April 29, 2004

Silicon Valley case offers lesson: Obey the law and watch out for speakerphones

This week’s question:
I have sometimes wondered whether conversations picked up inadvertently by a speaker phone are confidential. Isn’t there a requirement that I must intend to relay the conversation to the other person or persons before they can use it against me?

Audrey A.
Almaden Valley

Dear Audrey:
You may be interested in a very recent case that occurred right here in Silicon Valley. By the way, it is so recent that it possibly could be changed by the California Supreme Court, but we will assume for this column that the case has become final as is.

The case is Jasmine Networks, Inc., v. Marvell Semiconductor, Inc., 04 C.D.O.S. 3124, decided here in San Jose by the Sixth District Court of Appeal on April 8, 2004.

The unanimous 15-page Court of Appeal decision was written by Presiding Justice Conrad Rushing and joined in by Justice Wunderlich and Justice Mihara.

Both companies, Jasmine and Marvel, are in the semiconductor business, more specifically, the design and manufacture of telecommunications chips.

Marvel is a publicly held company, while Jasmine is a smaller, closely held company. Marvel offered to buy a portion of Jasmine’s technology, along with some of its engineers. Jasmine accepted the offer with many conditions, including the implementation of a nondisclosure agreement preventing Marvell from obtaining Jasmine’s trade secrets or employees without paying for them.

Three of Marvell’s officers/employees placed a call to Jasmine’s senior director of legal and business affairs. The callers were (1) Marvell’s vice president of business affairs, general counsel and a Marvell officer; (2) a vice president of engineering and a Marvel officer; and (3) Marvell’s in-house patent attorney.

Using a speakerphone, the three executives placed the call to Jasmine’s senior director of legal and business affairs and left a message to return their call, since the recipient of the call was not there. However, after leaving the initial message, the three Marvell executives failed to hang up the speakerphone and proceeded to have a conversation that was recorded on the Jasmine officer’s voicemail system.

In the words of the Court of Appeal: “In the voicemail, Marvell’s general counsel and corporate officers openly discussed theft of Jasmine’s trade secret and the unlawful hiring of the engineering group, as well as the potential consequence of jail for the conduct.”

The Court of Appeal also stated that: “The contents of the conversation demonstrate the theft of Jasmine’s trade secret, the potential consequences and the planned cover up.”

The Court concluded by saying: “In an era where corporate fraud and boardroom misconduct is front-page news as well as prosecutions of accountants and lawyers in connection with such conduct, our courts are required to ensure that the attorney-client privilege is not used to promote or further any such conduct.”

You can read the case for yourself by going to a free Web site, www.findlaw.com. The link is: http://caselaw.lp.findlaw.com/data2/californiastatecases/h023991.doc

So, Audrey, you might want to be certain to obey the law at all times and that all of your business affairs are legal and proper. Finally, you might want to be very careful when using speakerphones.

Donald J. DeVries
Almaden Valley

Donald J. DeVries is an attorney practicing law in Almaden Valley. If you would like him to answer your question in his next Almaden Times column, you can reach him by e-mail at don@almadenvalleylawyers.com, fax at (408) 268-6502, telephone at (408) 268-9500, or mail at, 6475 Camden Avenue, Suite 200, San Jose, CA 95120. Your matters are personal and private, so of course, he will not disclose your identity or any details about your situation. Want to learn about a specific legal issue or how DeVries can help you? Visit his web site at www.almadenvalleylawyers.com. Almaden Times columns since 1986 are available there. DeVries writes this column to provide you with general information about important legal matters affecting California residents—not to give you legal advice about your specific matter. No attorney-client relationship is created by these articles. The law is complex and constantly changing and varies from state to state. So you should consult an attorney before taking any action that would affect your personal or business matters.