest, and attorney fees. We reject KMSL’s contentions and affirm the trial court’s judgment.

Background

From the voluminous record in the present case we set forth only those facts relevant to resolution of the issues on appeal. We recite the facts in the manner most favorable to the judgment and resolve all conflicts and draw all inferences in favor of respondent Altavion. ( SCI California Funeral Services, Inc. v. Five Bridges Foundation (2012) 203 Cal.App.4th 549, 552-553; see also Pool v. City of Oakland (1986) 42 Cal.3d 1051, 1056, fn. 1.) Conflicts in the evidence are noted only where pertinent to the issues on appeal. (Pool, at p. 1056, fn. 1;SCI California Funeral Services, Inc., at p. 553.) [1]

Altavion’s DST

Dr. Ali Moussa is the President and founder of Altavion. He founded Altavion in 2000 with the goal of developing DST to enable the self-authentication of digital and paper documents.[2]

Altavion’s DST was designed to encode the content of an original document into a small (maximum 1" x 1") barcode (also called a “stamp”) printed on the document. In order to create the barcode, a scanned version of the original document would be divided into cells and the pixel-level data about each cell would be represented in the barcode in a highly compressed form. By comparing the data encrypted in the barcode with a subsequent version of the document, Altavion’s DST would show whether and where the document had been altered by searching for alterations at the pixel-level. Because the barcode would permit the document to be authenticated without involvement of a third party, Altavion claimed its DST would create “self-authenticating” documents. Altavion’s DST was implemented by software programmed to execute the algorithms necessary to perform the various barcode creation and authentication functions. [3]

Altavion’s barcode, and especially its color barcode, could contain far more data in a small space than existing barcodes. Grayscale or color barcodes, as compared to black and white barcodes, represent data with higher density, enabling more data to be represented in a given area. However, the development of a color barcode presented a distinct technical challenge because over time the colors on a printed barcode are subject to degradation, which can inhibit read back of the data contained in the barcode. Altavion resolved this problem by using “color reference cells” to aid in reconstruction of the encoded data. The company’s implementation of the approach was unique, in that Altavion’s barcode employed multiple reference cells for each color, and by an averaging process a range of values could be determined to represent each color.

Altavion’s Relationship With KMSL

KMSL is a research and development company that develops technologies for its parent company, Konica Minolta Business Technologies, Inc., which, among other things, manufactures products including MFP’s that can copy, scan, and print documents. [4] Some of the KMSL personnel involved in the events underlying this case include KMSL’s president, Hiroshi Tomita, former consultant Paul Cattrone, computer scientist Dr. Wei Ming, and software engineer Vivek Pathak. Tomita handled the business negotiations with Altavion; Cattrone was hired in February 2004 to manage the digital stamping project; Ming helped evaluate Altavion’s DST; and Pathak was hired in September 2004 to help develop KMSL’s own DST.

Altavion was introduced to KMSL through William Zivic, a salesman employed at the time by Minolta Business Solutions. Although the terms of the agreement are unclear, in July 2003 Altavion and KMSL entered into a nondisclosure agreement (NDA), in which the companies agreed that any confidential information disclosed during their subsequent negotiations would be kept confidential. [5] Prior to discussions with Altavion, KMSL had no digital stamping projects in progress or products in development. Indeed, Tomita admitted “the first consideration [he] had ever given to [DST] was brought about by [his] discussions with Altavion.”

KMSL’s interest in Altavion’s DST was in developing technology for authenticating printed documents, rather than for documents that remain only in a digital environment. For a variety of reasons, it is more difficult to authenticate printed documents than electronic documents (an issue known as the “closed loop problem”). For example, an expert for KMSL at trial explained that problems can arise in the printing, storage, and scanning processes that make it more difficult to authenticate a paper document with a stamp.

In a December 15, 2003 letter to Moussa, Tomita wrote, “At [KMSL] we are studying using your unique technology for digital stamping for possible use in multiple applications in current and future products and for jointly developing it further for even better utilization.” The parties sought to negotiate terms by which Altavion’s DST could be embedded in a KMSL MFP. Altavion and KMSL discussed the possibility of a pay-per-stamp revenue model.

KMSL consultant Cattrone assesssed evaluation software provided by Altavion and authored a report entitled “Altavion Digital Stamping Software Evaluation.” The report concluded, “Altavion is the first available solution for creating a machine readable authentication barcode which can be later used to not only authenticate the document, but on false authenticity locate the areas within the document where tampering or alteration has occurred.” In reporting the testing results, the report stated, “In all cases, the verification software was able to successfully authenticate unaltered digital documents. For most cases, when a document was found to be altered and not authentic, the software was able to successfully identify the areas within the document—graphic or text—which had been tampered with.” The report also identified further areas for evaluation and stated that Altavion’s technology “does contain a number of problems and functional anomalies in its current implementation in both the stamp creation and integrity checking software components.”

A February 27, 2004 KMSL project development planning report (February 2004 planning report) articulated KMSL’s project development strategy employing Altavion’s DST. It stated, “This project will develop a Digital Stamping solution for use as a Konica-Minolta document authentication security technology. The solution will be built as two SDKs—Digital Stamp Creation SDK and Digital Stamp Authentication & Integrity Check SDK. [[6]] Both SDKs will be built around a digital stamping core functionality component. Altavion will provide the core functionality component as they have a patent pending digital stamping technology which can create and verify authentic documents as well as discover tamper locations in unauthentic documents. With Altavion technology a small amount of essential data extracted from the image is required and can be encoded into a digital stamp as small as ½" x ½". [KMSL] will drive the development of Altavion’s core technology to provide Konica[-]Minolta with a solution that satisfies the basic requirements for creation and verification of a digitally stamped document.” It also stated, “By developing [an] SDK around Altavion’s digital stamping core technology, Konica-Minolta will develop competing patentable technologies and marketable products which work to close the Printer/Scanner Loop to provide document authenticity and integrity validation regardless of digital or print form.”

The February 2004 planning report distinguished Altavion’s digital stamping process from a process patented by a competitor, Canon Inc., stating “The amount of data required to authenticate and verify integrity with the Altavion method is their key differentiating technology. Where as the Canon patent reduces the original document size in its approach to embed 2D barcodes, the Altavion solution does not apply any transformation to the original document as the stamp can be generated as small as ½" x ½".” The February 2004 planning report also included a “[p]atent application plan,” indicating that “a patent could be filed which describes an Altavion technology based method for creating self-authentic[ating] with embedded integrity data documents which can be authenticated from digital or print form.”

In an April 1, 2004 e-mail, KMSL proposed to pay Altavion a fee for development of an SDK for a KMSL machine and further development of Altavion’s grayscale and color barcodes. In e-mail communications on April 21 and 22, KMSL and Altavion discussed the possibility of a $400,000 fee, although it was contingent on an evaluation of Altavion’s software. On April 27 and May 11, KMSL paid a total of $50,000 to Altavion for new evaluation software. The new software addressed some of the issues raised and enhancements requested in Cattrone’s evaluation of the previous version of the software.

On August 31, 2004, KMSL and Altavion executed a memorandum of understanding (MOU), which stated that KMSL “will continue to recognize that Altavion’s unique implementation of [DST] is Altavion’s own intellectual property and will continue to protect [it].” Unbeknownst to Altavion, even before execution of the MOU, KMSL had already begun filing a series of patent applications encompassing Altavion’s DST. [7] Specifically, on June 28 and August 9, 2004, KMSL filed patent applications for color barcode producing methods, with KMSL’s Ming listed as the inventor on the June application and Ming and Tomita listed as inventors on the August application. Both applications described a method “to keep the integrity or authenticity of the color barcode” through the use of color reference cells in the barcode. KMSL ultimately filed 24 United States DST patent applications, and eight United States patents were issued. The patents and applications identified varying combinations of Tomita, Ming, Cattrone, and Pathak as inventors.

The trial court ultimately found that KMSL “had no idea, interest or information about DST . . . or use of bar codes prior to their dealings with” Altavion. Among other things, the trial court rejected as unreliable the meager evidence that Tomita and Ming independently developed the DST concepts reflected in KMSL’s patents. KMSL does not dispute those findings on appeal.

In September 2004, shortly after execution of the MOU, KMSL hired software engineer Pathak to work on the digital stamping project and, specifically, to develop “closed loop technologies.” Pathak had access to the evaluation software provided by Altavion. In a September 17 e-mail to Tomita, Cattrone said he had “asked [Pathak] to analyze the Altavion software and think about ways in which we can achieve similar results with the focus on a closed loop digital stamp.” He also wrote, “[Pathak] understands and knows well that there are many ways to achieve similar Altavion’esque results within the digital domain.” The e-mail also asserted there were problems in the relationship with Altavion. For example, Cattrone opined, “It is unlikely that we will get a digital stamping SDK from Altavion in the near future—our signing of the MOU meant nothing to [Moussa].”

KMSL and Altavion reached an impasse in their negotiations in the fall of 2004. The parties were unable to agree on the terms for KMSL’s payment of a development fee to Altavion, or the scope of an SDK to be provided to KMSL.

The Present Lawsuit

In October 2006, Moussa learned about KMSL’s patent filings. In November 2007, Altavion filed the present lawsuit. In the second amended and operative complaint (Complaint), Altavion sued KMSL, Cattrone, and four other Konica Minolta entities (see fn. 4, ante). Altavion alleged causes of action for trade secret misappropriation, breach of the NDA, and a variety of other torts. KMSL filed a cross-complaint alleging (among other things) fraud based on Moussa’s false statements that he had applied for patents.

By the time of trial, the only remaining Altavion causes of action were for breach of the NDA and for misappropriation of Altavion’s trade secrets. The trial court issued a tentative statement of decision in July 2011 and a final statement of decision (FSOD) in November. The court ruled in favor of KMSL on Altavion’s claim for breach of the NDA and in favor of Altavion on KMSL’s fraud claim. Neither of those two claims is at issue on appeal.

The court found in favor of Altavion and against KMSL (but not against the other Konica Minolta defendants) on Altavion’s misappropriation claim. The trial court awarded damages of $1 million and prejudgment interest of $513,400, for a total of $1,513,400. After further proceedings, the trial court awarded attorney fees to Altavion in the amount of $3,297,102.50, as well as amounts for expert fees and costs. The court also awarded costs to three of the Konica Minolta companies that had not been found liable for misappropriation.

Discussion

I. Summary of Trade Secret Law

In 1984, the Legislature “adopted without significant change” the Uniform Trade Secrets Act (UTSA) (Civ. Code, § 3426 et seq.). [8] (DVD Copy Control, supra, 31 Cal.4th at p. 874; Cadence Design Systems, Inc. v. Avant! Corp. (2002) 29 Cal.4th 215, 221; Trade Secrets Practice in Cal. (Cont.Ed.Bar 2d. ed. 2013) § 1.2, p. 1‑2.) Nearly all states have adopted the UTSA; although there are some variations, case law applying UTSA enactments in other states is generally relevant in applying California’s UTSA. (K.C. Multimedia, Inc. v. Bank of America Technology & Operations, Inc. (2009) 171 Cal.App.4th 939, 955; Trade Secrets Practice in Cal., at p. 1‑2.)

The UTSA “creates a statutory cause of action for the misappropriation of a trade secret.” (Brescia v. Angelin (2009) 172 Cal.App.4th 133, 143.) The statute defines a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: [¶] (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (§ 3426.1, subd. (d).)[9] “Trade secret misappropriation occurs whenever a person: (1) acquires another’s trade secret with knowledge or reason to know ‘that the trade secret was acquired by improper means’ (§ 3426.1, subd. (b)(1)); (2) discloses or uses, without consent, another’s trade secret that the person ‘[u]sed improper means to acquire knowledge of’ ( id., subd. (b)(2)(A)); (3) discloses or uses, without consent, another’s trade secret that the person, ‘[a]t the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was’ (a) ‘[d]erived from or through a person who had utilized improper means to acquire it’ (id., subd. (b)(2)(B)(i)), (b) ‘[a]cquired under circumstances giving rise to a duty to maintain its secrecy or limit its use’ (id., subd. (b)(2)(B)(ii)), or (c) ‘[d]erived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use’ ( id., subd. (b)(2)(B)(iii)); or (4) discloses or uses, without consent, another’s trade secret when the person, ‘[b]efore a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake’ (id., subd. (b)(2)(C)).” (DVD Copy Control, supra, 31 Cal.4th at p. 874.)

In DVD Copy Control, the California Supreme Court outlined the purposes underlying the protections provided by trade secret law. The court explained, “ ‘[t]he basic logic of the common law of trade secrets recognizes that private parties invest extensive sums of money in certain information that loses its value when published to the world at large.’ [Citation.] Based on this logic, trade secret law creates a property right ‘defined by the extent to which the owner of the secret protects his interest from disclosure to others.’ [Citation.] In doing so, it allows the trade secret owner to reap the fruits of its labor [citation] and protects the owner’s ‘moral entitlement to’ these fruits [citation]. As such, ‘trade secrets have been recognized as a constitutionally protected intangible property interest.’ [Citation.]” (DVD Copy Control, supra, 31 Cal.4th at p. 880.) As we noted at the outset of this decision, “ ‘Trade secret law promotes the sharing of knowledge, and the efficient operation of industry; it permits the individual inventor to reap the rewards of his labor by contracting with a company large enough to develop and exploit it.’ [Citation.]” (Id. at p. 878.) “Trade secret law also helps maintain ‘standards of commercial ethics . . . .’ [Citation.] . . . By sanctioning the acquisition, use, and disclosure of another’s valuable, proprietary information by improper means, trade secret law minimizes ‘the inevitable cost to the basic decency of society when one . . . steals from another.’ [Citation.] In doing so, it recognizes that ‘ “good faith and honest, fair dealing, is the very life and spirit of the commercial world.” ’ ” (Id. at p. 881.)

II. Standard of Review

We review for substantial evidence the trial court’s finding that KMSL misappropriated Altavion’s trade secrets. (Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1521 (Morlife); Vacco Industries, Inc. v. Van Den Berg, supra, 5 Cal.App.4th at p. 50.) “ ‘ “When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.” ’ ” ( Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640, 1658.) “[W]e presume that the record contains evidence to sustain every finding of fact. [Citation.] It is the appellant’s burden to demonstrate that it does not.” (Ibid.) An appellant who challenges a trial court’s factual determination following a nonjury trial “must marshal all of the record evidence relevant to the point in question and affirmatively demonstrate its insufficiency to sustain the challenged finding. [Citation.]” (Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal.App.4th 547, 557 ( Yield Dynamics).)

We review the trial court’s damages award for substantial evidence. (Morlife, supra, 56 Cal.App.4th at p. 1528.) The trial court’s attorney fee award “will not be overturned in the absence of a manifest abuse of discretion, a prejudicial error of law, or necessary findings not supported by substantial evidence.” (Yield Dynamics, supra, 154 Cal.App.4th at p. 577.)

III. Were Altavion’s Trade Secrets Adequately Identified?

“It is critical to any [UTSA] cause of action—and any defense—that the information claimed to have been misappropriated be clearly identified. Accordingly, a California trade secrets plaintiff must, prior to commencing discovery, ‘identify the trade secret with reasonable particularity.’ (Code Civ. Proc., § 2019.210; see Lemley, The Surprising Virtues of Treating Trade Secrets as IP Rights[, supra,] 61 Stan. L.Rev. [at p.] 344 [plaintiff should be required to ‘clearly define[] what it claims to own, rather than (as happens all too often in practice) falling back on vague hand waving’].)” (Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 221 (Silvaco), disapproved on another ground inKwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337.) [10] “[U]ntil the content and nature of the claimed secret is ascertained, it will likely be impossible to intelligibly analyze the remaining” elements that constitute the cause of action. (Id. at p. 220.) The trade secret must be described “with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.” ( Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244, 253 (Diodes); accord, Brescia v. Angelin, supra, 172 Cal.App.4th at p. 144 [noting that Code Civ. Proc., § 2019.210 was intended to codify Diodes]; Advanced Modular Sputtering, Inc. v. Superior Court (2005) 132 Cal.App.4th 826, 835; Imax Corp. v. Cinema Technologies, Inc. (9th Cir. 1998) 152 F.3d 1161, 1164-1165; Computer Economics, Inc. v. Gartner Group, Inc. (S.D.Cal. 1999) 50 F.Supp.2d 980, 984-985.)

As explained in Computer Economics, Inc. v. Gartner Group, Inc., supra, 50 F.Supp.2d at page 985, the rule requiring a plaintiff to describe its trade secrets before the commencement of discovery serves several purposes: it discourages the filing of meritless claims, prevents plaintiffs from using the discovery process to uncover the defendant’s trade secrets, assists the trial court in framing the scope of discovery, and “enables defendants to form complete and well-reasoned defenses, ensuring that they need not wait until the eve of trial to effectively defend against charges.” (Accord, Perlan Therapeutics, Inc. v. Superior Court (2009) 178 Cal.App.4th 1333, 1343; Brescia v. Angelin, supra, 172 Cal.App.4th at p. 144; Advanced Modular Sputtering, Inc. v. Superior Court, supra, 132 Cal.App.4th at pp. 834, 836.)

KMSL contends the trial court’s judgment must be reversed because both Altavion and the court failed to identify with sufficient particularity the trade secrets KMSL misappropriated. Each claim must be analyzed separately.

A. Altavion Did Not Fail to Adequately Identify Its Trade Secrets.

The cases discussed above and the cases KMSL relies upon on appeal relate to a plaintiff’s obligation to identify the allegedly misappropriated trade secrets with sufficient particularity for purposes of discovery and trial. (See Silvaco, supra, 184 Cal.App.4th at pp. 221-222;Perlan Therapeutics, Inc. v. Superior Court, supra, 178 Cal.App.4th at pp. 1343-1352; Advanced Modular Sputtering, Inc. v. Superior Court, supra, 132 Cal.App.4th at pp. 834–836; Diodes, supra, 260 Cal.App.2d at p. 253; Imax Corp. v. Cinema Technologies, Inc., supra, 152 F.3d at pp. 1164-1167;Agency Solutions.Com, LLC v. TriZetto Group, Inc. (E.D.Cal. 2011) 819 F.Supp.2d 1001, 1017-1018; Bunnell v. Motion Picture Ass’n of America (C.D.Cal. 2007) 567 F.Supp.2d 1148, 1155; IDX Systems Corp. v. Epic Systems Corp. (W.D.Wis. 2001) 165 F.Supp.2d 812, 816-817.) In the present case, Altavion identified the allegedly misappropriated trade secrets pursuant to Code of Civil Procedure section 2019.210 in a third amended identification (Amended Identification) dated May 20, 2009. On August 27, 2010, Altavion served KMSL with an “Outline of Trade Secrets Misappropriated by Defendants” (Outline), which was admitted at trial as exhibit 1032. In the Outline, Altavion identified and detailed aspects of eight trade secrets (numbered 1B, 1C, 2, 4, 7, 11, 12, & 15). After the presentation of Altavion’s case at trial, the trial court granted KMSL’s motion for nonsuit as to misappropriation of trade secrets 7 and 11.

On appeal, KMSL asserts “no trade secret was sufficiently identified to permit [KMSL] to present a meaningful defense.” However, KMSL presents no reasoned argument with citations to authority (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785) that Altavion’s Amended Identification or Outline were overly vague or otherwise failed to describe the allegedly misappropriated information with “sufficient particularity” to separate it from matters of general knowledge and to permit KMSL to ascertain “at least the boundaries within which the secret lies.” (Diodes, supra, 260 Cal.App.2d at p. 253; see also Advanced Modular Sputtering, Inc. v. Superior Court, supra, 132 Cal.App.4th at pp. 835-836.) Instead, KMSL argues the trade secrets identified by Altavion were not the same as the trade secrets the trial court found misappropriated in the FSOD. In particular, KMSL focuses on the fact that, in identifying its trade secrets, Altavion largely did not use the phrase that was used by the trial court—DST—and specifically did not use the phrase in any of the numbered trade secrets still at issue at the conclusion of the trial. KMSL asserts, “[i]nstead, the lists described a multitude of specific algorithms and process steps that Altavion claimed could be used to create barcodes or authenticate documents and which were allegedly implemented in its software.” Arguing the trade secrets as described in the FSOD differ from those identified by Altavion is not, however, a claim that Altavion failed to comply with its statutory obligation to adequately identify its trade secrets either before or during trial. KMSL has not shown any error in that respect.

B. The Trial Court Did Not Err in Its Identification of the Misappropriated Trade Secrets.

The heart of KMSL’s claim on appeal is that it was improper for the trial court to base its ruling on misappropriation of Altavion’s “DST,” and that, otherwise, the trial court failed to adequately identify the trade secrets it found had been misappropriated.

A trial court’s statement of decision must explain “the factual and legal basis for its decision as to each of the principal controverted issues at trial.” (Code Civ. Proc., § 632.) It will be deemed adequate “if it fairly discloses the determinations as to the ultimate facts and material issues in the case.” (Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501, 513.) “Where [a] statement of decision sets forth the factual and legal basis for the decision, any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision.” (In re Marriage of Hoffmeister (1987) 191 Cal.App.3d 351, 358; accord, Estate of Young (2008) 160 Cal.App.4th 62, 75-76.) “[F]indings of fact are liberally construed to support the judgment.” (Estate of Young , at p. 76.) If the statement of decision “does not resolve a controverted issue, or if the statement is ambiguous and the record shows that the omission or ambiguity was brought to the attention of the trial court . . . , it shall not be inferred on appeal . . . that the trial court decided in favor of the prevailing party as to those facts or on that issue.” (Code Civ. Proc., § 634; see also SFPP v. Burlington Northern & Santa Fe Ry. Co. (2004) 121 Cal.App.4th 452, 462.)

1. The Trial Court’s Analysis

In the FSOD the trial court frequently used the umbrella term DST to refer to the whole of Altavion’s barcode technology. The court explained Altavion’s DST was a method of creating “a self-authenticating paper document, through the use of a digital stamp (which is also self-authenticating). It is ‘unique,’ according to [Altavion], in that it could detect alterations as well as show where the alterations had occurred in the document.” The court further explained: “A digital stamp is a type of bar code. DST is data represented as an image. [¶] [Altavion’s] bar code is not a miniature image of the entire document nor does it digitize all data in an entire document, called ‘compression.’ Rather, it is the ‘thumbprint’ of the document, a form of essential data, which can be used to self-authenticate the document as a true and correct copy of the original document. Part of this process is that the technology ‘grids’ the subject document into squares, and then selects reference information to create the barcode. [¶] According to Moussa, [Altavion’s] bar code has three main components: (1) Textual Data, which is the text in the bar code; (2) Statistical Data, which keeps the bar code within one inch by one inch in size . . . , and (3) Reference Data. [¶] [Altavion’s] technology allegedly does two things: (1) Authentication, i.e., Has the document been altered? and (2) Integrity, i.e., Where has the document been altered?” The court also explained that, in 2002, Altavion created grayscale and color barcodes, which could hold more information than black and white barcodes at the same size. Altavion sought to partner with KMSL to embed Altavion’s DST in one of KMSL’s MFP’s.

Prior to analyzing the evidence of misappropriation, the trial court acknowledged the parties had different purposes in developing DST. It explained that Altavion’s “focus is a self-authenticating bar code that takes ‘thumbprint’ details from a document for purposes of double-checking document integrity and showing where (if anywhere) the document has been altered.” On the other hand, KMSL’s “focus is a bar code . . . to preserve document integrity such that the document itself is preserved, so that the document text and images are not distorted by copying, scanning, printing, age or fading over time. The bar code is to preserve the document, including its text and images (and colors).” Nevertheless, the court reasoned that “taking the idea of one person and using that same idea for another purpose does not make it the second person’s ‘new’ idea.”

The trial court ultimately found KMSL misappropriated Altavion’s DST, especially through KMSL’s patents. The court stated, KMSL “used one or more trade secrets of [Altavion] in attempting to create [KMSL’s] own DST. Further the Court finds that, at the very least, [11 specified patents and patent applications] disclose or use a trade secret (or component part of a trade secret) of Altavion.” The trial court described the secret information provided by Altavion to KMSL as “information . . . regarding its DST technology.” In addition to finding KMSL misappropriated Altavion’s DST concept as a whole, it is also clear, as detailed below, the trial court found KMSL misappropriated particular design concepts identified in Altavion’s Amended Identification and Outline, especially aspects of trade secrets 1B, 1C, 2, and 12.

2. Misappropriation of Altavion’s DST as a Combination of Design Concepts

As explained above, the trial court found KMSL misappropriated Altavion’s DST concept as a whole, both by using Altavion’s DST in developing KMSL’s own DST and by disclosing aspects of Altavion’s DST in 11 of KMSL’s patents and patent applications. [11]

At the outset, we reject any contention that Altavion’s DST concept on the whole was inherently not protectable as a trade secret. Because (as explained in part IV.B.2., post) the detailed design concepts underlying Altavion’s DST were undisclosed, a finding of trade secret appropriation could be based on misappropriation of Altavion’s DST concept as a whole. That is so because, even if some or all of the elements of Altavion’s design were in the public domain and thus unprotectable, the combination was a protectable trade secret if it was secret and had independent economic value (see part IV.C., post). For example, in Rivendell Forest Products v. Georgia-Pacific (10th Cir. 1994) 28 F.3d 1042, 1043, the plaintiff lumber business alleged a competitor misappropriated a software system that permitted the plaintiff to provide special customer services and manage distribution. The 10th Circuit concluded the trial court erred in requiring “that the software system be examined bit by bit with the further requirement that Rivendell demonstrate protectability of its elements or some of them rather than the protectability of the software system as a whole.” (Id. at p. 1045.) The court explained, “the doctrine has been established that a trade secret can include a system where the elements are in the public domain, but there has been accomplished an effective, successful and valuable integration of the public domain elements and the trade secret gave the claimant a competitive advantage which is protected from misappropriation.” (Id. at p. 1046; see also Harvey Barnett, Inc. v. Shidler (10th Cir. 2003) 338 F.3d 1125, 1130 [reversing a district court’s grant of summary judgment because it looked at the components of the plaintiff’s infant swimming program “in isolation, rather than as a whole, in determining that [plaintiff] does not possess a trade secret”]; 3M v. Pribyl (7th Cir. 2001) 259 F.3d 587, 595-596; Integrated Cash Mgmt. Serv. v. Digital Transactions (2d Cir. 1990) 920 F.2d 171, 174; Imperial Chem. Indus. Ltd. v. National Distillers & Chem. Corp. (2d Cir. 1965) 342 F.2d 737, 742.) Similarly, Altavion’s implementation of DST was potentially protectable as a “combination of characteristics and components” (3M v. Pribyl, at p. 595), regardless of whether particular design concepts separately qualified for protection as trade secrets.

KMSL’s primary argument on this point is that DST “was never identified [by Altavion] as a misappropriated trade secret” and the trial court’s finding that KMSL misappropriated Altavion’s DST means the court found “[KMSL] misappropriated something else that wasn’t on the trial list.” The thrust of the argument is that the trial court’s finding of misappropriation of Altavion’s DST was not “fair” and frustrated KMSL’s right to “ ‘mount a defense.’ ” It is true Altavion’s Amended Identification and Outline did not identify “DST” as a combination trade secret, but it is disingenuous for KMSL to suggest it was unaware what the trial court meant in referring to Altavion’s DST. As we noted earlier (fn. 2, ante), the parties regularly used the phrase “DST” during negotiations and during the litigation to describe the technology KMSL sought to obtain from Altavion. The Complaint alleges, in paragraph 13 of the general allegations, that Altavion “has created and perfected a novel set of digital document security platform technologies, which are the first of their kind to provide the dual functionality of document authentication via the use of novel stamp embedding techniques and document integrity assessment via novel tamper detection techniques. [Altavion’s] proprietary digital document security platform technologies are collectively referred to as Digital Stamping Technology (‘DST’ or ‘DST Platform’).” Paragraphs 48 and 49 of the misappropriation cause of action explained that Altavion’s “DST Platform” and “DST Solutions Suite” were “collectively referred to as ‘Trade Secrets,’ ” and alleged the defendants “misappropriated portions of [Altavion’s] DST Trade Secrets by obtaining such Trade Secrets from Dr. Moussa and [Altavion] during discussions, negotiations, meetings and other communications.” Accordingly, it is unmistakable the trial court used the phrase DST to refer to Altavion’s secret barcode technology, taken as a whole, and there can be no question that KMSL understood what the trial court referred to in using the phrase DST.

Although the Amended Identification and the Outline did not list “DST” as a misappropriated trade secret, KMSL does not explain in what ways the concepts the court identified as Altavion’s DST differ from the trade secret concepts identified by Altavion that were the subject of the proceedings in the case. KMSL does not show “Altavion’s DST” as described in the FSOD differs from the digital stamping concepts described in Altavion’s Complaint, Amended Identification, or Outline. Neither does KMSL show “Altavion’s DST” as described in the FSOD differs from the digital stamping concepts that were the subject of evidence and argument presented at trial. [12] In particular, KMSL has not demonstrated how it was prejudiced by the trial court’s finding it misappropriated the “forest” of Altavion’s DST as opposed to individual “trees” referenced in Altavion’s Amended Identification and Outline. It is difficult to imagine what additional evidence KMSL could have presented to show it did not misappropriate Altavion’s DST concept as a whole, since such misappropriation could be established by the evidence that KMSL made use of Altavion’s DST in developing its own DST and DST patents.[13]

KMSL denies this is “a debate about semantics.” However, absent a failure of proof supporting the trial court’s findings, and absent legal authority and reasoned analysis why the trial court’s findings deprived KMSL of a fair trial, KMSL has failed to show the trial court’s determination it misappropriated Altavion’s DST concept as a whole was reversible error. (See Cal. Const., art. VI, § 13 [“[n]o judgment shall be set aside, or new trial granted, in any cause, . . . for any error as to any matter of procedure, unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice”]; Century Surety Co. v. Polisso (2006) 139 Cal.App.4th 922, 963 [“[n]or will this court act as counsel for appellant by furnishing a legal argument as to how the trial court’s ruling was prejudicial”]; see also Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 800.)

3. Misappropriation of Particular Design Concepts Underlying Altavion’s DST

In any event, the trial court adequately identified the particular DST design concepts misappropriated by KMSL. KMSL asserts the FSOD “does not find—and given the absence of any evidence could not have found—that any alleged trade secret on Altavion’s trial list meets the statutory definition of a ‘trade secret.’ ” KMSL is mistaken. Although the FSOD does not analyze each aspect of trade secrets 1B, 1C, 2, 4, 12, and 15 and identify whether each of those aspects was misappropriated by KMSL, the FSOD does identify specific aspects of the identified trade secrets that were misappropriated by KMSL. [14]

In the FSOD, the trial court described KMSL’s patent applications and patents and then found, “at the very least . . . Patent ‘769 (and related Patent Application ‘224), Patent ‘855 (and related Patent Application ‘229), Patent ‘865 (and related Patent Application ‘563), Patent Application ‘608, Patent Application ‘621, Patent Application ‘035, and Patent Application ‘138 disclose or use a trade secret (or component part of a trade secret) of Altavion.”[15]

The FSOD describes Patent Application ‘608 as a method to preserve the integrity of barcode colors through the use of color reference cells, demonstrating the trial court found KMSL misappropriated Altavion’s idea for using color reference cells to preserve the integrity of the colors of the barcode. [16] Patent Application ‘608 describes “an apparatus and a method to keep the integrity or authenticity of the color barcode. Such is accomplished by the color information portion of the color barcode representing the color information about what colors are used for color tiles of data portion of the color barcode and an apparatus and a method for producing and reproducing such color barcode.” The FSOD also describes KMSL’s Patent Application ‘347 and related Patent ‘817, which also relate to color barcodes using color reference cells, including color averaging. Altavion’s trade secrets 1B, 2, and 12 relate to its process for creating a color barcode with color reference cells and color averaging.

The trial court’s findings also reflect its determination that KMSL’s patent applications and patents misappropriated other aspects of Altavion’s DST design, including at least the process steps of scanning a page to locate blank space available to locate a barcode (Patent ‘769 and related Patent Application ‘224; Patent Application ‘035); partitioning the image of a document into a grid of cells (Patent ‘865 and related Patent Application ‘563); using compression to encode data representing a document’s contents in a digital stamp (Patent Application ‘035; Patent ‘769 and related Patent Application ‘224; and Patent ‘855 and related Patent Application ‘229); and, in detail, using a barcode to authenticate a document by detecting alterations and indicating the locations of the alterations (Patent Application ‘621 and Patent Application ‘035). [17] In language very much echoing Altavion’s DST, Patent Application ‘035 (entitled “Method and Apparatus for Authenticating Printed Documents”) describes how a printed document bearing an authentication barcode is self-authenticating because when scanned the document’s contents may be “compared to the authentication data to determine if any part of the printed document has been altered since it was originally printed (i.e. whether the document is authentic) and what the alterations are. A printed document bearing authentication barcode is said to be self-authenticating because no information other than what is on the printed document is required to authenticate its content.” Altavion’s trade secrets 1B, 1C, and 2 relate to these processes. [18]

Accordingly, contrary to KMSL’s assertions on appeal, the FSOD does identify particular DST design concepts that the trial court found were misappropriated.[19]

4. Conclusion Regarding Adequacy of the FSOD

The degree of specificity required in the identification of misappropriated trade secrets in a statement of decision depends on the nature of the case. (See Diodes, supra, 260 Cal.App.2d at p. 253 [“[n]o more comprehensive rules for pleading can be generally enunciated because no inclusive definition of trade secrets is possible”]; Burroughs Payment Systems, Inc. v. Symco Group, Inc. (N.D.Cal., May 14, 2012, C-11-06268 JCS) 2012 WL 1670163, p. *14 [“question of whether a trade secret has been adequately identified depends, at least to some degree, upon the nature of the trade secret alleged”].) Ultimately, the trial court’s specification needed to be clear enough to “fairly disclose” its determinations ( Central Valley General Hospital v. Smith, supra, 162 Cal.App.4th at p. 513) and allow for meaningful review of its decision. Because the trial court found that KMSL misappropriated Altavion’s DST concept as a whole, and also identified particular trade secret ideas that were misappropriated by KMSL in its patents and patent applications, the trade secret identification in the FSOD was adequate. [20]

IV. Did Altavion’s DST Design Concepts Constitute Protectable Trade Secrets?

As noted previously, the UTSA defines a “ ‘[t]rade secret’ ” as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: [¶] (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (§ 3426.1, subd. (d).)

“ ‘Information’ has a broad meaning under the [UTSA].” (Trade Secrets Practice in Cal., supra, § 1.4, p. 1-5; see also Forro Precision, Inc. v. International Business Machines Corp. (9th Cir. 1982) 673 F.2d 1045, 1057.) “The definition of trade secret is . . . unlimited as to any particular class or kind of matter and may be contrasted with matter eligible for patent or copyright protection, which must fall into statutorily defined categories.” (1 Milgrim on Trade Secrets (2013) Definitional Aspects, § 1.01, p. 1-4.) “[A] trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device or list of customers [citations].” (Sinclair v. Aquarius Electronics, Inc. (1974) 42 Cal.App.3d 216, 221, italics omitted.)

A. Ideas Are Protectable as Trade Secrets.

As explained below (part IV.B., post), the trade secret information at issue in the present case is principally comprised of the design concepts underlying Altavion’s DST. In the words of the trial court, “the issue is whether [KMSL’s] ideas set forth in the patents and patent applications are founded upon and disclose any trade secret ‘ideas’ [it] learned from [Altavion].” Because the trade secret information at issue in this case is a set of ideas rather than a set of products or specific formulae, it is important to address KMSL’s assertion in its brief on appeal that “[g]eneralized ideas and inventions are protectable by patents and thus cannot be trade secrets.”

Although KMSL fails to provide a citation for that assertion, KMSL proceeds to quote language in Silvaco drawing a distinction between patent law and trade secret law. Silvaco explained, “The sine qua non of a trade secret . . . is the plaintiff’s possession of information of a type that can, at the possessor’s option, be made known to others, or withheld from them, i.e., kept secret. This is the fundamental difference between a trade secret and a patent. A patent protects an idea, i.e., an invention, against appropriation by others. Trade secret law does not protect ideas as such. Indeed a trade secret may consist of something we would not ordinarily consider an idea (a conceptual datum) at all, but more a fact (an empirical datum), such as a customer’s preferences, or the location of a mineral deposit. In either case, the trade secret is not the idea or fact itself, but information tending to communicate (disclose) the idea or fact to another. Trade secret law, in short, protects onlythe right to control the dissemination of information.” (Silvaco, supra, 184 Cal.App.4th 210 at pp. 220-221.) [21]

In isolation, the statement “[t]rade secret law does not protect ideas as such” (Silvaco, supra, 184 Cal.App.4th at p. 220) is easily misunderstood. In fact, Silvaco plainly does not hold that secret ideas are not protectable under trade secret law, and KMSL cites no authority for its apparent claim that the definition of “information” in section 3426.1, subdivision (d), excludes patentable ideas. The court in Sinclair v. Aquarius Electronics, Inc., supra, 42 Cal.App.3d 216, explained the overlap between trade secret law and patent law as follows: “[A]lthough a trade secret may be a device or process which is patentable, patentability is not a condition precedent to the classification of a trade secret. Thus, it has been said that a trade secret may be a device or process which is clearly anticipated in the prior art or one which is merely a mechanical improvement on a machine or device. Novelty and invention are not requisite for a trade secret as they are for patentability [citation]. In harmony with these precepts, it has been held thata trade secret in the broad sense consists of any unpatented idea which may be used for industrial and commercial purposes [citation].” (Id. at p. 222, italics added, citing Painton & Company v. Bourns, Inc. (2d Cir. 1971) 442 F.2d 216, 222; accord, Rigging Internat. Maintenance Co. v. Gwin (1982) 128 Cal.App.3d 594, 613; see also Kewanee Oil Co. v. Bicron Corp. (1974) 416 U.S. 470, 491 [“extension of trade secret protection to clearly patentable inventions does not conflict with the patent policy of disclosure”]; Sketchley v. Lipkin (1950) 99 Cal.App.2d 849, 854 [“owner of an unpatented device is by legal principles protected against the piracy of his invention because it is his own by virtue of being the original product of his mind”]; AvidAir Helicopter Supply, Inc. v. Rolls-Royce (8th Cir. 2011) 663 F.3d 966, 973 [“[t]rade secret protection does not shield an idea from ‘infringing’ other uses of the idea; instead it protects valuable information from being misappropriated despite reasonable efforts to keep it secret”]; Gabriel Technologies Corp. v. Qualcomm, Inc. (S.D.Cal., Dec. 12, 2011, 08CV1992 AJB MDD) 2011 WL 6152240, p. *5 [court agreed that “a unique approach to a problem can constitute a process that is a protectable trade secret provided that the approach process is sufficiently described”].) [22]

An inventor who fails to obtain a patent for a patentable idea incurs significant risks. The secret may leak, or other circumstances may arise that frustrate the inventor’s right to obtain a patent. (Kewanee Oil Co. v. Bicron Corp., supra, 416 U.S. at p. 490; Painton & Company v. Bourns, Inc., supra, 442 F.2d at p. 224.) Nevertheless, the “long-standing principle” is “that an inventor who chooses to exploit his invention by private arrangements is entirely free to do so, though in so doing he may thereby forfeit his right to a patent.” (Painton & Company, at p. 225; see also ibid. [“inventor ‘may keep his invention secret and reap its fruits indefinitely’ ”]; Sinclair v. Aquarius Electronics, Inc., supra, 42 Cal.App.3d at p. 223 [“although a trade secret does not give its owner any monopoly and once contracted away is subject to being copied, the inventor is entirely free to keep his idea secret and not to divulge it to the general public”]; Learning Curve Toys, Inc. v. PlayWood Toys, Inc. (7th Cir. 2003) 342 F.3d 714, 727 (Learning Curve) [stating it is “irrelevant that [PlayWood] did not seek to patent its concept”].) Indeed, as a leading scholar has observed, because a “substantial number of patents” are invalidated by the courts, resulting in disclosure of an invention to competitors with no benefit, “many businesses now elect to protect commercially valuable information through reliance upon the state law of trade secret protection.” (1 Milgrim on Trade Secrets, supra, § 1.01[2][a], p. 1-36.) [23]

In conclusion, it is clear that if a patentable idea is kept secret, the idea itself can constitute information protectable by trade secret law. In that situation, trade secret law protects the inventor’s “right to control the dissemination of information” (Silvaco, supra, 184 Cal.4th at p. 221)—the information being the idea itself—rather than the subsequent use of the novel technology, which is protected by patent law ( Cadence Design Systems, Inc. v. Avant! Corp., supra, 29 Cal.4th at p. 222). In other words, trade secret law may be used to sanction the misappropriation of an idea the plaintiff kept secret. (See, e.g., Learning Curve, supra, 342 F.3d at p. 721 [misappropriation of “concept” for noise-producing toy railroad track]; Contour Design, Inc. v. Chance Mold Steel Co. (D.N.H., Jan. 14, 2010, 09-CV-451-JL) 2010 WL 174315 [misappropriation of ergonomic mouse “concept”].) This is consistent with the proposition that “The sine qua non of a trade secret . . . is the plaintiff’s possession of information of a type that can, at the possessor’s option, be made known to others, or withheld from them, i.e., kept secret.” ( Silvaco, at p. 220)

B. Design Concepts Underlying Altavion’s DST Constitute Protectable “Information.”

As explained in greater detail post, the information at issue in the present case can readily be divided into three tiers of specificity and secrecy. The least specific and least secret level of information is Altavion’s general idea for a barcode allowing for self-authentication of documents with identification of alterations. This level of information is not a protectable trade secret because the general idea was disclosed to other companies without the benefit of an NDA. At the other extreme, the most specific and secret level of information is Altavion’s algorithms and source code that execute Altavion’s DST.[24] Such information is unquestionably protectable by trade secret law, but it could not form the basis for Altavion’s misappropriation claim because Altavion did not share its algorithms and source codes with KMSL.

The middle tier of information is comprised of the design concepts that underlie Altavion’s DST, many of which might be evident to a software end user. There is no evidence such information was disclosed to anyone other than KMSL, pursuant to an NDA, and, thus, misappropriation of these secret design concepts (separately and in combination) provide a basis for Altavion’s claim.

1. Altavion’s General DST Idea Was Not Secret.

Secrecy is an essential characteristic of information that is protectable as a trade secret. (Ruckelshaus v. Monsanto Co. (1984) 467 U.S. 986, 1002; DVD Copy Control, supra, 31 Cal.4th at p. 881; Silvaco, supra, 184 Cal.App.4th at pp. 220-221; see also Lemley, The Surprising Virtues of Treating Trade Secrets as IP Rights, supra, 61 Stan. L.Rev. at pp. 342-344.) KMSL contends Altavion failed to show it made “reasonable” efforts (§ 3426.1, su