The Interplay Between Trade Secrets Law and Patent Law Effective portfolio management and litigation strategies for companies relying on a combination of patent and trade secrets protections George P. McAndrews, Esq. McAndrews, Held & Malloy, Ltd. / Chicago, IL at Law Seminars International Comprehensive Conference on Trade Secrets Litigation & Transactions Protecting trade secrets, negotiating business agreements and effective trial tactics November 8 & 9, 2007 Renaissance Seattle Hotel in Seattle, WA

From the halls of academia... Trade Secrets Law Updated September 2007 Melvin F. Jager Chapter 15. Trade Secret Licensing

A "hybrid" license exists when both patent rights and trade secrets are covered in the same agreement. State law continues to control the interpretation of the hybrid license, except when federal patent or antitrust issues are raised. The parties will have substantial freedom to determine the patent royalties during the term of the patents, but no right to exact patent royalties after the patents expire or are invalidated. Likewise, the parties will have an even wider latitude under state law to negotiate the terms and payment period for the trade secret aspects of the license.

OSLO, Norway: The Norwegian unit of the Scandinavian Airlines System said Thursday it would appeal its conviction and fine on changes of stealing trade secrets from smaller rival Norwegian Air Shuttle ASA. Associated Press

Featured Web resource... R. Mark Halligan, Esq. of LOVELLS LLP hosts a content rich source for Trade Secret information on the Web including a case database, articles, news and a forum. Take a look!

Featured blog resource... Check out the WCSA blog. This resource has been offering reliable posts on a range of topics including news cases and news.

IN DEFENSE OF ANIMALS, Plaintiff, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant, and Life Sciences Research, Inc., Intervenor-Defendant. United States District Court, District of Columbia Civil Action No. 02-557 (RWR). Information is privileged and confidential, for purposes of the Freedom of Information Act (FOIA) exemption for trade secrets and commercial or financial information obtained from a person and privileged or confidential, if disclosure would either impair the agency's ability to obtain similar information in the future or likely cause substantial competitive harm to the entity that submitted the information. 5 U.S.C.A. § 552(b)(4). Download file

WEBWIRE – Friday, October 12, 2007 One of many discussed... Economic Espionage and Theft of Trade Secrets – On Sept. 26, 2007, Lan Lee and Yuefei Ge were charged in a superseding indictment the Northern District of California on charges of economic espionage and theft of trade secrets. The indictment alleges that the pair conspired to steal trade secrets from two companies and created a new firm to create and sell products derived from the stolen trade secrets. The charges also allege that Lee and Ge attempted to obtain funds for their new company from the government of China, in particular China’s General Armaments Division and China’s 863 Program, otherwise known as the National High Technology Research and Development Program of China. The case was investigated by the FBI.

David Yates

Trade secrets that may have been leaked at a plant in Orange are at the center of litigation between two global chemical companies. INVISTA SARL has filed a petition for an injunction, asserting the French-based Rhodia S.A. plans to use INVISTA SARL's proprietary information to build a chemical plant in China. The petition was filed with the Orange County District Court on Oct. 9. INVISTA SARL, part of Koch Industries Inc., owns and operates chemical manufacturing facilities in Orange and Victoria and maintains an engineering office in Houston, employing more than 1,000 people in the state of Texas.

Welcome to the Trade Secrets Vault.

Professor Jon Cavicchi has opened the Vault to the world and shares a wide range of information on trade secrets. The intent of this blog is to raise consciousness as to the range, extent, predominance and role trade secrets play in day to day business and legal environments. The sources of the blogs vary from new on the web, proprietary sources on the hidden web, jury verdicts, court opinions, reports by government and NGOs around the globe as well as fun stuff such as trivia questions about products that are the subject of trade secrets. It is designed as a blog to keep anyone interested in trade secrets coming back for more up to date news and data.

The Vault compliments the Pierce blog, Jorda on Trade Secrets — The Interface Between Patents and Trade Secrets.

A hybrid license licenses both patent and trade secret rights. The hybrid license brings into play the laws and regulations dealing with both patent licensing and trade secret or know-how licensing. Some restrictions apply to hybrid licenses that would not apply to pure trade secret licenses. It is important to review these restrictions in the relevant jurisdiction, since the major portion of the licenses negotiated are hybrid-type licenses involving both patents and trade secret technology. A major error in many hybrid licenses is the intermingling or lumping together of the rights and obligations relating to patents and to trade secrets. It is a common drafting technique to state, for example, that the license is granted for both patents and trade secret technology for a stipulated royalty per unit. In most circumstances, confusion and uncertainty often arise when the licensed patent rights are invalidated or expire. In the United States, if such a hybrid license intertwines the patent and trade secret payment obligation, all obligations to pay cease upon the termination or expiration of the patent rights. This rule applies regardless of efforts in the license to extend payment, such as by providing provisions that require payment to extend for 25 years or the like. As a general rule, if payment for trade secret technology is expected after the patent rights terminate, the contract should specifically provide for that obligation. If payments are expected beyond the patents, it would be a simple matter to state that royalties or other forms of payments shall continue thereafter, until the trade secrets become in the public domain.

Elizabeth A. Rowe Assistant Professor of Law, University of Florida, Levin College of Law 42 Wake Forest L. Rev. 1 (2007) Soft Corporation is a leading maker of software and operating systems. It undertakes great measures to protect the secrecy of its new products under development, plans to launch new products, technical product specifications, and product source codes, all of which it considers company trade secrets. A disgruntled employee, John Sneaky, one of the few persons with access to the source code to Soft's soon to be released operating system, Win100, posts the source code (labeled “Confidential--Soft Proprietary Information”) on a members-only Web site critical of Soft, Softsucks.com.

Download file Here is a presentation by Melvin F. Jager, a consultant to Ocean Tomo. He is the Past President of The Licensing Executives Society International and The Licensing Executives Society (U.S.A. and Canada, Inc.) Prior to joining Ocean Tomo, he was engaged in the private practice of intellectual property law and licensing for 35 years as a senior member of the firm of Brinks Hofer Gilson & Lione in Chicago, Illinois, where he was Chair of the Licensing Practice Group. His law practice concentrated in IP litigation, patent analysis and due diligence, licensing and general IP counseling. He has served as an expert witness in patent and trade secret litigation, and as an arbitrator in international licensing disputes.

Lincoln Electric Holdings Inc. is suing a former employee for allegedly stealing the company’s trade secrets then trying to use them to help a Chinese competitor enter the U.S. market. In a suit filed Oct. 15 in the U.S. District Court in Cleveland, Lincoln Electric Holdings said that a former marketing and sales employee, Roy M. Short, attempted to help Ningbo Longxing Group Co. of China to enter the U.S. market for welding products, and violated a non-compete agreement he had with Lincoln Electric. The suit says Short worked for Lincoln Electric for five years, ending in 2006, and agreed that he would not go into a business that competes with Lincoln nor solicit its employees for two years after his last day of employment. It also said that, as a representative for Lincoln’s business and supply contracts, he agreed to keep the company’s trade secrets and proprietary information confidential. Lincoln Electric alleges in its complaint that Short violated that agreement by working for CDL International Sales Inc., a unit of Ningbo Longxing that is based in Hendersonville, Tenn. The complaint says that Short planned to attend trade shows for CDL International, and used information that belongs to Lincoln Electric to contact potential customers and employees. Lincoln Electric is asking the court to stop Short from working for Ningbo Longxing and its business units before his non-compete agreement ends. Lincoln Electric also is seeking unspecified damages.

Orlando Business Journal

Mirabilis Ventures Inc. announced Wednesday it was seeking $20 million in damages from its former top officers and the company they founded.

A lawsuit and a preliminary injunction was filed against Palaxar LLC and Frank Hailstones, former Mirabilis CEO, and Edith Curry, former Mirabilis executive vice president, to prevent them from what that lawsuit says is trade secrets and confidential/proprietary information that belongs to Mirabilis.

Anyone want to take the challenge to enhance Wikipedia's entry of trade secrets to reflect the teachings of Professor Karl Jorda on the complementariness of patents and trade secrets.

I search the Web daily and as Jorda has preached for decades, the synergy is sorely misunderstood.

Here is what the DOJ & FTC have to say in this 2007 Report. One research tip is to use Google books to find buried concepts like hybrid patent/trade secret licenses... Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition The panel also discussed whether antitrust issues can arise if a patent holder tries to extend the market power conferred by a patent beyond its expiration by bundling the patent license with trade secrets or know-how. Unlike patents, trade secrets enjoy perpetual protection provided the proprietary information remains secret. If the patent in such a “hybrid agreement” expires, or if the trade secrets hold little or no value, the licensing of these rights may incorporate restrictions that effectively establish a cartel.

Ottawa wades into WTO fight over plane aid
STEVEN CHASE

The EU is challenging patents, trade secrets and other intellectual property owned by Boeing, alleging these are subsidies because their development benefited from government-funded research. It's also arguing that some infrastructure projects near Boeing's Everett, Wash., facility are subsidies because they were built with state funds.

Suterra petitions judge again to seal record
By J.M. BROWN
SENTINEL STAFF WRITER

Late Wednesday, Suterra LLC, creator of the CheckMate pesticide used to steer the crop-eating light brown apple moth off course, filed a second motion asking Monterey County Judge Robert A. O'Farrell to close records because trade secrets are at stake. O'Farrell did not issue an immediate ruling Thursday.

Staffing Agency Conspired to Harm Rival Firm, Plaintiff Alleged

Judge William Zloch issued a default judgment in favor of the plaintiff. Zloch issued an injunction prohibiting the defendant from using Nurse Finder's trade secrets or confidential information. Zloch also prohibited the defendant from contacting or otherwise interfering with Nurse Finder's prospective temporary employees for 12 months.

INTELLECTUAL PROPERTY FOR LITIGATORS
PAPER 3.1
Confidentiality & Trade Secrets 2007

These materials were prepared by J. Kevin Wright of Davis LLP, Vancouver, BC, for the Continuing Legal Education Society of British Columbia, September 2007

IBLS INTERNET LAW - NEWS PORTAL

Some of the more egregious changes proposed in this bill include:

• Mandatory publication of pending patent applications regardless of whether they are going to be granted as patents. This abrogates a legislative compromise crafted in 1999 that has allowed applicants who forego filing applications in foreign jurisdictions to "opt out" of pre-grant publication, thus preserving their trade secrets and preventing their own disclosures from unintentionally becoming part of the prior art.

Our Founding Fathers gave the Congress a constitutional mandate to "promote the progress of science." This Congress, if it passes this bill, will do the opposite. A patent is the only incentive for an inventor to disclose an invention to the public, rather than keeping the invention as a trade secret. This bill will take this incentive away. As had been the case for centuries, companies and independent inventors will choose to rely on trade secrets in place of patent protection. This will discourage the exchange of information and stifle innovation-leading to everyone reinventing the wheel, rather than building on others' ideas.

Tom Colson, President & CEO, IP.com

If created and protected correctly, trade secrets can have real value. But, beware. In today's environment, protecting trade secrets is often unrealistic. Increased competition has driven more aggressive pursuit of information by competitors with access to previously inaccessible data sources and previously unheard of data mining tools. That, coupled with increased employee mobility and ease of communication has made it virtually impossible to keep secrets. Companies may not appreciate the risks associated with the use of trade secrets until after they see their ideas claimed in competitive patents.

Piribo

Biosimilars are also called biogenerics, follow-on proteins or follow-on biologics in the U. S. They are generic versions of biotechnology products. The study points out that since biosimilars are made in living organisms and manufacturing processes are trade secrets, generic versions of biologics cannot be kept identical to their reference products. In this regard, they are not true generics and need to get treated differently from generics of small molecule drugs.

Law Seminars International Presents
A Comprehensive Conference on Trade Secrets Litigation & Transactions
Protecting trade secrets, negotiating business agreements and effective trial tactics
November 8 & 9, 2007
Renaissance Seattle Hotel in Seattle, WA

Trade Secrets Best Practices: Avoid Being the Next Victim of a Data Security Breach

Date: 11/01/2007
Time: Registration/Lunch: 11:30 am – Noon
Program: Noon – 2:00 pm

Speaker: Robert A. Naeve, Naomi Fine
Contact: Wende Arrollado

In this seminar you will learn why search engine security is a critical access control issue and is among the most challenging problems for organizations, how search engines have the potential to uncover flaws in existing security frameworks and can expose even the existence of restricted content, a detailed comparison of the three different approaches to search security, including pros and cons of each, what to include in a worksheet to document your organization's security requirements before selecting a solution, and what criteria a large pharmaceutical company used to evaluate enterprise search security during a recent evaluation of solutions.
Sponsored by: Vivisimo Inc.
Original Broadcast Date: Jun. 19, 2007

The Practising Law Institute is planning a CLE seminar titled Outsourcing and Offshoring.

The program will take place on October 29 and 30 at the PLI Conference Center, 810 7th Avenue, New York City. Sessions run from 9 a.m. to 5 p.m. on the first day and from 9 a.m. to 4:30 p.m. on the second day.

Attendees will learn what every lawyer should know about external service provider deals and trade secret issues in complex technology transactions, as well as techniques for managing the contract process. Seminar highlights include offshoring to India, current industry privacy practices and key risks and effective governance methods.

An experienced faculty will discuss how outsourcing and offshoring issues cover several legal areas including information technology, IP, employment, security, regulatory, corporate, insurance, real estate, tax and dispute resolution.

To register, call (800) 260-4PLI.

Compliments of our friends at Juris Notes

San Jose Construction, Inc. v. S.B.C.C., Inc.
(10/12/07)

The trial court granted SBCC's summary judgment motion, finding no triable issues of facts with regard to the misappropriation of trade secrets claim. However, the appellate court agreed with SJC that issues of material fact existed, necessitating reversal of the judgment in SBCC's favor. The information alleged to be a trade secret comprised much more than a list of subcontractors' names. Considering the length of time that each proposal took to create and the urgency with which four of the owners impressed upon the prospective contractors to begin the work, the court could not overlook the possibility that the information was not readily ascertainable in the circumstances presented. In addition, whether SJC took reasonable efforts to maintain the secrecy of the information was subject to dispute.

Compliments from our friends at Juris Notes

General Universal Systems, Inc. v. HAL, Inc.

The magistrate judge properly focused on the agreement between Lopez, Herrin, and Parkin as the only possible basis for a breached confidential relationship supporting the claim of trade secret misappropriation. Because Lopez was ousted from the HAL group in March 1993, any use of the program at issue by HAL after such a time would mark the accrual of Lopez's claim of trade secret misappropriation. Further, it was clear that HAL used the program by continuing to rely on it to accelerate the development and marketability of the new program. This continued use represented an exploitation of the program that was likely to result in injury to Lopez and enrichment to HAL. The 5th Circuit, however, declined to apply the concept of a continuing tort to the Texas common law claim of trade secret misappropriation. Thus, the magistrate judge properly treated the claim as time-barred.

The IP Handbook is a comprehensive resource on current IP management issues and approaches. The book offers information and strategies for utilizing the power of both IP and the public domain for a diverse audience including policy makers, technology transfer professionals, licensing executives, and scientists. Chapter 11.5 from Pierce Law Professor Karl Jorda is now FREE for your enjoyment at the Pierce Law IP Mall. home page in the lower left display box.

Congratulations to Professor Karl F. Jorda, one of nine individuals to be selected for induction into the Intellectual Property Hall of Fame. He was recently chosen from a field of over 300 nominations solicited from members of the global intellectual property community. The Intellectual Property Hall of Fame was established in 2005 by Intellectual Asset Management magazine and is designed to honor those who have made an outstanding contribution to the development of intellectual property law and practice, thereby helping to establish intellectual property as one of the key business assets of the 21st century. He will be inducted into the Intellectual Property Hall of Fame on October 24 at gala dinner at the Field Museum in Chicago, hosted by Ocean Tomo, the Intellectual Property Merchant Bank of intellectual property auction fame.

TUESDAY, DECEMBER 4

The United States spends over $300 billion a year on basic research, making it a natural target for countries that seek to close a technology gap without having to invest time and money in R&D. Approximately 70 percent of the market value of a typical U.S. company resides in its intellectual property assets, such as trade secrets and R&D activities, both classified and unclassified. Yet most companies spend the lion’s share of their security budgets protecting the other 30 percent of their assets, such as physical property. Similarly, the sheer number and variety of threats to U.S. national security have stretched federal resources devoted to combating the foreign intelligence threat to these assets.

Advice from the Trade Secrets Office

These six conjoint requirements on plaintiff naturally form the six areas of attack by defendant. Failure on any of these six proofs will result in a finding against plaintiff. Defendant's case will be structured along these lines:

1 - The information doesn't qualify as a trade secret, and even if it did
2 – Plaintiff had no ownership rights in the information, and even if he did
3 - We had no access to the information, and even if we did
4 - We were not aware that the information was a trade secret, and even if we were
5 - We made no use of the trade secret information anyway, and even if we did
6 - There is no remedy within the power of the court to apply.

Legal professionals normally turn to traditional law sources for literature on trade secrets. Librarians know that trade secrets are interdisciplinary and look in non legal databases covering business, science, economics and more. Here is a recent example of an article that is indexed in the Social Science Search

Managing intellectual property in R&D alliances
38 INTERNATIONAL JOURNAL OF TECHNOLOGY MANAGEMENT 160 (2007)

This paper deals with the management of Intellectual Property (IP) in R&D alliances, with a focus on two key IP types - patents and trade secrets. Since IP is both inputs to and outputs of R&D alliances, the key is to simultaneously achieve two objectives - IP protection and IP generation. As research inputs, IP could be devalued by partners' opportunistic learning. Thus, IP needs to be carefully selected and protected through mechanisms such as equity arrangement, non-disclosure and non-compete agreements, and monitoring and auditing.

Free reports, articles, thoughtful professionals.... The AIPLA Trade Secret Committee considers the laws, practices, and judicial decisions relating to unfair competition (excluding, except for Liaison, matters primarily involving trademarks and trade names), including the protection of trade secrets and other data maintained in confidence, interferences with contractual relationships, trade libel and slander. Committee members report and make recommendations to the Board of Directors in regards thereto.

Former Harvard classmates have come out of the wood work to file legal action against him, claiming Zuckerberg stole their social network idea when he helped them with a project in 2003.

The federal lawsuit was filed by the founders of rival site ConnectU, who accuse Zuckerberg of copyright infringement, fraud and stealing trade secrets. The case is still before the courts and ConnectU has asked Facebook be shut down.

The most valuable assets of a company typically include its intellectual property ("IP") and confidential information, and the employees entrusted with this information. With the proliferation of technology in the workplace and the increased mobility of employees and IP, companies are increasingly becoming victims of data breaches and theft of trade secrets. To assist their clients in addressing and preventing such issues, M&F decided to publish a periodic Trade Secret Report, covering recent developments in trade secret law and best practices in this area. In this inaugural issue, we will be discussing the recent appellate decision in VL Systems v. Unisen, Inc., which deals with "non-hire" and "non-solicitation" provisions in employee contracts.

Download file">

Six judicial candidates vying for a position in the Rock County Circuit Court made it to round two of the application process. Today, the candidates will each have an interview with the Judicial Selection Committee, which is made up of 11 Wisconsin judges and the list will be whittled down to two to four people who will meet with Gov.

Jim Doyle. Janesville attorney Michael Fitzpatrick, 49, is a partner with Brennan, Steil & Basting, S.C. “Virtually my entire career over most of 25 years has been as an advocate in litigation,” he explained in his application. Fitzpatrick's law practice focuses on litigation; particularly commercial, trade secrets.

James Pooley specializes in the litigation and trial of patent, trade secret, copyright, and technology-related commercial disputes, in state and federal courts, and before the International Trade Commission.

I am featuring James Pooley not only for his expertise but his willingness to share his knowledge at seminars and in publications, many free on his firm website. He is also author of the chapter on international trade secrets in the multi-volume West treatise, Trade Secrets throughout the world.

Source: Compliance Reporter

The National Futures Association has filed a proposed rule change with the Securities and Exchange Commission and the Commodity Futures Trading Commission clarifying that its members may not misuse secret information and trade secrets from competitors. The proposing notice stated that the rule change seeks to prevent members from using illegitimate means to gain a competitive advantage if doing so would harm customers.

Peter Brieger, Financial Post

Separate from money damages, the latest claims ask for injunctions to block their rivals from using the information, noting their former employees broke non-compete agreements. While employees can take skills they've learned to a new company, they must leave confidential details at the door. And with some industries pumping out brand new technology in short time periods, non-compete agreements usually ensure that whatever details ex-employees may remember are obsolete by the time they start working for a rival.

William M. Corrigan, Jr. & Jeffrey L. Schultz
63 J. Mo. B. 234 (2007)

This article includes a thorough analysis of the Missouri Uniform Trade Secrets Act and Missouri state and federal decisions that analyze the act, along with some practical considerations for protecting trade secrets. It also includes a discussion of discovery strategy in a trade secrets case.

Trade secret litigation often involves “high stakes” or “bet-the-business” cases. For example, in February 2007, in a case involving the misappropriation of trade secrets, the Eighth Circuit Court of Appeals affirmed a jury verdict totaling more than $2 million in actual and punitive damages. Moreover, in 2004 the Eighth Circuit upheld an award of punitive damages in another trade secrets case, which it “remitted to $7 million.” As far back as 1997, General Motors and Volkswagon reached a $1.1 billion settlement in a trade secrets case concerning a former senior executive from General Motors who joined Volkswagen. Because trade secrets can be of tremendous value to businesses, the protections provided by the Missouri Uniform Trade Secrets Act (“MUTSA”) can be of critical importance to one's clients.

Compliments of our friends at JurisNotes.com

D Kan - Proprietary information constituted trade secrets.
Universal Engraving, Inc. v. Duarte (10/16/07)
The court granted Universal's motion for a preliminary injunction, noting that Universal had shown both an imminent threat of irreparable harm and that it had, in fact, suffered irrepara