A recent decision issued by the U.S. District Court for the Northern District of California, San Jose Division, presents a stark example of what can result when a defendant accused of trade secret misappropriation is careless in preserving electronically stored information (“ESI”) relevant to the lawsuit.
Silicon Valley-based autonomous car startup WeRide Corp. and WeRide Inc. (collectively, “WeRide”) sued rival self-driving car company AllRide.AI Inc. (“AllRide”), along with two of its former executives and AllRide’s related companies, asserting claims for misappropriation under the federal Defendant Trade Secrets Act and the California Uniform Trade Secrets Code, along with numerous other claims. WeRide secured a preliminary injunction from the Court, directing AllRide not to use or disclose WeRide’s confidential information and trade secrets, and specifically directing defendants not to destroy evidence.
Discovery showed that the defendants did not heed the Court’s injunction, instead engaging in what the Court called a “staggering” amount of spoliation, much of which AllRide conceded. The spoliation included:
- Failure to disable a 90-day automatic deletion of emails in AllRide’s computer system;
- Destruction of email accounts assigned to or used by the individual defendants;
- Destruction of the source code alleged to have been stolen; and
- Wiping clean one laptop and deleting files from another laptop.
Evaluating defendants’ actions under Federal Rules of Civil Procedure 37(b) and 37(e), the Court issued terminating sanctions against AllRide and the individual defendants, striking their answers and entering defaults against them, and holding that they must pay WeRide’s attorneys’ fees relating to discovery and motion practice regarding the spoliation.
Although an extreme example, this decision serves as a reminder of the importance of preserving ESI, even when litigation is a possibility.