BLOGS: Trade Secrets Blog

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Friday, January 28, 2011, 1/28/2011 10:46:00 AM

Nokia Says "No Interest in Huawei's Trade Secrets"

By Todd

We did a post earlier this week ( regarding Huawei's lawsuit filed in federal court in Illinois charging Motorola with attempting to hand over Huawei's technology Nokia Siemens, which announced plans last year to buy Motorola's networking equipment business for $1.2 billion. The complaint asked the court to stop the transfer because it would result in "irreparable harm" to Huawei as Nokia and Huawei compete across the globe.

Nokia has now released a statement "the company wishes to make it clear that it has absolutely no interest in Huawei's trade secrets." Well, folks - that surely isn't going to be the end of this.

Thursday, January 27, 2011, 1/27/2011 10:57:00 AM

Compensated Nuts? Guitar Nut Case Results in Unfair Competition Ruling Under California Law

By Todd

Guitars have a slotted "nut" that the strings go through to reach the tuners. Ernie Ball had a patent on their nut, which was "compensated" to aid in tuning the instrument. They alleged, among other things, that Earvana was infringing on that patent AND they alleged that Earvana had engaged in common law unfair competition. The guitar world was temporarily in discord as the suit progressed. (Pun intended).

Well, the federal court in California ruled that Earvana WAS infringing on the Ernie Ball nut patent. BUT, on the common law unfair competition claim the court held:

"Ernie Ball contends that the Defendant engaged in unfair competition by using Ernie Ball's trade secrets to create competing copy products and selling the products to others. The claim was pled as a common law unfair competition claim, but should have been plead under the Uniform Trade Secrets Act. The allegations do not state a claim outside of the UTSA. The claim therefore fails."

Ernie Ball won the more imporant patent claim but the court made clear that (drum roll please) if you're alleging trade secret misappropriation you can't do so without pleading it as a California UTSA claim.

Wednesday, January 26, 2011, 1/26/2011 09:07:00 AM

Gundlach's DoubleLine Wins First Trade Secret Battle With Former Firm TCW Group

By Todd

You might recall we covered this nasty, brutish but not short battle back in early 2010: TCW Group accused its former golden boy Jeffrey Gundlach of stealing employees and trade secrets regarding clients but leaving a cache of porn and drugs in his office.

Well, the Los Angeles Business Journal is reporting that the trial court has sided with DoubleLine and has thrown out two of the claims in a lawsuit filed by TCW against a mutual-fund trust subsidiary of DoubleLine and denied TCW’s attempt to have the trust temporarily closed. TCW last month sued the trust and its trustees for allegedly misappropriating trade secrets after Gundlach was fired from TCW in December 2009.

“There are insufficient factual allegations that the trust … ever possessed, disclosed or used TCW’s alleged trade secrets,” West wrote in the Thursday ruling.

The judge preliminarily dismissed five other claims related to unfair competition, but he allowed TCW to amend those complaints.

This case surely isn't over but TCW didn't win this round.

Tuesday, January 25, 2011, 1/25/2011 09:22:00 AM

Shoe Meets Other Foot: Chinese Firm Huawei Sues Motorola Alleging Trade Secret Theft

By Todd

The Washington Post is reporting that Chinese tech giant Huawei has filed a federal civil action against Motorola in Chicago alleging trade secret misappropriation against the latter company.

The case concerns the announcement last year that Motorola was going to sell its main mobile telecommunications unit to Nokia Siemens Networks. In a complaint filed Monday in federal court in Chicago, Huawei alleged that it had provided Motorola with $878 million worth of equipment and technology for wireless networks - including routers and switching stations - that Huawei had developed since 2000.

Huawei further alleged that the technology was about to be handed over to Nokia Siemens, which announced plans last year to buy Motorola's networking equipment business for $1.2 billion. The complaint asked the court to stop the transfer because it would result in "irreparable harm" to Huawei as Nokia and Huawei compete across the globe.

The theft of Western intellectual property has long been a major issue between the West and China. It figured prominently in the recent summit between President Obama and Chinese President Hu Jintao, during which China agreed to do a better job protecting U.S. software against piracy.

Motorola sued Huawei last year, alleging that Huawei had obtained restricted Motorola technology after some Motorola employees set up a dummy corporation that was used to funnel trade secrets to Huawei. In 2004, computer networks firm Cisco sued Huawei for allegedly using Cisco's computer code in Huawei's products. Cisco dropped the suit after Huawei agreed to make changes in its products.

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

Monday, January 24, 2011, 1/24/2011 09:21:00 AM

Much Litigated FOIA Case Results in Federal District Court Declaration 50 Year Old Airplane Designs Aren't Trade Secrets

By Todd

Public Citizen is reporting that a federal district court in Washington, D.C. has ruled that the Federal Aviation Administration (FAA) cannot block an airplane enthusiast’s request for the design specifications of an antique aircraft because the information is neither secret nor commercially valuable.

Airplane enthusiast Brent Taylor filed a request under the Freedom of Information Act (FOIA) in August 2002 for records relating to a 1930s-era antique aircraft, the Fairchild F-45. After receiving no response from the agency, Taylor filed a complaint in the United States District Court for the District of Columbia. The district court dismissed the case, concluding that Taylor had been “virtually represented” by the plaintiff in a previous FOIA case over the same documents. Taylor’s case went all the way to the U.S. Supreme Court, which, rejecting the theory of “virtual representation,” reversed the lower courts.

Back at the district court, the FAA claimed the requested information should not be disclosed to Taylor because it contained trade secrets. However, in 1955, the Fairchild Engine and Airplane Corporation, the makers of the aircraft in question, sent a letter to the Civil Aeronautics Authority (CAA), the predecessor to the FAA, authorizing the agency to “loan” certification materials – which included specific design information – to members of the public who wanted to repair their aircraft. Fairchild revoked the permission in response to a similar FOIA request in 1997.

The court ruled this week that when Fairchild in 1955 allowed the CAA to release the documents to people who would have no obligation to keep them secret, the documents stopped being secret. Therefore, the information in the documents no longer qualifies as “trade secrets” that can be withheld under FOIA, and the government is obligated to release the documents. The court also ruled that the aircraft’s specifications are not trade secrets because they are no longer commercially valuable, as the technology is outdated and Fairchild no longer manufactures aircraft.

Sunday, January 23, 2011, 1/23/2011 10:55:00 AM

Trial of Chinese Man Accused of Polymer Trade Secrets Theft from Dow

Right on the heels of the visit of China’s president to the U.S. comes another story of Chinese trade secrets theft and commercial espionage.

From the Baton Rouge (LA) Advocate, a story about opening statements in the criminal trial of Wen Chyu Liu, a/k/a David Liou, accused of stealing trade secrets from his former employer, Dow Chemical.

Liu, who worked for Dow for 25 years until 1991, is alleged to have lead an effort to obtain and market the secrets of a Dow polymer known as Tyrin CPE. The secrets were allegedly obtained from employees at Dow facilities in Plaquemine, Louisiana and Stade, Germany.

The prosecutors claim Liu received $500,000 for delivering the secrets. His attorneys claim that he developed an alternative process and obtained patents for it in China.

We’ll follow the story and report back.

Friday, January 21, 2011, 1/21/2011 10:31:00 AM

Steelers' Secret Trick Play May Have Been Shared With Jets By ESPN Reporter

By Todd

Gather Inc. has an interesting piece suggesting that Bob Holtzman, an ESPN reporter, may have been accused by Pittsburgh Steelers Coach Mike Tomlin of inappropriately sharing with the New York Jets a trick play he learned about in private discussions with Tomlin.

You can click on the link above - and we note that Mike Tomlin seems like a guy who can issue his own injunctions. If Holtzman really did disclose the play, we'd imagine that injunction will be permanent.

Have a great weekend and enjoy the games!

Thursday, January 20, 2011, 1/20/2011 10:46:00 AM

China Oriented Espionage Getting Closer Scrutiny

By Todd

As you might guess, we don't sponsor all of the views of opinion pieces and trade secrets stories that we link or introduce to our readers. Nonetheless, we want you to read what ALL sides are saying in order to be able to judge for yourselves what is useful and what might not be.

Now, with that disclaimer established - we link you to a piece in the online magazine Right Side News which examines the ubiquity of Chinese involvement in oh-so-many of the trade secret and industrial espionage cases that become reported.

The piece notes: "But that does not mean these efforts are directed from Beijing. History shows that such espionage activities are not well coordinated. Various Chinese company executives (who are also Communist Party officials) have different requirements for their industrial espionage. In cases where two SOEs are competing to sell similar products, they may both try to recruit agents to steal the same technology. There are also a growing number of private Chinese companies getting involved in espionage. One notable example was when Du Shanshan and Qin Yu passed on technology from GM to Chery Automobile, a private, rather than state-run, manufacturer. In the five trade-secret cases in 2010, most of the suspects were caught because of poor tradecraft. They stored data on their hard drives, sent e-mails on company computers and had obvious communications with companies in China. This is not the kind of tradecraft we would expect from trained intelligence officers. Most of these cases probably involved ad hoc agents, some of whom were likely recruited while working in the United States and offered jobs back in China when they were found to have access to important technology."

We're not recognized experts in theft by Chinese nationals but our continuing review of these reported cases confirms the stated view - rather than a product of directed activities by Chinese government agents, many of the recent reported cases appear to be ones in which the alleged or convicted thief just desires to make a name or money for themselves and are not carried off or perpetrated by expert spies.

Now, this piece we've linked you to also draws some conclusions we don't know what to make of, including: "First-generation Chinese carried out 10 of the 11 publicized cases in the United States last year. Some were living or working temporarily in the United States, others had become naturalized American citizens (with the exception of Xian and Li, who were caught in Hungary). The Chinese intelligence services rely on ethnic Chinese agents because the services do not generally trust outsiders. When recruiting, they also use threats against family members or the individuals themselves. Second- and third-generation Chinese who have assimilated in a new culture are rarely willing to spy, and the Chinese government has much less leverage over this segment of the ethnic-Chinese population living overseas. In the 11 cases in 2010, it is not clear what payments, if any, the agents might have received. In some cases, such as those involving the trade secrets from Valspar and Ford, the information likely helped the agents land better jobs and/or receive promotions back in China. Cash does not typically rule the effectiveness of newly recruited Chinese spies, as it might with Western recruits. Instead, new Chinese agents are usually motivated by intelligence-service coercion or ideological affinity for China."

Where do they get their data or information regarding the motivations and conclusions of Chinese intellegence operatives? To state a conclusion is not the same as supporting a claim. Also, where do they get their data or information regarding the "new Chinese agents"? We have no idea.

Anyway, we thought this piece was of significant interest to our readers to link you up to it.

Wednesday, January 19, 2011, 1/19/2011 11:26:00 AM

Second Trial Begins in Bratz Doll Case: Opening Statements

By Todd

Opening statements were made today in a Santa Ana, California federal courtroom for a trial that U.S. District Judge David Carter has said may take as long as four months. Mattel is seeking damages for copyright infringement and trade-secret theft from closely held MGA, which in turn will ask the jury to hold Mattel liable for unfair competition and stealing its trade secrets.

That's right - both sides are accusing the other side of stealing their trade secrets. This is akin to that old TV commercial: "you got your peanut butter on my chocolate!" "no, you got your chocolate on my peanut butter!"

Bloomberg is reporting that John Quinn, lead attorney for Mattel, opened with “We will prove to you that Bratz was created at Mattel. MGA took Mattel’s design and with it took Mattel’s sales.”

It is also reporting that MGA's attorney, Jennifer Keller, opened saying “MGA didn’t steal Bratz from anybody.”

More reports as they come available.

Tuesday, January 18, 2011, 1/18/2011 04:36:00 PM

Japan Considers Confidentiality Shields for Trade Secrets Implicated in Prosecutions

By Todd

This just in from the Daily Yomiuri Online: Japan is considering a law that will shield trade secrets that are at issue in criminal prosecutions traditionally open to the public.

The Economy, Trade and Industry Ministry will submit a bill to revise the Unfair Competition Prevention Law during the next ordinary session of the Diet, a ministry official said. The revision would help ensure secret information is not publicly disclosed during court hearings for criminal cases of industrial espionage, which in principle are open to the public, the official said.

If the court approves a request by lawyers, during proceedings trade secrets would be referred to as "material A" or "process B," for example, to keep their specifics concealed.

This rule would be applied only in cases of alleged infringement of trade secrets, which was established as a criminal offense by a previous revision to the Unfair Competition Prevention Law made in 2003.

A revision in 2006 toughened punitive measures, extending the maximum term of imprisonment for industrial espionage to 10 years and raising the maximum fine to 10 million yen.

Punishments were toughened further by a 2009 revision that made it an offense not only to use data acquired via espionage for personal gain, but also to copy such data to disks and other storage devices.

In Japan, a majority of companies that fall victim to industrial espionage do not file criminal complaints, for fear of suffering greater damage if confidential information is revealed in indictments or submitted as evidence. As a result, indictments for alleged infringement of trade secrets have been ordered in only two cases.

The ministry hopes the planned revision to the law will result in more companies lodging criminal complaints over industrial espionage.

Thursday, January 13, 2011, 1/13/2011 03:20:00 PM

Accused Renault Execs Say "Wrongly J'Accused!"

By Todd

France24 is reporting that the three Renault executives accused of leaking company secrets to Chinese outsiders have denied any wrongdoing.

French daily 'Le Figaro' claims a Chinese firm paid money into two bank accounts in Switzerland and Liechtenstein that had been opened by two of the car manufacturer's employees. But China's foreign ministry have also come out to say the allegations are without basis.

As Deepthroat once advised: Follow the money.

Tuesday, January 11, 2011, 1/11/2011 09:57:00 AM

Renault Suspends Three Executives in China, Claiming They Passed Secrets to the Chinese

By Todd

Bloomberg is reporting that Renault believes it has fallen victim to an “organized, international ring” that passed on vehicle designs and commercial data, Chief Operating Officer Patrick Pelata said in an interview published Jan. 9 in Le Monde and confirmed by the company. Battery technologies “appear” to be safe, he said.

It is also reporting that China rejected media reports linking its companies to a suspected leak of Renault's electric-car secrets that led to the suspension of three senior executives by the French automaker. Renault has said its next step will be to interview the three suspended executives prior to the possible termination of their employment. The meetings may take place today, Les Echos reported, citing union sources.

The highest-ranking of the accused Renault managers is Michel Balthazard, a vice president for long-term product development who is on the 27-member management committee chaired by Chief Executive Officer Carlos Ghosn, two people with knowledge of the matter said Jan. 5.

Another suspended executive, Matthieu Tenenbaum, previously worked at Nissan before overseeing development of four battery- powered Renault models as deputy head of its electric-vehicle program.

Tenenbaum has received no explanation for his suspension, his lawyer Thibault de Montbrial said in a telephone interview.

“He can’t defend himself because he doesn’t even know what he’s accused of,” Montbrial said. “He obviously denies being a Chinese spy. The accusation would be ridiculous if it weren’t so serious.”

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

Monday, January 10, 2011, 1/10/2011 10:03:00 AM

Ambulatory Trade Secrets

By Todd

The Southeastern Texas Record is reporting that a new lawsuit has been filed by one South Texas ambulance provider against another.

Court filings allege Cindy Bridges managed Southeast Texas EMS for eight years and was trusted with all the company's trade secrets, including medical providers, pricing information and marketing strategies.

"Defendant Bridges converted all of these trade secrets... and formed a competitive ambulance company," the suit states, adding that she is guilty of tortious interference and conversion.

Southeast Texas EMS is seeking a restraining order and injunction to stop the defendants from capitalizing on its trade secrets.

Thursday, January 06, 2011, 1/06/2011 08:34:00 AM

Taiwanese Trade Secrets Ruling Irritates MediaTek

By Todd

According to Focus Taiwan, Taiwan-based IC designer MediaTek Inc. said Wednesday it will appeal a ruling handed down by a district court in Taipei on a trade secret leak case filed by the company.

In a verdict issued Monday, January 3rd, the Taipei District Court sentenced a former MediaTek employee surnamed Yang to nine months in prison that could be commuted to a fine of NT$270,000 (US$9,225) for leaking information to a MediaTek competitor.

What's interesting to us here at Womble Trade Secrets is not the punishment, but the hybrid nature of the verdict. It seems the civil case, brought by a private company, has resulted in a criminal sanction that can be satisfied by the payment of an seemingly insignificant fine. Maybe our confusion explains MediaTek's anger - clearly the court found the defendant to have misappropriated MediaTek's trade secrets.

MediaTek is reportedly appealing, contending that confidential business information is an IC designer's most important intangible asset, and if the law could not adequately protect companies' trade secrets and other intellectual property, the sector's survival would be threatened.

Saturday, January 01, 2011, 1/01/2011 01:10:00 PM

Game Over and Lights Out on Eaton v. Frisby Trade Secrets Case

We’ve had tons of posts on this case going back as far as 2006. In this recent one from last June, we discussed the discovery sanctions against Eaton, the plaintiff in this trade secrets case concerning former employees who went to work for a rival company, Frisby.

Now comes word that the judge has dismissed the whole case, with prejudice, on account of misconduct by plaintiff’s counsel.

According to the Jackson Clarion-Ledger, the Mississippi state court judge found that plaintiff and its counsel tried to influence the then-trial judge (since imprisoned) through a particular counsel hired for that purpose.

According to the article, Eaton will take up the matter on appeal. Its spokesman said "we in no way asked Ed Peters to try to influence Judge DeLaughter or any other judge," adding that "Eaton is a value-based organization...We're very disappointed in the decision."
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