BLOGS: Trade Secrets Blog

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Monday, November 30, 2009, 11/30/2009 09:58:00 AM

Starwood Hotels and Hilton Hotels Talk Settlement in High Profile Trade Secrets Case

By Todd

Nielsen Business Media is reporting that the parties are talking settlement.

After Starwood filed the suit last spring, Hilton suspended development of its Denizen hotel brand and placed the two former Starwood Luxury Brands Group executives accused of stealing trade secrets on paid administrative leave.The suit appeared headed toward trial, as demanded by Starwood, but in a court filing this month, Charles Gilman, a lawyer for Cahill Gordon & Reindel, which represents Starwood, asked the judge to postpone a hearing set for Nov. 18 until the week of Dec. 14, noting that "the parties have been exploring the possibility of settlement."A Hilton spokesperson last week said the company has no further comment "beyond the document that was filed last week." Similarly, a Starwood spokesperson offered "no comment at this time."

We'll report back regarding any developments in this regard. We'd bet that the topics for settlement include some hands-off "covenant not to solicit or hire" employees provision and additional restrictions on Hilton's abilities to develop the Denizen hotel brand or hotel concepts that look and operate like the Denizen brand was supposed to. More when we learn it.

Wednesday, November 25, 2009, 11/25/2009 12:48:00 PM

High-End Photography Companies Settle Trade Secrets Suit in Las Vegas

By Todd

Well, the Las Vegas Sun is reporting that this matter has settled.

Peter Lik USA charged in the lawsuit that Scottland, a former Peter Lik employee, had violated his noncompete agreement by soliciting the business of Peter Lik customers on behalf of The Lough Road.

The Lough Road has four galleries around the country and is preparing to open its first Las Vegas location, at MGM Mirage’s CityCenter complex, in December.

The Lough Road, which sells the works of landscape and wilderness photographer Rodney Lough Jr., had denied allegations in the lawsuit that Scottland had violated the noncompete agreement.
Court records show the suit was settled and dismissed last month, with Scottland’s noncompete agreement modified to allow him to continue working for The Lough Road and further amended to specify which customers Scottland could solicit.

This is how these matters often end, folks. So - there you have it.

Tuesday, November 24, 2009, 11/24/2009 10:45:00 AM

Alleged Ford Motor Trade Secret Thief Jailed While Awaiting Trial

By Todd

The Detroit Free Press is reporting that U.S. District Judge Gerald Rosen has ordered that a former Ford product engineer remain jailed while he awaits trial on charges of stealing documents from the Dearborn automaker.

Xiang Dong Yu, also known as Mike Yu, 47, of Beijing, was indicted last month on federal charges of theft of trade secrets, attempted theft of trade secrets and unauthorized access to a protected computer.

On Thursday, Magistrate Judge Mark Randon ruled that Yu could be free while he awaits trial on the charges.

The U.S. Attorney's Office appealed that ruling and Rosen overturned Yu's release on Friday.
During a hearing Thursday, U.S. Assistant Attorney Cathleen Corken argued that Yu, a Chinese citizen, has no family, employment or property in the United States and is a flight risk.

Yu was arrested Oct. 14 at Chicago's O'Hare International Airport, where Corken said the government seized a laptop computer that had thousands of pages of documents from Ford as well as from another, undisclosed company.

The government estimates that the documents are worth $24 million to $32 million.
Corken said Yu, who already faces five felony counts and more than 6 1/2 years in prison, could face additional charges.
Let's face it folks - if you're a highly mobile Chinese national with a number of aliases and you're in Detroit and you're accused of stealing competitively-sensitive secrets from a major auto company, you've got some strikes against you when it comes to being free on bail awaiting trial.

More China Trade Secrets Cases in the Pipeline

On the heels of the failed prosecution of the two Chinese engineers in the NetLogic trade secrets case, Mark Albertson, writing in the SF Technology Examiner, takes notice of the apparent – but not necessarily politically correct – fact that in trade secrets cases in Silicon Valley “the trail always seems to lead to China.”

The NetLogic case, Albertson notes, is “only one of many recent cases where the recipient of trade secrets was in China.”

Albertson mentions the Boeing case as well as the case of Sheldon Meng, a former engineer for Quantum3D, accused of stealing a simulation program for night vision technology.

Monday, November 23, 2009, 11/23/2009 09:05:00 AM

Third Party Litigation Financing Funds Delve Into Trade Secrets Matter

By Todd

We thought this an interesting topic for you to consider - funding of trade secrets litigation by investors unrelated to the firms or the parties involved in the litigation.

MarketWatch is reporting that U.K. commercial dispute investor Burford Capital on Monday announced its first two investments since an initial public offering on the Alternative Investment Market in London last month. The first case involves theft of trade secrets and breach of contract; it is set for trial in a U.S. federal court in May 2010.

Burford will invest $2 million to cover getting it to trial and some legal fees, with potential returns between 35% to 67% of settlements or judgments. The second is shareholder dispute over the application of proceeds from the sale of a business, with a hearing scheduled for February 2010. Burford has invested $2.3 million and could see a return three or four times that amount.

These are interesting arrangements to watch play out. You can read this piece here from AmLaw Litigation Daily regarding a case involving third party litigation financing where the third party wasn't happy with a 10% return and the arrangement itself resulted in litigation.

Friday, November 20, 2009, 11/20/2009 03:47:00 PM

Idaho Health and Home Products Company Sues Former Employees For Trade Secret Theft - And Ubiquitous News Stories Abound Regarding Longevity Payments

By Todd
The Associated Press is reporting that an Idaho health and home products company Melaleuca Inc. accuses a Utah company of raiding some of its top sales staff, infringing on company trade secrets and competing unfairly.

Idaho Falls-based Melaleuca filed a lawsuit in federal court Monday against Max International, its top sales executive and dozens of former Melaleuca sales executives.

The complaint seeks more than $10 million in damages and asks a judge to issue an injunction that would stop future sales staff raids. The lawsuit also seeks to cancel a meeting scheduled for Saturday that's described as another attempt by Max International to lure away top Melaleuca sales talent and their customer data.

"Already attempting to piggyback off of Melaleuca's success by duplicating key portions of its business model, Max now seeks to swell the ranks of its (sales) associates by raiding Melaleuca's marketing executives," the lawsuit states.

Max International, a Salt Lake City-based company, was incorporated in 2006 and produces and sells health and wellness products directly to customers.

Melaleuca, founded in 1985, sells about 350 nutritional and household products, including lotions, detergents and powdered drinks. It employs about 3,400 workers worldwide and has 700,000 customers that buy products from sales executives.

Under the company's operating guidelines, sales executives earn commissions on customer sales or by training and motivating other sales staff in gathering new customers. Each sales representative is required to maintain an extensive database, called a business report, of customer contact information and other sales executives they support. The company considers this catalog of information a trade secret.

The lawsuit accuses Max of luring Melaleuca sales staff with lucrative payments and using information from those Melaleuca business reports, causing former Melaleuca employees to violate noncompete agreements that are designed to prevent workers from using inside knowledge to benefit a direct competitor.

The lawsuit accuses Max of attracting at least eight of Melaleuca's best sales staff in the last year and encouraging each to recruit Melaleuca customers, sales staff and others.

Melaleuca is asking for a jury trial and for a judge to issue a restraining order barring Max from recruiting more Melaleuca sales staff. It also seeks a restraining order on a sales presentation planned by Max on Nov. 21 in Atlanta because it "promises to be another unlawful raid of Melaleuca marketing executives."

NOW, we're scratching our heads here in North Carolina - does anyone find it ironic that just two days ago numerous local news oranizations ran these "stories": or and and

Just wonderin' about the timing of these "news" stories . . . .

Tuesday, November 17, 2009, 11/17/2009 10:07:00 AM

Hedge Fund Withdraws Trade Secret Summons After Concluding its "Evidence" Was Too Shaky to Proceed

By Todd

The AmLaw Litigation Daily is reporting that Amaranth Advisors LLC, the energy trading hedge fund that lost almost $7 billion in 2006 trading in natural gas, has withdrawn its trade secret misappropriation lawsuit summons against Touradji Capital Management, another

According to the summons, Amaranth and Touradji signed a confidentiality agreement in advance of the transfer of Amaranth's base metals portfolio to Touradji. The transfer was part of Amaranth's ultimately unsuccessful attempt to stave off the biggest hedge fund meltdown in history.

Amaranth's summons suggested that Touradji stole confidential and proprietary trade secrets and trading strategies related to the base metals portfolio. But that's where things get complicated. Touradji claims that Amaranth's would-be suit was based on information from two former Touradji employees who are in the middle of their own New York state court litigation with Touradji. Those two former employees are being sued for slander/defamation.

Seems Amaranth had second thoughts about its summons after it learned from Touradji what Touradji intended to prove about their former employees. Suffice it to say that Amaranth concluded that Touradji had the goods on its former employees and, thus, dropped its summons. You can read here about Touradji's claims against its former employees:

Monday, November 16, 2009, 11/16/2009 10:29:00 AM

IMAX Claims Former Partner, Cinemark, Stole The Trade Secrets of the IMAX Theater Experience

By Todd

Courthouse News Service is reporting that IMAX claims its former partner Cinemark defrauded it and stole trade secrets by trying to "reproduce" IMAX's "multiplex movie theaters across the Americas." It claims Cinemark used the secrets to create "Extreme Digital" or XD theaters to provide a "bootleg version of the IMAX Experience."

In its complaint filed in state court in New York, IMAX says it teamed up Cinemark in the 1990s after "two principals of Cinemark ... professed an intent to become one of IMAX's biggest customers."

At the time, IMAX says, Cinemark multiplexes "housed standard, conventional-sized auditoriums," while IMAX theaters were "wrap around." IMAX says it went for the deal because Cinemark promised "to install IMAX systems in ... Cinemark's domestic multiplexes ... and to ultimately provide IMAX an expansion opportunity into Latin American markets, where Cinemark touted a strategic presence." IMAX says it disclosed to Cinemark "confidential and sensitive information regarding the IMAX immersion theatres ... all the details that set IMAX apart from all other industry participants."

But now, IMAX says, instead of promoting the IMAX brand, Cinemark is "blatantly" trying "to reproduce the entire, trademarked IMAX Experience in the form of a product that Cinemark unveiled earlier this year," which Cinemark calls "'Extreme Digital Cinema' ... or XD.'" Cinemark has the brass to claim that XD is "just like" or even "better than" IMAX, according to the complaint.

IMAX claims XD is a "bootleg version of the IMAX Experience." It claims Cinemark "fraudulently misrepresented its intentions to IMAX for the purpose of extracting confidential information." It adds that "over a number of years, [Cinemark] has deliberately misappropriated that information, co-opting ... hundreds of millions of dollars worth of strategic research ... and is now ... seeking to profit from its actions at IMAX's expense." IMAX seeks compensatory and punitive damages for tortious interference, unjust enrichment, theft of trade secrets and breach of contract.
We'll keep our 3-D glasses on and watch for developments in this one.

Tuesday, November 10, 2009, 11/10/2009 11:29:00 AM

TSMC v. SMIC Trade Secrets Case Settles: $200 Million Plus Plus Goes to TSMC and SMIC CEO To Resign

By Todd

LegalPad, a law blog out in California, is reporting that the massive TSMC v. SMIC has settled.

SMIC has agreed to pay TSMC $200 million and an undisclosed amount of stock and warrants, Keker & Van Nest partner Jeff Chanin acknowledged. Chanin and his firm represented TSMC in the matter. TSMC needs to get approval from the Taiwanese government to obtain the SMIC shares, a TSMC spokesman said.

TSMC won big during the liability phase with the jury finding that SMIC stole trade secrets and broke a previous settlement agreement. Chanin said that pursuant to stipulations by both parties a judgment was entered in favor of his client TSMC on all claims and counterclaims.
The two sides were in the midst of the damages phase when the court announced the settlement Monday morning.

Additionally, SMIC announced the resignation of its chief executive, a few hours after the China-based chip maker said it would pay rival TSMC $200 million as part of a deal to settle the legal dispute. SMIC's announcement that founder Richard Chang has stepped down marks the latest twist in China's struggle to build a semiconductor industry, and caps Mr. Chang's effort to build a cornerstone of that industry that could compete with more established overseas rivals like Taiwan's TSMC. Mr. Chang resigned to pursue personal interests, SMIC said in a statement, without elaborating.

SMIC said David N.K. Wang would succeed Mr. Chang. Mr. Wang is an industry veteran who has worked at several companies, including a lengthy stint at Applied Materials Inc.

That's a whopper of a settlement even in the face of possible expert testimony establishing perhaps billions in damages. Goodbye Mr. Chang, hello Mr. Wang.

Monday, November 09, 2009, 11/09/2009 09:24:00 AM

The Trade Secrets of Insanity: Guy Claims Sarah Jessica Parker Stole iPod Trade Secrets From Him and Then Transferred Them to Apple

By Todd

Not all trade secrets lawsuits are alike. The one we're going to tell you about here is like no other we've reviewed.

Seems Franz Wakefield thinks he got screwed. He claims he invented the iPod in 1983, but had the design stolen from him by "Sex in the City" star Sarah Jessica Parker, who then sold it to Steve Jobs in a terribly concerning progression of corporate espionage.

Here's how the scheme allegedly worked: In 1989, the suit alleges, Wakefield won first place in a District Arts Competition and was honored by U.S. Congressman William Lehman and movie stars Parker and Robert Downey Jr. A self-described "trade secret and copyright owner," Wakefield, of Miami, Fla., is president and chief product design engineer with In meeting these people, Wakefield alleges he was asked by the congressman to disclose his "trade secrets" to the FBI, including the concept of the iPod, iTunes, and the iPhone, the last of which he allegedly specifically named nearly 20 years prior to its debut.

The suit claims that Wakefield also developed a friendship with Parker and "made a trade secret deal" with her to commercialize the iPod classic, nano, mini, shuffle, video, touch and photo, as well as iTunes and the iPhone. The supposed agreement would have granted Parker 2 percent of gross revenues from the products. Wakefield said he asked the FBI to watch over him to ensure the security of his inventions and deal with Parker.

Per his "deal" with Parker, Wakefield claims the actress agreed to meet with Apple co-founder Steve Jobs to present his concepts, including the sale of songs via iTunes at $0.99.

In one of the complaint's apparently honest admissions, Wakefield claims he attempted to contact Parker in 2006, only to be told by her attorney that she has no recollection of any conversations regarding the iPod.

So what does Wakefield want? In a letter to Steve Jobs, he demanded: “I… seek legal recourse for the immediate cease and desist from the manufacture, marketing, and sale of all the iPOD, iTunes, and Iphone lines; along with pursuing damages from the products sold to date, unjust enrichment caused by the theft, enforcement of the agreed 2% gross revenues on all sales, and any other applicable damages or compensation.”
We may not keep an eye on this one for you.

Friday, November 06, 2009, 11/06/2009 09:33:00 AM

TSMC v. SMIC Trial Continues - See CVN Video Links of Opening, Witness Examination and Verdict

By Todd

We've been following progress in the massive TSMC v. SMIC trade secrets trial going on in California, see here:
You'll recall that the jury has already found that SMIC had improperly "acquired, used or disclosed" the TMSC trade secrets and violated the 2005 agreement between the companies and that an attorney for TSMC said its expert witness on damages put the requested amount in the range of "ten figures," or $1 billion. This is a whopper of a case, folks - and it's still going on.

CVN - Court View Network - is a provider of live and on-demand video for high-stakes civil litigation. The proceedings they cover via video feed are shown gavel-to-gavel and commercial-free. They even provide live video feeds to their customers. CVN's David Siegel read our blog posts on this case and was kind enough to provide us with a link to CVN's coverage of this trial and we're now providing that link to you from which you can review free sample video clips available from the trial - one from opening statements, one from witness examination and one from the verdict session. Click here: and then click on any or all of the links under the heading "free video clips from the case." For those of you who have never seen a real courtroom or real attorneys presenting a case in one - here's your chance.
We thank David Siegel at Court View Network for providing this opportunity to our readers. We've reviewed Court View Network's offerings and were quite impressed with the breadth of their coverage. When you have ten minutes, click on the link above and watch the selected snippets of this major trade secrets trial - and we happily note for you providing video coverage is a first for the Womble Trade Secrets Blog. This is a cool day for us.

Wednesday, November 04, 2009, 11/04/2009 05:04:00 PM

TSMC Wins Major Trade Secrets Verdict Against SMIC - Damage Award Not Yet Declared

By Todd

The Wall Street Journal is reporting the jury in Oakland ruled Tuesday in favor of Taiwan Semiconductor Manufacturing Co. in a long-running legal battle against rival Chinese chip maker Semiconductor Manufacturing International Corp., which TSMC had accused of stealing trade secrets and violating a prior settlement between the companies.

An Alameda County Superior Court jury still must rule on what damages SMIC might have to pay in the case, but they could be hefty. An attorney for TSMC said it hasn't asked for a particular figure, but noted its expert witness on damages put the amount in the range of "ten figures," or $1 billion.

Jeffrey Chanin, the attorney at Keker & Van Nest LLP representing TSMC, said the case involved 65 instances of trade-secrets theft, which he said amounted to "the biggest case of wholesale corporate espionage" he had encountered.

After a nine-week trial, the jury agreed that SMIC had improperly "acquired, used or disclosed" the TMSC trade secrets and violated the 2005 agreement.

SMIC, among other things, argued that the information in question didn't constitute trade secrets and was widely disclosed in technical literature, said David Steuer, an attorney with Wilson Sonsini Goodrich & Rosati who is representing SMIC.

SMIC also raised counterclaims against TSMC, including the argument that the Taiwan company took trade secrets from SMIC. Some of those issues remain to be tried, Mr. Steuer said.

"Obviously, it's a good day for them," Mr. Steuer said, referring to TSMC. But he said the battle remains "in the middle, because our claims haven't been decided."

Stay tuned, folks. We have never reported a billion dollar trade secret theft verdict - but this might be the case where we do.

Tuesday, November 03, 2009, 11/03/2009 09:22:00 AM

Spring Design Says to Barnes & Noble's Nook E-Reader: "You've Got Our Chocolate in Your Peanut Butter!"

By Todd

Reuters is reporting that Silicon Valley start-up company Spring Design has sued Barnes & Noble and the lawsuit asserts Barnes & Noble misappropriated trade secrets and violated the parties' non-disclosure agreement when it copied Alex's features into its recently announced Nook e-book.

"Spring Design unfortunately had to take the appropriate action to protect itsintellectual property rights," said Spring Design Vice President of Sales andMarketing, Eric Kmiec. "We showed the Alex e-book design to Barnes & Noble ingood faith with the intention of working together to provide a superior dualscreen e-book to the market."

Spring Design first developed and began filing patents on its Alex e-book, aninnovative dual screen, Android-based e-book back in 2006. Since the beginningof 2009 Spring and Barnes & Noble worked within a non-disclosure agreement,including many meetings, emails and conference calls with executives ranging up to the president of Barnes and, discussing confidential information regarding the features, functionality and capabilities of Alex. Barnes & Noble's Nook, which will compete with Amazon's Kindle, is due to go on sale later this month for $259.

Throughout, Barnes & Noble`s marketing and technical executives extolled Alex`s "innovative"features, never mentioning their use of those features until the public disclosure of the Nook. Alex, with its unique Duet Navigator, provides the capability for interactionand navigation techniques of the two screens and furthermore utilizes the capabilities of Android to enhance the reader`s experience by supporting interactive access to the Internet for references and links. As the first in the market to offer an e-book with full Internet browsing while reading and with easy navigational control via its touch screen, Alex is well-positioned to offer the most dynamic and powerful reading device in the market.

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