BLOGS: Trade Secrets Blog

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Tuesday, May 31, 2011, 5/31/2011 09:14:00 AM

ABA Journal: Federal PACER Document Filing System May Reveal Trade Secrets Formerly Believed to Be Shielded

By Todd

The ABA Journal is reporting that the PACER protocol for hiding redacted information in court documents filed with Pacer don’t always work, according to a study that suggests tens of thousands of the online filings may have failed redactions.

Timothy Lee, a PhD candidate in computer science at Princeton, conducted the study. He found 194 documents with not-so-hidden information that included trade secrets; personal information; and names of witnesses, jurors or plaintiffs. Lee wrote about his study at Freedom to Tinker, a blog hosted by Princeton’s Center for Information Technology Policy.

Lee explains that PDF documents have multiple layers, and text may still be under a blacked-out rectangle. Extracting the information can be as easy as cutting and pasting.

Lee found the 194 documents by writing a computer program to detect redaction boxes in the 1.8 million Pacer documents in Princeton’s collection. The software identified about 2,000 documents with redactions. Of those, 194 had redactions that didn’t work.

Lee notes that Pacer reportedly has about 500 million documents. He cautioned that Princeton’s Pacer documents aren’t a random sample, so it’s difficult to estimate just how many Pacer documents have similar problems. Still, he writes, it’s safe to say there are thousands, and probably tens of thousands, of documents in Pacer with failed redactions.

We'll keep an eye on any response from the federal judiciary.

Friday, May 27, 2011, 5/27/2011 01:35:00 PM

PayPal Sues Former Execs and New Employer Google in Trade Secrets Spat Over

By Todd

PayPal has filed a lawsuit against Google following the announcement of Google's new Wallet and Offers features, claiming that the company stole PayPal's "trade secrets" to create the services. PayPal alleges in its complaint that a key PayPal employee moved to Google following failed negotiations for Google to adopt PayPal as its go-to payment platform on Android.

PayPal claims that it had been "developing capabilities to provide large retailers with next generation 'mobile payment' point of sale technology and services." The company further alleges that a former employee who had "intimate knowledge" of these secrets, senior executive Osama Bedier, was recruited to Google by a former eBay executive, Stephanie Tilenius, and hired on January 24 of this year.

Google has issued a press release as follows: "Silicon Valley was built on the ability of individuals to use their knowledge and expertise to seek better employment opportunities, an idea recognized by both California law and public policy," a company spokesperson said. "We respect trade secrets, and will defend ourselves against these claims."

The complaint filed by PayPal is linked above if you click on the title to this post.

Have a restful and enjoyable weekend, folks.

Tuesday, May 24, 2011, 5/24/2011 12:33:00 PM

Bratz Doll Trial Victor Seeks $130 Million in Attorneys' Fees, $177 Million in Punitive Damages and $32 Million in Costs

By Todd

That's right, folks - Bloomberg is reporting that the victorious MGA Entertainment, Inc. is seeking post-trial amplification of their victory by seeking $130 million in attorneys' fees, $177 million in punitive damages and $32 million more in compensable "costs."

Let's focus on this punitive damages request for a moment. The jury was convinced that Mattel (the maker of the less-bratty Barbie doll) employees and agents used deceptive means (we understand these to be phony, falsified business cards such that Mattel could review MGA's new doll offerings at toy shows). According to Bloomberg the jurors "awarded MGA $3.4 million for each of the 26 instances in which they found that Mattel had misappropriated a trade secret."

The question now becomes whether the court (not the jury) is convinced that Mattel acted "willfully and maliciously" is misappropriating those secrets. We are not sure but we surmise that Mattel is arguing that the trebling of the damages found by the jury compounds the error made by the jury in awarding compensatory damages in the first place. The compensatory methodology the jury used (e.g., $3.4 million times each of the 26 instances of fraudulent entry into MGA's space during the toy shows) is likely something Mattel is going to ask to have set aside. As such, Mattel is surely asking the judge to consider the post-trial JNOV or remittitur request BEFORE getting to MGA's trebling request.

Mattel's argument is likely to be that the jury's methodology was not a compensatory methodology at all - how could it be that at each of those reported 26 discrete trade shows MGA was damaged by Mattel's fraudulent entry and review in the exact same amount? Mattel will likely argue that the jury wasn't "compensating" MGA at all -but, instead, punishing Mattel on its own. As most of you know, the punitive damages for trade secret theft are left to the judge, not the jury.

We'll keep an eye on this one for you - and wonder with you: how much work did how many people do to generate $130 million in attorneys' fees?

Monday, May 23, 2011, 5/23/2011 11:54:00 AM

Texas Jury Hits Accenture with $95 Million Verdict in Trade Secrets Suit Brought by Wellogix

By Todd
Law360 is reporting that a federal jury in Texas on Friday awarded software company Wellogix Inc. $94.4 million in a contract and trade secrets suit that accused consulting firm Accenture LLP of reneging on a joint marketing deal.

The jury found that Accenture had misappropriated and stolen Wellogix’s trade secrets from May 2006 onward, and said it must pay Wellogix $26.2 million in compensatory damages and $68.2 million in punitive damages.

Wellogix, which makes software to help companies manage their so-called complex services, sued Accenture in 2008 for allegedly ignoring six agreements that created a marketing alliance between the two companies.U.S. District Judge Keith Ellison trimmed the case in April, granting Accenture summary judgment on claims that it breached a fiduciary duty by cutting Wellogix out of a software sale to its client BP PLC, despite an alleged agreement to help Wellogix push its products.

The oil company retained Accenture to help it overhaul its IT system, and despite the agreement, BP and Accenture bought the entire customized software package from Wellogix rival SAP AG, according to Judge Ellison. The theft of trade secrets claim arose from Accenture's alleged use of Wellogix source code in the software package.

Thursday, May 19, 2011, 5/19/2011 03:13:00 PM

Societe Generale Has ANOTHER Former Employee in Trade Secrets Crosshairs

By Todd
Do you recall reports of Samarth Agrawal, the former Societe Generale trader, who admitted under questioning from his own attorney in his trade secret theft criminal trial that he DID steal the French bank's code and he DID show it to the potential new employer and that he DID know it was wrong? See:

Well, Bloomberg is reporting that Societe Generale has now accused a former foreign-exchange trader of misappropriating trade secrets involving clients for his future employer, Credit Agricole. (Note: we remember from our Latin training that agricola meant farmer - so this must be the institution that gives loans to farmers?)

Societe Generale SA, in a lawsuit filed today in federal court in Manhattan, is seeking an order to force the ex-trader, Karma Tenzing, to return the data. The bank said in its complaint that Tenzing was a junior salesperson on it foreign exchange desk from January 2010 until April 28 when he left for Credit Agricole, France’s third-largest bank by market value.

The documents Tenzing allegedly took from the bank’s New York office and its computer server were found on the hard drive of a computer in his New York office, according to the suit.
“Knowing full well that his lack of ‘a book’ and minimal contacts made him less desirable as a candidate, he set upon a scheme to make himself more marketable to a competitor,” Societe Generale said in the complaint.

“Tenzing knew that taking those documents was wrong,” Societe Generale said. “He was trained by Societe Generale on the need to maintain confidentiality.”

Anne-Sophie Gentil, a spokeswoman for Credit Agricole, couldn’t be reached for comment after business hours in Paris.

Tuesday, May 17, 2011, 5/17/2011 10:42:00 AM

The Right to Repair Act and Trade Secrets

By Todd
United Business Media is reporting that the AAA (Automobile Association of America) has come out in support of the Motor Vehicle Owners' Right to Repair Act (H.R. 1449).

"The purchase of a motor vehicle is now a greater investment than ever before," said Jill Ingrassia, managing director, government relations and traffic safety advocacy for AAA. "New technology has made the cars we drive smarter, more efficient and safer. However, some vehicles are being manufactured with systems that do not allow independent repair shops and auto technicians to interpret information necessary to diagnose and repair problems. Motorists faced with no alternative but to have their vehicles serviced at a dealership may be limited in their ability to get competitive prices, convenient locations, or the option of getting a second opinion."

The Right to Repair Act protects motoring consumers from an expensive and growing vehicle repair monopoly by requiring that car companies provide full access at a reasonable cost to all service information, tools, computer codes and safety-related bulletins needed to repair motor vehicles. The pro-consumer, pro-small business bill is intended to level the competitive playing field for motoring consumers and between new car dealerships and independent repair shops. The legislation further provides car companies with strong protections for their trade secrets, only requiring them to make available the same non-proprietary diagnostic and repair information they provide their franchised dealers.

The supporters of the bill say the following about the automobile manufacturers' trade secret issues:

"The Right to Repair legislation only applies to information necessary to repair a vehicle. The
information needed to produce replacement parts is very different from the information used to
repair a vehicle. Unlike a parts producer, repair technicians do not need to know the internal
software codes or specifications of a part. They only need to know the information that comes
off the diagnostic systems in order to understand where a failure has occurred and how to repair
that malfunction. The bill ensures that the information that comes off the computer is owned
by the car owner, while the internal codes used to develop the software is owned by the vehicle

We'll watch this one for you.

Thursday, May 12, 2011, 5/12/2011 03:11:00 PM

Ninth Circuit's Nosal Decision in CFAA Case Making Headlines

By Todd
We've linked above (click on the title to this blog post) the Ninth Circuit's decision and opinion in their April 29th decision in United States v. Nosal.

Nosal had originally won a dismissal of the United States' indictment in arguing “that the CFAA was aimed primarily at computer hackers and that the statute does not cover employees who misappropriate information or who violate contractual confidentiality agreements by using employer-owned information in a manner inconsistent with those agreements.” In other words, the Korn/Ferry employees could not have acted “without authorization,” nor could they have “exceed[ed] authorized access,” because they had permission to access the computer and its information under certain circumstances.

The United States appealed. Succesfully appealed.

The appellate court held: "Korn/Ferry employees were subject to a computer use policy that placed clear and conspicuous restrictions on the employees’ access both to the system in general and to the Searcher database in particular. By using their authorized access to defraud Korn/Ferry in violation of Korn/Ferry’s access restrictions, Nosal’s accomplices certainly had fair warning that they were subjecting themselves to criminal liability. For this reason, we conclude that the rule of lenity, which applied with particular force in interpreting the phrase “without authorization,” does not support ignoring the statutory language and the core rationale of Brekka. Nosal’s argument that the government’s “Orwellian” interpretation would improperly criminalize certain actions depending only on the vagaries and whims of the employer is foreclosed by Brekka, which held unequivocally that under § 1030 the employer determines whether an employee is authorized. Id. at 1133, 1135. Therefore, as long as the employee has knowledge of the employer’s limitations on that authorization, the employee “exceeds authorized access” when the employee violates those limitations. It is as simple as that."

This is a statutory interpretation issue that will probably ultimately be decided by the Supreme Court - maybe even in this case.

Obviously counsel for companies who permit competitively sensitive access to their employees will be advising that policies need to be audited and revised. These policies should contain clear and conspicuous use restrictions for computer usage. The policy should plainly state that employees may access and use information available on or through work computers only for legitimate and authorized business purposes, and that employee access and use rights will be deemed revoked if they use work computers for unauthorized purposes.

Tuesday, May 10, 2011, 5/10/2011 11:46:00 AM

Weatherford International Asks Texas State Court to Block Former Employees From Using Trade Secrets

By Todd
Law360 is reporting that a unit of oilfield services provider Weatherford International Ltd. asked a Texas state court Friday to block its former employees from using its trade secrets at their new company in violation of a confidentiality agreement.

Weatherford Laboratories Inc. accuses ex-employees of starting a company called Wildcat Technologies LLC in order to use Weatherford's proprietary design of an oil and gas instrument, called a source rock analyzer, to make a knock-off version of it.

The former employees include Daniel M. Jarvie, an engineer who originally designed the source rock analyzer. Weatherford bought the instrument and other assets from Jarvie and his three companies, collectively called Humble, in 2007. But Jarvie and other former Humble employees decamped from Weatherford and formed a new company to sell its own version of the analyzer, according to the complaint.

"Weatherford's success in selling SRAs, and in selling services provided using its SRAs, depends on its ability to protect the trade secrets associated with the design, manufacture and assembly of the SRA," Weatherford said. "It is essential that the court act immediately because defendants are developing their own SR analyzer using Weatherford's trade secrets."

The SRA heats rock cuttings to high temperatures to measure the hydrocarbons that are cooked off, according to the complaint. Weatherford calls it one of Jarvie's most valuable assets.

After Jarvie sold his assets to Weatherford, he and Humble employees Brian Jarvie — his son — and David Weldon joined the company and signed confidentiality agreements, according to the complaint. Christian Fiot, whose company contracted with Humble to design electronic components for the SRA, also joined Weatherford, signing a confidentiality agreement, the suit says.

According to the complaint, Jarvie left Weatherford in February 2008 after getting into physical altercation with another employee, and Brian Jarvie left in July 2008.

In 2010, the Jarvies approached Fiot to manufacture a source rock analyzer with the same design as Weatherford's device, the complaint alleges. Jarvie instructed Fiot to send the invoices to the newly-formed Wildcat, which Brian Jarvie started in March 2010, instead of his own consulting firm, Worldwide Geochemistry LLC, the suit claims."Despite this clear attempt to distance himself from the conspiracy to misappropriate Weatherford's trade secrets, Dan Jarvie has obvious connections to Wildcat," Weatherford said.

Weatherford also accuses the former employees of taking proprietary rock samples and data sets used to calibrate the source rock analyzer."The samples are not generally available in the market, and Weatherford stores them at its laboratories where SRAs are manufactured [and] used," the complaint said. "Those labs are accessible only by certain Weatherford employees with electronic access keys.

Weatherford is seeking a two-week restraining order and injunction against the dissemination of Weatherford's trade secrets.

Jarvie lambasted Weatherford and the complaint Friday in an interview with Law360."It's a frivolous lawsuit but I think it's more of a vindictive lawsuit," Jarvie said. "All they're trying to do is cost me a lot of money. I'm more concerned about time. I think it's a huge mistake on their part."

Sunday, May 08, 2011, 5/08/2011 08:45:00 PM

West Virginia Bank Trade Secrets Case

From The Dominion Post of Morgantown, W.Va., via the Charleston Daily Mail online, a story about a lawsuit filed by Huntington National Bank claiming that six former employees stole more than 2,000 customer records before they quit to go work for competitor bank MVB Bank of Morganton.

Huntington filed the lawsuit in federal court against a former vice president and other mortgage department employees who are alleged to have committed a "brazen and egregious theft of trade secrets."

According to the story, Huntington claims that the defendants spent weeks leading up to their resignations downloading and printing confidential customer records from the bank's secure database -- records they then used to solicit Huntington's existing and prospective customers.

"These customer records did not merely include customer names, addresses and telephone numbers," the lawsuit said. "In addition, the defendants took with them what is presently known to be over 2,000 customer Social Security numbers, dates of birth, bank account numbers, and other highly confidential, personal information of Huntington's customers, the unwitting victims of this theft."

The story goes on to say that Huntington discovered the alleged theft April 19 when a few customers called to ask why MVB was contacting them about the loans they had applied for at Huntington.

Sadly typical, as we know.

Tuesday, May 03, 2011, 5/03/2011 09:20:00 AM

Chinese Workers Charged with Leaking iPad 2 Secrets

By Todd is reporting that three employees of Apple manufacturing partner Foxconn Electronics were charged in March with leaking the iPad 2's case design to third-party accessory suppliers.

The workers, employed at Foxconn's Shenzen, China plant, were arrested by Chinese authorities on Dec. 26, 2010 and officially charged with violating company trade secret regulations on March 23, DigiTimes reported Thursday, citing a Chinese-language report.

Images of iPad 2 cases featuring a rear-facing camera and a thinner profile than the first-generation media tablet from Apple began to surface last December. At the time, Foxconn reported its suspicions that the design had been leaked by its own employees, according to reports.

We will blog what we find out about the legal treatment of these three employees.

Monday, May 02, 2011, 5/02/2011 10:26:00 AM

Mayo Clinic Beats Dr. Elkin in Trade Secret Battle - But Jury Says it Owes Him Royalties

By Todd

We blogged about this case originally back in May of 2009:

Well, the jury in this federal lawsuit between The Mayo Clinic and Dr. Peter Elkin. The case stems from Mayo's allegations that Dr. Peter Elkin took the core code from the program he helped develop and deleted all copies from Mayo computers. Mayo said Elkin had signed over all control of the software to the clinic, as the clinic's policy dictates. Because the software is "too complex for Mayo to recreate," the complaint alleges it is completely under Elkin's control. Elkin was with Mayo Clinic until he left for a position with Mount Sinai Center for Biomedical Information in New York in August 2008, according to court records. Mayo, along with Cerner Corp., filed the lawsuit in December of 2008 against Elkin alleging breach of contract.

The Minneapolis Star-Tribune is reporting that the federal jury on Wednesday found that a former high-profile researcher at the Mayo Clinic misappropriated its trade secrets and violated his employment contract when he left the Rochester health care giant for a better job in New York City.

After four hours of deliberation in U.S. District Court in Minneapolis, the jury also ordered Mayo to pay Dr. Peter Elkin $143,222 in royalties for medical record-keeping software that he developed while working there. Elkin claimed Mayo owes him up to $520,000.

We will report back upon learning of any appeals.
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