A judge agreed Monday to postpone for 13 months the trial of a Chinese-American engineer charged with stealing military and aerospace trade secrets on behalf of China.

Kenneth Miller, the attorney for 72-year-old Dongfan "Greg" Chung, asked for the delay because he is involved in a lengthy trial, said Assistant U.S. Attorney Greg Staples.

The trial was scheduled for April 8, but U.S. District Judge Cormac Carney agreed to delay it until May 5, 2009.

The government alleges that Chung stole trade secrets on the space shuttle, C-17 military transport and the Delta IV rocket during his decades of employment at Rockwell International and Boeing.

Keith Gingery Since the school finance cases came out a few years ago, there has been some grumbling from the Wyoming State Legislature as to the activist role taken by the Wyoming Supreme Court in legislating school finance reform from the bench. Some legislators felt that the Wyoming Supreme Court had overstepped its judicial branch role and moved into the arena of legislating. In 2006, Wyoming legislators again expressed concern that the Wyoming Supreme Court was overstepping its boundaries by legislating from the bench. The Court faced a unique issue dealing with trade secrets. The Court pointed out that there was no statutory law in Wyoming that could effectively deal with the situation presented in the case, so the Court had no other choice but to create the law. The Court’s majority was careful to point out that they could not adopt the Uniform Trade Secrets Act, which was the preferable choice, but that the Court could adopt the Restatement (Third) of Unfair Competition, which was a close substitute. The Wyoming Legislature only allowed the holding to stand for barely over a month before stepping in and adopting the Uniform Trade Secrets Act.

Simon Montlake

A former Pentagon official pleaded guilty in court Monday to an espionage charge over the disclosure of secret data to an alleged Chinese agent in the US. Gregg Bergersen said he was unaware that the Taiwan-born businessman was passing the information to China. Mr. Bergersen, a weapons systems policy analyst who resigned his job last week, could face up to 10 years in prison.

Tom Wright is a partner in the firm’s Intellectual Property Section. His practice involves both complex intellectual property litigation and counseling. His litigation experience includes patent infringement disputes, copyright infringement actions and cases involving the misappropriation of trade secrets. He also counsels clients on the acquisition of intellectual property assets and maintenance and enforcement of intellectual property portfolios involving patents, copyrights and trademarks.

Albuquerque Journal - McClatchy-Tribune Information Services via COMTEX

Hollywood's cloak-and-dagger world of industrial espionage and purloined trade secrets isn't typically associated with housing developments.

But Pulte Homes claims in a federal lawsuit that a top executive who was being laid off stole a highly confidential, $1 million Albuquerque market study and used it to create a similar report for a major competitor.

The lawsuit filed in U.S. District Court alleges that Lynn Galindo, a former area vice president based in Las Vegas, Nev., conspired with former subordinates and other employees to obtain the Albuquerque Operating Strategic Plan as she was negotiating her severance from Pulte.

By Thomas Claburn
InformationWeek

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.

12 Fordham J. Corp. & Fin. L. 1079 (2008)
Edward Pekarek

Introduction

Two-Thousand-Six was a year in which the opaque investment pools commonly known as “hedge funds” provided frequent headline-fodder through scandals, congressional testimony, and the collapse of Amaranth Advisors, a nine billion dollar hedge fund implosion that exceeded the financial scope of the Long Term Capital Management Asian currency debacle. Yet despite these swirling scandals and controversies, many of the broader equity indices established record levels and the domestic capital markets barely blinked. Among the luminaries of the 2006 hedge fund universe was Phillip Goldstein, a former New York City municipal employee who is now the activist manager of a group of pooled investments operating under the moniker “Bulldog Investors.” Mr. Goldstein took the Securities and Exchange Commission (“SEC”) to task in a successful challenge [FN8] of the so-called “Hedge-Fund Rule.” The United States Court of Appeals for the District of Columbia Circuit was apparently persuaded by Mr. Goldstein's definitional theory as to the term “client,” and vacated the entire investment adviser registration regime as “arbitrary.”

Apparently emboldened by his appellate victory, Mr. Goldstein again tilted at regulatory windmills months later and petitioned the SEC to exempt his “Bulldog” hedge funds from certain portfolio reporting requirements. This Article analyzes Section 13(f) of the Securities Exchange Act of 1934 and Mr. Goldstein's effort to avoid the Section 13 reporting regime through an intellectual property and due process theory. Mr. Goldstein has asserted that compulsory disclosure pursuant to Section 13(f) is an unconstitutional regulatory taking in violation of the Fifth Amendment because he contends that his hedge fund portfolio positions are trade secrets. Mr. Goldstein, however, has reportedly admitted his petition is merely a “pretext for a lawsuit,” and that petition failed to articulate the substance of these purported trade secrets with the required measure of particularity to properly assert a trade secrets claim. “Bulldog's” October 24, 2006 petitioned to the SEC for an order pursuant to §13(f)(2) of the Exchange Act of 1934 that would exempt the “Bulldog” funds from the reporting requirements embodied in Rule 13f-1(the “Goldstein Application” or the “Application”) is also flawed due to the absence of any demonstration that he or his “Bulldog” funds utilized “reasonable efforts” to ensure that the portfolio holdings at issue remained secret. Mr. Goldstein's trade secret theory is also significantly undermined because he and his funds have made public disclosures that could eliminate any trade secret status, which, among other facts and issues discussed herein, erode the theory of the Goldstein Application to such an extent that the SEC may properly deny the requested relief.

EMS claimed lost profits of $1,140,000 million and argued that the defendants were also liable for $1,286,000 that EMS allegedly paid for the CenterPoint-Freebird agreement.

In November 2006, Freebird Gas Storage awarded a contract to pipeline servicing company Tanner Construction Co. of Texas Inc., a competitor of plaintiff EMS Gulf Coast.
Freebird Gas had previously used CenterPoint Energy for pipeline servicing, pursuant to a pipeline-servicing agreement, and several former CenterPoint employees worked for Tanner Construction. EMS claimed to have purchased the CenterPoint-Freebird agreement from CenterPoint in October 2006.
EMS sued Tanner Construction and several affiliates, and the former CenterPoint employees for misappropriation of trade secrets (such as pricing and the scope of the contract) contained in the CenterPoint-Freebird agreement, conspiracy to misappropriate trade secrets, unfair competition, breach of duty to maintain the confidentiality of trade secrets, tortious interference with business relations and prospective business relations, breach of fiduciary duty and destruction of property.
The defense moved for summary judgment, arguing that, although EMS acquired several pipeline-servicing agreements from CenterPoint in October 2006, the CenterPoint-Freebird agreement was not one of them; that trade secrets were excluded from the assets EMS bought; that Freebird did not consent to an assignment of the CenterPoint-Freebird agreement to EMS and had a right to withhold consent; that the CenterPoint-Freebird agreement did not contain a confidentiality clause and was neither confidential nor used by Tanner in acquiring its contract; and that the former CenterPoint employees made no covenants not to compete with CenterPoint and were not prohibited from working for Tanner Construction.
The defense denied any damages, arguing that Freebird would not have awarded a contract to EMS regardless of Tanner Construction's involvement or lack thereof, and that EMS had paid CenterPoint nothing for the CenterPoint-Freebird agreement.

The Recorder, Vol. 132, No. 62 (March 31, 2008) By Dan Levine Executives at Broadcom Corp. may rue the day they sicced the FBI on engineer Tien Shiah. A Santa Ana federal judge acquitted Shiah of stealing trade secrets to benefit Santa Clara-based Marvell Semiconductor. Notable in Judge David Carter's February decision aren't just the shortcomings attributed to federal law enforcement, but what Carter revealed about Broadcom's conduct. Instead of answering Shiah's specific queries at his 2003 exit interview as to which of his work should be considered secret, Broadcom sent an in-house attorney to 'scare the hell out of' the engineer before he decamped for Marvell, according to the ruling. The Broadcom lawyer 'declined to answer these questions or give any guidance, instead advising Shiah that he should consult an attorney,' Carter found.

Texas Wesleyan University School of Law
Friday, October 10, 2008

Texas Wesleyan University School of Law is pleased to host
a symposium on the topic of Intellectual Property and
Indigenous Peoples, on Friday, October 10, 2008. The
purpose of this symposium is to examine intellectual
property concepts - copyrights, trademark rights, patent
rights, and trade secrets - as applied to the cultural
heritage, art, and artifact of indigenous peoples.

We are now accepting proposals for presentations and papers
on subjects related to the conjunction (or disjunction) of
intellectual property law and policy with the interests of
indigenous peoples. We anticipate the dialogue to represent
a variety of perspectives, and include both academics and
practitioners. Accepted papers will be published in Texas
Wesleyan Law Review.

4/8/08 CommWeb News (Pg. Unavail. Online)

Microsoft continued to release formerly closely held application protocol documentation Tuesday, posting 14,000 pages of information for Microsoft Office 2007, SharePoint Server 2007, and Exchange Server 2007 at MSDN, a Web site for developers.

The information released includes protocols that allow Exchange Server to communicate with Outlook and those used by Office and SharePoint to communicate with each other and with other Microsoft server products. Most of this information was available previously only under a Trade Secret license made available only to select partners.

"Microsoft is pleased to announce another step toward putting our interoperability principles into action," Tom Robertson, Microsoft's general manager of interoperability and standards, said in a statement. Microsoft announced a set of four interoperability principles in February, including the release of protocol documentation, which it says will lead to a more "open" Microsoft. In separate antitrust cases, the United States and the European Union had long sought for Microsoft to release protocol documents, but trends like Linux and Web 2.0 are increasingly forcing Microsoft's hand.

The protocol documentation released Tuesday is only preliminary; the company has said that more complete documentation for these products will be available by June. Between now and then, Microsoft will collect information from developers whose feedback will help determine the final shape of the documentation. Microsoft's created a number of forums to encourage feedback.

Despite Microsoft's pledged openness, there's still a devil in the details with the release of this information. Microsoft's protocol documentation, which includes 30,000 pages of Windows Server and Windows client documentation already released, is free to anyone to download, but protocols Microsoft deems covered by a patent -- patent maps are being made available -- can only be implemented freely by noncommercial open source developers. Commercial developers and enterprises will have to pay Microsoft royalties for their use. For that reason, Gartner has warned companies of the risks of freely implementing these protocols.

Formal terms of protocol licensing hasn't yet been made available and won't be until June, but Microsoft has licensed Windows Server protocols for prepaid royalties of $10,000 plus additional royalty rates of anywhere between 40 cents and $20 per unit of software sold, or between 0.10% and 0.40% of revenue made from the products in question per protocol, depending on the protocol used.

In addition to the protocol documentation already released, Microsoft has said it will release SQL Server documentation by June and other information going forward. "No one said that Microsoft's efforts in this area would stop with the release of 30,000 pages of technical documentation," Robertson said in a recent interview.

3/2008 IP Law & Business 18
Zusha Elinson

Silicon Valley has always been a hot bed of trade secrets suits. But there's a new twist in an ongoing dispute between Applied Materials, Inc., the huge Santa Clara-based maker of semiconductor equipment, and a company started by its former employees: the former employees' business is in China. So the dispute raises the question of which country will have jurisdiction. "Do the California courts want to be an international court of trade secret?" asks David Steuer, a Wilson Sonsini Goodrich & Rosati partner who represents another Chinese semiconductor company in a similar case.

Applied Materials claims that Gerald Yin, its former chief technology officer, and others took confidential information about tools used to design microchips, formed Advanced Micro-Fabrication Equipment Inc. (AMEC) in Shanghai, and then disclosed the technology in patent applications in China, Japan and the U.S. Morrison & Foester lawyers for the Chinese company are arguing that the case should be dismissed for lack of jurisdiction. "[Applied] is not suing any alleged thieves, it is only suing their subsequent employer, which, in this case happens to be a Chinese company," says Harold McElhinny, the lead MoFo lawyer. "But why would a Chinese--or Canadian or British or Brazilian--company be subject to California law simply because it hired someone who used to work in California?" Applied Materials's lawyers at Goodwin Procter and Fish & Richardson argue in court filings that the proper jurisdiction is California because many of the events giving rise to the claim happened there. The motion was scheduled to be heard in February.

The obvious reason for Mofo's strategy: "The home court advantage is pretty serious in China," said Bing Ho, a Baker & McKenzie lawyer who splits his time between California and China. "A big bad multinational against a little fledgling Chinese company -- the optics don't look very good."

In fact, AMEC is no fly-by-night operation--its backers include Goldman Sachs and Redpoint Ventures. Knock-offs of handbags are far from the whole story in China these days. Says Steuer of Wilson Sonsini: "I think it's more like the trade secrets cases in the early days of Silicon Valley."
This story appeared in sibling publication The Recorder .

Chris Kanaracus

A court-appointed official in California has shot down SAP AG's request that Oracle's general counsel be denied access to "highly confidential" information related to Oracle's ongoing lawsuit against SAP and its subsidiary, TomorrowNow, rejecting SAP's contention that sensitive and strategic information could find its way into the hands of Oracle's top executives.

Oracle filed suit against SAP and TomorrowNow last year, charging that TomorrowNow employees illegally downloaded data from an Oracle support Web site and used it to court Oracle's customers. TomorrowNow provides third-party support for Oracle's PeopleSoft, Siebel, and J.D. Edwards software products.

SAP has said TomorrowNow was authorized to download materials from Oracle's Web site on behalf of TomorrowNow's customers, but also acknowledged that "some inappropriate downloads of fixes and support documents occurred at TomorrowNow." But this information remained in TomorrowNow's systems, and SAP did not gain access to Oracle's intellectual property, according to SAP.

Thanks to our friends from JurisNotes.com

Clearplay, Inc. v. Nissim Corp. (4/2/08)

Clearplay makes DVD players and related products. In 2001, Clearplay began marketing a filtering program and membership service allowing customers to filter their DVD movies by skipping or muting objectionable content. In 2004, Thomson, Inc. began selling an RCA brand DVD player that incorporated Clearplay's filtering technology. Nissim sued Clearplay for patent infringement, misappropriation of trade secrets, and breach of contract in connection with Thomson's sale of these players. That matter was settled and the parties entered into a licensing agreement in which Nissim granted Clearplay a license to produce and sell a modified version of its filtering technology. In January 2007, Target placed its first order for Clearplay's DVD players. After learning of the foregoing, Nissim sent Target a letter alleging that such players were not covered by the license. Thereafter, Nissim published a press release on its website stating that Clearplay was violating Nissim's intellectual property rights by selling the players. Nissim later sent another letter to Target, again demanding that Target cease selling the players. Target then cancelled several large purchase orders for additional players.

535 F.Supp.2d 180 (D. Me 2008)

United States District Court,
D. Maine.
KELLY SERVICES, INC., Plaintiff
v.
Erin E. GREENE, Defendant.
Civil No. 08-23-P-H.
Feb. 28, 2008.

A former employer, engaged in personnel staffing business, sued former employee, claiming breach of non-compete and nondisclosure provisions of employment contract, occurring after former employee left to work for alleged competitor. Former employer moved for preliminary injunction.

Holdings: The District Court, D. Brock Hornby , J., held that:
(1) likelihood of prevailing on merits requirement was not satisfied, and
(2) required showing of irreparable harm was not made.

Likelihood of prevailing on merits requirement, for issuance of preliminary injunction, was not satisfied in suit by employer claiming that former employee would be utilizing trade secret information in her new position with competitor, in violation of statute; there was no evidence of actual misappropriation and little indication that relatively junior employee would be making use of trade secret information in role as clerical worker for new employer. M.C.L.A. § 445.1902(b) .

2007 Wis. L. Rev. 1271 (2008)

Michael Ahrens

Introduction

Corporations are like jugglers. In one hand they must establish a market for their product. In the other hand they have to train and retain a workforce capable of creating and developing the products necessary to maintain their place in that market. Floating between a market full of competitors and a corporation's employees are the valuable trade secrets that give a corporation its competitive edge. Misappropriation of trade secrets has been estimated to cost companies over $100 billion annually. [FN1] Thus, balancing the need to protect trade secrets in the face of a transient workforce with the desire to maintain a strong and competitive economy is of great importance.
In light of the economic importance of trade secrets, the Uniform Trade Secrets Act (UTSA) was drafted in the 1970s to eliminate state-by-state variation in judicial interpretations of the common-law principles related to the misappropriation of trade secrets. Trade-secret law primarily serves to fill gaps in federal intellectual-property law by permitting businesses to protect commercially valuable information that cannot be patented. In several ways, however, and in spite of the adoption of some form of the UTSA in the majority of states, this desired uniformity has not occurred.
One major point of contention among different jurisdictions is whether the UTSA preempts other civil remedies for the misappropriation of confidential information when that information does not meet the statutory definition of a trade secret. In Burbank Grease Services v. Sokolowski, the Wisconsin Supreme Court was asked to decide this question. The court held that the Wisconsin Uniform Trade Secrets Act (WUTSA) does not preempt common-law civil remedies for the misappropriation of confidential information when that information does not meet the statutory definition of a trade secret.
Burbank Grease Services (“Burbank”), a limited liability company, collected and processed fry grease, industrial grease, and trap grease from its customers. Burbank hired Larry Sokolowski in 1996 to serve as its director of operations. He was later promoted to territory procurement manager, and in this capacity he prepared spreadsheets and billings, oversaw sales people, and managed customer relations with industrial clients. As a territory procurement manager, Sokolowski used several pieces of confidential information, including: (1) a list of contact and client information for some of Burbank's grease-trap customers, (2) a spreadsheet detailing client information concerning Burbank's industrial customers, and (3) a spreadsheet of client information organized by collection routes. These confidential documents contained information such as the total gallons of grease collected from different clients and the pricing applied to each customer. Sokolowski knew how Burbank treated all of this material because he was given an employee handbook with the warning that customer lists, financial information, and marketing strategies were confidential.
In April of 2001, Sokolowski resigned from his position at Burbank and signed an employment agreement to serve as a sales and customer-service representative for United Liquid Waste Recycling, Incorporated (“United Liquid”). United Liquid provided waste and sludge hauling and recycling services to clients throughout Wisconsin. Sokolowski took Burbank's confidential information with him and entered it into United Liquid's computer system. When United Liquid and Sokolowski formed United Grease to collect fry, industrial, and trap grease, Sokolowski used the information he had taken from Burbank to solicit customers. The majority of customers United Grease was able to acquire were formerly customers of Burbank.
In 2003, Burbank filed suit against Sokolowski in Dane County Circuit Court. In its complaint, Burbank alleged that Sokolowski had misappropriated trade secrets in violation of the WUTSA, breached his duty of loyalty as Burbank's agent, and intentionally interfered with Burbank's business relationships. Burbank also alleged that United Liquid and United Grease had aided and abetted Sokolowski in these actions.
Burbank and Sokolowski both filed motions for summary judgment. The circuit-court judge granted Sokolowski's motion and dismissed the complaint. The court held the WUTSA preempted civil remedies for the misappropriation of confidential information even when the information did not meet the statutory definition of a trade secret. As the information taken by Sokolowski did not fall within the statutory definition, Burbank's information was not protected by the WUTSA. Finally, due to the preemptive power of the WUTSA, Burbank was also precluded from making any common-law tort claims based upon the misappropriation of confidential information.
The Wisconsin Court of Appeals affirmed this decision. In reaching this conclusion, the court examined how other jurisdictions had approached the issue of preemption. The majority of these decisions held that the UTSA preempted common-law claims for the unauthorized use of confidential information. The court explained that the rationale was to preserve a single tort action for misappropriation of statutorily defined trade secrets and to eliminate other causes of action for misappropriation of information that does not meet that standard. To hold otherwise, the court concluded, “would undermine the uniformity and clarity that motivated the creation and passage of the Uniform Act.”
Upon review, the Wisconsin Supreme Court reversed the lower courts. The majority held that civil remedies other than those provided by the WUTSA are available for the misappropriation of confidential information when that information does not rise to the statutorily defined level of a trade secret. It concluded that the circuit court erred when it dismissed Burbank's complaint because, in addition to its claims under the WUTSA, Burbank had also stated common-law claims.
In its analysis, the majority relied upon the plain language of the WUTSA. To the majority, the WUTSA was the exclusive remedy for misappropriated trade secrets. [FN39] However, the language of the statute permitted civil tort claims for the misuse of confidential information. To hold otherwise, the majority stated, would be to alter the words of an unambiguous statute created by the legislature.
The majority recognized that at the time of their decision forty-four other states had adopted some version of the UTSA. However, it concluded that while the interpretation of similar statutes could be helpful, such an examination was not necessary in this case. The court's interpretation affirmed the statute's plain meaning. The majority also noted that even if they were to use decisions from other jurisdictions as extrinsic sources for interpretation, Burbank could fit into a class of cases holding the UTSA does not abrogate similar common-law claims.
In contrast, the dissent reasoned that the language of the WUTSA directed courts to examine decisions in other jurisdictions to meet the UTSA's goal of uniformity. The dissent argued that the majority disregarded one of the fundamental purposes of the WUTSA: to create a uniform statutory remedy for the misappropriation of trade secrets. Other jurisdictions may not have an entirely uniform approach to interpreting UTSA preemption, but, according to the dissent, a lack of absolute uniformity could not condone a complete disregard for those analyses. The dissent applauded the court of appeals' attempt to undertake an in-depth analysis of decisions from other jurisdictions. They agreed with the lower court's holding that preemption of all common-law claims alleging the misappropriation of information, regardless of whether information met the statutory definition of a trade secret, was the more persuasive and prevailing rule supported by legal commentators and the majority of other UTSA jurisdictions.
This Note analyzes the impact of Burbank Grease Services upon both Wisconsin and the Uniform Trade Secrets Act. Part II outlines the general evolution of trade-secret law in the United States and Wisconsin. Part III analyzes the arguments made by the majority and dissent in Burbank Grease Services regarding preemption, including how other jurisdictions have approached the issue. It maintains that the dissenting opinion sets forth the more logical and practical interpretation of the WUTSA. Finally, this Note discusses the negative impact this case will have on the areas of trade-secret litigation and employee mobility. In light of these arguments, this Note debates the future of the WUTSA in its current form and the utility of creating a federal trade-secrets act. It concludes that the Wisconsin Supreme Court arrived at the wrong decision regarding preemption under the WUTSA and advocates a return to the approach described by the court of appeals and the majority of other jurisdictions.

Scott Hadly A former off-road racer shows how he prepares military vehicles for the war zone. Danny Wreesman strips down a 20-ton Navy tractor truck to be reinforced with a high-threat armor kit at Southern California Gold Products. It is the prototype for 11 vehicles the Oxnard company has been contracted to beef up. Photos by Eric Parsons / Star staff. Danny Wreesman strips down a 20-ton Navy tractor truck to be reinforced with a high-threat armor kit at Southern California Gold Products. It is the prototype for 11 vehicles the Oxnard company has been contracted to beef up. Danny Wreesman fashions a metal plug to cap heater core lines on a Navy truck that he and co-workers are stripping down in preparation for an armor job. Danny Wreesman fashions a metal plug to cap heater core lines on a Navy truck that he and co-workers are stripping down in preparation for an armor job. Glenn Harris tilted a heavy piece of pockmarked armor onto its edge. The green veneer was gouged and dented with quarter- and dime-sized cavities. Next to each divot was a bit of writing, some in white, some in gray and black: "7.62 x39LC," "5.50," "AP 308." "That one's armor piercing," said Harris, a 49-year-old champion off-road racer turned defense contractor. He owns Southern California Gold Products in Oxnard. He pointed at another hole, where the caliber of the projectile was marked in white. "That's a high-velocity round," he said while drifting his finger over it. "And that one's from an AK-47." Harris' company began installing "up-armor kits" on Humvees, trucks, bulldozers, cranes and other military vehicles about three years ago. On Harris' factory floor is an armored door with blast glass that's been tested with a simulated IED explosion. The fragments split open the metal covering on one hinge, cut the skin of the door in spots and knocked a big spider web of cracks into the window, but nothing blew all the way through. Knowing that their work makes a difference has driven Harris and his employees to work harder. "It's saved a lot of lives," he said of the company's first armoring effort in early 2004 — shields mounted around gun turrets on top of Humvees. "We got e-mails and photos from guys thanking us." ... Harris' company was among dozens of companies from across the country that rallied to patch up the military's Achilles' heel in Iraq. The competitive field is a bit cutthroat. Last year, Gold Products won a lawsuit against a defense contractor that didn't pay for work the company performed. But instead of getting paid, Harris' company was sued by the other company in federal court. The company alleged that Gold Products had taken its trade secrets for armoring military vehicles.

Free Advice's trade secrets law legal information helps individuals and small businesses to understand their legal rights. To use Free Advice effectively, we recommend you read the Q&A's, post on the legal advice Bulletin Boards, and/or visit the state resource center! Click if you need assistance in locating an attorney, or finding trade secrets law legal forms. Intellectual Property - Trade Secrets Information Trade Secret Basics * What is a "trade secret’? * Do I register a trade secret? * What factors determine whether something is a "trade secret"? * What is the nature of trade secret protection and where does it come from? * Does the federal government recognize trade secret protection? * How do I mark something "trade secret"? * How do I choose whether to patent something or keep it as a trade secret? How to Maintain a Trade Secret * How do you maintain something as a trade secret? * What are reasonable means to protect secrecy? * What if I just don't tell anyone. Is that enough to preserve secrecy? * What should be in a non-disclosure agreement? * An employee is leaving, how can I be sure he/she won't take any trade secrets? * Do I absolutely need a written agreement to preserve trade secrets? * Can I recover trade secret status if the trade secret information is made public? * If one does everything reasonably possible to maintain the secrecy on trade secret, can trade secret protection be destroyed anyway, and, if so, how? Trade Secret Protection * How do I protect a trade secret? * How long does trade secret protection last? * Do most states protect trade secrets in the same way? * What about protecting trade secrets when dealing with federal government? * Do I keep something secret or patent it? * What is the nature of trade secret protection and where does it come from? Trade Secret Violations/Infringement * What can I do if someone under an obligation not to disclose my trade secrets threatens to disclose them? * What can I do if someone under an obligation not to disclose my trade secrets has already disclosed them? * What kinds of monetary damages are available for trade secret misappropriation? Transferring Trade Secret Rights * Can I transfer trade secret rights to another party?

By Judith A Silver of Coollawyer.com Intellectual Property is the group of legal rights in things that people create or invent. Intellectual property rights include patent, copyright, trademark and trade secret rights. In Europe and some other countries, "moral rights", which are rights of the artist not to have her work greatly altered, are also included. Origins of Intellectual Property Law Most people are surprised to discover that intellectual property rights originated with our Founding Fathers in Article 1, Section 8, Clause 8 of the U.S. Constitution which states that Congress shall have the power "to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." The right to exclusive ownership and use of one's inventions and the monetary rewards from giving others permission to use them, work in conjunction with the other beliefs of our Founders. In the middle to late nineteenth century, fostering of creation with monetary reward grew into capitalism. Capitalism embodied (a) the benefits and rewards of hard work (concepts from Puritanism);(b) the exchange of business ideas through products and services; and (c) competition in the marketplace and financial reward for the most popular or beneficial ideas (i.e. those items that sell the most make the most for their inventors). It was not accidental that capitalism had many of the same theoretical bases as Charles Darwin's notions of survival of the fittest that was authored during roughly the same time period. Author and Harvard biology professor Stephen Jay Gould states that Darwin read economist Adam Smith's writings prior to authoring his "survival of the fittest"theory[1]. Indeed, intellectual property law, with exception of patents that preceded the rest in codification by several centuries, was mostly codified during this same period-- the late eighteenth to late nineteenth centuries. The laws sought to protection rights in creations and ensure earned monetary reward for their creators. These rewards incentivized others to create. The heart of United States intellectual property law is the balancing of two goals: financially rewarding creation through granting of exclusive rights to the creators, and promoting the free flow of ideas to facilitate more inventions. The tension in these goals reflects the careful balance between the "Promotion of Science and Useful Arts" constitutional clause above and the First Amendment - between ownership of art and words and the freedom to speak and express them. Understanding the tension between these goals is the key to understanding intellectual property law. The balance of these concepts is visible throughout intellectual property cases and statutes. Keep these goals in mind whenever you try to assess an intellectual property problem and the solution will be much easier to grasp. With this in mind, let's consider what rights you have under trade secret law. Trade Secret Law Origins The first assertions of trade secret rights are reported to be in England in the sixteenth century. In the United States, the first United States case was in Massachusetts in 1868. When Do You Have a Trade Secret? Most states have adopted some form of the Uniform Trade Secret Act (UTSA). The UTSA sought to provide some consistency in trade secret law that, until recently, was protected only by state laws. The Act defines a trade secret as: "..information, including a formula, pattern,compilation, program, device, method, technique, or process that: (a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." When you have information that has economic value as a result of its secrecy and you use reasonable efforts to keep it secret, you have a trade secret. There is no registration of trade secrets. There is now also federal protection of trade secrets under 18 USC 1832 that defines and protects trade secret use, copying and theft in similar fashion to the UTSA. A good example of a trade secret is the recipe for Coca Cola. What's Required to Have a Trade Secret? In order to keep the trade secret status of information, you must keep it secret. For example, if you wanted to maintain trade secret protection of the code for your website, you would have to program the pages so that the "view source" option would not allow Internet users to freely view the code. Other steps to take would be using confidentiality agreements to maintain its secrecy in business deals and discussion, allowing only employees who must know the information to have access to it, and keeping the information in a secured environment. What Do You Have When You Have a Trade Secret and Is There Any Risk? Having a trade secret means that you have a legal cause of action for damages, or an injunction to stop the use, if another party steals, copies or uses your trade secret without your permission. The risk to maintaining trade secret protection is that you do not take advantage of other forms of intellectual property protection such as patent and copyright that require registration and disclosure. Patent, upon granting of your application, requires full disclosure of the information patented. Copyright registration recognizes some trade secret protection and permit abbreviated registrations for some items, such as computer programs. In addition to missing these other intellectual property protections, the registration process provides proof of your ownership of the material as of the registration date. In most intellectual property cases, the other party claims that he or she, in fact, created or used the item or information first and that your use is unauthorized. Therefore, it will be necessary to prove that you originally created and owned the trade secret. It is vital to maintain dated proof of creation of your trade secret. You can do this cheaply by mailing the information to yourself and retaining the postmarked, sealed envelope. Alternatively, you can deposit a copy of the information with a source code escrow company that would maintain a dated copy of the information in storage. [1] Stephen Jay Gould, The Panda's Thumb: More Reflections in Natural History (NewYork: Norton, 1982), p.64 as reported on www.crosscurrents.org/darwin.

By David W. Garland and Kristina R. Haymes
Internet Law & Strategy

n recent years, millions of employees have joined the world of Web 2.0, which includes social networking sites such as Facebook and LinkedIn, blogs, wikis, podcasts, video sharing sites and RSS feeds. Today, technology allows virtually anyone to easily post a message, picture, audio and/or video to his or her networking page, blog or other Web site. In this constantly changing new world, where individuals have the ability to disseminate information about their employers to a potentially worldwide Internet audience, employers need to evaluate their existing technology policies and, where necessary, implement new policies and strategies.

...

Of course, content matters, and before any action is taken, the content must be evaluated. Disclosing a company's trade secrets on the Internet is far different from exposing allegedly financial wrongdoing by management in the selling of mortgage-backed securities. The former would constitute a breach of an employee's duty of loyalty, misappropriation of trade secrets and potentially a breach of any contractual confidentiality or nondisclosure agreements, all justifiable grounds for the employee's termination.

PETE WELLS

The owner and chef of a Greenwich Village seafood restaurant has settled the lawsuit she brought against her former sous-chef after he opened a restaurant that she said was a “total plagiarism” of her own.

The chef, Rebecca Charles of Pearl Oyster Bar, had accused her former assistant, Edward McFarland, of copying “each and every element” of her restaurant, including the white marble bar, the color scheme and the Caesar salad recipe when he and his partners opened Ed’s Lobster Bar in SoHo.

Both sides in the case agreed to keep the terms of the settlement confidential.

The case, brought last June, was avidly followed in the hospitality business because it cited principles of intellectual property law, including trade secrets and trade dress — the kind of tactic more commonly used by large corporations than by restaurants like Pearl, a tiny storefront on Cornelia Street known for urbane takes on lobster rolls, chowder and other New England clam-shack standbys.

The Recorder

Marvell Semiconductor appears to have lost a long battle to suppress a voice mail at the center of a major trade secrets case brought by rival Jasmine Networks. On Wednesday, the California Supreme Court, in which the dispute had been pending for nearly four years, dropped its review of the matter and sent it back to the court that had ruled against Marvell in 2004. The order appears to let the 6th District's ruling stand, and possibly lets Jasmine use the contested voice mail at trial.

Verdict-Defendant : The jury found in favor of the plaintiff on the counts of breach of fiduciary duty and interference of contract, and awarded it $59,780. The jury found for Der on the counts of breach of contract and common counts, and awarded him $135,291.

In 2001, plaintiff Redwood Health Services and Clifford Der co-developed a partially self-insured health plan for small employers, called "Basic Plus." Redwood and Der, doing business as Benefit Brokerage Services, doing business as Health Plan Alliance, then entered into an agreement under which Redwood would act as a third-party administrator of the plan and provide financing for marketing, and Der would act as a general insurance agent who would market and sell the plan through his network of brokers. Redwood would then get an administrative fee and a marketing fee on each plan sold, and Der would get a commission.

Redwood started marketing through other brokers and stopped paying Der. In 2004, Der stopped selling Basic Plus plans and began selling a similar plan called "Insured Plus." Redwood stopped Der's commissions in 2005.

Beneficial Administration Co., Inc. agreed to act as the third party administrator for Insurance Plus, and put the logo on its website and documents.

Der then transferred 18 employer groups from Basic Plus to Insured Plus and also sold new Insured Plus plans.

Redwood Health Services sued Der, doing business as Benefit Brokerage Services, doing business as Health Plan Alliance, claiming breach of fiduciary duty and interference of contract. Redwood also sued Beneficial Administration Company, Inc., claiming service mark infringement.

Der filed a cross-claim against Redwood Health Services, for a breach of contract and common costs.

Beneficial Administration was dismissed on a non-suit on Feb. 26, 2008, because the judge believed that there was insufficient evidence of confusion, similarity of marks and damages on infringement to allow the case to proceed to the jury against it.
Redwood claimed that Der had committed a breach of fiduciary duty when Der began selling the Insured Plus plans, which Redwood claimed were too similar to the Basic Plus plan.

Redwood also alleged that Der misappropriated trade secrets when he switched groups from Basic Plus to Insured Plus, though this claim was not presented to the jury.
Der claimed that Redwood was in the wrong, since they began selling the Basic Plus plans through a different agent in 2003.

Der sought damages for unpaid commissions on all Basic Plus plans sold, whether through him or through another agent. Der asked the jury for more than $1.5 million.

4/17/2008 N.Y.L.J. 25, (col. 5)

In the Matter of Kristan Peters
U.S. - SDNY

Judge Rakoff

RESPONDENT, a former partner at law firm Dorsey & Whitney, was sanctioned for misconduct arising from her actions as counsel to Wolters Kluwer Financial Services Inc. during its trade secrets action against Scivantage. Among the charges of misconduct was respondent's long delay in returning deposition transcripts to court custody and her alleged instruction to a junior associate that he 'scribble all over' unmarked transcripts so they could be called attorney work-product and not have to be returned. In an unusual opinion by the judge chairing the Southern District of New York's grievance committee, respondent was suspended from practice in the district pending the outcome of disciplinary proceedings. The judge found the suspension warranted because of the 'nature and seriousness of the charges against [respondent], the strength of the record supporting those charges, and the danger of recurrence as demonstrated by respondent's lack of appreciation of the wrongfulness of her misconduct.'

Lovells LLP
R Mark Halligan and Deanna R Swits

The recent case of Modis v Bardelli9 illustrates the increasingly common practice of litigating trade secret disputes in the US federal courts in conjunction with claims under the US Computer Fraud and Abuse Act (CFAA)10.

In the United States, state law governs claims for misappropriation of trade secrets and breach of a non-disclosure or non-compete agreement. This often leads to frustrating jurisdictional wrangling for plaintiffs who desire the benefits of extraterritorial jurisdiction and national service of process afforded by the US federal courts, but who have difficulty in establishing federal jurisdiction. However, it is now becoming increasingly common for plaintiffs to avoid this problem by tying claims for trade secret misappropriation to claims under the CFAA, which provides federal subject matter jurisdiction.

The CFAA

The CFAA originally was enacted in 1984 as a criminal statute to protect classified information on government and financial institution computers. In the 1990s it was amended to add a private civil cause of action and to apply to any “protected computer” (defined to include any computer used in interstate or foreign commerce, whether in the US or elsewhere).

Because most trade secrets now reside in an electronic environment, the use of the CFAA to combat the theft of trade secrets by disloyal employees is increasing. There have been dozens of cases involving the litigation of trade secret misappropriation claims under the CFAA in recent years, and this trend will continue.

Section 1030(a) of the CFAA enumerates various categories of misconduct but the cases involving departing employees focus on the element of “without authorisation” or “exceeding authorised access.” Recent cases have recognised that the CFAA provides a remedy in the federal courts against disloyal employees who download, transfer or delete trade secret information on company computers or engage in other acts of trade secret misappropriation involving computers.

Shurgard11

In Shurgard, employees accessed the plaintiff’s computer to transmit trade secrets to a new employer they were joining. The district court rejected the argument that these employees had authorised access to Shurgard’s computer system because they were still employed by Shurgard. Instead, the US District Court for the Western District of Washington held that these employees lost their authorisation and were, therefore, “without authorisation” when they accessed Shurgard’s computer system to send confidential information via email to their new employer.

Citrin12

In Citrin, Judge Posner, writing for the Seventh Circuit Court of Appeals, expanded upon the reasoning in Shurgard, analysing the issue of authorisation from an agency theory. The case involved an employee, Mr Citrin, who decided to leave International Airport Centers (IAC) and start up his own competing business. Before leaving, he deleted from his company-issued laptop computer all the data he had collected on potential acquisition targets for IAC. The Seventh Circuit held that Mr Citrin’s authorisation to access the computer terminated when he decided he would delete the data; that decision was a breach of his duty of loyalty to his employer which automatically terminated the agency relationship which, in turn, automatically terminated his authority to access the company-owned laptop computer.

Modis

On 22 January 2008, the US District Court for the District of Connecticut issued its decision in a the case brought by Modis against its former employee, Ms Bardelli, who had joined a competitor company and had accessed and downloaded customer files from Modis before leaving. The court held that an employment agreement restricting her access to Modis’ computers unless “in furtherance of Modis’ Business” was sufficient to establish that she had exceeded her authorised access. The court chose not to discuss whether the defendant had an improper purpose or breached the duty of loyalty – the employment agreement’s prohibition on access was enough.

SLASHDOT

"Princeton Professor, Ed Felton, has posted a series of blog entries in which he shows the printed tapes he obtained from the NJ voting machines don't report the ballots correctly. In response to the first one, Sequoia admitted that the machines had a known software design error that did not correctly record which kind of ballots were cast (republican or democratic primary ballots) but insisted the vote totals were correct. Then, further tapes showed this explanation to be insufficient. In response, State officials insisted that the (poorly printed) tapes were misread by Felton. Again further tapes showed this not to be a sufficient explanation. However all those did not foreclose the optimistic assessment that the errors were benign — that is, the possibility that vote totals might really be correct even though the ballot totals were wrong and the origin of the errors had not been explained. Now he has found (well-printed) tapes that show what appears to be hard proof that it's the vote totals that are wrong, since two different readout methods don't agree. Sequoia has made trade-secret legal threats against those wishing to mount an independent examination of the equipment. One small hat-tip to Sequoia: at least they are reporting enough raw data in different formats that these kinds of errors can come to light — that lesson should be kept in mind when writing future requirements for voting machines."

HELEN BRANSWELL
The Canadian Press

U.S. and Canadian regulatory rules allowed companies to conduct "secret science" that jeopardized the lives and health of hundreds of people who took part in clinical trials for a human blood substitute, even though earlier tests had shown the existing products were dangerous, researchers reported yesterday.

Companies were not required to publish the findings of their trials, leaving research ethics boards that were assessing applications for additional trials - and people being asked to participate in them - in the dark about the fact the products elevated the risks of death and of having a heart attack.

A review of all the available literature on the trials - published online yesterday by the Journal of the American Medical Association - shows that people who received hemoglobin-based blood substitutes in clinical trials were 30 per cent more likely to die and faced a nearly threefold increased risk of heart attack.

By ANDREA KIMBALL, Luce, Forward, Hamilton & Scripps LLP

Employee mobility is the greatest threat to a company's intellectual property. Gone are the days when an employee hires in and retires with a gold watch after 30 years of service. In this age of employee turnover, it's not surprising that nearly all theft of corporate information is committed by someone within the company.

R. Mark Halligan's Trade Secret Case Law Database which is hosted by the askSam Web Publisher has been recently updated with 2007 and 2008 cases. The database is approaching one thousand cases. R Mark Halligan, Esq. is now a partner in the Chicago office of LOVELLS, an international law firm with 1700 lawyers in 26 offices around the world.

Mr. Halligan's contact information is as follows:

R Mark Halligan, Esq.
Partner LOVELLS
One IBM Plaza, 330 N. Wabash Avenue Suite 1900
Chicago, IL 60601

Trade Secrets and Confidential Information Security Risk and Misappropriation by Ryan Conion (Hardcover - Aug 28, 2008)

Global Secrets: Global Trade Secret Protection (Globalization & Law) by C. D. Freedman (Hardcover - Jun 28, 2008)

Intellectual Property Culture: Strategies to Foster Successful Patent and Trade Secret Practices in Everyday Business by Eric M Dobrusin and Ronald A Krasnow (Paperback - Jun 26, 2008)