BLOGS: Trade Secrets Blog

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Friday, September 30, 2011, 9/30/2011 02:24:00 PM

"Breastaurant" Trade Secret Allegations Filed

By Todd

The Huffington Post is reporting that Hooters, the restaurant chain featuring hot wings and scantily clad servers, has sued La Cima Restaurants for alleged misappropriation of trade secrets and other competitive misdeeds in its hiring and utilization of a former Hooters executive now associated with La Cima. The name of La Cima's up-and-coming establishment? Twin Peaks. That is not a misprint.

Hooters alleges Joseph Hummel, Hooters’ former vice president of operations and purchasing, gained unauthorized access to its computer databases and stole competively-sensitive trade secrets to benefit La Cima, where Hummel now works as a partner and chief operating officer. The complaint alleges “Hummel took, and La Cima now possesses, a wide variety of trade secrets and other confidential and proprietary business information belonging to Hooters — information that will endow a competitor like La Cima with significant competitive advantages relative to the company.” Hooters also alleges that other executives conspired with Hummel to resign en masse, saying "Hummel and his former executive colleagues coordinated the timing of their departures from Hooters, and have formed La Cima to exploit their knowledge of Hooters’ trade secrets and confidential business information and thereby compete unfairly against Hooters.”

This is Friday and its a beautiful day outside so we'll leave the rest of this story to your imagination as the Hooters v. Twin Peaks litigation continues . . . .

Thursday, September 29, 2011, 9/29/2011 09:26:00 AM

Former Software Engineer for Chicago Based CME Group Indicted for Criminal Trade Secret Theft

By Todd

Bloomberg Businessweek's Margaret Cronin Fisk is reporting that Chunlai Yang, a 48 year old former software engineer for CME Group, has been indicted by the U.S. Attorney's office in Chicago for two counts of trade secret theft.

The U.S. claims Yang downloaded more than 1,000 computer files containing CME computer source code from December 8, 2010, to June 30, 2011, related to the company’s Globex electronic trading platform. The U.S. alleged Yang transferred the files to his home computer via a flash drive and negotiated to provide source code to the Zhangjiagang, China, chemical electronic trading exchange.

Yang's attorney, Edward Genson from Chicago, says the government has this all wrong. These claims are “specious,” Genson said. “There was a business but it involved real estate." The source codes at CME were “incompatible for use in China,” he said.

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

Tuesday, September 27, 2011, 9/27/2011 02:49:00 PM

The Trade Secrets of Chewy Dog Bone Recipes

By Todd

The Minneapolis St. Paul Business Journal dropped in our lap news of the latest lawsuit commenced in this dog-eat-dog world of trade secrets litigation - the secrets of dog bones. Seems a kiosk operator at the giant Mall of America called Chewzy Dogs LLC entered into a franchise agreement to license the treat recipes from Washington, Pa.-based Just Dogs Barkery Inc. in 2007.

In June 0f 2011, Just Dogs abruptly ended the 10-year agreement, the federally-filed lawsuit said. Chewzy Dogs said Just Dogs offered to transfer its trademarks and trade secrets, including recipes and cookie cutters, but that Just Dogs reneged on that agreement after Chewzy Dogs accepted. Now they are truly in the doghouse and Chewzy has sued them.

We'll report back who's playing in traffic on this one.

Wednesday, September 21, 2011, 9/21/2011 10:23:00 AM

Infogroup Sues Company's Founder and Former CEO Alleging Trade Secret Theft

By Todd

The Omaha World-Herald is reporting that Omaha-based Infogroup, a data, research and marketing company which offers email marketing and other marketing services, has sued its founder and former CEO Vinod Gupta for misappropriation of trade secrets and unfair competition. Infogroup alleges that Gupta obtained the stolen data from former employees after he left the company in 2010 under scrutiny over his spending of company money. Among the challenged expenses precipitating Mr. Gupta's departure were costs for the use of company jets by Gupta, his family and guests including Bill Clinton, as well as meals, cars, legal fees and accommodation in Aspen and Hawaii. Many of the “excessive” payments were made to companies in which Gupta or members of his family had an interest.

Mr. Gupta left in 2010 and then started a company called Database 101 - a company that Infogroup suggests was created to compete with it and interfere with its customer relationships. One interesting "gotcha" allegation in the present lawsuit is Infogroup allegedly planting fake customer identities in Infogroup's database and then monitoring Gupta's company's efforts regarding those fake companies. Days after Infogroup inserted fake company names, the lawsuit says, Database 101 sent a postcard advertisement to "Test Order" at the mailing address that Infogroup was monitoring.

That's evidence that will surely get a judge interested. We'll try and track Gupta's and Database 101's response to that one.

Tuesday, September 20, 2011, 9/20/2011 11:50:00 AM

Las Vegas Sands Claims Terminated Executive Stole Trade Secrets of Their Macau Operation

By Todd

The Boston Globe is reporting that the Las Vegas Sands Corporation has filed a lawsuit against its now-former CEO of its Macau gambling operations, alleging misappropriation of trade secrets. A court hearing in Las Vegas regarding the return of documents and data is scheduled for October 18th.

Las Vegas Sands is claiming that former CEO Steven Jacobs stole and refused to return sensitive company materials. "Jacobs was privy to a host of sensitive LVSC company information that, if revealed, could and would harm LVSC's business and gaming operations," the company said in court filings.

Jacobs oversaw the company's three casinos in Macau for more than a year before he was fired last summer. He has filed a wrongful termination lawsuit against the company and owner Sheldon Adelson.

Jacobs claims Adelson wanted him to use "improper leverage" against unnamed senior Macau government officials to help the company secure rights to sell apartments at its Four Seasons Macau. Jacobs also claims Adelson wanted him to employ a Macau attorney who held a government position.

We haven't seen either side's legal papers yet but these suit-countersuit cases routinely fizzle out in settlements and we'll keep you apprised of how this one plays out.

Monday, September 19, 2011, 9/19/2011 10:09:00 AM

Jury Says Gundlach Liable for Trade Secret Theft, But Awards Him $67 Million on His Counter-Suit

By Todd

The New York Times is reporting that the California jury in the case between TCW and Jeffrey Gundlach and his associates has ended with the jury concluding Mr. Gundlach did technically misappropriate trade secrets but awarding his former employer nothing in damages. TCW was also found liable to Gundlach for back-pay the jury believed they wrongfully withheld from Mr. Gundlach. This is, and these are your bloggers speaking now, a pure split-the-baby outcome for both sides.

In finding Mr. Gundlach liable for misappropriating trade secrets and violating fiduciary duties he had to TCW but awarding TCW no damages, the jury must have concluded that the theft of trade secrets was not the cause of TCW's lost business to Mr. Gundlach. We are just speculating here but it seems likely that the jury concluded that it was Mr. Gundlach's skill as a fund manager, not his ability to communicate directly with TCW's former clients about his departure, that led to the clients leaving and joining him at his new firm. In other words, the misappropriation of trade secrets and fiduciary breaches were NOT the cause of the lost business and therefore TCW was not awarded damages for legal breaches that didn't cause their loss.

There will surely be post-trial motions in this matter and we'll report back what we learn.

Friday, September 16, 2011, 9/16/2011 10:49:00 AM

Former Dow AgroSciences Scientist Pleads Guilty to Economic Espionage Violations Involving China

By Todd

Forbes is reporting a scientist from has agreed to plead guilty to charges of illegally sending trade secrets worth $300 million to China and Germany.

A federal judge in Indianapolis on Thursday scheduled a plea hearing for Kexue Huang for Oct. 18. Huang agreed to plead guilty to one count of theft and attempted theft of trade secrets to benefit a foreign government and instrumentality in a document filed last month in U.S. District Court.

Huang, who was born in China, is a Canadian citizen with permanent U.S. resident status.
Huang was indicted in June 2010 but it was kept secret until August 2010. The indictment charged Huang with 12 counts of theft and attempted theft of trade secrets to benefit a foreign government and instrumentality under the Economic Espionage Act. He also was charged with five counts of foreign transportation of stolen property. We blogged about these charges back in 2010: This was a rare prosecution of a discrete prong of the Economic Espionage Act - the one regarding theft of secrets to benefit a foreign government.

Thursday, September 15, 2011, 9/15/2011 08:03:00 AM

DuPont Wins $919 Jury Verdict Against Kolon in Trade Secrets Matter

By Todd

Bloomberg is reporting that Kolon Industries lost a $919.9 million jury verdict to DuPont Co. over the theft of trade secrets about the manufacture of Kevlar.

Jurors in federal court in Richmond, Virginia, deliberated about 10 hours over two days before finding South Korea-based Kolon and its U.S. unit wrongfully obtained DuPont’s proprietary information about Kevlar by hiring some of the company’s former engineers and marketers.

Kolon has announced its intention to appeal. DuPont is also seeking post-verdict punitive damages of up to $52 million, legal fees and an injunction to prevent Kolon from selling its competing fiber. Kevlar generated $1.4 in sales for DuPont last year.

Tuesday, September 06, 2011, 9/06/2011 07:56:00 AM

GM's Volt Meeting Resistance in China Unless GM Turns Over Technology

By Todd

Interesting piece in yesterday's New York Times regarding the General Motors Volt - the plug-in hybrid favored by President Obama in many speeches on the future of automotive engineering.

But it seems, as the Times is reporting, that China has a couple tricks up its sleeve before it will permit GM to sell its Volt in China. The first is their mandate regarding technology sharing.

The article reports: "The three core technologies that China is most interested in acquiring through the subsidy provision are electric motors, complex electronic controls and power storage devices, whether batteries or a fuel cell. At least one of those systems would need to be included in the technology transfer for a vehicle to qualify for the consumer subsidies. In Ford’s case, Nancy Gioia, director of global electrification strategy, said the company planned to transfer at least one of the core technologies to a joint venture in China at the point when Ford decided to sell such a vehicle in China. Ford’s main joint venture partner in China is the civilian automotive affiliate of China Weaponry Equipment, a large contractor for the People’s Liberation Army."

The article also reports that Chinese subsidies are at issue, as well. China apparently subsidizes almost half of an electric car's cost through direct payments to manufacturers. Pursuant to WTO rules, China cannot discriminate against foreign manufacturers if they are unwilling to transfer technology to Chinese run companies. This could result in the showdown that is being forecasted.
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