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"Defend Trade Secrets Act" - How Will This New Law Affect Your Business?

With a near unanimous (410-2) vote on April 27, 2016, the House passed the aDefend Trade Secrets Acta (aDTSAa). Having already been passed by the Senate (87-0), the legislation advances to President Obama, who has signaled that he will sign the bill into law. The law is drafted to go into effect on the day of its enactment, and will apply to misappropriation occurring on or after that date.

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Trade Secrets of the Assault Rifles

From the Daytona Beach News-Journal of Florida, a Florida contribution to the evolving role of trade secrets, concerning old-fashioned stealing, a vendetta against a former employee, and, of course, assault weapons.

The paper reports that two men -- Mark Hazelip and Jake Economou a were arrested and charged with stealing trade secrets from Tactical Machining of Deland, Florida, a company that produces upper and lower receivers for AR-15 rifles.

The two alleged stole computer programs, blueprints, drawings and a list of customers. Hazelip quit the company in January and went to work for a competitor, Daytona CNC . Economou was later fired from Tactical Machining. According to investigators, Hazelip talked of putting Tactical Machining out of business/

Instead, after a tip from another former employee working at Daytona CNC, the police aexecuted a search warrant at Daytona CNC and found the Tactical Machining blueprints and drawings for the gun parts and a spiral bound notebook with the name of clients in Hazelip's desk.a

Uncle Samas Economic Espionage a Not Looking for Your Trade Secrets

This follows on the heels of reports that the NSA has hacked into the systems of various foreign companies including a Brazilian state oil company.

The report quotes James Clapper, Director of National Intelligence:
aWhat we do not do, as we have said many times, is use our foreign intelligence capabilities to steal the trade secrets of foreign companies on behalf of, or give intelligence we collect, to US companies to enhance their international competitiveness or increase their bottom line.a
This issue, obviously, is far from settled.

John Deere in Trade Secrets Dispute with Former Factory General Manager

From the Business Section of the Waterloo Cedar Falls (IA) Courier, a story concerning a trade secrets case by agricultural equipment maker Deere & Co. against the long-time general manager of its largest combine factory.

Deere is seeking injunctive relief against Eric Hansotia, who was hired by Deere competitor AGCO into a position that "significantly overlaps" his old job.

The case is pending in federal court in Illinois.

By the sound of the allegations, the case concerns both inevitable disclosure type claims, but also has claims that the defendant aIn his last four days of work . . . connected portable electronic storage devices, some of which computer logs indicate contained Deere trade secrets, to his Deere computer, and he may have kept those devices after his employment ended.a

Chinese Trade Secrets Theft Hits US Universities

Now, in a new twist, Reuters reports that three Chinese researchers at NYU Langone Medical Center have been charged in federal court with bribery in connection with theft of trade secrets relating to MRI technology.

The researchers apparently received at least $400,000 in bribes to provide information to a Chinese Medical Imaging company, United Imaging Healthcare, and a Chinese government-backed research institute, Shenzen Institute of Advanced Technology.

The three were charged in federal court in the Southern District of New York where the US Attorney doesnat play.

Man Bites Dog!

Morning Whistle, an unsourced report that publisher and education company Pearson has been sued for stealing the trade secrets of a Chinese competitor, CentriPoint (China).

According to the report, Pearson VUE, Pearsonas computer-based testing division, acquired Certiport on May 15, 2012, but decided to suspend the online service of Certiport (China).

That company now claims that Pearson stole its client list under the pretense of an audit and informed customers of the change without prior consent of the other shareholders of Certiport (China).

An initial court date is scheduled for May 23, 2013.

Trade Secrets Finally Gets Toward the Top of the National Agenda

You know trade secrets has finally hit it big when the subject is covered in USA Today and the report is on the Obama Administrationas a new strategy to combat the theft of American trade secrets.

The administration has released its 141-page Strategy on Mitigating the Theft of U.S. Trade Secrets. This comes just after the president signed an executive order adesigned to help U.S. computer networks guard against cyberattacks,a as USA Today put it.

The story contains comments from Victoria Espinel, the U.S. Intellectual Property Enforcement coordinator.

In the words of USA Today:

aThe strategy includes diplomatic engagement with nations where incidents of trade secret theft are high, working with industries on the best ways to protect their secrets, and stepped up prosecutions of business espionage.a

The plan comes out at the same time as reports of Chinese Red Army hacking into U.S. computers.

Espinel says: "The administration will continue to act vigorously to combat the theft of American trade secrets that could be used by foreign companies or foreign governments to gain an unfair commercial advantage over U.S. companies."

Sounds like weare finally getting serious about a problem that has been allowed to grow for years.

Bratz-Mattel Doll Fight Ends Not with a Bang But a Whimper

Now it looks to be all over.

A prA(c)cis goes like this: designer leaves Mattel to go to MGA Entertainment where he designs the popular Bratz line of dolls. Mattell sues MGS for copyright infringement and gets a $100 million verdict and the rights to Bratz going forward.

The Ninth Circuit finds that amount excessive and sends the case back down to the trial court where the jury finds nothing for Mattel, but returns a $170 million verdict against Mattel on a counterclaim for theft of trade secrets, along with $137 million in attorneysa fees.

Now the Ninth Circuit vacates that verdict, finding it time-barred. The attorneysa fees, however, stick.

Itas time to find a cautionary tale here, but the case is so weird we may just need to chalk it up as a one-off.

A Video Overview of the Economic Espionage Act

From me (click the link), a short description of the recent changes in the EEA.

Do Computer Fraud & Abuse Act Prosecutions Sometimes Go Too Far?

Offered here without commentary, an article from Slate concerning the recent suicide of Aaron Swartz who was set to go on trial next month for violations of the Computer Fraud & Abuse Act for unlocking a database of scholarly articles.

Prosecutors charging decisions a particularly the amount of prison time and penalties to be sought a are generally discretionary, rarely reviewable, and certainly subject to abuse (and not just under the CFAA).

There should be near unanimous agreement that what happened to Aaron is sad and, if an over-reaching prosecution played a role, something that ought to be rectified.

More on Economic Espionage Act Amendments

IP 360, a story concerning the amendments to the Economic Espionage Act.

The story quotes John Marsh of Hahn Loeser & Parks LLP as saying that the two bills passed by Congress represent "a strong commitment by the federal government to broaden the protections of trade secrets."

The bill, once itas signed by the President, will increase the maximum penalty for misappropriating trade secrets to benefit a foreign government from $500,000 to $5 million for individuals and also applies the law more broadly to the services industry.

The big question on tap for 2013: will Congress create a federal civil remedy for trade secrets theft as a cognate to the criminal statute represented by the EEA?

Amendment to Economic Espionage Act

In the Aleynikov case that we reported about over the years, the defendant managed to walk because the trade secrets he stole were not aproduceda for use in interstate commerce.

Under the new law, designed to reverse the earlier decision in Aleynikov, trade secrets used in or intended for use in interstate commerce are now included. The produced for requirement is gone.

Now say goodnight to the 112th Congress.

Chinaas Economic Espionage

Foreign Affairs, an excellent article by James A. Lewis on aChinaas Economic Espionage.a

According to Lewis, China is the worldas most aggressive practitioner of economic espionage, targeting key industries such as telecom, aerospace, energy and defense. Among other victims are Google and Nortel while some companies that are victims aoften conceal their losses.a

Lewis also argues that the national strategy of economic espionage actually serves to handicap Chinaas own development.

His final assessment:

Economic espionage lies at the heart of the larger issue of Chinaas integration into the international system -- the norms, practices, and obligations that states observe in their dealings with one another and with the citizens of other states. A failure to hold China accountable for espionage undermines efforts to bring Beijing into the fold. In the end, any peaceful rise requires that China play by the rules, even if it seeks to change them, rather than pretend they do not apply.

More Kolon Troubles

The US Attorney in Richmond has indicted the company and five officials, charging them with trade secrets theft. According to the Business Week report here the indictment includes a forfeiture claim seeking at least $225 million in alleged criminal proceeds from the company.

Civil trade secrets cases are bad enough. Criminal ones should be avoided at all costs.

Huawei a Another Side of the Story

Farhad Manjoo, in Slate, says that whether a given piece of technology is dangerous is not determined by the nationality of the company that makes it.

As Manjoo puts it:

In reality, most devices are from everywhere. Your Android smartphone was designed in Korea, assembled in China, runs an operating system created in California, and works on a cellular carrier owned by a firm based in Germany. If youare worried about a certain companyas connections to China, you should be worried about pretty much every company in the tech industryathey all have large operations there, and, as a result of those operations, theyave all cut certain less-than-transparent deals with Chinese authorities.

Huawei a Any Old Tech Company or Trade Secrets Threat?

On the heels of a recent report on 60 Minutes, Reuters (from LiveMint) reports on the controversy concerning Chinaas Huawei, the worldas second-largest maker of telecommunications gear.

The report quoted Rep. Mike Rogers, chair of the House Intelligence Committee: aIf I were an American company today ... and you are looking at Huawei, I would find another vendor if you care about your intellectual property; if you care about your consumersa privacy and you care about the national security of the United States of America.a

The committee is expected to release a report on the company later today (10/8/12).

Weall get a summary up as soon as itas released.

According to Reuters, Huawei has rejected charges that its expansion in the US poses a security risk and argues that it operates independently of the Chinese authorities.

A Long, Long Injunction in DuPont Trade Secrets Case

We reported earlier on the $920 million damage award in favor of DuPont against South Koreaas Kolon for stealing trade secrets relating to the fibers used to make Kevlar body armor.

Now we learn from Bloomberg that the trial judge has not only upheld the verdict, but also imposed a 20-year injunction against Kolon to keep the company from producing any such fibers.

Injunctions, including permanent injunctions, are generally available under trade secrets statutes. Twenty years, though, is probably toward the outside range of what courts have ordered.

New Indictment in Bridgestone Tire Trade Secrets Case

Plain-Dealer is becoming our go-to source on current trade secrets stories.

Hereas another from that publication concerning a case out of Akron.

Xiaorong Wang, a former research scientist with Bridgestone Americas, has been indicted again on 15 counts of trade secrets theft and lying to the FBI.

The indictment claims that Wang burned six CDas of proprietary information on his way out the door after being told he would be let go. The secrets allegedly concern formulas and compound properties for race tires.

An earlier plea deal was rejected by the judge.

The FBI says that Wang provided the trade secrets to Shanghai Frontier Elastomer Co.

Eaton-Frisby Trade Secrets Summary

Cleveland Plain Dealer concerning one of the strangest trade secrets cases ever, with North Carolina ties to boot.

Set Back in Governmentas DuPont Trade Secrets Case

Weave reported previously on the economic espionage case concerning Pangang Group Steel Vanadium & Titanium Co Ltdas indictment for stealing DuPontas secret process for manufacturing titanium dioxide, a compound that makes products white.

Now comes this report from Reuters (in the Chicago Tribune) concerning a major set back in the governmentas case.

Federal judge Jeffrey White in the Northern District of California dismissed the indictment against the Chinese company on the grounds that service on its putative US agent was insufficient.

According to the report, White ruled that the government had not shown sufficient evidence that Pangang exercised enough control over the entity served for it to be considered an agent.

So we can now add service of process issues to the list of difficulties in trying to rein in Chinese economic espionage.

The government has until August to figure out what it will do next.

Weall report on what happens.

Trade Secrets of the OLED TVas

Daytona Beach News-Journal is reporting what sounds like a potentially big trade secrets case.

According to the News-Journal, Samsung is accusing eleven people, including six of its own employees of stealing its trade secrets with respect to OLED (organic light-emitting diode) television technology.

The alleged bad-guy in the scenario: fellow Korean TV maker LG Display. Those two are currently fighting it out in OLED, believed to be the next generation of big-screen TV technology.

Samsung claims that LG stole its display technology and poached Samsung employees.

Snyder's and Almeling's "Keeping Secrets: A Practical Introduction to Trade Secret Law and Strategy"

Womble Trade Secrets - after 16 great years at Womble Carlyle, I am departing for a litigation boutique that will be called Graebe Hanna & Sullivan, PLLC.  Before advising you about a great new trade secret resource for all, I want to thank my friend and partner Press Millen for prompting me to co-author this blog with him back in 2006.  There have been literally hundreds of thousands of visitors to this blog and I've met scores of attorneys and business people who reported perusing and using the blog for information.  Thank you Press.

Our friends at O'Melveny & Myers, Darin Snyder and David Almeling, have written a practical and useful primer on trade secret law and the legal and practical treatment of trade secrets.  The book, published by Oxford University Press, is divided into three parts:  (a) the basics and some definitions useful in understanding trade secret law; (b) guidelines for creating a legal strategy for protecting trade secrets; and (c) practical guidance regarding business and legal responses to incidents of trade secret misappropriation or accusations of the same.

The anecdotes and breezy case studies in the book are rewarding - our favorite quote was from the founder of a company that designed underground mining vehicles and whose company was the victim of a key, respected employee's theft: "I was like the husband whose wife was getting it on the side."  Messrs. Snyder and Almeling have shared with us their homework and case studies - just great stuff.  We recommend this book to business litigators and non-specialists but it is great reading for those of us specializing in this area of law, as well.  You can find the link to the book here:

Chicago Trade Secrets Case Blows Up on Plaintiff

Take the case of Portola Packaging against its rival Logoplaste (reported here behind Litigation Dailyas paywall) but also nicely summarized in the Trial Communityas Litigation News Blog.

Logoplaste, in 2007, discussed the prospect of buying Portolaas Canadian subsidiary. They exchanged some putatively confidential information but never got a signed NDA. Negotiations broke off in February 2008. Shortly thereafter, Logoplaste landed a key Portola client.

Fast forward more than a year. Portola finally demanded return of the confidential information and filed suit claiming Logoplaste used the documents to steal the customer.

An Illinois state court judge ultimately ruled that Portola failed to protect its information. So far, pretty normal.

Hereas where it gets weird. The judge also ruled that because Portola designated its general counsel as a key witness, his emails were not protected by the attorney-client privilege.

Those emails apparently showed that he had urged Portola to sue just to hurt Logoplasteas business interests. And, he also apparently hired Logoplasteas regular counsel in an unrelated matter in order to create a conflict.

According to the report, although Portola claimed that its confidential documents were used to lure an employee away, the emails indicated the general counsel knew the employee approached Logoplaste first.

The result: a scathing opinion and an order that Portola will pay all of Logoplasteas attorneysa fees for the three years of litigation.


Appeals, no doubt, to follow.

Another Big Verdict a Utah Style

For sheer dollars, though, this one out of state court in Utah is right up with those. The report is from the Salt Lake Tribune.

The scenario is a familiar one: Company A seeks bids to build a power plant and Company B, under a non-disclosure agreement, submits its proposal. Company A decides to pull the bidding and awards the contract to itself.

Many years and one trade secrets lawsuit later, Company A finds itself on the wrong side of $134 million verdict based on the contention that it used Company Bas trade secrets to build the power plant.

Company A is PacifiCorp (doing business in Utah as Rocky Mountain Power) and Company B is USA Power.

Now USA Power wants to double the verdict to $267 million.

Thatas a big one by trade secrets standards and weall let you know how it turns out.

The Trade Secrets Dilemma a Sue and Disclose

News & Insight on an age-old problem in trade secrets, the fact that bringing suit often requires disclosing the trade secrets.

The article concerns a case in New York state court, MSCI v. Jacob and Axoma. MCSI, a software maker, claimed that its former employee, Jacob, misappropriated trade secrets in its software on behalf of his new employer, Axoma.

The judge overseeing the case made a critical ruling in a discovery dispute requiring the plaintiff to identify awith reasonable particularitya the trade secrets it contends were misappropriated. Only this, the judge ruled would allow the court to distinguish abetween the general knowledge in their field and trade secrets.a

An earlier ruling, now changed, had allowed the plaintiff to identify only those portions of its computer source code that were not trade secrets. That, defendants contended, was unfair since it essentially required them to deduce which trade secrets were at issue, possibly from millions of lines of computer source code.

The judge came around to defendantsa point of view:

Plaintiffs who have brought this action, bear the burden of proving their allegations. Merely providing defendants with plaintiffs' "reference library" to establish what portions of their source code are in the public domain shifts the burden to defendants to clarify plaintiffs' claim.

One of the defense lawyers claimed that to do otherwise would be like allowing a person to claim that he had been robbed by a suspect and then walk around the suspectas apartment to identify what was taken.

Before bringing any trade secrets case, it's always necessary to consider what disclosure may be required and its implications for the business and the trade secrets themselves.

Christmas Books: 14 Books to Read This Holiday Season

It’s time to decide what Christmas books to read this holiday season! The holiday season is upon us once again. I like to theme my reading, so every year I pick a Christmas book to read for the month of December. This year, as I was contemplating which Christmas book to read for 2023, I […]

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The WOOP Method – A Scientifically Proven Method to Achieve Your Goals

WOOP is a research-based method you can start applying right away to achieve your goals. WOOP is an acronym that stands for Wish, Outcome, Obstacle, Plan. It’s a method for achieving goals, setting preferences, and changing habits that is based on 20 years of sccientific research in the science of motivation. The WOOP method was […]

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5 Scientific Ways to Be Happier – Tips from Yale University

You can increase your happiness by applying practices from the science of happiness. I came across an online course from Yale University–an Ivy League research university in New Haven, Connecticut–on “The Science of Well-Being“. It’s taught by Professor Laurie Santos, and it became the most popular class ever taught at Yale. I took the course […]

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3 Must-Read Books by Ancient Roman Philosophers

Although often overshadowed by the Ancient Greeks, the Ancient Romans also had a rich culture and produced many must-read books. As Iave mentioned before on this blog, one of my goals in life is to be well-read. I’m making a list of the books I feel that I need to read to achieve that goal, […]

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9 Ways to Cure Wanderlust When You Can’t Travel

What do you do when you want to travel, but can’t? People love to travel for many reasons. Here are some of them: We crave knew experiences. We may have read, or heard, of a place that sounds like it would be fantastic to visit. We want to discover new ways of doing things and […]

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