South Korea Recognizes Disgruntled Employees Are Major Risk to Trade Secrets

We've linked you to etnews.cr.kr and its translated report regarding employee theft of trade secrets.

They note: "Out of the 189 cases the national agency investigated at this time, 113 were about former employees stealing technologies. Current employees were involved in 33 of them and partner firms’ personnel in 26. To sum up, 91% of the total cases had to do with staff members handling technologies themselves. According to the center, the number of tech leaks caused by disgruntled employees is rising these days, too."

St. Jude Medical Wins $2.3 Billion Trade Secret Verdict - But Defendants Didn't Attend the Trial

Law360 is reporting that St. Jude Medical, Inc. has won a whopping $2.3 billion trade secret secret verdict from a California state jury in a case they brought against a former employee and his new company.

The jury concluded the former employee, Yongning Zou, stole confidential technical information from the Sylmar, Calif.-based manufacturer of pacemakers, defibrillators, and neuromodulators and took it to start Nervicon Co. Ltd. in China.

The jury awarded St. Jude Medical $947 million against Zou and Nervicon for past harm, $868 million against Nervicon for future economic losses, and $500 million against Nervicon in punitive damages. The award represented substantially more than the $1.2 billion the company had sought based on the testimony of an expert witness.

“We found the expert witness a little too conservative,” the foreperson told St. Jude attorneys after the verdict, to the nods of fellow jurors.

These default trial verdicts will become more common as foreign-based thieves conclude that their foreign assets will be difficult, if not impossible, to levy against. Problem for them, of course, is what happens when they try to tap the American marketplace with their goods or services.

Bratz Jury Verdict In: MGA Wins Big and Mattel Loses Big

The Los Angeles Times is reporting that the jury sided with the maker of Bratz dolls, MGA Entertainment Inc., over Mattel in the retrial over who owns the rights to the billion-dollar franchise.

The decision came Thursday morning in federal court in Santa Ana, capping eight days of jury deliberations, nearly three months of testimony and years of corporate bickering. Dozens of spectators packed U.S. District Judge David O. Carter's courtroom for the announcement, including the chief executives of both companies.

The eight-person jury, made up of four men and four women, rejected Mattel's copyright infringement claims; said Mattel did not own the rights to the dolls, early models or accessories; and said MGA did not steal trade secrets.

Awards of monetary damages in the case were read in court much of Thursday morning, and it was clear that Mattel would owe MGA millions of dollars. On MGA's claims that Mattel stole trade secrets, for instance, the jury decided that Mattel owed its rival $88.5 million.

Mattel has long argued that MGA stole the concept for Bratz. The company maintains that Carter Bryant, Bratz's creator and a former Barbie designer, came up with the idea for the dolls in 1999 during his second stint with the company. The company said Bryant violated the terms of his "inventions agreement" by taking the idea for the wildly popular multiethnic dolls known for their oversized heads, pouty lips and sexy clothing to rival MGA, which went on to produce and market the billion-dollar franchise.

Bryant testified that he conceived of Bratz in 1998 when he was on a break from Mattel and living with his parents in Missouri -- an assertion often attacked in court by Mattel lawyers, who said Bryant was engaged in a massive cover-up with Larian.

During the first trial in 2008, a jury in Riverside sided with Mattel. The company, which had claimed copyright infringement and breach of contract, was awarded $100 million in damages; MGA was ordered to turn over the franchise to Mattel and stop making and selling Bratz products.

That decision was overturned last year by a three-judge panel of the U.S. 9th Circuit Court of Appeals, which ruled that MGA deserved credit for manufacturing and marketing the dolls. The appeals court said Mattel couldn't claim a monopoly over dolls with a bratty attitude.

This time around, jurors heard not only the copyright claims but also accusations from both companies that the other side stole trade secrets. MGA accused Mattel of sending employees into its showrooms at industry trade shows to spy on their products.

During long hours of testimony during the retrial, jurors were presented with an arsenal of star witnesses, damaging e-mails and dozens of dolls.

South Korea's Samsung Alleges Trade Secret Theft by Chinese Ex-Employee

AFP is reporting that a Chinese employee of South Korea's Samsung Electronics has been arrested for allegedly trying to leak confidential business information, a Seoul prosecutor said Wednesday.

The 40-year-old woman is suspected of photographing confidential documents about sales plans and key technologies and storing the image files in her personal laptop.

"Her contract was about to expire without extension when she downloaded all the files from the firm's computer server, printed them out and took photographs," Lee Cheon-Sei, a chief prosecutor in the case, told AFP.

The woman who was not identified had been working for Samsung's home appliance unit since 2007 and was recently offered a job with a Chinese electronics firm, Lee said without naming the company.

The confidential information included Samsung's key technologies on reducing noise of home appliances, details of products under development and sales plans for the next 10 years, he said.

"We don't think the confidential information has already been handed to another firm, but we are still investigating," said Lee.

The worker was arrested at the weekend after tipped-off prosecutors found evidence at her home during a raid.

Six Year Sentence for Former Ford Employee Convicted of Trade Secret Theft

We've been following this one, see: http://wombletradesecrets.blogspot.com/2010/11/guilty-plea-by-former-engineer-in-ford.html.

Xiang Dong Yu, aka Mike Yu, of Beijing, China pled guilty back on November 18, 2010 to a criminal violation of the Economic Espionage Act. Mr. Yu was a product engineer at the Dearborn, Mich. auto maker from 1997 to 2007. In December 2006, on the eve of his departure from Ford, Mr. Yu copied some 4,000 Ford documents onto an external hard drive, according to his plea deal. In November 2008, Mr. Yu began working for Beijing Automotive Company. Upon his arrest in October 2009 in the U.S., the FBI discovered that 41 Ford design documents had been copied to Mr. Yu's Beijing Automotive Company work computer.

The Wall Street Journal is reporting that Mr. Yu was sentenced Tuesday to 70 months in prison and will be deported to China after his release. He worked at Ford for 10 years and quit the company by sending an e-mail from China in January 2007. It was a tip from Mr. Yu's girlfriend that led Ford to investigate the matter.

2010 and 2011 will certainly go down in history as the year of the Economic Espionage Act in terms of prosecutions, convictions and sentences.

Unique Event! Join NC Attorney General Roy Cooper & Womble Carlyle for the CLE Symposium for Top NC Legal Counsel on May 5

Womble Carlyle CLE Symposium for Top NC Legal Counsel
A full-day CLE event for in-house counsel
May 5, 2011 -- 8:30-4:30 p.m.
10 CLE Sessions, Lunch and Keynote Address by North Carolina Attorney General Roy Cooper

On May 5, Womble Carlyle will offer CLE sessions on such topics as:

• political contributions/lobbying


• data management


• economic development


• crisis/catastrophic event planning


• employee defection/personnel departures


• outsourcing agreements


• intellectual property minefields


• legal project management


• the China market


• ‘green’ strategies

Event information

Location: Proximity Hotel
704 Green Valley Road
Greensboro, NC 27408
(800) 379-8200
http://www.proximityhotel.com/
Reference this event when booking overnight stay to receive special rate.

RSVP: There is no fee to attend but seating is limited.
Please RSVP by Friday, April 22nd, using one of the following methods:
phone: (336) 433-5699
email: greensbororsvp@wcsr.com

Click here for information on the ten panels that are being offered to top legal counsel in North Carolina.

Register today!

$38 Million Arbitration Award Given to Norit NV Against ADA-ES Inc.

The Wall Street Journal is reporting that ADA-ES Inc. has been hit with a $37.9 million arbitration award in a case brought by Norit NV. The arbitration panel found ADA breached a non-solicitation provision of a market development agreement with Norit and, in pari delicto with former Norit employees John Rectenwald and Steve Young, misappropriated certain trade secrets. The panel also ordered ADA to pay Norit a royalty on all activated carbon sales (10.5% for three years, and 7.0% for a further five years).

Arbitration awards in trade secrets cases are relatively rare. While ADA-ES Inc. may be considering its options, it is certainly difficult to overturn an arbitration award.

DuPont Sues Over Alleged Trade Secret Theft of Titanium Technology

Bloomberg is reporting that DuPont has sued USA Performance Technologies and Performance Group Inc. and two of those companies' employees for allegedly misappropriating confidential specifications for its titanium pigment manufacturing process.

The two defendant companies, both based in Oakland, California, and two of its employees have, or are in the process of providing DuPont’s trade secrets to DuPont’s competitors in China, according to a complaint DuPont said was filed in federal court in California.

The manufacturing process at the company’s titanium pigment plant in Kuan Yin, Taiwan, “has become the target of misappropriation,” the complaint says. DuPont’s trade secret information was found on the company computer of one of the defendants, the lawsuit said.

The suit seeks an injunction requiring return of its trade secret information, prohibiting use of its proprietary information and unspecified damages, DuPont said in a statement.

DuPont is the world’s largest manufacturer of titanium dioxide, a white pigment commonly used in coatings, plastics and paper.

Small Defendant Prevails at Trial in Trade Secrets Case Brought By Aerotek

We first reported about this case here: http://wombletradesecrets.blogspot.com/2008/01/staffing-firm-aerotek-sues-former.html.

Well, defense attorneys at Sacramento's Porter Scott law firm are reporting a "no cause" verdict from the jury in a complete victory for the defendants in this employee defection litigation that raised trade secret misappropriation issues. Apparently this case has been tried twice and Aerotek, a large staffing company owned by the owner of the Baltimore Ravens, has filed a notice of appeal.

That said, we decided to run this write-up because trade secrets cases do not routinely go to trial and the lead defense attorney, Jennifer E. Duggan, obviously did a nice job on this one. While we do not routinely link our readers to write-ups generated by other attorneys or law firms, we note that Ms. Duggan and her firm represented their client on a pro bono basis as things got expensive and this story is worthy of us bending our rule.

Job well done, Ms. Duggan.

Wilmington Trust Sues Defecting Executives Hired By Citi Private Bank

The Wall Street Journal is reporting that Wilmington Trust Corp. filed a lawsuit Friday against three former vice presidents who defected to a rival firm in advance of Wilmington Trust's acquisition by M&T Bank Corp.

In a complaint filed in Delaware Chancery Court, Wilmington Trust alleges that the three former executives conspired to misappropriate confidential business information that could be used by their new employer, Citi Private Bank.

The complaint also alleges that the former executives recruited former colleagues in Wilmington Trust's Wealth Advisory Services group to leave the company and join them in the Philadelphia office of Citi Private Bank, part of Citigroup Inc.

Named as defendants in the lawsuit are former Wilmington Trust vice presidents Barbara L. McCollum, Robert D. Rosenberg and Paul T. Gordon.

Wilmington Trust is seeking temporary restraining orders preventing its former executives from working for Citi, from soliciting former WTC clients, and from divulging any trade secrets.

The company also is seeking the return of any confidential information they may possess.

According to the complaint, the three defendants worked on a Wealth Advisory Services team, led by McCollum, that served high-net worth clients in Delaware and Pennsylvania. All three allegedly had access to confidential client and company information, and had signed confidentiality agreements.

The lawsuit alleges that the defendants began talking with Citi about possible job opportunities in January, about two months after Wilmington Trust, reeling from huge losses in its real estate loan portfolio, agreed to be bought by Buffalo, N.Y.-based M&T Bank for about $351 million. The deal is expected to close this month.

The Wealth Advisory Services 'branch was a major catalyst driving M&T's decision to partner with WTC," the lawsuit states, adding that the defendants were privy to confidential terms of the merger related to the WAS unit.

After accepting jobs with Citi but while still employed by Wilmington Trust, the three executives allegedly arranged a "secret meeting" with other employees of the WAS group on March 14 at the Wilmington Club, encouraging them to leave Wilmington Trust and subsequently arranging for them to meet with representatives of Citi.

According to the lawsuit, the defendants persuaded several other WTC employees, including Jennifer Phillips and Timothy Carroll, to accept jobs with Citi, which announced the hiring of Phillips, Carroll and the three defendants on Wednesday.

In addition to helping recruit other Wilmington Trust employees for Citi, the lawsuit alleges that McCollum last week accessed her Wilmington Trust computer and tried to email the entire financial database for clients of her team in the Wealth Advisory Services group to another email account.

Rosenberg, meanwhile, is accused of having an assistant provide him a document containing WAS client information, then taking it with him when he and the other Wilmington Trust employees resigned on Monday.

After resigning, the defendants allegedly tried to persuade Wilmington Trust clients to move their accounts to Citi, making false and misleading statements about the upcoming merger with M&T and implying that the accounts were at risk if they stayed with Wilmington Trust.

Folks, employee defection cases are about the story that can be told about the defection. We'll keep an eye on this one as the story develops.