BLOGS: Trade Secrets Blog

Powered by Blogger
Add to Technorati Favorites

Sunday, April 30, 2006, 4/30/2006 06:30:00 PM

Local Laws Look to Protect Against Wi-Fi Crime

From Wi-Fi Planet, a story about a local law set to be passed in Westchester County, New York (just north of New York City) which would require additional security measures on Wi-Fi networks. According to the article, businesses that use a wireless LAN to handle sensitive customer data, will be required to make sure it's secure. This could include such measures as internal firewalls to switching on a system to changing a network's SSID identifier.

Even public places like coffee shops that offer Wi-Fi service will be required to required to post signs reminding users to turn on personal firewalls and embedded 802.11 protection.

We're all for protecting confidential information, especially trade secrets, but a local law setting up local standards may not be a step in the right direction.

Thursday, April 27, 2006, 4/27/2006 11:02:00 AM

Orbitz and the Computer Fraud and Abuse Act

By Todd
A good number of you know that Orbitz is an online travel agency where you can search for, and purchase, airline tickets and the like. Apparently it was created in late 1999 pursuant to a partnership among five airlines: American, Continental, Delta, Northwest and United. Back in 1999 and 2000 Orbitz signed a bunch of contracts with companies to provide it with information and web-infrastructure. Worldspan L.P. was one of those companies.

Worldspan apparently agreed to provide Orbitz with information about the availability of airline segments and web-page support so that Orbitz could book and issue airline tickets and also display in a screen the various international flight options available to the potential customer. Orbitz's business model, however, was ultimately to rely less and less on these companies providing "computer reservation systems" - or CRS companies.

In 2001, Orbitz went into negotiations with Worldspan to use the Worldspan information Orbitz needed. A contract was entered but the companies were unable to resolve the amount of compensation Worldspan would receive from Orbitz for certain information provided. At some point, Worldspan learned that Orbitz was continuing to use information and data that Worldspan had not authorized Orbitz to use in marketing and selling airline tickets. This resulted in another negotiated agreement but Worldspan was still not happy with Orbitz after that agreement was reached. According to Worldspan, Orbitz was accessing Worldspan's systems without authorization and stealing data in derogation of the negotiated agreements. So Worldspan filed suit . . . and their principal claim against Orbitz was for violation of the federal Computer Fraud and Abuse Act at 18 U.S.C. section 1030 et seq.

Orbitz filed a motion to dismiss Worldspan's claim under the Computer Fraud and Abuse Act. Orbitz said that the agreements appended to Worldspan's federal complaint demonstrated that Orbitz's access to Worldspan's data was authorized - the contractual language being "During the term of this Agreement, WORLDSPAN will provide Orbitz with acceess to the WORLDSPAN System for purposes of the operation of the Orbitz Website and in accordance with the provisions of this Agreement." Hmmm - good point, Orbitz. Worldspan responded that Orbitz "had exceeded the permitted access and misused the . . . data." The district court deciding the motion to dismiss noted that there is a distinction between accessing a computer "without authorization" and accessing a computer while "exceeding the authorized access." To "exceed authorized access," the district court noted, is "to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter." But that is not what Worldspan pled in their complaint - they alleged Orbitz was not authorized to access the computer data. Oops.

The district court dismissed Worldspan's Computer Fraud and Abuse Act claim. The message to companies and their attorneys is to plead the violation of the CFAA particularly. The case is cited as Worldspan L.P. v. Orbitz, L.L.C., 2006 WL 1069128 (April 19, 2006 N.D. Ill.).

Wednesday, April 26, 2006, 4/26/2006 11:12:00 AM

Those Pesky E-Mails Will Get You Every Time

By Todd
Zinco-Sherman, Inc. is a company that developed a reduced sugar sweetener product known as REPLACE. Adept Food Solutions is a company that went into discussions with Zinco-Sherman about potentially manufacturing this product for Zinco-Sherman in Texas. Russell Bianchi is Adept Food's President.

Apparently the Zinco-Sherman/Adept Foods relationship broke down but only after Zinco-Sherman had disclosed its REPLACE formulation to Adept Foods for its consideration of the potential partnership. Unbelievably, Zinco-Sherman did not require Adept Foods to execute a nondisclosure agreement prior sharing the REPLACE formula with them.

After the potential relationship broke down, Mr. Bianchi of Adept Foods wrote an e-mail to the President of Zinco-Sherman in which he advised "therefore, it is my decision to take my formula, develop a new team, if or when possible, and move forward with a business plan of my own creation." This e-mail must have struck Zinco-Sherman as weird and misguided, because apparently Zinco-Sherman spent nine years funding the research and development of REPLACE.

Zinco-Sherman sued Adept Foods and Mr. Bianchi and was able to obtain a preliminary injunction against the defendants on grounds that they had misappropriated Zinco-Sherman's trade secrets under Texas state law and needed to be stopped. As readers of this blog know, sometimes the mere acquisition of a trade secret and attendant threat of use is enough to obtain injunctive relief from a court on grounds of misappropriation of that trade secret. And that is what the United States District Court for the Southern District of Texas found - that Mr. Bianchi's e-mail was sufficient evidence for it to enter a strong preliminary injunction. One has to wonder - why did Mr. Bianchi write this incriminating e-mail? We have to figure he wanted it to stick it in the eye of Zinco-Sherman, but only he knows for sure.

We know this - those pesky e-mails will get you every time. The case is cited as Zinco-Sherman, Inc. v. Adept Food Solutions, Inc., 2006 WL 1061917 (April 21, 2006 S.D. Tex.).

Tuesday, April 25, 2006, 4/25/2006 09:10:00 AM

Federal Claims May End Up in Federal Court

By Todd
Some of the readers of this blog might not be professional litigators or professional litigants. This post is for you. We've talked about cases involving the federal Computer Fraud and Abuse Act which is codified in the federal law books at 18 U.S.C. section 1030 and the sections thereafter. We've also talked about cases involving state law claims for breach of confidentiality agreement and unfair and deceptive trade act statutes in state codes. How is it that some cases end up in state court and some end up in federal court and why would anyone care about the difference? A court is a court, right?

Wrong. A general statement could be made that state courts, and the judges that run those courts, are usually not as well funded as the federal courts and those state court judges also are often elected - instead of appointed like the federal judges (who are appointed by the President). Due to the differences in funding, access to clerks and other administrative services, and related differences, our experience is that state court is often a less sophisticated and less discriminating forum for lawsuits of all types, including lawsuits involving misappropriation of trade secrets. State judges might be said to be less critical of weaknesses in a plaintiff's case and will sometimes let some proof defects slide while federal judges are often more knowledgeable about the law and more interested in challenging a plaintiff's claim - and a defendant's defenses, for that matter.

We tell you this because one of the ways to end up in federal court is for the defendant to "remove" to federal court the case originally filed by the plaintiff in state court. Defendants have an interest in removing the case to federal court if there are known or apparent weaknesses in the plaintiff's claims and there is an opportunity to have a discriminating court and judge critically examine those weaknesses. Another reason a defendant might want to remove a case to federal court is that plaintiff's attorneys often file a case in the court they feel comfortable in and feel they might have advantages in - so the defendant's removal is sometimes to blunt the potential impact any forum shopping might have.

Quality Machine Mfg. v. Williamson, et al., 2006 WL 950176 (April 12, 2006 E.D. La.) was a case filed by a former employer against a former employee and some of his alleged co-conspirators. The claims included ones under Louisiana state law for "unfair trade practices" but ALSO under the federal Computer Fraud and Abuse Act. Williamson and his co-defendants thought to themselves "hmmm . . . maybe federal court is a better forum for us in this case." So they removed the case, successfully so, on the grounds that the federal Computer Fraud and Abuse Act claim permitted federal jurisdiction over the claims. Quality Machine's attorneys obviously didn't like federal court. As a response to the defendants' removal, they decided to dismiss their Computer Fraud and Abuse Act claim so as to deprive the federal court of a federally-based claim such that the court would want to keep the case in its hands and on its docket.

Quality Machine's strategy worked. Their dismissal of that claim, accompanied by a motion to remand (editor's note: "remand" is just a little used word meaning "judicially return"), worked its magic and the federal court returned the case to state court where it is now being litigated.

Every once in a while we decide that we should explain developments in the law as if the reader doesn't know much about the law in the first place. This is one such post - we hope it helps.

Updates on Recent Trade Secrets Stories

More on the China-Canada economic espionage flap from the China Daily, Chinese Ambassador Lu Shumin says that Canada's charges about China spying for trade secrets are "baseless and not conducive to bilateral relations."

Meanwhile, Canadian officials are hardly mollified (or mollifying). The Star-Phoenix of Saskatoon, reports here that Canadian Prime Minister Stephen Harper brushed aside that angry denial from Beijing and said the Conservative government plans to press China for answers about industrial espionage in Canada.

Don't expect a lot of answers Mr. Harper.

On the Apple vs. Bloggers trade secrets front, here's an interesting report from the New York Law Journal (reprinted on on the tough questioning Apple's lawyers received from the appellate court which seemed equally troubled by the first amendment and trade secrets aspects of the case. According to the report, the "6th District Court of Appeal panel expressed serious concerns Thursday with Apple Computer's two-year quest to find out who leaked trade secret information to online blog sites."

EETimes has another report on the Apple argument here.

Monday, April 24, 2006, 4/24/2006 01:12:00 PM

"Bring Out Your Dead . . . ."

By Todd
The authors of this blog are fans of Monty Python. You might recall in "The Holy Grail" the cart master who walked through town ordering those victimized by the plague to "bring out your dead!" We love that scene.

Seeking a protective order from a court in a trade secrets case is alot like needing to "bring out your dead" - if you want the state's help, you've gotta put the goods on the cart master's cart. Alright, alright . . . it's a strained analogy. But regardless, when seeking a protective order you can't just say "we have trade secrets that are implicated by the other side's discovery request," you have to SHOW that you need the court's assistance.

The defense attorneys in Autotech Technologies L.P. v., Inc., et al., 2006 WL 1046957 (April 20, 2006 N.D. Ill.) needed to do this in their 3 page motion seeking a protective order precluding discovery of their customer list but didn't. In Magistrate Judge Cole's opinion and order forcing the defendant to produce the customer list but subject to certain restrictions that the Court would later review if and when submitted as a consent order by the parties, the Court went out of its way to say that defense counsel had better spend a little more time and effort developing these arguments in the future if it really needs the Court's assistance.

We think the Court's conclusion is worthy of a reprint here: "This case, like so many, deals with a clash of pretending absolutes; ADC insists that its customer identities and related information are not discoverable under any circumstances, which Autotech insists it is entitled to the unrestricted access to the information. Both contentions are unpersuasive; customer lists are relevant and must be hedged with appropriate restrictions. It is not desirable for a court to fashion such an order in the first instance, but for the parties, if they can. They are in the best position to structure a meaningful order that sensitively deals with the particulars that confront them and that are, at this early juncture, and given the specifics of their businesses not fully perceived by a court."

Guess the attorneys for both sides had better get their ninepence out because the cart master's cart is coming around again Thursday . . . .

Sentence for Former Corning Employee in Trade Secrets Case

In a follow-up to our posting from January here concerning a former Corning employee who stole trade secrets and sold them to a competitor in Taiwan, the Evansville (IN) Courier & Press has the story of his sentencing to 4 years in federal prison under the Economic Espionage Act.

According to federal prosecutors, the employee admitted selling stolen blueprints about Corning's liquid-crystal-display glassmaking process and selling them for $34,000 to PicVue Electronics Ltd. in 2000.

Sunday, April 23, 2006, 4/23/2006 03:24:00 PM

Intellectual Property for the Technological Age

For the academics (or the academically-minded) among you, a scholarly article by Professor Richard Epstein of the University of Chicago and the Hoover Institution.

The paper, sponsored by The Manufacturing Institute, argues generally for the importance of protection of all intellectual property -- patents, trademarks, copyrights and trade secrets -- in helping to create strong and growing economies. Its treatment of trade secrets is of interest.

Friday, April 21, 2006, 4/21/2006 02:19:00 PM

Judicial Deconstruction of a Trade Secrets Case

By Todd
It is not an everyday occurrence to read a judicial decision that picks apart a trade secret claim like Derrida picking apart a Platonic text. One such decision is that of Chief United States District Court Judge Babcock of the District of Colorado in the case of Hertz v. Luzenac America, Inc., et al., 2006 WL 1028865 (April 17, 2006)(slip copy) and one can say of Judge Babcock - he read the record and knows the facts. As readers of this blog know, a company claiming trade secret protection for one or another of its processes must show that it used reasonable efforts to keep that process secret and confidential. Here's what Judge Babcock says of Luzenac's allegedly secret process:

"But secrecy is the sine qua non of the claim and there can be no genuine dispute that the process for manufacturing 604AV was not a secret. As is clear from the above recitation of undisputed facts, Luzenac and VHM have utilized no discreet mixing time, instead adjusting the duration of each batch mix according to the equipment employed. Each of the eight other process elements Dr. Hauser identified as trade secrets was either obtained from the public domain - dispersion of talc as a cloud, use of undiluted silane, application of silane as a fine mist, storage for two weeks before sale - or disseminated in the public domain - use of 6.0 grind, testing by the Scott volumeter - or both - use of VTEO silane, use of 0.5% and 0.6% silane concentrations . . . . The record demonstrates beyond dispute that Luzenac shared the process with its distributors, with temporary employees, with Littleford Day, with customers, with potential customers, in trade journals, and at trade expositions. Rather than refuting its silane supplier's assertions that the process was not proprietary, Luzenac declined to obtain a confidentiality agreement." And so on the opinion goes for a good bit more, with Chief Judge Babcock referring to Luzenac's efforts to maintain the secrecy of their so-called trade secrets "superficial." One can almost hear Homer Simpson reading the opinion and responding at this point - "DOH!!!!"

We have to hand it to Chief Judge Babcock - he knew his stuff. We also have to wonder if Luzenac would've been better served to take out a checklist of trade secret requirements before litigating this case to summary judgment that resulted in its claim being dismissed.

Apple Update -- Sharp Questioning on Trade Secrets Case

From Business Week, a follow-up to the Apple trade secrets story indicates that Apple's lawyers came in for some sharp questions by the appellate court in its case claiming that bloggers were publishing its trade secrets. The court questioned whether the published item -- a picture of a not-yet-released Apple product -- was really a trade secret and whether, in any case, the claim would be trumped by the first amendment rights of the bloggers.

Oh Canada! -- Blaming China for Stealing Trade Secrets

From Reuters, a story about how the Canadian government is very worried by the extent of Chinese industrial espionage inside Canada and will raise its concerns with China's Foreign Minister.

Research In Motion, maker of the famous Blackberry wireless device, said last week that it expected to launch a wireless e-mail service in China by mid-year. But Canadian media reports say state-controlled China Unicom Ltd. this month introduced its own version, nicknamed the "Redberry." Needless to say, neither Research in Motion nor the Canadian government is happy about that.

There have also been Canadian media reports of 1,000 Chinese spies in Canada.
The official Chinese new agency, Xinhua, reports an official denial by the Chinese government here: "The accusation against China is completely groundless and irresponsible."

The official Chinese new agency, Xinhua, reports an official denial by the Chinese government here: "The accusation against China is completely groundless and irresponsible."

We reported here in February a story about how Canada needed trade secrets protection more in line with the U.S. federal Economic Espionage Act.

And, in a somewhat related story here from the Shanghai Daily, KFC is making it easier to get a franchise in China. But the article notes, "some Chinese have been known to sign up as a franchise partner, only to steal a franchiser's trade secrets or recipes. They open a competing store under a different name."

Thursday, April 20, 2006, 4/20/2006 08:50:00 AM

You Gotta Show Those Cards . . . .

By Todd
After many years of litigating misappropriation of trade secrets cases, the authors of this blog have learned most of the tricks of the trade. One of those tricks is to make sure you have convinced the judge in the case that your client actually has and maintains demonstrable trade secrets. Seems common sensical.

That said, there are a significant number of cases where courts simply refuse to grant any injunctive relief to the allegedly harmed party because they have neither pled, nor proven, their trade secrets with any particularity. Such was the case recently in Medtronic, Inc. v. Elan Pharma Intern. Ltd, 2006 WL 983909 ( D. Minn. April 13, 2006)(slip copy). Medtronic and Elan Pharma were apparently partners trying to make a machine to administer certain drugs to patients. Medtronic made the machine and Elan Pharma made the drug. At some point, however, the relationship broke down and Medtronic was fearful that Elan Pharma was going to release Medtronic's confidential information to the world - so they sought a TRO and PI. Makes sense.

The court held that no injunction would issue because Medtronic pled and proved its trade secrets only in categories, not in particulars. The lesson for all litigators in these matters is that when the pit boss asks to see the cards, you have to show them - you can't just say what you're holding.

Medtronic, Inc. v. Elan Pharma Intern. Ltd.

Phony Surveys -- Courts Beat the Media Everytime

It's not about trade secrets, but attached is an article I wrote from today's Raleigh News and Observer about the contrasting treatment of public opinion surveys in courts and the media. Courts, generally, put surveys through rigorous hurdles before admitting them into evidence. Most media, on the other hand, publish the results of any press release they receive whether the survey is scientific or just spin.

The article describes a particularly egregious survey by the American Medical Association concerning young women and spring break.

Wednesday, April 19, 2006, 4/19/2006 08:14:00 AM

Apple versus the Bloggers -- Journalism or Trade Secrets?

From the San Jose Mercury News, the story of the upcoming appellate argument in Apple's continuing battle against bloggers whom Apple alleges published its trade secrets. Apple claimed that the plans for its "Asteroid" product, including an exact drawing of the device, were posted on the PowerPage blog. Asteroid, which has not yet been released, is a digital music device designed to work with Apple's GarageBand music software.

Apple used subpoenas to seek the identity of persons who leaked the information to the bloggers. The bloggers claimed that they were journalists entitled to First Amendment protection of their sources. The case may be headed for the California Supreme Court.

MacNewsWorld has another take here.

We'll keep you up to date on this story of continuing importance.

Tuesday, April 18, 2006, 4/18/2006 07:38:00 AM

Taking a Hard Line on Trade Secrets Experts (Pacer Req'd)

From the United States District Court for the District of New Jersey, in Thomas & Betts Corp. v. Richards Manufacturing Co., No. 01-4677 (D.N.J. Apr. 4, 2006) (2006 WL 902148), the court dealt with cross-motions from the parties seeking, in limine, to exclude technical expert testimony in a trade secrets case concerning an employee who left plaintiff to go to work for the defendant-competitor in the field of manufacturing of underground high-voltage connectors.

The court took a hard line under Daubert and largely granted the motions to exclude. Among other things, the court refused to allow the experts to testify that certain things were "trade secrets" within the given industry. The court also said that experts would not be permitted to testify regarding the length of time it would take for defendants to reverse engineer certain trade secrets. There, the court said, the experts' methodology was lacking under Daubert.

Taken altogether, the court's rulings are among the toughest on potential expert testimony in trade secrets cases.

Monday, April 17, 2006, 4/17/2006 02:01:00 PM

"Eighty Percent of Success is Just Showing Up"

By Todd
We like Woody Allen and think his joke concerning how one succeeds in this world is often a valuable proscription for defendants in misappropriation cases.

Some of the named defendants in the case of ACS Consultant Company, Inc. v. Williams et al., 2006 WL 897559 (E.D. Mich., April 6, 2006) (slip copy) didn't heed Woody's words when they failed to make an appearance at the preliminary injunction hearing United States Federal Judge Zatkoff had in his courtroom. As the readers of this blog surely know, one of the inquiries federal judges make when deciding whether to issue an injunction is whether the defendants will be harmed in a manner that exceeds the benefit to the plaintiff were the court to enter the order. BUT if you don't show up for the hearing to make the argument "this is really going to harm us if you enjoin us," it would be predictable that the court will probably not make that argument for you.

The Court's order identified above enjoined the non-appearing defendants in some significant ways. The defendants, not residents of or present in Michigan, probably figure that if they live in California that they'll just fight enforcement of the Court's order in their neck of the woods. Stay tuned on this one - federal judges do not like to be ignored and it's possible that a future blog post you'll read from us is "Federal Judge in Michigan Finds California Defendants in Contempt of an Order They Didn't Even Defend Against." We'll see.

What Does the EEOC Know About Misappropriation Defenses?

By Todd
Anyone who routinely advises employers of their legal obligations knows that the Equal Employment Opportunity Commission is the federal administrative agency charged with receiving, investigating and occasionally litigating discrimination complaints made by current and former employees of public and private entities. The EEOC has a tough task - they have to take all the complaints and investigate those that are meritorious and meritless alike. Their investigators and attorneys are usually skilled analysts of federal anti-discrimination laws. Those same agents, however, are not usually skilled in other areas of law and that could cause a problem when they decide to take a case against an employer which has some counter-claims of its own against its departed employee.

That's why the case of E.E.O.C. v. Vanguard Group, Inc., 2006 WL 931613 (E.D. Pa., April 10, 2006) (slip copy) is rather interesting. Seems the EEOC felt Vanguard had violated the federally-based employment rights of Mr. Ross, an African-American information engineer whom Vanguard once employed. Mr. Ross had apparently developed some computer programs during his employment with Vanguard and Mr. Ross said he developed the computer programs on his own time and Vanguard disputed that. The dispute got so heated it resulted in Mr. Ross's termination. Mr. Ross filed charges against Vanguard with the EEOC and ultimately the EEOC brought suit against Vanguard for violations of the federal anti-discrimination laws. Vanguard ultimately counter-sued for copyright infringement and theft of trade secrets and the like.

The reported decision we refer to above is the Court's treatment of the EEOC's motion to dismiss these intellectual property sounding counterclaims. The trial court denied the EEOC's motions in their entirety and told Mr. Ross and the EEOC "your answer to the counterclaims is due in twenty (20) days." Should be an interesting piece of litigation with the EEOC probably needing to call in experienced defense counsel (will the EEOC pay for that? we doubt it) to defend the counterclaims made by Vanguard. We've gotta say to Vanguard - we tip our hats to you for putting the EEOC in a place they don't like to be and we believe this could be an interesting case to watch as it winds its way through the discovery and trial process. The EEOC loves mediation and it would be interesting to be a fly on the wall of that mediation to see if the EEOC will learn that there are real distinctions between making someone else dance to your tune and having to learn a few quick steps of your own while the other side's band is playing.

Economic Espionage Case Against Harvard Researchers Evaporates

From the Boston Globe, a story about the end of an economic espionage case against two former Harvard Medical School researchers, husband and wife, who were accused of removing 19 boxes of proprietary information and trade secrets from their lab and offering to sell it to a Japanese drug company. The information was removed when they left Harvard for the University of Texas.

According to their lawyer, "after nearly four years, the crux of this case was whether our clients should have requested permission from a Harvard professor before shipping certain research materials to a new laboratory, where they intended to continue their work on a proposed article for a scientific journal."

Like many such cases, it started with a bang and ended with a whimper.

A few more details from TMCNet are available here.

Friday, April 14, 2006, 4/14/2006 01:05:00 PM

Where is the Intersection of Patent Law and Trade Secrets Law?

Many of the cases we review assert patent claims and trade secrets claims. The natural question arises, where do those two laws intersect?

At the most fundamental level, state trade secrets laws may not protect unpatented design specifications of products sold in commerce. In Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 94 S.Ct. 1879 (1974), the United States Supreme Court, for the first time, considered the issue of whether state trade secrets laws were preempted by federal patent law. The Court held such laws were not preempted with respect to subjects which were secret and not "of public knowledge or of general knowledge in the trade or business." Id. at 475, 94 S.Ct. 1883. The Court made it clear, however, that trade secrets laws may not "offer protection against discovery by fair and honest means, such as by independent invention, accidental disclosure, or by so-called reverse engineering, that is by starting with a known product and working backward to divine the process which aided in its development or manufacture." Id. at 476, 94 S.Ct. 1883. Therefore, "[b]y definition, a trade secret has not been placed in the public domain," id. at 484, 94 S.Ct. 1887, and a "matter once in the public domain must remain in the public domain." Id., 94 S.Ct. 1887.

The Supreme Court confronted the issue head-on in 1989 in a case concerning a Florida statute that purported to give protection from duplication by others of unpatented boat hull designs. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 109 S.Ct. 971 (1989). The Court held that state trade secrets laws cannot be used to prohibit reverse engineering. Id. at 160, 109 S.Ct. at 982 ("this is clearly one of the rights vested in the federal patent holder, but has never been a part of state protection under the law of unfair competition or trade secrets") (emphasis added).

Basic rule: patents and trade secrets are mutually exclusive.

Thursday, April 13, 2006, 4/13/2006 08:37:00 AM

Computer Fraud & Abuse Act -- Take Care When Quitting in a Huff

From CNET, a column cautioning departing employees not to download computer information prior to leaving in order to avoid a civil case under the Computer Fraud and Abuse Act.

Taking off from the case of International Airport Centers v. Citrin, discussed here, the column notes the dangers of such cases, including the fact that employers need not show that the information taken comprises trade secrets.

Tuesday, April 11, 2006, 4/11/2006 05:43:00 PM

More on Silicon Labs Trade Secrets Verdict

From the Associated Press, a correction -- really a clarification -- of the story concerning the Silicon Labs trade secrets verdict.

The AP says its original story "should have pointed out that of 15 trade secrets Axiom Microdevices was accused of stealing, the jury found that only one was misappropriated."

To some degree, the issue raised here is endemic in the reporting of jury verdicts where the result is mixed. Who wins when plaintiff prevails on one claim and defendant prevails on the other? (Or, as in this case, when plaintiff prevails on one claim and defendant prevails on 15?) The answer is "it depends."

It's a reporting conundrum and papers and wire services can find themselves being spun when all they report is one party's press release. For our part, we'll try to find the nuances (when we can) and give you our best assessment of the implications of a given result. That's pretty much all you can ask from a lawyer.

Monday, April 10, 2006, 4/10/2006 08:32:00 AM

Court Refuses to Quash Subpoena of Personal Email Account in Trade Secrets Case

From ZDNet, a story concerning a subpoena to Yahoo for the personal email account of a former employee of biotech company, MicroBrightField, in a dispute over his academic website.

The employee, a software engineer, had as his specialty research into stereology, the science of three-dimensional interpretations of two-dimensional images. His employer paid for his master's degree in computer science at Virginia Tech. While at Virginia Tech, he created an academic website with a wealth of information on stereology. After the company demanded that his website be moved to the company, the employee quit and went to work for a competitor.

After he left, the company brought claims against him alleging copyright infringement, breach of contract, trade secret theft, and violation of the Computer Fraud and Abuse Act (for allegedly accessing the company's source code repository). It also sent a subpoena to Yahoo for the contents of defendant's e-mail account.
Last week, the court refused to quash the subpoena to Yahoo notwithstanding defendant's claims that it was a family account and was also used for attorney-client communications.

The lesson: few courts are going to draw a distinction between a personal email account and a business account.

Saturday, April 08, 2006, 4/08/2006 10:18:00 PM

Silicon Labs Prevails in Federal Trade Secrets Action

From the Austin (Texas) American-Statesman, Silicon Laboratories Inc. of Austin said Friday that it won a trade secrets verdict in U.S. District Court in Austin against competitor Axiom Microdevices of Irvine, California.

A jury decided that Axiom misappropriated Silicon Labs' trade secrets "with malice, fraud or gross negligence," the company said. The court will hold a later hearing on remedies.

The secrets involved a power-amplifier chip that Silicon Labs was developing for cell phones. A Silicon Labs employee, Ali Niknejad, who worked on the project, later joined the technical advisory board of Axiom. Silicon Labs claimed Niknejad passed its design secrets to the startup, which used them to design a competing chip.

A more detailed story from TMCNet on the lawsuit can be found here.

Friday, April 07, 2006, 4/07/2006 08:10:00 AM

New Trade Secrets Cases in the News

Lots of action this week:

From the Orlando Sentinel,

Lockheed Martin Corp. has sued three former employees, a key competitor and a subcontractor (L-3 Communications Corp. and Mediatech Inc.), accusing them of conspiring to steal trade secrets involving a lucrative simulation-training contract managed in Orlando.

From the Memphis Business Journal,

A judge issued a restraining order on behalf of Exel Transportation Services, Inc., which is suing a competitor (Total Transportation Services) staffed by several former Exel executives who Exel says allegedly stole trade secrets from their former employer. Read about it here.

From Business Week, a story on how inventor Jeff Conklin beat IBM in a trade secrets and patent infringement case concerning technology which allows buyers and sellers to exchange information, negotiate and buy and sell online. According to Business Week, it's a real-life case of David beating Goliath.

Monday, April 03, 2006, 4/03/2006 05:11:00 PM

Computer Fraud and Abuse -- From Arkansas (Pacer Req'd)

In Nilfis-Advance, Inc. v. Mitchell, 2006 WL 827073 (W.D.Ark. Mar 28, 2006), the court considered a motion to dismiss in a case by an employer against a former employee who undertook the now-standard download of company information just prior to his termination. Specifically, the complaint alleged that the defendant sent emails to his personal email address containing numerous electronic documents and files with confidential information and trade secrets relating an "orbital scrubber" he was developing.

Defendant contended that those allegations could not support a claim under the Computer Fraud and Abuse Act. The court disagreed holding that the facts that the form of files sent -- zip files -- were not in a form used by the defendant at work and that the transmission occurred after the employee had decided to resign both supported the contention that the defendant exceeded his authority in violation of the CFAA.

Motion to dismiss denied.

Saturday, April 01, 2006, 4/01/2006 10:14:00 PM

Broadcom's Response to Qualcomm Trade Secrets Litigation

From which is following the story, Broadcom's response to the recent (third) litigation filed against by Qualcomm and the attendant bad blood.

According to a Broadcom spokesman: "This is Qualcomm's latest response to our effort to aggressively protect our intellectual property portfolio."
back to top