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Judge Sides With SanDisk in Trade Secrets Fight

The Recorder

A Santa Clara County judge agreed Tuesday to help flash memory giant SanDisk Corp. retrieve trade secrets it says were stolen by a competitor in a case that sparked an overseas arrest in March.

Superior Court Judge Peter Kirwan said he would issue a preliminary injunction requiring South Korea-based SK Hynix Inc. to hand over the alleged secrets, despite Hynix's protest that the order could cripple its business.

"I want whatever was taken, in whatever forms, whether it's been used in other documents, other things—I want it returned," Kirwan said.

SanDisk's attorneys at Keker & Van Nest trace the breach back to a former SanDisk engineer they say took 10 gigabytes of confidential data when he defected to Hynix in 2008. SanDisk was tipped off to the theft in January, according to the company's court filings, and the engineer was later arrested in Tokyo.

Keker partner Jeffrey Chanin asked Kirwan to issue an injunction that would "stop the bleeding" by forcing Hynix to search its databases for confidential SanDisk information, and return what is found. Hynix should also be blocked from releasing new products that incorporate SanDisk data, Chanin said.

But Kirwan insisted the injunction would be carefully tailored. Prior to finalizing his order, Kirwan said he would allow Hynix to explain how it obtained any alleged trade secrets that surface during the search. He also will allow both sides to voice objections before issuing his order.

Kirwan's caution seemed to come in response to warnings from Hynix attorney Barry Sher that the proposed injunction could be devastating to his client.

"They would essentially be shut down," Sher, a partner with Paul Hastings, told Kirwan. "That's a massive, massive injunction."

Sher also accused SanDisk attorneys of using the sweeping injunction request as a way of sneaking into early discovery.

Chanin defended the scope of SanDisk's injunction request, equating the case to a seesaw with only one person sitting on it: All the proof is on SanDisk's side, he said.

"This is really damning evidence and it hasn't been refuted in any way in this case," Chanin said. "We saw three documents—that's it," Sher fired back, adding just because files are marked "confidential" and refer to SanDisk doesn't mean they were procured illicitly. Hynix obtained SanDisk information in several legal ways, including via an agreement between the two companies to cross-license each others' patents, Sher said.

Kirwan seemed to balk at that argument.

"On one hand you're telling me this is all legitimately obtained," he said, "but on the other hand, I'm looking at these declarations that clearly indicate otherwise."