WeRide Corp. v. Kun Huang
379 F. Supp. 3d 834 (2019)
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Rule of Law:
A plaintiff seeking a preliminary injunction in a trade secret misappropriation case can establish a likelihood of success on the merits through strong circumstantial evidence, such as a former employee's suspicious data handling and a competitor's implausibly rapid technological development.
Facts:
- Jing Wang, CEO, and Kun Huang, Director of Hardware Engineering, worked for autonomous vehicle company WeRide and signed Proprietary Information and Inventions Agreements (PIIA) promising to protect confidential information.
- In December 2017, Baidu sued Wang and WeRide for trade secret theft, leading the WeRide Board to remove Wang as CEO on January 31, 2018.
- After his removal, Wang allegedly disparaged WeRide to potential investors, leading to the loss of over $75 million in expected investment.
- In mid-2018, Huang became dissatisfied with his employment at WeRide, began considering other jobs, and his data downloads from WeRide's secure network increased significantly.
- On August 7, 2018, days before his employment ended, Huang copied over 1,100 files from a shared company laptop to a personal USB device.
- On the same day, Huang erased the hard drive on his personal WeRide MacBook, deleted files from the shared Lenovo laptop, and cleared its web-browsing history.
- After his employment terminated on August 13, 2018, Huang began working for ZZX, a competing autonomous vehicle company closely affiliated with AllRide.
- On October 22, 2018, just 10 weeks after Huang's departure, ZZX presented a video demonstrating a vehicle with 'Advanced Capabilities' that an expert opined would have been impossible to develop independently in that short timeframe; the vehicle also featured a radar component in the same unusual roof-top location as WeRide's vehicles.
Procedural Posture:
- WeRide Corp. and WeRide, Inc. filed a lawsuit against Zhong Zhi Xing Technology Co. Ltd. (ZZX), AllRide.AI, Inc., Jing Wang, and Kun Huang in the U.S. District Court for the Northern District of California, a federal trial court.
- WeRide filed a Motion for Preliminary Injunction and Expedited Discovery against all defendants.
- Each defendant or group of defendants filed a separate opposition to WeRide's motion.
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Issue:
Does a plaintiff in a trade secret misappropriation case establish a likelihood of success on the merits for a preliminary injunction through circumstantial evidence, such as a former employee's suspicious data downloads, wiping of company devices, and a competitor's subsequent, implausibly rapid technological advancement?
Opinions:
Majority - Judge Edward J. Davila
Yes. A plaintiff can establish a likelihood of success on the merits for a preliminary injunction through strong circumstantial evidence of misappropriation. The court found that WeRide demonstrated a likelihood of success on its trade secret claims against Huang, ZZX, and AllRide. The evidence against Huang was compelling: he was under a duty of secrecy via his PIIA, his data downloads increased as he planned his departure, he copied confidential files to a personal device, and he wiped company computers before returning them. Such actions constitute strong circumstantial evidence of misappropriation. The court extended this finding to ZZX and AllRide because Huang held a senior technical role at the new company, their technology advanced at an 'implausibly fast' rate after he joined, and their vehicle design mimicked an unusual feature of WeRide's cars (the radar placement). This combination of facts indicated ZZX and AllRide knew or should have known they were using misappropriated trade secrets. However, the court found the evidence against Wang was insufficient, as it consisted of second-hand reports that Wang directly denied under oath, failing to meet the 'likelihood of success' standard. The court also held that Huang's employee non-solicitation agreement was void and unenforceable under California law.
Analysis:
This decision reinforces the principle that direct evidence is not required to obtain a preliminary injunction in trade secret cases, which are often built on circumstantial evidence. It highlights the critical role of digital forensics—such as VPN logs and evidence of data wiping—in demonstrating misappropriation by a departing employee. The opinion also provides a clear example of how a competitor's 'implausibly rapid' development, coupled with hiring a key employee from a rival, can establish corporate liability. Furthermore, the court's invalidation of the employee non-solicitation clause reflects the modern judicial trend in California strictly interpreting section 16600 of the Business & Professions Code to void such restrictive covenants.
