IP Law Daily, TRADE SECRETS—N.D. Cal.: Capconvert secures another court victory against former employee and his company in trade secret battle, (Jul 31, 2026)

By Carolin Dennis, B.Sc., LL.B., LL.M.

District court granted a marketing company’s motion for an order to show cause as the defendants may be held in civil contempt for violating the temporary restraining order (TRO).

In a trade secrets proceeding, the U.S. District for the Northern District of California granted the motion for an order to show cause as to why the defendants should not be held in contempt of the TRO. The district court found that the marketing company demonstrated that the defendants violated the TRO because the defendants resisted the forensic examination and used bots developed using or with reference to the marketing company’s materials (Capconvert, LLC v. Brown, No. 3:26-cv-02149-CRB (N.D. Cal. Jul. 28, 2026)).

Background. Capconvert, LLC (Capconvert) is a search marketing company that helps businesses rank at the top of Google, AI search engines, and paid media channels. Capconvert provides businesses with search engine optimization, generative engine optimization, answer engine optimization, and paid ad management services. Capconvert hired an employee, Benjamin Brown, in July 2025 as a partner for creating new processes and improving systems. Brown had full access without restriction to everything in Capconvert’s systems. Brown then resigned or was terminated on February 22, 2026, by Capconvert. An audit revealed that Brown made copies of at least 46 files on the marketing company Google Drive’s account and copied other files. Brown allegedly began secretly developing Signyl LLC (Signyl), a company that competes with Capconvert even before he left Capconvert. Capconvert alleged that Brown and Signyl misappropriated Capconvert’s trade secrets and confidential information. Capconvert filed a suit against Brown and his company, Signyl (together, defendants) in the federal district court in California. The complaint alleged misappropriation of trade secrets in violation of the Defend Trade Secrets Act as well as violations of the Lanham Act, California’s Uniform Trade Secrets Act, and California’s False Advertising Law.

Shortly after filing suit, Capconvert obtained a TRO enjoining the defendants “from interacting with, using, disclosing, or making available” any Capconvert information or any bots developed, trained, or prompted using or with reference to Capconvert information. The TRO also ordered the forensic imaging and analysis of the defendants’ cloud accounts and personal devices. Capconvert claimed that the defendants violated the TRO in multiple ways. Capconvert contended that the defendants “refused to allow the forensic analyst to image their Mac Mini, have continued using bots developed, trained or prompted using Capconvert’s materials, and have continued interacting with and using Capconvert’s materials through their bots and AI agents, all in violation of the TRO.” Accordingly, Capconvert moved for an order to show cause as to why the defendants should not be held in contempt of the TRO.

Contempt of TRO. The party alleging civil contempt must demonstrate that the alleged contemnor violated the court’s order by clear and convincing evidence. Citing Calvillo Manriquez v. Devos, 411 F. Supp. 3d 535, 539 (N.D. Cal. 2019), the district court explained that a court may hold a party in civil contempt when the party has displayed disobedience to a specific and definite court order by failure to take all reasonable steps within the party’s power to comply.

Refusal of forensic examination. Capconvert’s first basis for contempt was that the defendants’ refused to produce their Mac Mini from May 11, 2026, when Capconvert demanded to image the Mac Mini, up until May 22, 2026, when the defendants agreed to produce the Mac Mini for forensic imaging. The district court noted that the TRO required the parties to engage a forensic analyst approved by both parties to image the defendants’ cloud accounts and personal devices. The defendants acted appropriately at the outset by producing the Mac Mini to Capconvert’s forensic analyst for imaging on March 27, 2026. However, that proper conduct was later overwritten by their improper apparent refusal to produce the device unless Capconvert could identify trade-secret information uniquely present on the Mac Mini. The district court found that the defendants’ unilateral imposition of this requirement blatantly violated the clear terms of the TRO, which allowed the defendants no such basis to resist the imaging of the device. Further, the defendants’ unilaterally imposed condition was also unreasonable, as Capconvert would have no way of knowing whether the Mac Mini contained unique information without imaging and inspecting it. Therefore, the district court concluded that since the defendants lacked any legitimate basis to withhold the Mac Mini after entry of the TRO, the defendants violated the TRO by resisting the forensic examination of the Mac Mini as of May 12, 2026, thus necessitating the filing of Capconvert’s contempt motion on May 21, 2026.

Continued use. Capconvert’s second basis for contempt was that the defendants continued to use Capconvert materials, as well as bots or AI agents trained on those materials, since the entry of the TRO. The district court noted that Brown admitted that his AI agents continued to audit their own sessions using Capconvert information as part of a “background process remaining alive” until late March, even after Brown “instructed” the agents to stop. Brown stated that, “after the TRO entered, on March 18, 2026, he instructed OpenClaw” to “‘Disable all crons,’ ‘Stop working,’ and ‘DISABLE ALL CRONS.’” Nevertheless, even after his “March 18 shut-down order,” OpenClaw continued to access and use Capconvert confidential information. Therefore, as the defendants have continued to operate AI agents that had access to and used Capconvert information, they violated the TRO’s prohibition on using bots developed using or with reference to Capconvert data.

Thus, the district court concluded that the defendants may be held in civil contempt for violating the TRO by (1) resisting the forensic examination of the defendants’ Mac Mini from May 12, 2026, to May 22, 2026, and (2) continuing to operate AI agents developed using or with reference to Capconvert’s information, along with the AI agents with ongoing access to Capconvert’s information. Accordingly, Capconvert’s motion for an order to show cause as to why the defendants should not be held in contempt of the TRO was granted.

The Case is No. 3:26-cv-02149-CRB.

Judge: Krishnan, A.

Attorneys: Seth Kalela Kugler (Grellas Shah LLP) for Capconvert, LLC. Andrew C. Palmer (Adibi IP Group, PC) for Benjamin Brown.

Companies: Capconvert, LLC

Cases: TradeSecrets CaliforniaNews TechnologyInternet