Feds to Retry Defendants in Silicon Valley Economic Espionage Case

We've blogged about this case before (http://wombletradesecrets.blogspot.com/2009/10/defense-in-silicon-valley-economic.html) - the one where a defendant's wife reported him to the authorities for allegedly stealing NetLogic's secrets to benefit himself and possibly the People's Republic of China. The jury didn't buy most of it and all but one count the feds' case was dismissed: http://www.law.com/jsp/article.jsp?id=1202458668065. You'll recall that the judge's reasoning went like this: "The government must present evidence that defendants intended to confer a benefit on the [People's Republic of China], not receive a benefit from it," Ware wrote. "The court finds evidence that defendants intended to apply for a grant from the PRC is insufficient to satisfy the statutory requirement that the government prove that the defendants intended to provide a benefit to the PRC, or one of its instrumentalities or agents."

Well - the feds are going to retry the defendants on that sole count of criminal theft of trade secrets. This one isn't over. Stay tuned.

Discovery Sanctions Against Eaton Aerospace Upheld in Never Ending Trade Secrets Case

ClarionLedger.com is reporting that Eaton Aerospace has failed to convince the Mississippi Supreme Court to overturn the $1.5 million sanction issued against it and its attorneys for discovery abuses.

We've covered this case extensively, for example: http://wombletradesecrets.blogspot.com/2010/04/criminal-theft-of-eaton-aerospace-trade.html; http://wombletradesecrets.blogspot.com/2009/01/federal-indictments-in-eaton-aerospace.html.

For the second time in four months, a Mississippi Supreme Court has upheld Hinds County Circuit Judge Swan Yerger's order imposing sanctions in the civil case Eaton Corp. v. Frisby Aerospace against Eaton Aerospace and some of its attorneys for discovery abuses.

On June 12, 2008, Yerger ordered $1,560,642.83 in sanctions against Eaton Corp. and some of the attorneys who were involved in the case for intentionally not providing records.

Yerger set a Jan. 27, 2010, deadline for the defendants to pay but delayed the deadline until a ruling was made on Eaton's Supreme Court appeal.

In March, the state's high court denied Eaton's appeal. Another panel of the court recently turned down Eaton's request for reconsideration.

This is a massive discovery sanction as far as discovery sanctions go.

Big Fracking Fight: The Trade Secrets of Hydraulic Fracturing of Rock to Obtain Natural Gas

Seems to be a lot of talk about natural gas as an energy substitute for crude oil these days. We at the Womble Trade Secrets Blog had no idea how one captures natural gas. Do you drill a well? Well, no you don't. You frack for it.

Fracking is another name for hydraulic fracturing of the shale formations that hold the gas. Seems simple enough - you break up the shale formations and you suck the gas out. But there's different ways to do this and they involve pumping stuff into the ground. Environmentalists and community groups want to know what they're fracking with.

The article we linked from The New York Times (just click on the title, folks) tells the story about what the fracking companies are disclosing and to whom. This is becoming a recurring story in the trade secrets world - private companies hired to work on public land and using techniques and chemicals that give public health people and environmentalists pause. We'll keep an eye on this one for you.

Hilton's Motion to Dismiss Starwood's Federal Trade Secrets and Computer Theft Case Denied

The news wires are abuzz with reports that Hilton's motion to dismiss filed 26 February 2010 has been denied. U.S. District Court Judge Stephen C. Robinson said there was plausible reason to continue the legal action, instead of submitting it to arbitration, and he also concluded there was federal question jurisdiction under the federal Computer Fraud and Abuse Act. For non-lawyers out there in trade secret land, this motion was likely filed with Hilton's full expectation that it would not be granted.

Judge Robinson was forced to address the CFAA and the judicial dialogue that seems to follow this federal law - whether an employee with authority to enter databases containing secret information violated the CFAA when they use that authority for purposes of theft. Judge Robinson concluded that employees do violate the Act when they exceed their authority in accessing the data.

Judge Robinson wrote “… this is the case of the ‘corporate spy,’ a company employee who essentially perpetrates a fraud against the company by obtaining the employer’s information under false pretenses,” Robinson said in the document. “In this scenario, the employee has lawful access to the employer’s information—but has obtained this access through trickery and deceit.”

We'll continue to keep an eye on this Starwood v. Hilton trade secret case for you.

Todd Sullivan Talks Trade Secrets with LA Times

RALEIGH, N.C.—Womble Carlyle attorney Todd Sullivan discussed trade secrets in the hotel industry in a major new article in the Los Angeles Times.

The article, “Hotel Wars: Drama and Intrigue Behind the Hospitality Trade” ran in the Sunday, June 6th edition of the newspaper. The article discusses a trade secrets dispute involving a former executive at Starwood Hotels and Resorts who built a competing brand for Hilton. The resulting claims of trade secrets theft has become a major news story within the hospitality industry.

Todd Sullivan has a national practice focused on issues of employment agreements and employee departures. He has litigated more than 100 employee defection matters in numerous state and federal courts and arbitral forums.

Naples, Florida Developer Can Withhold Subpoenaed Documents - For Now

Naplesnews.com is on a rare trade secrets case. Luxury, heck all, real estate purchasers in South Florida have had a rough road in the last couple years. Some are fighting mad. Robert Housel is apparently fighting mad. He sued the Bonita Bay Group alleging breach of contract, violation of the Florida Deceptive and Unfair Trade Practices Act and fraud. It relates to his purchase of a membership in the Naples-based club called Mediterra. Apparently the original deal was that anyone who paid the $186,000 membership deposit would get it back upon demand, no questions asked. And then that arrangement stopped.

So, as litigants routinely do, he issued a subpoena for records. Lots of them. And Bonita Bay Group objected, even though they sold the club to a member-run group after it ran into financial trouble. Housel wants the docuements. Bonita Bay Group says they contain "trade secrets" and need to be treated in the court process as such. “There’s a blank piece of paper marked trade secret,” he said at a court hearing on Monday. “It’s not until I asked for them in my lawsuit that any of these documents became trade secret.”

So Housel asked for a hearing on the matter. At the hearing, Collier Magistrate Jim McGarity said he understood Housel’s frustration with the delays he’s faced in getting the information he’s requested. But, he said, the documents from the new club should fall under the same protective order as the ones coming from the developer.

Mr. McGarity gave the developer until noon on July 16 to produce all of the requested documents, including the ones from the new club. The next step would be for Housel to ask for an internal court review of the documents marked as “trade secrets.” He hopes to get many of them unsealed and made public by the magistrate.

Bonita Bay's attorney explains their concern this way: many of the documents Housel requested from the new club should remain confidential because they contain financial information and information on bidding strategies and techniques used in the sale of the Mediterra club to members. If that kind of information is disclosed it could hurt the developer’s ongoing negotiations to sell three other clubs because it would reveal the “give-and-take” and show how far it’s willing to go to reach a deal.

We'll keep a sunburned eye on this one for you.

More on the Trade Secrets of Muffins

As we reported earlier here, there’s a battle going on over the trade secrets of muffins and a key inevitable disclosure case in which an executive of the company that manufactures Thomas’s English muffins was barred from going to work for a competitor.

Now the case is heading to the Third Circuit court of appeals on a fast-tracked appeal of the preliminary injunction against the employee.

The company contended the employee had access to competitive planning, including product launch plans and strategies for cutting costs and securing lucrative contracts for store-brand products. There was also evidence that trade secrets information was downloaded to a USB hard drive prior to the employee’s departure.

The Legal Intelligencer has the full report (linked here).

Ohio State's Contract With Coca-Cola Released: Original Trade Secret Redactions Get Unredacted

The Lantern is reporting that The Ohio State University's contract with Coca-Cola have been released after objections made by interested citizens. Payments made to OSU from Coke come from royalty fees and vending commissions on Coke products sold on the university's campus. In exchange, Coke receives the exclusive right to sell its products on campus as well as sponsorship opportunities and the ability to use OSU trademarks in Coca-Cola advertising.

For a short period, both OSU and Coca-Cola refused to produce the actual numbers contained in the agreement on grounds that the same constituted confidential trade secrets. They've reversed course now and have released the numbers. This is not the first public-private contract that resulted in trade secrets claims made, and then reversed. We covered a similar issue earlier in May in connection with the University of Oregon's arrangement with Nike: http://wombletradesecrets.blogspot.com/2010/05/swoosh-oregon-attorney-general-orders.html.

$50 Million Connecticut Trade Secrets Award

From the Hartford Courant (a paper I delivered for many years), a report on a big trade secrets verdict.
Dur-A-Flex, an East Hartford maker of floor and tile products claimed that a former longtime customer, Laticrete International (also from Connecticut) copied its process for bonding paint to sand in order to make tile grout and started manufacturing an identical product on its own. Dur-A-Flex had provided the product to Laticrete under a confidentiality agreement covering the manufacturing process.

The jury awarde Dur-A-Flex $43.7 million and the court tacked on $600,000 for royalties and $6 million in attorney fees.

According to the Courant, it is notoriously difficult to get paint, an organic compound, to bond with an inorganic compound such as sand.

Laticrete, not surprisingly, says it will appeal.

Trade Secrets of Bull Semen Sales

A judge in Maine is being asked by a company based in Ithaca, New York to stop a former bull semen salesman from competing against his former company. You can read the story from the Kennebec Journal by clicking on the title of this post.

This appears to be more of a noncompete than trade secret matter but we were intrigued by the story, nonetheless. There apparently are people whose job title is "relief artificial insemination specialist."