ROBOT WARS!!!! Robotic FX Says iRobot's Secrets Ain't All That Secret

XConomy's Robert Buderi is doing an excellent job covering the robotic trade secret wars and we though you'd enjoy having a look in on this reporting.

Apparently, Robotic FX's attorneys have presented the presiding judge with a letter that argues along these lines:

"Schmidt’s letter argues that none of these features involves trade secrets or confidential information. She contends that the elastomer material used in the PackBot’s tracks and the method of manufacturing it are publicly known. She says that three of the five prototype PackBot features in question “are merely applications of common engineering knowledge.” The other two, as well as the chassis design, are not trade secrets but “publicly disclosed in iRobot’s patents,” according to the letter."

We'll keep an eye on those controlling the robots for you.

Danger Will Robinson!!! U.S. Army Tells Robotic Fx To Call Off The Robots - For Now

DefenseNews.com is reporting that the U.S. Army has temporarily stopped a $280 million contract given to Robotic Fx to build up to 3,000 bomb-clearing combat robots, after rival robot-maker iRobot filed two lawsuits and protested the award with the Government Accountability Office (GAO), claiming Robotic Fx stole patented designs and ripped off its trade secrets.

The fate of the contract award is unclear. The delivery of the robots is on hold pending further inquiry, Army contracting officer Joanne Byrd said in a written statement.

Robotic Fx, Alsip, Ill., beat out iRobot, Burlington, Mass., for the U.S. Robotic Systems Joint Project Office xBot competition to deliver less-than-50-pound, remote-controlled robots able to beam sensor images back from caves, buildings and hostile areas.

The robots have been classed as an urgent need, as requested by Army and Marine Corps commanders in Iraq and Afghanistan.

“After careful consideration and consultation with cognizant legal and procurement officials, I have determined that the protests, though not clearly meritorious, raise questions regarding the award,” Byrd wrote to the U.S. Army Legal Services Agency.

The Army is now conducting a formal reassessment of Robotic Fx and its ability to complete the xBot contract, Byrd said.

If Robotic Fx is determined to be unable to fulfill the xBot contract, the matter will be referred to the Government Contracting Area Office and the Small Business Administration, which will decide whether to issue Robotic Fx a Certificate of Competency, Byrd wrote. If Robotic Fx is not awarded this certificate, the xBot contract award will be given to iRobot.

iRobot had asked a U.S. federal court to enjoin Robotic Fx from fulfilling the contract. The request for injunction is now moot, iRobot lawyer Michael Bunis wrote in an Oct. 24 letter to the U.S. District Court of Massachusetts.

“On October 23, 2007, we were informed by the U.S. Army that it has taken corrective action in response to our bid protest including setting aside the award to Robotic Fx Inc. and conducting a reassessment to Robotic Fx’s responsibility to perform the xBot contract in light of information now in the possession of the contracting officer,” iRobot Chief Executive Colin Angle wrote in a statement.

In September, officials with the Robotic Systems Joint Project Office had asked the courts to allow Robotic Fx to complete the work.

“If these systems are not sent to the theater in the most expedient manner, a far greater number of soldiers and Marines will be placed in danger,” wrote Marine Col. Edward Ward, the office’s division chief for program management.

We reported on this trade secret dispute earlier on October 22.

Accusations of Stealing Hedge Fund Secrets

From Hedgefund.net, investment bank Piper Jaffray has sued four former employees who went on to form their Vermilion Capital Management, another hedge fund.

Piper claims that the four stole trade secrets about the company’s technical research products.

According to the story, the suit names David Nicoski, Joseph Jasper, Shelly Moen and Scott McClure, all of whom worked for Piper for years before forming Vermilion in 2005. The firm started its first fund in August of that year with $5 million in partner capital.

Vermilion denies any wrongdoing and claims the four former employees have been cooperating with Piper to assure them they are not using any of the company’s trade secrets.

Russia & Economic Espionage -- Spyor or Spyee?

From Axis, a story concerning the appointment of new Russian spy chief (and former Prime Minister), Mikhail Fradkov.

According to the story, President Putin says he wants the Russian foreign intelligence service to "help fight terrorism, but also expected Fradkov to build up efforts in economic espionage."

According the ITAR-TASS news agency, Putin says the service "must be able to swiftly and adequately evaluate changes in the international economic situation, understand their consequences for the domestic economy and, of course, it's necessary to more actively protect the economic interest of our companies abroad."

Does that mean guarding the trade secrets of Russian companies or stealing the trade secrets of others on their behalf?

Your guess is as good as mine.

Trade Secrets for Bomb Detecting Robots - The United States Attorney Gets Involved

Declaring that “the lives of soldiers presently at war in Iraq and Afghanistan” could be placed in peril, the federal government has injected itself into the legal battle between iRobot and Robotic FX—asking a U.S. District Court judge in Massachusetts on the brink of this morning’s hearing not to let iRobot’s efforts to win a preliminary injunction against its rival’s operations delay the shipment of bomb-detecting robots to the Middle East.

If an injunction is issued against Robotic FX, which on Friday beat out iRobot to win a $279.9 million contract to deliver robots to the military, “soldiers will certainly be placed in life-threatening situations when a safer alternative exists,” the U.S. Attorney’s office declared in yesterday’s filing. A second filing, a declaration from U.S. Marine Corps Colonel Edward Ward of the military’s Robotic Systems Joint Project Office, echoed the U.S. attorney’s statement. Improvised explosive devices, or IEDs, are “the number one cause of Soldier and Marine casualties,” Ward said. “If these systems are not sent to the Theater in the most expedient manner, a far greater number of Soldiers and Marines will be placed in danger…”

The excellent reporting on this lawsuit and the legal maneuverings therein comes from XConomy and Robert Buderi. Click on the various postings and you'll learn alot about interesting this matter.

Trade Secrets and Insurance Underwriting

From Business Insurance, a story concerning the temporary injunction against Arch Capital Group Ltd. issued by a Connecticut state court judge who found that several Arch facultative reinsurance officials misappropriated General Re Corp. trade secrets when they left Gen Re to join Arch earlier this year.

In a classic employee raiding scenario, this April four of Gen Re’s top property facultative underwriting executives — Steven Franklin, Jennifer Apgar, Philip Augur and Kenneth Vivian — quit to start a new facultative operation for Arch. Within a week, 26 other Gen Re facultative employees followed suit.

Although Business Insurance notes that none of the four top officials had employment contracts or noncompete agreements with Gen Re, it nevertheless sued Arch and the four executives for breach of fiduciary duties, tortious interference with business contracts and violations of a state trade secrets law.

The judge's ruling noted that Gen Re had withdrawn initial charges that its former employees physically took proprietary material when they quit. But, the judge concluded that the defecting executives made a “concerted effort” to tap their collective memories for loss cost data that Gen Re had developed to price facultative accounts. These memories proved “exceedingly accurate,” and Arch was able to replicate Gen Re’s loss cost figures in at least a dozen fire risk categories.

Trade Secrets and Christmas Shopping at Wal-Mart

I know, I know. It seems every year that the Christmas hype just gets earlier and earlier. Not to be outdone in 2007, we have a little early Christmas cheer involving threats over trade secrets.

From CNNMoney.com, a story about Wal-Mart's threats to various websites that have, in the past, leaked details of the retailer's post-Thanksgiving (so-called "Black Friday" special deals. Apparently, the sites obtain advance copies of Wal-Mart advertising circulars and publish the information weeks in advance of the sale.

According to the story, Brad Olson, the founder of Gottadeal.com, a Web site that markets itself as one of many 'official Black Friday deals sites,' told CNNMoney.com that he received an e-mail Wednesday from lawyers representing Wal-Mart warning him against 'improper release' of the No. 1 retailer's Black Friday sales circular. Other websites are reporting receiving the same threats.

"It has recently come to our attention that you and/or your company may potentially obtain possession of and untimely release Wal-Mart's sales circulars, advertisements or other information prior to their authorized release dates," the law firm Baker Hostetler, which represents Wal-Mart, wrote in a legal notice e-mailed to Brad Olson and obtained by CNNMoney.com.

One lawyer quoted in the story averred that any Wal-Mart employee, design firm or distribution firm that is associated with its Black Friday ads is probably under contract with Wal-Mart not to leak the information. Therefore, "as a general proposition, someone can be liable for misuse of trade secrets if they know that the information they received was obtained in violation of a confidentiality agreement," according to the lawyer.

Bah humbug!

Bad Faith in Trade Secrets Claims (PACER Req'd)

The Uniform Trade Secrets Act, adopted (sometimes with changes) by most states, provides that trade secrets defendants can recover their attorneys' fees when claims of misappropriation are made in bad faith.

The statute, however, doesn't define bad faith and courts have struggled to come up with a legal definition and then apply that definition to the facts in given cases.

Streamline Packaging, Inc. v. Vinton Packaging Group, Inc., a case from the United States District Court for the Western District of Michigan decided on October 2, 2007, presented the court with just those questions.

The court found in a motion for summary judgment that plaintiffs had no standing to assert trade secrets claims with respect to trade secrets belonging to another company (of which plaintiffs claimed to be an agent). The question then switched to whether defendants were entitled to attorneys' fees.

The court first ruled that "bad faith" exists when the court finds (1) objective speciousness of the plaintiff's claim and (2) plaintiff's subjective misconduct in bringing or maintaining a claim for misappropriation of trade secrets.

Plaintiffs' lack of standing, in the view of the court, establish both prongs required for bad faith:

"Plaintiffs' lack of objective evidence [of misappropriation] combined with their inability to identify any legal theory under which an agent in this situation might raise a claim indicates 'recklessness in not knowing that the claim for trade secret misappropriation has no merit.'"

[Disclosure: our firm represented the defendants in this case.]

Update on West Virginia Trade Secrets Case

More details from the West Virginia Record on a case reported here last week.

According to the Record, part of defendant's job duties involved preparing job design documents, job bid documents and other documents containing "proprietary and commercially sensitive information and trade secrets."

The complaint alleges that the information in the documents is valuable to competitors because it reveals Prime's pricing and job design, as well as bidding information. Moreover, "[t]hat information could not easily be acquired or duplicated by others, but for misappropriation," and "Prime has expended considerable effort and money in developing its pricing, job designs and job bids."

Leaks and Al Qaeda's Trade Secrets

Al Qaeda is reportedly in the business of terrorism - or at least acting like it's an exporter of terrorism. Like any business, they've got secrets. They've got marketing. And they've got Osama bin Laden with his funny hats and long grey (sometimes black) beard as their pitch-man. But like a proverbial Steve Jobs, Osama doesn't like anyone stealing his thunder.

According to the Washington Post, an outfit called SITE Intelligence Group was in a position to do exactly that. They were receiving pre-release Al Qaeda videos before anyone else - and they apparently shared this information with the White House. But - as we all know - the feds aren't always solid on keeping a lid on things and - the next thing you know - the gig was up. It got out that SITE Intelligence Group was the source of the pre-release. Osama is presumedly making a list of his helpers and checking to see who's been good and who's been bad.

SO - the head of SITE Intelligence Group has learned her lesson: sharing pilfered secrets with the White House isn't using reasonable means to protect your information. Also, it is possible that Osama bin Laden is having counsel review the Afghani Trade Secrets Protection Act to see if he's got a claim. We'd hate to know the nature of injunctive relief he'd claim entitlement to.

Trade Secrets and Insulation? In West Virginia

A small blurb from The Record, West Virginia's legal journal:

Prime Insulation filed a suit against Randall Barrett, claiming Barrett violated the West Virginia Computer Crime and Abuse Act. Barrett was fired for sexually harassing his co-worker and insubordination. According to the suit, Barrett's job duties included working with documents that contained "sensitive information and trade secrets." The documents were stored on an "S" drive on his workplace computer. According to the suit, Barrett asked a third party to copy the files from his computer onto a CD. Prime claims Barrett's actions put the secrets of the company in danger. Prime claims Barrett also violated the Uniform Trade Secrets Act. They claim he obtained private information through theft and misrepresentation. They seek compensatory and punitive damages.

Sounds like a mess.

The case is Prime Insulation, Inc. and Prime Inc. v. Randall L. Barrett, filed in Kanawha County, West Virginia.

Scandanavian Airline Systems Convicted of Stealing Norwegian Air Shuttle's Trade Secrets

If you speak with citizens of Scandanavian countries, they are sometimes struck by the litigious nature of Americans and the American civil legal system. Well, they sue each other too.

BusinessWeek is reporting that an appeals court on Tuesday convicted the Norwegian unit of the Scandinavian Airlines System of stealing trade secrets from a smaller rival in a reversal of a lower court's acquittal. The Borgarting appeals court found SAS Norway guilty of accessing confidential passenger and price information on computers used by Norwegian Air Shuttle, which operates under the name Norwegian, and ordered the larger airline to pay a fine of $740,000.

The case concerned an electronic booking system the airlines shared until the deal was canceled in 2002. Norway's economic crime police said SAS Norway continued to access the system to get information about their rival's pricing and routes until 2005. The appeals court found that SAS had used the system in an intentional effort to gain inside information. However, it cut the fine demanded by the prosecution in half, saying Norwegian had not taken steps to stop SAS's access to the system.

So - it seems the Scandanavians are concerned about unfair competition too - as they should be. Even if they usually live in a legal system that "just works," they have to keep tabs on those that want to capitalize on the business advantages of their rivals.

More on Economic Espionage in Canada

From the Toronto Sun, a story following up on many others from this blog, concerning economic espionage in Canada.

The unstated prime culprit? China, of course.

The big quote:

"Dispelling a widely held view that espionage abated with the end of the Cold War, CSIS reports and briefing notes from 2006 and 2007 say spying by foreign states and hostile actors has 'intensified' in the past 15 years. Regional conflicts have also spawned aggressive intelligence-gathering and foreign-influence activities in Canada."

NetLogics Microsystems Employees Indicted for Allegedly Stealing Computer Chip Trade Secrets

This scenario is becoming all-too-common: valuable information and research is being ripped off by those seeking to cash in on dollars available in and from China. Interestingly, though - the prosecutors are alleging that the dollars sought in this instance would be provided by an identified program run by the People's Republic of China.


Information Week is reporting that two employees at NetLogics Microsystems have been indicted for allegedly trying to steal trade secrets on computer chip design that they were going to use in a company they were starting on their own.

Lan Lee, aka Lan Li, 42, of Palo Alto, and Yuefei Ge, 34, of San Jose, were both indicted by a federal Grand Jury in San Jose on charges of conspiracy to commit economic espionage and to steal trade secrets. The government contends they were conspiring to steal information from both NetLogics and from Taiwan Semiconductor Manufacturing.

NetLogic Microsystems is a computer chip design and development company based in Mountain View, Calif. Taiwan Semi-Conductor Manufacturing is a computer chip manufacturing company with facilities in Taiwan, San Jose, Calif., Singapore and Washington state.

According to the indictment, Lee, who is an American citizen, and Ge, who is a Chinese national, created their own company, SICO Microsystems. The U.S. Attorney's Office reports that they planned on using the stolen trade secrets to develop and market products with the new company. The men allegedly were looking for venture capital funding from the Chinese government, the U.S. Attorney added.

The indictment also alleges that Lee and Ge were trying to take advantage of the 863 Program and the General Armaments Department within the Chinese government.

The 863 program, explained the DOJ, is a funding plan created and operated by the government of the People's Republic of China, and also is known as the National High Technology Research and Development Program of China. The program was designed by leading Chinese scientists to develop and encourage the creation of technology and focused on issues, such as high technology communications and laser technology, with an emphasis on military applications.

The General Armaments Department of the People's Liberation Army was responsible for the Army, Navy, and Air Force in the People's Republic of China, and oversaw the development of weapons systems used there, according to the DOJ.

We'll keep an eye on this one for you.

GE Accuses Subcontractor of Stealing Trade Secrets

From the Albany Times Union, a story about General Electric suing a former supplier from Rotterdam, Feuz Manufacturing, for allegedly stealing trade secrets. The claim comes on the heels of a suit by Feuz against GE for unpaid bills filed in New York state court. The GE trade secrets claim was filed in federal court.

Feuz made parts that GE Energy in Schenectady (NY) used in the manufacturing of gas turbines, including pins, rotors and other turbine parts.

GE claims that Feuz used GE's engineering designs to make parts that it sold to GE competitors and seeks $2 million in damages based on the value of the parts sold to GE competitors by Feuz.