BLOGS: Trade Secrets Blog

Powered by Blogger
Add to Technorati Favorites

Tuesday, August 31, 2010, 8/31/2010 03:55:00 PM

Todd Sullivan on Bloomberg Radio: Facebook Lawsuit

RALEIGH, N.C.—Who owns a good idea? With increasing frequency, those questions are being answered in courtooms—and millions, or even billions, of dollars are at stake.

The most notable recent example is an ongoing lawsuit concerning the ownership of Facebook. Web designer Paul Ceglia is suing Facebook, claiming he rightfully should own 84 percent of the multi-billion dollar social networking empire. Also, two Michigan advertisers successfully sued Taco Bell for $40 million after they claimed they first presented the restaurant chain with the idea for its Chihuahua advertising campaign.

Womble Carlyle attorney Todd Sullivan recently joined Bloomberg Radio to discuss the rise of what he describes as “idea litigation.”

Sullivan said such lawsuits have increased in number and prominence because ideas have never been more valuable. Also, these technology-based ideas often come from start-up entrepreneurs and may lack well-crafted ownership documents.

"There was a lot of litigation that came out of the dot-com explosion over who owns what properties,” Sullivan told the program. "The parties didn’t have the financial ability to create contracts that were imminently understandable and enforceable."

Click here to hear the interview on Bloomberg Radio (courtesy of Bloomberg Radio).

India and Trade Secrets: Former Board Member of Bombay Company Enjoined as to Some Information, But Not All, He Learned

By Todd

The Times of India is reporting on a new decision rendered by the Bombay High Court - certain Board discussions and business plans of a real estate company can NOT be treated as trade secrets under Indian law. The suit was brought by Bombay Dyeing against former Board Member Mehar Karan Singh. The company alleges he left Bombay Dyeing to join a competitive firm.

Although we haven't seen the actual printed decision, The Times of India suggests that Justice Roshan Dalvi did restrain Singh from divulging any information about software and a manual prepared by Bombay Dyeing.

The judge, however, refused the plea to stop the former director from letting out business plans that were discussed in meetings where Singh was present. "Strategic business plans, product mix, square footage of construction, capital expenditure or revenue budgets cannot be claimed to be matters of any confidential nature, which no other competitor would be aware of," the judge said. "(Singh) who attended the board meetings would have amassed information regarding to Bombay Dyeing's plans of operation. But he cannot be injuncted from disclosing those plans, if any, to the competitor except for what would cause damage to the company by such disclosure alone, if he carried them in his head," he added.

We can't tell if the last part of that ruling - the part that suggests an injunction can only issue if there is evidence that the disclosures would cause damage to the company - is essentially agreement with the standard American "irreparable harm" standard. Nonetheless, we found the ruling and the report interesting enough to post. This is a topic all developing societies and economies will be dealing with in time - how does the legal system protect competitively-sensitive information but still allow key personnel to utilize their general skills in competitive employment.

Monday, August 30, 2010, 8/30/2010 09:36:00 AM

University of Minnesota Professor at the Center of Anti-oxidant Trade Secret Fight

By Todd is reporting on an interesting issue in trade secrets law: can an insider release trade secrets maintained by a corporation and invalidate those trade secrets without any authorization or knowledge of the corporation? The answer would seem to be "of course" but this is an issue that will surely be litigated in this matter.

Rain Nutrition is based in Utah. It wanted research for new products and went to one of the world-recognized experts for that research, Dr. Arnold Leonard at the University of Minnesota. Botanic Oils Innovation, Inc. also has a commercial relationship with Dr. Leonard and his research - he was instrumental is developing the research for their anti-oxidant supplements and has been part of their management team since 2003.

But, and one wonders if university professors are skilled in smelling a conflict when one is in the air, seems Dr. Leonard entered into a $6,000 per month arrangement with Rain Nutrition to supply them research and actually supplied them research pursuant to that deal. And now we have a full-blown lawsuit. Of course, Botanic Oils has not sued Dr. Leonard himself - even though he was allegedly the conduit through which the purported trade secrets got into Rain Nutrition's hands.

This is going to be a procedural battle before it becomes a substantive one. We are making an early bet: somehow the parties see the sense in allowing Rain Nutrition to license certain research from Botanic Oils. We'll keep our eyes and ears open for future developments.

Thursday, August 26, 2010, 8/26/2010 10:41:00 AM

Full Appellate Panel at Second Circuit Won't Reconsider Fed Bailout Data Ruling

By Todd

On August 20, the en banc grouping (that's all of them, folks) of the U.S. Court of Appeals for the Second Circuit in New York City refused the Federal Reserve's request to reconsider a unanimous three-judge panel’s March 19 ruling in Bloomberg LP's Freedom of Information Act suit for access to records relating to its $2 trillion emergency lending program.

You'll recall that in March a three-judge appellate panel upheld a lower court's decision to release the records/documents, rejecting the Federal Reserve's arguments that the records should be withheld due to a FOIA exemption that protects trade secrets, and that revealing the bailed-out institutions could cause investors to lose confidence in the banks' financial security.

Though the requested records were financial in nature, the court said they were considered records of the Fed because Bloomberg requested information on loans that were actually made, not on applications that were received and therefore obtained from a private banking institution.

"The fact that information about an individual can sometimes be inferred from information generated within an agency does not mean that such information was obtained from that person within the meaning of FOIA," the opinion read.

The Fed has seven days to hand over the records to Bloomberg unless the court stays its decision, which would give the Fed 90 days to ask the nation’s high court to review the case.

Nice reporting by Miranda Fleschert on this one, here:

This issue may be going to the Supreme Court if they agree to hear it.

Wednesday, August 25, 2010, 8/25/2010 08:28:00 AM

The Human Side of A Trade Secret Misappropriation Allegation

By Todd

Today we link you to the interesting story in today's New York Observer about Nicholas S.G. Stern, the 42-year old son of the renowned architect and Dean of the Yale School of Architecture, A.M. Stern. This is a trade secrets blog, you note?

Well, seems young Mr. Stern was formerly an executive vice president at Taconic Builders and this year, on March 3rd, he resigned. And a good number of other employees resigned, too. Taconic accused them of a number of bad things, including misappropriating Taconic's trade secrets. We thought this well-written piece's take on the whole thing was interesting, and have copied the pertinent excerpt below:

Taconic responded swiftly. Reeling from what it perceived as an effort "to take over existing Taconic projects," the company filed a lawsuit, accusing Stern et al. of a "calculated surreptitious effort" to sabotage Taconic's business, in alleged violation of noncompete agreements that it said the defendants had signed. The former employees walked out with "trade secrets," Taconic said, after they allegedly deleted emails from Taconic computers and stole valuable clients. Taconic sought restraining orders on the defendants' construction projects, in an attempt to shut down the lead defector and his crew. "Let's say we got divorced and I got the kids," Mr. Stern said, referring to his colleagues. "I guess that makes me Dad or something."

For the previous two months, Mr. Stern had spent nights and weekends setting up a new company that would become Stern Projects. After resigning, all the former employees immediately began work at Mr. Stern's new company. ("They wanted to go camping with me," Mr. Stern said, continuing the divorce analogy.) To Taconic, it looked like a massive suicide pact—some sort of conspiracy. But Mr. Stern denied that there was any such pact. He said he had only mentioned the new company to his close friends Mr. Carey and John Huthwaite. Mr. Stern called the two men "my right and left hand."

"When Nick came to me a few months prior to his departure and said he was leaving to start his own company, I think he got about four words out before I said, 'I'm going with you no matter what,'" Mr. Carey said. "I don't want to say I follow the guy anywhere, but when it comes to business, I needed to follow him."

The group that resigned, Mr. Huthwaite said, was "essentially a company within the company"—not officially, but that's how they behaved.

Mr. Stern said Taconic's lawyer, Richard Menaker, seized innocuous details and turned them into exaggerated allegations. Taconic has a videotape of Mr. Stern packing up "eight years of memorabilia and personal furniture" from his corner office, which Mr. Stern said was the basis of Taconic's claim that he stole, as he called it, "the secret sauce." Mr. Carey and Mr. Stern said that "trade secrets," as the lawsuit calls them, don't exist in construction, since every project is unique.

"We're not coming up with the formula for Coca-Cola here," Mr. Stern said. "Do you know what the trade secret is in construction? Be honest."

On June 17, the parties settled. "I don't have time, money or the interest in sidelining the business [Stern Projects] to get into a year and a half of appeals to prove that they are wrong on every count," Mr. Stern said.

He wouldn't disclose how expensive the lawsuit ended up being, saying only that it was "more than our drinks tab here." The drinks were water.

Tuesday, August 24, 2010, 8/24/2010 10:49:00 AM

"Hi-Diddle-Dee-Dee" - Boyfriend Who Tried to Sell Stolen Disney Earnings Data Probably Wishing Upon a Star Now

By Todd

DNAinfo is reporting that the boyfriend of a former Disney executive secretary has pleaded guilty of attempting to sell inside information regarding Disney and, alas, actually sold it to federal agents. Charges against the girlfriend, Barbara Hoxie, are still pending. The boyfriend's name is Yonni Sebbag. He is apparently 30 years old and Ms. Hoxie is 33 years old.

As reported previously by SiftMedia here, the details of the attempted scam involved letters and e-mail communications to Wall Street hedge funds.

The letters were postmarked from Los Angeles, and stated:

Hi, I have access to Disney’s (DIS) quarterly earnings report before its release on 5/03/10 [sic]. I am willing to share this information for a fee that we can determine later. I am sorry but I can’t disclose my identity for confidentiality reasons but we can correspond by email if you would like to discuss it. My email is count on your discretion as you can count on mine. Thank you and I look forward to talking to you.

The letters offered to reveal before they were officially released results from Disney’s earnings from the second quarter of this year in exchange for a fee. The SEC complaint states that one offer letter mentioned a fee of $15,000, and another asked for half of the expected trading profits. Some of the hedge funds that received letters contacted the SEC. The SEC, in turn, reached out to the U.S. Attorney and the FBI to initiate an investigation.

As part of the probe, the FBI sent an undercover agent, posing as an investment manager, to meet with Sebbag, who used the alias Jonathan Cyrus. According to the agent, Sebbag said he had confidential information to share on a regular basis in exchange for compensation. He wanted a “business relationship,” and said that he understood this relationship would involve risks.

Sebbag sent e-mail messages to the agents, some of which the SEC reprinted (complete with original spelling and punctuation errors):

"First of all, i am not a fed, I have no way to prove it at this point but i am not asking you to disclose your identity not i will disclose mine. It is up to you to determine if this is worth the risk as i did. I work for Disney, that is all i can tell you."

"I can deliver 3 to 4 days before release. I will email you the report as soon as i have it and you will wire transfer the money to my account after you get ahold of it. I am asking you to make me an offer based on the capital gains from the trade and the risk i am taking delivering this information to you? Also, i am looking to build a strong business relationship with you for future quarters and information."

"I dont think we will get caught if we stay discret and careful. You can count on my discretion as i am counting on yours…"

"… $15k sounds great and $30k even better as i hope you will make a killing from Q2 earnings. I promise i will keep you informed of any unanticipated event, i keep my ears wide open here."

Sebbag allegedly provided the agents with a 107-page confidential document two days before the company’s earnings were announced. The documents contained talking points for the Disney executives for an upcoming conference call and detailed information about quarterly performance and future prospects. Hoxie also gave Sebbag Disney’s earnings per share, which he gave to the agents two hours before the figures were to be released.

After the exchange, Sebbag made plans to meet with the agents again in person to collect his fee. On May 14th, the complaint states, he met with agents in New York telling them he wanted to make a lot of money and asked their advice on opening an offshore account in which to stash the cash. He left the meeting with $15,000 and an arrangement to meet again in California.

On May 26th, the couple was arrested.

Monday, August 23, 2010, 8/23/2010 01:36:00 PM

Tom Brady Not Giving Away His Trade Secrets of Quarterbacking

By Todd

Well - we don't only cover dull and boring trade secrets topics. This just out from The Boston Herald - Tom Brady isn't giving up the secrets of his quarterback skills yet. Falcons quarterback Matt Ryan was interested in Brady giving him some hints but wasn't surprised when the older, more experienced Brady didn't give him much.

”I don’t blame him,” Ryan said. ”I think everybody is protective. Everybody wants a bit of their competitive advantage. Whatever he’s been doing has worked. He’s been extremely productive over the course of his career. Even more than X’s and O’s and training tips, it’s good to get to know those guys."

"I watched Tom all through college at BC. Right through their three Super Bowl runs,” Ryan went on. ”It was good to finally meet him last year when we played up there and get to talk to him a little bit today.”

Brady, while having great admiration for Ryan, wasn’t going to spill the beans. Nope, not even close.

"I don’t give away my ideas too easily,” Brady said. "I’ve worked a long time for my ideas. I’ve been through a lot of games. You’ve got to really let the other competitors figure it out for themselves.”

Tom Brady has good counsel, folks.

Wednesday, August 18, 2010, 8/18/2010 03:27:00 PM

Bratz Hitz Back at Mattel

It’s football season, so apparently it’s time to trot out the old adage about the best defense being a good offense. This time in the ever-lasting Barbie vs. Bratz fight that we’ve reported on most recently here.

According to an article in, defendant MGA Entertainment, Inc. (the Bratz company), has filed a new counterclaim against Mattel (Barbie’s company) claiming racketeering and theft of trade secrets in connection with an alleged corporate espionage ring.

Among the claims is that Mattel executives used fake business cards to gain access to private toy showrooms of competitors. Those actions, according to MGA, allowed Mattel to assemble an “unparalleled library” of competitors’ plans and products, including products not yet on the market.

Mattel’s lawyers are understandably dismissive, calling MGA’s filing “second-rate tactics by desperate lawyers” and indicating that the counterclaim won’t survive the pleading stage.

At first blush, although styled a counterclaim, it’s hard to see how these counterclaims relate to the case at hand concerning MGA’s stealing the idea for Bratz dolls from Mattel.

Departing Wells Fargo Vice-President Accused of Looting Data and Clients

By Todd

The complaint in a recently filed federal suit is linked when you click on the title of this blog post above.

As you'll read, Wells Fargo accuses Glenn Frank of lots of bad things - including, interestingly, intentionally lying to clients and telling them that the bank had a secret plan to invest client funds in bank vehicles without the clients' consent.

Not shocking is the report regarding Mr. Frank's resignation, effective immediately, at 4:43 p.m. on a Friday. That's how they routinely roll in that industry, buh-bye on a Friday when managers are out sailing or golfing and sometimes not tending to the store.

This one will presumably end up in arbitration before FINRA but we'll report whether the federal court in Massachusetts thinks the story told is nefarious enough to issue an injunction against Mr. Frank.

Tuesday, August 17, 2010, 8/17/2010 01:31:00 PM

EPA Proposing Chemical Regulation Changes That Implicate Industry Trade Secret Issues

By Todd

OMB Watch is reporting that the Environmental Protection Agency (EPA) has proposed several changes to its regulation of chemicals that should improve the public's access to crucial information.

The proposed rule is the latest of several actions by the EPA to use its existing authority under the nation's primary chemical law, the Toxic Substances Control Act (TSCA), to improve the public's access to chemical data and prevent manufacturers from inappropriately hiding health and safety information as alleged trade secrets.

Chemical manufacturers and importers will apparently be required to report the information electronically. EPA will provide manufacturers with access to electronic reporting software and additional guidance on how to report electronically. Only one-third of reports were submitted electronically in the last reporting year, 2006, and EPA took over two years to validate the data submitted in paper or CD-ROM formats. A large number of errors were generated by entering data by hand into agency computers. By requiring electronic submissions over the Internet, EPA hopes to greatly reduce the reporting errors and get the data out to the public in a more timely manner.

Changes to the agency's treatment of trade secret claims have also been proposed in the rule. Currently, manufacturers are allowed to label data as confidential business information (CBI) with few limitations, which compels the agency to withhold such information from the public. EPA has acknowledged that the excessive use of CBI claims has hidden important information from the public and even from EPA offices. According to the EPA "The public would be better informed and better able to understand and provide meaningful comment on Agency actions if less information were unnecessarily or inappropriately claimed as CBI. The Agency would also be able to provide other public and private organizations and individuals with better information for making their own decisions."

The agency will place limits on what a manufacturer can label as CBI when submitting data under the IUR rule. EPA intends to prohibit use of CBI claims for the identity of a chemical listed in an IUR submission if the chemical identity is already publicly available on the public portion of the TSCA Inventory. EPA also proposes requiring upfront substantiation for CBI claims for processing and use information. Submitters would have to supply the agency with written explanations defending their CBI claims. Manufacturers have previously claimed data to be CBI even though the same data were available publicly elsewhere – such as on the company's website.

The recent proposed rule follows several other actions by EPA to limit perceived abuses by chemical manufacturers of trade secrets protections. In May, EPA issued a "general practice" restricting CBI claims on chemical identities that are part of a health or safety study. In January, EPA announced chemical identities could not be considered CBI when manufacturers submit information indicating a chemical substance or mixture presents a substantial risk of injury to health or the environment if the chemical identity is already on the public portion of the TSCA Inventory.

We will continue to follow this topic and the general topic of governmental control and release of information private enterprise considers competitively sensitive or confidential.

Monday, August 16, 2010, 8/16/2010 12:25:00 PM

Apple Employee Indicted for Taking Kickbacks in Exchange for Disclosing Confidential Information

By Todd

Charges were filed against Apple's global supply manager Paul Shin Devine last Wednesday in U.S. District Court for the Northern District of California, according to court documents. Several news reports said Devine was arrested Friday.

Devine was accused of accepting $1 million in kickbacks from half a dozen Asian suppliers of iPhone and iPod accessories in a federal indictment and a civil suit, the San Jose Mercury News reported. Devine allegedly was paid for sharing confidential Apple information with contractors that helped them win Apple business on favorable terms, the paper said.

The Wall Street Journal reported that Devine gave confidential information to companies like Cresyn in South Korea, Kaedar Electronics in China and Jin Li Mould Manufacturing in Singapore. He allegedly shared the kickbacks with Andrew Ang, an employee of Jin Li who the indictment charges helped broker deals with his employer and others.

Thursday, August 12, 2010, 8/12/2010 11:20:00 AM

Accused Ford Motor Trade Secrets Thief Needs Time to Consider Plea Bargain Options

By Todd

Lawyers have been discussing a possible plea deal in a case involving a former Ford Motor Co. engineer charged with stealing trade secrets.

A federal judge in Detroit this week postponed a December trial until March so Mike Yu's lawyers can continue to pore over evidence. A court filing says prosecutors and the defense also want more time to discuss ways to resolve the case.

The new deadline for a plea deal is Nov. 14.

Yu is accused of copying design details on doors, mirrors, power systems, wipers and other components before going to work in China in 2007.

He has pleaded not guilty and remains in custody without bond.

Wednesday, August 11, 2010, 8/11/2010 04:20:00 PM

What Keeps IP Counsel Up at Night? Trade Secret Loss in China

By Todd has an interesting piece suggesting that trade secret loss to China is the primary thing keeping corporate IP counsel up at night. Here's an excerpt from the piece:

They (in-house counsel meeting in San Francisco during an ABA meeting) talked in-depth about how they deal with their biggest and most important concern -- protecting their companies’ trade secrets. It’s a growing challenge, they said, whether it’s during litigation or when doing business overseas. Gary Loeb, vice president of intellectual property at Genentech, Inc., said that during litigation he fights aggressively to keep his company’s secret information confidential. “It’s a battle we take very seriously,” he said. “It’s something that makes our cases very expensive.”

Scott Piering, senior IP lawyer at Cargill, Incorporated, said he often seeks to try cases before the International Trade Commission instead of in U.S. federal court because information can be sealed more easily. “The ITC is a great venue for us,” he said.

Cargill has had less success keeping their trade secrets secret when doing business in China. Dealing with corporate espionage is just the price of doing business there, he said. So his company doesn’t take its best trade secrets to China, but Cargill has taken some calculated risks in the country, and said it’s expected that trade secrets will be stolen. “It keeps me up at night constantly,” he said.

Robert Lindefjeld, general counsel and chief IP counsel for Nantero, Inc., said he hasn’t figured out how to deal with corporate spying in China either. His strategy is to just maintain a strong patent portfolio in China. “I used to file every single patent overseas,” he said. “Now I only file key patents because it’s so expensive.”

Tuesday, August 10, 2010, 8/10/2010 11:23:00 AM

Company Secrets Inadvertently Retained on Copying Machines?

By Todd

The Epoch Times is running this interesting piece on photocopiers and printers that have been discarded or junked actually representing a threat - a threat of trade secret and competitively sensitive information actually contained on those machines.

“Thousands of these machines leave businesses every month with the internal data intact,” according to Digital CopierSecurity Inc. (DCSI). “Some are resold domestically and many are placed into cargo containers and shipped overseas. There is no control over the resale of these machines. They are sold on the open market to anyone with the cash to buy them.”

Thought you'd appreciate reading this piece.

Monday, August 09, 2010, 8/09/2010 09:27:00 AM

All the Tea in China - New Book on Perhaps the Biggest Economic Espionage Ever

By Todd

FastCompany has an interview with Sarah Rose who has written a new book "For All the Tea in China" regarding the British Empire's efforts to steal the secrets of planting and manufacturing tea from the Chinese.

The interview makes a fascinating read and we're going to try and get a copy of this book, too.

Saturday, August 07, 2010, 8/07/2010 02:58:00 PM

Trade Secrets of the Securities and Exchange Commission

The new financial reform law gives the SEC extensive investigatory powers to seek out information from the regulated, but limits how much of that information must be provided to the public under the Freedom of Information Act (FOIA).

The Commission says the broad exemption from FOIA is necessary to gather confidential business data from industry insiders who otherwise would fear that their trade secrets would be made public.

The Chicago Tribune, in an editorial, isn’t buying that rationale.

Instead, the Tribune says, the new law “gives big cover for an agency that has a track record of failure in its regulatory efforts.”

As an example, the paper points to a Fox Business Network suit against the SEC that seeks internal agency documents about its botched investigations of Bernard Madoff and Allen Stanford. The SEC is invoking its FOIA exemptions.

Drawing the right lines for trade secrets in these regulatory contexts is important and undoubtedly difficult.

That said, it’s hard to imagine any Madoff trade secrets worth the definition.

Thursday, August 05, 2010, 8/05/2010 09:54:00 AM

Trade Secrets of Making a Killer Black Bean Dip?!? Dallas Trade Secrets Case Pits One Restaurant Against Another

By Todd

The Dallas Morning News is running an interesting piece today on a trade secret battle that's brewing in a Dallas courtroom. A former Gloria's manager named Mario Alfaro apparently opened a competitive restaurant and, according to Gloria Rubio's legal papers, has a plan to steal her recipes, employees and customers. And she's not standing for it. Here are some interesting snippits from this report:

"Though he did not cook for Gloria's or was taught Gloria's recipes, Mario Alfaro knew the process, the ingredients, the preparation, and execution of Gloria's dishes," Rubio said in court documents.

Rubio said in her affidavit that the meals found at Gloria's came from a mix of family recipes, in trips throughout Latin America or through old-fashioned trial and error.

"The recipes of these dishes came from El Salvador, from my mother and grandmother, and from extensive travel and research," she said.

The recipes are written down and stored in a secret place, Rubio said. Not even the cooks get to see them on paper. She trains the chefs herself from her memory of the recipes. The training process takes three months.

"Jose Fuentes and I have told all Gloria's cooks that all my recipes are a secret and cannot be used out of Gloria's," Rubio said.

Two other cooks who went to work for Alfaro said in affidavits that they quit after a few days because they had been ordered to "make everything according to Gloria's recipes."

"I was shocked to see Mario Alfaro using the same herb butter in his restaurant ... because I knew it was Gloria's secret recipe," said one of the cooks.

If the two menus look similar, Alfaro said, it's because the bare ingredients for the same dish wouldn't change.

"Of course, some ingredients are the same," Alfaro said in his affidavit. "All chicken dishes contain chicken, for example."

In court documents, Rubio describes the process Gloria's cooks use to make ceviche, claiming that their use of orange roughy instead of catfish is unique and that the idea was stolen by Alfaro.

Mario Alfaro's attorney disagreed: "Have you Googled orange roughy and ceviche?" the attorney said. "There's thousands of recipes that use orange roughy in ceviche. ... We're not talking rocket science here. We're talking Mexican food recipes."


Tuesday, August 03, 2010, 8/03/2010 11:56:00 AM

Massachusetts Right to Repair Act Has Trade Secrets Monkeywrench Thrown At It

By Todd

The Boston Globe is reporting that a piece of legislation requiring auto manufacturers to give independent mechanics the same diagnostic codes offered to mechanics at dealerships has hit a roadblock.

The Massachusetts Senate passed a version of the bill in the spring, but the Massachusetts House failed to take any action on the measure before the session ended Saturday. If the bill had passed, Massachusetts would have become the first state in the country with such a law.

The world’s largest auto manufacturers opposed the bill, saying it would have unfairly required them to give away trade secrets to manufacturers who would create and sell generic parts for less. The manufacturers also say the repair information in dispute is already available to independent mechanics willing to buy it.

The Right to Repair issue was one of the most contentious on Beacon Hill — and one of the most expensive. Opponents and proponents spent a total of $1.3 million on lobbyists and advertising this year in an attempt to sway votes.

Supporters pointed to endorsements from AAA and a variety of consumer groups that said the bill would allow for increased competition between dealerships and independent mechanics, benefiting consumers, who tend to pay more for repairs at dealerships.

Monday, August 02, 2010, 8/02/2010 09:51:00 AM

Chico's-Cache Trade Secret Spat Back to New York State Court

By Todd

As most of our readers know, trade secret law is primarily a creature of state law and this makes it different from other types of intellectual property (patent, copyright, trademark). As such, many trade secret theft cases are litigated in this country's state courts, and not the federal courts, when the parties are located or headquartered in the same states. No diversity of citizenship, no federal question - thus, you're in state court.

Well, sometimes a trade secret claim can look like a federal claim, such as when the secrets relate to things like designs or schemata. Why? Because there might actually be a copyright claim behind the allegations. And that is apparently what Cache was trying to argue when it removed Chico's trade secrets case to federal court. But Chico's wanted to be in state court and made a motion to remand that case back. And the federal court agreed with Chico's, as Forbes is reporting.

The rival retailer's assertions that misappropriation of clothing designs qualified as a copyright issue, and not a trade secrets issue, were arguments best left to the motion to dismiss phase of litigation and were not appropriate for determining whether to remand a lawsuit, Unites States District Court Judge Paul Gardephe said.

“Defendants cite no legal authority suggesting that this court is required to consider the merits of plaintiffs’ state law claim in resolving a motion to remand, however, nor do they explain why plaintiffs' alleged failure to state a claim dictates that their claims is preempted,” the order said.

Earlier in July, the judge refrained from issuing a remand order from the bench, saying that he would need to consider Cache’s arguments a bit more thoroughly.

"The whole issue of design and its copyrightability is a difficult one," the judge said at the time, referring to references by Chico's to similar-looking clothing items as indications that Cache pilfered concepts and development plans for 2010 seasonal lines.

Back to state court. We'll continue to watch this case for you.
back to top