BLOGS: Trade Secrets Blog

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Thursday, September 25, 2008, 9/25/2008 02:28:00 PM

Scientist Accused of Illegally Selling Rocket Technology to China

More from the Annals of Chinese Economic Espionage:

From the Associated Press and our sister state, the Commonwealth of Virginia, comes a story regarding Shu Quan-Sheng, a scientist who heads a high-tech company in Newport News, who has been indicted on charges of illegally selling rocket technology to China and offering bribes to Chinese officials. The indictment issued from the federal court in the Eastern District of Virginia in Norfolk.

Shu is 68 and the president of AMAC International Inc. He’s charged with two counts of violating the federal Arms Control Act and one count of bribery. If convicted, he faces up to 10 years on each arms count and five years for the bribery charge.

The government claims he sold technology to China for development of hydrogen-propelled rockets and also accuses Shu of bribing Chinese officials to award a $4 million hydrogen liquefier contract to a French company acting as an AMAC intermediary.

According to AP, federal authorities in recent years have prosecuted more than a dozen cases of either traditional spying or economic espionage related to China.

Tuesday, September 16, 2008, 9/16/2008 07:49:00 AM

Guilty Plea in Metaldyne Trade Secrets Theft

From the Associated Press via the Chicago Tribune, a story concerning three ex-employees of auto parts maker, Metaldyne, who entered a guilty plea for stealing trade secrets for . . . the Chinese.

The pleas were entered Monday, September 15, by Anne Lockwood; her husband, Michael Haehnel, both of Rockford, Illinois; and Fuping Liu, of Flushing, N.Y.

Lockwood, Metaldyne's former vice president for sales; Liu, a former metallurgist; and Haehnel, a former senior engineer, were accused of stealing Metaldyne's technology for manufacturing connecting rods and other parts.

The defendants face sentences between a year and nearly three years.

Monday, September 15, 2008, 9/15/2008 01:52:00 PM

Ex-Intel Employee Accused of Misappropriating Intel Trade Secrets

By Todd
In a criminal complaint unsealed Tuesday, the FBI alleged that Biswahoman Pani of Worcester copied a host of confidential Intel documents, including 13 "top secret" company files containing highly sensitive design plans for future processor chips. In the complaint, filed in late August in US District Court in Boston, FBI Special Agent Timothy Russell of the bureau's Boston computer crime squad said in an affidavit that more than 100 pages of sensitive Intel documents, as well as 19 computer-aided-design drawings, were found in a search of Pani's house conducted on July 1.

According to the affidavit, Pani told his supervisor in May that he was unhappy because he missed his wife, Vandana Padhi, who worked at an Intel facility in California. On May 29, Intel agreed to transfer Padhi to the Hudson plant. But a few hours later, Pani handed in his resignation, saying he was interested in taking a job with a hedge fund. Pani said he would leave the company on June 11, and would be on vacation until that date, but that his wife would continue to work at Intel.

However, Russell said, unbeknownst to Intel officials, Pani had been discussing a possible job at AMD for several months. He began working for AMD on June 2, eight days before his employment at Intel ended. Pani still had access to his Intel laptop and the company's computer network. Russell said Pani used this access to collect sensitive documents that might have provided valuable competitive intelligence for his new employer.

The FBI was called in after an Intel employee learned about Pani's job with AMD and ordered a check of the computer system to see if Pani had accessed confidential documents.

Wednesday, September 10, 2008, 9/10/2008 09:27:00 AM

Motorola Sues RIM for Employee Piracy and Trade Secrets Threats

By Todd
Motorola is suing rival handset manufacturer Research in Motion after it claimed that company has been poaching its staff. The lawsuit, filed last week, says that RIM lured away some 40 of its employees in Florida since the beginning of this year.

In the paperwork, Motorola says that RIM is violating a non-solicitation contract the two companies signed when Motorola announced plans to spin off its handset business as a separate company. In the court filing, Motorola included copies of emails which it says had been sent by RIM to its employees offering the jobs.

The company is concerned that the employees cannot work for RIM without disclosing confidential Motorola industrial secrets.

"Motorola is threatened with losing customers, employees, technology, its competitive advantage, its trade secrets and goodwill in amounts which may be impossible to determine," the company said in the court filing.

However, the company is seeking token damages of just US$50,000.

Earlier this year, Motorola sued Apple after former Mobile Devices executive, Mike Fenger jumped to the company to head up its iPhone sales.

Monday, September 08, 2008, 9/08/2008 11:39:00 AM

Massachusetts Jury Says Former Employee and New Employer Did Not Steal STR Holdings' Trade Secrets for Solar Modules

By Todd
A solar supply company based in Connecticut that plans a $300 million initial public offering lost an intellectual property case in a Massachusetts court last week, raising new questions about its vulnerability to competitors that seek to use its technology.

A Superior Court jury in Northampton, Mass., rejected claims by STR Holdings that a former employee working for a rival misappropriated trade secrets in developing an encapsulant that shields solar modules from weather damage.

STR Holdings, which employs 1,700 Specialty Technology Resources Inc. employees at facilities in the United States and Spain, said the ruling “will not have a material impact on our business.”

But in its registration statement filed with the Securities and Exchange Commission July 31, the company had warned that a negative ruling in the case could expose it to greater competition, saying: “The outcome of this litigation is unknown and, if we are unsuccessful, competitors may be legally entitled to use certain proprietary technologies that have historically given us a competitive advantage in the marketplace.”

STR had filed suit against JPS Industries and former STR employee Jim Galica, claiming the South Carolina-based company misappropriated trade secrets in developing its own encapsulants, which were introduced in 2006, a year after Galica left STR to join JPS.

The jury ruled that a misappropriation of trade secrets had not occurred. The verdict not only opens the door for an immediate competitor, but also underscores STR’s lack of patent protection and heavy reliance on trade secrets, as cited in its SEC documents.

STR acknowledged in its registration statement any breaches in its trade secrets may “undermine our competitive position,” and further legal actions to defend them “may be protracted and expensive.”

Friday, September 05, 2008, 9/05/2008 03:26:00 PM

Nobel Biocare Receives $2 Million Settlement from Keystone Dental

By Todd
Swiss-based Nobel Biocare has settled an unfair competition and trade secrets misappropriation lawsuit against U.S. competitor Keystone Dental and will get $2 million as well as certain guarantees regarding proprietary material.

"The settlement terms provide for Keystone Dental to pay $2 million to Nobel Biocare and that Keystone Dental not hire or solicit any current Nobel Biocare employee through February 1, 2009," the world's largest maker of dental implants said in a statement.

Nobel Biocare filed a lawsuit in late 2007, saying Keystone Dental systematically targeted and hired Nobel Biocare's sales and marketing employees to gain an unfair competitive advantage.

Under the settlement, Keystone Dental, funded by private equity firm Warburg Pincus, is required to destroy confidential and proprietary information on Nobel Biocare in its or its employees' possession, Nobel said.

Wednesday, September 03, 2008, 9/03/2008 04:43:00 PM

$57.5 Million Trade Secrets (Default) Judgment in North Carolina

From the Raleigh News & Observer, and right in our backyard, news that a North Carolina judge has granted Durham bio-pharmaceutical company, Serenex, a $57.5 million default judgment against Chinese businesses for corporate espionage and stolen trade secrets. (We reported on the filing in July, 2007 here.)

This was, as you can read here, a unique case in that the trade secret thieves actually tried to use the information to patent a cancer technology seemingly derived from the information stolen - ingenuitous criminals, no doubt.

Serenex claimed that its former chemist, Yunsheng Huang, passed along trade secrets to Beijing Gylongli Sci. & Tech. Co. and GYLL Biomedtech. Serenex also sued Tongxiang Zhang, a member of the Chinese Communist Party who runs the two Chinese companies. Serenex also alleged that Zhang and others filed a patent application for a cancer treatment similar to Serenex's.

Serenex was acquired earlier this year by Pfizer.

Reverse Engineering Software

From develop, a website for European game developers, a short but thoughtful article concerning the right to engage in reverse engineering and the associated perils of outsourcing.

It's in the context of games, but applies more generally to any sort of software code.

Tuesday, September 02, 2008, 9/02/2008 06:50:00 AM

Lawyers and Competitive Intelligence

Although it doesn't address trade secrets directly, the National Law Journal has an interesting article on gathering competitive intelligence and how legal ethics might impede wide-open intelligence gathering by lawyers.

The article raises interesting questions:

"Experts agree it is unethical to misrepresent one's status or position to obtain information. But what about failing to identify yourself in a public place when others around you are talking about a competitor's proprietary information? Is an act of omission (failing to identify yourself) in the gathering of CI unethical? Is taking advantage of someone else's mistake unethical? What about misrepresenting intent versus identity in gathering CI (saying you are conducting a legal industry survey when you are really only interested in gathering CI regarding a particular subject)? These questions highlight the dichotomy between moral conduct and current ethical standards."

The answers, as one might expect, are not easy to find.
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