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Friday, October 30, 2009, 10/30/2009 10:42:00 AM

Well-Dressed Attorneys Make Closing Arguments in TSMC v. SMIC Trade Secrets Trial

By Todd

We've been following this TSMC v. SMIC trade secrets trial going on out in Oakland, see here:

The parties have now made their closing arguments, and has an interesting report regarding those arguments.

Jeffrey Chanin, who represents TSMC, compared SMIC to a thief whose "strategy has been to play a game of catch me if you can and play dumb when caught." He argued that SMIC took trade secrets from former TSMC employees to get its plants up and running in short order.
Chanin said that SMIC had agreed to clean out all the stolen trade secrets as part of the 2005 settlement, but kept using them -- and on top of it destroyed documents. Indeed, Judge Brick told jurors they could infer that SMIC had deliberately destroyed TSMC documents in its possession. Chanin and his colleagues tried to capitalize on the instruction by writing it out in large letters on an oversized, glossy plasterboard right beside the jury box.

David Steuer, who represents SMIC, told the jury that TSMC's lawsuit was nothing more than "a mean-spirited attempt to destroy a competitor." He claimed that the case boiled down to "fragments of alleged trade secrets that were not cleaned out." He claimed that TSMC hadn't proven that any trade secrets were misappropriated, because, as Steuer had argued, "information circulates in this industry in a number of ways."

In closing, Chanin told the jury to punish SMIC. "It's time for you to tell this company to act responsibly with your verdict in this case," Chanin said.

Steuer said that SMIC had already paid the price. "They did take responsibility," he said. "They settled the case and it was a huge and painful settlement."

We'll report back on the jury's verdict. Our favorite part of this article - and remember that you can read the article by just clicking on the title to this blog post - is the author's repeated references to what the attorneys and the judge were wearing (e.g., "The nine-week California trial has unfolded before Judge Steven Brick, who on Wednesday was attired in his trademark bow tie and dark-rimmed glasses" or "Dressed conservatively, Chanin delivered his argument in a calm, friendly, slightly didactic tone"). Interesting stuff - you don't usually get that kind of color in trial reporting from the field. We like the use of the word "didactic" too - kudos to on this one.

Thursday, October 29, 2009, 10/29/2009 10:02:00 AM

Citing Need to Protect Certain Trade Secrets, Iowa Judge Agrees to Close Courtroom For Some Testimony and Evidence in Consumer Fraud Trial

By Todd

The Des Moines Register is reporting that a Polk County, Iowa judge agreed Tuesday to close his courtroom for parts of a consumer fraud trial brought against a Connecticut-based company by the State of Iowa, ruling that certain testimony and evidence could expose the trade secrets of a company accused of illegal sales tactics. The lawsuit alleges Vertrue Inc. sold discount buyer-club memberships to nearly 500,000 Iowans for such things as home improvement items, entertainment, fashion and fitness products.

Judge Robert Hutchison ruled that specific data about Vertrue Inc.'s membership could open it to attacks from business competitors. The Connecticut company is the subject of a major consumer fraud lawsuit filed by the Iowa attorney general's office.

Lawyers for the discount club membership company said making public internal customer statistics — such as the number who actually use their memberships, and how long they stay enrolled — would place them at a competitive disadvantage.

Hutchison said he wanted "to keep the courtroom open as much as possible," but would not allow exact numbers into the public trial. He said he would close the courtroom to the public only when testimony involved exact company data. The trial started Monday in Polk County.

"I want this information protected," he said. "I'm in hopes we won't have to close the courtroom much, but we may have to while examining a particular witness."

The lawsuit contends Vertrue used unrelated telemarketing calls to lure customers into the memberships without their knowledge. The calls usually began with pitches for products advertised on television, or other solicitations.

Wednesday, October 28, 2009, 10/28/2009 09:38:00 AM

Connecticut Mortgage Broker Loses Staff in 2004 and Lawsuit in 2009

By Todd has an interesting piece about a small mortgage brokerage company that claims to have had 33% of its employees "raided" by another company. Those employees then allegedly worked within 2 miles of their former employer and ate its proverbial lunch.

"It was a complete shock," says Charter Oak Lending Group Co-Founder Debra Killian. "We lost everything that took 10 years to build in one month, because one company stole it. How is that not illegal?"

It's an important question. Are there some things that companies "build" that they're not legally entitled to retain? This court seemed to think so.

Certainly the piece's identification that Ms. Killian and Charter Oak did not use any type of employment agreements that restricted certain post-departure competition was instructive. That definitely hurt them. But one wonders what Connecticut law says about raiding - where the number of employees hired by the competitor is so substantial that it renders the former employer hobbled competitively. Isn't that illegal as unfair competition?

We'll see how the appeal of this matter turns out. I am not persuaded by Ms. Killian's claim that Charter Oak "lost everything" when they lost a third of their employees to a competitor - but I buy the argument that she lost something and that the law distinguishes between losses to pure competition and unfair competition. The former is what we want. The latter is not.

Tuesday, October 27, 2009, 10/27/2009 11:41:00 AM

Federal Economic Espionage Trial Employs Unique Evidence Presentation Technique

By Todd

Johnny Carson used to employ an expression "I did not know that!" for instances where he was surprised by the claim or admission of a guest.

We admit surprise and will acknowledge "we did not know that!" with regard to a report by that the criminal trial judge is permitting a unique evidence presentation technique for the NetLogic trade secrets theft trial currently underway in California.

The report claims: "after each witness testifies, Northern District of California Judge James Ware will allow lawyers from each side to give a five-minute "summary argument" to "heighten juror comprehension and sharpen the issues in dispute. The side presenting the witness will go first."

Hmmm. Very interesting. Very, very interesting. This is not normal and we've never seen trial courts permit such a protocol - it would seem to benefit the defense in that those attorneys can supply commentary on evidence the government is introducing as it is being introduced. Defense attorneys usually only have the benefit of cross-examination of the witnesses and the proponents of documents or other evidence - and sometimes the value of the cross-examination in complex cases isn't clear to the jury until the defense later (sometimes, much later) explains: "remember when I asked witness x whether so-and-so was at that meeting? well, this is why."

Defense lawyers Thomas Nolan from San Jose and Edward Swanson from San Francisco requested the protocol, "given the complexity of this case and the technical nature of many of the witnesses' anticipated testimony," they wrote in a court filing.

Assistant U.S. Attorney Matthew Parrella opposed the move, calling it a waste of time that serves no productive purpose. But - apparently Judge Ware disagreed.

We anxiously await further reports from this trial - including the prosecution or defense objecting to characterizations made by the other side in these five-minute summaries. Judge Ware will surely have to police these efforts judiciously.

More soon . . . .

Thursday, October 22, 2009, 10/22/2009 09:42:00 AM

Federal Prosecutor Calls Two Engineers "Traitors to NetLogic" In Opening Statements to the Jury in Rare Economic Espionage Prosecution

By Todd

We want to thank the San Jose Mercury News and ComputerWorld for publishing courtroom accounts of this rare Economic Espionage Act prosecution of Lan Lee and Yuefei Ge.

Calling Lee and Ge "traitors" to NetLogic, Assistant U.S. Attorney Matthew Parrella told the jury that the case was about stealing cutting-edge chip designs to set up a company that was backed by a Chinese venture capital program and China's military.

"There is no doubt about it," the prosecutor said. "They planned to build, market and sell in China the chip that is a direct competitor."

Parrella told jurors that the government would present a "treasure trove" of evidence that the two engineers conspired to steal NetLogic's technology, including e-mails and material found
on their home computers linking them to business plans with China and its venture capital arm, known as the "863 program." Government attorneys also said they have evidence the two stole company secrets from Taiwan Semiconductor.

But while the prosecutor unveiled how the alleged scheme was exposed, including anonymous e-mails and phone calls to NetLogic executives and the FBI from Ge's wife, defense lawyers offered a very different portrait.

In statements to the jury, defense attorneys August Gugelmann and Tom Nolan said the men were carrying out the most commonplace of Silicon Valley stories — using their engineering know-how to build their own company with their own ideas.

Lee and Ge, they said, did not steal trade secrets and never intended to benefit China.

"This case isn't really about economic espionage, it's not about spying and it isn't about stealing trade secrets," Gugelmann said. "What this case is really about is our clients wanting to start a company of their own based on their own ideas, their own design."

The defense also made clear it would attack the FBI's pursuit of the engineers, saying Ge's wife tipped off agents because she didn't want her husband to start his own business but that there was never any evidence to back up her claims they were stealing from NetLogic. She is expected to testify in the trial.

The case against Lee, a Palo Alto resident, and Ge, of San Jose, is the second in the nation to go to trial under the specific provision of the 13-year-old law making it a crime to steal technology to aid a foreign government. ComputerWorld has an informative piece on the trial and prosecution theories here: [Note: we are quoted in the piece but it is informative, nonetheless].

We'll keep watching this one for you. Of particular interest to us is the development of the evidence concerning this "863 program" - a program set up by The People's Republic of China to generate technologies that will benefit and enrich China. You can read the Chinese government's explanation of this program here:

This is the hottest trade secrets trial we've covered and it really is a showdown between Silicon Valley's interests and those of a foreign government suspected for years of sponsoring technology theft and copying at the highest levels. Stay tuned . . . .

Tuesday, October 20, 2009, 10/20/2009 10:01:00 AM

Rare Criminal Prosecution Under Economic Espionage Act Proceeds - Case Will Examine Issue of Chinese Government's Sponsorship of Technology Theft

By Todd

We first blogged about this Economic Espionage Act case here:
You'll recall that the Sec. 1831 of the federal Economic Espionage Act of 1996 provides as follows:

"Sec. 1831. Economic espionage
(a) IN GENERAL- Whoever, intending or knowing that the offense will benefit any foreign government, foreign instrumentality, or foreign agent, knowingly--
(1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains a trade secret;
(2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys a trade secret;
(3) receives, buys, or possesses a trade secret, knowing the same to have been stolen or appropriated, obtained, or converted without authorization;
(4) attempts to commit any offense described in any of paragraphs (1) through (3); or
(5) conspires with one or more other persons to commit any offense described in any of paragraphs (1) through (3), and one or more of such persons do any act to effect the object of the conspiracy, shall, except as provided in subsection (b), be fined not more than $500,000 or imprisoned not more than 15 years, or both."

You'll also recall that the Act contains a separate section, Sec. 1832, that does not require that the misappropriation of the trade secret was done to benefit a foreign government or instrumentality. Most FBI and prosecutorial activity in EEA cases regards Sec. 1832 cases, not Sec. 1831 cases. But - we are now watching a Sec. 1831 case unfold in trial.

The Silicon Valley Mercury News is reporting that Lan Lee and Yuefei Ge have pleaded not guilty to the charges that include theft of trade secrets and violations of the espionage law. If convicted, they face 10 years or more in prison, although most convicted on economic espionage charges in recent years have received much lower sentences. Ed Swanson, Ge's lawyer, declined to comment. Tom Nolan, Lee's attorney, did not return calls seeking comment.

In court papers, defense lawyers suggested Lee and Ge had no intention of doing anything to illegally benefit China. Lee, a U.S. citizen, and Ge, a Chinese national, allegedly stole the blueprints for a superfast computer chip from their employer, NetLogic Microsystems of Mountain View, and another company, Taiwan Semiconductor, for a Chinese-backed program.
The defense does plan to call witnesses with expertise on the technology involved and China's relationship with technology companies, as well as witnesses who will testify about the engineers' character, including wives, co-workers and friends, according to court papers.

Assistant U.S. Attorney Matthew Parrella, who is prosecuting the case, declined to comment.
In court papers, prosecutors allege Lee and Ge conspired to steal secrets from NetLogic to establish their own startup company with funding from a Chinese venture capital arm called the "863 program" — which the U.S. says is intertwined with the Chinese government. Court papers show the two men were first uncovered by anonymous e-mail tips to the FBI traced to Ge's wife.
Prosecutors have already been dealt one blow when U.S. District Judge James Ware refused to allow them to use the testimony of two other former valley executives who pleaded guilty last year to economic espionage charges. They were supposed to testify about China's "863" program.
But prosecutors have other witnesses and material seized from the engineers' home computers, including references to the allegedly stolen data and negotiations with China, court documents show. There are no direct allegations of China's role, except that the technology could be used for the Chinese military and tech businesses.

China has repeatedly denied any involvement with defendants charged in U.S. courts with stealing trade secrets.

Meanwhile, experts say that while the San Jose trial will be an intriguing glimpse into the loss of valley secrets overseas, it also is a reminder that the economic espionage laws are seldom used and most companies wind up protecting themselves. Experts estimate U.S. companies lose more than $40 billion a year from stolen trade secrets.

"So, it's two or three (trials) in 13 years," said Steven Fink, president of Los Angeles-based Lexicon Communications, which advises companies on espionage. "Wake me when some real action is going on. The real story is what took so long and why there aren't more of these."
We'll report on the trial as it continues.

Monday, October 19, 2009, 10/19/2009 10:49:00 AM

Illinois Judge Grants Injunction Against Former Citadel Employees - One of Whom Claims Additiction to Pornography To Explain Empty Hard-Drive

By Todd

We've been blogging about this trade secrets case for a while, see here: You'll recall that Citadel, a huge Chicago hedge fund, has sued some former employees for breach of their noncompete covenants and theft of trade secrets of certain kinds of high-speed trading.

Well, Reuters is reporting that the trial court issued an injunction against the former employees and their new company, enforcing their noncompete agreements and judicially shutting them down until mid-November. The court did not, even though Citadel asked the court to do so, extend the noncompete for additional time in light of the former employees' prior breach. The report does not identify the injunction bond required by the Court - but we'll look into that and report back.

BUT - the singularly fascinating aspect of this case for this purposes of this report is the defense raised by the key departed employee ( Mikhail "Misha" Malyshev, pictured above) to explain why his hard drive was wiped clean of forensic evidence, apparently after a court order was entered requiring the preservation of all electronic evidence. His defense? I am addicted to hard-core internet pornography and wiped my hard-drive clean to save myself the embarrassment of being examined about the forensic details of my addiction.

Res ipsa loquitur.

Saturday, October 17, 2009, 10/17/2009 10:08:00 PM

Georgia Trade Secrets Act and Preemption

The Georgia Trade Secrets Act contains a provision that states that the GTSA supersedes “conflicting tort, restitutionary, an other laws of this state providing civil remedies for misappropriation of a trade secret.” GCGA § 10-1-767(a).

That provision was front and center in a recent opinion of the Georgia Court of Appeals, Professional Energy Management, Inc. v. Necaise, 2009 WL 3050598 (Ga.App. Sept. 25, 2009).

The fact pattern was pretty standard: the defendant Necaise left employment with the plaintiff company and founded his own company. He allegedly used the trade secrets of the former employer and stole customers for his new company.

Plaintiff, in addition to its trade secrets claim, brought claims for breach of fiduciary duty, tortuous interference with contractual relations, conversion, misappropriation of corporate opportunity, unjust enrichment, and constructive fraud.

The trial court dismissed all the claims except the GTSA claims on the grounds of statutory preemption. The trial court followed a decision in a federal case, Diamond Power Int’l, Inc. v. Davidson, 540 F.Supp.2d 1322 (N.D.Ga. 2007), which had ruled that where the “full extent” of a claim relied on the same allegations as those underlying a claim for misappropriation of trade secrets, the claims are “conflicting” under the GTSA and therefore precluded.

The court of appeals agreed with the federal court’s statement of the legal principle but found that each of the claims had to be reinstated because each of them, on the facts alleged, went beyond just trade secrets allegations. Thus, the “full extent” of the claims was not coterminous with the trade secrets claim.

The standard fact pattern of this case could make it a leading one on the contours of preemption under the Georgia Trade Secrets Act.

Friday, October 16, 2009, 10/16/2009 11:16:00 AM

Ford Motor Design Secrets Allegedly Pilfered by Chinese Ex-Employee

By Todd

The Detroit Free Press is reporting that an ex-employee of Ford Motor Company has been criminally charged with stealing approximately 4000 pages of documents that included system design specifications for an engine and transmission mounting subsystem, electrical distribution system, electric power supply, electrical subsystem and generic body module.

Xiang Dong Yu, a.k.a. Mike Yu, 47, of Beijing is charged with theft of trade secrets, attempted theft of trade secrets and unauthorized access to a protected computer.

Yu was arrested Wednesday at Chicago's O'Hare International Airport after he exited a flight from China and remains in federal custody in Chicago, where a detention hearing is set for Tuesday.

Yu worked for Ford from 1997 to 2007, according to the indictment. In December 2006, Yu took a job at the Chinese branch of a U.S. company.

The company, Foxconn PCE Industry Inc., is an electronics manufacturer, according to the indictment, and is not accused of wrongdoing in the documents filed Thursday. Officials at Foxconn could not be reached for comment Thursday. Yu was later hired by Beijing Automotive Corp., which also isn't cited for wrongdoing.

U.S. Attorney Terrence Berg told the Free Press that the investigation began when Ford alerted the FBI to its suspicions.

"There's no question that when times are hard that the importance of a company's competitive edge and trade secret information increases," Berg said.

Ford spokeswoman Marcey Evans declined to discuss details of the case.

"We are fully cooperating with authorities," Evans said.

Thursday, October 15, 2009, 10/15/2009 10:53:00 AM

North Carolina Business Court Says Customer Pricing Information is NOT a Trade Secret Per Se

By Todd

The authors of this blog practice law in North Carolina. In North Carolina we have a specialized "business court" - where cases involving complex issues of corporate and commercial law are assigned/transferred by the Chief Justice of the North Carolina Supreme Court. This business court hears some of our state's more interesting business law disputes - and trade secrets cases are routinely assigned to this court for its consideration and adjudication. This trial-level court also routinely drafts and publishes well-reasoned and persuasive (well, we think so when our clients prevail) opinions. Click on the title to this blog-post and you can read the Edgewater v. Epic opinion and order.

On August 11th this court (per Judge John R. Jolly, Jr.) examined a trade secrets misappropriation argument made by a company called Edgewater Services, Inc. Edgewater negotiates transporting packages and pricing for clients, specializing mostly in full truckload shipping. Another company located nearby, Epic Logistics, was also in this business but they specialized mostly in partial truckload shipping - apparently their clients didn't usually fill a full truck with their goods. Well - as the story goes - they made an oral deal with each other. They were supposed to direct relevant business to each other pursuant to this agreement. At the time the deal was made, Edgewater employed a woman named Osgood.

Osgood, unbeknownst to Edgewater, was in secret discussions with Epic to become employed with Epic. What she was charged with accomplishing upon her arrival at Epic was to get Epic into the full truckload shipping business - in other words, to help Epic do what Edgewater did. Edgewater also claimed that it observed Osgood stealing files from the company offices - and that those files were customer lists and shipping pricing information.

Epic, after the discovery period was up, moved for summary judgment. They claimed that Edgewater couldn't prevail on its trade secrets misappropriation claim because the stuff they claimed Osgood stole were not trade secrets. As such, Judge Jolly had to consider the issue of whether there was legal validity to Edgewater's claim that it maintained trade secrets and that Osgood had stolen them.

The court found that Edgewater could not legally support their claim and dismissed the trade secrets claims, among others.

The court reasoned that: "In her deposition, Plaintiff Dosher conceded that the only thing in the carrier file that might be considered a “trade secret” would be the rate information. With respect to rates, she testified that rates change as variables such as the cost of fuel and insurance change, and that they even can change depending on the economy or how the industry itself is doing. Dosher further testified that when a customer becomes aware of ESI's rate schedule, the customer is not required to sign anything agreeing to keep that information confidential. Plaintiffs do not dispute Dosher's testimony as reflected in this paragraph, and it therefore is deemed to be undisputed for purposes of the Motions. In addition, although ESI only communicates a quote or rate to its customer, it does not instruct that customer to refrain from sharing that rate information with others."

In essence, the court held that customer pricing information, in order to be a trade secret, needed to be treated differently than customer pricing information is usually treated. Judge Jolly concluded that the pricing is provided to the customer - and the customer is under no obligation to keep that information to itself. In fact, customers would presumably have an incentive to use pricing information from one vendor to use it to extract concessions from another potential vendor. As such, the court concluded that this is not information that would constitute trade secrets under the standard definition.

But the court did not stop there. It went on to note that "The carrier files and rate information are kept in an unlocked file room, accessible to anyone. Carrier files, rate information, and customer files are not kept in any locked containers. Dosher conceded in her testimony that anybody could access the information in the carrier files and rate files “if they knew where to go and what they were looking for.” She also testified that the three ESI operations employees at that time would have had access to these files."

This was not good for Edgewater, either. Trade secrets require reasonable means under the circumstances to maintain their secrecy. The court was essentially concluding Edgewater did not use reasonable means to keep the pricing data secret. As such, the information did not constitute a trade secret and thus wasn't protectable as such.

But - you might be wondering: if Osgood was seen pilfering through Edgewater files and taking documents, even if they weren't trade secrets documents, can she get away with that and not have to face trial? No. The court did not dismiss claims for conversion or breach of her confidentiality agreement with Edgewater. Those claims are going to trial.

North Carolina businesses should take note - before you claim trade secret protections for your customer pricing information you might want to consider requiring customers to keep that information confidential and you might want to lock up your pricing files.

Wednesday, October 14, 2009, 10/14/2009 10:35:00 AM

Saudi Prince Claims Swiss-Based Drilling Company Stole His Trade Secrets

By Todd

Transocean, the world's largest offshore drilling company, was sued by a member of the Saudi royal family who claims he was cheated of his share of multimillion-dollar contracts won using his trade secrets.

Soroof International Co., a Saudi trading agency run by Prince Bander Bin Abdullah Al Saud, claims Transocean reneged on a signed 2007 agreement that would have made the prince's firm Transocean's sole agent for pursuing drilling contracts with Aramco, the Saudi Arabian national oil company.

“Instead, using confidential and proprietary information and trade secrets obtained from Soroof, Transocean pursued these opportunities through what appeared to be a competitor, GlobalSantaFe Corp., which — unbeknownst to Soroof — Transocean was in the process of acquiring,” lawyers for the prince's firm said in a suit filed this week in Houston federal court.

Soroof is seeking more than $50 million in compensatory damages and lost profits and at least $90 million in punitive damages. The suit claims Geneva, Switzerland-based Transocean fraudulently induced Soroof to become its Saudi agent to gain leverage in a bid to acquire GlobalSantaFe, a primary competitor that was at the time dominant in the Saudi drilling market.

The complaint claims Transocean owes Soroof 3.5 percent commission on Aramco drilling contracts that are paying, on average, $170,000 a day per rig. The suit was originally filed in Texas state court in Houston in August and removed to federal court yesterday.

Tuesday, October 13, 2009, 10/13/2009 10:56:00 AM

The Trade Secrets of Greek Yogurt Going on Trial in New Hampshire

By Todd

Okay, admit it. You eat yogurt. You were convinced by all those advertisements back in the 1970s that if you eat yogurt regularly you'll live to be 110 years old.

Stonyfield Farm sells yogurt but they apparently didn't know how to make Greek yogurt before they hooked up with Agro-Farma from upstate New York. Agro-Farma penned a deal with Stonyfield Farm to manufacture its Greek yogurt - a particularly creamy form of yogurt because the whey is strained out and removed. Agro-Farma itself got removed when Stonyfield Farm struck up a new relationship with Schrieber Foods from Green Bay, Wisconsin.

So Agra-Farma sued claiming that Stonyfield Farm and Schrieber Foods stole their Greek yogurt trade secrets. As the report from the Union Leader pithily notes "the business relationship turned sour." A federal judge in New Hampshire is letting Agro-Farma try its case before a jury. Their attorney notes: "We are confident that New Hampshire law will protect Agro-Farma's ideas and processes for manufacturing Greek yogurt . . . We believe that a jury will recognize the novelty and value of Agro-Farma's intellectual property, without which Stonyfield could neither make nor market its 'Oikos' Greek yogurt product."

The yogurt wars continue . . . .

Monday, October 12, 2009, 10/12/2009 10:29:00 AM

Semiconductor Trial Gets Testy in Oakland

By Todd

Semiconductor International has published an interesting piece on the pending trial between Taiwan Semiconductor Manufacturing Company (TSMC) and Semiconductor Manufacturing International Corp. (SMIC) that is being litigated in Oakland, California.

The companies reached a contingent settlement agreement in 2005 that permitted additional litigation if SMIC did not comply with that settlement agreement - a whopper, too, in that SMIC was supposed to pay TSMC $175 million.

Well, TSMC claims SMIC did breach the agreement and it brought the suit. The report is that the courtroom testimony of an in-house SMIC attorney and SMIC expert from Duke University resulted in some courtroom fireworks. The piece reports:

"These "meet and confer" sessions were part of the 2005 settlement, which called upon both parties to act in good faith to settle any disputes. Chen said SMIC proposed that a third party expert be called in to assess the TSMC claims and recommend ways that SMIC could resolve differences, which TSMC allegedly did not respond to.

By late August, after several meetings, Dick Thurston, vice president and general counsel of TSMC, wrote to Chen informing her that TSMC would file a lawsuit in California. Chen said that after she received the Aug. 25 letter, she was "shocked and furious, because we were arranging a further meeting."

Later, during cross-examination of Chen by Ashok Ramani, another lawyer at Keker and Van Nest, Chen briefly lost her composure. She said that she was a commercial lawyer, not a litigation lawyer, and accused the TSMC trial attorneys as being "very tricky. You put words in our mouths and distort what we say."

At that point, Chen was advised to limit her answers to yes or no responses. She later asked the judge, "Can I tell the jury?" her version of events. Judge Steven Brick said, "No. Miss Chen, you are in a court of law. Please comply with the rules.""

Trials are often messy affairs. We'll continue to report on this trade secrets trial as the matter progresses.

Wednesday, October 07, 2009, 10/07/2009 12:39:00 PM

Grand Jury Looking Into Alleged Trade Secrets Theft By Hilton Employees

By Todd

The Wall Street Journal is reporting that Hilton Worldwide and several of its former executives could face criminal charges over allegedly stealing documents from rival Starwood Hotels.

The Journal, citing unnamed sources, says a grand jury is investigating whether Hilton, owned by private equity firm Blackstone, used documents pilfered by executives who defected to Hilton from Starwood to replicate Starwood’s successful high-end W hotel brand.

Criminal indictments against major corporations are rare, but prosecutors from the U.S. Attorney’s Office in Manhattan are taking an aggressive line in this case, the Journal reports.

The grand jury is also investigating Steven Goldman, Hilton’s president of global development and real estate, who was placed on leave last month and isn’t expected to return to the company. Ross Klein and Amar Lalvani, former Starwood employees who moved to Hilton, are also under investigation.

Of course, the grand jury may decide not to indict anyone in the case, and prosecutors may or may not prosecute. Such a decision is expected within the next two months.

Monday, October 05, 2009, 10/05/2009 01:33:00 PM

Texas Supreme Court Agrees With Railroad - Trade Secrets Needn't Be Disclosed

By Todd

The Southeast Texas Record is reporting that the Texas Supreme Court has sided with the Union Pacific Railroad in its appeal of a trial court's mandate that its rates for hauling hazardous materials needed to be turned over to the plaintiffs in a hazardous materials spill case.

The trial court did enter an order restricting those who could view the rate structures, but that alone does not ensure that an order will not violate the trade secret privilege," they wrote in an unsigned opinion. They wrote that they "would have difficulty concluding that evidence of damages, even punitive damages, could not be found anywhere but through trade secrets. "Plaintiff Kathleen Constanzo failed to show that rate structures were material and necessary to the case, they wrote.

Constanzo and her neighbors sued Union Pacific after a train derailed and toxic chlorine gas hissed from a broken tank car. The chlorine belonged to Occidental Chemical, or OxiChem. The neighbors alleged negligence and sought damages for injuries from inhaling. They claimed Union Pacific should have positioned the chlorine car farther back and shouldn't have placed hazardous cargo next to a steel car.

In a deposition, Union Pacific chemical transportation safety manager Timothy O'Brien said crews could put hazardous cargo anywhere but within five cars of an engine.

Plaintiffs then served notice on Union Pacific to produce rates for shipping hazardous material and the methods for calculating rates. Union Pacific moved to quash the notice, and Pozza denied the motion. Facing an appeal, plaintiffs amended the notice. They narrowed it to a comparison of OxiChem chlorine rates and rates for less hazardous materials.Union Pacific again moved to quash, and Pozza again denied the motion. She ordered disclosure only to attorneys and necessary employees.

Union Pacific sought a writ of mandamus at the Fourth District, and lost. It then sought a writ of mandamus at the Supreme Court, and won.

"If the information is a trade secret and the requesting parties do not need it, an order that requires disclosure is a clear abuse of discretion," the justices wrote. They wrote that all plaintiffs but Constanzo have settled their claims. The justices relied on Union Pacific safety executive Robert Worrell, who swore by affidavit that customers and competitors don't know the information. "The information is not even generally known throughout the company," he wrote.

The justices couldn't understand why Constanzo wanted to see the rates. They wrote, "Constanzo claims she has no alternative means of proving that Union Pacific recognized, yet disregarded, a higher duty with respect to hazardous materials.""It is unclear to us, and Constanzo has not explained, why she needs the specific rate structures to advance this negligence theory," they reasoned.
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