More on Google's Trade Secrets vs. The Government

From Silicon.com, an article reporting that the government's brief "denounces" Google for maintaining that complying with the government's request for a week's worth of search data "would mean disclosing important trade secrets, take up too many of the company's resources to produce and harm its reputation with users."

No, says the Justice Department. Instead, "Google is holding up efforts to protect children from pornography."

This is another example of the difficult trade-offs between protecting trade secrets and government information and public records requests. Is Google legitimately trying to protect trade secrets, the privacy of its users, or is it facilitating illegality? Maybe all three. Companies like Google are to put hard choices in these cases.

It will be very instructive to see how the court rules.

Google Subpoena Dispute Continues

More from the San Jose Mercury News concerning the government-Google subpoena flap. To recap, the government is seeking to review a week's worth of search requests from Google. Google has objected on trade secrets and privacy grounds.

In a recently-filed brief, the government says that the privacy concerns are non-existent since the information will not allow the government to link particular users to given searches. The brief also said the nature and depth of the requested information would do little to threaten Google's closely guarded trade secrets. The company itself publishes more details about its queries than is being sought by the government, said a government expert who provided a declaration in support of the subpoena.

Google is expected to continue its objections.

The dispute is scheduled to be heard before U.S. District Judge James Ware in a March 13 hearing in San Jose.

Secret Opinions in Trade Secrets Cases? Not in the Seventh Circuit.

Hicklin Engineering v. Bartell, slip op. (7th Cir. Feb. 22, 2006) concerned, by all appearances, a fairly mundane trade secrets dispute between a company in the transmission testing business and a former independent contractor who went into competition with plaintiff. What was unusual was the fact that the district court (in this case the magistrate-judge) issued all the opinions in the case in secret.

This was not to Judge Easterbrook's liking on appeal. He ruled that:

"Redacting portions of opinions is one thing, secret disposition quite another. We have insisted that litigation be conducted in public to the maximum extent consistent with respecting trade secrets, the identities of undercover agents, and other facts that should be held in confidence."

He also offered a cogent reason why:

"What happens in the federal courts is presumptively open to public scrutiny. Judges deliberate in private but issue public decisions after public arguments based on public records. The political branches of government claim legitimacy by election, judges by reason. Any step that withdraws an element of the judicial process from public view makes the ensuing decision look more like fiat and requires rigorous justification."

The court ruled that all opinions and briefs would be filed publicly, in parallel redacted versions if required to protect trade secrets.

Trade Secrets and Lottery Machines

From the Des Moines Register, another case of state public records acts bumping up against trade secrets laws. Iowa newspapers are seeking information regarding sales at the state's new "TouchPlay" lottery machines that resemble slot machines.

Apparently, Iowa lottery officials have encouraged retailers to resist the public records request on the grounds that such information could constitute trade secrets.

The Register editorializes that companies shouldn't "expect to keep information about their lottery operations out of the public's hands: If private businesses want to get into the gambling business with the state-run lottery, they must expect that all information related to that gambling will be made public."

Don't Get Tricky, Mr. Rikhy - Trade Secret Consent Decrees Should Not Be Violated

When you're caught, you're caught. Seems Mr. Abhijit Rikhy, doing business as Quik Commission, got caught stealing a competitor's trade secrets. Mr. Rikhy operates a business providing cash advances to real estate agents who have completed sales but are waiting to get paid their commission. That's the same business Commission Express National, Inc. (editor's note - somebody might want to advise Mr. Rikhy about the value in incorporating) is in. After Mr. Rikhy got nabbed apparently having stolen a significant number of Commission Express National's operational agreements and got sued, he entered into a consent decree filed with the New York federal court. After entering into that consent decree, Mr. Rikhy was bowed but unbroken. So the story goes on - he violated the consent decree and in doing so even, and this might be a first in the annals of New York law, pirated Commission Express National's customer testimonials via a commission question and answer log - and even posted them on his website!

"NO, NO, NO!" says Commission Express National in their motion seeking enforcement of the consent decree and "NO, NO, NO!" says the Court. Mr. Rikhy got hauled into court and he defended himself saying "these are not trade secrets." Might have been a good point, concedes the Court, if you'd argued that at a different stage of this proceeding. But here, Mr. Rikhy, we are examining your alleged violation of the consent decree, not the law. Mr. Rikhy got hit with approximately $75,000 in sanctions, $53,000 of which were in disgorgement sanctions relating to the benefit he derived from using the commission question and answer materials.

THE RULE OF THIS CASE? Negotiate that trade secret theft consent order - and then abide by it. Don't make your post-consent order conduct the subject of future litigation through the splitting of trade secret hairs. You will be going before the same judge and if the argument didn't work the first time, or you didn't make it, that same judge will likely say "you should've successfully argued that last time we met." Commission Express National, Inc. v. Rikhy, 2006 WL 385323 (E.D.N.Y., February 17, 2006)(slip copy).

Canada Needs More Protection for Trade Secrets

From Law Times of Ontario, an article concerning the need for specific Canadian legislation dealing with trade secrets and industrial espionage. Unlike the U.S. where most states have adopted versions of the Uniform Trade Secrets Protection Act and Congress has criminalized theft of trade secrets in the Economic Espionage Act, Canada is still relying on common law concepts which don't provide clear protections for trade secrets.

For example, Canada's highest court has ruled that confidential information is not capable of being "stolen" since it is not converted in a way that deprives its owner of use.

The article quotes Richard Austin, chief legal counsel for EDS Canada, who says that there "isn’t very much in a criminal law context you can do with the theft of information" in Canada.

Like most countries, Canada needs to catch up with the changing nature of property crimes in the 21st Century.

Second Circuit Grapples with North Carolina Trade Secrets Law

In Nexan Wires S.A. v. Sark USA, Inc., slip op. (2d Cir. Feb. 13, 2006), the Court of Appeals for the Second Circuit considered issues relating to a trial court's jury charge under North Carolina's trade secrets law.

The court first affirmed the trial court's instruction to the jury that under North Carolina law it had to find that some misconduct occurred in North Carolina in order to find a violation of the North Carolina Trade Secrets Act.

Next, and more importantly, the court dealt with the issue of the interplay of that statute's burden of proof – which shifts the burden to defendant once a prima facie case is established – and the instructions to the jury on misappropriation. Under N.C.G.S. § 66-151(1), prima facie proof of misappropriation can be established by the introduction of evidence that the defendant (1) knows of should have known of the trade secret and (2) has had a specific opportunity to acquire the trade secret for disclosure.

The court refused, however, to give an instruction requested by plaintiff that could, the court reasoned, have led to a finding of liability without a showing of actual misappropriation. The court instead held that burden-shifting principles should not be allowed to confuse a jury as to the plaintiff's ultimate burden of proof and gave an instruction which made it clear that the ultimate burden remained with plaintiff.

Trade Secrets Prosecutions -- U.S. Cybercrime Statistics

From the United States Department of Justice, the Cybercrime statistics showing prosecutions under the Economic Espionage Act ("EEA") for theft of trade secrets.

From 2000 through the end of 2005, federal prosecutors brought 34 cases under the EEA. Of that number, nearly half (15) were filed in the Northern District of California. That's five times the number of the next most prolific district, the Southern District of New York with three cases. Only three other districts -- the Western District of New York, the Southern District of Florida, and the Central District of California -- had multiple cases filed over the six-year period. Nine districts had one case each.

Interestingly, 86 federal judicial districts had no EEA prosecutions during the period. While in some cases businesses in those districts might not have had many trade secrets worth stealing, it's more likely that prosecutors simply weren't comfortable proceeding under a relatively novel federal statute.

Also, interesting was the classifications of the individuals indicted. The largest categories were ex-employees and competitors (and sometimes a combination of the two). However, company insiders were also indicted in a number of cases.

Prosecutions, while slow, appear to be picking up.

Employees Blogging About Trade Secrets? -- A Generally Bad Idea

From the San Francisco Examiner, an article concerning the pros and cons of employee blogs. To believe the article, and the experts it quotes, it's mostly cons.

Among the cons, according to Doug Dexter, a San Francisco lawyer, "employees putting up confidential information are potential landmines." In addition, "it may be trade secrets, which is a very serious issue, or it may be just confidential information that may have an implication on stock value. Then you also have issues around defamation of somebody."

Most experts recommend that companies have a blogging policy for their employees.

Cut Out the Middleman -- Just Don't Use Trade Secrets

From the Court of Appeals for the First Circuit, APG, Inc. v. MCI Communications Corp., 2006 WL 295503 (1st Cir. Feb. 8, 2006), concerned a small company's attempts to sell MCI phone cards through CVS drug stores. Ultimately, plaintiff was bypassed when CVS contracted directly with MCI.

Plaintiff claimed that it brought CVS to the brink of finalizing an agreement but that MCI stepped in at the last minute after learning information in an email concerning the status of plaintiff's discussions with CVS. That email -- containing information concerning CVS's needs, its interests in MCI's product, and the imminence of the decision -- was a trade secret according to plaintiff.

Not so, said the Court of Appeals. Although MCI did not previously have the information, the court agreed that "it was obtainable within normal business channels had MCI sought to do so." That was the case even though the information may have contained "knowledge that MCI had originally obtained unfairly and then used to its advantage without properly compensating" plaintiff.

While plaintiff could not state a trade secrets claim, the Court of Appeals held that it might be able to assert an unjust enrichment claim under the circumstances.

Biggest Security Threats? Internal Ones.

From the Wall Street Journal(subscription req'd), today's Technology Report has a long article detailing how most companies' biggest security threats come not from external hackers, but from employees and other insiders.

Many big companies' security procedures concerning data and trade secrets are out of control according to the article. The article details numerous practical steps, including encryption and data classification, that companies can use to lower risks.

Legal Outsourcing and Trade Secrets -- The Case for India

From the Financial Express of Bombay, an article concerning whether India is ready to take part in a booming potential market for legal outsourcing. Legal outsourcing for law firms and legal departments, according to the article, ranges from "really low-end services like proofreading to high-end value-added services like patent drafting and searches." A recent survey indicates that the legal outsourcing business in India will be a $1 billion industry by 2015.

Before India can really make inroads into this market, though, the author (a lawyer himself) recognizes "an urgent need for legislation to protect trade secrets and for the courts to enforce confidentiality in a big way."

Protecting Trade Secrets from Cyber Crime -- Some Suggestions

From BusinessWeek online, an interesting article from IBM Research Senior Vice President, Paul Horn, concerning the ways in which companies can protect their trade secrets and other data from cyber criminals.

Horn suggests that the days of the lone hacker in the basement rec room are over and that the threat now comes from real criminals.

Global initiatives such as the Data Governance Council can help organizations protect themselves against indulgent data-collection practices and weak security.

Trade Secrets and Bubble Gum -- An Expert Issue (Pacer Req'd)

In The Topps Company, Inc. v. Cadbury Stani SAIC, 2006 WL 176995 (S.D.N.Y. Jan. 20, 2006), Senior Judge Haight dealt with in limine motions regarding defendant's experts in a trade secrets case between two bubble gum makers.

Defendant sought to offer the testimony of a damages expert who would testify that of the three measures of damages permitted under the New York trade secrets law -- (1) compensation for plaintiff's losses, (2) accounting for defendant's profits, or (3) a reasonable royalty rate -- that the appropriate compensation to plaintiff was a reasonable royalty based on defendant's use of plaintiff's technology.

The court, though, would have none of it holding that an attempt by an expert to define the appropriate measure of damages would invade the province of the court in determining questions of law. Thus, the proposed testimony "impermissibly expresses an opinion on a question of law."