BLOGS: Trade Secrets Blog

Powered by Blogger
Add to Technorati Favorites

Monday, July 31, 2006, 7/31/2006 05:02:00 PM

Business Week Online Piece on Trade Secrets

By Todd
This piece was published yesterday by Business Week Online on the importance of acknowledging the risk of, and fending off, misappropriation of company trade secrets by former employees. The advice provided by Ms. Fleming is time-tested and wise.

Virginia's Trade Secrets Act -- Not Every Sin Covered

Trade secrets laws can be pretty flexible. They can't, however, be stretched too far out of shape.

That's what the plaintiff learned in a new case from Judge Alper on the Virginia Circuit Court, Rohrbaugh v. Kreidler, 2006 WL 2032640 (Va. Cir. Ct. July 20, 2006).

The facts are a little tricky, so pay attention: the plaintiff, Rohrbaugh, was an engineer who for years worked for URS Corporation of Washington. In 2003-05, he was in talks with another company, Matrix Settles of Virginia, about working with them. Last August, Matrix formed a new corporate entity, TM/R Engineering, LLC ("TM/R") and told its employees who were aware of the discussions with Rohrbaugh to keep it confidential. Matrix also contracted with another company, Jewell and Associates, to provide technological services and software programs.

While on that job, a Jewell employee, the defendant Bonnie Kreidler was informed by a Matrix employee, that TM/R stood for "Team Matrix Rohrbaugh" which tipped her off regarding Rohrbaugh's potential move from URS to the new company. Kreidler, rather than keeping that information quiet, blabbed to her husband who happened to work for URS, Rohrbaugh's current employer. When URS found out, Rohrbaugh was canned without getting any severance. He also lost his stock options. Then he sued Kreidler, alleging that she should have kept her mouth shut.

Among the many claims asserted was one under the Virginia Uniform Trade Secrets Act against both Kreidlers. The court, though, didn't bite.

On defendants' demurrer -- Virginia's old fashioned name for motion to dismiss -- the court ruled that Rohrbaugh stated no claim under the trade secrets act.
The court bought defendants' contention that neither the meaning of the letters TM/R nor the issue of whether Mr. Rohrbaugh had agreed to join them was a "trade secret" within the meaning of the VUTSA because the complaint lacked allegations that the information was confidential and the information did not confer economic value upon the Kreidlers. Moreover, the court held, "even if the information constituted a 'trade secret,' it was not 'misappropriated' under the statute, which requires that inappropriate means were used to acquire and/or disclose the information." The Complaint did not allege that the Matrix employee specifically informed Mrs. Kreidler of the confidential nature of what TM/R stood for; only "certain staff" were warned.

The court said it would allow plaintiff to amend his complaint, but, as is often the case, that may be more easily said than done.

Friday, July 28, 2006, 7/28/2006 01:24:00 PM

The Trade Secrets of Your Winter Garden

By Todd
Just so you know this is often a fun blog and not a stuffy kaffeklatsch only about technical trade secrets, we thought you'd like to see this piece from the Seattle Times about the trade secrets for preparing your winter garden.

Have a great weekend.

The Company Spy -- A Primer on Economic Espionage

From the New York Jewish Times, an article on economic espionage that first deals with a real case concerning stolen blueprints for LCD screens and ends with a summary of the FBI's favorite tips.

The FBI's six tips are old-hat to readers of this blog, but still worth repeating:

How to Protect Your Business from Espionage

1. Recognize there is a real threat.
2. Identify and evaluate trade secrets.
3. Implement a definable plan for safeguarding trade secrets.
4. Secure physical trade secrets and limit access to trade secrets.
5. Confine intellectual knowledge.
6. Provide ongoing security training to employees.

Now, go and do likewise.

Thursday, July 27, 2006, 7/27/2006 12:58:00 PM

More Trade Secret Defenses to Subpoenaed Production

By Todd
McGraw-Hill used to publish a good number of our textbooks when we were little kids. McGraw-Hill also owns, apparently, a natural gas price publishing operation called Platts. Platts gets its published natural gas prices from various traders who report those market prices on a daily basis to Platts.

The United States Commodities Futures Trading Commission is currently prosecuting four natural gas traders for market manipulation - including one named Whitney. Allegedly, these traders were manipulating natural gas markets by mis-reporting natural gas price information to Platts which then would influence futures trading prices for that commodity. As part of their case, the USCFTC has served non-party subpoenas on Platts to produce the pricing reports they received from a few years back via Mr. Whitney and his co-defendants. McGraw-Hill has objected, saying their reports are subject to a "reporter's privilege" and that the same constitute trade secrets of McGraw-Hill.

Judge Royce Lamberth of the United States District Court for the District of Columbia has rejected McGraw-Hill's basic trade secret claims. Judge Lamberth apparently felt the fact that the data was a couple years old and did not create a current competitive advantage in McGraw-Hill such that a trade secret argument could withstand scrutiny. Many of the documents and things sought need to be produced says the Court.

The decision can be cited as U.S. Commodities Futures Trading Comm'n. v. Whitney, 2006 WL 2055722 (July 25, 2006 D.D.C.).

Wednesday, July 26, 2006, 7/26/2006 11:21:00 AM

Where's My Injunction? -- Part Two

In a follow-up to a post from last month, "He Took Our Trade Secrets, Now Where's Our Injunction?" comes a case from Nebraska, Riverpoint Management, LLC v. Kleinholz, 2006 WL 2008515 (D.Neb. July 17, 2006). This time, "she," the defendant former employee, took the trade secrets, in the form of client and job candidate lists. The court, though, refused to grant an injunction on the grounds that there was no evidence of use of the misappropriated trade secrets and plaintiff could not demonstrate that there was a "threatened" use which might also justify an injunction under the Nebraska trade secrets act.

Underlying everything in the court's ruling was a certain skepticism that the secrets really contained much of value or that their use could not be remedied by damages and thus would not constitute irreparable harm.

As the court concluded:

"I have only limited evidence about the origin of the information Riverpoint deems to be secret and about the value of the information to Riverpoint. Riverpoint did not submit any persuasive evidence regarding the nature of the harm it could sustain. I am not convinced on the record before me that the subject information imparts anything of value or bestows any competitive advantage upon the possessor of the information. Because the Court cannot evaluate on this record the extent to which the information that Kleinholz took is proprietary or exclusive to Riverpoint, I am not persuaded that Riverpoint has shown that it faces any imminent threat of irreparable harm caused by Kleinholz's possession of the information."

Some courts, at least, are retreating from lax standards concerning the grant of preliminary injunctions in trade secrets cases.

"You're Suing Me? Then Front Me My Attorney's Fees . . . . "

By Todd
This really isn't a posting dealing with the Computer Fraud and Abuse Act because the decision of Judge Posner of the Seventh Circuit doesn't technically address CFAA issues. That said, the decision in International Airport Centers, LLC v. Citrin, 2006 WL 2051659 (7th Cir., July 25, 2006) is an interesting one.

Mr. Citrin was a former executive with International Airport Centers. When he handed back his company laptop as part of his departure, he apparently deleted some of the company's computer data on that laptop. The company did not like this. They sued him for violations of the Computer Fraud and Abuse Act. He argued originally that mere deletion of information is not a violation of the CFAA. The Seventh Circuit told him he was wrong. He spent a lot in attorney's fees making his arguments.

Mr. Citrin sued in Delaware Chancery Court for enforcement of the indemnity provision of his employment contract that International Airport Centers must pay for his attorney's fees if he is sued for matters arising out of his work for the company. That same indemnity provision provides that International Airport Centers must front Mr. Citrin his attorney's fees while he's defending himself and he is obligated to reimburse the company if he is not the prevailing party.

Well, Mr. Citrin went to Delaware to get the advance that International Airport Centers refuses to give him. He wants $1.3 million for legal expenses already incurred. Delaware is likely going to give it to him. The company wanted the Seventh Circuit in Chicago to issue an injunction stopping that legal proceeding. The Seventh Circuit, per Judge Posner, said "no, we're not going to enjoin that action. That's a proper forum, the court has jurisdiction over the parties and the subject matter, and Mr. Citrin did not have to bring that action in the federal district court where the CFAA case is pending. It is not a compulsory counterclaim."

The interesting part of the decision is the ramification of the employment contract. The company sues their former executive for alleged misconduct involving a company laptop, he gets some mighty thorough (read: expensive) attorneys to represent him, and they have to foot the bill until a decision comes out one way or the other. We bet this doesn't sit well with the company's Board. We will await the outcome of the CFAA claim and report back.

Saturday, July 22, 2006, 7/22/2006 09:53:00 AM

Another Thoughtful Trade Secrets Piece in the Wake of Coke

From Canada's Business Edge, another good piece assessing the fall-out from the Coke case and new directions taken by companies which have finally woken up to the issue.

One quote: "It's something that's made everyone I know their hair stand on end," said corporate security consultant Richard Heffernan, who works for trade group ASIS International.

The article notes that "[s]tealing trade secrets is not uncommon in a competitive corporate culture where heavy premiums are placed on bringing an innovative new product to the market first."

It will be interesting to see if the Coke case really does represent a watershed in companies' thinking about trade secrets or whether they'll all go back to sleep in a couple of weeks.

Wednesday, July 19, 2006, 7/19/2006 09:32:00 AM

The Archives: A Law Review Student Note from the Past

By Todd
As the reported decisions this summer seem to be stopped up in the proverbial drain of the state and federal court systems in the United States, we thought you'd be interested in seeing the title of a 1996 University of Illinois Law Review note published by a forward-looking student named Bruce Atkins.

Were his predictions accurate? We're not so sure. Trade secret law has evolved, in our view, to handle internet-generated trade secret thefts and misappropriations but we commend Mr. Atkins for his identifying and examining this threat so early in the game. The note makes an interesting read.

Tuesday, July 18, 2006, 7/18/2006 09:27:00 AM

A First-Rate Article on Protection of Trade Secrets

From CSO Online, an excellent article entitled "Secrets Stolen, Fortunes Lost," by Christopher Burgess and Richard Power. Burgess was with the CIA for 30 years. Power is editorial director for the Computer Security Institute.

The article is unusual in that it has a realistic point of view regarding the nature of threats to company's trade secrets and provides real-world examples of cases of economic espionage. The article also gives some suggestions for avoiding the worst outcomes.

Saturday, July 15, 2006, 7/15/2006 02:10:00 PM

Final Word -- Apple Trade Secrets Case Against the Bloggers

From CIO Magazine, and finally closing the case discussed in our previous reports (including this one) in April, and in May, and in June, (okay, we reported a lot on this case), Apple has decided not to appeal the ruling against it in its case alleging bloggers improperly published its trade secrets.

Friday, July 14, 2006, 7/14/2006 04:19:00 PM

Milgrim on Trade Secrets

By Todd
You should know that we do not know New York attorney Roger Milgrim and have no financial arrangement with Matthew Bender, Lexis or its bookselling operation in recommending this wonderful set. That said, we'd like to recommend to those of you interested in gaining an encyclopedic knowledge of the law of trade secrets Mr. Milgrim's "Trade Secrets" treatise. The four volume treatise might be a tad pricey at almost $1400 but for those of you practitioners who are looking to build a library that comprehensively covers issues in this area of law, Milgrim's work is a great foundational purchase. We just thought you should know we think it's a great resource.

Have a great weekend.

Wikipedia on Trade Secrets

By Todd
If you've never used Wikipedia, it's an interesting resource. The authors of this blog were fascinated by how fast the Zinedine Zidane entry was modified to take into account his head-butt of the Italian footballer who apparently whispered a little more than sweet nothings to him on the pitch during the World Cup. Zidane's entry was amended within 39 minutes of the head-butt!

That being said, here's what Wikipedia's entry is for "trade secrets."

Enjoy your weekend.

Wednesday, July 12, 2006, 7/12/2006 03:41:00 PM

To the Prevailing Party Go . . . The Attorney's Fees

By Todd
You ever read employment agreements that have provisions that say "if litigation is necessary to seek redress for alleged theft of our confidential or trade secret information, the prevailing party in any such litigation is entitled to reimbursement of its attorney's fees from the non-prevailing party"?

Hawaii Management Alliance Ass'n. apparently sued Mr. Meek for misappropriating its trade secrets and confidential information. Mr. Meek argued that he did no such thing and Mr. Meek happened to have one of those clauses referenced above in his employment agreement. The district court apparently agreed Mr. Meek hadn't done anything wrong and then granted his motion to have his attorney's fees reimbursed by Hawaii Management Alliance Ass'n.

On appeal, Hawaii Management Alliance Ass'n. apparently argued "but we weren't suing him under the contract." Ninth Circuit said "that contract doesn't limit the reimbursement remedy to only suits based on the contract - it relates to any actions." The case can be cited as: Hawaii Management Alliance Ass'n v. Meek, 2006 WL 1891819 (9th Cir. July 11, 2006).

Indictments in Coke Case

From the Associated Press via, rounding out last week's big story, a federal grand jury indicted three people yesterday on a conspiracy charge alleging they tried to sell Coca-Cola trade secrets to Pepsi and were willing to give the information to the "highest bidder." The three pleaded not guilty.

Some interesting details emerged in the indictments: a box containing two undisclosed Coca-Cola product samples and other confidential company documents was found in one of the individual's homes during search on July 5, the day of the original arrests. The product relates to a mysterious and as-yet unidentified "Project N" at Coke.

One of the individuals indicted was the secretary for Coke's global brand director. The other two had served time in federal prison on various drug offenses.

Tuesday, July 11, 2006, 7/11/2006 07:42:00 AM

Coke Trade Secrets Case – It’s Everywhere

The latest update from the Atlanta Journal Constitution, for which this is a local story. The preliminary hearing is scheduled for the suspects later today (Tuesday).

From the Associated Press, via the Seattle Post-Intelligencer, a broader story about the new focus on protection of trade secrets in the wake of the Coke case.

From Time Magazine, its reporting – in a Time-like way – on the Coke case under the title "You Can’t Beat the Real Thing."

An editorial – "America’s Secret Recipe" – from the Los Angeles Times about secrets generally tries to draw some wider analogies (to Vice President Cheney, no less).

And, just to round it out, an encomium for Pepsi from the Macon Telegraph in Coke's backyard, "A Straight Arrow Competitor."

Monday, July 10, 2006, 7/10/2006 07:32:00 AM

Competitive Intelligence -- An Honorable Calling or Just Stealing Trade Secrets?

From Business Week, a review of a new book, The Secret Language of Competitive Intelligence, by Leonard M. Fuld (Crown Business -- 309 pp). Mr. Fuld is a pioneer in the field.

According to the review, the book shows that there's much more to competitive intelligence than diving into the trash of your competitors (or buying stolen material as in the Coke case). Instead, the best competitive intelligence (or CI as its practitioners call it) involves a sophisticated sifting of publicly-available information.

And, as if on cue (and following on the heels of Coke), from Advertising Age, a story regarding the state of economic espionage in America.

Saturday, July 08, 2006, 7/08/2006 10:13:00 AM

A Trade Secrets Reminder . . . From the Boss

From the Atlanta Constitution, a reprint of the memo from Coke's General Counsel, Geoff Kelly issued to all Coca-Cola employees concerning Coke's Code of Business Conduct and its confidentiality policies.

The money quote: "Perhaps at no time in our history has information protection been more important to our ability to compete and win in the marketplace than it is today." Amen to that.

And so the question becomes why doesn't every general counsel in America send out a memo like this?

Friday, July 07, 2006, 7/07/2006 11:48:00 AM

Bail for Coca-Cola Employee Alleged of Stealing Secret Formula

By Todd
Coca-Cola Executive Assistant Joya Williams has reportedly been released on bail by a federal judge upon her posting bond monies. This is in connection with the case we have been following closely in which Ms. Williams and two alleged conspirators attempted to sell Coca-Cola trade secrets to Pepsi but ended up making an alleged deal with FBI agents after Pepsi reported the activity to Coca-Cola. We will keep you updated on this fascinating instance of alleged employee misappropriation.

Have a great weekend.

Insurance Coverage for Your Trade Secrets Defense?

It sounds too good to be true, right? You get sued by your former employer, but you get your defense covered by your general liability insurer. It happened in a case from Georgia, Colony Insurance Co. v. Corrosion Control, Inc., 2006 WL 1785108 (11th Cir. June 29, 2006), but not without a fight first.

Here’s the background: the Meiers, a husband and wife, worked for Corrpro Companies, Inc., a seller of products and services to prevent corrosion of underground storage tanks. After they left Corrpro, they founded their own company, Corrosion Control, doing essentially the same thing. The inevitable lawsuit came along alleging a whole host of claims, including misappropriation of trade secrets.

The Meiers, presciently, had earlier obtained for Corrosion Control a general liability insurance policy from Colony. They sought to get Colony to provide a defense under the policy, specifically under its coverage for "advertising injury." When Colony balked, the district court took up the matter and ruled that coverage was required.

On appeal, the Court of Appeals for the Eleventh Circuit affirmed. The starting place was the broad principle under Georgia's law that an insurer must provide a defense against any complaint that, if successful, might potentially or arguably fall within the policy's coverage.

Under the policy, covered advertising injury included "[m]isappropriation of advertising ideas or style of doing business." The court held that at least one of the allegations of the complaint concerning use of allegedly proprietary pricing structures and methods and other proprietary data fit this coverage.

Colony then tried to argue that the defense should be excluded on the grounds of a "first publication" exclusion. That exclusion stated that the insurance did not apply to an injury arising from a first publication that pre-dated the beginning of the policy period. The court held that Colony could not make out the exclusion on the record.

Generally it's hard to find insurance coverage of any type in claims concerning misappropriation of trade secrets. This case, though, shows it's not impossible.

Thursday, July 06, 2006, 7/06/2006 07:38:00 AM

Indictments All Over the Place -- US Attorneys Step Up Trade Secrets Efforts

From the Detroit News, and hot on the heels of the Coke case, the U.S. Attorney's Office in Detroit unsealed a 64-count indictment against three former employees of auto supplier Metaldyne Corp. who are accused of illegally sharing the company's trade secrets with Chinese competitors.

The indictment alleges the former employees -- a salesman, an engineer (the salesman's husband), and one other -- breached confidentiality agreements and shared with Chinese companies Metaldyne's trade secrets (and those of another company, GKN) concerning how to manufacture auto parts and other manufactured parts from powdered metals.

Wednesday, July 05, 2006, 7/05/2006 06:38:00 PM

Coca Cola's Secret Formula? The FBI Nabs Three Thieves

By Todd
This just out - the FBI has nabbed three people allegedly involved in a scheme to sell some of Coca-Cola's trade secrets to Pepsi. Pepsi apparently cooperated in the investigation and advised officials at Coca-Cola of the scheme that was offered to them. CNN is reporting that one of the three people involved in the alleged scheme is a Coca-Cola employee. Our hats go off to Pepsi for doing the right thing and turning these people in to the authorities.

In May, PepsiCo told Coke that it had received a letter from a person calling himself "Dirk" offering "very detailed and confidential information" about Coke's products for a fee, according to the DOJ press release.
The FBI got its undercover agents involved in the case, and over the course of the next month gave the alleged con men manila envelopes with money in exchange for Coke secrets.
Ibrahim Dimson of New York and Edmund Duhaney and Joya Williams of Georgia were arrested in Atlanta on Wednesday without incident, and charged with wire fraud and unlawfully stealing and selling trade secrets. Williams was a Coca-Cola employee.
"Sadly, today's arrests include an individual within our company," said Coke CEO Neville Isdell in an email to employees. "While this breach of trust is difficult for all of us to accept, it underscores the responsibility we each have to be vigilant in protecting our trade secrets."
"Information is the lifeblood of the company," Isdell continued. "As the health of our enterprise continues to strengthen and the breadth of our innovation pipeline continues to grow, our ideas and our competitive data carry increasing interest to those outside our business."
A Pepsi spokesman said that the company was pleased to be of assistance in the investigation.
"We did what any responsible company would do," said a Pepsi spokesman. "Competition can be fierce, but it must also be fair and legal."

Trade Secrets and Cosmetics

From, a story concerning a fight between two cosmetics companies, Arch PCP and Active Concepts. In 2000, Arch acquired the personal care business of Brooks Industries, then owned in part by one Ivar Malmstrom. Malmstrom went on to become one of the founders of Active Concepts which, Arch claimed, misappropriated the trade secrets that Arch had acquired from Brooks. An earlier federal court case found that Malmstrom breached his contractual obligations and infringed on Arch's trademark.

A state court case in New Jersey by Arch for trade secrets misappropriation against Active Concepts didn't fare so well. In fact, the court ruled that all of the information that Arch acquired from Brooks was unprotected by reason of earlier disclosure prior to the acquisition. Not only that, according to the court, those trade secrets had been disclosed in an earlier lawsuit in which the trade secrets were discussed in open court.

The case is a not-so-subtle reminder that trade secrets have to be continually protected even while in court.

Monday, July 03, 2006, 7/03/2006 06:57:00 AM

Trade Secrets -- Sue at Your Own Risk

From Semiconductor International, an interesting and well-written article about a Massachusetts lawsuit between a company and its former employee who jumped ship for a competitor.

What happened next was a case of "shoot first, ask questions later" with the usual disastrous results.

When the counterclaim becomes the sole remaining focus of your case, you know you've got problems.
back to top