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Tuesday, August 26, 2008, 8/26/2008 05:58:00 PM

Kate Hudson Sued for Allegedly Misappropriating the Formula for Taming Flyaway Hair

By Todd
That's right - this is WombleTradeSecrets' first foray into alleged trade secret theft by a Hollywood celebrity. The complaint is attached in the link above.

A U.S. hair products laboratory says actress Kate Hudson and her partner, celebrity stylist David Babaii, misappropriated its formula for taming flyaway hair.

In a lawsuit filed Friday in Los Angeles Superior Court, 220 Laboratories claims the pair took its "Vanuatu Complex" formula and shopped it to a competing manufacturer without providing it proper compensation, E! News reported.

The suit accuses Hudson and Babaii of fraud, misappropriation of trade secrets, breach of contract, breach of confidence and other charges, the Web site said. It also claims the "eco-friendly" hair care line, called David Babaii for Wildaid, features products and packaging that are too similar to the ideas developed while 220 Laboratories was allegedly negotiating with the pair.

A spokesman for Hudson denied the claims.

"Kate and her attorneys are only just learning of the complaint, as Kate has not yet been served," publicist Brad Carfelli told E! News. "Kate does not know the plaintiffs and has never met with them or spoken with them. Her representatives believe that the claims are baseless and without merit and intend to vigorously defend the lawsuit."

Monday, August 25, 2008, 8/25/2008 11:55:00 AM

Apple iPhone Trade Secrets Cause Buzz in Programming Community

By Todd
The Los Angeles Times is reporting that the software development kit that Apple Inc. distributed to programmers bound them to not discuss the process of creating programs for the iPhone. Companies typically waive such legal restrictions once the product in question launches, but Apple didn't. And it won't say why.

As a result, iPhone developers -- and businesses that cater to them -- say they are prohibited from asking technical questions or sharing tips anywhere in public. On Apple's official support website, moderators remind visitors that they are bound by the nondisclosure agreement and should mind what they say or ask.Conference organizers are trying to figure out how to plan sessions for iPhone software developers when they're not allowed to talk about iPhone software. Book publishers are sitting on how-to manuals, afraid that if they ship them Apple will sue.And software developers are forced to make applications for the iPhone in an information vacuum, without the help of a developer community that is used to openly sharing tricks of the trade.

The Cupertino, Calif., company is famous for tightly controlling its products and image. But even professionals who for years have made products and services to complement Apple's are startled by the information clampdown. Many had hoped to make big money off the much-hyped iPhone franchise, and many developers are. Apple recently said that customers have downloaded more than 60 million games, productivity tools and other widgets through its iPhone App Store, which lets programmers sell software or give it away.

But many Apple enthusiasts are left in the cold."We can't talk about our problems," said Jeffrey Long, a developer for Banterability who is working on a satellite radio program for the iPhone. "At the same time, we can't talk about the problems we've fixed."

Apple did not return calls seeking comment.

When it launched the iPhone last year, Apple decided it would be a closed platform -- developers could create programs that ran on the device's Web browser but not programs that could be downloaded to the device itself, as they can for computers. After a backlash, Apple opened the iPhone to programmers in March and began selling their programs through its App Store in July. Apple says it sells about $1 million in iPhone programs each day. But to get the software needed to create iPhone programs, developers had to sign a nondisclosure agreement. They expected Apple to lift the restrictions on July 11, when the new version of the multifunction gadget, the iPhone 3G, hit stores.

Many developers say they are erring on the side of caution. They interpret the agreement to mean they can talk about the programs that they make, but they can't discuss the Apple developer tools used to make them, even with friends.They also believe they're barred from sharing their thoughts and iPhone programming tips on blogs, on discussion boards, via e-mail and at conferences.After all, Apple has sued before, including acting against a blogger accused of misappropriating the company's trade secrets by publishing scoops about new products. (The case was settled.)

Some have taken the risk and discussed the iPhone development process openly, and so far faced no is making an open-source version of its iPhone blogging software, meaning that anyone can contribute to its development. In the process, WordPress is publicly discussing its work and exposing the software code for its iPhone program. Apple has not complained about the practice to WordPress, said Matt Mullenweg, one of the lead developers.But some developers fear that the gag order is preventing iPhone programs from being as technically sound and polished as they could be.

Wednesday, August 20, 2008, 8/20/2008 02:32:00 PM

$60 Million Trade Secrets Verdict Announced in Utah

By Todd
The Salt Lake Tribune is reporting that American National Insurance Co. will challenge a $60 million verdict awarded by a Utah jury this month to a rival company in a suit over the defection of agents.

James Pozzi, senior executive vice president with the Galveston, Texas-based company, said the punitive damages verdict - which was based on a claim that American National poached Farm Bureau Insurance Co. agents in southern Utah and misappropriated that agency's trade secrets - is excessive. He added that his company is evaluating a "number of legal actions" to overturn it. However, Dennis James, a Salt Lake City lawyer for Farm Bureau, contends that the decision was appropriate.

"I believe the punitive damage[s] award was a powerful message in favor of corporate integrity."

A suit filed in U.S. District Court alleged that Darrin Ivie shared confidential information with American National while still working as a district manager for Farm Bureau's Zion's Cove agency. In addition, Ivie engaged in recruitment efforts that caused at least seven Farm Bureau agents and three recruits to leave the company to become American National employees, according to the lawsuit.

Ivie tendered his resignation in February 2003 and was named a general agent with Farm Bureau the next month, the suit says. About that time, some Farm Bureau customers allegedly received an invitation to a dinner meeting in Fillmore to learn about American National's venture into the farm market.

The defendants - Ivie, American National, two of its subsidiaries and one of its employees, Kenneth Gallacher - were accused of various counts of breach of fiduciary duty, interference with contractual relationships, interference with business relations, misappropriation of trade secrets and civil conspiracy. They denied all the allegations.

However, the federal jury on Aug. 8 awarded Farm Bureau $3,606,214 in compensatory damages. The 11 jurors also awarded punitive damages of $60 million against American National and its subsidiaries and $2.4 million against Gallacher.

Punitive damages are designed to punish wrongdoers. Pozzi, in a press release, complained that the amount has no correlation to the compensatory damages and is unconstitutional.

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

Monday, August 18, 2008, 8/18/2008 08:17:00 AM

Chemical Biggies in Trade Secrets Spat

Dow Jones, via, reports on a trade secrets actions in federal court in the Southern District of New York between Koch Industries subsidiary, Invista, and DuPont and Rhodia.

The claims relate to alleged theft of Invista's trade secrets concerning proprietary technology for the production of adiponitrile, a chemical used in the manufacture of nylon.

According to Invista's allegations, "[u]nable to develop its own comparable technology, Rhodia has decided to take it from Invista and has enlisted the financial, technical and other support of DuPont in its illegal scheme."

Invista claims it bought the core technology as part of $4.1 billion sale of DuPont's fibers business in 2004.

As part of the transaction, DuPont agreed to prohibitions that barred it from competing against Invista and from disclosing the technology and any third party, according to the lawsuit.
The complaint alleges Rhodia obtained unlawful access to the trade secrets through a joint venture between affiliates of Invista and Rhodia.

The lawsuit claims DuPont has joined forces with Rhodia as Rhodia seeks to build an adiponitrile plant in Asia and compete unfairly against Invista.

Wednesday, August 13, 2008, 8/13/2008 09:44:00 AM

Another Public/Private Hybrid Trade Secrets Issue

By Todd
Duke Energy has been sued by a former employee who apparently claims that he was terminated for making an issue about the legality of payments made by Duke Energy to large customers. Duke Energy is now arguing that the legality or illegality of those payments is a matter for the Ohio Supreme Court to consider. Additionally, however, there is the issue of trade secrets contained in those agreements with the large customers. Duke Energy appears to be arguing that the rebates and pricing structure of certain customers' contracts are trade secrets - and we think that argument might be correct. Of course, the argument is going to drive the regular customer for electricity in the Cincinnati area nuts - that big corporate purchasers of energy get their supply cheaper than the little guy. They're going to try to argue that the public has a right to know these sweetheart deals made by publicly-granted monopolies. We'll see . . . .

Wednesday, August 06, 2008, 8/06/2008 09:56:00 AM

Chinese Economic Espionage -- The Mistress is Sentenced

From the AP via Google, a follow up to our earlier post here, concerning an economic espionage case against a Chinese national, Yu Xin Kang, convicted of aiding and abetting the earlier-convicted Tai Shen Kuo. She was Kuo's mistress.

According to prosecutors in the Northern District of Virginia, between March 2007 and February, Kuo obtained secrets on U.S. military sales to Taiwan and updates on Taiwan's new air defense system.

Kang acted as a go-between for Kuo, helping him get information to a handler affiliated with the Chinese military.

Kang was sentenced to 18 months in prison, less than the government wanted, based on the judge's conclusion that she was a puppet in the espionage and only "a minor participant."

I hope everyone is looking forward to the Opening Ceremonies in Beijing on Friday. Keep those laptops closed!

Friday, August 01, 2008, 8/01/2008 09:04:00 AM

More Public-Private Trade Secret Disputes - This Time PETA is Involved

By Todd
The is reporting the Iams Company's records from seven years of pet food research at Mississippi State University are not public documents, the state Supreme Court has ruled.

In 2006, People for the Ethical Treatment of Animals sued Mississippi State University.

It alleged the school violated the Mississippi Public Records Act by denying PETA access to records of dental experiments and other tests on animals conducted since 1999 for Iams.
Iams had argued that the experiments were the company's intellectual property.
Iams said it had made a substantial investment at Mississippi State to develop and protect that property.

PETA said it didn't want trade secrets. PETA said it only wanted to know what happened to the animals at Mississippi State.

PETA claimed Mississippi State wanted an advance fee of $40,497 for the documents it requested. When it reduced the number of pages asked for, PETA claims MSU told them that only 19 of the requested pages would be sent and the cost would be $1,000.

The university claimed the remaining pages contained proprietary information, according to court documents.

In a 2006 ruling, Chancery Judge Dorothy Colom said the type and number of animals used in an experiment, whether surgery will be performed, and information related to animals' pain and discomfort did not qualify as trade secrets.

In a 6-3 ruling Thursday, the Supreme Court rejected PETA's arguments.

"PETA failed to rebut the evidence presented by MSU and Iams that the data and information requested in the subject records constituted trade secrets and/or confidential commercial and financial information of a proprietary nature developed by MSU under contract with Iams.

"Therefore, this court finds that the data and information requested by PETA is exempted from the provisions of the Mississippi Public Records Act," Justice Michael Randolph wrote in the majority opinion.

Presiding Justice Oliver Diaz Jr., in a dissent, said PETA could not dispute Iams' claim of protected trade secrets without seeing the documents. Diaz said Iams and MSU also were allowed to assert that the documents were proprietary information without having to justify the claim.

This is a live issue that we will focus on in future blog posts.
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