Synthes Accuses Stryker in Federal Court in Pennsylvania of Raiding Employees in California

Bloomberg BusinessWeek is reporting that a unit of Synthes Inc., a leading maker of bone-related medical devices, accused Stryker Corp. in a federal lawsuit of raiding its San Francisco sales force and using confidential information from former employees.

Stryker seeks to obtain “an improper competitive advantage” in the industry for medical implants and instruments used in spinal surgery, Synthes USA Sales LLC said in the complaint filed today in federal court in Philadelphia. Synthes also accused three former sales employees of misappropriating trade secrets and breaching their contractual and fiduciary obligations to the company. The former employees resigned from Synthes from August to early October, according to the complaint. They immediately began working for Stryker, one of the company’s direct competitors, and are soliciting former customers, according to the court filing.

Synthes, based in West Chester, Pennsylvania, was purchased by Johnson & Johnson in April of 2011 for $21.3 billion. We note that the employees are based in California but the suit has been filed in federal court in Pennsylvania. We forecast that the employees and Stryker will be arguing regarding the proper choice of law for this dispute, as California law and Pennsylvania law are rather different when it comes to the mobility of employees and what employees can and can't do having executed a contract restricting their post-resignation activities.

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

"China Threat?" - Columnist Claims Western Stereotyping of China is Unfair But Predictable

China.org.cn columnist Geoffrey Murray has made an interesting argument - that China is being stereotyped in the West as a nation of intellectual property thieves in a continuing campaign of misinformation and stereotyping going back over 150 years.

He writes: "The 'China Threat' is frequently evoked by others regarding its insatiable appetite for foreign investment, and when it has gone onto the world market to purchase large amounts of wheat to offset domestic shortages and, again, with its huge imports of crude oil, iron ore and other crucial minerals. Every time the West considers the challenge of modern China, the message tends to echo the basic theme begun two centuries ago. It brings to mind the old saying that there is 'nothing new under the sun.'"

Mr. Murray makes an interesting argument that the West continues to demonize China and its economic apirations as it always has historically. But there's a counter-argument and it was made and published in October 2011 by the Office of the National Counterintelligence Executive here: http://www.odni.gov/reports/20111103_report_fecie.pdf. The report suggests as follows: "China’s intelligence services, as well as private companies and other entities, frequently seek to exploit Chinese citizens or persons with family ties to China who can use their insider access to corporate networks to steal trade secrets using removable media devices or e-mail. Of the seven cases that were adjudicated under the Economic Espionage Act— both Title 18 USC § 1831 and § 1832—in Fiscal Year 2010, six involved a link to China. US corporations and cyber security specialists also have reported an onslaught of computer network intrusions originating from Internet Protocol (IP) addresses in China, which private sector specialists call “advanced persistent threats.” Some of these reports have alleged a Chinese corporate or government sponsor of the activity, but the IC has not been able to attribute many of these private sector data breaches to a state sponsor. Attribution is especially difficult when the event occurs weeks or months before the victims request IC or law enforcement help."

We've operated this blog since March of 2006 and in the close to five years that we've covered Economic Espionage Act prosecutions, we've noted that a noticeably large number involve former or existing Chinese citizens - including, ironically, older workers over the age of 40. Perhaps those data thieves' Chinese heritage is unimportant or unrelated to their crimes - but the ubiquity of Chinese nationals ending up in our economic espionage criminal system is still an undeniable fact. We welcome Mr. Murray's analysis of the data with or for us - and his explanation of whether "Project 863" is a myth perpetrated by the West or a state-financed program of catching up with the rest of the organized world's technologies. See, e.g., http://www.edu.cn/achievement_1509/20060323/t20060323_4403.shtml.

One of the things history has taught the co-authors of this blog, as trade secret litigators, is that the fastest, cheapest and most efficient way to match and surpass rivals' technological superiority is first to obtain, copy and then deconstruct it. To compete with and beat your rival, you first have to study his playbook. Our government's cybercrime watchdogs confirm our sneaking suspicions that there is something different about China's role in the race for competitive advantages generated by the control of trade secret information. We admit to not being certain why Chinese nationals seem to find themselves prosecuted for these economic espionage crimes at such high rates - but we hypothesize that "Project 863" has some causal relation or nexus to the data.

7 Year Prison Sentence in Dow AgroSciences Economic Espionage Case Against Former Scientist

Bloomberg Businessweek is reporting former Dow Agro Scientist Kexue Huang, 46, was sentenced yesterday by U.S. District Judge William T. Lawrence in Indianapolis, according to an e- mailed statement from U.S. Attorney Joseph Hogsett’s office.

“The United States Attorney’s Office takes seriously its obligation to protect Hoosier businesses from economic espionage,” Hogsett said in the statement. Hoosier is a nickname for people from Indiana.

Huang, a Chinese national, pleaded guilty in October to economic espionage. He also admitted to stealing trade secrets from the Minneapolis-based grain distributor Cargill Inc., the U.S. Justice Department said in October. Financial losses from his conduct exceed $7 million, the U.S. said. It’s the first such prosecution in Indiana under a provision of the Economic Espionage Act that bans trade-secret theft to benefit a component of a foreign government, the government said.

Eight such cases have been brought since the law was enacted in 1996, the U.S. said.
James Edgar, Huang’s attorney, didn’t immediately respond to a voice-mail message seeking comment on the sentencing. Huang has been in federal custody since he was indicted and will begin serving his sentence immediately, said Tim Horty, a spokesman for the U.S. Attorney’s office in Indianapolis. The government will seek to deport him after his sentence, Horty said in a phone interview.

Huang worked for the Indianapolis-based unit of Midland, Michigan-based Dow Chemical Co., where he researched the development of organically derived pesticides, from 2003 to 2008.
While at Dow, he shared confidential information with at least two people, one of whom conducted research first at the Hunan Normal University in China and later in Dresden, Germany, according to a plea agreement, which didn’t name the people.

In 2008 Huang went to work for Cargill as a biotechnologist. He admitted that while at Cargill he stole one of the company’s trade secrets -- a key component in the making of a new food product -- which he gave to a student at Hunan Normal University, the U.S. said in a statement yesterday.

Prison Sentence in Akamai Trade Secrets Case

We posted on this one last June. The case involved a former employer of Akamai caught in a sting operation trying to sell company trade secrets to what he thought was Israel.

Now, UPI.com reports, Elliot Doxer of Brookline, MA has been sentenced to six months in prison and a $25,000 fine for foreign economic espionage.

According to reports, Doxer tried to sell trade secrets valued at $10 million including “confidential contracts between Akami and the FBI, [Department of Homeland Security], a leading aerospace company and several Department of Defense contractors."

Coca-Cola Moves "World's Most Valuable Trade Secret" to a New Vault in Atlanta

The New York Daily News is reporting that Coca-Cola has moved the "secret formula" for its international brand-name soft drink to an impressively high security-looking vault in Atlanta.

Late last week, the company released photos of the formula’s new home as part of a promotional campaign for its shrine-like World of Coca-Cola museum, where the recipe is now entombed in a massive steel vault.

While this is all just for show and a marketing blitz - it still interests us at this blog in that the company recognizes and heralds not only that its secret, but the expense and caution with which it holds and maintains that secret. Not a bad message. http://www.thecoca-colacompany.com/dynamic/press_center/2011/12/coca-cola-secret-formula-moves-to-the-world-of-coca-cola.html

Profile of a Trade Secret Thief? 37 Years Old, Male and Probably a Programmer or Engineer

Online e-zine computing.co.uk is reporting that Symantec has come out with another survey/report that reveals something new - the average trade secret data thief is 37 years old, male and probably either a programmer or engineer.

The piece notes: "According to Symantec's research, nearly two-thirds of those that commit IP theft will already have another job lined up. Three-quarters of insider thefts involve data the thief has authorisation to access. Typically IP thieves target trade secrets, business information such as billing details and price lists, source code, proprietary software, and business plans."

We are going to keep our eyes peeled for the Symantec report. One wonders what definition of "IP theft" they are working with - there are lots of examples of employees copying data on the way out the door but it certainly does not always constitute "IP theft." We also thought we'd post about this one because we've always liked the way the British spell "authorisation."

High Court Argument in Case Involving UConn Trade Secrets of Sporting and Cultural Supporters Has Twist at Oral Argument

The Hartford Courant is reporting that there was an interesting twist the other day in the oral arguments at the Supreme Court of Connecticut in the case considering whether the University of Connecticut can rightfully withhold/shield records regarding its major ticket buyers for sporting and cultural events. Although we haven't read the brief, apparently the appellant (Connecticut's Freedom of Information Commission, represented by its attorney Clifton Leonhardt) argued that it is conceivable that the University of Connecticut COULD hold trade secrets, even though the Commission's brief contended the public institution could not.

The Courant reports: "Leonhardt caught both the justices and Pelto by surprise Monday when he stepped back from that position. He conceded that the school may have the right to maintain trade secrets, but that Pelto is entitled to the materials he requested for other reasons.
Minutes into Leonhardt's presentation to the court, Chief Justice Chase T. Rogers interrupted Leonhardt to point out that his argument sounded as if it were at odds with the commission's written brief. Later, Leonhardt said in an interview that he does not believe the commission, in its final decision, definitively settled the question of whether UConn can maintain trade secrets. If the commission had found definitively against UConn, he said, such a finding would contradict state law authorizing UConn to create and own intellectual property and to enter into research contracts with private businesses."

This admission in oral argument makes eminent sense to us. There is a significant amount of development of confidential and competitively sensitive IP going on at schools like UConn and the institutions have a right to seek and assert legal protections for that information. There was no need for the Commission to argue that a university has no ability to create and hold trade secrets - the case and argument needn't go that far. This appears to be the judgment call that Attorney Leonhardt made at oral argument and we'd predict it that concession and admission made for smoother sailing in that argument.