The Trade Secrets Vault

A blog of trade secrets news, verdicts, and resources

A jury decided favorably for FLIR Systems after Raytheon Corp. filed a lawsuit alleging that FLIR subsidiary Indigo Systems Corp. (now known as FLIR Commercial Systems) misappropriated trade secrets.

A jury in U.S. District Court for the Eastern District of Texas rejected Raytheon’s allegations that Indigo, prior to its acquisition by FLIR in 2004, and FLIR misappropriated 31 trade secrets that Raytheon owned

FLIR said the jury determined that 27 of the 31 alleged trade secrets were not Raytheon trade secrets and that neither FLIR nor Indigo misappropriated any of the 31 asserted trade secrets.

No damages were awarded against FLIR and Indigo. The court will decide whether or not to award FLIR and Indigo their attorney’s fees as the prevailing parties under the Texas Theft Liability Act.

Please click here to read more from Trade Only Today.

Intel, the world's largest manufacturer of computer chips, has called on the Indian government to strengthen protection for trade secrets under the intellectual property rights policy, raising concerns that the current regime is not strong enough. It has even asked for criminal sanctions to discourage theft.

Intel has a design and development centre in Bengaluru for key products and is expanding its high-end technology research and development efforts. It sought a tightening of the rules in its letter to the government and the panel that's drafting the country's intellectual property rights (IPR) policy.

"As India continues to grow in IT and innovation, it needs to depart from the British model of contractual protection and to elevate trade secrets to a genuine IP right with statutory protection with specific criminal sanctions," Intel said.

The Narendra Modi government is looking to attract foreign investment through its 'Make in India' drive and is also urging overseas companies to set up R&D facilities in the country.

The US Uniform Trade Secrets Act is a state law enacted by 47 states so far. Besides, the US expanded the jurisdiction of the federal courts last year over cases related to misappropriation of trade secrets by enacting the Theft of Trade Secrets Clarification Act.

Please click here to finish reading this interesting article from The Economic Times.

By Francesca Buzzi

This October, oilfield company Baker Hughes made a surprising announcement that the company would begin disclosing the contents of its frac fluid. Oilfield companies like Baker Hughes, Halliburton, and Schlumberger provide drilling and well completion support—including the creation of toxic frac fluid—to oil and gas companies. Last week, the company announced that they will merge with multinational giant, Haliburton – the very company after whom an infamous Safe Drinking Water Act exemption is named.

This 2005 exemption in the Safe Drinking Water Act allows oilfield companies to claim the contents of their frac fluid as “trade secrets” and are therefore exempt from disclosure. This exemption is now well known as the Halliburton Loophole. Because of these trade secret protections, it is difficult to know what pollutants to test for, making it harder to identify air and water contamination near fracking operations and identify its specific source.

Halliburton and Baker Hughes’ $34.6 billion merger would consolidate the second- and third-largest oilfield services companies in the industry, which are frequent rivals in both services offered and the geographic regions in which they operate. A Reuters analysis predicts that the combined firms would hold a whopping fifty-four percent market share of completion products and services, comprising thirty-nine percent of the market share of fracking services.

Of course, a merger of this scale is not unheard of in the oil and gas industry. In 1999, Exxon and Mobil’s megamerger reunited two of the most powerful facets of Rockefeller’s original behemoth, Standard Oil Company (Standard Oil of New Jersey and Standard Oil of New York, respectively), almost a century after they were broken apart for violating a law designed to protect competition. This is just the latest in a long line of oil industry megamergers, which have allowed the oil and gas industry to have undue influence over our elected officials.

To finish reading this article from Food and Water Watch, please click here.

A Delaware jury has ordered Hewlett-Packard Co. to pay $6.5 million in damages to a corporate security company for misappropriation of trade secrets, breach of the covenant of good faith and fair dealing, and defamation. The jury returned the verdict last week after a Delaware Superior Court trial before Judge Mary M. Johnston.

Professional Investigating & Consulting Agency Inc., a Columbus, Ohio, company focusing on brand protection, loss prevention, risk management and corporate security, filed a February 2013 lawsuit against technology giant HP. The lawsuit alleged HP contracted with PICA, used its trade secrets, ruined the company's reputation and ultimately terminated its relationship with the security business.

In 2002, PICA contracted to perform investigative loss prevention and brand protection services for HP in its Europe, Middle East and Africa regions, referred to in court papers as EMEA. PICA was later invited to bid on a contract handling HP's anti-counterfeit program in Latin America, but lost the contract to rival M. Morgan Cherry & Associates, or MMCA.

To read the complete article from Delaware Weekly, please click here.

Lyft, a San Francisco-based hail-a-car start-up, filed a lawsuit on Wednesday evening against a former executive, arguing that he stole confidential company information in the weeks before he left the company.

“We are disappointed to have to take this step, but this unusual situation has left us no choice but to take the necessary legal action to protect our confidential information,” said Erin Simpson, a Lyft spokeswoman.

The lawsuit accuses Travis VanderZanden, Lyft’s former chief operating officer, who left the company in August, of downloading important company information including financial data, information on future product plans and growth statistics. The lawsuit says that Mr. VanderZanden’s personal online storage account contained more than 98,000 files and folders after he left the company, according to a copy of the filing obtained by The New York Times. Mr. VanderZanden joined Uber, Lyft’s strongest rival, just two months after leaving Lyft.

To read the complete article on BITS, by The NY Times, please click here.

The North Carolina Department of Public Instruction has released to several media outlets including WWAY salary information submitted by a Leland-based educational management company for employees who work at four area charter schools even though it was submitted as confidential trade secrets.

Roger Bacon Academy submitted the information last week through Charter Day School, Inc., whose schools it manages.

The submission on Roger Bacon Academy letterhead begins with the header in red type "Proprietary and Confidential Privately Owned Business Information." It then includes bullet points about the nature of the information and why it should be protected under state statue from being disclosed under North Carolina's public record laws. It ends with red text that reads "Unauthorized release of this confidential information may result in incurring liability."

The information was disclosed to state regulators to satisfy an August request for the information. WWAY and other media outlets have requested the information from Charter Day School, Inc., in an attempt to help provide transparency in how public money is being spent on charter schools in North Carolina.

Due to the nature of the provisions of the submission, WWAY is withholding publication of the salary information until it can consult with an attorney, but salaries for assistant head masters at the schools is comparable to assistant principals at public schools in the area, while one of three headmasters cited appears to make more than a typical public school principal.

To read the complete article by WWAY, NewsChannel 3, please click here.

Mayo Clinic filed a lawsuit alleging misappropriation of trade secrets and breach of contract against Dr. Franklin R. Cockerill III, who was president and CEO of the for-profit Mayo Medical Labs for eight years. The case was filed Tuesday in Olmsted County District Court. Mayo Clinic released the lawsuit to the media this morning.

On July 17, an emotional Cockerill told his department that he was "retiring" to help his 85-year-old mother run her fertilizer business in Nebraska. Co-workers lauded his almost 30-year career with Mayo Clinic and gave him an appreciative send-off that built up to his final day of work on Sept. 30.

All of that changed on Oct. 1. Instead of retiring to Nebraska, Cockerill reportedly went to New Jersey to work for a major MML competitor, Quest Diagnostics Inc. He stepped into the position of vice president and chief laboratory officer for the multibillion-dollar public company.

Using emails as evidence, Mayo Clinic contends Cockerill had been talking to Quest about a job since February. He reportedly had a phone interview with Quest in March followed by a face-to-face interview in May, when Cockerill said he needed the time off to help his mother with a business problem. The lawsuit alleges he accepted the Quest position in June. Instead of informing Mayo Clinic, he continued to work at Mayo and attend confidential meetings, where issues were discussed that could cause irreparable damage to MML and Mayo Clinic in the hands of Quest.

Mayo Clinic alleges Cockerill left with at least seven clinic-owned USB memory drives and that he used four of them to "download information from Dr. Cockerill's computer in the days before … (he) started working for Quest."

Mayo Medical Labs and Quest vie for millions in medical test contracts. Mayo Medical Labs performs about 20 million tests for more than 4,000 hospitals annually. Quest says it does 1.5 billion tests a year. Many of the clinical tests conducted by both MML and Quest are proprietary and generate millions in revenue.

To read the complete article from Post Bulletin, please click here.

Top Agent Network Sues Zillow

Terry Garrison
Housing Wire
San Francisco-based Top Agent Network filed suit Monday in U.S. District Court for the Northern District of California against Zillow (Z), alleging theft of its proprietary trade secrets to create the highly touted “Coming Soon” feature.

The lawsuit claims that the online listing giant gained access to TAN’s confidential information by feigning interest in investing in the company when, in fact, it was simply interested in tapping into TAN's proprietary data and systems to launch a competing product.

The lawsuit alleges that beginning in early 2014, under the guise of a potential investment by Zillow, Zillow was granted access to TAN’s confidential and proprietary information as well as its business strategy, metrics and model. The lawsuit further alleges that TAN provided this information under the assurance that it would be kept confidential and would be used solely for evaluating a potential investment in TAN.

“Although many systems offer some version of a ‘Coming Soon’ tool to allow agents to announce pre-MLS listings, our particular version was developed and perfected over many years,” Faudman said. “Our proprietary system, the strategy behind it and the particular features and tools offered to our members are unique to TAN. They collectively explain why we have succeeded where other industry players have not.”

“We would never have met with Zillow and shared sensitive information about our business had they disclosed that they were working on a competing product or that they would use our knowledge and proprietary information to launch one,” Faudman says.

After months of accessing TAN’s confidential information, in May 2014, Zillow passed on the investment opportunity, informing TAN that this was “just not what we do nor have ever done.”

Not long after in June, Zillow rolled out what TAN alleges is a copycat product that incorporated much of the confidential and proprietary information taken from TAN.

In March, filed suit against Zillow for for breach of contract and misappopriation of trade secrets.

Protecting Trade Secrets in the Cloud

The business community’s growing use of cloud-based computing services provides great benefits due to cost-savings and mobile information access. However, business leaders should understand the risks of storing valuable trade secrets in the cloud. This article provides the business community tips on how to safeguard valuable trade secrets stored in the cloud from being freely disclosed to the public, thus putting the business at risk of losing protections that courts grant trade secrets.

As businesses’ profit margins have continued to shrink since the Great Recession, more companies have looked to reduce costs by reducing growing expenses related to their information technology departments.[1] The first line item to draw attention in the IT budget is frequently the rising costs associated with maintaining and upgrading system hardware. Businesses often find that housing and operating multiple servers stretches IT budgets thin by increasing maintenance, labor, and operational costs. The solution so many businesses have turned to is to move their valuable data to virtual servers, or the “cloud.”[2] A recent survey of IT executives provides that companies will triple their IT spending on cloud-based services in 2014 over 2011.[3] Cloud service providers have also seen demand increase as they increase their cloud capabilities.[4]

Although cloud-based servers provide businesses with substantial financial and operational benefits, businesses must recognize that there are perils to shifting data to the cloud. One of the key concerns businesses should consider before moving data to the cloud is the risk that its valuable trade secrets will lose protection as a result of insufficient safeguards to protect against disclosure. This article addresses that concern and provides businesses keys for seeking to protect valuable secrets in the cloud.

To finish reading this interesting article by The National Law Review, please click here.

A former engineer for medical technology giant Becton Dickinson and Co. of Franklin Lakes was sentenced Thursday to 18 months in prison for stealing trade secrets from BD and another New Jersey company.

U.S. Attorney Paul Fishmann said Maniar had worked as an engineer in Salt Lake City for C.R. Bard Inc., which is based in Murray Hill, from 2004 until 2011. He worked on catheters and ports, among other medical products.

Maniar then worked on syringes and pen injectors at BD in Franklin Lakes from February 2012 until May 2013, at a salary of $115,000, according to court documents.

At the two companies, Fishman said, "Maniar was able to steal secret information related to the companies' products," including BD's development of a self-administered disposable pen injector called Vystra.

A former engineer for medical technology giant Becton Dickinson and Co. of Franklin Lakes was sentenced Thursday to 18 months in prison for stealing trade secrets from BD and another New Jersey company.

Maniar downloaded Bard and BD files onto computer storage devices, and forwarded trade secrets from his work email accounts to his personal email accounts, Fishman said.

Prosecutors alleged that in the weeks before he left BD, Maniar downloaded more than 8,000 files of confidential information.

"At BD, we take very seriously the protection of our confidential information and trade secrets," the company said in a statement. "We have worked closely with the FBI and U.S. Attorney's Office with their investigation and enforcement of this matter."

BD had also filed a civil suit against Maniar, but the company said it decided not to pursue that case, "given the satisfactory resolution of the government's criminal prosecution."

Cases involving alleged theft of trade secrets have become more common, in part because digital files are easier to steal than boxes of paper documents.

To read the complete article by Kathleen Lynn, published in North Jersey, please click here.

The last time we checked on the Beckett v. COMC case, Beckett had requested permission to file an amended complaint to add a breach of contract claim against COMC. COMC opposed Beckett's request, which I theorized was a COMC strategy to re-argue its side of the case to the court, rather than an actual attempt to stop Beckett's motion.

As predicted, the court rejected COMC's opposition and allowed Beckett to amend its complaint.

In a minor backfire for Beckett, once it filed its amended complaint, COMC responded by adding a new claim of its own.

In its response, COMC asked the court to issue an order "that the Beckett Media data is simply an ordinary compilation of readily accessible materials that is not entitled to trade secret protection."

Legal translation: Judge, can you tell the world that everything Beckett has is freely available for everybody in the world to copy?

Click here for the complete article.

Can Your LinkedIn List Be a Trade Secret?

As a LinkedIn user, the decision concerning whether to share your entire list of connections with any individual connection can often implicate a number of strategic questions. As of May 2014, LinkedIn boasts 300 million users globally and access, or lack thereof, to such a vast network can depend to some degree on how an account is configured insofar as that configuration determines how information is shared amongst a user’s connection. The business implications are apparent, but such a decision has started to engender legal actions, as encapsulated by Cellular Accessories for Less, Inc. v. Trinitas, LLC, No. CV 12-06736 DDP (C.D. Cal. Sept. 16, 2014).

Plaintiff Cellular Accessories for Less, Inc. (Cellular) and Defendant Trinitas LLC (Trinitas) are both in the business of selling mobile phone accessories to businesses. Defendant David Oakes (Oakes) worked for Cellular as a sales manager from 2004 to 2010. In order to receive approbation to start, Oakes was required to sign an Employment Agreement (the Agreement) which included a clause that stated in relevant part that Cellular requested that the “proprietary information remain property of this organization, and may not leave, either physically or electronically, unless approved in writing” by the CEO of Cellular. Oakes similarly signed a “Statement of Confidentiality” (the Statement) in which he avowed to not “knowingly, disclose, use, or induce or assist in the use or disclosure” of the Cellular proprietary information or anything related thereto, without the express written consent of Cellular.

Proprietary information was defined in the Statement as “information (a) that is not known by actual or potential competitors of the Company or is generally unavailable to the public, (b) that has been created, discovered, developed, or which has otherwise become known to the Company … and (c) that has material economic value or potential material economic value to the Company’s present or future business.” Oakes signed the agreement, but disputed such signature created a valid contract.

By JD Supra. Click here to read the complete article.

In June Pro Publica reported that the Red Cross was resisting our request that the New York attorney general's office release information provided by the group on how it spent money after Superstorm Sandy, arguing that documents we sought contained "trade secrets."

The charity has now reversed itself, concluding that "with all of the disasters the American Red Cross responds to and the peak of hurricane season fast approaching, it simply isn't worth our time and resources to continue these efforts over a year-old letter," Red Cross spokeswoman Anne Marie Borrego said.

The Red Cross provided ProPublica with a copy of a July 2013 letter that offers a bit more insight into how it used the more than $300 million it raised for storm relief, but stops short of detailing how it allocated resources geographically or the pace at which money was spent.

In the weeks and months after the storm, the Red Cross faced criticism that it hadn't provided aid quickly enough where it was most needed.

In an additional note provided with the letter, the Red Cross said that as of June 30, 2014, it had spent $239 million on post-Sandy relief and made "firm commitments" to spend almost all of the rest of the $312 million raised. It also broke its expenditures into seven categories, a level of detail not given in its annual reports or tax filings.

More than half the money spent, $129.6 million, went to financial assistance, food, and other relief items, the Red Cross said. The next-largest expenditures were $46.1 million for "deployment of staff and volunteers (e.g. air travel, rental vehicles, meals, lodging for volunteers)" and $30 million for "costs of permanent program resources included in Superstorm Sandy response."

The group said it spent smaller amounts to pay temporary disaster workers, to acquire or rent equipment, and on miscellaneous operational costs. Nearly $5 million went to professional and consulting services for events like telethons and direct mail fundraising.

To read the complete article by Justin Elliot from Pro Publica, please click here.

A U.S. steel company on Monday filed a petition with the U.S. International Trade Commission, seeking to block imports of some stainless steel products from India, Germany and Taiwan, claiming competitors are using stolen trade secrets.

Valbruna Slater Stainless and Valbruna Stainless of Fort Wayne, Indiana, which manufacture stainless steel forging billets, round cornered square billets and stainless steel bars, and their Italian parent Acciaierie Valbruna said the petition aimed to protect their intellectual property rights.

The foreign companies named in the complaint are India's Viraj Profiles Limited, German affiliate Flanschenwerk Bebitz GmbH and Taiwan's Ta Chen Stainless Pipe Co, along with associated companies.

"The proposed respondents' unfair acts have substantially injured Valbruna by undercutting the market for Valbruna steel and taking away Valbruna's customers," the petition said.

"Valbruna seeks a limited exclusion order and a cease and desist order to stop the proposed respondents from continuing to profit from the misappropriation of Valbruna's trade secrets and injuring Valbruna."

From Reuters

Industry experts and academics advised on the legislation, which is pending in the U.S. House of Representatives and Senate and known as the Trade Secrets Protection Act of 2014 and the Defend Trade Secrets Act of 2014, respectively. The bills, which have bipartisan sponsors, would allow companies to bring civil suits in federal court when their trade secrets have been misappropriated.

Companies currently bring state law trade secret misappropriation claims in state court and in federal court if they can satisfy the federal diversity statute or the federal supplemental jurisdiction statute.

“The challenge is quick enforcement across state lines,” said Mark Schultz, senior scholar and co-director of the Center for the Protection of Intellectual Property at George Mason University School of Law, who spoke in support of the bills at the briefing session.

With different statutes in each state, the law has not kept up with technology, Schultz said in an interview. “The bottom line is to be able to stop a leak faster,” Schultz said.

Those who oppose, have objections on the provision of quick injunctive relief, which could inadvertently result in greater disclosure of trade secrets. The federal laws also would have a negative impact on business collaboration and worker mobility, according to the open letter.

To read this story from Bloomberg, please click here.

Trade Secret Tips From Recent Caselaw

Dana Finberg, The Recorder

Imagine your client calls you one day and tells you they have developed a great new idea for a software product and, because you are their trusted advisor, they want your help in devising a legal strategy for protecting this valuable intellectual property.
As you listen to them describe this great new idea, because you are a diligent IP practitioner and familiar with the U.S. Supreme Court's June 19 decision in Alice Corp. v. CLS Bank International, 573 U.S. __ (2014), it begins to sound suspiciously like what they have come up with is an "abstract" idea—an idea constituting a category of patent ineligible subject matter, including algorithms, mathematical concepts, chemical elements, naturally occurring biological products and methods that can be carried out in a person's head.

Since it appears your client cannot obtain a patent for their bright new idea for a software product, do they have any options for attempting to protect the fruits of their hard work?

Fortunately for your client, you have also been keeping up with recent developments in trade secrets law. In a decision filed in May, the California Court of Appeals held that ideas, if kept secret, can constitute information protectable by trade secret law. By so holding, the court in Altavion Inc. v. Konica Minolta Systems Laboratory Inc. went a long way in clearing up confusion created by a 2010 decision, Silvaco Data Systems v. Intel Corp., which stated that "[t]rade secret law does not protect ideas as such" and trade secret protection only extends to information tending to communicate or disclose ideas to another.

Keep it secret, keep it safe
In Altavion, the dispute arose when the defendant took the plaintiff's overall concept and specific design implementations for digital stamping technology—which it had received under a non-disclosure agreement executed in the course of business negotiations between the parties—and covertly incorporated them into patent applications in its own name. The trial court found for Altavion on its claims of trade secret misappropriation, and on appeal Konica Minolta Systems Laboratory (KMSL) argued that, under Silvaco, Altavion's concept was not protectable because "[g]eneralized ideas and inventions are protectable by patents and thus cannot be trade secrets."

The California Court of Appeals rejected this argument, relying on earlier precedent explaining the overlap between trade secret law and patent law, explaining that "a trade secret in the broad sense consists of any unpatented idea which may be used for industrial and commercial purposes." The court unambiguously declared "it is clear that if a patentable idea is kept secret, the idea itself can constitute information protectable by trade secret law" and "trade secret law may be used to sanction the misappropriation of the idea the plaintiff kept secret."

The trade secret ideas at issue in Altavion were ultimately embodied in at least eight patents obtained by the defendant, so the information constituted patentable subject matter, at least before the recent U.S. Supreme Court decision in Alice Corp. However, the Court of Appeal's detailed explanation of the interrelationship of patent and trade secret law made clear trade secret law extends to inventions which, for whatever reason, may not be patent-eligible.

As the court explained, "[P]atentability is not a condition precedent to the classification of a trade secret. Thus it has been said that a trade secret may be a device or process which is clearly anticipated in the prior art or one which is merely a mechanical improvement on a machine or device. Novelty and invention are not requisite for a trade secret as they are for patentability."

As long as a company's ideas and information meet the general requirements for trade secret status under the Uniform Trade Secrets Act, then trade secrets law will provide protection and powerful remedies for misappropriation. Those requirements include that the ideas and information are not generally known; derive independent economic value from their secrecy; and are the subject of reasonable efforts under the circumstances to protect their secrecy.

To read the complete article published in The Recorder, click here.

Cargill, in a lawsuit filed Thursday in the U.S. District Court in Denver, accused Jason Kuan of downloading hundreds of confidential and proprietary files detailing the agricultural conglomerate's meat-processing operations.

The lawsuit highlights the intense competition among the world's biggest meat-processing firms, which invest in technology and methods to produce meat as cheaply as possible and win business from fast-food chains, grocery stores and food service operations.

Cargill said Mr. Kuan had worked for the company for 20 years. Much of Mr. Kuan's tenure there involved managing the company's U.S. and Canadian "case-ready" meat businesses—meat that is processed and packaged at a plant and delivered to the meat departments of food retailers, according to the lawsuit. Mr. Kuan, who Cargill said joined JBS this month, was appointed to lead a similar business under development at JBS's U.S. division based in Greeley, Colo., Cargill alleged, citing an announcement that JBS had circulated.

According to the lawsuit, Mr. Kuan's abrupt departure prompted Cargill to carry out a forensic analysis on his Cargill-issued laptop, which showed that in early July he downloaded "hundreds of highly confidential and proprietary" files related to Cargill's prepackaged meat business, which he stored on an external hard drive.

To read the complete article from the WSJ, please click here.