Trade Secrets of the Detroit Red Wings

The co-authors of this blog like hockey. One of the co-authors (me) grew up in Detroit. It is a slow day in the trade secrets blog world so here's a post related to the proclaimed secrets of assembling a Stanley Cup champion team, direct from GM Ken Holland's mouth:

1. Good people: Like assistant GM Jim Nill, Holland says, who might get a note from his boss on a kid, but "he knows if he wants to, he can throw my note in the garbage."

2. Players learn from other players: Which is why the Wings like to keep old-timers. "They are there to guide our young players," Holland writes. "I'd like to think when an older player is done here, he's done."

3. Uncovering draft gems: "Because we like skill, when a player joins our team, skill plays with skill."

4. On-ice discipline: Though when the Wings get outmuscled, "You wonder, 'Are we good enough? Are we big enough?' " Yes, they are.

5. Puck possession. It's a Holland thing.

6. Ownership: "I report to one person: Mike Ilitch. I talk to all our people and when I want something, I go to Mr. Ilitch and -- boom! -- it's done."

7. Salary cap. "We have a capologist, but working with a budget is also my strength. I like numbers. I was a goalie -- you're always working out your goals-against average."

8. Reclamation projects. Chris Osgood, Dan Cleary, Darren McCarty ...

9. Patience: "I just think the philosophy seems to be working," Holland writes. "Next year we could lose in the first round because we're out of energy, but judge us on five years, not on one year."

Laptop Seizures at U.S. Borders Implicates Trade Secret Concerns

The United States Congress is attempting to investigate reports of widespread laptop seizures by U.S. Customs Officials of business travelers going, and coming from, abroad. The same implicates troubling consequences were foreign countries to engage in the same behavior at their borders.

The laptop seizures have proved especially worrisome for business travelers, who could be crippled if they were unable to access data on a laptop seized by the government, said Susan Gurley, executive director of the Association of Corporate Travel Executives.

A survey of business travelers found that 7 percent had their laptops or other electronic device seized by the government, Gurley testified.

“Generally speaking, customs officials do not go through briefcases to review and copy paper business records or personal diaries, which is apparently what they are now doing now in digital form—these PDA’s don’t have bombs in them,” says Marc Rotenberg, executive director of the Electronic Privacy Information Center.

More troubling is what could happen if other countries follow the lead of the United States. Imagine, for instance, if China or Russia began a program to seize and duplicate the contents of traveler’s laptops. “We wouldn’t be in a position to strongly object to that type of behavior,” Rotenberg says. Indeed, visitors to the Beijing Olympic Games have been officially advised by U.S. officials that their laptops may be targeted for duplication or bugging by Chinese government spies hoping to steal business and trade secrets.

Small Software Company Sues Google - Alleges Trade Secret Theft

LimitNone, a small software development company, is seeking nearly $1 billion in damages in a lawsuit that accuses Google of reneging on a partnership with the small company and misappropriating its trade secrets for its Google Apps online service.

The tiny five-person startup claims it entered into a confidentiality agreement with Google in March 2007 to share its trade secrets with Google's engineers, salespeople and certain key prospective Google Apps customers. LimitNone claims Google then told it last December that it would develop the software itself, shutting the startup out of its major business opportunity.

LimitNone claims it designed an email migration tool called "Gmove" in collaboration with Google, that Google's free "Email Uploader" that it launched earlier this year is "almost identical" to Gmove and that "both operate under a similar conceptual design."

"With gMove priced at $19 per copy and Google's prediction that there were potentially 50 million users, Google deprived LimitNone of a $950 million opportunity by offering Google's competitive product for free as a part of its 'premier' Google Apps package," the lawsuit, filed Monday in Cook County Circuit Court in Illinois.

Trade Secrets and the Public Sector

The San Diego Union-Tribune is reporting that Kaiser Permanente and San Diego's Palomar Pomerado Health District are objecting to the requested disclosure of terms of a contract between the private company and the public hospital district that is funded, in part, by property tax receipts. We are starting to see more of these public/private business arrangements in which there is a conflict between the public's right to know and the private business's right not to disclose. The piece notes:

"Not being released are the particular portions of the contract that would disadvantage PPH in its regular negotiations with other health care organizations, jeopardize its ability to obtain similar contracts in the future, or which would provide an advantage to the many private health care competitors of PPH,” the letter says.

The letter, written by assistant general counsel Katherine Philbin, also says the district is “entitled to withhold the entirety of the contract” under state code but has decided to release it with redactions.

When asked to explain various redactions, such as the number of beds the district has promised Kaiser, general counsel Janine Sarti responded in an e-mail. Most of Sarti's responses are two words: “trade secret.”

Sarti only would say that the contract “provides for the use of all bed types as needed” to Kaiser. District officials declined to talk about why the number of beds or how much Kaiser will pay for them constitute trade secrets."

Trade Secrets Sentence for Convicted Engineer

From the Associated Press, a story about Xiaodong Sheldon Meng, a 44 year-old engineer who admitted he tried to sell fighter-pilot training software to the Chinese Navy.

He was sentenced in federal district court in the Northern District of California on Wednesday to 24 months in prison, in what the AP refers to as the first sentencing for a newly defined intellectual property crime, stealing trade secrets to benefit a foreign government under the Economic Espionage Act of 1996.

Meng was raised in China but holds Canadian citizenship. He faced up to 25 years in prison on two felony counts: economic espionage and exporting controlled military technologies. Because he had no prior criminal record, prosecutors agreed to seek a shorter sentence.

He was indicted in December 2006 on 36 felony counts alleging he attempted to sell the programs to the Royal Thai Air Force, the Royal Malaysian Air Force and the Navy Research Center in China.

Need a British Trade Secret? Airport Good Place to Start

This jarring (seemingly hyperbolic) report comes from WNUNET.com in Great Britain - lots of confidential business information is being exposed in public places:

"Over two thirds of Brits travelling on business have eavesdropped on someone else's confidential business conversation, and over a third have caught sight of sensitive information on laptops.

A survey of 1,000 UK and US mobile workers found that the rise of flexible working means that many people are battling to find sufficient privacy to conduct business.

Over 10 per cent of those catching snippets of information admitted that they have been able to use the data for their own business purposes.

Almost half of travelling UK professionals now spend at least half a day a week working in a public place, the report says.

Some find it so hard to find a place to work that one in six have resorted to working from toilets, over half in pubs and almost two thirds in busy restaurants.

"Many organisations just do not realise the staggering problems which their staff face when out on the road," said Kurt Mroncz, UK sales and marketing director at Regus, which conducted the survey.

"From a dangerous lack of privacy to difficult and absurd working environments, business travellers are often put in impossible positions as they try to carry out their professional role."
David Porter, head of security and risk at technology consultancy Detica, said: "These findings point to a significant vulnerability in British corporate security.

"The growing tide of professionals expected to work 'on the hoof' without proper support is putting the UK's prized corporate intellectual property, trade secrets and deals at risk."

Porter warned that people need to aware of slipping into a "casual security mindset" when using laptops, PDAs and social networking sites, and should be aware of those around them when dealing with sensitive information."

This is our favorite reference in the report: "Hard-nosed City boys lived up to their reputation, as the survey found that Londoners are the most likely to exploit business information overheard in public."

Those damn City boys . . . .

Criminal Trial for Former Eaton Aerospace Employees is Delayed

We reported on the Eaton Aerospace criminal trade secrets trial back in May: http://wombletradesecrets.blogspot.com/2008/05/eaton-aerospace-trade-secrets-criminal.html#links.

Now the ClarionLedger.com is reporting the scheduled trial of five former Eaton Aerospace employees accused of stealing trade secrets from the Jackson company for aerospace contracts has been delayed.

The trial had been scheduled in U.S. District Court in Jackson.But federal prosecutors’ appeal of a judge’s decision to dismiss seven of 12 federal charges delayed the start of the trial.

U.S. District Judge William Barbour Jr. said the trial will be delayed until the 5th U.S. Circuit Court of Appeals in New Orleans rules on the appeal.

Eaton ex-employees Rodney Case, Kevin Clark, Mike Fulton, Douglas Murphy and James Ward were accused of stealing secrets from Eaton and taking them to Frisby Aerospace in Clemmons, N.C., where they started working in January 2002.

Frisby now is known as Triumph Actuation Systems.Eaton designs, tests and manufactures aerospace hydraulic fluid applications for commercial and military use.

In April, Barbour threw out the first five counts of the latest indictment, saying the charges were unconstitutionally vague. The charges were one count of conspiracy to defraud the United States, two counts of theft of trade secrets and two counts of wire fraud.

He also threw out two counts involving theft of trade secrets, saying they were barred by the statute of limitations.

Departing Broker Litigation Still An Issue

We blogged the Ohio Supreme Court's ruling regarding memorized trade secrets here: http://wombletradesecrets.blogspot.com/2008/02/trade-secrets-all-in-head.html#links.

Well, the securities brokers who routinely depart one financial services firm for another have taken note and are concerned that this decision, and other regulatory developments under way, spell trouble for the departing brokers. We've linked hereto an article regarding the same in today's Investment News.

As for the recent Ohio ruling, that could hurt brokers who change firms, even when they take no customer records, industry observers say.

Prior court decisions have split over whether memories are trade secrets, Mr. Stief said, and the Ohio ruling will give courts and arbitrators more reason to restrict brokers.

In litigation, firms usually allege that the rep has illegally taken trade secrets.

Mr. Stief said he isn't aware of any industry cases yet citing the Ohio case, but "reps should be concerned, especially in Ohio."

At least 45 states have enacted the Uniform Trade Secrets Act, he said. Even states that haven't adopted the act could follow it, Mr. Stief said.

IBM and PSI Engage in Trade Secrets Arguments

IBM sued Platform Solutions, Inc. ("PSI") in 2006 alleging the PSI's servers illegally utilize IBM technology. In August of 2007, IBM apparently amended its complaint to add a misappropriation of trade secrets claim against PSI and PSI has now moved for summary judgment on that claim, asserting that it is time-barred under the California Uniform Trade Secrets Act. PSI's brief can be found here: http://www.itjungle.com/big/psifullfilling.pdf.

We'll keep an eye on this one for you and note, with interest, that statute of limitations issues are a hot topic in current trade secrets law.

Taiwan Signals It Is Starting to Take Trade Secrets Seriously

The attached link contains an interview with Dr. Chii-Ming Yiin, Taiwan's Minister of Economic Affairs. It proves an interesting read, but we were most interested in the question and answer relating to the protection of intellectual property rights (IPR), including trade secrets, in that country. We've pasted, and even bolded, the relevant dialogue below:


Q: Taiwan recently launched an Intellectual Property (IP) Court to help further protect intellectual property rights in Taiwan. Do you think this will encourage more high-tech firms to invest in Taiwan? What other roles is the government taking to protect IP and increase investment from foreign high-tech firms in Taiwan?

A: Taiwan is thoroughly committed to IPR protection, not only as part of our obligation to the international community but also as a vital element in our industrial upgrade and national competitiveness. As such, building a sound environment for IPR protection has always been one of our key national policies.

Taiwan will inaugurate an IP Court on July 1, 2008. All of the legal and regulatory groundwork for the court has been completed, and eight outstanding judges with extensive background and experience in IPR issues have been selected to head the Court. The Intellectual Property Office will lend the expertise of nine technical examiners to assist the judges in hearing cases involving technical disputes. This arrangement will remove the obstacle we faced in the past of judges lacking professional IPR knowledge.

In recent years, Taiwan's IPR regulations have been extensively amended to bring them into line with international standards. As a result, we are receiving a growing number of patent applications from foreign companies. In 2007 alone, foreign companies accounted for 32,239 of the 81,834 patent applications filed. Each year Taiwan grants about 15,000 patent rights to foreign applicants. However, the increase in IPR filings has also resulted in an increase in IPR litigation. Figures from the Judicial Yuan indicate that the number of IPR cases heard at district courts in Taiwan increased from 3,500 in 2004 to 4,500 in 2006. With the establishment of the IP Court, future IPR litigation will be handled by a highly professional institution that fully regulates the qualifications of judges, litigation procedures, presentation of evidence, and trade secrets protection. IP disputes therefore can be effectively and efficiently resolved, and this will dramatically enhance IPR protection in Taiwan. In this environment, local enterprises will be more willing to invest resources in R&D, and foreign firms, especially in the high-tech industry, will have more faith in investing in Taiwan.

In addition to judicial reform, the Executive Yuan has approved an IPR Action Plan, under which different government agencies can meet periodically to coordinate and review the implementation of IPR protection measures. To further strengthen Taiwan's IPR protection environment, prosecutors, police authorities, and the Joint Optical Disk Enforcement Taskforce (JODE) coordinate their efforts to step up infringement inspections. In 2003, Taiwan formed the IPR Police, which is manned by 200 officers that deal specifically with inspections related to IPR infringement. Through these various initiatives, Taiwan has made tremendous progress in IPR protection. This progress is widely recognized and acknowledged by rights holder groups at home and abroad.

Trade Secret Risks Seen as Elevated in "Clean Technology" Field

This report from CNNMoney.com caught our eye. The piece concerns the rise of intellectual property lawsuits in the "clean technologies" sector.

Brian C. Yerger, and analyst with Jesup & Lamont Securities Corp., compared what is happening to the information-technology book of the late 1990s.

"Many start-ups and some established companies are pursuing the same endgame ( for example, cheaper or more efficient solar cells) from differing technological viewpoints," Yerger said, "and in that pursuit are discovering processes and trade secrets that perhaps mimic another company's internal processes.

"Once the technology is patent-protected by one company or another, patent disputes erupt as to who developed or created the technology first," he said.

This confirms our experiences with any nascent technology or competitive environment - capital rushes in and labor battles occur as a result. There is fear in the former employers that their intellectual property capital is at risk and that's where the fighting begins.

Trade Secrets and Telemarketers

From KCRA television in Sacramento, a story about two siblings in Modesto, CA who work for competing telemarketing companies. They were arrested Thursday on charges of stealing thousands of dollars worth of trade secrets.

The Modesto police accuse Kevin Vincent of taking lead and contact information from the telemarketing company for which he worked -- Telecontact Resource Services -- and sending the information to his sister who works at Telepro, a competing telemarketing company.
The sister, Lacy, would then kickback to her brother a portion of the commission she made on every sale that used the information from his e-mails.

The investigation was begun by the Modesto Police Economic Crimes Unit in February when administrators at Telecontact received evidence showing that one of their employees had e-mailed leads and contact information for potential customers to a competing agency.
Both Kevin and Lacy Vincent were booked on charges of stealing trade secrets, conspiracy, embezzlement and using a computer to commit fraud and theft.

This could just be karma for bothering people on the phone during dinnertime.

Follow-Up to California Case on When the Trade Secrets Clock Starts Ticking

Here's a follow-up, from Financial Week, to Todd's posting from yesterday.

Trade Secrets Statute of Limitations - California

If someone steals a trade secret and then sells it to a third party, when does the statute of limitations begin to run on any misappropriation claim the trade secret owner might have against the third party?

The Court of Appeals for the State of California says that the clock starts ticking when the trade secret owner has any reason to suspect that the third party knows or should know that the information they've purchased is a trade secret.

The reason this case was up on appeal is because the trial court felt that the statute of limitations should run from the time the third party had actual notice of the trade secret owner’s claim to the information.

The Court of Appeals reasoned that the actual state of mind of the third party purchaser is not relevant to the running of the clock. "The proper focus, for purposes of the running of the statute of limitations, is not upon the defendant’s actual state of mind but upon the plaintiff’s suspicions. Indeed, a defendant’s bad faith is often something a plaintiff cannot prove directly. In many cases a plaintiff must allege the defendant’s tortious state of mind on information and belief. Certainly that plaintiff should not be expected to wait until he or she has direct proof of the defendant’s mental state before filing the lawsuit. The plaintiff’s subsequent inability to prove the requisite mental state means that the plaintiff cannot prevail on the merits of the claim but it does not retroactively affect the running of the statute of limitations."

The case is CYPRESS SEMICONDUCTOR CORPORATION v. SILVACO DATA SYSTEMS,
Santa Clara County Super. Ct. No. CV019992. The decision was issued May 30th, 2008.