Trade Secrets Online (Albeit Inadvertently)

From Bitform Technology Inc., a software component developer of tools for content inspection and security, a study indicating that many documents at the websites of Fortune 100 companies contain hidden metadata which could be embarrasing to the companies if not downright security breaches.

Among other publicly-exposed problem documents:

-- A contract from a telecommunications company contains dozens of track changes - both insertions and deletions - potentially exposing negotiable terms.

-- A customer presentation from an equipment manufacturer contains a comment that questions whether the facts in a slide are accurate.

In the words of Joe Keslin, CEO and Co-founder of Bitform, "it's remarkable how much information is accidentally exposed through seemingly benign documents that organizations generate every day."

The solution? Scrubbing the metadata before documents are posted or circulated outside the company.

Trade Secrets and Pizza (ECF Log In required)

In Papa John's International, Inc. v. Specktackular Pizza, Inc., WL 3132337 (W.D.Ky. Nov. 21 2005), the U.S. District Court for the Western District of Kentucky ruled against a franchisee of pizza restaurant system Papa John's. The defendant restaurant continued to operate using Papa John's trademarks and trade secrets after its franchise agreement was terminated in connection with a cooperative advertising dispute. The court ruled that Papa John's was entitled to an injunction shutting down the restaurants even though it had improperly established the advertising cooperative.

The court was not specific regarding the trade secrets embodied in Papa John's "proprietary system for the retail sale of pizza," but they appear to have included "manuals, policy and procedure statements, instructions and other materials relating to operating the . . . restaurants, including Papa John's proprietary software."

Trade Secrets and Intellectual Property in the Kingdom of Jordan

From the ag-IP-news Agency, an article on how the country of Jordan is recognizing intellectual property rights, including trade secrets.

According to the Director-General of Jordan's National Library, Mamoun Talhouni, "international investors today are looking for good local environments where IP laws are strong and effective, and once they see that, Jordan will become much more attractive for outside investments."

Federal Circuit Rules Virginia Conspiracy Claim Preempted by Trade Secrets Act

In what may finally be the end to the long dispute between Microstrategy Inc. and Business Objects, SA, two providers of so-called business intelligence, the Federal Circuit largely affirmed the trial court's ruling in favor of the defendant, Business Objects.

In so ruling, the Federal Circuit held that the Virginia Uniform Trade Secrets Act preempted a statutory conspiracy claim under Va. Code � 18.2-499 when the conspiracy claim was predicated on misappropriation of trade secrets.

In another part of the ruling the court held that the trial court was correct in granting summary judgment on Microstrategy's claim under the federal Computer Fraud and Abuse Act, 18 U.S.C. � 1030, based on Microstrategy's failure to show the amount of damage it suffered with reasonable certainty. That ruling, in turn, was based on the trial court's exclusion, under Daubert, of Microstrategy's damages expert based on his use of a flawed methodology.

Big Sale a Trade Secret?

From the New York Times via the Virginian Pilot:

Retailers are threatening legal action against an 18 year-old college student who runs a website dedicated to publishing advertisements concerning sales before those advertisements actually run in the intended newspapers. The website -- BF2005.com ("BF" stands for Black Friday, the big shopping day after Thanksgiving) -- routinely publishes leaked advertising circulars showing sales times and low prices weeks in advance of the date of the sale.

In the words of the NYT:

The renegade sites, whose popularity is growing, highlight how much the Web is shifting the balance of power in retailing from companies to consumers. Big national chains used to control discounts carefully, and shoppers were lucky to stumble into a sale at a store or receive an e-mail message promising free shipping.

Although the student claims his postings fall into a "legal gray area," retailers accuse of him misappropriating trade secrets. It's all about the timing.

Happy Holidays!

The Computer Fraud and Abuse Act: A Tool for the Protection of Trade Secrets

All of the legal tools for protecting important information -- non-competes, non-solicitation and confidentiality agreements -- have their uses and their drawbacks.

A series of recent cases, including an important pharmaceutical industry case from a North Carolina federal court, illustrate that a new tool for protection of trade secrets may be available to counter the problems arising from the departure of key employees. That tool is the federal Computer Fraud and Abuse Act (CFAA), 18 U.S.C. � 1030, a statute originally enacted in 1984 to protect the federal government's computers and computer data.

Now it covers any protected computer defined to include a computer which is used in interstate or foreign commerce or communication. As a practical matter, the CFAA covers virtually any computer linked to the Internet. More importantly, the CFAA forbids access of such a computer without authorization and prohibits a person with access from exceeding the authorized access. Many (if not most) employee departures and defections to competitors make some use of the former employer's computer data, often by emailing confidential information to the competitor or downloading the information onto computer disks and bringing those disks to the new employer.

Protections, though, are not automatic. This article tells how to ensure protection.

$43.1 Million Arbitration Award in Trade Secrets Case

From Business Week OnLine:

Wireless equipment maker LM Ericsson has been ordered to pay $43.1 million in damages to U.S. chip maker Atmel Corp. by an international arbitration tribunal, the companies said Tuesday. The tribunal found Ericsson and its subsidiary, Ericsson Mobile Platform, liable for breaches of contract and misappropriation of trade secrets relating to Atmel's proprietary AVR microcontroller technology, San Jose, California-based Atmel said

Vietnam to Increase Trade Secrets Protection?

From the Vietnam News Agency (the state-run news outlet), a report that "experts" have called upon the government of Vietnam to take steps to increase protection of trade secrets. According to Dr. Pham Phi Anh, Deputy Director of the Vietnam Intellectual Property Service, Vietnam is in the process of creating legal guidelines and trade secrets protection procedures.

No word from Dr. Anh, though, on when those guidelines and procedures will be adopted, let alone whether they will be enforced.

Kansas Federal Court Rejects Novel Attorneys' Fees Theory

In Bradbury Co., Inc. v. Teissier-DuCros, 2005 WL 2972323 (D.Kan., Nov. 3, 2005), a Kansas federal judge rejected a novel claim for attorneys' fees in a trade secrets case.

Defendant alleged a bad faith claim stemming from an allegation that Plaintiff was preparing for the case at hand while also negotiating a settlement agreement in a different lawsuit. The settlement agreement in that case stated that: "[t]he parties desire to avoid future litigation insofar as is reasonably possible ..." Defendant argued that the preparation for the lawsuit while making such a representation in the settlement agreement showed that Plaintiff brought its trade secrets claim in bad faith.

The federal court rejected the theory holding that "Kansas courts would define bad faith in the KUTSA as a frivolous action or one brought with no supporting evidence." Subjective intent of the plaintiff was not a basis for finding bad faith.

Trade Secrets & The Common Law -- 6th Circuit Holds No Conversion Claim for Theft of Trade Secrets

In Stratienko v. Cordis Corp., the plaintiff-inventor of a catheter device found himself whipsawed by the interaction between the Tennessee trade secrets act and the common law. On the one hand, he could not assert a statutory trade secrets claim because the acts complained of occurred before the effective date of the act. At the same time, he could make no common law claim for conversion of trade secrets because Tennessee law doesn't recognize that tort for theft of intangible property.

In states that don't provide common law protection for trade secrets, the need for statutory trade secrets protection is even more critical.

Trade Secrets: The Other Intellectual Property

Why do companies have so many problems dealing with Trade Secrets?

Why are companies typically dealing with Trade Secrets in a reactive mode?

One main reason: Failure to have a Plan.

More broadly, as our experience in trade secrets litigation has shown over and over, few companies have a comprehensive plan in place for the protection of trade secrets. The survey data confirms that the majority of companies do not provide a comprehensive framework for safeguarding trade secrets. Instead, in most companies the responsibility for trade secrets protection "if, indeed, responsibility has been assigned at all" is split between the legal department, the human relations department, the information technology function, and sometimes even physical plant security. Divided responsibility, of course, is a recipe for problems. The most common problem is that a divided responsibility becomes no one's responsibility.

For most companies, this is a recipe for disaster.

11th Circuit Discusses Choice of Law & Scope of Trade Secrets

In Manual v. Convergys Corp., 2005 WL 3040815 (11th Cir. Nov. 15, 2005), the Eleventh Circuit discusses choice of law under Georgia law in cases alleging both trade secrets violations and breach of an agreement with an employeee when that agreement contains a choice of law provision. Even though the parties' agreement required application of Ohio law, the court held that Georgia would apply its own choice of law doctrince -- lex loci delicti -- to the tort of misappropriation of trade secrets. The place of the alleged tort was Georgia and so its trade secrets statute applied.

Applying other state and federal cases decided under the Georgia Trade Secrets Act, the court refused to find a trade secrets violation for information simply "in the mind" of the employee, holding "Convergys only alleges general customer and business information that Avnet [an earlier Georgia state case] held cannot be a trade secret if it is only personal knowledge."

Score it for the former employee.

Brutal Trade Secrets Wars in Hong Kong

From the South China Morning Post, an article on nasty business in the Hong Kong property business, including theft of trade secrets:

"Two key players have squared off with each other in court: Centaline Property Agency has sued a subsidiary of the Midland Group, claiming an exodus of staff to its arch rival came at a hefty cost. Centaline believes confidential information was stolen from its database and is now being used by the Midland arm."

Hot markets can lead to bad behavior.