United States v. 2020-01-09 | 18-56331 | SOTERA WIRELESS, INC. V. MASIMO CORP. | nonprecedential | memorandum disposition |

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: SOTERA WIRELESS, INC.,

Debtor,
______________________________

MASIMO CORPORATION,

Appellant,

v.

SOTERA WIRELESS, INC.,

Appellee.

No. 18-56331

D.C. No.
3:17-cv-00885-BTM-BLM

MEMORANDUM
*

Appeal from the United States District Court
for the Southern District of California
Barry Ted Moskowitz, District Judge, Presiding

Argued and Submitted December 13, 2019
Pasadena, California

Before: KELLY,
**
PAEZ, and BADE, Circuit Judges.

Masimo Corporation (Masimo) appeals from the district court’s affirmance

*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.

**
The Honorable Paul J. Kelly, Jr., United States Circuit Judge for the
U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
FILED

JAN 9 2020

MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

2 18-56331
of a bankruptcy court judgment in favor of Sotera Wireless, Inc. (Sotera) regarding
three sets of trade secrets that Masimo claims Sotera misappropriated. These
include Masimo’s marketing technique, which it calls customized alarm analytics,
technical trade secrets (TTS), and customer list trade secrets (CTS). The
bankruptcy court decided, and the district court affirmed, that customized alarm
analytics is not a trade secret, documents containing TTS were misappropriated but
not used, and documents containing CTS were misappropriated and used to a
limited extent. It awarded damages in accordance with its analysis. We have
jurisdiction under 28 U.S.C. § 158(d)(1), and we affirm.
The parties are familiar with the facts and procedural background, so we
need not restate them here.
I.
We review a district court’s legal holdings de novo. In re Mortg. Store, Inc.,
773 F.3d 990, 994 (9th Cir. 2014). In bankruptcy cases, the district court functions
as an appellate court and so reviews the bankruptcy court’s legal conclusions de
novo and findings of fact for clear error. Id.; Northbay Wellness Grp., Inc. v.
Beyries, 789 F.3d 956, 959 (9th Cir. 2015). The appellate court thus reviews the
bankruptcy court’s decisions by the same standard as the district court. Id.
Accordingly, we review the bankruptcy court’s conclusions of law de novo and
findings of fact for clear error. Id. Because we review the bankruptcy court’s

3 18-56331
conclusions of law de novo, we can affirm its decision on any grounds supported
by the record, even if the reasoning of district court or the bankruptcy court was
incorrect. In re Crystal Props., Ltd., 268 F.3d 743, 755 (9th Cir. 2001).
II.
On appeal, Masimo makes several arguments that may be distilled as
(1) whether the bankruptcy court erred by importing a requirement that the alleged
trade secret not be readily ascertainable, and (2) whether the bankruptcy court
erred when it did not expressly address Masimo’s request for royalties for the
misappropriated documents.
Masimo’s first argument is unavailing. The bankruptcy court did not decide
that custom alarm analytics are not a trade secret based wholly, or even mostly, on
the basis that it was readily ascertainable. The bankruptcy court gave two other
valid grounds for its holding, both of which are based upon fact-intensive
analyses.
1
First, the bankruptcy court found that the evidence at trial did not show
a meaningful distinction between Masimo’s alleged trade secret, customized alarm
analytics, and analyzing aggregate hospital data as a sales technique. Second, the
bankruptcy court found that Masimo publicly disclosed its alleged trade secret in a
White Paper on its website and in an article in a trade journal, Horizons. In its

1
The district court did not address these alternate grounds. See In re Sotera
Wireless, Inc., 591 B.R. 453, 466 (S.D. Cal. 2018).

4 18-56331
analysis of the Horizons article, the bankruptcy court noted that “the article’s
insight is not the provision of customized analytics to a hospital” but nevertheless
“the key idea here—analyzing an individual hospital’s data—is embedded within
the article . . . the calculations are the same; the data set is just larger.” The
bankruptcy court concluded that without a meaningful distinction from public
information, Masimo’s technique is not protected.
These grounds turn on the bankruptcy court’s credibility determinations and
factual findings based on an extensive record developed at trial, to which we owe
deference. See In re Schmitz, 270 F.3d 1254, 1256 (9th Cir. 2001). The
bankruptcy court’s assessment of the technique was based on witness testimony in
the context of a seven-day trial. It clearly articulated its findings and supported
them with evidence from the trial. We find no clear error in its factual assessment.
III.
Masimo next argues that the bankruptcy court erred by failing to expressly
consider its request for royalties for the TTS and CTS documents that former
Masimo employees James Welch and David Hunt misappropriated but did not use,
and that the district court erred in affirming the bankruptcy court’s damages
analysis. The California Uniform Trade Secrets Act (CUTSA) provides a remedy
of a reasonable royalty if “neither damages nor unjust enrichment caused by
misappropriation are provable.” Cal. Civ. Code § 3426.3(b). Here, the bankruptcy

5 18-56331
court analyzed damages, granted an injunction requiring destruction of the
misappropriated documents, and gave an unjust enrichment award for the
documents that were used. It specifically considered awarding royalties, and it
declined to do so. Masimo does not cite authority to support its claim for
additional damages, but rather argues that the bankruptcy court’s factual findings
were in its favor and the bankruptcy court should have addressed its request for
royalties.
Although the bankruptcy court did not specifically address Masimo’s request
for royalties for the misappropriated documents, any error was harmless because
the court found that Sotera did not use or benefit from the TTS documents. See
Atl. Inertial Sys v. Condor Pac. Indus. of Cal., 2015 WL 3825318, at *6 (C.D. Cal.
June 18, 2015) (identifying four factors that “should inform the exercise of the
[c]ourt’s discretion to determine whether to award a royalty and, if so, in what
amount”).
Additionally, because the court awarded unjust enrichment damages based
on Mr. Hunt’s use of the CTS documents, it did not err by failing to expressly
address whether royalties were warranted. See id. at *4 (“[w]hen calculating a
monetary remedy for the past use of a misappropriated trade secret, a court ‘may
order’ reasonable royalties ‘[i]f neither damages [for actual loss] nor unjust

6 18-56331
enrichment caused by misappropriation are provable.’”) (quoting Cal. Civ. Code
§ 3426.3). Masimo is not entitled to additional royalty damages.
AFFIRMED.