More Public-Private Trade Secret Disputes - This Time in Helena, Montana

The authors of the WombleTradeSecrets (um, that's us) are starting to see more and more disputes of the type we are reporting on in this post - private companies providing information to public entities for some public/private contracting purpose AND THEN the press or consumer advocacy group or environmental group seeks access to that information via statute or law that permits access to the same.

That being noted, greatfallstribune.com is reporting that a Helena-based environmental group filed a motion in Cascade County District Court on Wednesday in an effort to stop the city of Great Falls from holding back documents related to the proposed Highwood Generating Station.

Montana Environmental Information Center won a lawsuit last month that forced the city to turn over hundreds of pages of papers detailing plans for the coal-fired power plant, in which the city has already invested millions of dollars.

The city made most documents available last week, but withheld at least three papers because the group with which the city is partnering in the coal plant deal said those papers contained trade secrets.

Southern Montana Electric Generation and Transmission said it might eventually hand over the remaining documents after their attorneys have had the chance to review them.

That's not good enough, said Ann Hedges, program director for MEIC.

"We want to see what's going on," she said. "The public has a right to see what decisions its government is making, where money is being spent."

Settlement in Motorola Trade Secrets Case That Had $23 Million Sanction Issued In It

We've blogged about this case before: http://wombletradesecrets.blogspot.com/2007/04/motorola-ordered-to-pay-229-million-in.html

Well, law.com is reporting that the Ft. Lauderdale, Florida trade secrets case brought by SPS Technologies against Motorola has settled.

Oracle v. SAP Trade Secrets Case Getting Messier

We've blogged this case before: http://wombletradesecrets.blogspot.com/2007/09/oracle-v-sap-trade-secrets-case-could.html#links.

The Wall Street Journal is reporting that Oracle is attempting to file an amended complaint that alleges SAP Board members were well aware a company they were acquiring was misappropriating Oracle's trade secrets - but did nothing to stop the practice.

In one document cited in Oracle's amended complaint, SAP executives were warned that TomorrowNow's access to the software "is very likely to be challenged by Oracle" and that TomorrowNow's operating practices "may be a serious liability." In another, a member of SAP's due-diligence team warned an executive-board member that it was "very likely that TomorrowNow is using [Oracle's] software outside the contractual rights granted to them."

The amended complaint charges that SAP's senior leadership developed a plan, dubbed "Project Blue," to discontinue TomorrowNow's alleged illegal activity, but that the plan was never enacted.

Instead, SAP continued to let TomorrowNow download its rival's trade secrets, the Oracle complaint alleges. The court filing alleges that TomorrowNow used customized software to automatically find and download information from Oracle and that TomorrowNow had 20 computers dedicated to storing this information. One of these computers contained eight million Oracle software and support documents, the complaint alleges.

Happy Birthday -- Sort Of -- to the Computer Fraud & Abuse Act

Saturday, July 26, was the 19th Anniversary of the first indictment under the Federal Computer Fraud & Abuse Act, passed earlier in 1986.

Robert T. Morris a Harvard graduate and a graduate student at Cornell, developed the first widely spread Internet virus, and the first worm virus. He was indicted for spreading that virus and infecting more than 6,000 university, research center and military computers.

Morris was found guilty in 1990 and sentenced to 400 hours of community service and three years’ probation, and fined $10,050.

Honeywell Sues Akebono and Two Former Employees for Trade Secrets Theft

On July 24, 2008, Honeywell International sued Akebono Corporation, Akebono Brake Industry Co., Ltd. and Sunil Kesavan and Ximming Shao for misappropriating trade secrets that relate to the making of fiction materials for automotive brake pads.

Honeywell claims that a secret process one of its employees designed for the making of automative brake pad materials has been maintained as a trade secret from 1996 until the present. Honeywell further claims that Kesavan and Shao, who left employment with Honeywell in 2002 and 1999 respectively, began work with Akebono and used information Honeywell maintained to research and develop, and ultimately received a US patent for, brake systems that utilize Honeywell's confidential and trade secret information.

Honeywell is now trying to get the genie back in the bottle. Their first two claims for relief are to have the Akebono patent declared the property of Honeywell and correct the "named inventor" for the patent to be exclusively their employee (see http://uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_256.htm) and not Kesavan and Shao and, ultimately, Akebono.

The case is filed in the United States District Court for the Eastern District of Michigan and is case number 2:08-CV-13197. We'll keep an eye on this one for you.

Motorola Sues Former Executive Now With Apple's iPhone Team

This is a story that may be misreported as a theft of trade secrets case when, instead, it appears to be a breach of noncompete agreement and inevitable disclosure case. That being said, Crain's Chicago Business is reporting that a former Motorola executive employee, Michael Fenger, has been sued by that company for leaving and going to work with Apple and its iPhone team. Mr. Fenger reportedly had a two-year noncompete agreement with Motorola that it says he is breaching through his Apple employment and additionally that his work at Apple will inevitably cause him to disclose Motorola's secrets that he learned about while with the Illinois-based company.

"He was privy to the pricing, margins, customer initiatives, allocation of resources, product development, multiyear product, business and talent planning and strategies being used by Motorola,'' according to the complaint.

This is an interesting hybrid case - a noncompete plus inevitable disclosure arguments. We'll report back soon on whether Motorola obtains a TRO or other injunctive relief against Mr. Fenger.

Taiwanese Company Complains "Ancient Chinese Secret, Huh?"

Forbes.com is reporting that giant electronics manufacturer Hon Hai Precision Industry Co. recently took out half-page ads in major Taiwanese newspapers to complain about delays in a Chinese court over the prosecution of a Chinese competitor for allegedly stealing its commercial secrets.

Spokesman Edmund Ding says Hon Hai's China problems center around concerns that BYD Company Limited, a Chinese electronics maker based in the southern Chinese city of Shenzhen, is systematically looting its trade secrets.

The purpose of BYD's actions, say Taiwanese media, is to give the Chinese firm a leg up against Hon Hai in winning big parts orders from international mobile phone powerhouse Nokia.

Hon Hai's China saga began in 2006, when it sued BYD for infringing on its trade secrets after two former China-based Hon Hai employees allegedly took secret Hon Hai information with them when they went to work for BYD.

The employees have since been convicted in a Chinese court on infringement charges.

But according to Hon Hai, that may be only the tip of the iceberg.

Ding says that 400 Hon Hai employees have moved to BYD over the past 4-5 years, and many are suspected of providing the company with proprietary Hon Hai information.

To protect its interests, Ding says, Hon Hai is suing BYD in Hong Kong. In parallel, he says, Chinese prosecutors have opened a criminal investigation against BYD in Shenzhen.

But Hon Hai fears that the cards may be stacked against it - at least in Shenzhen.
BYD's head is a member of the city's powerful People's Congress, "with the power to remove members of the judiciary," its recent newspaper ad said

"This results in a certain degree of unwillingness among local judicial and police members to deal with the case," the ad concluded.

Healthcare Contract Data Subject of Georgia Trade Secrets Litigation

dailyreportonline.com is reporting that an open records battle between the state's doctors and a major health insurance company will continue because a decision in the case by the Georgia Court of Appeals has left neither side satisfied.

A panel of the appellate court ruled on July 3 that doctors were entitled to see certain documents related to United HealthCare's administration of the state's employee benefits plan because they are public records generally covered by the state open records law. But the panel said a Fulton County judge has to consider whether some of those documents—those that UHC hasn't given to the state government yet—are trade secrets that would be exempt from disclosure to physicians' groups.

Having rejected the trial court's decision-making path, the appeals panel had to consider whether the documents sought were actually trade secrets.

The appellate panel readily concluded that the documents in the state's possession are not trade secrets exempted from the open records law—meaning the doctors' groups won the appeal as far as those documents. The contract between the state and UHC contains a specific provision that, except for proprietary software, information received by the Department of Community Health is subject to disclosure under the Open Records Act, noted Bernes, amounting to a contractual waiver by UHC.

But the doctors didn't win on the documents UHC hasn't given to the state. The appeals court rejected the doctors' argument that the trade secret exemption couldn't apply because UHC had voluntarily entered into a public contract to administer public funds.

“A private entity's voluntary participation in a government contract does not, standing alone, strip the entity's documents of their trade secret status,” wrote Bernes. “Moreover, SGPA and MAG's argument is vitiated by the existence of the statutory trade secrets exemption itself, which is intended to prevent the disclosure of trade secret information in documents that have already met the threshold requirement of being public records due to their connection to a government program or activity.”

The appeals panel did not decide whether the documents that UHC hasn't given to the state are exempted trade secrets, though, because Judge Lane's (the trial judge's) approach to the case meant she hadn't reached that question. The Court of Appeals sent the case back to her to decide that.

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

Former IBM VP Sentenced in Trade Secrets Theft Case

From InfoWorld, an continuing in our parade of trade secrets sentences, Atul Malhotra, 42, of Santa Barbara, a former vice president of imaging and printing services at Hewlett-Packard has pleaded guilty to stealing trade secrets from IBM.

Malhotra was charged on June 27 with one count of theft of trade secrets, and he pleaded guilty on July 11 (a pretty quick turnaround as these things go).

Malhotra worked as director of sales and business development in output management services for IBM Global Services from November 1997 to April 2006, before moving to HP in May 2006.

In March 2006, while still employed at IBM, Malhotra requested and received confidential information about product costs and materials, the DOJ said. The memo he received was marked confidential on each page, and a pricing coordinator at IBM Global Services told Malhotra not to distribute the information, the DOJ said.

Shortly after starting work with HP, Malhotra shared the IBM trade secrets with superiors, the DOJ said. In July 2006, he sent e-mail messages containing the IBM information to two senior vice presidents at HP, the DOJ said. Malhotra noted in the e-mail that knowledge of this information would help HP sales teams better understand their competitors' goals as they determined pricing for prospective deals.

HP and IBM cooperated fully with the investigation, the DOJ said. HP has said Malhotra's actions were in "direct violation of clear HP policies." The company conducted an internal investigation and fired Malhotra, and it reported the incident to IBM and law enforcement, it said.

Malhotra faces sentencing on Oct. 29. He faces up to 10 years in prison and a fine of $250,000. Expect a lot less in both categories.

Sentencing in Chinese Espionage Case

From the Associated Press, via Chron.com, a story concerning a former Pentagon analyst, Gregg W. Bergersen, 51, of Alexandria, Virginia, who was sentenced Friday to almost five years in prison for giving secret information about U.S.-Taiwan military relations to a New Orleans furniture salesman who turned out to be a Chinese spy.

Bergersen thought that Louisiana businessman Tai Kuo, the recipient of the information, was aligned with the Taiwanese government and that the information was furthering the establishment of a sophisticated new air defense system in Taiwan, called Po Sheng.

But, according to the AP, Kuo was actually a spy for the People's Republic of China and was relaying the information provided by Bergersen to the Communist regime in Beijing.

In return, prosecutors said, Bergersen got thousands of dollars from Kuo, as well as gambling trips to Las Vegas and Kuo's promise of future employment.

The 57-month sentence imposed by U.S. District Judge Leonie Brinkema was less than the sentence of seven to nine years sought by the government. Brinkema said she departed from the federal sentencing guidelines, which also called for a 7- to 9-year term, in part because of a classified memo filed by the government that apparently detailed the damage caused by Bergersen's actions and indicated that the harm was not too substantial.

Brother vs. Brothers Trade Secrets Dispute

From the Herald Bulletin of Anderson, Indiana, a story about a bitter dispute over trade secrets pitting brother against brothers.

According to the story, Indianapolis-based Darlington Farms and owner Phil Hockemeyer filed a lawsuit against Rubicon Foods LLC, a company founded by Hockemeyer’s younger brothers, Steve and Todd. The companies make easily digestible food products that are sold to health care facilities and nursing homes.

Darlington’s lawsuit claims that Steve and Todd Hockemeyer took proprietary information -- including customer details and business plans -- when they left Darlington and formed Rubicon in 2006.

Rubicon has filed a counter claim seeking thousands of dollars in unpaid compensation from Darlington and nearly a million dollars in lost revenues. Todd Hockemeyer of Rubicon said Darlington had used information garnered during the lawsuit to alter its products to closely resemble Rubicon’s product line.

These sorts of family disputes can be vicious.

Trade Secret Issues Become Paramount in Viacom-YouTube Litigation

Viacom has sued YouTube for major-league copyright infringement, alleging that YouTube does not take sufficient means to insure that copyrighted material doesn't make its way onto YouTube. In order to prove its allegations, Viacom requested that the court give it access to YouTube's software source code to demonstrate that it does not utilize sufficient screens and filters to separate copyrighted material out from the non-copyrighted material. YouTube, of course, said - "not so fast, that's a major league trade secret."

Viacom had asked Judge Stanton to order that YouTube reveal details about its search algorithm to bolster a claim that YouTube deliberately designed the product to make it easy to find infringing material. Judge Stanton ruled Wednesday that Viacom was not entitled to that information because there was no proof that the search engine could tell whether videos were pirated.

"A plausible showing ... that the search function can and has been used to discriminate in favor of infringing content, should be required before disclosure of so valuable and vulnerable an asset is compelled," he wrote.

The Washington Post is reporting that this big-issue skirmish has been won by YouTube (now owned, of course, by Google). We'll keep an eye on this one for you.

Former HP Exec Says to FBI "Okay, I Did It" in Criminal Trade Secrets Theft Matter

The Silicon Valley edition of The Mercury News is reporting that a former Hewlett-Packard executive has agreed not to contest federal charges that he stole trade secrets from his previous employer, IBM, and attempted to pass the information to colleagues at HP.

Atul Malhotra was a vice president for printing services at IBM when he obtained confidential pricing information in March 2006, according to charges filed Friday in San Jose's U.S. District Court.

Prosecutors said Malhotra went to work for HP's printing division that May, and in July 2006, he sent e-mails to other HP executives with the confidential IBM information, marked "for your eyes only."

HP said it responded to the attempt by launching an internal investigation, which led to the executive's firing in September 2006, and to HP notifying law enforcement authorities and IBM.

Malhotra's attorney, John Vandevelde, said Tuesday that his client is "an honorable man with an impeccable history" who "made one mistake in transitioning from one high-tech job to another."

Malhotra faces up to 10 years in prison and a $250,000 fine, but Vandevelde said his client has agreed to plead guilty or no contest in the case. Such an agreement could result in a lower sentence.