A blog of trade secrets news, verdicts, and resources

July 2008 Archives

WASHINGTON -- Two U.S. Department of Defense (DOD) contractors, both U.S. citizens who previously lived in Prague, Czech Republic, pleaded guilty today to various conspiracy charges related to their business of providing fuel supply services to the DOD.

Paul Wilkinson and Christopher Cartwright, who were scheduled to begin trial today, entered into plea agreements filed in the U.S. District Court in Baltimore.

Wilkinson pleaded guilty to conspiring to defraud the United States, to commit wire fraud, and to steal trade secrets by hiring another individual, Matthew Bittenbender, to steal those trade secrets from his employer, Avcard. Avcard is a division of Kropp Holdings Inc., a Hunt Valley, Md., company which provides fuel and fuel services to commercial and government aircraft. Wilkinson used the inside information to underbid Avcard at every location where the companies were bidding against each other, thereby subverting DOD's competitive bidding procedures.

Oracle expands theft allegations against SAP

By Brandon Bailey

Oracle fired a new volley across the bow of rival software-maker SAP today, alleging in court papers that members of SAP's executive board ignored warnings and knowingly allowed an SAP subsidiary to steal Oracle's trade secrets.
The new charges are part of a 2007 lawsuit in which Oracle, the Redwood City-based business software giant, claims that SAP subsidiary TomorrowNow was illegally downloading Oracle's proprietary software and using it to support TomorrowNow customers.

But the allegations are part of a much wider feud between Oracle and its chief rival, Germany's SAP. Oracle says SAP bought TomorrowNow in 2005 because Oracle was buying software-maker PeopleSoft. TomorrowNow offered discounted prices on maintenance and support for clients who used PeopleSoft products, and Oracle alleges that SAP wanted to use TomorrowNow to lure those clients away from Oracle.

Oracle Steps Up Fight With SAP in Filing - WSJ.com

By Ben Worten

Oracle Corp. alleged in a federal-court filing Monday that executives at rival SAP AG knew that an SAP subsidiary was stealing Oracle trade secrets.

The filing is the latest salvo in a suit Oracle brought against SAP in U.S. District Court in San Francisco in March 2007. The suit alleges that TomorrowNow Inc., which SAP bought in 2005, illegally obtained and reused Oracle software-support documentation.

In Monday's San Francisco Federal Court filing, Oracle claims that SAP Chief Executive Henning Kagermann and other members of SAP's executive team knew that TomorrowNow misused Oracle's intellectual property before making the acquisition. The new allegations are based on documents uncovered during the discovery phase of the lawsuit and on witness depositions.

How to Keep Corporate Secrets a Secret

By H. Abelson, K. Ledeen, H. Lewis

One of the problems with corporate data breaches is the catastrophic risk to corporations when trade secrets, customer lists, pricing data and other critical information are exposed. Hal Abelson, Ken Ledeen and Harry Lewis, authors of "Blown to Bits: Your Life, Liberty, and Happiness after the Digital Explosion," explain how companies can use the right mix of process, people and advanced technologies to keep their data secure--and their CIOs out of the headlines.

There is nothing like a data breach to bring a CIO unwanted publicity. We read all the time about these costly spills of precious corporate data, from the British government exposing the records of 25 million citizens, to the TJX Companies' loss of 45.6 million credit card and debit card records. The PRC (Privacy Rights Clearinghouse) documented roughly 234 million data records were involved in security breaches since 2005.

The cases involve everything--from the University of Iowa putting a few hundred students' data on the Internet--to the supermarket chain Hannaford Bros.' breach, in which 4.2 million credit card numbers were compromised and more than 1,800 cases of identity theft resulted. Tapes lost, laptops stolen, Wi-Fi and network snooping, malware and virus intrusions, and plain old theft are just a few of the threats that keep CIOs up at night.

MPAA hired hacker to 'spy' on The Pirate Bay

by Andre Yoskowitz

According to new court documents, it appears that the MPAA hired a hacker to reveal the identities of the administrators of the infamous torrent tracker The Pirate Bay, the same hacker who was found to be 'spying' on the torrent site TorrentSpy last year.

Robert Anderson, the "hacker" and the center of the new scandal was paid by the MPAA in 2006 to steal e-mails and trade secrets from TorrentSpy. Anderson later admitted to this but it was unknown that he was also asked to spy on The Pirate Bay.

The now public court documents reveal a conversation between Anderson and the MPAA. "We can provide the names, address, and phone (numbers) of the owners of Torrentspy.com and Thepiratebay.org -- along with evidence, including correspondence between the two companies."


Motorola is suing a former executive now employed by Apple's iPhone sales division, charging him with the theft of trade secrets. Michael Fenger is the defendant, who was an executive for Motorola. According to the complaint, he is now vice president for global iPhone sales after joining Apple in March. [CNET]

Department of Commerce Office of Inspector General - United States Patent and Trademark Office, The Overseas Intellectual Property Rights Attaché Program Is Generally Working Well, but a Comprehensive Operating Plan Is Needed, Final Report IPE-19044/July 2008.

"According to the U.S. Chamber of Commerce, IPR theft costs at least $200 billion per year and the loss of at least 750,000 U.S. jobs. IPR theft also increases safety and health risks, impacting a wide range of industry sectors such as manufacturing, consumer goods, technology, software Intellectual property rights include copyrights and pharmaceuticals, trademarks, patents, industrial designs, and trade secrets. USPTO issues patents and registers trademarks to inventors, authors of written works, and creators to protect their intellectual property rights in the United States. USPTO also promotes IPR protection and enforcement domestically and abroad by conducting outreach and training activities to foster respect for IPR, working to secure strong IPR provisions in international agreements, and encouraging strong IPR enforcement by U.S. trading partners to deter intellectual property theft."

Daily Business Review

After a false start, a settlement was reached Tuesday in the $10 billion trade secrets dispute in Florida between Motorola and a defunct Fort Lauderdale-based company. The confidential agreement was reached hours after an earlier hearing to discuss a settlement was canceled. At the earlier hearing, an attorney representing Motorola told the judge, "We're still working out the written details," even though both sides had previously informed the judge that a settlement had been reached.


A franchisee brought action against franchisor alleging violation of the
Sherman Act and Robinson-Patman Act (RPA). The franchisor counterclaimed alleging
misappropriation of trade secrets. The United States District Court for the
Eastern District of Pennsylvania, Ronald L. Buckwalter, J., 2005 WL 724117 and
2006 WL 2385519, granted judgment for the franchisor. Franchisee appealed.

Holdings: The Court of Appeals, Jordan, Circuit Judge, held that:

(1) whether dealers entered into horizontal agreement among themselves to not
compete was jury question;

(2) evidence of events before limitations period was admissible to establish
existence of antitrust conspiracy during limitations period;

(3) whether manufacturer entered into vertical competition-restricting agreement
with its dealers was jury question;

(4) rule of reason, not per se analysis, applied to vertical restraint of trade

(5) whether vertical agreement between truck manufacturer and some of its
dealers existed was jury question;

(6) two-sales requirement under RPA had not been satisfied by single sale of
customized good via competitive bidding process, and

(7) Pennsylvania's "gist of the action" doctrine did not apply to franchisor's
claim that franchisee misappropriated its trade secrets.

Affirmed in part and vacated in part.

Contributed by Advokatfirman Vinge

On June 10 2008 a Swedish governmental committee assigned with the task of reviewing and potentially proposing amendments to the Act on Trade Secrets submitted its report entitled "Strengthened Protection for Trade Secrets".

As further detailed below, the main proposed changes would introduce:

* criminal liability for employees and consultants;
* infringement investigations; and
* liability for use or disclosure of trade secrets obtained in court proceedings.

The committee concluded that it is sometimes difficult to assess whether an attack on a trade secret made by a person with lawful access to the secret is punishable under the Penal Code. To clarify the situation, it is proposed that the act be amended explicitly to provide for liability for this group of people (ie, those who have gained access to a business operation's trade secrets as a result of having participated in its operation). This category would include, among others, employees, temporary agency personnel, certain consultants, directors and auditors. It is suggested that if such a person intentionally and unlawfully discloses or uses in business operations a trade secret, he or she may be fined or sentenced to up to two years' imprisonment. For severe offences, imprisonment of a minimum of six months and a maximum of six years should be imposed. Furthermore, in instances where the basis for participation in the business operation in question has ceased, liability shall be imposed only if the perpetrator acted in a particularly disloyal way or if the act is considered to constitute a severe offence.

The committee also proposed to introduce a new means for securing evidence. The suggested measure is called an 'infringement investigation' and is similar in character to measures already available to plaintiffs in cases of suspected infringement of intellectual property. It would allow a court to grant on request permission for a search to be made for evidence at the premises of a person who reasonably may be assumed to have used trade secrets in violation of the act. However, permission may be granted only if the reasons for the measure outweigh the inconvenience to the person adversely affected by it. Furthermore, it is suggested that the party requesting the investigation should be required to provide adequate security (eg, a bank guarantee) for the damage that may potentially be incurred by the subject of the investigation.

Finally, it is proposed that protection should be introduced for trade secrets that have been obtained in conjunction with court proceedings. It is suggested that anyone who intentionally or by negligence, without reasonable cause, discloses or uses a trade secret in business operations where such trade secret was obtained in the capacity of a party to a court decision shall be liable to compensate for the damage incurred as a result.

The report has been submitted to interest groups and governmental agencies for consideration, which have until November 2008 to provide their comments. Thereafter, a revised bill for enactment of the amendments may be presented during Spring 2009 and, if so, adoption of the legislation is likely to occur not earlier than Autumn 2009.

For further information on this topic please contact Claes Henriksson at Advokatfirman Vinge by telephone (+46 8 614 30 00) or by fax (+46 8 614 31 90) or by email (claes.henriksson@vinge.se).

Trade secrets dispute with "Barbie" maker Mattel

On Friday a lawyer for MGA Entertainment, the maker of "Bratz" dolls, said the company requested a new trial in its trade secrets dispute with "Barbie" maker Mattel after a juror was dismissed for making an ethnic slur against MGA's CEO. The judge has set a hearing for August 3 to decide whether the trial should proceed.

A market researcher brought action against Board of Trustees of
California State University and acting director of San Diego State University
Center for Hospitality and Tourism Research alleging copyright infringement,
conversion, trade secret misappropriation, and unfair business practices. Affiliate brought
motion to dismiss.

The District Court, John A. Houston, J., held that:

(1) Fourteenth Amendment's enforcement provision had not been validly invoked by
purported abrogation of state's Eleventh Amendment immunity by Congress under
Copyright Remedy Clarification Act (CRCA) to allow for federal claims of copyright
infringement against states;

(2) acting director was not entitled to Eleventh Amendment sovereign immunity
from suit seeking relief against him in his individual capacity for alleged
violation of federal copyright law;

(3) defendants were entitled to Eleventh Amendment immunity to state law claims
in federal court alleging conversion, misappropriation, and unfair business

(4) rights asserted in state law conversion claim, seeking damages for use of
questionnaires and work papers created in connection with copyrighted economic
impact studies, were same as those protected by Copyright Act, and thus were
preempted; and

(5) state law misappropriation of trade secret claim, alleging that
confidential, proprietary trade secret information had been used in preparation of
economic impact report, lacked extra element of disclosure of secret in
contravention of specific duty to keep that information confidential, and, as
such, was preempted by Copyright Act.

Motion granted in part and denied in part.


A Communications company, providing integrated voice and data
communications, including digital subscriber line (DSL) services, as alternative
to local phone companies, filed suit against customer lead generation services
provider, claiming breach of contract, misappropriation of trade secrets, breach
of covenant of good faith and fair dealing, breach of fiduciary duty, and
conversion by taking proprietary customer lead information for voice over internet
protocol (VoIP) marketing campaign and integrating such information into
provider's federated database and sharing it with competitors. Customer lead
services provider moved for judgment on pleadings.

The District Court, Colleen Kollar-Kotelly, J., held that there was
fact issue as to whether client information in confidentiality agreement included
customer lead information. Motion denied.

Stanford Law and Economics Olin Working Paper No. 358
This paper can be downloaded without charge from the Social Science Research Network

MARK A. LEMLEY, Stanford Law School
Email: mlemley@law.stanford.edu

Trade secret law is a puzzle. Courts and scholars have struggled for over a century to figure out why we protect trade secrets. The puzzle is not in understanding what trade secret law covers; there seems to be widespread agreement on the basic contours of the law. Nor is the problem that people object to the effects of the law. Rather, the puzzle is a theoretical one: no one can seem to agree where trade secret law comes from or how to fit it into the broader framework of legal doctrine. Courts, lawyers, scholars, and treatise writers argue over whether trade secrets are a creature of contract, of tort, of property, or even of criminal law. None of these different justifications have proven entirely persuasive. Worse, they have contributed to inconsistent treatment of the basic elements of a trade secret cause of action, and uncertainty as to the relationship between trade secret laws and other causes of action. Robert Bone has gone so far as to suggest that this theoretical incoherence suggests that there is no need for trade secret law as a separate doctrine at all.

In this article, I suggest that trade secrets can be justified as a form, not of traditional property, but of intellectual property (IP). The incentive justification for encouraging new inventions is straightforward. Granting legal protection for those new inventions not only encourages their creation, but enables an inventor to sell her idea. And while we have other laws that encourage inventions, notably patent law, trade secrecy offers some significant advantages for inventors over patent protection.

It seems odd, though, for the law to encourage secrets, or to encourage only those inventions that are kept secret. I argue that, paradoxically, trade secret law is actually designed to encourage disclosure, not secrecy. Without legal protection, companies in certain industries would invest too much in keeping secrets. Trade secret law develops as a substitute for the physical and contractual restrictions those companies would otherwise impose in an effort to prevent a competitor from acquiring their information.

The puzzle then becomes why the law would require secrecy as an element of the cause of action if its goal is to reduce secrecy. I argue that the secrecy requirement serves a channeling function. Only the developers of some kinds of inventions have the option to over-invest in physical secrecy in the absence of legal protection. For products that are inherently self-disclosing (the wheel, say, or the paper clip), trying to keep the idea secret is a lost cause. We don't need trade secret law to encourage disclosure of inherently self-disclosing products - inventors of such products will get patent protection or nothing. But if trade secret law prevented the use of ideas whether or not they were secret, the result would be less, not more, diffusion of valuable information. The secrecy requirement therefore serves a gatekeeper function, ensuring that the law encourages disclosure of information that would otherwise be kept secret, while channeling inventors of self-disclosing products to the patent system.

My argument has a number of implications for trade secret policy. First, the theory works only if we treat trade secrets as an IP right, requiring proof of secrecy as an element of protection. If we give the protection to things that are public, we defeat the purpose and give windfalls to people who may not be inventors (what we might call "trade secret trolls"). Courts that think of trade secret law as a common law tort rather than an IP right are apt to overlook the secrecy requirement in their zeal to reach "bad actors." Second, an IP theory of trade secrets also encourages preemption of "unjust enrichment" theories and other common-law ways courts are tempted to give private parties legal control over information in the public domain. Thus, an IP theory of trade secrets is in part a "negative" one: the value of trade secret law lies in part in defining the boundaries of the cause of action and preempting others that might reach too far.

Finally, treating trade secrets as IP rights helps secure their place in the pantheon of legal protection for inventions. The traditional conception of the tradeoff between patents and trade secrets views the disclosure function of the patent system as one of its great advantages over trade secret law. And indeed the law operates in various ways to encourage inventors to choose patent over trade secret protection where both are possible. But for certain types of inventions we may actually get more useful "disclosure" at less cost from trade secret than from patent law.

Man charged with stealing trade secrets from Andover firm

By Mark E. Vogler and Jim Patten

ANDOVER -- Police have charged an employee of a local job placement agency with stealing client information and giving it to a former co-worker who was fired earlier this year over similar allegations.

Timothy Corcoran, a veteran worker at Staffing Group/Andover Personnel, is accused of stealing possible job leads, resumes and other classified information and giving it to Henry Jacobo at Brooks Staffing & Associates -- a North Andover company he helped set up last December before being fired from Staffing Group.

Corcoran, 46, of 168 River Road, Andover, was charged with buying, selling or receiving stolen trade secrets, and conspiracy. After his arraignment yesterday in Lawrence District Court, Corcoran was released without bail and ordered to return to court on Sept. 9 for a pretrial hearing.

Clear Channel says settles Tribune lawsuits

by Robert MacMillan

NEW YORK (Reuters) - Clear Channel Communications Inc said on Wednesday it settled lawsuits against Tribune Co and several former Clear Channel employees lured away by the newspaper publisher and broadcaster.

Clear Channel said Tribune agreed not to further solicit or hire Clear Channel employees under contract.

The company accused Tribune in May of hiring a key executive to run its interactive division, claiming misappropriation of trade secrets.

Transfer no gross trademark

McDermott Will & Emery

The U.S. Court of Appeals for the Second Circuit overturned a summary judgment in favor of accused trade-secret infringer Cadbury Stani (Stani) after determining that the license in suit was ambiguous and inapposite for determination on summary judgment. The Court also discussed the legal effect of transferring a trademark "in gross," that is, without also transferring the goodwill that the trademark symbolizes. The Topps Co. v. Cadbury Stani S.A.I.C., Case. No. 06-5316, (2nd Cir., May 15, 2008) (Cardamone, J.).

Topps licensed its trademarks and trade secrets respecting certain bubblegum brands to Stani in South America. The license was amended to terminate in 1996 and a second agreement was executed providing for transfer of the trademarks to Stani upon termination for $100,000. In 1996 the license expired by its terms, the trademarks were transferred and Stani continued to make and sell the trademarked gums. In 1999 Tops sued for misappropriation of the trade-secret gum ingredient formulas. Stani contended both that it had not used Topps' formulas to make its gum after 1996 and that Topps had transferred the trade secrets along with the trademarks. The district court found that the contracts made no express provision for transfer of trade secrets. Nonetheless the court found for Stani on summary judgment because it decided that the parties must have intended to transfer the trade-secret gum formulas to effectively assign the trademarks since an assignment of the trademarks in gross would have been invalid.

The Second Circuit agreed that an assignment of a trademark in gross is invalid under U.S. law but observed that this is "a complex and evolving area of the law." The Court noted a judicial trend towards finding a valid assignment where the marked goods are "substantially similar," although not identical, to the assignor's goods "such that consumers would not be deceived or harmed." The Court found that the factual issue of whether Stani's post-1996 gum was substantially similar to the gum made before 1996 using Topps' formulas could not be determined on summary judgment. The court further observed that Argentine, not U.S., trademark law, would be legally controlling, but that the issue had never been briefed. The case was remanded with instructions to construe the contract language by considering whether the parties had intended to transfer the trademarks in gross notwithstanding the unclear legal effect of that intent.

Practice Note: When assigning trademarks, counsel should carefully consider and contractually provide for the goods to which the assigned marks will be applied. Here, 12 years after purported assignment of the trademarks and nine years after suit was initiated, the rights of the parties remain unresolved.

Decision is for the Plaintiff. In a bench trial, the court found in favor of Acacia Research and CombiMatrix, awarding $35,635,822.66 in damages. The award included $21,464,484.20 for actual damages incurred in excess of the policy retention; $10,288,656.30 in prejudgment interest; $310,492.99 for the present value of future royalties paid; $3,550,157.52 in attorney fees; and $22,031.65 in costs.

Plaintiffs Acacia Research Corp. and CombiMatrix Corp. reportedly had a Directors, Officers and Corporate Insurance Policy with National Union Fire Insurance Co. of Pittsburgh, PA.
In 2000, CombiMatrix and an officer-director were sued and immediately tendered the case to National Union. National Union allegedly acknowledged the receipt, but thereafter failed to take any action or respond to CombiMatrix or Acacia Research until after the case settled in 2002. National Union reportedly never took a coverage position until it denied coverage in 2003. As a result, Acacia Research and CombiMatrix were required to pay defense costs and settle the underlying case at their own expense.
Acacia Research and CombiMatrix sued National Union, alleging that the defendant breached the insurance policy and violated the covenant of good faith and fair dealing by failing to investigate the claim, failing to respond to the plaintiff, failing to appoint an adjuster to monitor the case, and refusing to pay their defense and indemnity costs in the lawsuit.
At trial, National Union reportedly failed to explain why it assigned an adjuster for the first three months of the claim, but thereafter did nothing on the file for more than 15 months, while Acacia Research and CombiMatrix had to defend and settle the lawsuit, according to plaintiff's counsel.
According to defense counsel, National Union issued a non-duty-to-defend D&O loss reimbursement policy to the plaintiffs. The lawyer reported the policy had a $150,000 self-insured retention. National Union received notice from Acacia Research and CombiMatrix in December 2000 of the underlying breach of contract/trade secret misappropriation lawsuit against the plaintiffs and its director. National Union acknowledged notice of the suit and subsequently issued a reservation of rights letter in March 2001, counsel reported. The plaintiffs continued to litigate the underlying lawsuit and entered into the $20 million-plus settlement without notifying National Union or seeking its consent, counsel said. The lawyer reported that, after receiving notice of the settlement from the plaintiffs in November 2002, National Union investigated the claim and ultimately denied coverage a year later based on the plaintiffs' alleged violation of the consent-to-settle provision in the policy and certain applicable policy terms and exclusions which barred coverage for the claims asserted in the underlying lawsuit.
National Union contended at trial that its contractual duty to reimburse the plaintiffs for covered "loss" (as defined by the policy) did not arise until Acacia Research first established that it had satisfied the $150,000 self-insured retention. As a result, any failure by National Union to timely communicate with the plaintiffs during the self-insured retention period could not as a matter of law result in any breach of contractual obligation owed under the policy.
National Union disputed the plaintiffs' theory that a non-duty-to-defend D & O loss reimbursement policy--which contains an express allocation provision regarding covered and non-covered fees and costs--is subject to a "potential for coverage" standard applicable to duty-to-defend liability policies for purposes of evaluating the scope and extent of National Union's reimbursement obligations, defense counsel reported. Counsel claimed that, given the plaintiffs' decision to incur approximately $2 million in defense costs in excess of the self-insured retention and enter into a multi-million dollar settlement agreement without notifying National Union or seeking its consent, National Union further contended that the policy's consent-to-settle provision should be enforced to bar coverage for the plaintiffs' claim.
National Union also argued that the limited-entity reimbursement coverage afforded under the policy did not cover the plaintiffs' separately incurred defense costs and/or contributions toward the underlying settlement. Additionally, counsel reported that the plaintiffs' issuance of common stock and payment of royalties did not constitute covered "loss" under the policy or applicable law.
Defense claims handling expert Edward J. McKinnon testified that National Union's claims handling conduct was consistent with industry custom and practice for the handling of non-duty-to-defend D & O insurance claims. McKinnon also testified that National Union acted appropriately in reserving its rights and waiting for the plaintiffs to provide it with information and documentation showing exhaustion of the self-insured retention, which, according to defense counsel, the plaintiffs failed to do prior to January 2003. In addition, McKinnon testified that the plaintiffs were obligated to notify National Union prior to entering into the underlying settlement in the lawsuit, which the plaintiffs allegedly failed to do.
Defense counsel reported that the court previously denied National Union's motion for summary judgment based on the applicability of the prior-pending litigation exclusion to bar coverage for the lawsuit.
With respect to the plaintiffs' claim for extra-contractual damages, National Union argued that its claims handling conduct was reasonable under the circumstances, and that no "bad faith" damages could be awarded based on communication deficiencies with the plaintiffs during the period it was "self-insured [prior to the exhaustion of the $150,000 retention amount]." According to defense counsel, the "genuine dispute" doctrine applied to bar any award of extra-contractual damages, given the legitimate factual and legal disputes between the parties regarding the applicability of the consent-to-settle provision, the prior-pending litigation exclusion and issues relating to whether the alleged wrongful acts of the plaintiffs' officer-director (the party sued in the initial lawsuit) occurred in his capacity as an officer-director for the plaintiffs.
National Union also argued that there was no basis for awarding punitive damages.

Mattel Wins Trade Secret Case

Yesterday a California jury found in favor of Mattel Inc., maker of Barbie dolls, in its high profile suit against MGA Entertainment Inc., maker of Bratz dolls, and its chief executive. According to the Wall Street Journal, "Mattel alleged that MGA essentially stole the idea for Bratz from Mattel through a secret collaboration with designer Carter Bryant, who Mattel said invented the doll while on its payroll." Bryant's credibility was called into question when it was disclosed that he used a program called "Evidence Eliminator" to wipe a computer hard drive shortly before it was to be entered into evidence.

Government can't withhold data on serious car accidents, court rules

By Ken Bensinger, Los Angeles Times Staff Writer
A federal appeals court ruled Tuesday that the government may not withhold key data on serious car accidents from the public.

The decision by the U.S. Court of Appeals for the District of Columbia potentially ends years of litigation over the data, and could soon put crash information collected by the National Highway Traffic Safety Administration into the hands of journalists, consumer watchdogs and others.

At issue are so-called Early Warning data reported to the safety administration by tire makers, car manufacturers, motorcycle companies and child-seat producers, among others. Under a provision of a 2000 law, such companies must report information on defects, injuries, deaths and damage related to their products.

That law was passed largely in response to a string of rollovers involving Ford Explorers with Firestone tires that killed several hundred people and forced one of the biggest tire recalls ever. The law was intended to help regulators quickly detect potential trends in accidents related to individual products.

By Alana Roberts and Catherine Wilson

After a false start, a settlement was reached Tuesday in the $10 billion trade secrets dispute in Florida between Motorola and a defunct Fort Lauderdale, Fla.-based company.

The confidential agreement was reached hours after an earlier hearing to discuss a settlement was canceled because both sides hadn't come to terms, despite telling the judge they had.

Prominent litigator Willie Gary, representing the plaintiff, SPS Technologies, told the judge, "It's settled as far as we're concerned."

By Marcia Heroux Pounds

Fort Lauderdale-based SPS Technologies Corp. has settled its $10 billion trade secret case against Motorola for an undisclosed sum, lawyers representing SPS said today.

The parties settled Monday night before a pre-trial hearing scheduled for this morning.

Still pending is an appeal of nearly $23 million in attorneys' fees that have been mounting since the case began six years ago.

Motorola accuses Apple IPhone executive of taking trade secrets

Bloomberg News

Motorola Inc., the largest U.S. mobile-phone maker, has sued a former executive now working for Apple Inc., accusing him of disclosing its trade secrets to aid in the marketing of Apple's iPhone.

Apple introduced the newest version of its year-old iPhone wireless device on July 11, selling about 1 million of them in its debut weekend at a base price of $199.

Michael Fenger in March ended a six-year career at Schaumburg-based Motorola where he was a vice president for the company's mobile-device business in Europe, the Middle East and Africa. He is now Apple's vice president for global iPhone sales, according to a complaint filed yesterday in state court in Chicago.

The Associated Press

TAIPEI, Taiwan: Taiwan's giant electronics manufacturer Hon Hai Precision Industry Co. appears to have a big advantage in the China market -- its principals all speak Chinese and have an intuitive sense for the country's often bewildering business culture.

But last week the company took out half-page ads in major Taiwanese newspapers to complain about delays in a mainland court over the prosecution of a Chinese competitor.

Spokesman Edmund Ding said Hon Hai suspects that BYD Company Limited, a Chinese electronics maker based in the southern city of Shenzhen, is systematically looting its trade secrets.

The Associated Press

TAIPEI, Taiwan: Taiwan's giant electronics manufacturer Hon Hai Precision Industry Co. appears to have a big advantage in the China market -- its principals all speak Chinese and have an intuitive sense for the country's often bewildering business culture.

But last week the company took out half-page ads in major Taiwanese newspapers to complain about delays in a mainland court over the prosecution of a Chinese competitor.

Spokesman Edmund Ding said Hon Hai suspects that BYD Company Limited, a Chinese electronics maker based in the southern city of Shenzhen, is systematically looting its trade secrets.

Los Angeles Lawyer
June, 2008

James W. Denison [FNa1]

Attorneys are often called upon to draft agreements intended to protect a client's proprietary rights. The client may wish to prevent an employee from using information after leaving. Or, the client may want to keep its vendors or potential business partners from disclosing its information to the competition. In these situations, attorneys should consider advising their clients that courts may not recognize the proprietary right a client claims to have. Additionally, attorneys drafting agreements should be aware of the limitations that public policy and other laws place on proprietary information rights.
Unfortunately, confidentiality provisions and noncompetition clauses are often so broadly written that a party may believe that it has proprietary rights in virtually anything it chooses to designate as proprietary. A clause may, for example, claim protection for "all information, reports, studies ... flow charts, diagrams and other tangible or intangible material," [FN1] with nothing more specific defining the items protected. Or, perhaps more frequently, the drafter will include a catchall generally prohibiting use or disclosure of "proprietary information or material." [FN2] In Fox Controls, Inc. v. Honeywell, a manufacturer of machine safety products argued that any document on which it stamped its company logo was proprietary and therefore protected. [FN3]
This argument, however, was handily rejected by the court hearing the case. As often as not, a recitation in a contract--although important--will not be determinative of the parties' rights. As a leading opinion put it: "In self-serving 'Whereas' clauses, an employer cannot state that he is going to confide something unique and hush-hush, and then merely disclose the A-B-C's or Mother Goose Rhymes ...." [FN4]
So how can a party identify and protect proprietary rights that courts will recognize? In case law, possible sources of and limits on proprietary rights include the Uniform Trade Secrets Act (UTSA), statutory provisions barring restraints of trade, federal patent and copyright law, and the common law tort of misappropriation. [FN5]
The UTSA is an important reference point *20 for any understanding of what proprietary rights are. Indeed, courts often refer to "proprietary material and information" as essentially interchangeable with trade secrets governed by the act. [FN6] The California Uniform Trade Secrets Act statute (CUTSA) is found in Civil Code Sections 3426 et seq. To qualify as a trade secret under CUTSA, material or information must be the sort that "[d]erives independent economic value, actual or potential, from not being generally known ... and ... [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy." [FN7]

Not Generally Known

The first requirement--that the information is not generally known--may be met by compilations of data such as customer lists or other similar confidential information about customers. [FN8] The misappropriation of customer lists, in particular, has been a frequent subject of trade secret law. As a California court explained in Morlife, Inc. v. Perry: "[I]f an employer has expended time and effort identifying customers with particular needs or characteristics, courts will prohibit former employees from using this information to capture a share of the market. As a general principle, the more difficult information is to obtain, and the more time and resources expended by an employer in gathering it, the more likely a court will find such information constitutes a trade secret." [FN9]
Outside of customer list cases, the first requirement may be an issue when a party seeks to enjoin a competitor or former employee from using information that is already available in the public domain--or, at least, to anyone in the particular trade or business. [FN10] Trade secret law is similar to patent law in that there must be some degree of novelty or nonobviousness to the information claimed to derive its value from not being generally known. For example, in Buffets, Inc. v. Klinke, [FN11] an all-you-can-eat cafeteria chain contended that its recipes and "job manuals" on food preparation had been misappropriated by former employees and others who established a competing restaurant. The Ninth Circuit held that the recipes and manuals were not protected by the UTSA because they concerned "basic American dishes that are served in buffets across the United States." [FN12]
If a contract seeks to prevent an employee or others from using information that does not qualify as a secret to those in the industry, the provision will likely be stricken for violating statutory prohibitions on unreasonable restraints of trade. In California, Business and Professions Code Section 16600 provides: "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." The point of Section 16600 is that employees' lawful pursuit of their livelihood is generally to be encouraged. Employees setting up shop in competition with their former employer will necessarily be hindered from competing if they cannot use any information they gained during their former employment. As one federal appellate court opinion puts it:
[T]he right of an individual to follow and pursue the particular occupation for which he is best trained is a most fundamental right. Our society is extremely mobile and our free economy is based upon competition. One who has worked in a particular field cannot be compelled to erase from his mind all of the general skills, knowledge and expertise acquired through his experience. These skills are valuable to such employee in the market place for his services. Restraints cannot be lightly placed upon his right to compete in the area of his greatest worth. [FN13]
A question that has come up with some frequency in cases outside California concerns whether the information that an employer seeks to prevent a former employee from using merely consists of generalized skill or knowledge of the occupation or is truly a trade secret. FMC Corporation v. Cyprus Foote Mineral Company [FN14] is illustrative. In FMC, there were only two principal competitors in the highly technical field of lithium battery production, FMC and Foote. FMC's onetime employee, Fickling, had been instrumental in FMC's product development. After nearly 10 years at FMC and its predecessor, Fickling decided to jump ship and work for Foote. FMC filed a lawsuit seeking to enjoin Fickling from performing any research and development relating to lithium battery technologies. In denying FMC's motion for a preliminary injunction, the North Carolina federal district court explained:
FMC asserts that it has trade secrets that implicate almost every stage in the production of battery-quality lithium metals. But the evidence offered in support of those assertions is very general, and FMC seeks an injunction that effectively precludes Fickling from doing any work in his general area of expertise. Under these circumstances, the Court finds that FMC has not shown that its processes, whatever they are, "derive[] independent actual or potential commercial value from not being generally known or readily ascertainable through independent development." ... Rather, FMC seeks something much broader than the protection of its trade secrets to which it is entitled under North Carolina's Trade Secrets Protection Act and its confidentiality agreement with Fickling. FMC seeks to enjoin Fickling from performing any research and development for Foote in ... areas that he worked in for FMC. [FN15]
The line between employee training and protectable trade secrets was also addressed in the California appellate opinion Metro Traffic Control, Inc. v. Shadow Traffic Network. [FN16] In Metro Traffic, a traffic reporting service had a one-year contract with radio station KFWB. In one provision, KFWB acknowledged that Metro's employees agreed in writing "to treat all traffic gathering and reporting procedures as confidential trade secrets of Metro and to not compete with Metro in the traffic reporting business during their employment and for one year following their termination." When the contract year ended, KFWB did not renew with Metro and chose to use Shadow Traffic instead. Shadow immediately began building up its staff by procuring employees from competitors, including traffic reporters who had been under contract with Metro. According to the California Court of Appeal, whether Metro could enforce the ban on its former employees' use of traffic gathering and reporting procedures hinged on whether Metro could show that the procedures amounted to protectable trade secrets, and it failed to do so. Metro Traffic argued that it had developed its procedures to satisfy KFWB's "very strict and particular requirements regarding the quality, sound and personality of the anchors reporting over its airways ...." [FN17] That did not establish the existence of a protectable trade secret, however, according to the Metro Traffic court:
No doubt Metro conveyed to its employees KFWB's preferences and requirements regarding word choice and factual reporting but that does not amount to the compilation of an intangible personal property right owned by the employer. Actors, musicians, athletes, and others are frequently trained, tutored, and coached to satisfy the requirements of their sponsors and audiences, but their talents belong to them to contract away as they please. [FN18]
Metro Life may be an extreme example, but plaintiffs in trade secrets cases should not expect to convince a court that the "not generally known" requirement is satisfied by general training.

Panel approves bill allowing GAO to sue agencies

By Dan Friedman

The House Oversight and Government Reform Committee Wednesday passed a bill that would boost the Government Accountability Office's power to examine the executive branch through steps that include a legislative remedy to a court ruling that said the congressional auditing agency lacks the legal authority to sue for information about Vice President Dick Cheney's energy task force.Introduced by Oversight and Government Reform Committee Chairman Henry Waxman, D-Calif., and co-sponsored by all of the House's Democratic committee chairmen, the measure repudiates a 2003 district court finding in Walker v. Cheney by giving GAO the right to pursue civil action against federal agencies to obtain information.In 2001, then-Comptroller General David Walker sought to obtain records on who Cheney's task force met with in formulating the Bush administration's energy policy -- an effort backed by Waxman and Energy and Commerce Chairman John Dingell, D-Mich.

Taiwan manufacturer Hon Hai seeking China rights


Like other Taiwanese companies, giant electronics manufacturer Hon Hai Precision Industry Co. appears to have a big advantage in the China market - its principals all speak Chinese and share an intuitive sense for the country's often bewildering business culture.

But last week the company took out half-page ads in major Taiwanese newspapers to complain about delays in a Chinese court over the prosecution of a Chinese competitor for allegedly stealing its commercial secrets.

The row was a stark reminder that even for the most sophisticated Taiwanese companies - in this case one employing 500,000 Chinese workers - doing business on the mainland is not quite as simple as it seems.

Judge backs action against Nvidia and AMD on price fixing

By Paul Hales

IN A BARELY-REPORTED development, a judge has lauded evidence in a case against apparent arch-rivals Nvidia and AMD which stand accused of artificially keeping the price of graphics cards high.

A San Franciscan law suit combines "at least" 51 separate civil complaints against the GPU makers, according to a report here.

District Judge William Alsup of the Northern District of California was shown an email that had passed between the two firms which suggested ways of appearing to compete with one another while keeping prices high.


An award-winning New York City furniture designer is suing the parent company of a furniture retail chain, claiming the Door Store commissioned another designer to copy his furniture for profit.

In a complaint filed yesterday in state Supreme Court, John Kelly, of John Kelly Furniture Design in Manhattan, said the Door Store's CEO, Jodi Brinkman Fitzgerald, dismissed John Kelly Furniture Design as a supplier after finding that she could get "virtually identical" furniture from a competitor, Ligna USA Inc.

One of Mr. Kelly's signature design features, according to the complaint, is furniture created to be promoted and sold in "series," or corresponding pieces of similarly designed furniture that work together to create "room environments."

Maryland Daily Record


Cluck-U Corp., the Laurel-based chicken chain that requires customers to sign a waiver when ordering the hottest of its hot sauces, is turning up the heat on a former franchisee in Calvert County.

According to a federal trademark lawsuit filed in U.S. District Court in Greenbelt, Gary and Jennifer Armstrong backed out of the franchise agreement but continue to profit from Cluck-U's brand recognition and recipes.

The Armstrongs -- both of whom were Cluck-U employees, too --also have attempted to convince other franchisees to terminate their agreements, the complaint alleges.

Bally hit with suit on hiring of CEO

By Ameet Sachdev

Bally Total Fitness Holding Corp.'s recent hiring of its chief executive has touched off a lawsuit from a competitor over the possible misappropriation of trade secrets.

Michael Sheehan joined the Chicago-based gym operator as CEO on July 1, after nearly eight years at 24 Hour Fitness USA Inc., where he was most recently chief operating officer. 24 Hour Fitness, based in San Ramon, Calif., operates more than 400 clubs that offer low-cost memberships similar to Bally's.

24 Hour Fitness claims that Sheehan's new position would inevitably lead him to rely on his previous employer's trade secrets, according to its complaint filed July 7 in federal court in Chicago. In his previous position Sheehan, 46, had knowledge of the company's confidential growth plans, marketing strategies and financial data, the suit said.

"As CEO of Defendant Bally, a direct, head-to-head competitor of 24 Hour Fitness, Defendant Sheehan cannot 'unring the bell,' as he will be charged with executive responsibilities for the same areas that he worked in as COO of 24 Hour Fitness, " it said.

ED Pa - No showing that information constituted a trade secret.

Parexel International Corp. v. Feliciano (6/30/08)

Parexel claimed that Feliciano improperly acquired or retained custody of its confidential proprietary information, including its customer lists, without Parexel's consent and in violation of Feliciano's employment agreement. Parexel further alleged that Feliciano disclosed its confidential information to IMM for his own benefit. Parexel pointed to similarities in the websites of Feliciano's two companies and Parexel's own website. In addition, Parexel pointed to a letter authored by Feliciano, indicating that he had obtained the records of millions of pharmaceutical companies. The court concluded that fact issues existed as to whether Feliciano improperly obtained business information from Parexel in furtherance of his own interests. However, there had been no showing that the business information at issue constituted a trade secret.

E.I.P.R. 2008, 30(8), 309-319

Christopher Wadlow.

Abstract: Discusses the protection of trade secrets in private international law, focusing on the impact of Regulation 864/2007 (Rome II). Notes what is determined by the applicable law and details the approach of the travaux preparatoires and Regulation to unfair competition. Reflects on the problems that lack of a harmonised trade secrets law poses for the practical application of the three alternative rules in art.4, including the difficulty of applying the common personal law rule, establishing what constitutes damage and determining the "proper law" of the tort.


This is the second of two connected articles on the protection of trade secrets in private international law. The first, published as [2008] 30 E.I.P.R. 269, dealt with jurisdiction over trade secret actions under the Jurisdiction Regulation. [FN1] Like the present article, which deals specifically with the law applicable to non-contractual claims for trade secret protection, it was based on a presentation given by the author at the Centre for Intellectual Property and Information Law (CIPIL) Conference Breach of Confidence and Trade Secrets: Domestic Developments and Comparative Perspectives under the title "Trade Secrets in Private International Law". [FN2] At that time, the text of the Rome II Regulation [FN3] had not been finalised, and references to it were necessarily tentative. Now that the Regulation has been adopted and is about to come into force, [FN4] it is all too clear that its application to trade secret actions cannot be summarised in a few words.

Former HP exec pleads guilty to stealing trade secrets

7/11/08 InfoWorld Daily News

Grant Gross

Former Hewlett-Packard vice president of imaging and printing services shared confidential information about IBM's product costs and materials with superiors

A former vice president of imaging and printing services at Hewlett-Packard has pleaded guilty to stealing trade secrets from IBM, the U.S. Department of Justice said.

Atul Malhotra, age 42, of Santa Barbara, Calif., was charged June 27 with one count of theft of trade secrets, and he pleaded guilty Friday in U.S. District Court for the Northern District of California in San Jose. Malhotra worked as director of sales and business development in output management services for IBM Global Services from November 1997 to April 2006, before moving to HP in May 2006.

In March 2006, while still employed at IBM, Malhotra requested and received confidential information about product costs and materials, the DOJ said. The memo he received was marked confidential on each page, and a pricing coordinator at IBM Global Services told Malhotra not to distribute the information, the DOJ said.

Shortly after starting work with HP, Malhotra shared the IBM trade secrets with superiors, the DOJ said. In July 2006, he sent e-mail messages containing the IBM information to two senior vice presidents at HP, the DOJ said. Malhotra noted in the e-mail that knowledge of this information would help HP sales teams better understand their competitors' goals as they determined pricing for prospective deals.

HP and IBM cooperated fully with the investigation, the DOJ said. HP has said Malhotra's actions were in "direct violation of clear HP policies." The company conducted an internal investigation and fired Malhotra, and it reported the incident to IBM and law enforcement, it said.

Malhotra faces sentencing on Oct. 29. He faces up to 10 years in prison and a fine of $250,000.

Defense Department official sentenced to 5 years for China espionage

By Mike Rosen-Molina

A judge in the US District Court for the Eastern District of Virginia [official website] Friday sentenced [DOJ press release] a former US Department of Defense (DOD) official to almost five years in prison for disclosing national defense information to Chinese agents. Gregg William Bergersen, an analyst at the DOD's Defense Security Cooperation Agency [official website], pleaded guilty [DOJ press release; JURIST report] to conspiracy for providing classified military information to Tai Kuo, a Louisiana businessman, who in turn gave the information to a Chinese foreign official. Kuo also pleaded guilty to conspiracy and could be sentenced to life in prison. In May, Yu Xin Kang [CICentre materials], a Chinese woman who is a permanent resident of New Orleans, pleaded guilty [JURIST report] to charges of aiding and abetting espionage by acting as an intermediary between Kuo and Bergersen. Reuters has more.

In another Chinese espionage case, Dongfan "Greg" Chung, a former Chinese-American engineer at Boeing [corporate website], was arrested in February and charged with stealing corporate trade secrets [PDF indictment] related to aerospace programs and turning them over to China [JURIST news archive]. Chung's and Bergersen's activities were allegedly linked by Chi Mak [CI Centre backgrounder; JURIST report], a Chinese-American engineer sentenced [JURIST report] in March for conspiring to smuggle sensitive naval intelligence data to China.

Former HP executive pleads guilty to stealing trade secrets | ITworld

by Grant Gross

July 11, 2008, 04:19 PM -- IDG News Service --
A former vice president of imaging and printing services at Hewlett-Packard has pleaded guilty to stealing trade secrets from IBM, the U.S. Department of Justice said.

Atul Malhotra, age 42, of Santa Barbara, California, was charged June 27 with one count of theft of trade secrets, and he pleaded guilty Friday in U.S. District Court for the Northern District of California in San Jose. Malhotra worked as director of sales and business development in output management services for IBM Global Services from November 1997 to April 2006, before moving to HP in May 2006.

Job Squad Inc. v. Champion Industries, et al

PA - Lisa Kerr Michael Folio; J - Walker

Job Squad, a local nonprofit, filed a suit against Champion Industries, seeking $2.2 million in damages. Job Squad claims Champion stole confidential information and business clients. The suit also names Rhonda Copen, a former project manager at Job Squad, as a defendant. Copen left Job Squad to go to Champion. The suit says that shortly after she left, BB&T and Ticketmaster switched to Champion's presort mailing system. Job Squad claims Copen held mail from clients and misappropriated trade secrets by disclosing information. Job Squad seeks $2.2 million in actual damages, as well as punitive damages.
Case number: 08-C-1123

Merced concrete company awarded $2.5m from rival

By Scott Jason

MERCED -- Central Valley Concrete won a $2.5 million settlement Thursday against a competitor, which a jury said feigned interest in buying the company so it could gain access to financial records and evaluate its potential for success in the Merced market.

American Transit Mix, now owned by Houston's Cemex, agreed to pay the Merced-based company $2.5 million in damages after a jury found it guilty on five charges. The trial in Merced County Superior Court lasted about three weeks.

"I think the jury sent a message to the community that if you engage in sharp business practices, you will be held accountable," CVC's Fresno attorney Steven Paganetti said outside the courtroom.

Brothers vs. brother: Firm says trade secrets its own

By Barrett Newkirk

ANDERSON -- A dispute over corporate intellectual property involving three brothers has become a courtroom food fight.

Indianapolis-based Darlington Farms and co-owner Phil Hockemeyer filed a lawsuit against Rubicon Foods LLC, a company founded by Hockemeyer's younger brothers, Steve and Todd, and based at the Flagship Enterprise Center.

Both companies make easily digestible food products that are sold to health care facilities and nursing homes.

Transfer No Gross Trademark!

Article by Kenneth E. Crowell
10 July 2008

The U.S. Court of Appeals for the Second Circuit overturned a summary judgment in favor of accused trade-secret infringer Cadbury Stani (Stani) after determining that the license in suit was ambiguous and inapposite for determination on summary judgment. The Court also discussed the legal effect of transferring a trademark "in gross," that is, without also transferring the goodwill that the trademark symbolizes. The Topps Co. v. Cadbury Stani S.A.I.C., Case. No. 06-5316, (2nd Cir., May 15, 2008) (Cardamone, J.).

Topps licensed its trademarks and trade secrets respecting certain bubblegum brands to Stani in South America. The license was amended to terminate in 1996 and a second agreement was executed providing for transfer of the trademarks to Stani upon termination for $100,000. In 1996 the license expired by its terms, the trademarks were transferred and Stani continued to make and sell the trademarked gums. In 1999 Tops sued for misappropriation of the trade-secret gum ingredient formulas. Stani contended both that it had not used Topps' formulas to make its gum after 1996 and that Topps had transferred the trade secrets along with the trademarks. The district court found that the contracts made no express provision for transfer of trade secrets. Nonetheless the court found for Stani on summary judgment because it decided that the parties must have intended to transfer the trade-secret gum formulas to effectively assign the trademarks since an assignment of the trademarks in gross would have been invalid.

Former HP VP Charged With Stealing IBM Trade Secrets

MarketPlace News
July 11, 2008 • Vol.30 Issue 28

A federal grand jury has charged Atul Malhotra, a former vice president at HP, with allegedly stealing trade secrets from IBM, his former employer, and distributing them. Malhotra worked at IBM from November 1997 through April 2006, and in March 2006 he asked for and received confidential information on IBM's calibration metrics. Four months later, after he had left IBM and started working at HP, he sent emails to two HP senior vice presidents with attachments about the IBM calibration metrics he had obtained. According to an HP spokesperson, once the company discovered the incident, it fired Malhotra and told law enforcement and IBM about it.

10 Jul 2008

GULFPORT, Miss. -- A judge in Mississippi has granted Triton System's request for a preliminary injunction against Global Cash Services, a newly created ATM consultancy that's been working with ATM manufacturer GRG Banking Equipment Co. Ltd.

In February, Triton filed a lawsuit against GCS and six former Triton employees, including Brian Kett, Triton's former president and one of GCS's founders. Since that time, two of the former employees' names have been dropped from the suit.

The suit alleges that Kett and other co-defendants used proprietary information, obtained while still employed with Triton, to help them launch their new company, GCS. And because GCS has been working closely with GRG to help GRG expand its U.S. presence, Triton sees Kett's new company as a competitor, even though GRG specializes in ATM equipment for the financial-institution market.

Editorial - The Government and Your Laptop - Editorial - NYTimes.com


The Department of Homeland Security is routinely searching laptops at airports when Americans re-enter the United States from abroad. The government then pores over or copies the laptop's contents -- including financial records, medical data and e-mail messages. These out-of-control searches trample the privacy rights of Americans, and Congress should rein them in.

There have been widespread reports of the government searching -- and often seizing -- laptops, BlackBerrys, iPhones and other portable electronic devices at airports. It is not clear how often these searches occur, and the government will not say. The Association of Corporate Travel Executives says that of 100 people who responded to a survey it conducted this year, 7 said they had had a laptop or other electronic device seized.

This goes well beyond examining a piece of luggage. Because of the enormous amount of private information people keep on their laptops, the searches are more akin to rifling through someone's home and reading every letter, financial record and personal journal.

Protecting your trade secrets


Called A brief guide to preserving intellectual capital this might be a good primer to share with new employees who might be working with trade secrets.

Trade Secrets: General Guidelines Every Employee Should Know

EFaragi IP Litigation Reporter 1.30.07.pdf


When most people think of trade secrets, they imagine Coca-Cola's famous recipe locked in a heavily secured vault or the names of Colonel Sanders' 11 herbs and spices
dancing in the heads of a select few KFC executives. The truth is that many companies -- large and small -- maintain their competitive advantage by using trade secrets that may be as mundane as source code and customer telephone lists. As technology continues to facilitatethe rapid transfer of information, employees must be able to recognize when they are dealing with trade secrets and use strategies to avoid disseminating legally protected proprietary information.

Read the full analysis in the linked file ~ Jon


Trade secrets are a common, but potentially powerful, form of intellectual property. Businesses must be particularly careful when dealing with trade secrets because,
unlike the case with patents or trademarks, for example, failure to maintain the confidentiality required for trade secret protection can result in a complete loss of rights.
Those who improperly acquire or use trade secrets may face injunctions and may be forced to pay substantial monetary damages. Employees must learn to identify information that qualifies for trade secret protection and must adopt strategies
to prevent its inadvertent dissemination. Employees should always become familiar with their companies' policies governing confidential information and should
consult with their managers when not sure whether a particular piece of information is a trade secret. Trade secrets present many risks and opportunities, and the most prudent approach to managing them is to consult with intellectual property counsel on a regular basis.

Kimberly Morrison

Wal-Mart Stores Inc. has won a permanent gag order and agreed to drop its lawsuit against a fired security employee who detailed to media what he said were the retailer's surveillance practices.

A Benton County judge Monday granted Wal-Mart a permanent injunction against Bruce Gabbard, a technician who alleged that a manager pressured him to find security leaks.

The injunction replaces a previous restraining order Wal-Mart had against Gabbard and bars him from further disclosing trade secrets and other confidential information.

Gabbard and his supervisor, Jason Hamilton, were fired last year after recording phone calls to and from a New York Times reporter and intercepting pager messages. Wal-Mart said the pair violated company policy.

Innovative Solutions gains in intellectual property case


UWCHLAN -- A U.S. District Court recently issued several rulings in favor of Innovative Solutions & Support Inc. in a two-year-old intellectual property case.

The U.S. District Court for Tennessee's western district awarded Innovative Solutions $17.2 million in exemplary and punitive damages in its case against Kollsman Inc., an Elbit Systems Ltd. subsidiary, J2 Inc., Joseph Caesar, James Zachary and Zachary Technologies Inc.

Last November, Innovative Solutions was awarded $6 million in compensatory damages as part of the same intellectual property case, bringing the total to more than $23 million.

Charity sues charity for theft of donor list

By Michelle Massey, Texarkana Bureau

MARSHALL - Two employees and a board member of the Longview charity American Syringomyelia Alliance Project ("ASAP") recently resigned and started a new nonprofit with the same mission.

ASAP believes they took more than experience to the new nonprofit and asserts one or more of the former staff members took a copy of ASAP's database of donors.

Alleging theft and conversion of trade secrets, the American Syringomyelia Alliance Project filed suit against Chari and Syringomyelia Foundation on July 1, in the Marshall Division of the Eastern District of Texas.

Microsoft tells EU court €899 million fine too steep


By Emil Protalinski

The Microsoft-European Union antitrust dust-up has been going on for quite some time. The saga continues, as Microsoft has submitted a filing to the EU Court of First Instance detailing why the most recent fine imposed by the EU, €899 million ($1.36 billion), and which the company has already appealed, is too high.

According to the EU, the fine was set because Microsoft charged a royalty rate of 0.7 percent for each developed product from June 21, 2006 to October 21, 2007 that made use of the company's interoperability protocols. The problem, according to the EU? You guessed it: the royalty rate was too high.

MediaSentry denies being investigators to avoid licensing

7 July 2008 12:18 by Rich "vurbal" Fiscus

As the RIAA's campaign of file sharing lawsuits against customers has gone on a number of interesting legal questions have been raised about how investigations are being conducted. MediaSentry is responsible for finding and identifying computers sharing copyrighted music on behalf of RIAA attorneys. One important question that has yet to be answered is whether they are required by law to be licensed as private investigators.

According to a letter from MediaSentry lawyers to Michigan regulators they believe the answer is no. The letter is in reply to another, in which Michigan officials suggested that MediaSentry's investigations might put them in violation of state law with respect to what activities require a private investigator's license. The original letter notes the following requirement.

Award increased to IS&S in trade-secrets case

Philadelphia Business Journal
Monday, July 7, 2008

Innovations Solutions & Support Inc. said Monday that a federal court has increased the amount awarded to it in a trade-secret misappropriation case to more than $23 million from more than $6 million.

The Exton, Pa., maker of monitoring and display equipment for aircraft said the United States District Court for the Western District of Tennessee awarded it damages, interest and fees in addition to the compensatory damages awarded by a jury in November 2007.

The defendants in the case are former IS&S (NASDAQ:ISSC) employee Joseph Caesar; former IS&S sales consultant James Zachary; J2 Inc., which Caesar and Zachary owned and founded; Zachary Technologies Inc., which Zachary owned and founded; and Merrimack, N.H.-based Kollsman Inc., the U.S. subsidiary of Elbit Systems Ltd., which is located in Haifa, Israel.

IBM Buys Its Way Out of Antitrust Trouble

By: Maureen O'Gara
Jul. 4, 2008 06:30 AM

IBM Has Gotten Out from Under A Threat to its Multibillion-dollar Mainframe Monopoly

The fireworks over Armonk this 4th of July are going to be a bit brighter and more awesome because - by the flick of a checkbook - IBM has gotten out from under a threat to its precious multibillion-dollar mainframe monopoly.

For a reported pittance, it's bought Platform Solutions Inc (PSI), the first significant new mainframe maker in 30 years, the start-up that sued it for antitrust 18 months calling it every dirty kind of monopoly-abusing name in the Sherman and Clayton Act dictionary.

PSI also took its complaint to the European Commission.

Google Vs. Viacom - Federal Judge Rules 50-50

by Daisy Sarma - July 3, 2008

The ongoing legal battle between Google and Viacom over YouTube has resulted in a 50-50 situation for Google. The bad side of the deal for Google is that it has, as per the order of a federal judge, to turn over all YouTube user histories to Viacom; the good side is its search code and IP is safe.

In a 25-page ruling Wednesday in New York, U.S. District Judge Louis Stanton ordered Google to hand over all user histories at YouTube to Google, quite a task considering Google says this figure could run into millions given the popularity of the website.

Judge Stanton, however, also said Google did not have to hand over the search code to Viacom as the latter had not been able to come up with a good enough reason as to why Google should do this during the course of the trial. What this means that Google's trade secrets are essentially safe.

En Pointe Files Suit in Employee Dispute


Los Angeles Business Journal Staff
IT services provider En Pointe Technologies Inc. is countersuing a Toronto competitor that claims En Pointe is hiring away its employees to gain access to its trade secrets.

Gardena-based En Pointe said Thursday that it is seeking a court declaration that Softchoice Corp. has engaged in improper business practices by using anti-competitive clauses in its employment contracts and policies which unlawfully restrict an individual's ability to work.

"We believe that Softchoice wrongfully threatens suit against employees who dare to leave them," En Pointe Vice President Michael Rapp said in a statement

ASIP Holds "Patents of Inventions and Trade Secrets" Course

pecial to ag-IP-news Agency

AMMAN - The Arab Society for Intellectual Property (ASIP) announced on Wednesday that the registration for the third course of the Arab Certified Intellectual Property Practitioner (ACIPP) program entitled "Patents of Inventions and Trade Secrets" has started.

The course will begin on July 8, 2008 at the Talal Abu-Ghazaleh College of Business/ German Jordanian University (TAGCB/GJU).

ACIPP is a professional Arabic program offering advanced teaching and training for Arab practitioners. It aims at providing an easier understanding of modern principles that govern IP, as well as access to knowledge and international developments, so that the practitioner may be able to provide his/her services in line with international standards.

The program is comprised of four courses:

Module 1: Introduction to Intellectual Property
Module 2: Trademarks and Unfair Competition
Module 3: Patents of Inventions and Trade Secrets
Module 4: Copyrights and Related Rights

Upon the completion of each course, students will sit for a final examination. Upon successful passing of the examination, they will receive a certificate. When a student passes final examinations in the Modules, s/he will be granted the full Arab Certified Intellectual Property Practitioner Certificate.

ASIP is a specialized Arab professional body. Its main objective is to enhance and develop the protection of intellectual property system through various means of awareness and education, which explain the nature of work in this field and its effective role in the economy.

For further questions or registration information please contact ASIP; www.aspip.org

Viamedia tries to stop trade secrets leaking

Fatima Schroeder

A Cape Town company that has been developing an instant mobile messaging service to rival the popular Mxit, is applying for a High Court order to stop a former employee moving to a group that owns 30 percent of the Mxit business, fearing he may divulge secret information.

The company, Viamedia, says its former digital marketer Stafano Sessa has played "a pivotal role" in launching the service, which has been code-named VIP.

If he moves to rival business 24.com, he will be able to divulge information which Viamedia has spent millions of rands developing, the company states in court papers.

But Sessa, who has also prepared a costing scheme for Viamedia on sales through the popular Facebook Internet website, says he was "bored and frustrated" at Viamedia.

YouTube: Trade secrets are safe but your information isn't

A judge has ordered YouTube to hand over information about every video watched including logins and user IP addresses to Viacom, which is suing the video sharing service for $1billion.

YouTube won't be forced to hand over its source code to Viacom because a US judge has ruled that it is a trade secret, but the same judge has ruled that the video sharing site must turn over the record of every video watched including user names and IP addresses to the media giant. Viacom is suing YouTube's parent company Google for $1bn over copyright infringement. Reading the ruling shows what a fishing expedition-or witch-hunt for users-this lawsuit has become. Even with confidentiality, it's clear Viacom could have used this suit to glean some competitive edge. On the flip side, users clearly lose, but at least Viacom isn't sorting through your private videos.

Judge Louis Stanton called Google's argument that turning over the user data would violate users' privacy "speculative".

Michael Arrington of TechCrunch in a post titled "Judge Protects YouTube's Source Code, Throws Users To The Wolves" said:

I can understand why Judge Stanton, who graduated from law school in 1955, may be completely and utterly clueless when it comes to online videos services. But perhaps one of his bright young clerks or interns could have told him that (1) handing over user names and a list of videos they've watched to a highly litigious copyright holder is extremely likely to result in lawsuits against those users that have watched copyrighted content on YouTube, and (2) YouTube's source code is about as valuable as the hard drive it would be delivered on, since the core Flash technology is owned by Adobe and there are countless YouTube clones out there, most of which offer higher quality video.

The Electronic Frontier Foundation believes the ruling is in violation of federal law, the federal Video Privacy Protection Act. The EFF did cede that the court might have been confused by the reference to video tapes in the act and not felt that it applied to the internet, but the act applies not only to old video tapes but also "similar audio visual materials". Was it really necessary for Viacom to have all of this information to prove that its videos were more popular than user generated content? The EFF thinks not. What about you?

UPDATE: An ironic twist. Viacom used Google's own assertions that IP addresses without other supporting information could not be linked to individuals. And blogger John Little wonders if Viacom will use this information to launch suits against YouTube users. Christopher Dawson at ZDNet answers John's question: "...there is nothing to stop Viacom from using the data RIAA-style to go after users."

Stan Schroeder at Mashable thinks that Viacom will have more than enough information to identify and then sue YouTube users. To which he responds: "I think I'm not alone here when I say screw you, Viacom."

UPDATE 2: As commenter acrobat74 points out from a CNET News.com article, Viacom does have constraints on how it will use the information. And it is more than a 'finger wag' from the court, as I said in the comments last night.

Google has been ordered to turn over YouTube user data to Viacom. But Viacom will be guilty of contempt of court if it uses that data for anything other than specifically proving the prevalence of piracy on YouTube, a source close to Viacom told CNET News.com on Thursday.

UPDATE 3: EuroJohn asks in the comments: "So, is it actually illegal in the US to watch on YouTube a video uploaded there in breach of copyright?" Chris Soghoian of CNET has made the case that the answer is yes, even if you watch an illegally uploaded piece of content that the rights holder has actually uploaded. Or to put it another way, if I watch a Dr Who clip uploaded by someone other than the BBC, I would be liable even if the BBC had uploaded the same or a similar clip elsewhere on YouTube. There are questions as to whether streaming content would create the same liability as downloading the content, but that is a legal question yet to be answered by the courts.

And Christopher, who writes about education and IT, thinks this might lead more schools to block the video sharing service.

"Can we justify leaving YouTube unblocked in the face of potential litigation?" I'm not sure of the answer. If it's just keeping kids from watching raunchy videos, I don't mind leaving that to teachers supervising their classes. If it comes to teachers unwittingly showing videos that infringe on copyrights (maybe even videos created by students), then I'm a bit more uncomfortable about exposing teachers and the district to that level of potential liability.

Are you pissed off that a US judge has turned over your YouTube video viewing habits to Viacom? Philip at the blog Replicating Memes is calling on Europeans to formally protest to their privacy agenices, and he's posted contact details up for the Belgian privacy office in case you live there.
Technorati tags:privacy, youtube

Google Sued For Trade Secret Theft

July 4, 2008

A small company called LimitNone, dealing in the development of software products, has filed a lawsuit against Google, alleging theft of trade secrets.

The suit has been filed in the Cook County Circuit Court of Illinois. LimitNone are seeking damages to the tune of $1 billion.

LimitNone has claimed that Google backed out of a partnership deal at the last minute, after having gotten access to trade secrets of a new software product that LimitNone was developing.

Former HP VP charged with stealing IBM trade secrets

By Sharon Gaudin

July 2, 2008 (Computerworld) A former Hewlett-Packard Co. vice president was indicted by a federal grand jury last week for allegedly stealing trade secrets from his former employer, IBM.

Atul Malhotra is charged with allegedly e-mailing confidential IBM information to two senior vice presidents at HP. HP terminated Malhotra, who worked at the company for four months, and reported the incident to law enforcement and to IBM, according to a statement from Emma McCulloch, a spokeswoman for HP.

YouTube: Trade secrets are safe but your information isn't

Kevin Anderson

YouTube won't be forced to hand over its source code to Viacom because a US judge has ruled that it is a trade secret, but the same judge has ruled that the video sharing site must turn over the record of every video watched including user names and IP addresses to the media giant. Viacom is suing YouTube's parent company Google for $1bn over copyright infringement. Reading the ruling shows what a fishing expedition-or witch-hunt for users-this lawsuit has become. Even with confidentiality, it's clear Viacom could have used this suit to glean some competitive edge. On the flip side, users clearly lose, but at least Viacom isn't sorting through your private videos.

Obesity, Fitness & Wellness Week

Tongjitang Chinese Medicines Company (NYSE: TCM) ("Tongjitang" or the "Company"), a vertically integrated and profitable specialty pharmaceutical company focusing on the development, manufacturing, marketing and selling of modernized traditional Chinese medicine ("TCM") in China, announced that the Ministry of Science and Technology and the National Administration for the Protection of State Secrets of the People's Republic of China have granted the Company national trade secret status for its flagship product, Xianling Gubao ("XLGB").

The trade secret program in China protects intellectual property without publicly disclosing the detailed information involved in a patent application, such as manufacturing techniques or TCM formulae. Additionally, the state grants trade secret status to leading products demonstrating unique commercial value and brand value. Such products typically have a long history and proven efficacy in their respective markets, and presently in China there are approximately twenty TCM products with trade secret status.

Xiaochun Wang, Tongjitang's chief executive officer and chairman stated, "We are ecstatic to announce this significant milestone for our Company - which is a great testament to our leadership in the modernized TCM market. We are one of only a handful of modernized TCM providers to earn this honor and we are very pleased with the benefits we'll receive, such as manufacturing exclusivity and pricing protection. We also expect that new product developments, such as our next generation XLGB product, should receive expedited treatment from China's State Food & Drug Administration ("SFDA") when the time comes."


The feds have indicated a software engineer who was flying to China with confidential technical documents, a thumb drive, four external hard drives, 29 recordable compact discs, and a videotape.

A former software engineer for a telecommunications company based near Chicago was indicted for allegedly stealing trade secrets worth an estimated $600 million and trying to take the documents to China.

The FBI said Wednesday that Hanjuan Jin of Schaumburg, Ill., a naturalized U.S. citizen who was born in China, was stopped at Chicago's O'Hare International Airport on Feb. 28, 2007, in a random search.

According to an affidavit filed by FBI special agent Michael R. Diekmann, Jin was traveling on a one-way ticket to Beijing at the time. She declared that she had $10,000 in U.S. currency in her carry-on luggage. Customs and Border Protection officers found about $30,000 in cash.

According to Diekmann, this prompted officers to further inspect Jin's luggage, whereupon they found several technical documents labeled "[Company A] Confidential Property," Chinese documents, a European company's product catalog of military technology written in English, a personal laptop computer, a thumb drive, four external hard drives, 29 recordable compact discs, and one videotape.

A search of the thumb drive and hard drives, conducted with Jin's consent, revealed numerous documents marked "[Company A] Confidential Property." Initially, Jin told customs officers she worked for Company A. In a subsequent interview with law enforcement agents, Jin said she was on medical leave from Company A. She later said she worked for Company A and Company B at the same time. Company B is a Chicago-area company that competes with Company A.

Diekmann's affidavit and the indictment do not name either Company A or Company B.

Schaumburg-based Motorola is one of several telecommunications companies that Jin might have worked for. Asked to confirm or deny whether Jin had ever worked for Motorola, company spokeswoman Paula Thornton said in an e-mail," We are not able to do so, as Motorola does not comment on questions associated with pending prosecutions or ongoing governmental investigations."

Nortel also maintains an office in Schaumburg. A Dallas-based spokeswoman for the company said she'd never heard the name Hanjuan Jin.

Another possibility might be American Telecommunications Corp. When called, the person answering the phone declined to make a media contact available and hung up.

Jin was released, though customs agents retained the documents marked confidential and her computer equipment. She was again stopped at O'Hare on March 1, 2007, while traveling on another one-way ticket to Beijing.

Following a subsequent search of her home, Jin was arrested on March 7 based on a criminal complaint brought by Patrick J. Fitzgerald, the U.S. attorney for the Northern District of Illinois. She was released on $50,000 bond.

If Jin is convicted, each of the three counts against her carries a maximum penalty of 10 years in prison and a $250,000 fine.


A U.S. federal judge has sentenced a former Silicon Valley software engineer to two years in federal prison for stealing military technology and trying to sell it to the Chinese government, the first defendant to be convicted under the anti-espionage provisions of a 12-year-old federal law. Xiadong Sheldon Meng pleaded guilty last year to violating the Economic Espionage Act of 1996 and federal export laws, admitting he stole technology from his former employer, Quantum 3D. [SiliconValley.com]

Background: Complaint and counterclaim were filed relating to the control of a
small Spanish-language bi-weekly newspaper. After defendants withdrew from
litigation and agreed to turn over entire control of paper to plaintiffs, jury
returned a verdict in favor of plaintiffs.

Holdings: The District Court, Ponsor, J., held that:

(1) court would not enhance jury award for violation of Lanham Act provision
prohibiting, inter alia, false designation of origin;

(2) court would not award double or treble damages against defendants for their
violation of Massachusetts law regarding the taking of trade secrets; and

(3) court would not treble damages against defendants for infringement of a
federally registered trademark.

So ordered.


A former Hewlett-Packard executive has agreed not to contest federal charges that he stole trade secrets from his previous employer, IBM, and attempted to pass the information to colleagues at HP. Atul Malhotra was a vice president for printing services at IBM when he obtained confidential pricing information in March 2006, according to charges filed Friday in San Jose's U.S. District Court. [SiliconValley.com]

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