Case Name: Ariba, Inc. v. Coupa Software, Inc., et al.
Case No.: 1-14-CV-265917

This is an action for misappropriation of trade secrets and conversion brought by plaintiff Ariba, Inc. (“Ariba”) against defendants Coupa Software Inc. (“Coupa”) and its employees Steven Sovik (“Sovik”), Ravi Thakur (“Thakur”), Gabriel Perez (“Perez”), Joe Rex Robertson (“Robertson”), and Ashish Deshpande (“Deshpande”) (the “Individual Defendants”) (collectively “Defendants”). The action was originally filed on May 30, 2014.

On October 10, 2014, Ariba filed the operative First Amended Complaint (“FAC”). In the FAC, Ariba alleges that it is a competitor with Coupa in the e-procurement industry. Ariba alleges that it has spent time and effort creating and compiling confidential, proprietary information about pricing, products, services, competitive strategy, and customer accounts, referred to as the “Ariba Trade Secrets.” Ariba also alleges it has spent considerable time and effort creating and compiling confidential or proprietary documents (whether or not they contain Ariba Trade Secrets), referred to as the “Ariba Converted Documents.” To maintain the secrecy of the Ariba Trade Secrets and Ariba Confidential Documents, Ariba uses non-disclosure agreements, license agreements, employee contracts, employee training and/or other internal measures to minimize the circulation of sensitive information about Ariba’s products and services. In the course of employment, Ariba employees gain access to Ariba Trade Secrets and Ariba Confidential Documents. Ariba employees who have such access are bound by a confidentiality agreement signed as a condition of employment that prohibits disclosure to third parties except as permitted by company policy and requires an employee to return all Ariba confidential, proprietary documents (whether marked or not) upon termination.

Ariba alleges that in recent years, Coupa has hired a significant number of employees who previously worked at Ariba. Ariba alleges on information and belief that Coupa has extracted Ariba Trade Secrets and Ariba Converted Documents from these employees.

Ariba further alleges on information and belief that the Ariba Trade Secrets obtained, possessed, distributed and used by Defendants include Ariba confidential and proprietary customer request for quotation (“RFQ”) responses, product technical/function/feature specifications and user guides, internal marketing strategies against Coupa and others, product demonstrations, pricing proposals and strategies, proposed statements of work, internal Ariba email communications regarding customer accounts, customer account information and strategy, and internal product information. The Ariba Converted Documents allegedly include marketing presentations, product demonstrations, product brochures, product specifications, user guides, and white papers.

Ariba alleges that it previously sued Coupa for patent infringement in the United States District Court for the Northern District of California, Ariba v. Coupa Software Inc., No. 3:12-cv-01484 (N.D. Cal. filed Mar. 23, 2012) (the “Patent Litigation”) and in the course of discovery, Ariba learned that Coupa was in possession of certain confidential and proprietary Ariba product solution package descriptions (“SPDs”) and internal marketing/sales strategy presentations for competing against Coupa. Coupa admitted that these materials were brought over to Coupa by at least two former Ariba employees who became Coupa employees: Mark Carlton (“Carlton”) and Steven Paskow (“Paskow”), and then distributed the Ariba materials to at least several other Coupa employees including Sovik, Tony Dawson (“Dawson”), and Thakur.

Regarding the SDPs, Ariba alleges that in 2007 it began to offer “On-Demand” e-procurement services hosted on the cloud with a number of packages such as Ariba Contract Management, Ariba Procurement Content, Ariba Travel & Expense, Ariba Invoice and Ariba Payment, and Ariba Procure to Pay, and for each of these solution packages, Ariba created an SPD to use during a sales cycle to describe the features and functionality of the solution, to define the scope of deployment, and to use as a solution warranty. The SPDs allegedly contain confidential, proprietary information, including which features and functions would comprise a “basic” or “professional” package and which features are optional or standard, the customer resources required during the implementation phase for each package, specific and detailed implementation timelines, delivery methodologies, and customer/technical support services for each package. The SPDs serve as a “table of contents” to the precise permutations for the solutions that Ariba offers, and the details of what to include in each package and how that package will be delivered are the result of years of research and market experience by Ariba. Ariba alleges that Coupa obtained and distributed at least six Ariba SPDs. As of May 2011, when Ariba’s SPDs were distributed within Coupa, Coupa did not have complementary competing solutions for five of the six SPDs.

Ariba also alleges a category of Trade Secret documents called “Competitive Analysis Documents” including the “Competitive Summary” and the “Presentation.” The Presentation allegedly compares Ariba’s product offerings to Coupa’s product offerings and discusses Ariba’s sales strategy for head-to-head sales cycles. Together with the Presentation, the Competitive Summary details Ariba’s internal sales strategy and corporate messaging for the Ariba sales team when competing against Coupa. The Competitive Analysis Documents allegedly contain confidential, proprietary information such as Ariba’s internal opinion of how Ariba’s solution compares to Coupa’s, the arguments that Ariba expects Coupa to make in favor of its solution and against Ariba’s solution, and proactive strategies for promoting Ariba’s solution.

Regarding Defendants’ alleged misappropriation of the Ariba Trade Secrets and Ariba Converted Documents, Ariba alleges that in the Patent Litigation, Coupa admitted that Paskow disclosed the Presentation to Sovik and Dawson by at least January 2012, and that Thakur received several Ariba confidential and proprietary SPDs from Carlton by at least May 2011.

Ariba alleges that Perez is Senior Solutions Director, Global Major Accounts for Coupa and has been employed at Coupa since September 2010, but he was previously employed at Ariba from June 2008 to August 2010. Ariba alleges on information and belief that Perez solicited, possessed, received, distributed, and/or used other Ariba Converted Documents and Ariba Trade Secrets, including Ariba Converted Documents and Ariba Trade Secrets initially obtained from Coupa employees who had formerly worked for Ariba.

Ariba alleges that Robertson is Director of Sales, North America at Coupa and has been employed at Coupa since December 2010, but he was previously employed as an Account Executive at Ariba from October 2006 to April 2009. Robertson allegedly solicited, possessed, received, distributed, and/or used other Ariba Converted Documents and Ariba Trade Secrets, including Ariba Converted Documents and Ariba Trade Secrets initially obtained from Coupa employees who had formerly worked for Ariba.

Ariba alleges that Deshpande is General Manager and has been employed at Coupa since January 2010. Prior to this, he was employed in product marketing at Ariba from January 2007 to February 2009. Deshpande allegedly solicited, possessed, received, distributed, and/or used other Ariba Converted Documents and Ariba Trade Secrets, including Ariba Converted Documents and Ariba Trade Secrets initially obtained from Coupa employees who had formerly worked for Ariba.

Ariba alleges that Carlton was employed by Ariba from June 1998 to December 2005 and from June 2008 to May 2009 and was the Director, Solutions Consulting at Coupa from March 2010 to February 2014. He had access to Ariba’s confidential, proprietary information and executed an “Employee Agreement” and signed his acknowledgment of Ariba’s “Confidential Information and Trade Secrets Policy” prohibiting disclosure of Ariba’s confidential, proprietary information. Coupa admitted in the Patent Litigation that Carlton disclosed Ariba’s confidential, proprietary SPDs to at least Thakur by at least May 2011.

Ariba alleges that Paskow was employed by Ariba from May 2010 through November 2011 and has been the Enterprise Regional Sales Manager-Southeast at Coupa from January 2012 to the present. He had access to Ariba’s confidential, proprietary information and executed an “Employee Agreement” and signed his acknowledgment of Ariba’s “Confidential Information and Trade Secrets Policy” prohibiting disclosure of Ariba’s confidential, proprietary information. Coupa admitted in the Patent Litigation that Paskow disclosed Ariba Trade Secret and Ariba Converted Documents by disclosing the Presentation to at least Sovik and Dawson by at least January 2012.

The FAC asserts two causes of action against all Defendants for: (1) misappropriation of trade secrets; and (2) conversion.

On December 2, 2014, Coupa filed a Cross-Complaint against Ariba for unfair competition and tortious interference with contractual relations.

Coupa now demurs to the FAC on the grounds that the misappropriation and conversion claims are time-barred, and the conversion claim is superseded by the California Uniform Trade Secrets Act (“CUTSA”). The Individual Defendants separately demur to the FAC on the same grounds.

Ariba moves to seal portions of Coupa’s Cross-Complaint.

I. Demurrers

a. Judicial Notice

In support of the demurrers, Defendants request judicial notice of the Complaint filed by Ariba against its former employee Edward G. Mathews (“Mathews”) in Ariba, Inc. v. Mathews, Case No. 3:10-cv-01810-PCD (D. Conn., Nov. 18, 2010) (“Ariba v. Mathews” or “Mathews”).

In support of its opposition to the demurrers, Ariba requests judicial notice of: (1) the Answer and Counterclaims filed in Ariba v. Mathews; (2) Defendant’s Opposition to Motion for Temporary Restraining Order in Ariba v. Mathews; (3) Affidavit of Edward G. Mathews in Ariba v. Mathews; (4) Ariba’s Notice of Motion, Motion, and Memorandum of Points and Authorities ISO Motion for Leave to File the Second Amended Complaint in Ariba v. Mathews; (5) Stipulation of Dismissal with Prejudice in Ariba v. Mathews; and (6) Order Denying Motion for Leave to File Second Amended Complaint in Ariba v. Mathews.

With their reply papers, the Individual Defendants request judicial notice of “Plaintiff’s Prehearing Memorandum of Law in Support of its Application for Temporary Restraining Order and Motion for Preliminary Injunction” filed by Ariba on December 30, 2010 in Ariba v. Mathews.

The Court may take judicial notice of the records of any court of record of the United States. (Cal. Evid. Code, § 452, subd. (d)(2).) The court records from Ariba v. Mathews are clearly relevant to the statute of limitations issue, as both parties cite to these records in support of their respective positions. The requests for judicial notice of the existence of these court records are GRANTED.

b. Misappropriation of Trade Secrets

i. Parties’ Arguments

Defendants argue the claim for misappropriation of trade secrets is time-barred under the CUTSA’s three-year statute of limitations because Ariba’s papers filed in the 2010 case against Mathews demonstrate that Ariba had reason to suspect its current allegations against Coupa and the Individual Defendants more than three years before it filed the instant action. According to Defendants, the information about Ariba’s pricing, products, services, competitive strategies and customer accounts that Ariba claims Mathews misappropriated in 2010 is the same type of information that Ariba claims was misappropriated by Defendants. Thus, Defendants argue that Ariba’s claim for misappropriation is a continuing one that arose in 2010 when Ariba had suspicion of wrongdoing, and Ariba was under a duty to reasonably investigate at that time. Defendants argue that Ariba’s ignorance of the identity of the defendants or the specific documents alleged to be misappropriated is irrelevant as to when Ariba’s suspicion of wrongdoing (and duty to investigate) arose.

In opposition, Ariba argues the misappropriation claim is not time-barred on the face of the FAC because there were no allegations of wrongdoing against Defendants in the Mathews complaint, the record in the Mathews litigation showed the case was quickly dismissed with no finding of misappropriation (after Mathews submitted a sworn declaration averring that he had not stolen any Ariba trade secrets), and therefore, Ariba had no basis to contend that Defendants had misappropriated Ariba information in 2010. Ariba argues that a plaintiff can have more than one claim for misappropriation, with different statutes of limitation, where, as here, more than one defendant is involved.

ii. Analysis

A demurrer on statute of limitations grounds will only be sustained if the running of the statute appears “clearly and affirmatively” from the dates alleged. It is not enough that the complaint might be barred. (See Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.)

“Misappropriation” is defined in the CUTSA as the unauthorized or improper acquisition, disclosure, or use of a trade secret. (§ 3426.1, subd. (b)(1) & (2).) “An action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. For the purposes of this section, a continuing misappropriation constitutes a single claim.” (Cal. Civ. Code, § 3426.6.)

“[T]he plaintiff discovers the cause of action when he at least suspects a factual basis, as opposed to a legal theory, for its elements, even if he lacks knowledge thereof–when, simply put, he at least ‘suspects…that someone has done something wrong’ to him [citation], ‘wrong’ being used, not in any technical sense, but rather in accordance with its ‘lay understanding’[citation.]” (Norgart v. Upjohn Co. (1999), 21 Cal. 4th 383, 397-398.) “Because a plaintiff is under a duty to reasonably investigate and because a suspicion of wrongdoing, coupled with a knowledge of the harm and its cause, will commence the limitations period, suits are not likely to be unreasonably delayed, and those failing to act with reasonable dispatch will be barred.” (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112, original italics.)

Defendants rely primarily on a number of “continuing misappropriation” cases. Cadence Design Systems, Inc. v. Avant! Corp. (2002) 29 Cal.4th 215 was not technically a statute of limitations case but a dismissal based on a settlement and release agreement. Upon certification of the question by the United States Court of Appeals for the Ninth Circuit, the California Supreme Court held that a claim for post-release misuse of trade secrets allegedly taken before the release was executed was barred by the release because the defendant’s continued improper use or disclosure of the trade secrets after the initial misappropriation was still part of a single “claim” of “continuing misappropriation” accruing at the time of the initial misappropriation.

Notably, there was no discussion in Cadence about whether the pre- and post-release uses of trade secrets involved the same trade secrets; the only issue was the effect of the very broadly-worded release on the later misappropriation claim. Here, we are not interpreting the language of a release in order to determine whether the FAC alleges a continued improper use or disclosure of the trade secret at issue in Mathews. More importantly, it is not clear to the Court that the instant matter involves the same trade secret at issue in Mathews to support the inference of a “continuing misappropriation.” Defendants provide little support for their contention that Mathews and the instant action involve the same trade secrets. That both actions allege misappropriation of information dealing with Ariba’s pricing, products, services, competitive strategy and customer accounts does not mean they involve the same trade secrets to constitute a continuing misappropriation. Cadence articulated a distinction between a “misappropriation” and a “claim” finding that while misappropriations occur at the time of the initial wrongful acquisition as well as with each misuse or wrongful disclosure, “a claim for misappropriation of a trade secret arises for a given plaintiff against a given defendant only once, at the time of the initial misappropriation, subject to the discovery rule provided in section 3426.6.” (Cadence, supra, 29 Cal.4th at p. 223.) However, Cadence does not support the position that a plaintiff has only one “claim” for misappropriation for a broad category of trade secrets. The language and scope of Cadence’s main holding still pertains to a singular trade secret that is being misused or wrongfully disclosed again. “The UTSA does not define the term ‘continuing misappropriation,’ but its meaning appears evident in light of the definition of ‘misappropriation.’ It is the continuing use or disclosure of a trade secret after that secret was acquired by improper means or as otherwise specified in section 3426.1, subdivision (b).” (Cadence, supra, 29 Cal.4th at p. 223, emphasis added.)

Defendants also rely on Glue-Fold, Inc. v. Slautterback Corp. (2000) 82 Cal.App.4th 1018, but there, the defendant simply halted its public advertising and sale of an allegedly infringing product before resuming such activities later, leading to the untimely lawsuit. The Court of Appeal held that “the actual discovery of an act of misappropriating a trade secret commences the limitation period of three years, which is not tolled by subsequent inactivity by the misappropriator” and “that the limitation period is also not tolled if such inactivity is followed by what the [CUTSA] calls a ‘continuing misappropriation.’” (Glue-Fold, supra, 82 Cal.App.4th at p. 1021.) Here, there is no basis to conclude from the FAC and judicially-noticed documents that the time period between the alleged misappropriation by Matthews and the alleged misappropriations by Carlton and Paskow and the Individual Defendants was merely a cessation of the same infringing activity, as opposed to multiple separate acts of misappropriation.

Nothing on the face of the FAC or judicially-noticed documents suggests that Defendants are currently being sued for using or disclosing trade secret information that was first obtained from Mathews. There are no allegations linking the alleged misappropriation by Mathews with the misappropriations by the Individual Defendants, Carlton and Paskow, nor allegations that any of the Defendants acquired Ariba trade secrets from Mathews. Notably, the alleged misappropriations by Carlton and Paskow took place in 2011 and 2012, some time after the incident with Mathews, and the materials allegedly misappropriated by Carlton and Paskow include SPDs and the Presentation, while the Mathews complaint refers generally to the misappropriation of confidential sales strategy documents distributed during a sales training meeting in Orlando, Florida from November 7-10, 2010. Nothing in the FAC suggests that Ariba is suing Defendants for using and disclosing the sales strategy documents distributed during the November 2010 sales training meeting in Orlando.

Defendants argue that the trade secrets need only be related in order to create a time bar to the current action, and since both Mathews and the current action allege misappropriation of trade secrets related to Ariba’s pricing, products, services, and competitive strategies, Ariba cannot dispute that both actions involve the same trade secrets and confidential information. Defendants cite MedioStream v. Microsoft Corporation (N.D. Cal. 2010) 869 F.Supp.2d 1095 in support. In MedioStream, the U.S. District Court for the Northern District of California held that “California law does not allow a plaintiff to reassert the same claims after the statute of limitations has run by simply making its allegations more specific. [Citation.]” (MedioStream, supra, 869 F.Supp.2d at p. 1109.) Here, the Court does not see the FAC as an attempt to evade a statute of limitations bar by making more specific allegations than in the Mathews complaint. The Mathews complaint already specifically referred to Mathews’ misappropriation of information from Ariba’s internal knowledge site and sales strategy documents that were distributed at an Orlando sales training meeting, while the FAC alleges the misappropriation of specific confidential, proprietary documents such as the Presentation and SPDs.

MedioStream does make a broader point that ostensibly favors Defendants on the issue of “related” trade secrets: “[U]nder California law, ‘[w]hen the statute of limitations begins to run on some of a plaintiff[’]s trade secret claims against given defendants, the statute also begins to run at the same time as to other trade secret claims against those same defendants, even if there have not yet been any acts of misappropriation of the other trade secrets, at least when the plaintiff shared all the trade secrets with the defendants during the same time period and in connection with the same relationships and when the trade secrets concern related matters. [Citations.]” (MedioStream, supra, 869 F.Supp.2d at p. 1110, emphasis added.) However, this discussion also highlights why MedioStream is distinguishable: Ariba did not voluntarily share a broad category of related trade secrets with Coupa under a confidential relationship similar to the relationship between MedioStream and Sonic Solutions, Inc., and Coupa’s alleged misappropriation does not stem from a breach of any confidential relationship in order to combine ensuing different misappropriation claims (even acts of misappropriation that had not yet occurred in 2010) into one claim with one statute of limitations that began to run in 2010.

Defendants argue that Ariba made a deliberate decision in 2010 not to sue Coupa for misappropriation of trade secrets. This may be true for the trade secrets that Mathews allegedly stole and for any other acts of misappropriation that, with reasonable diligence, could have been found in 2010. However it is not a bar to Ariba suing Coupa for all future acts of trade secrets misappropriation that are not secondary uses or disclosures of the same trade secrets allegedly stolen by Mathews. No amount of reasonable diligence by Ariba in 2010 would have disclosed facts of misappropriations that had yet to occur.

Defendants cite the FAC’s descriptions of Coupa’s misappropriations as “rampant” and occurring “over the course of years” to suggest that they are continuing misappropriations. However, these general allegations do not clearly and affirmatively support the inference that the misappropriating acts by the Individual Defendants, Carlton and Paskow were part of the same misappropriation allegedly committed by Mathews in 2010. Even if we assume that Mathews, Perez, Robertson, Deshpande, Carlton and Paskow were all solicited under the same Coupa policy and practice to extract confidential information from former Ariba employees, and that a lawsuit and investigation of Coupa in 2010 would have revealed the existence of this policy and practice, this is still not a “misappropriation” as it is statutorily defined (e.g., wrongful acquisition, disclosure, or use of trade secrets), nor is it a continuing misappropriation of the same trade secret information stolen by Mathews. “Section 3426.6 provides that the limitations period commences upon discovery of a misappropriation, not a defendant’s plan to misappropriate.” (Display Research Labs. v. Telegen Corp. (N.D. Cal. 2001 133 F.Supp.2d 1170, 1177, emphasis added.)

For all of these reasons, the Court finds that the running of the statute does not clearly and affirmatively appear on the face of the FAC or judicially-noticed documents to support the demurrer. The demurrer to the first cause of action for misappropriation of trade secrets is OVERRULED.

c. Conversion

i. Statute of Limitations

1. Parties’ Arguments

Defendants argue the conversion claim is also time-barred under its three-year statute of limitations, since the statute of limitations runs even though the injured person has no knowledge of the cause of action.

Ariba argues the conversion claim is not time-barred on the face of the FAC because it alleges multiple acts of conversion at unspecified dates, and where a perpetrator has a fiduciary duty (as former Ariba employees Perez, Robertson, and Deshapande did here with Ariba), the statute of limitations for conversion is tolled until discovery.

2. Analysis

“Conversion is generally described as the wrongful exercise of dominion over the personal property of another. [Citation.] The basic elements of the tort are (1) the plaintiff’s ownership or right to possession of personal property; (2) the defendant’s disposition of the property in a manner that is inconsistent with the plaintiff’s property rights; and (3) resulting damages. [Citation.]” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)

The statute of limitations for conversion is three years under Code of Civil Procedure, section 338, subdivision (c), which applies to “action[s] for taking, detaining, or injuring any goods or chattels.” “[T]he statute of limitations for conversion is triggered by the act of wrongfully taking property.” (Bono v. Clark (2002) 103 Cal.App.4th 1409, 1433.)

“To the extent our courts have recognized a ‘discovery rule’ exception to toll the statute, it has only been when the defendant in a conversion action fraudulently conceals the relevant facts or where the defendant fails to disclose such facts in violation of his or her fiduciary duty to the plaintiff. In those instances, ‘the statute of limitations does not commence to run until the aggrieved party discovers or ought to have discovered the existence of the cause of action for conversion.’ [Citations.]” (AmerUS Life Ins. Co. v. Bank of America, N.A. (2006) 143 Cal.App.4th 631, 639.)

Ariba’s tolling argument is not well-taken. As Defendants point out, “[i]n general, employment-type relationships are not fiduciary relationships. [Citation.]” (O’Byrne v. Santa Monica-UCLA Medical Center (2001) 94 Cal.App.4th 797, 811-812.)

However, the Court finds that a statute of limitations bar does not clearly and affirmatively appear on the face of the FAC or judicially-noticed documents. As discussed above, the statute of limitations is triggered by the act of wrongfully taking property. Here, the FAC alleges wrongful receipt of Ariba’s confidential information by Sovik in January 2012, and by Thakur in May 2011, both of which were within three years of the initial filing of this action in May of 2014. As for Perez, Robertson and Deshpande, the FAC does not allege when they misappropriated Ariba’s confidential, proprietary information. Although the FAC alleges the dates when their employment with Ariba ended and their employment with Coupa began, the FAC does not allege that Perez, Robertson and Deshpande committed acts of misappropriation during their employment at Ariba such that the Court may assume the dates of misappropriation to be, at the latest, when their employment with Ariba ended. Nor does the FAC allege when they committed acts of misappropriation while employed at Coupa.

For these reasons, the demurrer to the second cause of action for conversion on timeliness grounds is OVERRULED.

ii. CUTSA Supersession

1. Parties’ Arguments

Defendants argue the conversion claim is superseded by the CUTSA because it is based on the same conduct as the claim for misappropriation of trade secrets, namely, the misappropriation and conversion of Ariba’s confidential and proprietary information and documents by former Ariba employees who were subsequently hired by Coupa.

Ariba argues the conversion claim is not superseded by the CUTSA because the CUTSA does not displace claims that, although related to trade secret misappropriation, are independent and based on facts distinct from the misappropriation claim, and here, the conversion claim arises out of the Ariba Converted Documents.

2. Analysis

The CUTSA “includes a specific provision concerning preemption. That provision, section 3426.7, reads in pertinent part as follows: ‘(a) Except as otherwise expressly provided, this title does not supersede any statute relating to misappropriation of a trade secret, or any statute otherwise regulating trade secrets. [¶] (b) This title does not affect (1) contractual remedies, whether or not based upon misappropriation of a trade secret, (2) other civil remedies that are not based upon misappropriation of a trade secret.’ Section 3426.7 thus ‘expressly allows contractual and criminal remedies, whether or not based on trade secret misappropriation.’ [Citation.] ‘At the same time, § 3426.7 implicitly preempts alternative civil remedies based on trade secret misappropriation.’” (K.C. Multimedia, Inc. v. Bank of Am. Tech. (2009) 171 Cal.App.4th 939, 954.) “[S]ection 3426.7, subdivision (b), preempts common law claims that are ‘based on the same nucleus of facts as the misappropriation of trade secrets claim for relief.’ [Citation.]” (Id. at pp. 958-959.)

The “CUTSA provides the exclusive civil remedy for conduct falling within its terms, so as to supersede other civil remedies ‘based upon misappropriation of a trade secret.’ [Citation.]” (Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 236, overruled on other grounds in Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337.)

Here, Ariba tries to avoid CUTSA supersession by alleging that the Ariba Converted Documents do not necessarily contain only Ariba Trade Secrets, and that they “include marketing presentations, product demonstrations, product brochures, product specifications, user guides, and white papers” that “have considerable value to a competitor (particularly a start-up competitor, such as Coupa), who could benefit from the use of, for example, marketing materials/brochures, templates, and presentations that took Ariba years of industry experience and know-how to compile in a professional manner.” Ariba cites Angelica Textile Services, Inc. v. Park (2013) 220 Cal.App.4th 495, 508, where the Court of Appeal (4th App. Dist. Div. 1) held that a conversion claim by an employer against a former employee who allegedly “retained thousands of pages of documents that plaintiff owns” (id. at p. 499) was not displaced by the CUTSA because “the asserted claim is not based on the existence of a trade secret[.]”

Angelica Textile provides almost no analysis and merely cites to an inapposite portion of Silvaco where the court explained that a UCL claim was not displaced by the CUTSA because that it did not “depend on the existence of a trade secret, but on knowingly facilitating another in the violation of its obligations under a judicial decree.” (See Angelica Textile, supra, 220 Cal.App.4th at p. 508, citing Silvaco, supra, 184 Cal.App.4th at pp. 241-242.) Angelica Textile does not contain discussion on the extended portions of Silvaco regarding conversion claims.

In Silvaco, the Court of Appeal (6th App. Dist.) held that “[i]f the only arguable property identified in the complaint is a trade secret, and the only basis for any property right is trade secrets law, then a conversion claim predicated on the theft of that property is unquestionably ‘based upon misappropriation of a trade secret’ [citation] and the conversion claim is preempted. The only thing that might change this conclusion is the plaintiff’s assertion of some other basis in fact or law on which to predicate the requisite property right.” (Silvaco, supra, 184 Cal.App.4th at p. 238, original italics.) “[I]nformation is not property unless some law makes it so. If the plaintiff identifies no property right outside of trade secrets law, then he has no remedy outside that law, and there is nothing unsound or unjust about holding other theories superseded.” (Id. at p. 239, footnotes omitted.)

Thus, the question here is whether Ariba alleges some basis in fact or law outside of trade secrets law as the predicate for the requisite property right over the Ariba Converted Documents. Arguably, despite its brevity on the subject, the published Angelica Textile opinion may be said to provide positive law recognizing a right to sue for conversion for the wrongful taking of “tangible property.” (Angelica Textile, supra, 220 Cal.App.4th at p. 508.) In the briefing, the parties debate the availability of conversion for intangible or electronic documents. The Individual Defendants cite Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 794 for the position that information in electronic form is intangible, and conversion cannot be based on intangible property. Critically however, the FAC does not seem to allege whether the Ariba Converted Documents were taken in a tangible or intangible/electronic form. If we assume the Ariba Converted Documents include tangible marketing materials, brochures, and presentations, then it could be said that Ariba has a property right of dominion and control over these materials, regardless of whether the information contained therein constitutes a trade secret. In contrast to Silvaco, where “[t]he conversion cause of action, last pleaded in Silvaco’s second…complaint, was predicated on ‘the conversion and use of SILVACO’s property as described herein[,]’” (Silvaco, supra, at p. 236, footnote omitted), Ariba’s conversion claim is not simply predicated on the prior allegations regarding trade secrets misappropriation, and the FAC provides some factual allegations supporting Ariba’s property right in the Ariba Converted Documents. Although the issue is close, the Court feels there are sufficient distinguishing features for this conversion claim to withstand dismissal on demurrer. Accordingly, the demurrer is OVERRULED.

II. Ariba’s Motion to Seal

a. Parties’ Arguments

Ariba moves to seal portions of Coupa’s unredacted Cross-Complaint, including the attached Exhibits A and B. Ariba argues the portions to be sealed constitute confidential and proprietary business information, including trade secret information, describing Ariba’s competitive intelligence program. Ariba contends that Exhibits A and B to the Cross-Complaint describe Ariba’s internal competitive intelligence program from February and October of 2011, respectively, including proposed strategies and methods for gathering intelligence about Ariba’s competitors’ activities in the marketplace. Ariba further argues that Exhibit A contains detailed analysis of the perceived weaknesses of Ariba’s historical competitive intelligence programs, together with a step-by-step proposal for how to enact a proposed new program, and it also sets forth what Ariba has done to develop competitive intelligence in the past, with a proposal for specific new procedures and policies to follow when gathering competitive intelligence in the future. Ariba argues that Exhibit B provides details about a similar proposal, including identification of specific sources of information and methods for retrieving this information for use in competitive intelligence gathering. Ariba argues it would be severely harmed if such information became public because Ariba’s competitors would have visibility into Ariba’s competitive intelligence program operations and potential plans, enabling them to exploit the information to better compete against Ariba. The motion is supported by the declaration of Landon Edmond, Ariba’s General Counsel and Cloud Legal Center of Excellence Co-Lead.

The motion is opposed by the Individual Defendants, who argue that Exhibits A and B contain nearly four-year old documents that describe Ariba’s illegal plan and business practice of soliciting its competitors’ confidential and trade secret information from Ariba’s employees who were former employees of Ariba’s competitors. The Individual Defendants argue that Mr. Edmond fails to state that the information is confidential or trade secret and does not explain why the disclosure of four-year old information could still harm Ariba.

In a supplemental request, Ariba further moves to seal Exhibit 1 to the Individual Defendants’ opposition to the motion to seal. Ariba argues that this Exhibit 1 quotes from the Cross-Complaint’s Exhibits A and B.

b. Analysis

“Unless confidentiality is required by law, court records are presumed to be open.” (Cal. Rules of Court, rule 2.550(c).) “A record must not be filed under seal without a court order. The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.” (Cal. Rules of Court, rule 2.551(a).)

“The court may order that a record be filed under seal only if it expressly finds facts that establish: [¶] (1) There exists an overriding interest that overcomes the right of public access to the record; [¶] (2) The overriding interest supports sealing the record; [¶] (3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; [¶] (4) The proposed sealing is narrowly tailored; and [¶] (5) No less restrictive means exist to achieve the overriding interest.” (Cal. Rules of Court, rule 2.550(d).)

Where some material within a document warrants sealing, but other material does not, the document should be edited or redacted if possible, to accommodate the moving party’s overriding interest and the strong presumption in favor of public access. (Cal. Rules of Court, rule 2.550(d)(4), (5).) In such a case, the moving party should take a line-by-line approach to the information in the document, rather than framing the issue to the court on an all-or-nothing basis. (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 309.)

“[V]arious statutory privileges, trade secrets, and privacy interests, when properly asserted and not waived, may constitute overriding interests.” (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 298 fn. 3; NBC Subsidiary (KNBC-TV) vs. Superior Court (1999) 20 Cal.4th 1178, 1222, fn. 46.) Financial information involving confidential matters relating to the business operations of a party may be sealed where public revelation of the information would interfere with the party’s ability to effectively compete in the marketplace and there is a substantial probability that their revelation would prejudice the foregoing legitimate interests of the party. (Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, 1285-1286.)

Ariba and Mr. Edmonds establish that these portions of the Cross-Complaint relating to Ariba’s competitive intelligence program are not shared outside of Ariba and divulge Ariba’s strategies to obtain intelligence for competing in the marketplace. Despite the Individual Defendants’ characterizations of the program as “illegal” and a type of “corporate malfeasance,” whether the program constitutes tortious interference with contract or unfair competition is not to be decided on a motion to seal. All that concerns the Court now is the fact that the information at issue constitutes confidential matters relating to Ariba’s business operations, and the disclosure of this information could harm Ariba’s ability to effectively compete in the marketplace by allowing competitors to duplicate Ariba’s efforts or develop countermeasures to Ariba’s intelligence-gathering strategies. Thus, the Court finds that Ariba sufficiently demonstrates an overriding interest that overcomes the right of public access to the record and supports sealing the unredacted Cross-Complaint. The Court further finds that a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed. The proposed sealing as set forth in the redacted exhibits to the Edmond declaration is narrowly tailored and no less restrictive means exist to achieve the overriding interest. The motion to seal portions of the Cross-Complaint and Exhibit 1 to the Individual Defendants’ opposition is GRANTED.