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Tuesday, March 31, 2009, 3/31/2009 10:07:00 AM

Former Congressional Investigator Talks About Trade Secret Protections in Congressional Investigations

By Todd

John Sopko is formerly a counsel to Congressional committees and currently a partner in the Akin Gump law firm. His bio can be found here:

The following exchange from a Metropolitan Corporate Counsel piece captures Mr. Sopko's views regarding the touchy issue of trade secrets that are sought by Congress in its investigatory function:

Editor: What role does e-discovery play in congressional investigations?
Sopko: Discovery of electronic documents is a major tool for congressional oversight committees. Most congressional investigations start off with a document request, usually massive in scope, that attempts to capture electronic documents and messages. A committee may issue multiple requests, so the recipient has to be particularly careful in messages sent after or in response to the first request. Numerous witnesses have learned to rue the innocent email commenting on their views of the committee and its members that is captured in a subsequent request.

Editor: Can trade secrets be protected? What about the attorney-client privilege?
Sopko: The courts have ruled that Congress does not have to recognize these privileges, but they can be protected, particularly if you know how to negotiate with the committee members and their staff. Most congressional members and staff with whom I've dealt recognize the importance of those privileges and do not want to harm a company by needlessly releasing trade secrets. However, as in most matters with congressional oversight, these things must be negotiated on a case-by-case basis.

Editor: To what extent does the trial bar feed off disclosures made in connection with congressional investigations? What strategies can be used to mitigate this risk?
Sopko: There is a bit of that actually going both ways. The plaintiff's bar feeds off disclosures made before committees resulting in litigation. Likewise, material disclosed in the course of litigation often ends up on the Hill and becomes the basis of investigations. Probably one of the best-known examples came out of the tobacco litigation.

Mr. Sopko's advice - that trade secret disclosure protocols should be negotiated before disclosures are made to a potentially leaky Congressional committee - makes great sense.

Monday, March 30, 2009, 3/30/2009 09:46:00 AM

Chicago-Area Valspar Employee Arrested By FBI For Suspected Trade Secret Theft - Chinese Connection

By Todd

David Yen Lee, 52, was arrested at his home Thursday and ordered held without bail Friday in federal court in Chicago, the FBI said. He faces up to 10 years in prison if convicted of the felony offense. Lee, a naturalized U.S. citizen, worked for Minneapolis-based Valspar Corp., a maker of paints and industrial coatings.

Lee, former technical director of new product development for Valspar's architectural group, quit March 16—two weeks after returning from a business trip to China, the FBI said. When Valspar workers examined the company laptop computer and BlackBerry device he turned in when he resigned, they found that all temporary files had been deleted, suggesting he had "taken steps to clean his computer user history," a criminal complaint stated.

"Valspar found a hidden file containing unauthorized software programs including a data copying program," the complaint said. Also, data including Valspar trade secrets had been downloaded to the computer without authorization, the complaint stated. Lee had booked a one-way airline ticket from Chicago to Shanghai scheduled to depart Friday, authorities said

Wednesday, March 25, 2009, 3/25/2009 10:59:00 AM

The Trade Secrets of 9/11: Federal Court Considers Arguments Related to Sealed 9/11 Documents

By Todd

A Manhattan federal court will hear oral arguments today on whether more than a million pages of documents related to the Sept. 11, 2001 terrorist attacks should remain sealed.

Judge Alvin K. Hellerstein of the United States District Court in New York City will hear arguments from The New York Times and the Reporters Committee, as well as victims’ families and attorneys for the aviation industry defendants.

The documents come from lawsuits the families of certain Sept. 11 victims brought against airlines and related defendants. According to a statement from the plaintiffs’ attorneys, more than a million documents remain sealed by an overbroad protective order that allowed the defendants to unilaterally designate vast numbers of documents as containing confidential trade secrets.

Neither the victims’ families nor the media groups seek to unseal documents the government has classified as containing “Sensitive Security Information.”

Attorneys for the victims’ families seek to set aside the aviation defendants' designations of confidentiality, arguing that documents withheld as trade secrets include such important information as “whether the airport screeners’ magnetometers were working on 9/11; whether the screeners were qualified for their jobs in terms of language skills, citizenship, past criminal record and other factors; video footage of the hijackers going through airport security; and training manuals for screeners.”

While we haven't reviewed the briefs of the parties, we question the argument that "documents regarding whether airport screeners' magnetometers were working on 9/11" or information of that type constitutes a trade secret. Information about airport screening, qualifications for screeners, information about the screeners, training manuals for screeners - all dating back to practices and protocols in place in 2001 and before - is surely to have changed since then and as such is stale and provides no competitive advantages in the aviation defendants now or even when the suits were brought. As such, it is hard to see how a trade secrets defense to unsealing these items will prevail.

Tuesday, March 24, 2009, 3/24/2009 04:08:00 PM

Senator Grassley Weighs In on FDA Trade Secret Issues

By Todd

We reported here: about the warning sent out by Acting Commissioner Torti to employees of the FDA regarding their duty to protect certain information the FDA obtains regarding, among other things, private companies' trade secrets. This didn't sit too well with Senator Grassley from Iowa - he shot back the letter copied below:

The text of the letter Grassley sent today to the Acting Commissioner of the Food and Drug Administration is below - we've bolded the relevant references to trade secret concerns:

March 24, 2009
Frank M. Torti, MD, MPH
Acting Commissioner
U.S. Food and Drug Administration
5600 Fishers Lane Rockville, MD 20857

Dear Dr. Torti:

As a senior member of the United States Senate and the Ranking Member of the Committee on Finance (Committee), I have a duty under the Constitution to conduct oversight into the actions of executive branch agencies, including the activities of the Food and Drug Administration (FDA/Agency). In this capacity, I work to ensure that FDA is completing its mission to protect the public’s health and makes responsible use of the public funding provided for medical studies. Decisions made by FDA often form the basis for action taken by the Medicaid and Medicare programs which fall under the exclusive jurisdiction of the Committee. I am concerned about a recent memorandum you sent to FDA employees warning them of their obligations to keep certain information confidential. While I appreciate the fact that some information, including certain business trade secrets, needs to be protected from unauthorized disclosures, I have serious concerns that your memorandum goes beyond legitimate privacy concerns and appears to run contrary to many statutes protecting executive branch communications with members of Congress. Specifically, your memorandum notes that certain information acquired from businesses and industry is protected as confidential and may only be disclosed in limited circumstances. Your memorandum cited the Food, Drug, and Cosmetic Act, the Freedom of Information Act (FOIA), the Trade Secrets Act, and the Privacy Act, as well as FDA regulations as the controlling authority for determining when a document or information may be disclosed. You added that FDA employees who violate these provisions may face disciplinary sanctions and criminal liability. I appreciate your concerns with protecting confidential information from unauthorized disclosures. These protections play an important role in allowing business and industry to work cooperatively with regulatory agencies. However, I am concerned with the timing of your memorandum, given some recent high profile matters concerning your Agency and the release of information that has shown failures in FDA’s regulatory mission. My concern is that this recent memorandum could be viewed by some as an effort to chill and/or prevent FDA employees from exercising their rights under whistleblower protection laws to communicate with Congress. Fox example, internal FDA documents released recently seem to suggest that lobbying may have influenced the decision in a device approval.[1] Another internal document shows that a physician was removed for inappropriate reasons from a recent safety panel.[2] In both, cases, I do not believe that Congress would be notified unless whistleblowers spoke up. Dr. Torti, I have been an outspoken advocate for whistleblowers and have authored numerous whistleblower protection provisions. Whistleblowers are some of the most patriotic people I know—men and women who labor, often anonymously, to let Congress and the American people know when the Government isn’t working so we can fix it. As such, it would have been prudent for you to include a section in your memorandum that outlines the interplay between protected confidential and trade secret information and making protected disclosures to Congress and/or Inspectors General in accordance with the whistleblower protection laws. Absent such a discussion, many FDA employees could take this memo to mean that they could be criminally sanctioned for providing information to Congress. As you may be aware, 18 U.S.C. § 1505 states, in pertinent part: Whoever corruptly, or by threats or force, or by any threatening letter or communication influences, obstructs, or impedes or endeavors to influence, obstruct, or impede the due and proper administration of the law under which any pending proceeding is being had before any department or agency of the United States, or the due and proper exercise of the power of inquiry under which any inquiry or investigation is being had by either House, or any committee of either House or any joint committee of the Congress-- Shall be fined under this title, imprisoned not more than 5 years or, if the offense involves international or domestic terrorism (as defined in section 2331), imprisoned not more than 8 years, or both. Additionally, denying or interfering with employees' rights to furnish information to Congress is also against the law. I have attached another copy of 5 U.S.C. § 7211 to this letter for your reference. That law states: The right of employees, individually or collectively, to petition Congress or a Member of Congress, or to furnish information to either House of Congress, or to a committee or Member thereof, may not be interfered with or denied. Finally, federal officials who deny or interfere with employees' rights to furnish information to Congress are not entitled to have their salaries paid by taxpayers' dollars. I have attached a copy of P.L. 111-5 § 714 to this letter for your reference, which states: No part of any appropriation contained in this or any other Act shall be available for the payment of the salary of any officer or employee of the Federal Government, who - (1) prohibits or prevents, or attempts or threatens to prohibit or prevent, any other officer or employee of the Federal Government from having any direct oral or written communication or contact with any Member, committee, or subcommittee of the Congress in connection with any matter pertaining to the employment of such other officer or employee or pertaining to the department or agency of such other officer or employee in any way, irrespective of whether such communication or contact is at the initiative of such other officer or employee or in response to the request or inquiry of such Member, committee, or subcommittee; or (2) removes, suspends from duty without pay, demotes, reduces in rank, seniority, stats, pay, or performance of efficiency rating, denies promotion to, relocates, reassigns, transfers, disciplines, or discriminates in regard to any employment right, entitlement, or benefit, or any term or condition of employment of, any other officer or employee of the Federal Government, or attempts or threatens to commit any of the foregoing actions with respect to such other officer or employee, by reason of any communication or contact of such other officer or employee with any Member, committee, or subcommittee of the Congress as described in paragraph (1). FDA employees have the right to talk to Congress and to provide Congress with information free and clear of Agency influence. Further, these employees have the right to be free from fear of retaliation or reprisal. You should review these important statutes and reevaluate the message sent by your memorandum. I believe that you should take the further step of issuing a second memorandum to FDA employees outlining their rights and whistleblower protections, as well as outlining the FDA’s responsibilities for respecting those protected disclosures. Such a memorandum would go a long way toward ensuring that the FDA remains “committed to the principles of open Government and transparency” as you stated in your memorandum.


Charles E. Grassley

Ranking Member

Monday, March 23, 2009, 3/23/2009 09:17:00 AM

Trade Secrets and Army Contracts

An interesting story from the Fulton County Daily Report about a case pending in the Northern District of Georgia, Southern Coach v. Dep't of the Army, concerning the Freedom of Information Act (FOIA), trade secrets, and the general issue of transparency in government contracting.

Southern Coach lost a long-time Army vehicle leasing contract and wanted to find out why. It made a FOIA request to see the winning bid.

The Army provided a copy of the contract, but with all the individual vehicle rental rates redacted. When Southern Coach asked for an unredacted copy, the Army waited for fourteen months and then said "no."

Southern Coach filed suit in federal court claiming that the Army failed to act promptly and then improperly continued to withhold the material.

Not surprisingly, the Army is claiming that the redacted information is proprietary and the story has a good precis of how trade secrets work under FOIA:

FOIA does contain an exemption for "trade secrets," such as customer lists,
secret formulas and financial data, according to the guide. That exemption is
intended to shield "sensitive internal commercial information" about a company
that could cause it "substantial competitive harm."

But a "trade secret" under FOIA should be given a "fairly limited
meaning" to include only information generally not known in the trade that is
commercially valuable, secretly maintained or used in making, preparing,
compounding or processing a commodity, according to the guide.

In order to exempt documents containing commercial or financial information
from a FOIA request, the government must prove the information is confidential
and would cause "substantial harm to the competitive position" of the individual
or company from which the information was obtained.

"Substantial harm" means more than just a likelihood that a business might
suffer some embarrassment or commercial loss, according to the guide. Instead,
it must include data pertaining to assets, profits, losses and market shares as
well as detailed information filed to qualify for loans and government

Sadly, as a rule, many agencies tend to over-designate to the detriment of transparency and taxpayers.

Friday, March 20, 2009, 3/20/2009 11:27:00 AM

New Trade Secrets Movie Starring Julia Roberts

Well sorta. According to film reviewer Steven Rea in the Philadelphia Inquirer, the new movie Duplicity concerns "corporate espionage - the pinching of trade secrets and lucrative new formulae." Rea, it seems, misses the days when espionage in movies meant menacing codes, nuclear weapons, and deadly toxins.

Now, the protagonists -- Julia's character and Clive Owen's -- work for companies "like Proctor & Gamble - conglomerate purveyors of toothpastes and laxatives, ointments and oils."

Okay, it may be boring for Rea, but it's not every day that the subject of this blog is also the subject of a blockbuster Hollywood movie. Let's hope it has a good opening weekend.

US FDA Deputy Commissioner Warns FDA Employees "No Leaks of Trade Secrets"

By Todd

U.S. Food and Drug Administration Deputy Commissioner Frank Torti is warning employees against leaking companies' trade secrets, a memo indicates.

Commissioner Torti's memo, which was obtained by the In Vivo blog (see here:, outlined prohibitions against leaking commercial information that "can result in disciplinary sanctions and/or individual criminal liability," The Wall Street Journal reported Wednesday.

Torti goes on to include "internal memoranda, letters, and e-mail to and from employees within FDA" in the ban, encompassing such items as drafts of policymaking documents, draft notices of proposed and final rules and drafts of other Federal Register documents, the newspaper said.
The memo comes as the FDA has been weathering congressional attacks in recent years for unauthorized disclosures of competitive company information, the Journal said.

Thursday, March 19, 2009, 3/19/2009 11:20:00 AM

Former Employee of Harland Robertson Co. Indicted for Alleged Trade Secret Theft

By Todd

A former Brighton, Michigan man was indicted Thursday by a federal grand jury on charges of wire fraud, theft of trade secrets from a Livonia, Michigan company. He was also charged with making false statements to federal investigators.

Thomas McKinney, 38, of Spring, Texas, was arrested near Houston by federal agents, said U.S. Attorney Terrence Berg. The indictment charges that in 2005, McKinney, while employed by Harland Robertson Co. of Livonia, stole its trade secrets and intellectual property and went to work at a new company. McKinney stole blueprints and drawings for chucks which Harland

Robertson manufactured for sale to the automotive industry and similar companies, Berg said.

The chucks involved were devices that held a moving part for the purpose of performing a machining or manipulation operation against a stationary tool. The designs and data for the chucks were trade secrets. McKinney worked as a salesman at Harland Robertson, and had access to its trade secrets and intellectual property.

The indictment also charges McKinney with making false statements to the FBI.

“When a corporate insider steals critical trade secrets, he puts at risk the competitive advantage of the victim company,” Berg said. “Corporations cannot afford to lose trade secrets in today's global economy where competition is fierce.”

If convicted as charged, McKinney could receive a maximum sentence of 20 years imprisonment for the charge of wire fraud, 10 years imprisonment for the theft of trade secrets, and up to five years for the false statements charge. He could also be fined up to $250,000 and ordered to pay restitution.

An indictment is only a charge and is not evidence of guilt. The case was investigated by the FBI. The prosecution is being handled by Assistant U.S. Attorney Christopher L. Varner.

Wednesday, March 18, 2009, 3/18/2009 11:08:00 AM

Boston-Based Telecom Firm Alleges Trade Secret Theft By Employee

By Todd

Granite Telecommunications filed a complaint in Massachusetts federal court last week against Stephen Levee, a former employee in Granite’s Atlanta office who was fired last month, and Telesource Consulting LLC, a firm that Granite claims was using the information to divert existing and potential customers away from Granite.

In the lawsuit, Granite claims Levee had been improperly accessing customer account data and leaking it to Telesource for at least three years. Telesource would earn a commission if a customer left Granite for another telecom provider and would then give a portion of that commission to Levee, according to Granite’s lawsuit.

In one example cited in the suit, Logan’s Roadhouse left Granite to get phone services from Bullseye Telecom, a competitor of Granite’s. Logan’s, a restaurant chain based in Nashville with nearly 200 locations, represented about $420,000 in annual revenue for Granite.
Granite claims Levee gave confidential information about Logan’s to Granite before Logan’s switched to Bullseye.

Rand Currier, Granite’s chief operating officer, said he learned about the conspiracy last month. He said he flew to Atlanta to fire Levee after Granite’s information technology staff verified that Levee was leaking confidential data.

“When we heard about it, for someone who had been here for years, we were shocked,” Currier said. “It’s very disappointing.”

Levee, a Georgia resident who joined Granite not long after the company was launched in 2002, declined to comment about the lawsuit. Telesource, which is based in Atlanta, couldn’t be reached for comment.

A representative for Bullseye, which was not named as a defendant in the suit, said the company couldn’t comment because it wasn’t familiar with the suit.

Granite is asking a judge for an order that would block Levee or Telesource from further using confidential information regarding Granite’s clients. Granite also wants to be compensated for its lost revenue.

“We’re going to put every resource we can into making sure he pays back every penny he’s capable of paying back of what we lost,” Currier said.

Granite has been one of the South Shore’s fastest-growing employers. The company, which started seven years ago, currently employs about 700 people and collected about $360 million in revenue last year. It specializes in wholesaling phone service for companies with locations in multiple states.

Audio Story on Internet Security Threats

From National Public Radio's On the Media, an audio report concerning the Internet which is turning 40-years-old. The story outlines the cyber-threats to the Web going forward.

Among other interesting things, former national security advisor Richard Clarke tells of espionage by both the Russians and Chinese hacking into computers at the Pentagon in recent months.

In the words of the show's host, Brooke Gladstone, as "the importance of the Net has grown . . . along with it so has the sophistication of the attacks and the sense of impending doom."

For those concerned about Internet security, this is a thought-provoking piece.

Monday, March 16, 2009, 3/16/2009 01:30:00 PM

XpertUniverse Sues Cisco For Allegedly Stealing Trade Secrets

By Todd

This just in - XpertUniverse has sued Cisco Systems for allegedly stealing its trade secrets related to XpertUniverse's "Expert on Demand" offerings. A copy of the complaint filed in Delaware federal court is attached above. We'll keep an eye on this one for you.

Friday, March 13, 2009, 3/13/2009 01:49:00 PM

Sun Microsystems Denied Summary Judgment in Trade Secrets Case

By Todd

Versata Software accused Sun Microsystems of patent infringement and trade secret misappropriation related to product configuration software. The case is filed in the United States District Court for the Eastern District of Texas. Versata is no stranger to litigation:

In December, Sun filed three separate motions for summary judgment in an attempt to have the cases dismissed. In a three sentence order entered and filed yesterday, Judge T. John Ward denied all three motions.

This case is going to a jury if it doesn't get amicably resolved first.

Thursday, March 12, 2009, 3/12/2009 11:17:00 AM

Are There Risks in Publishing Allegations of Trade Secrets Theft?

By Todd

If you click on the link above, you'll see that Atrua has published a press release regarding its allegation that one of its competitors, a company called Authentec, has misappropriated Atrua trade secrets on multiple occasions. The press release was apparently made by Atrua's Director of Marketing and is published via a site called "WebWire." Atrua doesn't exactly couch their claims as claims - they refer to "the trade secret theft" and "their misappropriation of Atrua's trade secrets."

Many of you know that allegations contained in legal pleadings filed in court are entitled to judicial immunity - “immunity” from lawsuits for defamation based upon statements made in the filed documents, regardless of the intent in making the statements.

But what if the company publishes, outside of the legal/judicial process, their claims that someone else wronged them in some way - is that also entitled to judicial immunity? That issue is not so clear. We admit to not having briefed or researched this issue but we believe that publishing statements or contentions from a legal pleading and airing it outside of the courtroom is a risky endeavor.

Atrua has now published outside of its legal pleadings its statement that Authentec has stolen its trade secrets. The published report doesn't say "Atrua claims this . . . " or "Atrua believes that . . . " it says Authentec misappropriated trade secrets. The world can read this published statement - as is evidence by the fact that we read it in North Carolina.

Atrua may ultimately prove its claims that Authentec DID misappropriate its trade secrets. Truth is a defense to a defamation claim. But if Atrua doesn't ultimately prove its claims, it might have just subjected itself to a claim for defamation by publishing the report outside of the judicial process in a way that presumably takes the statements outside of the shield/cloak of absolute immunity.

Wednesday, March 11, 2009, 3/11/2009 09:17:00 AM

Kansas Jury Awards $17.5 Million Trade Secrets Verdict

By Todd

A Manhattan, Kansas electronics design and manufacturing company has been awarded nearly $17.5 million in actual and punitive damages in a lawsuit alleging breach of contract, fraud, fraudulent concealment and misappropriation of trade secrets after a deal with a French company to make a propeller deicing system dissolved.

Randy O’Boyle, president and CEO of ICE Manhattan, said he learned of the verdict today. The case went to trial in early February at the Frank Carlson Federal Building, with U.S. District Judge Julie Robinson presiding.

“We were successful,” O’Boyle said. “More than anything it means the big companies of the world can’t get away with mistreating the smaller companies.”

In the lawsuit, originally filed on Nov. 15, 2005, ICE Corp. alleged it entered into a contract with Ratier-Figeac, a French company, for the design, development and manufacture of a propeller deicing controller for an A400 M, a military transport aircraft being developed by Airbus.
Ratier-Figeac is a wholly owned subsidiary of Hamilton Sundstrand Inc., a Connecticut corporation, according to court records. The French company manufactures parts and ships them to Hamilton for assembly and testing.

The lawsuit said an upgrade to the system, changes in its design and other factors increased the costs of the component and its development, and in June 2005, Ratier-Figeac representatives instructed ICE to cease all development work.

In addition to breach of contract, ICE Corp. alleged the defendants “wrongfully appropriated confidential, proprietary and trade secret information” the Manhattan company created to a French competitor.

Tom Buchanan, attorney for ICE Corp., said today the nearly $17.5 million award includes:
-- $153,000 in actual damages, against Ratier-Figeac for breach of good faith and fair dealing.
-- $4.79 million in actual damages, against Ratier-Figeac for misappropriation of trade secrets.
-- $10 million in punitive damages, against Ratier-Figeac for intentional misappropriation of trade secrets.
-- $35,000 in actual damages, against Hamilton Sundstrand for unjust enrichment.
-- $2.5 million in punitive damages, against Hamilton Sundstrand for intentional misappropriation of trade secrets.

Tuesday, March 10, 2009, 3/10/2009 09:59:00 AM

Deutsche Bank Suing Departed Financial Advisor Now Employed with Morgan Stanley - Alleging Trade Secrets Theft

By Todd

Law360 is reporting that the U.S. investment and securities arm of Germany's Deutsche Bank is suing a former employee it claims stole confidential information and poached two assistants when he took a job with rival Morgan Stanley on Friday.

This suit comes close on the heels of a suit filed by Merrill Lynch against Deutsche Bank for poaching 12 senior bankers from Merrill Lynch:

Deutsche Bank Securities Inc. filed a complaint in the U.S. District Court for the District of Columbia on Monday seeking a preliminary injunction against James Wohlgemuth pending the outcome of an arbitration proceeding before the Financial Industry Regulatory Authority.

Wohlgemuth worked as a financial adviser in Deutsche Bank's Washington, D.C., branch office for almost 22 years before "abruptly" resigning to work at Morgan Stanley on March 6, the bank claims.

According to the suit, Wohlgemuth poached two Deutsche Bank sales assistants — Kathryn Collison and Cristina Gabalda — to join him the same day.

The suit also alleges Wohlgemuth breached the bank's code of conduct and his common law obligations by stealing the names, addresses and phone numbers of clients before his resignation.

The financial adviser “improperly solicited” these clients to close their Deutsche Bank accounts and open new ones at Morgan Stanley, which offered “significant financial inducements” to Wohlgemuth in return, according to the complaint.

The bank urged the district court to issue a temporary restraining order and a preliminary injunction barring Wohlgemuth from further using Deutsche Bank's confidential and proprietary information and from soliciting any employees of his former division to work for him until the resolution of the bank's claims in arbitration.

According to the suit, Wohlgemuth had worked for Deutsche Bank since August 1987 before his defection to Morgan Stanley. During his employment with the bank, Wohlgemuth serviced approximately 1,500 accounts with assets of about $424 million and earned almost $3 million in commissions in 2008 alone.

The suit claims Wohlgemuth had access to highly confidential Deutsche Bank customer files during his employment and violated the bank's code of professional conduct when he took the information with him on his departure.

The code of conduct, the bank said, stipulates that employees must handle confidential and proprietary information — including customer lists and business plans — “in strict confidence.” It also bans workers, during the term of their employment and for 120 days following departure, from soliciting former co-workers from their jobs.

The firm said Wohlgemuth was fully aware of his obligations to comply with its internal policies regarding confidentiality of its trade secrets.

“The trade secret information that, on information and belief, defendant has misappropriated was entrusted to Deutsche Bank by its customers with the expectation that it would remain confidential and would not be disclosed to third parties. Defendant had access to this information solely by virtue of his employment by Deutsche Bank,” the bank said. “Deutsche Bank's customer list is the lifeblood of its business.”

Monday, March 09, 2009, 3/09/2009 10:45:00 AM

Johnson & Johnson Subsidiary Sues Bausch & Lomb For "Flagrant Pirating" of Employees and Theft of Trade Secrets

By Todd

Johnson & Johnson subsidiary Vistakon Pharmaceuticals LLC asked a federal judge Thursday to put an end to Bausch & Lomb Inc.’s “flagrant pirating” of Vistakon’s sales force, days after filing suit over the alleged wrongdoing.

Vistakon urged Judge Timothy J. Corrigan of the U.S. District Court for the Middle District of Florida to issue a preliminary injunction barring B&L from trying to recruit Vistakon’s sales staff as it prepares to bring a new antibacterial eye solution to market in April.

Last month, Vistakon filed suit against B&L for tortious interference and violation of Florida’s Unfair and Deceptive Trade Practices Act after B&L allegedly tried to lure its rival’s best sales representatives to help debut B&L’s ophthalmic eyewash.

While B&L sells contact lenses and contact lens solutions, its new product is the first ocular anti-bacterial product, and the defendant is trying by hook or by crook to assemble a sales force with relevant expertise, the complaint says.

“In the past two to three weeks, plaintiff is aware that B&L has solicited at least one-fourth of plaintiff’s sales representatives and is inducing them to breach their agreements with plaintiff,” the complaint said.

B&L is fully cognizant of its unlawful actions, informing the sales representatives that if they defected they would by promoting a competing product and misappropriating Vistakon’s customer relationships and good will, according to the complaint.

In addition to violating employment law with its “raid on plaintiff’s talent," B&L is trying to weaken its competitor by usurping a full quarter of its expert sales staff, the complaint says.

In order to contact Vistakon’s employees, B&L inappropriately obtained internal confidential contact information, the complaint says.

B&L is launching Optura in April to compete with Vistakon’s ocular anti-bacterial treatment for conjunctivitis and eye infections following surgery, Vistakon says, and by co-opting the employees, B&L will assemble a crack sales team overnight to vie for a market worth several hundred million dollars a year.

Vistakon’s sales team is highly trained and constitutes a considerable investment by the company, which expends roughly $25,000 in training each representative and loses as much as $100,000 in sales while bringing the individual up to speed, the complaint says.

The defendant's actions are consistent with a series of moves it made in recent years on Johnson & Johnson Vision Care Inc.’s talent pool, leading to the hire of numerous J&J executives, the complaint says.

The suit alleges one count of intentional interference with a contractual relationship, one count of interference with a beneficial relationship and one count of violating the state’s trade practices act.

Vistakon seeks a injunction upholding the employees’ noncompete agreements and preventing B&L from recruiting any Vistakon staff for its Optura product, as well as an order prohibiting the defendant from hiring any Vistakon employee for the next year.

The suit also asks B&L to relinquish all internal Vistakon documents, and seeks an award of compensatory and punitive damages as well as attorneys’ fees.

These companies have a litigious past between them: We'll keep a dry eye on this story for you.

Trade Secrets and Tires – Arrest in Topeka in Economic Espionage Case

From the Kansas City Star, another warning shot concerning economic espionage.

The paper reports that two engineers from Wyko Tire Technology Inc. of Greenback, Tennessee, Clark Alan Roberts, 46, and Sean Edward Howley, 38, were arrested on March 6 and charged with conspiring to steal trade secrets from Goodyear Tire & Rubber Co. for use in designing manufacturing equipment . The two pled not guilty.

Wyko Tire is part of Netherlands-based Eriks Group. It designs and builds tire-making equipment for tire companies, including Goodyear.

According to the indictment, Roberts and Howley conspired to visit a Goodyear plant in Topeka, Kansas in May 2007 under a ruse to evaluate Wyko equipment for possible repairs "when, in fact, as they then well knew, they intended to take unauthorized photographs" of Goodyear equipment.

The story says that the engineers were interested in Goodyear's proprietary "roll over-ply down device" used to wrap rubber around a cable, which creates an inner bead of the tire, and then applies the bead to the wheel hub. It was one of the machines for making very large "off the road" tires for earth-moving equipment that Wyko had contracted to provide Haohau South China Guilin Rubber Co. Ltd. under a $1.2 million order. Wyko had never built one of the machines before, the indictment said.

So Howell and Roberts traveled to Kansas. The indictment says they lied to their Goodyear escorts to get into the plant, they carried a cell phone camera into a restricted area and Howley took seven photos of the roll over-ply down device while Roberts "stood at a distance to look for Goodyear employees."

Friday, March 06, 2009, 3/06/2009 08:51:00 AM

Merrill Lynch Accuses Deutsche Bank of Employee Raid and Trade Secret Misappropriation

By Todd

Portfolio Media, Inc. is reporting that investment giant Merrill Lynch & Co. Inc. is seeking $100 million in damages from rival investment firm Deutsche Bank, claiming Deutsche Bank compromised its trade secrets when it improperly hired 12 former employees from Merrill's financial institutions group last February.

The suit, filed on Tuesday in the New York State Supreme Court, accuses Deutsche Bank of raiding and unfair competition, aiding and abetting breaches of loyalty and fiduciary duty, tortious interference, breach of contract and misappropriation of trade secrets and confidential information.

The suit also names former Merrill Lynch treasurer Eric Heaton as a defendant in the case. The plaintiffs claim that Heaton, as former co-head of the financial institutions group, played a critical role in coordinating the employees' departure for Deutsche Bank.

In addition to the $100 million and additional punitive damages, Merrill Lynch is asking the courts to issue a preliminary injunction barring Heaton from working for Deutsche Bank. In response, Deutsche Bank has agreed to put a 90-day hold on hiring Heaton.

“We believe these mass resignations were part of a carefully orchestrated plot by Deutsche Bank to raid a key Merrill Lynch business unit in violation of Merrill's trade secret and fiduciary rights and to encourage employees with ongoing obligations and common law duties to Merrill to breach them and leave,” the bank said in a prepared statement.

Heaton and the 11 other Merrill employees – coming from offices in New York, London and Hong Kong – all tendered their voluntary resignations on Feb. 3 without advanced notice. As a former top executive, Heaton was required to give at least six months' advanced notice before handing in his resignation, the suit contends.

In the complaint, Merrill Lynch notes that its former employees will be responsible for performing nearly identical duties in the same arenas, putting Merrill's own ability to make money with those investments at risk.

"The only real difference is that, instead of generating tens of millions of dollars in annual revenues for Merrill Lynch, now they will be generating these enormous revenues for Deutsche Bank,” the complaint said.

The lawsuit also claims that Deutsche Bank is legally prohibited from hiring nine out of the 12 employees for a period of between 30 and 90 days after they left Merrill.

Eric Heaton is allegedly bound by a separate noncompete agreement.

According to the complaint, these employees were contractually prohibited from directly or indirectly soliciting co-workers, working for a competitors or sharing confidential business information. David Heaton, Eric Heaton's brother and one of the disputed Deutsche Bank hires, is accused of sending proprietary information about Merrill to himself via e-mail in the days and weeks before his departure.

A Deutsche Bank representative said the company has no comment on the pending complaint.

The case is scheduled to go before New York State Supreme Court Justice Eileen Bransten for a hearing on Merrill's order on March 16.

Thursday, March 05, 2009, 3/05/2009 02:18:00 PM

Algorithms as Trade Secrets

An interesting article from the Guardian (U.K.) concerning algorithms. From the subhead:

Ever wondered why traffic lights turn red when they do? How Amazon works out its recommendations? Or how Google prioritises its search lists? It's all done by algorithms - jealously guarded mathematical recipes that increasingly dictate how we lead our lives.

In the words of the article "algorithms are like computer programs or flowcharts - a sequence of steps that examines what is happening and comes to a conclusion. "


Since these recipes have helped internet companies cook up billions in profits, the precise details of the mathematical mechanisms are jealously guarded as among the companies' most valuable assets. Forget the recipe for Coke or the Colonel's blend of herbs and spices, these are the trade secrets of the 21st century. And wherever there are secrets, there are people desperate to unlock them. Around the world, countless hours and millions - perhaps billions - of pounds are spent trying to unravel the inner workings of the web's most powerful algorithms.

Google, for example, is reputed to spend millions keeping its key search algorithms a secret.

Tuesday, March 03, 2009, 3/03/2009 09:10:00 AM

Trade Secrets Theft "Common" According to New Survey

On February 26, 2009, the Washington Post ran a study with headline sure to induce dread in many employees: “Data Theft Common by Departing Employees.”

According to the story, the Ponemon Institute, on behalf of Symantec, interviewed one thousand individuals who had left an employer in the last year.

The results were shocking: nearly 60% of those leaving jobs steal company data when they go. Of those who admitted to that behavior, 79% said they did so despite knowing that their former employer did not permit it. One more scary figure jumps out: 67% of those who took data, said they did so “in order to leverage a new job.”

Among other things, the survey respondents took email lists, financial and non-financial business information, customer contact lists, and employee records.
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