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Wednesday, July 27, 2011, 7/27/2011 02:38:00 PM

Boeing Asks NLRB for Protective Order Protecting Certain Trade Secrets Union Has Subpoenaed

By Todd

The Seattle Times is reporting that Boeing is asking an National Labor Relations Board (NLRB) administrative judge for a protective order that will seal documents and restrict access by the public and press to parts of the ongoing NLRB hearing in Seattle.

Boeing asked the judge Monday "to safeguard the confidentiality of Boeing's sensitive business, commercial and proprietary information," including 787 program information such as its profit margins, schedules, relationships with suppliers, and production plans in Everett and in Charleston.

Boeing's filing states that the union has issued subpoenas for the release of such "trade secrets."

The company also seeks to withhold information from the union that might give it "an unfair advantage in future negotiations with Boeing."

The International Association of Machinists (IAM) union on Tuesday issued a statement saying that the "sweeping" Boeing request would bar the public from "hearing important evidence," including Boeing studies comparing the cost of putting the second 787 line in Charleston with the cost of putting it in Everett.

"If Boeing succeeds with this order, our members won't have the right to hear the facts Boeing's leaders considered when they decided to take their work away," said IAM spokeswoman Kelliher in the statement.

Boeing spokesman Tim Neale said the IAM should "share our concern about protecting Boeing proprietary information and trade secrets from Boeing's competitors."

We'll keep an eye on this one for you and report back what the NLRB Administrative Law Judge decides to do. It is entirely normal and appropriate for some kind of protective order to issue in these matters.

Tuesday, July 26, 2011, 7/26/2011 11:00:00 AM

Racy Gundlach/TCW Trade Secrets Case Commences - Pre-Trial Rulings Exclude Some Evidence

By Todd

You may recall that the lawsuit alleges Gundlach, ousted as investment chief of $110-billion-asset TCW on Dec. 4, schemed for months with top lieutenants to exit the firm with vast amounts of proprietary data.

TCW also seeks to portray the 50-year-old Gundlach as unfit to remain a company officer. The firm said it found marijuana, pornographic DVDs and magazines and "sexual devices" in his TCW offices on the day he was terminated. Gundlach's new firm, DoubleLine Capital, quickly fired back, asserting that TCW's suit had no merit and accusing the company of resorting to "gutter" tactics. DoubleLine said it planned to file a counterclaim against TCW.

Well, they've picked a jury and now the trial will begin. According to Fortune,, TCW is fighting hard to keep away from the jury a memo and deposition suggesting that executives at TCW, a division of Societe Generale, were thinking about firing Gundlach as early as August 2009. If this is the case, it contradicts the firm's allegations that it fired Gundlach only after discovering that he stole company information to start his own firm in December of that year. Why does that matter? Well, Gundlach has counter-sued, alleging that the firm actually fired him so it wouldn't have to pay he and his team between $600 million and $1.25 billion fees. Gundlach is accusing TCW of breach of contract and is seeking $1.25 billion.

The information that TCW is fighting so hard to protect is the deposition of Michael Conn, TCW's head of corporate strategy, along with notes that Conn took during an August 27, 2009 meeting. Court documents show that TCW top officers – including Conn, TCW president Marc Stern and three senior executives – discussed at the meeting what would happen if they fired Gundlach.
TCW says that during the meeting legal advice was sought from TCW general counsel Michael Cahill (who attended by phone), which would protect the discussion under attorney-client privilege.

But the judge in the case disagreed. "The subject of the comments that TCW seeks to redact, and that TCW claims are privileged, do not reflect legal advice of counsel, but rather an apparent justification or explanation of a future act, i.e., the termination of Mr. Gundlach," he wrote in a Motion for Reconsideration, dated Feb 10, 2011.

When TCW asked the court to reconsider its decision to allow the Conn notes as evidence, it seemed to admit that firing Gundlach was discussed in that August 2009 meeting. In fact, TCW may have even been drafting some sort of press release announcing Gundlach's termination.
"The [Conn] notes reflect Mr. Cahill's comments and suggestions how a press release on that topic, or, more generally, how TCW would communicate publicly were it the cause that it later determined to terminate Gundlach's employment," TCW wrote in its motion for consideration dated February 15, 2011. "A lawyer's comment about how to describe an employment action likely to lead to future litigation to his clients is both attorney-client privileged communication and work product."

We'll keep an eye on this one as the evidence is introduced and the witnesses examined. This might be one of those cases where the tail ends up wagging the dog. Currently it sounds like both sides are engaged in virtual hand-to-hand combat.

Monday, July 25, 2011, 7/25/2011 09:53:00 AM

Former Akamai Employee, Thinking He Was Providing Trade Secrets to Israel, Will Plea Guilty To Criminal Economic Espionage

By Todd

The Washington Post is reporting that a former employee of Akamai, a website content delivery company, has agreed to plead guilty to a charge of foreign economic espionage for providing company trade secrets to an undercover FBI agent posing as an Israeli intelligence officer, federal prosecutors announced Thursday.

Elliot Doxer, 42, will admit to providing trade secrets from Cambridge-based Akamai Technologies Inc. over an 18-month period to the agent, whom he believed was an Israeli spy, the U.S. Attorney’s Office for Massachusetts said in a statement. A plea hearing is scheduled for Aug. 29.

Doxer, of Brookline, worked in Akamai’s finance department at the time he committed the alleged offenses. Prosecutors said he sent an email to the Israeli consulate in June 2006 and offered to provide any information he had access to in order to help that country in exchange for $3,000.

Doxer said his main goal was “to help our homeland and our war against our enemies,” prosecutors said.

Israeli officials contacted U.S. authorities about the offer. An FBI agent went undercover and posed as an Israeli agent in September 2007, and arranged to use a “dead drop” location to exchange information with Doxer to avoid detection. From then until March 2009, Doxer visited the drop location at least 62 times and provided an extensive list of Akamai’s customers and employees, including their full contact information, and contract details, according to prosecutors.

He also allegedly described Akamai’s physical and computer security systems and said he could travel to Israel and support special operations in his local area if needed.

Akamai previously said that it had cooperated with the FBI. The firm also noted that there is no evidence that Doxer actually gave information to a foreign government.

Authorities arrested Doxer in August and charged him with one count of wire fraud. That charge will be dismissed as part of the plea agreement.

The espionage charge carries a maximum penalty of 15 years in prison, a three-year term of supervised release and a $500,000 fine.

Tuesday, July 19, 2011, 7/19/2011 05:16:00 PM

Corning Sues Hebei Dongxu Investment Group in China Alleging Misappropriation of Trade Secrets

By Todd

Citybizlist New York is reporting that Corning Incorporated filed suit in the Beijing Second Intermediate People's Court against Hebei Dongxu Investment Group Co., Ltd. for misappropriation of certain trade secrets related to the fusion draw process for manufacturing glass substrates used in active matrix liquid crystal displays ("LCDs").

They are also reporting that on the same day in Korea, Corning Incorporated and Samsung Corning Precision Materials Co., Ltd. ("SCP") filed suits in the Daejeon District Court against Hebei Dongxu, one of its officers, and two other named individuals, for related trade secret misappropriation. SCP is an equity company between Corning and Samsung Electronics Co., Ltd., which uses Corning LCD glass technology under license agreements with Corning.

In these actions, Corning is seeking monetary damages and orders restraining Hebei Dongxu from using, disclosing, or permitting others to use, misappropriated Corning LCD glass manufacturing technology. Two of the individuals named in the Korean suit were previously convicted in Seoul Southern District Court on January 22, 2009, for the theft of certain Corning LCD glass technology that was being used by SCP.

We'll keep an eye on this one for you - here's an American based company suing in China's courts and Korea's courts to protect their intellectual property rights. Novel idea, eh?

Thursday, July 14, 2011, 7/14/2011 11:13:00 AM

MGA Agrees to Recommended Fee Award in Bratz Case of $108 Million

By Todd

The National Law Journal is reporting that MGA has agreed to accept a Special Master's recommendation that it recover $108 million in attorneys' fees in connection with the Bratz doll trade secret fight.

The recommendation was issued on June 20 by attorney Robert O’Brien, who was appointed by the court to help manage the case, but only recently disclosed, according to the NLJ.
MGA is seeking $129 million in attorneys' fees and $32 million in costs after a jury rejected a claim by Barbie maker Mattel that MGA infringed on Mattel’s copyright of the Bratz doll concept. Mattel alleged that designer Carter Bryant formulated the Bratz concept while working at Mattel, before the designer was hired by MGA.

Mattel is disputing O’Brien’s recommendation, and wants to see more than 9,000 pages of billing invoices that MGA turned over, the NLJ reports.

Depriving Mattel of those documents "would be a miscarriage of justice and a deprivation of due process," wrote Mattel's lawyer, Michael Zeller, a partner at Quinn, Emanuel, Urquhart & Sullivan.

The NLJ reports that, according to Mattel's documents, O'Brien recommended that MGA receive $84.7 million in fees associated with defending Mattel's copyright infringement claim and $23.4 million related to pursuing the trade secrets claims.

All we can say is - holy cow!

Wednesday, July 13, 2011, 7/13/2011 11:54:00 AM

Fifth Circuit Holds Solicitation of Customers Utilizing Pilfered Trade Secrets Is NOT An "Advertising Injury" Under Insurance Policy

By Todd

Texas Lawyer has a piece that describes an appeal that went to the Fifth Circuit asking a question about a business provider's liability insurance policy: "If you directly solicit competitors' customers, is that advertising?" The term "advertising" was apparently not defined in the insurance policy and that led to confusion over whether defense fees and a jury verdict of over $13 million should have actually been covered by the insurance policy.

The Fifth Circuit said no.

In the underlying case, Rudamac Inc., a California family-owned printing company, sued its former employee, Daniel Chambers, along with Consolidated Graphics and a subsidiary, Thousand Oaks Printing & Specialties Inc., for Chambers' scheme to steal Rudamac's trade secrets. Chambers was the nephew of Rudamac's owner and president, Helen Mars. According to court papers, Mars "refused to give [Chambers] an ownership interest in the company."
Rudamac brought the case in California state court, alleging that Chambers misappropriated private information from Rudamac about product prices, profit margins and promotions for three of the company's customers when he became a Consolidated Graphics employee.

The jury ruled that Consolidated Graphics committed three torts: misappropriation of trade secrets, intentional interference with at-will employment relations and breach of fiduciary duty. It awarded Rudamac $5,698,000 in compensatory damages plus punitive damages, including $1,500,000 against Thousand Oaks and $6,647,000 against Consolidated Graphics. It did not award damages against Chambers. The judgment was affirmed on appeal.

During the insurance issue litigation, Consolidated Graphics' insurers sought a declaratory judgment in the Southern District of Texas that they had no duty to defend or indemnify the Consolidated Graphics defendants because the trade secrets theft did not constitute an "advertising injury" under the policies. Continental, an excess insurer, filed the declaratory judgment case in July 2008, and Sentry Insurance, the primary insurer, intervened that October.

The Fifth Circuit, affirming summary judgment in favor of the insurance companies, reasoned: "Texas law and our precedent make clear that in the Rudamac litigation against the Consolidated Graphics defendants, it was never alleged that the defendants caused an injury 'in the course of advertising your goods, products or services' within the meaning of Sentry's policy," Owen wrote. "The contacts Chambers had with the three customers were not through public dissemination of any kind. They were direct dealings. The district court did not err in holding that Sentry had no duty to defend the Consolidated Graphics defendants."

Friday, July 08, 2011, 7/08/2011 09:58:00 AM

Kolon Industries Argues DOJ Improperly Subpoenaed Foreign Documents in Trade Secret Criminal Action - Fourth Circuit Disagrees

By Todd

A shout out to our friends at "The Blog of Legal Times" - which is identified as an ALM Publication. They do a great job blogging about legal issues and they focused our attention on a fascinating issue that was just decided by the Fourth Circuit on June 15th.

The issue? Whether the lower court erred by not quashing a subpoena served by the Department of Justice on DuPont for documents DuPont possesses and controls only because they were provided to DuPont by Kolon in civil litigation between those companies over data and trade secrets stolen by a former DuPont employee who went to work for Kolon.

Kolon's attorneys argued that the government shirked traditional means of obtaining foreign documents, including through the use of mutual legal assistance treaties. Kolon’s attorneys alleged prosecutors unfairly piggybacked on DuPont in the civil suit, scooping up documents that would have been outside the scope of the grand jury.

The three-judge appeals court panel disagreed, reasoning that the government’s “substantial interaction” with DuPont does not reveal that prosecutors were directing the company’s civil discovery.

Last July, Senior Judge Robert Payne of the U.S. District Court for the Eastern District of Virginia ruled the government’s interaction with DuPont was not improper. Payne said the subpoenas trumped the civil protective order that guided the sharing of information in the litigation.

Thursday, July 07, 2011, 7/07/2011 10:01:00 AM

Some of TCW Group's Trade Secret Claims Against Investment Wunderkind Jeffrey Gundlach Going to Jury

By Todd

We've blogged about this matter before. Law360 is reporting that a judge in California has sent most of the claims and counter-claims between these parties to the jury, including trade secret misappropriation claims against Mr. Gundlach and his cohorts.

TCW, a unit of Societe General that manages more than $120 billion in assets, filed suit against Jeffrey Gundlach and three other former TCW officers in January 2010, claiming they spent months plotting to leave the firm to form management company DoubleLine Capital LP, pilfering information about clients and trading in the process. DoubleLine is also named as a defendant.

According to the complaint — which alleges breach of fiduciary duties, unfair competition, misappropriation of trade secrets, breach of confidence and other claims — Gundlach was fired for his increasingly unprofessional behavior.

The complaint further described Gundlach as unfit for his duties, alleging that after he was terminated, a search of his offices turned up several items of drug paraphernalia and containers of marijuana — some explicitly labeled “marijuana” — as well as dozens of pornography items and 12 unspecified sexual devices.

Gundlach filed a cross-complaint in February 2010, claiming that TCW broke an oral agreement and improperly fired him in order to avoid paying him between $600 million and $1.25 billion for his past and future work. Three former officers named in TCW’s suit joined the cross-complaint, which alleges several breach of contract claims.TCW moved for summary judgment to throw out the cross-complaint, arguing that an oral contract was never formed, and that even if it was formed, TCW had cause to terminate the agreement for gross misconduct.

Judge West denied the motion, finding there were “myriad triable issues of material fact precluding summary judgment.”

Gundlach and the other cross-complainants filed a more limited motion for summary judgment, asking the court to strike down TCW’s claims for breach of confidence and violation of a California penal code section on the grounds that the claims were both preempted by a California trade secrets law under which TCW is also suing.

Judge West agreed, striking down the two causes of action.

Wednesday, July 06, 2011, 7/06/2011 12:59:00 PM

Lawyers, iPads and Money: Purloined Apple Trade Secrets Lead to Profits and Then Prison

By Todd

BusinessInsider has published an interesting piece on insider trading that took place following the inappropriate disclosure to traders on Wall Street of Apple sales and marketing information.

The piece details the troubled past and future for Walter Shimoon, a Primary Global consultant who pled guilty to charges of insider trading and who allegedly gave 4 people secret information about Apple's plans for the iPad and iPhone 4.

The piece explains how one of Shimoon's hedge fund clients, Kingdom Ridge Capital, a hedge fund founded by former SAC Capital employees Christopher Zepf (worked at SAC from 2002-2007 as a tech portfolio manager) and Brian Thonn (worked as an equity analyst) located in White Plains, New York, allegedly made $560,000 trading Shimoon's secrets in just one month, October 2009.

Shimoon is presumably going to prison. We'd imagine that the hedge fund guys are a little nervous about their futures, too.

Tuesday, July 05, 2011, 7/05/2011 10:29:00 AM

Chicago-based Programmer at CME Group Held By FBI in Alleged Trade Secrets Heist

By Todd

The Chicago Sun-Times is reporting that a 49-year old suburban Chicago resident, who was employed as a senior software engineer with the Chicago-based CME Group, remains in federal custody today after being charged with theft of trade secrets.

Chunlai Yang, who is a naturalized U.S. citizen, was taken into custody Friday morning at his CME office, 550 W. Washington St., Chicago, without incident, by FBI special agents. Yang was charged in a criminal complaint filed Friday in U.S. District Court in Chicago with one count of Theft of Trade Secrets, a felony offense.

According to the complaint, Yang has been employed at the CME since 2000, and is responsible for writing computer code. Beginning in May this year, CME security personnel began monitoring Yang’s computer activity. They discovered that thousands of files had been downloaded to his computer, and some were then copied to removable storage devices, such as “thumb drives.” Many of the downloaded files were critical to the operation of the CME Group and are considered proprietary in nature and contain protected source code.

Subsequent investigation by the FBI determined that Yang had also been in email contact with the assistant director of the Logistics and Trade Bureau for the Zhangiagang Free Trade Zone (their website here: . One of the emails sent by Yang contained an attachment, which was a CME document containing protected source code and proprietary information.

It was also determined that Yang had booked travel to China on a commercial airline flight, scheduled to depart from O’Hare International Airport July 7.

Yang appeared before Magistrate Judge Michael Mason in Chicago, late Friday, at which time he was formally charged.

Yang was ordered held without bond, pending his next court appearance, which is scheduled for July 6. Until then, Yang will be housed at the Metropolitan Correctional Center in Chicago. If convicted of the charge pending against him, Yang faces a possible sentence of up to 10 years incarceration, a $250,000 fine and three years of supervised release.
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