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Thursday, December 20, 2007, 12/20/2007 01:50:00 PM

Think Secret Blog Settles Apple Trade Secrets Case By Shutting Down

By Todd
InformationWeek is reporting a confidential settlement has been reached between Apple Computers and the Mac-blog Think Secret that was reportedly a "positive solution for both sides." No sources of the information that sparked the lawsuit were revealed, the release said.

Apple sued Nicholas Ciarelli, who was 19 years old at the time and a Harvard undergraduate, after he revealed details about the Mac Mini computer and other Apple products before they were announced at MacWorld in January 2005. The suit, which also named Ciarelli's company dePlume Organization, was filed in Santa Clara County, Calif., Superior Court shortly after Apple unveiled the products at the conference.

On Thursday, Ciarelli said in a statement that he was glad to have the legal wrangling behind him. "I'm pleased to have reached this amicable settlement, and will now be able to move forward with my college studies and broader journalistic pursuits."

Apple accused Ciarelli, who was also an editor at the Harvard Crimson, of "inducing" company employees to break their confidentiality agreements with the company by disclosing trade secrets. The complaint argued that Ciarelli obtained the information illegally by posting a request for people with inside information to contact the site.

Ciarelli, who launched Think Secret when he was 13 years old as an avid fan of Apple products, claimed to have used the same newsgathering practices of other journalists, and therefore was entitled to the same protections. "I talk to sources of information, investigate tips, follow up on leads, and corroborate details. I believe these practices are reflected in Think Secret's track record," he told the Crimson in January 2005.

We here at Womble Trade Secrets are bloggers but do not necessarily share Ciarelli's views that blogger/journalists have a First Amendment right to publish the trade secrets of private entities having implied liability immunity. As we've established on this blog in the past, trade secrets are frequently information sets that, in the right circumstances, establish proprietary rights in their owners. We understand Ciarelli's position that he has the right to publish and print what he wishes - and we don't disagree. We just don't agree blanket liability immunity applies to any such publishing effort if a private party's intellectual property is what is published and the publisher knows, or should have known, that the trade secrets were shared in circumstances where they should not have been - such as in the instances of disloyal employees of a company sharing information about a pending product release.

For an interesting take on this First Amendment/Trade Secret conflict, see:

Wednesday, December 19, 2007, 12/19/2007 11:14:00 AM

Facebook Brings Claim Under Computer Fraud & Abuse Act

From eFluxMedia, a story concerning Facebook’s amending its lawsuit in the Northern District of California accusing defendants of unlawfully accessing its servers seeking the web site’s users’ personal details.

Facebook alleged that in June servers operated by the defendants used automated scripts to make more than 200,000 requests for personal information stored on Facebook’s own servers.

Facebook sued seventeen individuals as well as an Internet porn company. The company now claims the defendants violated the Computer Fraud and Abuse Act, as well as the California Comprehensive Computer Data Access and Fraud Act. Facebook also alleges breach of the Terms of Service set forth by the service that they agreed to upon signing up.

Tuesday, December 18, 2007, 12/18/2007 11:00:00 AM

TomTom Advises Tele Atlas Customers "Don't Fear Us"

By Todd
The Washington Post is reporting that Dutch navigation device maker TomTom is attempting to reassure customers of Tele Atlas that their secrets will be safe once TomTom buys the Tele Atlas.

Confidential information will be restricted to dedicated major account teams and TomTom and Tele Atlas will keep separate data-processing and email systems, TomTom CEO Goddijn said.

"Customer-specific information will be protected by rigorous document control processes and secure software," Goddijn said.

Thursday, December 13, 2007, 12/13/2007 10:56:00 AM

BNA Report: Mobility = Trade Secrets Risk

By Todd
BNA's Daily Labor Report has published a piece concerning risks the mobile workforce places on corporate trade secrets. It makes a solid read and provides reliable analysis:

Corporate policies aimed at safeguarding intellectual property and
trade secrets are becoming increasingly important as the mobility of labor
markets grows and as the tools available for compromising critical corporate
data expand, a panel of employment and technology law professionals said Dec.

Daniel Waldman, corporate counsel for San Jose, Calif.-based Cypress
Semiconductor Corp., said corporations must develop and execute vigorous trade
secret protection policies with the help of their legal, human resources, and
information technology departments. Such policies should become embedded in the
corporation's culture so employees understand that they play a vital role in
the protection of organizational assets.

"By having such specific policies in place, an employer puts its employees
on notice as to their obligations and responsibilities with respect to
protecting the company's technologies and data," Waldman said during an
American Bar Association teleconference entitled "Surviving the Brave New World
of Employee Mobility."

Bradford Newman, chairman of the employment law department at Paul,
Hastings, Janofsky & Walker LLP in Palo Alto, Calif., said three important
trends are converging to make trade secret protection a critical mission within
almost every organization. First, a corporation's essential value is
increasingly composed of its intangible assets, including intellectual property
and trade secrets. This fact of corporate life is obvious in technology and
financial companies, but Newman said this trend is no less true in
manufacturing, services, and other traditional industries.

"All industries are moving toward a business model that relies on product
differentiation and small differences in innovation vis-a-vis their
competitors," Newman said.

Time of Long-Term Employment Over.

In addition, Newman said employee mobility and the emergence of
nontraditional worksettings create significant opportunities for the loss of
intangible property, adding that the days of long-term employment with a single
employer are over. Newman said this trend is especially true for highly skilled
professionals, who likely understand an organization's most important
commercial secrets. The modern worker may also work from a remote location,
where his or her daily activities cannot be strictly monitored.

"Employees are moving in groups--in two's and three's and in 20s and 30s,"
he said. "And one thing everyone can be sure of: data is moving with these
employees--data that doesn't belong to them, data that may inadvertently or
intentionally be moved, and data that all of our clients increasingly want to
keep track of."

Finally, Newman said tools capable of hijacking the organization's most
valuable assets are becoming increasingly sophisticated. While external storage
devices, PDAs, instant message communication equipment, portable hard drives,
and cell phones are the essential tools of business, they are also effective
vehicles for shifting sensitive data and trade secrets off company servers. In
addition, external e-mail systems can serve as convenient storage bins for
employees looking to rob the store.

"E-mail policies alone are woefully inadequate to protect a company's
trade secrets," Newman said. "With mobile employees working all over the world
outside the four brick-and-mortar walls of the headquarters and with the
sophistication of moving information off of company systems, new technologies
such as instant messaging and stand-alone storage drives need to be accounted
for in a trade secrets policy."

Conduct Trade Secrets Audit.

Darren Weingard, senior corporate counsel for the Internet giant Yahoo!,
said companies need to begin their security processes by conducting a trade
secrets audit. Each organization must identify the intangible property to be
protected and then identify the locations and the channels by which it can be
accessed. Organizations also need to know who creates these valuable company
assets and who has access. Weingard said this internal process should be done
on a cross-functional basis involving members of the organization's information
technology, human resources, and legal departments.

The process should produce policies governing who has access to critical
organizational information and on what terms. The organization must also
develop specific policies governing the use of storage devices and external e-
mail accounts.

"It is an important point because a company's encouragement of the use of
external devices can, in the context of potential litigation, affect the
argument that a trade secret has been protected," Weingard said. "You will
certainly see your adversary argue that the company did not adequately protect
its trade secrets."

Waldman agreed, but cautioned that companies should be mindful of policies
that inhibit innovation.

"The real issue employers need to consider is how far does [the company]
want to go before the benefit of the constraint is outweighed by the adverse
impact on the employee's work performance," he said.

Comprehensive Policy Needed.

Newman pointed to a range of additional issues that should be addressed in a
trade secrets policy, including: controls on mobile employees, consultants and
contractors; ongoing training for employees aimed at trade secret
identification and protection; and, monitoring employees' use of computer and
e-mail systems.

Newman added that organizations must develop comprehensive employee exit
processes. During the exit interview, laptops and other equipment must be
accounted for. The employer should determine whether the exiting employee will
work for a competitor. He noted that the employer may ask the departing
employee to certify that he or she will not use any secret or sensitive
information in their new position. In cases involving executives who have been
privy to highly sensitive information, the company may want to create a
forensic imaging of the departing executive's hard drive.

Tuesday, December 11, 2007, 12/11/2007 08:29:00 AM

Chinese Espionage and Night Vision

From, a story on Chinese espionage in sensitive U.S. defense industries:

The author says that the threat posed by China goes beyond their reported involvement in the recent cyber attacks against Oak Ridge National Laboratory.

According to the story, "the aggressive Chinese economic espionage effort mounted by Chinese intelligence agencies is illustrated by the announcement by U.S. Attorney Scott N. Schools in the Northern District of California earlier this week that Philip Cheng had been sentenced to two years in prison and fined $50,000 for his part in brokering the illegal export of a night vision camera and its accompanying technology to China."

Cheng had pleaded guilty on October 31 to charges that without authorization from the Department of State for selling the Panther series infra-red camera. Indicted along with Cheng was the owner of Night Vision Technology of Cupertino California, Martin Shih who died after the indictment. Shih’s company designed and made military-application devices that use infrared technology to enhance night vision. Cheng established a separate technology-transfer company with the intention of producing the camera in China, court records show.

Tuesday, December 04, 2007, 12/04/2007 03:51:00 PM

DON'T MESS WITH TEXAS! The Coin Merchants' Trade Secret Battle

By Todd
The Southeast Texas Record is reporting that Austin-based U.S Money Reserve, Inc. is pursuing a permanent injunction against a band of former employees, who formed their own coin company by allegedly stealing the company's consumer accounts. U.S Money Reserve, doing business as United States Rare Coin & Bullion Reserve (USRCB), filed its suit, USRCB vs. United States Money Exchange et al, earlier this month.

On Nov. 13 Judge Bob Wortham, 58th Judicial District, granted a temporary injunction. Two weeks later, on Nov.29 a hearing was held for a permanent injunction. The hearing lasted all day; however, no decision was reached. Instead, both parties agreed that more witnesses were needed and the hearing was reset for Dec. 27. A court employee said the plaintiffs are gathering more witnesses, and that the case could possibly settle before the December hearing.

The suit names as defendants Cecil Roberts, individually and doing business as United States Money Exchange; Jason Braquet and Ed Seymour, individually and doing business as JTB Coins; Chad Poole, Terry Finley and Bill Truman. According to the plaintiff's petition, on Oct. 17, 2007, Braquet, a former USRCB employee, left the company to work with other former employees "to divert sales of coins from numerous customers of plaintiff." "Instead of making an honest living, these defendants were literally stealing the business of plaintiff, as well as stealing credit card information from plaintiff's customers, all in violation of criminal statutes," the suit said. "The defendants have acted as a joint enterprise…"

To prove its allegations, USRCB hired local private investigator and political blogger Phillip Klein to probe the former employees who had left the company "on suspicious circumstances." Klein wrote in his affidavit that USRCB was experiencing "strange calls" from current customers saying that United States Money Exchange charged their credit cards for products ordered from USRCB. During his investigation, Klein interviewed USRCB employee Derek Faulk. Transcripts from the interview were filed in court documents. Faulk, who was a high school friend of defendant Braquet, testified in the interview that he and Braquet had been selling USRCB customer information, including credit card numbers, to defendant Roberts, who co-owns United States Money Exchange. Faulk testified that after Braquet would make a sale while working for USRCB, he would write down the customer's information on a piece of paper, stick it in his pocket then sell it to United States Money Exchange.

"During the overview of the investigation I have found probable cause of both civil and criminal laws being violated by numerous individuals," Klein wrote in his affidavit. "Criminally I find that possible federal mail fraud and conspiracy to commit mail fraud, as well as fraud statutes may have been violated by multiple parities. Civilly I find that possible Texas Deceptive Trade Practice Act statues…have been violated as well as the violation of those named non-compete clauses being violated," Klein wrote.

The suit says defendants Seymour, Poole, Finley, Truman, Braquet and Roberts violated their non-compete agreements when they quit, stole USRCB trade secrets and formed their own rival coin companies. "The defendants, jointly and severally, have committed negligence, gross negligence, tortuous interference with business relationships and conversion of plaintiff's trade secrets…," the suit said. In addition to the permanent injunction, USRCB is seeking to recover actual and punitive damages.
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