Coca-Cola Trade Secrets Trial - The Real Thing Goes to the Jury

Reuters is reporting closing arguments have been made and the case is now in the hands of the jury. We'll report a verdict once one is rendered. Stay tuned . . . .

More Coke, Please!

From the AP, via the Gwinnett Daily Post, a report on the continuing Coca-Cola trade secrets case. A rebuttal witness for the government denied that he gave $4,000 to the defendant, his friend (maybe former friend), as she had claimed. Instead, the government contends, the money came from her co-conspirators who were trying to sell the Coke trade secrets to Pepsi.

The rebuttal testimony followed a long cross examination of the defendant. According to the AP writer, defendant's answers were "confrontational" and "longwinded."

The case looks headed for the jury soon.

Airframe Systems Inc. Sues Raytheon, L-3 Communications and Former Airframe Employee for Trade Secrets Misappropriation

Portfolio Media is reporting that Airframe Systems has sued Raytheon, L-3 Communications and a former Airframe Systems employee for allegedly misappropriating Airframe Systems' source code to enable Raytheon to upgrade aircraft fleet maintenance software it had licensed from Airframe Systems. The case was filed in federal court in Massachusetts and seeks unspecified compensatory and punitive damages and injunctive relief.

Airframe Systems alleges that it offered Raytheon an upgrade for $150,000.00 but Raytheon refused the offer and proceeded to use Airframe Systems' source code to accomplish the upgrade effects on its own. The lawsuit alleges violations of the Computer Fraud and Abuse Act, common law fraud, tortious interference with contract, and misappropriation of trade secrets.

We'll report any updates on this one.

More on Hewlett-Packard Trade Secrets Claims

Fleshing out the story we reported here last week, the San Jose Mercury-News has further details on the former HP executive accused of misappropriating the company's trade secrets. Seems the allegations first surfaced in his divorce case when his wife tried to get details of a business he started on the side while employed by HP in Japan. That business (dealing with flat-screen TVs, HP now says, was based on its trade secrets.

The employee is claiming that HP told him to spy on Dell and obtain that company's trade secrets. He's also claiming that he was the subject of illegal "pretexting" by HP private investigators.

This one will take some sorting out.

Clumsy Handling of a Different Kind of "Trade Secrets"

According to the online version of the South Korean Chosunilbo Daily, South Korea's international trade negotiators came under fire Monday after a confidential document relating to free trade talks with the United States was leaked to Korean news outlets last week. The classified document disappeared from an open session at the National Assembly Jan. 13. Copies of the document were distributed to members of a special Assembly free trade agreement (FTA) committee, even to absent ones.

Once the document was found missing, the news outlet reported that the government failed to take any action beyond asking Lee's office if he had the copy. Park Young-sun, a lawmaker with the ruling U-ri Party said, "The classified documents had already been distributed during an open session, meaning they were available to anyone who intended to see them." Lawmaker Sim Sang-jeung said that the Ministry of Foreign Affairs and Trade had neglected to properly protect the document, having only labeled the report confidential in pencil. "How can they treat a confidential document so carelessly?" he asked.

This report offers a different take on the loss of "trade secrets" but goes to show that even information as secret as international trade negotiation status reports are sometimes handled clumsily and, as such, loses their confidential properties.

Accusations of HP Paying for Dell Trade Secrets

From CNetnew.com, a strange story concerning accusations in a case between Hewlett-Packard and a former executive (himself accused by HP of stealing its trade secrets) that HP paid for information concerning Dell's secret plans to enter the printing business.

According to the story, the former HP employee, Karl Kamb, contends in a counterclaim that in 2002 senior HP executives signed off on payments to a Dell Japan employee who then turned over Dell's product specifications, launch dates and financial information. Kamb says he was working in Japan as an HP vice president at the time.

Interestingly, Kamb named in his suit some of the same former employees and investigators that allegedly conducted the illegal spying operation on journalists covered in the blog here (among other places).

We'll see if this story has legs.

Testimony Delayed in Coca-Cola Trade Secrets Case, But Not Before Ex-Boyfriend Testifies

This just out in the Coca-Cola trade secrets trial: the government has asked for a recess to review over 750 pages of defense documents to determine whether portions should be redacted before being shown to the jury. U.S. District Judge J. Owen Forrester granted the recess until 11 a.m. Thursday. When Judge Forrester released the jury for the day, he expressed frustration with the prosecution and defense attorneys by saying "In an effort to simplify things — they didn't."

Prior to the recessed adjournment, Ms. Williams' ex-boyfriend testified that the defendant wanted him to lie for her about a package she had sent to another man accused in the case.
Sedrick Wilson said Joya Williams sent him a text message on Jan. 7, nine days before jury selection began, saying that it was "beyond important" that he call her. The subject, Wilson said, was a package she sent via FedEx to Ibrahim Dimson, a co-defendant in the case, during the first half of 2006. Wilson said he was with Williams when the shipment was sent. "She said, 'Make sure you say that it was for the trucking company,'" Wilson recalled of his recent conversation with Williams. Wilson testified he didn't know what was in the package. "I guess she wanted me to lie for her," Wilson said. A defense lawyer objected, and U.S. District Judge J. Owen Forrester ruled the comment out of consideration by the jury.

We don't know how Ms. Williams' attorney is feeling about things so far, but this case has all the signs of a conviction written all over it. We'll continue to report on the case as the matter progresses.

Customer Lists as Trade Secrets? Not Always.

A federal case from the Eastern District of Pennsylvania, McQ's Enterprises, Inc. v. Philadelphia Parking Authority, 2007 WL 127728 (E.D.Pa. Jan. 11, 2007), deals with the issue of when a customer list is a trade secret.

The action arose out of the City of Philadelphia's plan to implement a city-wide cab dispatch service to improve service. The plaintiff cab company, which runs its own large and expensive dispatch system, didn't like the plan to create a coordinated system and sought a TRO.

Plaintiff asserted that under the coordinated system, its proprietary customary list would be appropriated (because when its customers called its dispatchers the company would be required to dispatch the nearest cab, not necessarily one of plaintiff's).

The court balked at plaintiff's claim that the Pennsylvania courts routinely treat customer lists as trade secrets. Instead, the court ruled, "courts focus on the value of the customer list, asking whether the list represents a permanent and exclusive relationship between customers and the company."

Thus, the court held:

Plaintiff's trade secret claim is unlikely to prevail on the merits for several reasons. First, it is unclear from the evidentiary record before the Court that Plaintiff's customer list qualifies as a trade secret. Plaintiff does not support its motion with evidence that Plaintiff uses this list to gain a competitive advantage. Given the nature of the taxicab industry, it seems unlikely that Plaintiff uses its customer list to solicit business. How would Plaintiff know which customers need to hire taxi cabs at any given point in time? The Court also doubts that the customer list has value to Plaintiff and is important in conducting its business because there is no evidence that the list represents a permanent and exclusive relationship between Plaintiff and its customers. Third, there is no evidence in the record that Plaintiff's customer list will be transmitted to its competitors. Although Plaintiff will be required to offer its customers the option of hiring a competing taxi cab in some circumstance, Plaintiff's own dispatcher will arrange for the service. It is not likely that Plaintiff's competitors will therefore learn the customer's identity and use it to their competitive advantage by soliciting that customer in the future.

The motion for the TRO was denied.

By the way, kudos to the clerk's office in the Eastern District for its excellent free opinions site.

Sketch of Coca-Cola Trade Secrets Defendant Joya Williams

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It's a slow day here at the Womble Trade Secrets blog, folks.

Coke Trade Secrets Case -- Day One

From the Canadian Press via Canada.com, a story about the first day of testimony in the Coca-Cola trade secrets case in federal court in Atlanta. The sole remaining defendant is former secretary and Coke employee, Joya Williams.

Assistant U.S. Attorney Randy Chartash told jurors during his opening statement Monday that Williams was the one who first approached the two co-defendants in the case about selling Coca-Cola documents and samples of products that hadn't been launched to rival Pepsi. Chartash said the case is about "greed and poor choices."
Williams' lawyer Janice Singer said the case is really about two ex-cons who duped Williams, stole documents from her and conspired behind her back.

According to the prosecutor's forecast, key evidence against Williams includes a $4,000 deposit Williams made into her bank account, voicemail messages between Williams and the co-defendants, and surveillance video of Williams at her desk at Coca-Cola headquarters.

And, we've finally got some insight into the trade secrets themselves: information about Coca-Cola's plans for marketing its new coffee-infused drink, Coca-Cola Blak, a lightly carbonated, mid-calorie beverage, designed to appeal to adult consumers by including real coffee and a coffee-like froth when poured.

According to testimony from her former co-defendant, Williams was angry at her employer for not treating her well and hatched a plan to steal the trade secrets from the beverage giant and sell them to Pepsi.

Jury Selected in Coke Trade Secrets Trial

From the AP via the Gwinett Daily Post, the jury has been selected in U.S. v. Joya Williams, the Coke Trade Secrets case. The real action starts Monday.

According to the AP, Williams' lawyer plans to attack the credibility of the two men with whom Williams was charged. They pled guilty earlier.

China Daily Covers the Coca-Cola Trade Secrets Case

Indicative of just how global this global economy is, the online edition of China Daily is covering the Coca-Cola trade secrets criminal case with interest. We will too.

Coca Cola Trade Secrets Case Begins Tomorrow

From Long Island's Newsday, we've covered this one to a fare-thee-well, but it's finally starting in federal court in Atlanta with jury selection tomorrow, Tuesday, January 16.

Two of the three defendants have pleaded guilty, and the case is proceeding only against Joya Williams, the former Coke employee.

According to the story: "Williams' lawyer, Janice Singer, said she plans to make the two men's credibility a key issue in her client's defense. Williams does not have a criminal record, another attorney who previously represented her has said."

Should be interesting.

Email and Trade Secrets

From the New York Times (registration req'd), a story about the heartburn employers feel when employees transfer their confidential company email to web-accessible free personal email accounts offered by companies such as Google and Yahoo.

As the Times puts it, "employers, who envision corporate secrets leaking through the back door of otherwise well-protected computer networks, are not pleased."

Rest easily (for now) though, "[s]o far, no major corporate disasters caused by this kind of e-mail forwarding have come to light."

But, for the paranoid among us: "Lawyers in particular wring their hands over employees using outside e-mail services. They encourage companies to keep messages for as long as necessary and then erase them to keep them out of the reach of legal foes. Companies have no control over the life span of e-mail messages in employees’ Web accounts."

University of Delaware's Contract-Contingent Trade Secret Claims Dismissed

In March of 1990 the University of Delaware entered into a contract with Research Corporation Technologies ("RCT") to examine, evaluate and ultimately market certain technologies that scientists at the University had developed. The agreement was called the "Disclosure, Evaluation and Commercialization of Inventions Agreement."

In August of 1992, RCT and a company named Phenomenex Inc. entered into a "Materials Treatment Agreement" in which Phenomenex would be permitted access to certain confidential and proprietary information owned by the University of Delaware but controlled and managed, under the above-mentioned agreement, by RCT.

Seems things got complicated, as these things sometimes do, and the University of Delaware felt it was not being treated fairly in the ultimate shake-out of the development and commercialization of this technology. So the University of Delaware's UD Technology Corp. sued Phenomenex and RCT for their alleged misdeeds. Subsequent to the filing of the suit, UD Technology Corp. filed a stipulation of dismissal of its claims against RCT with prejudice. This occurred on July 21, 2006 and, as you shall see, changed the nature of the claims that remained in the case. See - UD Technology Corp. never had a direct contract with Phenomenex, it only had an agreement with RCT. Thus, its claims against Phenomenex that derived from contract were imperiled by their dismissal of RCT. Such was the case with the trade secrets case.

The federal court in Delaware recently opined: "Where the duty to keep a divulged trade secret arises from a contract, it follows that only those parties to the contract have standing to pursue a claim of trade secret misappropriation based on a breach of that contract. For the reasons previously stated, the court concludes that UDTC does not have standing to pursue contract-based claims against Phenomenex. Therefore, UDTC's trade secret misappropriation claim must be dismissed."

Although it isn't clear from the decision, why didn't UDTC just bring a standard "misappropriation of trade secrets" claim against Phenomenex? Presumably UDTC's problem with such a claim is that Phenomenex had a RIGHT to see and use this proprietary technology through its agreement with RTC. Thus, a statutory trade secrets claim - always predicated on the fact that the allegedly infringing party had no right to see or use the confidential information in question - would certainly fail. And, as the Court noted above, the trade secrets claim was essentially a breach of contract claim that only RTC could bring.

Ugh, says the University of Delaware. Its dismissal of RTC from the case rendered its claims against Phenomenex infirm. That smarts. The slip opinion is at UD Technology Corp. v. Phenomenex, Inc., 2007 WL 28295 (Jan. 4, 2007 D. Del.).

Chinese and Economic Espionage in Australia

From The Age (of Australia), a story about the botched defection of a Chinese spy in Australia.

Here's the salient quote:

"Chinese and other spies have multiple interests in Australia. Because of our alliance with the US, we have long been seen as a back door to American secrets and defence technology. Commercial technology and trade secrets are also targets. And, as the Chen case revealed, China is particularly paranoid about the activities here of political and other dissidents."

Prosecutors in Coca-Cola Trade Secrets Case Want Confidential Exhibits Sealed

It is now being reported that prosecutors invoked a law used in terrorism and government espionage cases in asking the judge Thursday to bar jurors at the trial of a former Coca-Cola secretary charged in a trade secrets theft case from disclosing to others confidential materials they are presented.

In the unusual request, the prosecutors also asked that any exhibits containing Coca-Cola trade secrets that are entered into evidence during Joya Williams' trial be sealed by the court.
The move comes even though reporters will be in the courtroom and will be free to report what they hear and see. The government said sealing the exhibits would "avoid further display and copying by the general public."

Ms. Williams' attorney is vigorously objecting to the prosecution's request. We will keep an eye on developments in this matter.

Ex-Qualcomm Employee Sentenced for Trade Secret Theft After Departure for Nokia

A former Qualcomm Inc. employee who downloaded nearly 450,000 files of secret source code to his home computer before quitting to take a job with rival Nokia Corp. was sentenced to three years' probation Wednesday for stealing trade secrets.
Michael Laude, 47, had code that represented "virtually all of Qualcomm's product line," according to the U.S. attorney's office in San Diego.
A thorough investigation produced no evidence that he shared the code with his new employers at Nokia, a major Qualcomm rival, said Mitch Dembin, an assistant U.S. attorney, though Laude "had enough information to bring Qualcomm to its knees."
A Nokia spokesman, William Plummer, said Nokia was unaware of the theft and never benefited from stolen information. Nokia cooperated with the federal investigation.
Laude's attorney, Jeremy Warren, said his client made a mistake by failing to return the information when he left Qualcomm.
"It's a sad case because he's been a law-abiding guy his whole life and he got into trouble because he's a pack rat," Warren said. "It's been a very embarrassing moment in his life but, fortunately, no one got hurt here at all."
Laude held engineering and product management jobs at San Diego-based Qualcomm from June 1992 to October 2002, when he gave a day's notice that he was leaving. The following week, he joined Nokia, which is based in Espoo, Finland.
He pleaded guilty in October 2006 and was sentenced by U.S. District Judge James Lorenz in San Diego federal court.
Qualcomm raised concerns about Laude to the FBI after Nokia identified him in 2004 as an architect of a software platform designed to compete with Qualcomm's own products, according to the federal government and Qualcomm.
Laude downloaded more than 300,000 Qualcomm files to his home computer during a two-week period after the company granted him access in June 2002 and amassed nearly 150,000 more on his hard drive before leaving the company four months later, the government said.
Qualcomm has since tightened its security practices, said Alex Rogers, a company attorney.
"Our assessment so far is that we were fortunate there was no damage," he said.

We assume the relatively light sentence was based on the lack of demonstrable intent due to the former employee not having shared the source code information with his new employer. That said, we found it interesting that it was NOKIA's press release on this employee's responsibilities as a new hire that triggered the FBI investigation.

FISA Wiretaps and Corporate Espionage

From The National Law Journal via Law.com, a story about a recent case from the 7th Circuit, U.S. v. Wen, No. 06-1385 (7th Cir. Dec. 14, 2006), which permits prosecutors to use evidence gathered under a FISA warrant in contexts outside of spy cases. Judge Easterbrook wrote the opinion in which the court held that "[u]nless there is a constitutional problem in domestic use of evidence seized as part of an international investigation, there is no basis for suppression."

The article posits that FISA evidence could play a role in other federal law enforcement efforts such as corporate espionage prosecutions. Wen, a naturalized U.S. citizen, was arrested in 2005 in Manitowoc, Wisconsin, for sending $500,000 worth of computer parts to China which the government claimed could be used to improve missile systems. The government also alleged that the computer chips sent out of the United States to China without permission could be used for military radar and missiles.

Trade Secrets and Voting Machines

An interesting editorial from the Palm Beach Post concerning the lawsuit over the disputed election in Florida's 13th Congressional District.

A large number of undervotes on electronic voting machines led to a court contest by Democratic challenger Christine Jennings who lost by only 369 votes in a race where, suspiciously, 18,000 voters registered no choice.

In the suit, Jennings' lawyers wanted to see the source code for the voting machines supplied by ES&S to Martin County where the bulk of the undervotes occurred.

The court ruled against Jennings, but, according to the Post:

"[T]he public needs the courts to err on the side of voters, not trade secrets. Anything less does a disservice to the public and, ultimately, the machine's manufacturer, ES&S, which also makes the machines that Martin County uses. And Judge Gary's ruling relies on circular logic. Ms. Jennings hasn't proven that the touch screens failed. Thus, she can't get what she needs to see whether the touch screens failed."

And: "The company stated in a legal brief that 'ES&S has no interest in this case, other than to protect these trade secrets.' That may be a good legal argument but it is bad public relations. If touch-screen voting is as reliable as ES&S and other manufacturers say it is, the company should welcome rigorous scrutiny, particularly since the court can protect trade secrets."

Terminated AIG Employee Sued for Misappropriation of Confidential Information

A former executive in AIG's Accounting Policy Office has been sued for breach of her company nondisclosure/confidentiality agreement. AIG's complaint alleges Dong Chung was a poor performer who received numerous demerits for her work with the company and that she attempted to extort a settlement based on threats that she was going to share damaging information with the SEC and Eliot Spitzer, the new Governor and former Attorney General of the State of New York.

This case represents a hybrid of many of the cases we've followed and covered on this blog - a cross between the allegedly disloyal employee and the employee who had significant access to a company's crown jewels of information. The mix, as the lawsuit suggests, can be toxic. We'll keep an eye on this one for you.

Mighty Specific Trade Secrets (Pacer Req'd)

The case of Timm & Associates, Inc. v. Broad, 2006 WL 3759753 (D.Minn. Dec. 21, 2006), presented a standard fact pattern with a legal twist involving trade secrets.

The standard scenario: plaintiff real estate broker sued former employee who left for a competing broker and took some transactions with him. In addition to the usual stuff -- breach of a non-competition agreement, breach of duty of loyalty, intentional interference with contract and diversion of corporate opportunity -- the plaintiff had a trade secrets claim based on one of the transactions at issue, the sale of a Hampton Inn.

Defendant contended that he was entitled to summary judgment on the trade secrets claim because "the sale of the Hampton Inn was public information and cannot be considered a trade secret." The Court agreed that "the fact that the Hampton Inn was for sale was not a trade secret, but [plaintiff] asserts that the identity of the prospective purchaser of the Hampton Inn and the 'stage of the transaction' were trade secrets."

In turn, "[w]hether these were trade secrets primarily hinges on whether [plaintiff] made reasonable efforts to maintain their secrecy." On the record before the court, it could not grant summary judgment on that issue.

Thus, the case involves an unusual trade secrets circumstance involving just one -- completely discrete -- trade secret.