Using Litigation to Understand Trade Secrets: A Preliminary Exploration
By Josh Lerner

In recent years, there has been a growth in interest among economists in the litigation of intellectual property, as opposed the traditional focus on the grants of these rights and their subsequent citation in other awards. This new focus is very natural, given the critical importance of the litigation process in enforcing intellectual property rights. To date, though, the literature on litigation of intellectual property rights has almost exclusively focused on patents. This orientation is readily understandable: not only are patents a critically important property right, but they are also relatively straightforward to track. The major alternative forms of protection, such as trade secrets and copyrights, are often more difficult to empirically examine.

Despite these challenges, trade secrets are a key form of protection for many firms that either choose not to or cannot patent their discoveries. Thus, in this paper I seek to explore what can be gleaned empirically about this form of protection using the recorded decisions associated with trade secret-related civil litigation.

The Editor interviews Gayle Rosenstein Klein , Principal in the New York Office of McKool Smith, PC , a national commercial litigation and intellectual property law firm with offices in Dallas, Austin, Marshall, New York and Washington, DC. Ms. Klein is an experienced courtroom lawyer who regularly handles litigation involving non-compete agreements and trade secret claims in state and federal courts throughout the United States.

Editor: You recently joined the New York office of McKool Smith after working as a commercial litigator at a top 10 international, full-service firm. What made you decide to go with a boutique that only recently entered the New York market?

Klein: I married a practice group leader at my former firm, and wanted to continue to develop my practice without any appearance that my successes were the result of my marriage. Having begun my career in Dallas, I was familiar with McKool Smith and knew the firm had excellent trial lawyers with the same high-caliber practice that I enjoyed at my former firm. I'm also excited about the flexibility we have as a boutique litigation firm. I now have more opportunity to do plaintiff's work, offer creative fee arrangements, and take on matters where I would have had a conflict at my former firm. A lot of people know McKool Smith as patent litigation experts, but the firm started as a commercial litigation firm, and it has top-notch commercial litigators. Our growth in New York reflects a firmwide effort to fill what we believe is a growing client need.

Editor: Why do you think that there is a growing client need for boutique litigators in New York?

Klein: As the economy continues on its bumpy ride, we are experiencing a rise in commercial disputes, particularly those between companies where sophisticated deals have gone sour, as well as litigation over non-competes, trade secrets, and confidential information. On any given day, I spend time dealing with issues relating to either employee raiding or some other alleged misappropriation of trade secrets. These are important issues for blue-chip clients, but the fact is that many large firms can't accept these cases because of conflicts.

LOS ANGELES, Oct 02, 2008 /PRNewswire via COMTEX/ -- A California Superior Court jury has found defendants Thai Union International, Inc., Empress International, Inc. and Chicken of the Sea Frozen Foods (collectively "Thai Union"), as well as Bryan Rosenberg and Brenden Beck (former employees of Contessa Premium Foods, Inc.) liable in connection with a scheme to steal trade secrets and compete unfairly with Contessa in the sale of frozen food products in the United States.
The case of Contessa Premium Foods, Inc. v. Bryan Rosenberg et al. (BC 347105) dates back to 2005 when, without Contessa's knowledge, Thai Union began interviewing several key Contessa sales executives. The jury found that Thai Union ultimately conspired with two of the highest-ranking sales executives, defendants Bryan Rosenberg and Brenden Beck, to misappropriate Contessa's valuable trade secrets, defraud Contessa and take Contessa's existing as well as anticipated customers. The jury also found that Rosenberg and Beck breached their fiduciary duty while employed by Contessa and did so with malice, oppression or fraud. The jury was unanimous in its determination that Rosenberg and Thai Union engaged in fraud by concealment resulting in significant damages to Contessa. Contessa was represented in this case by the Los Angeles office of O'Melveny & Myers LLP.

by Halligan, R. Mark and Weyand, Richard F

The economic valuation of trade secret assets has perplexed the intellectual property bar for years. The economic and legal issues are seemingly inextricably intertwined. We present here a method for valuation of trade secret assets that decouples the economic and legal issues, rendering the problem tractable.

Several accepted methods exist for the valuation of a property. Depreciated cost, replacement cost, fair market value, and net present value of future cash flows are all proper measures in specific circumstances.

For intellectual property, however, depreciated cost is not appropriate. The direct acquisition cost of intellectual property may be insignificant, as when the intellectual property results from a flash of insight. However, that same insight may result from the sudden emergence of an idea after years of study in the field and years of experimentation in the laboratory. Which, then, is the true cost, the negligible cost of a moment's insight or the sum total cost of the education and experience of a lifetime?

Similarly, replacement cost is problematic. How does one replace a flash of insight? By what means can one predict the machinery of invention? For patents, trademarks, and copyrights, injunctive relief is true replacement, that is, the restoration of the exclusive use of the intellectual property. But trade secrets, once lost in the public domain, are lost forever. The bell cannot be unrung. How then can a replacement cost even be conceptualized, much less determined?

To read the entire article click here.

By Ntokozo Mfusi

Health MEC Peggy Nkonyeni has warned traditional healers to safeguard their knowledge and not give their trade secrets to anyone who came along.

"We are selfish with this knowledge we were given by the ancestors and don't want it to be stolen by outside countries," Nkonyeni said on Thursday.

"We have to safeguard our knowledge and not reveal all our secrets, not to outsiders, the media or others who could distribute it without our permission."

She was speaking at the traditional health practitioners' graduation ceremony held at the University of KwaZulu-Natal, where 250 people graduated in the allopathic (use of non-homeopathic remedies) and traditional health practitioners' collaboration on HIV prevention, Aids care and treatment project.

Cross-country beef gene research
Australia's Beef CRC has joined forces with the US Department of Agriculture and several American and Canadian universities to improve gene marker research.
The gene markers of more than 15,000 animals will be studied.
Dr Heather Burrow, from the Beef CRC, says the project means research will be faster and more reliable, but Australia isn't giving away any trade secrets.
"So we're all using a common panel to discover those markers that are associated with the traits that we are interested in," she says.
'So if we're all using common markers we're not going to discover something new in terms of the markers.
"But what we will do is a better job using the international collaboration to identify the markers that are having a big effect, particularly here in Australia."

Owners and operators of website that facilitated the copying and
distribution of large files brought action against motion picture trade
association, alleging that association procured and conspired to procure "hacked"
private information that association then used to interfere with owners' business
operation. Parties filed cross motions for summary judgment.

The District Court, Florence-Marie Cooper, J., held that:

(1) contractor's conduct did not violate Wiretap Act;

(2) invasion of privacy claim was preempted by Electronic Communications Privacy
Act (ECPA); and

(3) operators failed to establish a violation of California Trade Secrets Act.

Motion granted in favor of defendant.

Designer of marine pile driving barge brought action against
fabricator and others for injunctive relief and damages, alleging breach of
contract and violations of the Louisiana Uniform Trade Secrets Act and the
Louisiana Unfair Trade Practices Act. The Second Judicial District Court,
Claiborne Parish, No. 37713, Jenifer Ward Clason, J., denied designer's request
for a preliminary injunction, and designer appealed.

The Court of Appeal, Peatross, J., held that designer failed to take
reasonable efforts under the circumstances to maintain the secrecy of its barge
design as required for the design to obtain trade secret protection.

In 2003 and again in 2006, plaintiff Cooper Technologies Inc., a Houston-based manufacturer of electrical equipment, obtained patents with the U.S. Patent and Trademark Office on two of its products -- connectors used by utilities to distribute high-voltage electricity. The primary U.S. producer of competing products of this type was Thomas & Betts Corp., a Memphis, Tenn.-based corporation.
Cooper sued Thomas & Betts, alleging patent infringement. Cooper claimed Thomas & Betts connectors infringed on its patents by incorporating a colored band designed to show if the electrical components connected correctly. Cooper claimed it invented this technology in 1993 and has exclusive rights to connectors using such bands.
Thomas & Betts denied patent infringement, arguing that the patents in question were invalid. The defense claimed that colored bands of the type used on Cooper's products have been in use on similar devices since the 1960s, and that Thomas & Betts began using the bands in the 1970s.
Thomas & Betts disputed the damages, claiming Cooper's estimate of the contibrution of the technology in dispute to the value of the products was exaggerated.

Plaintiff Vax-D Medical Technologies, LLC, and Allied Health Management Ltd. entered into a confidentiality agreement regarding Vax-D therapeutic tables. The parties agreed that Allied would keep confidential certain trade secrets and information related to the tables, which were used for spinal decompression treatments.
Vax-D sued Allied Health, operating as Gilbertson Chiropractic Health Center, also known as Back Pain Institute; AMT Manufacturing Inc., also known as W.J. Deacon Industries Ltd., operating as D&D Industries, operating as Power Products; and Daniel Boudreau and Texas Spine Medical Center for patent infringement and breach of contract. Vax-D also sued William Deacon and Monohan Chiropractic Medical Clinic P.A. for patent infringement, claiming that the defendants misused the plaintiff's trademark and service mark.
Vax-D also claimed that the defendants used the information unlawfully obtained by Allied to manufacture or have manufactured a product similar to the therapeutic tables manufactured by Vax-D. The case came before the court on remand following a May 4, 2006, dismissal of the case against Boudreau, doing business as Texas Spine Medical Center. The remaining defendants had previously entered into confidential settlement agreements with Vax-D, thus having claims against them dismissed.
Boudreau did not appear at a hearing following the reversal and remand of the case's dismissal. Vax-D moved for a default judgment.

Article by Kelli N. Watson Francuzenko, Judith Toffenetti and Jennifer S. Gee

Start-up biotech companies should address these key legal issues with the aid of legal counsel.

Biotechnology start-ups face a dizzying array of business and legal requirements and a limited budget that forces them to prioritize where they expend valuable compliance funds on outside legal counsel. In the rush to stay cash-flow positive, attract investors and expand the platform while feeding as much capital as possible into research and development efforts to accelerate the maturity of the product line and its commercialization, start-up biotechs must make tough choices about the legal issues that require a share of the capital as well.

Although each business is unique, there are certain common experiences that lend themselves to generalization. The following is a top 10 list of critical legal issues that start-up biotech companies should make an effort to address with the aid of legal counsel, even when the capital squeeze is intense. An investment up front can secure long-term dividends for the financial stability and profitability of the venture.

Know Thy IP

It is an article of faith that, for biotech start-up companies, their intellectual property (IP) is their most valuable asset. The success of the biotech start-up rests on the value of its IP, which determines whether the company will be able to attract investors and strategic partners. Clearly, the IP assets of a biotech start-up are key to its survival and long-term success. The IP is not only the product line, but also the data, ideas, trademarks, trade secrets, know how and copyrights that accompany it. Companies should undertake basic IP due diligence to confirm the legal status of key IP components. The start-up biotech company must keep abreast of the competition. It is essential to know who the competition is and what the competition is doing. It is recommended that before any major research or development endeavors are begun, a patent landscape search be conducted in the field of related research, products and services in order to gain an accurate assessment of what IP protection might be obtained by the company and the potential market value of such IP. Information concerning competitors' IP should be updated on a regular basis and the information disseminated to the business people and researcher so that informed decisions concerning IP and products can be made. Obtaining and maintaining patents involves risk management as well as asset protection, which can take up a significant portion of the company's IP budget. Consequently, the start-up biotech company must choose wisely which innovations to protect and must put in place internal mechanisms for ensuring ownership of its IP and protecting the confidentiality of its business.

Spicy IP blog reports that Indian government has now released a draft version of the National Innovation Act, 2008 (hereafter "NIA").

Trade Secrecy Provisions
The interesting and perhaps most substantive (at least in terms of enforceability) part of this Bill are the provisions on trade secrecy or "breach of confidence". To appreciate this branch of intellectual property, think the secret Coke formula, the KFC formula and in the Indian context, the Ayurvedic "massage" formula by the famous Kottakal family. Under the "trade secrecy" provisions of the NIA, Kottakal can take steps to prevent the wrongful disclosure of its massage techniques by ex -employees etc to third parties.

With an increasing number of "trade secrecy" cases coming up before Indian courts, this promises to be welcome development for the IP community. So far, courts have protected trade secrets under the common law "breach of confidence" doctrine. With a statutory enactment, there is bound to be more clarity and certainty in the law.

However, the question that needs to be asked is: Do we want the American statutory model of trade secrecy (where trade secrecy norms are codified into a statute) or do we want to retain the flexible case law (judicial) approach that is currently endemic to the UK and India. Both approaches come with their respective pros and cons.

To read the complete post by Shamnad Basheer click here.

By Peter Ollier
Parts of a statutory law on trade secrets proposed in a draft bill by an Indian ministry have been described as"absolutely absurd" by an IP lawyer in the country.

The proposals are part of a draft National Innovation Act drafted by the Federation of Indian Chambers of Commerce and Industry and released by the Ministry of Science and Technology last week.
The Act is designed to "facilitate public, private or public private partnership initiatives for building an innovation support system ... and consolidate the law of confidentiality in aid of protecting confidential information, trade secrets and innovation".
Chapter VI deals with trade secrets and creates an obligation to preserve confidentiality. But Pavin Anand, a partner of Anand & Anand, objects to section 11(c), which gives an exception to the offenceof breaching trade secrets "where disclosure of the confidential information is held to be in public interest by a court of law" because the term "public interest" is too vague.
Section 12 (4) is also controversial. This says that an injunction restraining use of confidential information "may stipulate conditions for future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited".
Anand said the proposed exceptions from infringement "introduce a compulsory licence in trade secrets". As an example, he said that these provisions would make it possible for someone to steal the recipe for making CocaCola and to manufacture a drink using this recipe at a cheaper price, while paying a 10% royalty fee.
But Manisha Singh-Nair, a partner of Lex Orbis, said that the way the courts apply common law to protect trade secrets had been inconsistent and that a statutory law was "not only a good idea but a necessity".
Singh-Nair welcomed other parts of the draft Act, including the provision compelling the Ministry of Science and Technology to present an annual national integrated science and technology plan to the government, tax and fiscal incentives for innovation and the creation of designated special economic zones for innovation.
But she admitted that the bill is still vague: "The area of concern would remain whether the provisions are in the nature of policy statement or are mandatory provisions with in-built enforceability."
The draft bill is now open for comments.
Managing IP's 2008 list of the 50 most influential people in IP contains an extended profile of Kapil Sibal,Union Minister in the Ministry of Science and Technology, in which Sibal talks about the Innovation Act and a proposed Bayh-Dole style Technology Transfer Act.

Bangkok Post

Thai Union Frozen Products Plc (TUF) and two of its units have been ordered to pay a US food company $4.5 million plus legal fees in a trade-secrets case. Contessa Premium Foods Inc sued two of its former employees and TUF for trade-secret theft in California state court in Los Angeles in February 2006.

Globally, TUF's tuna-canning business is second in size only to that of San Francisco-based Del Monte Foods Co.

The court found that Bryan Rosenberg, TUF's former managing director of sales, and Brenden Beck, the former regional sales manager for retail for TUF, used Contessa sales calls to sell frozen food products made by competing companies.

They were also accused of using Contessa resources to develop design, products, promotional materials, marketing strategies and sales presentations for competitors.

TUF ''aided and abetted the misappropriation of Contessa's trade secrets'' by the two executives, said court papers.

The jury verdict, handed down in Los Angeles on Sept 26, included $200,000 in punitive damages relating to Mr Rosenberg's conduct, and $1.5 million in punitive damages that TUF must pay. Jurors also awarded Contessa $2,788,183 in actual damages.

CUPERTINO, CA, Oct 07, 2008 (MARKET WIRE via COMTEX) -- Software Analysis & Forensic Engineering Corporation ( www.SAFE-corp.biz), the leading provider of software tools for detecting and measuring software intellectual property, has just announced CodeGrid(TM), a distributed computing system that enables CodeSuite(R) jobs to be run many times faster than ever before. CodeSuite is a suite of tools, consisting of CodeMatch(R), CodeDiff(R), and BitMatch(R), for comparing computer source code and object code to detect such things as plagiarism, copyright infringement, and trade secret theft. CodeSuite can also measure software intellectual property changes through various revisions of program releases.
CodeSuite uses a computationally-intensive algorithm such that large jobs can take a long time to run, especially compared to the short schedule often required for IP litigation. In order to drastically improve performance, the engineers at S.A.F.E. Corporation developed a distributed computer grid, effectively creating a parallel-processing supercomputer out of off-the-shelf PCs. CodeGrid uses the same kind of technology as the grid systems used by NASA, CERN, and the National Science Foundation.
According to Tim Hoehn, Research Engineer at S.A.F.E. Corporation and lead engineer of the CodeGrid project, "Over a year in development, CodeGrid has proven itself to perform even better than expected. We anticipated a large performance increase over stand-alone CodeSuite, but CodeGrid has actually performed better than our initial calculations. We are extremely satisfied with its performance."

By Kaitlin Mara

Perhaps no topic over the past year has been cause for more uneasy speculation within the intellectual property community than the Anti-Counterfeiting Trade Agreement (ACTA), primarily because the negotiating process for this treaty has been behind tightly closed doors. Now two US-based public interest organisations have filed suit against the US trade office in charge of the negotiations, in hopes of being able to gain access to the records currently under lock and key.

ACTA was announced in October 2007 as a partnership to combat counterfeiting and piracy that the US and several of its trading partners view as critical threats to their businesses and the cause of billions of dollars in lost revenue annually.

But a lack of transparency in the negotiating process plus a discussion paper on the agreement leaked in the spring of 2008 have caused alarm among consumer rights groups. Attempts to gain access to negotiating documents have so far proved unfruitful. The leaked text includes provisions for the criminalisation of intellectual property infringement, including "internet piracy... without motivation for financial gain" as well as provisions for IP enforcement by customs authorities.

Now, the Electronic Frontier Foundation (EFF), a California non-profit focussing on the defence of civil liberties in the digital age, and Public Knowledge, a Washington, DC non-profit engaged in consumer advocacy on issues of intellectual property law and technology have filed suit against the USTR to try and obtain the information.

To read the entire piece click here.

Article by Charles H. Sanders

Offering speedy trials before IP-savvy judges and the powerful remedy of an exclusion order to stop infringing goods at the border, the U.S. International Trade Commission (ITC) has become an increasingly popular forum for enforcing IP rights. The Supreme Court's eBay decision reducing the availability of injunctive relief in federal district court patent cases has also contributed to the rise of the ITC. Acting similarly to a district court, the ITC most often hears claims of patent or trademark infringement but can also address unfair competition due to infringement of registered copyrights, misappropriation of trade secrets or trade dress, passing off, false advertising, or antitrust violations.

The ITC's new prominence demands attention to developments at the agency. Here are the top 10 to date this year.

1. The ITC Is More Popular Than Ever

The ITC has already instituted over 40 new IP cases this year, a record number. (Goodwin Procter has been involved in five ITC cases over the past year and two trials.) By comparison, the ITC instituted about 25 cases in 2004 and 2005, and 30 to 35 cases in 2006 and 2007. The ITC's fast-growing docket shows that IP rights holders are increasingly choosing to enforce their rights in the ITC due to its unique advantages.

2. The ITC Names A Fifth Judge And Plans To Add A Sixth Judge

For many years, the ITC had four judges, but to handle its burgeoning docket the ITC named a fifth administrative law judge, Robert K. Rogers, and plans to add a sixth judge in December. Like retired Judge Terrill, Judge Rogers comes to the ITC from the Federal Energy Regulatory Commission (FERC). The ITC must hire new judges from those at other federal agencies, such as the Environmental Protection Agency and FERC, so they generally do not have IP-related experience upon arrival at the ITC. New ITC judges quickly acquire such experience, however. Since being appointed in July, Judge Rogers has presided over two trials.

3. The ITC Names Judge Luckern As Chief Judge

The ITC named Judge Luckern as Chief Administrative Law Judge after many years without one. Judge Luckern has served as ITC judge for over 20 years and is the only current judge who came from a background in IP law. As Chief Judge, Judge Luckern will preside over all motions made during the time between institution of a case and its assignment to a judge, and will provide leadership in handling the caseload in a thorough yet expeditious manner. Judge Luckern is known for his dedication to his work at the ITC, exhibiting a strong work ethic and expecting the same of others.

4. Commission Gives Itself More Time To Reach Final Determinations

Partly to address its increased caseload, the ITC issued new rules. The higher workload has put more pressure on the ITC in reaching final determinations. In the ITC, the judge issues an initial determination which is then often reviewed, in whole or in part, by the Commission before it issues a final determination. Previously, a target date for the final determination was typically set 15 months from institution of the case, and the judge had to issue his initial determination three months before the target date. Under the new rules, a target date is likely to be set 16 months after institution, and the judge will need to issue his initial determination four months before that date. This gives the Commission another month to conduct its review, which may allow for higher quality opinions and help the ITC to preserve its historically high success rate on appeal. While the new rules lengthen the time to a final ruling by a month, they keep the typical time from institution to an initial ruling at 12 months and should not affect the time from filing to trial.
To continue reading this article click here.

As an IT manager for a midsize manufacturing company, I have spent the last four years trying to make my senior management understand that by lacking formal IT policies we risk electronic property loss, stolen trade secrets, unnecessary downtime, etc. Over the years I have been told that I was too paranoid and that it's no big deal. I was also told that I worry too much and a company the size of ours is too small to have IT policies.

One day my CEO and I were, again, discussing lack of IT policies over lunch. I told him that because he doesn't seem to want to listen to my concerns that I wasn't going to worry about it anymore. "If you don't care, then neither do I," I told him. I also told him that I do not want to be held liable in case a data breach occurs. After laughing, he agreed not to hold me accountable since he just knew that he was right and I was wrong. As we were finishing up lunch I told him that one day it was going to come back to haunt him for not listening to me. Again he just smirked.

Well, just recently a senior VP was fired for insubordination. He deleted all of his e-mails just before walking out the front door. Because I had implemented e-mail archiving about a year ago, I was able to retrieve all of his e-mails. It was discovered that this VP was also conducting electronic sabotage and stealing company trade secrets. Turns out he sold them to our competition, therefore costing us a lot of business.
To continue reading click here.

Texas Wesleyan University School of Law is pleased to host a symposium on the topic of Intellectual Property and Indigenous Peoples, on Friday, October 24, 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.

Registration is now available by visiting: http://law.txwes.edu/LawReview/FallSymposium2008/tabid/1041/Default.aspx
CLE credit is available for symposium attendees.
For more information, please contact Megan Carpenter, Associate Professor of Law, at (817)212-4051, or by email at mcarpenter@law.txwes.edu.

20 Intell. Prop. & Tech. L.J. 25 (October 2008)

Wood, Larry R., Jr.; Hogan, Emmett M.; Bhadha, Charmayne; Dadrewala, Jennifer.

SAN JOSE - United States Attorney Joseph P. Russoniello announced that a criminal information had been filed, charging Robert Scott West with one count of possession of stolen trade secrets, in violation of 18 U.S.C. § 1832(a)(3). These charges are the result of a referral by Phillips Lumileds Lighting Company ("Phillips") and an investigation by the Federal Bureau of Investigation.

According to the information, Phillips is a San Jose, California company that designs and manufactures light emitting diodes ("LED's"), which may be used for computer displays, liquid crystal display ("LCD") televisions and general lighting. One of Phillips' primary products was the Luxeon Rebel line of LED's. In February 2008, months after he had resigned his position at Phillips as a Senior Product Manager to work for a competitor of Phillips, Mr. West was found in possession of the architecture and product specifications for Phillips' next generation of Luxeon Rebel surface mountable power LED's. The information alleges that Mr. West intended to use this information for the benefit of someone other than Phillips.
To continue reading click here.

Scott J. Lebson
Journal of Intellectual Property Law & Practice.2007; 2: 726-728

The collateralization of IP rights has emerged from the fringes of intellectual asset management and is now a major driver of commercial decisions as to how an IP portfolio should be cultivated. • On account of their fixed and predictable format, statutory rights such as patents, trade marks, and copyrights have attracted most of the attention as means by which security is raised for a loan--but collateralization is not limited to such rights. • This analysis demonstrates how even an intangible right of uncertain duration and content may be collateralized, within the context of the interplay of US state and federal statutes and the guidance of case law.

LAKE FOREST, Calif., Oct 10, 2008 (BUSINESS WIRE) -- I-Flow Corporation (IFLO:

7.09, +0.95, +15.5%) continues to enforce its patent and trade secret rights against Apex Medical Technologies, Inc. and its president, Mark McLaughlin, in the United States District Court for the Southern District of California. I-Flow is also enforcing its patent rights against distributors of Apex's Solace(R) Pump, including Zone Medical, LLC. In view of early successes achieved in the lawsuit in the Southern District of California, I-Flow will ask the Court to rule, as a legal matter, that Apex, McLaughlin and Zone have infringed the patent. I-Flow is also vigorously moving forward in the case to protect its valuable trade secrets.
In response to the litigation brought by I-Flow, the defendants asked the United States Patent and Trademark Office to reexamine I-Flow's patent. The Patent Office routinely grants such requests and often times initially rejects previously issued patent claims. The Patent Office has taken this action after receiving Apex's position on the patent without input from I-Flow. I-Flow will now have an opportunity to present its position to the Patent Office in support of the patentability of the patent-in-suit, US Patent No. 5,284,481 ("the '481 patent"). I-Flow believes that, once its position has been presented to the Patent Office, the Patent Office will reconfirm the patent as it did in 1994 when it issued the '481 patent. Indeed, the primary prior art relied on by Apex, McLaughlin and Zone in the reexamination process that I-Flow has not yet participated in, and relied upon by the Patent Office in rejecting the claims, is in fact technology owned by I-Flow.
"While we believe we have a strong case against Apex, it is important to note that our success is not built solely around one patent," said Donald M. Earhart, Chairman, President and CEO of I-Flow. "Our success is based on a total package that includes a high quality disposable pump, a patented silver-coated soaker catheter, more than 60 clinical studies, our FDA-cleared indications that ON-Q(R) significantly reduces the need for narcotics and provides better pain relief than narcotics alone following surgery and, last but not least, our unsurpassed surgical sales force that spans the U.S. No other company in the market today even comes close to matching the breadth of our quality product line and the strength of our distribution. This is why we are the leader in this space."
To continue reading click here

International Trade in Technology - Licensing of Know-How and Trade Secrets
by Hans Verhulst

One of the effects of globalization is the relocation of production from the technology rich countries towards low labour cost countries. This is a threat for SME suppliers and manufacturers in technology-rich countries, whose customers turn their heads to low labour cost countries. On the other side of the globe, this trend creates opportunities for contract manufacturers and service industries.
From a historical and international perspective, we are witnessing a dramatic shift in the importance of the five main drivers for value adding: technology, production, marketing, logistics and support. From a historical and international perspective, technology -in the form of know how and trade secrets- has emerged as a key factor in this process.
In technology rich countries, there is a vast pool of know how waiting to be untapped. In emerging markets, there is an enormous demand for know how, waiting to be filled. This "trade in technology" could well be one of the answers to a changing world. But we need to improve the matching process for this trade i.e. through licensing. When it comes to transfer of know how and trade secrets which are hardly "patentable" -as is the case with most industrial know how- both parties, licensor and licensee alike, still seem to be reluctant to cross bridges. There is a role for institutions and governments to facilitate this matching process by improving the "climate" of intellectual property rights, particularly in know how and trade secrets.
To read the entire article click here.

MINNEAPOLIS, Oct 06, 2008 (BUSINESS WIRE) ----Regis Corporation (NYSE:RGS), the global leader in the $170 billion hair care industry, today reported consolidated revenues increased 1.9 percent in the first fiscal quarter of 2009 to a record $680 million, compared to $668 million a year ago. Deconsolidation of the beauty schools and the European franchise salon operations reduced revenue in the quarter by approximately $20 million. Absent the impact of the school and European deconsolidation, consolidated revenues for the quarter would have increased 5.0 percent. First quarter total same-store sales decreased 1.6 percent, falling below the previously issued guidance of negative 1.0 percent to positive 1.0 percent.

"In this difficult economic environment, we were able to show the stability of our service business as same-store service sales were positive 0.4 percent. However, the bottom line is consumer behavior has changed, consumers are cutting back and, as a result, we are seeing a slow-down in spending and visitation patterns," commented Paul D. Finkelstein, Chairman and Chief Executive Officer. "Our earnings results directly correlate to our same-store sales and with first quarter same-store sales coming in below plan, we now anticipate our operational earnings for the first quarter will be near or slightly below the low end of the previously issued guidance range of $0.41 to $0.47 per share."

Mr. Finkelstein continued, "In the near term, we do not expect economic conditions to improve and we now anticipate that our fiscal 2009 same-store sales will be in a range of negative 1.0 percent to positive 1.0 percent. With this revised same-store sales expectation, we are now forecasting fiscal year 2009 operational earnings per share to be in a range of $1.77 to $2.03."

Operational earnings per share exclude lease termination costs and costs associated with the Trade Secret transformation. Regis Corporation is scheduled to announce first quarter 2009 earnings results, including a reconciliation of non-GAAP financial measures, on October 23, 2008. A conference call discussing first quarter results will follow at 3:00 p.m. Central time. At that time, the Company will provide additional commentary and will address in further detail its first quarter 2009 results and its updated fiscal year 2009 guidance. Interested parties are invited to listen by logging on to www.regiscorp.com.
To continue reading click here

An Overview of International Trade Secret Protection from the International Trade and Investment Perspective
Pedro A. Padilla Torres

Intellectual Property Rights (IPRs) protection is one of the most important and current legal issues in the international trade arena. As international trade and investment increases around the world, copyrights, trademarks, patents and trade secrets need to be subjects of a more global perspective. The necessity for legal protection of products of the mind in the international trade and investment context from the stand point of developed countries is apparent: An English or Canadian manufacturing company is more willing to make capital investments in Singapore or Venezuela if they believe that their patented inventions and secret processes of manufacture are adequately protected from unwanted use or misappropriation; similarly, an American software producer will lay its products through Internet if there exists protection against its unauthorized copying.
Not surprisingly one of the hottest topics of the Uruguay Round of Multilateral Negotiations between the Ministers of the General Agreements on Tariffs and Trade (GATT) was the protection of IPRs. Likewise, the North America Free Trade Agreement (NAFTA) Preamble reflects the concerns of the contracting countries (Canada, Mexico and the United States) about the legal protection of those very same rights when, among other issues, they resolved to: "FOSTER creativity and innovation, and promote trade in goods and services that are subject of intellectual property rights". The European Union (EU), notwithstanding its more subtle way to deal with issue, had also addressed the necessity of harmonized rules to protect IPRs.
Some types of intellectual property are protected primarily to encourage technology innovation. In this category belongs patents, industrial designs and trade secrets. Their economic aim is to procure financing for technological research and development, through providing legal protection to products of investment in research and development activities.
In the midst of IPRs designed mostly to stimulate technological advancement, the law of trade secrets is getting, more than ever, international attention because of its potential to become an effective legal tool when other regimes, like patents or copyrights, are not suited to offer the satisfactory or desired protection for investors. This note begins with a brief general definition of trade secrets and an overview of its diverse approaches or theories of protection. Next, I will comment the major elements of trade secrets and some associated economics. Then, I will discuss the international agreements bearing on trade secret protection and the responses of some countries. Finally, I will offer, as a conclusion, some reflections on the current worldwide stage of trade secret protection and its implications to international trade.
To read the complete article click here.

Company press release from Lighting Science Group Corporation *** NEW YORK -- Lighting Science Group Corporation, a developer and integrator of intelligent LED lighting solutions, announced that on October 7, 2008, the Superior Court of California for Sacramento County issued a preliminary injunction against Philips Solid State Lighting Solutions, Inc., Koninklijke Philips Electronics N.V. and Philips Electronics North America Corporation (collectively "Philips") preventing Philips from using or relying on certain confidential or trade secret information obtained from LSG.

In granting the motion for a preliminary injunction sought by LSG, the court found that LSG was "likely to prevail on the merits" in its action pending against Philips.

The action began in March 2008 when LSG filed a complaint in the Superior Court of California for Sacramento County alleging, among other things, that Philips had misappropriated confidential information and engaged in unfair trade practices.

Trade Secret Theft
"Secured facilities and rigorous employee screening can cut the risk."
From www.computerworld.com

Taking work offshore may cut costs, but it still comes with a not-so-hidden price. Asian countries, including the No. 1 outsourcing destination, India, have weak or untested intellectual property laws, inefficient courts, and financial and public records mechanisms that make it difficult to conduct employee background checks.
That doesn't mean that intellectual property sent to reputable offshore developers is more likely to be stolen and sold than it is here. Sophisticated U.S. and Canadian companies have lost valuable intellectual property in their home countries because of dishonest employees and hackers. Employees in India and elsewhere aren't any more dishonest than workers here. But because overseas court systems and laws aren't as strong as in those the U.S. and evaluating potential employees is more difficult overseas, the odds of intellectual property theft could be higher.
U.S. businesses are also sending valuable code to regions of the world with high piracy rates. In China, for instance, 92% of the software installed on computers is pirated, according to a recent study by IDC and the Business Software Alliance. In India, the piracy rate is 73%, and in the U.S., it's 22%, the lowest rate in the global study.

Data Loss Prevention and .NET Software Code:
Protecting Your Software IP

Date: Tuesday, October 14, 2008
Time: 2:00 PM Eastern; 11:00 AM Pacific
Featuring speakers from:
About the Webcast:
While much attention has been paid to Data Loss Prevention (DLP), few organizations have remembered to protect some of their most valuable data: the intellectual property (IP) contained in deployed .NET applications.

Applications developed for the .NET platform are inherently easy for competitors, hackers, and software pirates to tamper with or steal the valuable or sensitive IP contained in the code.

Join V.i. Labs' Victor DeMarines and special guest speaker Charles Kolodgy of IDC for a discussion of this neglected aspect of protecting your IP. You will learn:

* The risks of source code and intellectual property theft when deploying applications - especially those developed in Microsoft .NET
* What software protection is and how it can offer DLP
* How to decide when software protection is appropriate/required
* Customer case studies: software protection in the real world

Who Should Attend?
IT professionals developing .NET applications for enterprises or ISVs should attend this webcast. The event is particularly geared for Directors or VPs of Software Development/Engineering, Product Management and Software Licensing, as well as General Counsels, Compliance Officers and CTOs.

Learn how to protect your software IP from theft and tampering at this webcast. REGISTER NOW.

Wednesday, October 08, 2008
by: Kamakhya Srivastava

The government's endeavour in bringing out a comprehensive legislation to boost research and innovation in the country has crossed the first milestone. The Draft National Innovation Act 2008 (hereinafter draft Innovation Act), put in place by the Department of Science and Technology, has a three pronged approach as evident by its preamble. The draft Innovation Act undertakes to encourage innovation through an Innovation support system facilitated by the public, private or public-private partnership. The second approach strategy is evolving into a National Integrated Science and Technology Plan. The third and last objective is the codifying and consolidating the law of confidentiality in aid of protecting Confidential Information, trade secrets and Innovation.
Pan-European Intellectual Property Summit 2008

The draft Innovation Act was widely speculated to be modeled on America COMPETES Act (America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science Act). The America COMPETES Act, through its preamble "To invest in innovation through research and development, and to improve the competitiveness of the United States" focuses on three primary areas of importance of maintaining and improving United States' innovation in the 21st Century: (1) increasing research investment, (2) strengthening educational opportunities in science, technology, engineering, and mathematics from elementary through graduate school, and (3) developing an innovation infrastructure.

The draft National Innovation Act through its first two objectives - an Innovation support system facilitated by the public, private or public-private partnership and a National Integrated Science and Technology Plan - seems to be taking care of the three focus areas of the America COMPETES Act.

Codification and consolidation of the law of confidentiality, the third highlight in the preamble of the draft Innovation Act demonstrates the significance of trade secrets and confidential information within the realm of innovation. Innovative ideas, products and business practices help enterprises to maintain competitive superiority in the market alongside furthering their economic interests. It is for this reason that there is a need to prevent others from taking advantage of the breakthrough ideas and knowledge or in ordinary parlance the confidential information or trade secrets.

Under the TRIPs Agreement 'trade secrets' are referred as 'Undisclosed information'. Any information is prevented from being disclosed so long as such information: (a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) has commercial value because it is secret; and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

In India protection of trade secrets is Common Law based. However section 27 of the Indian Contract Act provides some sort of limited remedy, it bars any person from disclosing any information which he acquires as a result of a contract. The grant of statutory protection to trade secrets is the need of the hour.

Under the draft Innovation Act, trade secrets and confidential information are elucidated in Chapter VI titled as "Confidentiality and Confidential Information and Remedies and Offences". The chapter explicates on Obligations of Confidentiality and Remedies to protect and preserve confidentiality. The obligation to maintain confidential information, under the draft statute, rests on the contractual terms and conditions, governmental recommendation and on any right arising in equity. Remedy in the form of preventive or mandatory injunction restrains misappropriation of Confidential Information and mandatory damages on proof of breach of confidentiality. Exceptions to misappropriation of confidential information form one of the sections under the chapter. Interestingly, disclosure of the confidential information in public interest forms one of the exceptions.

To spur innovation through planned and systematic investments and incentives is a dynamic idea which is amply reflected in the draft Innovation Act but the sore patch seems to be the part dealing with protection and preservation of trade secrets and confidential information. There is no doubt that innovation, as defined in the draft Innovation Act, relates to incremental developments often resulting in value enhancement or economic significance which may be a trade secret or a confidential information if vital to competitive strategy. Trade secrets such as technologies, proprietary knowledge (know-how), ideas and business methods acquire paramount importance in the present scenario of aggressive competition, industrialization and liberalization, but a statute meant to give a boost to research and innovation may not treat the subject-matter of protection and preservation of trade secret and confidential information adequately as a separate statute would accomplish.

The present statute may very well maintain and improve India's innovation through its 'Innovation Park Scheme', 'Special Innovation Zones' and 'National Flagship Programmes'. The intersection of innovation, trade secret and confidential information may best be addressed by a specific legislation addressing precise concerns of enterprises on protection and preservation of trade secrets and confidential information.

Bury & Partners claimed Mason's actions caused a client to break off a contract and to not bring expected future projects to the firm. It claimed this cost it $89,000 in past and expected future projects, and sought that amount plus attorney fees.

In September 2005, plaintiff Bury & Partners, a Houston civil engineering firm, hired Deborah Mason, a civil engineer. Mason signed a non-compete agreement as a condition of her employment. She left the firm in March 2006 to establish her own firm and one of her intial clients was a Bury & Partners' client. Mason had been manager of the client's project for Bury & Partners.

Bury & Partners sued Mason, alleging breach of contract, tortious interference, breach of fiduciary duty and misappropriation of trade secrets. It claimed Mason was in breach of a clause in the non-compete agreement barring her from taking current Bury & Partners clients. It further claimed Mason's actions caused the client to break its existing contract with Bury & Partners and prevented prospective future contracts, constituting tortious interference.

Mason denied she solicited the client in question. She claimed the non-compete agreement allowed her to take on clients she had known before starting at Bury & Partners, and that this applied to the client in question. She also claimed failure of consideration, justification and comparative responsibility. The misappropriation of trade secrets case was dropped before trial.

666 S.E.2d 472, 8 FCDR 2733 (July 28, 2008)

Private health insurer that contracted with Department of Community
Health (DCH) to administer state health insurance plan brought action to prevent
DCH from disclosing, in response to a request under the Open Records Act,
correspondence and form contracts submitted by insurer in connection with the contract, and requesters intervened and counterclaimed for disclosure of the documents, as well as of provider contracts and fee schedules prepared by insurer and never submitted to DCH. The Superior Court, Fulton County, Lane, J., awarded summary judgment to the requesters. Insurer appealed.

On reconsideration, the Court of Appeals, Bernes, J., held that:

(1) documents not submitted to DCH were public records;

(2) documents submitted to DCH were "required by law to be submitted to a
government agency," as necessary to qualify for the trade secrets exemption;

(3) exemption could apply to the documents not submitted to DCH; and

(4) insurer did not contractually waive trade secret exemption for all materials
other than proprietary software.

Affirmed in part, vacated in part, and remanded.

568 F.Supp.2d 1369 (July 15, 2008)

Manufacturer of night vision devices sued competitor, asserting claims for alleged trademark infringement, false advertising, unfair competition under Lanham Act and Florida law, and deceptive and unfair trade practices under Florida law. Competitor asserted counterclaims against manufacturer and its owner for declaratory judgment, alleged Lanham Act trademark and trade dress infringement, Lanham Act unfair competition, common-law unfair competition, tradesecret misappropriation, and business
disparagement. Manufacturer and owner moved to dismiss counterclaims.

The District Court, Anne C. Conway, J., held that:

(1) district court would dismiss, without leave to amend, counterclaim for
declaratory judgment;

(2) competitor stated trademark infringement claim under Lanham Act;

(3) competitor stated claims under Lanham Act for unfair competition and false
designation of origin;

(4) competitor failed to state claim for trade dress infringement;

(5) competitor failed to state claim for misappropriation of trade secrets; and

(6) competitor failed to state claim for business disparagement under
Pennsylvania law or injurious falsehood under Florida law.

Motions to dismiss granted in part and denied in part.

Jackson Lewis LLP
Joseph J. Lazzarotti

The same software that allows you and your children to share music and movie files may be placing your company at grave risk. Commonly referred to as "peer-to-peer" or "P2P" networks, file sharing technology is being used by millions to share electronic files with one another. Absent due care, however, this technology can cause a range of problems for any organization by making sensitive corporate financial information, trade secrets, and other corporate information, as well as personal employee and/or customer information, readily available to anyone on the P2P network. This article discusses some of the risks of P2P, as well as preventive strategies to protect valuable company assets and reputation.

By BRUCE FREEMAN, Scripps Howard News Service

Dear Professor Bruce: I'm a small business owner and have a great opportunity to work on a project with a large technology leader. They want a confidentiality agreement; but, I hate contracts and am afraid that if I try to negotiate I'll lose the deal. What should I do?

Answer: Playing in the big leagues is both exciting and scary. You're thrilled that they see the value in what your business has to offer. At the same time you're afraid that if you ask for too much they won't want to play with you anymore. Relax, it's a normal reaction; but, that doesn't mean you take no action.

Smart business owners recognize they have a business to run and protect. They also know that they have information that gives them a competitive edge. It could be the recipe for a special sauce that keeps customers lined up around the block; a technology breakthrough that cuts costs in half, or the know-how and expertise that comes with years of experience. It's what lawyers call a trade secret. It's what business owners call an asset.

Trade secrets are the most easily created form of intellectual property according to legal expert Hanna Hasl-Kelchner, author of The Business Guide to Legal Literacy: What Every Manager Should Know about the Law (Jossey-Bass, 2006). You don't need a lawyer, applications, or government filing fees. "What you do need is important information and the ability to keep it secret - something we all learned on the playground," she says, "when you swore someone not to tell, cupped your hands so no one else could hear, then whispered in their ear - the grown-up business version is called a confidentiality agreement."

By Salans, Associate, Maria Landau, Alexandra Bludyan

Employing a general director (president, general manager etc.) as a company's sole executive body is a complicated matter of particular concern to today's corporate owners and the authorized officials charged with the due maintenance of personnel documentation (i.e. HR specialists, accountants). A company's proper documentation of labor relations with its general director -- in accordance with the provisions of applicable law -- is key, first and foremost, to the establishment of a mechanism of interaction over the course of development in relations between the general director and the company's owners, and secondly, of ensuring the possibility of an amicable "divorce" should one become necessary -- an advantage with critical practical applications.

It must be noted that under applicable RF law and practice, the relations between a company and its general director constitute employment relations, a fact which has been confirmed by the RF Supreme Court. Thus, the company will be obliged to enter into a written employment contract with the general director, to pay his/her salary, and to provide safe working conditions, etc. Moreover, if the company's general director is a foreign national, it will be obliged to obtain the required migration permits. The assumption by a foreign national of the duties of general director in the absence of duly-obtained migration documents constitutes a violation of migration laws and may result in the imposition of administrative liability against the employer, i.e. the company and its officials.

In today's business world, the establishment of "non-competition" ground rules is of particular concern to employers. As distinct from the law of many foreign countries, Russian law neither defines nor accepts the concept of "non-competition." However, applicable legislation does provide for certain restrictions with respect to a general director's employment. Thus, a general director may only be hired by a secondary employer with the express permission of the company's authorized body. However, many other specialized rules pertaining to general directors and generally understood to fall under the "non-competition" concept are not directly established by RF law. In practice, therefore, companies frequently utilize other legal mechanisms to protect their interests, i.e. the establishment of "trade secret" regulations with respect to valuable information, which require the employers to implement a number of measures that are listed in law in order to ensure due protection of their trade secrets..

The Moscow Times
by Pepeliaev, Goltsblat Partners and Yury Ivanov

A non-compete clause or covenant not to compete is a term used in contract law meaning that one party (usually an employee) agrees not to pursue a similar profession or trade in competition with another party (usually the employer).

Such clauses are used because employees might, when they are dismissed or resign, or simply in breach of their contract, begin working for a competitor or start up their own business, consequently gaining an advantage by abusing confidential information about their former employer's operations or trade secrets, or any confidential information about, for example, customers and clients, business practices, marketing plans, etc. Thus, non-compete agreements are becoming an increasingly popular way for employers to try to limit employees and former employees in working for a competitor or divulging trade secrets, confidential information or other proprietary data.

On the other hand, a business might abuse a non-compete clause to prevent an employee from working elsewhere at all and thus to retain the employee on his own staff. Most non-compete clauses are signed either with little or without any negotiation between the employer and the employee. They are usually signed when the employee is initially hired and may have very little bargaining skill and power and the employee is generally concerned about limitations on his future employability. Yet, as soon as the employee decides to resign, the non-compete agreement may constitute a significant impediment to future employment or may prevent employees from becoming self-employed.

To read the entire article here.

By Eric Goldman

Nondisclosure agreements (NDAs) are often called the "Silicon Valley Handshake." In some circles, any conversation beyond pleasantries requires an NDA. However, NDAs have underappreciated and potentially strategic consequences. How did such an important agreement become so ubiquitous, and is ubiquity a good thing?

NDAs' Benefits
NDAs facilitate the disclosure of trade secrets. A trade secret is information that is valuable and secret. Information disclosed to third parties remains a trade secret if an NDA requires the recipient not to disclose it. Information disclosed without an NDA usually loses its trade secret status.
Thus, using an NDA permits the discloser to sue the recipient for trade secret misappropriation if the recipient breaches the NDA. Further, because the information remains a trade secret, the discloser can sue third parties who misappropriate the information. Additionally, if the disclosed information is also patentable, an NDA may help defer the deadline to file a patent application.
With these important benefits deriving from using NDAs, it's easy to see how NDAs have become de rigueur in Internet circles. However, further analysis shows some downsides.

To read on click here.

By Anthony O'Donnell
Insurance & Technology
October 16, 2008

Through an opinion written by Judge Sue L. Robinson, the Delaware U.S. District Court has dismissed both Accenture's trade secret missapropriation charges against Guidewire Software, and Guidewire's countersuit alleging that Accenture's allegations constituted bad faith litigation that was harmful to Guidewire's prospects in the marketplace. While Judge Robinson's opinion puts an end to substantial aspects of Accenture's allegations of improper practices on the part of Guidewire, an Accenture source notes that the company's patent infringement case is "alive and well."

By: Ted Barthel, Whyte Hirschboeck Dudek S.C.

Your company has created a new innovation. Now you would like to protect this intellectual property (IP) asset and use it to create value for your business. Four types of IP protection exist: copyright, patent, trademarks, and trade secrets. Which type of protection is best for your IP asset? The answer is found in the type of protections provided by patents and trade secrets.

A patent is a government-sponsored right to exclude others from making or using your invention. This right is conveyed in an issued patent, which is a published, publicly available document. A patent has a life span of 20 years from the filing date of the patent application. Obtaining a patent is rigorous, time-consuming, and expensive.

A trade secret is proprietary company information that achieves its value from not being known to the public and that a company takes steps to maintain as a secret. A famous example of a successful trade secret is the formula for Coca-Cola, a trade secret for more than 100 hundred years.

A patent protects an invention by making it known publicly (vis-à-vis the published patent). A trade secret, on the other hand, protects an asset by keeping it out of public knowledge. Patent protection is limited in duration. Conversely, a trade secret can theoretically last forever--i.e., as long as the information is kept secret. Keep in mind, however, that a trade secret can be lost in an instant if the secrecy is lost or if a competitor develops the IP asset on its own. Once a trade secret is lost, it is lost forever.

To continue reading this article click here.

by Gregory J. Maier

In intellectual property terms, software is a true hybrid. Although software has its origin in writing, it also possesses functionality, a property that clearly distinguishes it from ordinary writings. To write software, is to formulate instructions for reconfiguring a collection of electronic logic gates and memory cells into a virtual structure capable of accomplishing a predetermined objective. Thus what begins intellectually as a form of coded writing ultimately operates as an electronic network. The same, certainly, cannot be said of other types of writings, which are simply not capable of reconfiguring logic gates, but only of expressing intellectual concepts. Similarly, other types of electronic networks are not capable of existing entirely in the form of writings. Software is a hybrid because it both expresses intellectual concepts and has the power to physically implement them with the aid of a computer.
It is the hybrid nature of software that causes its failure to fit neatly into any one existing category of intellectual property, resulting in seemingly endless confusion as to how it may best be protected. The purpose of this article is not to place software into any particular category of intellectual property protection, but rather to identify the hybrid nature of software and to demonstrate that the very different intellectual property concepts embodied within software can be coextensively protected by patent, copyright, and trade secret. This article advocates a prospectively straightforward approach to protecting the various types of intellectual property found in software: an approach in which patents protect functioning implementations of concepts, copyrights protect modes of expression, and trade secrets protect functional aspects when patent protection is unavailable or undesirable.
As patent protection for software has experienced a more troubled legal history than copyright or trade secret protection, somewhat more emphasis is placed on historical development in this area than in the other areas.
To read the entire article click here.

By: Gordon Barker

With the dramatic change in the global economic environment, organisations need more than ever before to focus on creating an engaging performance environment.
With the dramatic change in the global economic environment, organisations need more than ever before to focus on creating an engaging performance environment for their employees. But how do you create an employee engagement strategy and communicate it effectively? And how can organisations measure the return on investment from employee engagement?

An engaging environment:

Recent research has highlighted HR's lack of strategic authority. A 2008 survey by consultants McKinsey found that 60% of senior managers see HR as 'an administrative department, not a strategic business partner', while TalentDrain's 2008 Employee Retention Survey revealed that 75% of HR departments have no retention strategy in place for their organisation.

Without a compelling strategy or business case, it's no wonder that the HR budget is often one of the first to be cut when the going gets tough. The good news, though, is that the basic value of employee engagement is well established and largely accepted - even by senior managers who recognise that employee-related expenditure is typically an organisation's highest cost.

With the ongoing war for talent, and a fast-approaching global labour shortage, it's important not only to retain employees, but to ensure that they are capable and motivated to deliver high performance.

By: Bruce Freeman

Q: I'm a small-business owner and have a great opportunity to work on a project with a large technology leader. They want a confidentiality agreement. But I hate contracts and am afraid that if I try to negotiate, I'll lose the deal. What should I do?

A: Playing in the big leagues is both exciting and scary. You're thrilled that they see the value in what your business has to offer. At the same time, you're afraid that if you ask for too much they won't want to play with you anymore. Relax, it's a normal reaction. But that doesn't mean you take no action.

Smart business owners recognize they have a business to run and protect. They also know that they have information that gives them a competitive edge. It could be the recipe for a special sauce that keeps customers lined up around the block; a technology breakthrough that cuts costs in half, or the know-how and expertise that comes with years of experience. It's what lawyers call a trade secret. It's what business owners call an asset.

Trade secrets are the most easily created form of intellectual property according to legal expert Hanna Hasl-Kelchner, author of "The Business Guide to Legal Literacy: What Every Manager Should Know about the Law" (Jossey-Bass, 2006). You don't need a lawyer, applications, or government filing fees. "What you do need is important information and the ability to keep it secret - something we all learned on the playground," she says, "when you swore someone not to tell, cupped your hands so no one else could hear, then whispered in their ear - the grown-up business version is called a confidentiality agreement."
To continue reading this article click here.

Post requested by our good colleague:

Michael Risch
West Virginia University College of Law
SSRN-id1269039.pdf

Abstract:

This essay is an edited and supplemented version of comments made during the 2008 AALS Annual Meeting Section on Law & Economics panel. The comments relate to information sharing in high velocity labor markets such as Silicon Valley, as discussed by presenter Alan Hyde.

The essay discusses four topics. First, it agrees with the principle that trade secret law does generally not provide an independent incentive to generate secret information.

Second, it asserts that trade secret law in California is strong when applied to valuable information, and that "information sharing" in high velocity markets is likely primarily tangential to core technologies.

Third, the essay situates the high velocity labor market analysis into a broader theoretical framework, namely that of protection cost minimization. Under this theory, an explanation for information sharing in Silicon Valley is that the information shared is not valuable enough to warrant more protection or to justify litigation costs.

Fourth, avenues for future research are explored, including the role of non-competition agreements in information sharing policy.

CLEARWATER, Fla., Oct 21, 2008 /PRNewswire via COMTEX/ -- Clearwater-based Orthopedic Development Corporation (ODC), the maker of the TruFUSE(R) spinal surgery system, has accused a rival of infringing both the patent and trade dress for a drill guide in one of the first patent design suits to be filed since the Federal Circuit handed down its standard-altering Egyptian Goddess ruling.

ODC lodged the suit, as well as a motion for a preliminary injunction, on Wednesday in the U.S. District Court for the Middle District of Florida, alleging that the design of NuTech Medical Inc.'s NuFix drill is substantially the same as its own.
The complaint describes the patented instrument as "an elongated hollow metal tube with a handle at one end and a number of teeth, including two large opposed teeth, as the opposite end."

The drill guide is part of a system used to treat facet joint disorders, or the degenerative conditions such as osteoarthritis, the complaint says. According to the suit, the drill guide allows the surgeon to maneuver the drill to the proper vertebrae area for treatment.

The U.S. Patent and Trademark Office issued the patent for the drill guide, U.S. Patent Number D574,495, on Aug. 8. ODC makes and markets the surgery system through minSURG, a wholly owned subsidiary, according to the suit.
In the complaint, ODC accuses NuTech of infringing the '495 patent both directly and contributorily by making, using and selling its NuFix drill guide and by distributing it to hospitals and surgeons.

The NuFix drill guide also infringes the trade dress of ODC's product, the suit contends, because "it is substantially similar, if not identical, to ODC's trade dress," the complaint says.
To continue reading click here.

Bluebonnet Petroleum v. Kolkhorst Petroleum

Bluebonnet challenged a summary judgment in favor of Kolkhorst and also appealed the denial of its motion for partial summary judgment. The appellate court affirmed, rejecting the notion that the mere identity of the potential accounts on which Robinson was working when he left Bluebonnet was a trade secret. The evidence did not show that this information was not known by others outside of Bluebonnet from a source other than Smith or Robinson. Further, Bluebonnet did not require Robinson to sign a non-compete agreement or a confidentiality agreement. There was simply no evidence that Bluebonnet had taken any steps to protect its potential client information. Nor was there any evidence that Bluebonnet expended a substantial amount of effort or funds in procuring the information. In short, the information at issue was not a trade secret.

By R. Todd Wilson

All businesses have trade secrets. Stated slightly differently, every business has information that it would rather keep confidential. A trade secret can be any useful information that is not generally known. Trade secrets encompass both technical information such as formulas, designs, tools, manufacturing processes, and computer source code as well as business secrets including customer lists, employee lists, financial and accounting data, product plans and marketing plans. Such "confidential" or "proprietary" information is usually essential to the success of the business. Often, however, companies do little or nothing to protect that knowledge.
A trade secret is a confidential practice, method, process, design, or other information used by a company to compete with other businesses. Even failed research and development efforts, so called "negative knowledge," is a trade secret. In either case, trade secrets cannot cover information that is generally known to professionals in the field or generalized know-how. If others had access to the same knowledge, a company's ability to succeed, or even to survive, would be significantly impaired. Therefore, trade secrets should be carefully guarded.
As with other forms of intellectual property, trade secrets can be valuable to a company's growth and competitive advantage. In fact, because technology changes so rapidly, trade secret protection is in some cases the most readily available intellectual property right for many businesses. Additionally, trade secrets can have more immediate economic benefits in that the right to use a trade secret can be licensed or sold. However, in order to be effective, the trade secret owner must take the appropriate steps to protect against misappropriation of trade secrets by its competitors.

To continue reading click here.

Managing Intellectual Property

Parts of a statutory law on trade secrets proposed in a draft bill by an Indian ministry have been described as "absolutely absurd" by an IP lawyer in the country

The proposals are part of a draft National Innovation Act drafted by the Federation of Indian Chambers of Commerce and Industry and released by the Ministry of Science and Technology last week.

The Act is designed to "facilitate public, private or public private partnership initiatives for building an innovation support system ... and consolidate the law of confidentiality in aid of protecting confidential information, trade secrets and innovation".

Chapter VI deals with trade secrets and creates an obligation to preserve confidentiality.
But Pavin Anand, a partner of Anand & Anand, objects to section 11(c), which gives an exception to the offence of breaching trade secrets "where disclosure of the confidential information is held to be in public interest by a court of law" because the term "public interest" is too vague.

Section 12 (4) is also controversial. This says that an injunction restraining use of confidential information "may stipulate conditions for future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited".

Anand said the proposed exceptions from infringement "introduce a compulsory licence in trade secrets". As an example, he said that these provisions would make it possible for someone to steal the recipe for making Coca-Cola and to manufacture a drink using this recipe at a cheaper price, while paying a 10% royalty fee.

But Manisha Singh-Nair, a partner of Lex Orbis, said that the way the courts apply common law to protect trade secrets had been inconsistent and that a statutory law was "not only a good idea but a necessity".

Singh-Nair welcomed other parts of the draft Act, including the provision compelling the Ministry of Science and Technology to present an annual national integrated science and technology plan to the government, tax and fiscal incentives for innovation and the creation of designated special economic zones for innovation.

But she admitted that the bill is still vague: "The area of concern would remain whether the provisions are in the nature of policy statement or are mandatory provisions with in-built enforceability."

The draft bill is now open for comments.

By JESSICA SAVAGE
The Lufkin Daily News
Thursday, October 23, 2008

A Texarkana appellate court has reversed a Lufkin jury conviction of an Alto man, ordering he be acquitted of theft of trade secrets because of insufficient evidence.

The Texas Court of Appeals in the sixth district handed down the opinion Oct. 17, acquitting Frank McClain Jr. of stealing trade secrets from his former Lufkin employer, Didrikson and Associates, and throwing out his seven-year prison sentence. Didrikson and Associates, located on Denman Avenue, is a company that services the petrochemical and pipeline industries.

The opinion stated materials, known as backsheets, that McClain took from his employer to open a competing company are not trade secret, which was the basis of the evidence used to convict McClain in 2006. An Angelina County state district judge later sentenced him to seven years in prison.

McClain's appeal attorney Al Charanza, Jr. said he presented the case the first week of September. Although he was not surprised by the court's decision, he said he was impressed how quickly the opinion was issued.

"The court found what I have been saying all along -- McClain is not guilty of stealing trade secrets," he said. "There was insufficient evidence."

In an opinion issued, the appellate court stated the trial record established the backsheets were public knowledge, and could not be considered trade secrets by legal definition.

"Didrikson admitted the backsheets had been placed in the public domain by GE, the original publisher," the opinion stated.

The opinion further stated any improvements or notes on the backsheets do not fall under trade secrets either.

"The only improvements identified as being stolen by McClain are the set-up sheets. Didrikson testified that the set-up sheets were McClain's idea and that McClain was the only person who created the set-up sheets," the appellate court stated.

The court concluded that although McClain may have obtained the backsheet information wrongfully, he is not guilty of theft of trade secrets.

"The evidence is legally insufficient. Because the evidence is legally insufficient, it is unnecessary to decide McClain's fourth point regarding error in the jury charge," the court stated. "We reverse the judgment of the trial court and render a judgment of acquittal."

By Marc C. Laredo

Virtually all business entities have information that they consider proprietary and confidential. Whether such information is truly a trade secret whose use by others can be limited or barred depends on a number of factors, including the nature of the information sought to be protected and the measures taken to preserve its confidentiality.
This overview will address Massachusetts state law on the topics of (1) what is a trade secret; (2) how trade secrets can be protected; (3) the balance between preserving trade secrets and allowing for free competition; and (4) damages and other remedies for the misuse of trade secrets.
To read the entire article click here.

By: David Rice
Numbers are interesting. At times, numbers almost feel to possess a physical quality about them; numbers represent something we can hold, even if we cannot actually touch.

Really big numbers, even those starting in the millions might be difficult to fathom at first, but somehow we're able to get our head around them; to hold them and manipulate them. Imagine having two million dollars in the bank, and a grin, even a smile, might quickly appear as we mentally allocate those funds towards our wants and desires.

Billions and trillions, though, are numbers that pose some interesting problems. Consider spending US$700 billion on bailing out a financial system and most of our reactions might be to shake our heads in disbelief. $700 billion is a big number. How and to what $700 billion might be allocated staggers the imagination. Big numbers make us skeptical. That is understandable.

When I first proposed the costs of insecure software might be somewhere around $180 billion some were and remain skeptical. Rightly so. Even I am skeptical about the number. Not because it might be wrong, but because we have no idea by how much.

Recent testimony given before the U.S. Congress helps me believe that the number might be less wrong. Paul Kurtz in testimony before the House Permanent Select Committee on Intelligence (Sept 18, 2008) states:

"Today our information systems are being exploited on an unprecedented scale by state and non-state actors. We face dangerous combination of known and unknown vulnerabilities, strong adversary capabilities, and weak situational awareness...

Government networks are being targeted to steal sensitive information and gain understanding of mission-critical dependencies and vulnerabilities. Corporate intellectual property across all sectors is being stolen (information technology, bio-technology, defense industrial base, financial, transportation, and energy). The NCIX [Office of the National Counterintelligence Executive] has estimated that the loss of intellectual property totals in excess of 200 billion per year. The United States is not alone in this conclusion."

Losses of $200 billion per year are hefty but not surprising. Earlier estimates in Congressional testimony by Frank Cillufo placed intellectual property losses due to system vulnerabilities for years 1997 to 2000 at over $1 trillion. To quote:

"...intellectual property theft has become so common that some companies now hire "good hackers" to perform vulnerability assessments of their networks...Fortune 1000 companies alone lost more than $ 45 billion from theft of trade secrets in 1999. By 2000, American companies were losing in excess of $1 trillion." [Intellectual Property Crimes, American Law Review]

Article by Simon Rowell

In-Depth Due Diligence

Trade Secrets

The purpose of trade secret due diligence is to determine the existence of valuable trade secrets, determine how well those secrets have been kept and identify any potential leaks of the secret. This will involve evaluating security policies employed by the vendor, such as document shredding, document storage and access logs, site visit records and protocols, physical security measures on premises, and reviewing records of breaches of these security measures, encryption and password protection of electronic data. Confidentiality and non-compete agreements will be reviewed. Key staff may be interviewed and the whereabouts and activities of any recent ex-employees noted.
To read the entire article click here.

By JUDY BATTISTA

In the N.F.L.'s version of phone-a-friend, the calls start on Monday, coach to coach, player to player, trolling for the subtleties of a game plan -- a code word here, a tendency there -- that only a trusted colleague would share. It is the sort of conversation Brett Favre had with the former Detroit Lions president Matt Millen a few weeks ago, one that began with hunting talk, only to turn -- as Favre suspected it would -- into a fishing expedition for information about his old team.

Favre's chat with Millen, depending on which version one believes, might have been brief and cursory or lengthy and detailed. But more than anything, it was entirely common and wholly within the rules. The controversy in which Favre found himself last week -- had he turned on the Green Bay Packers by telling Millen what he remembered about how they had attacked the Lions in previous games? -- was met largely with a shrug from around the N.F.L. But it pulled back the curtain on a widely practiced slice of the football culture that does not just accept the casual trading of information, but encourages it.

By Marine Cole

The push for global accounting standards will create more difficulties than companies may anticipate, experts warned at a conference earlier this month on the transition to international financial reporting standards from U.S. generally accepted accounting principles.

Because IFRS is based more on general principles than U.S. GAAP, the international regime lacks specific guidance on how to comply with the rules. As a result, experts believe auditors will require more public disclosure of the basis for a company's accounting before signing off on results compiled under IFRS than under U.S. GAAP, and that will make many companies uncomfortable.

At a minimum, compliance with IFRS will mean more time spent with auditors trying to determine how to apply a specific accounting principle. It may also mean more involvement on the part of the operations department in accounting matters, to determine the intent behind specific transactions. That, experts say, will require companies to walk a fine line between disclosing enough information for accounting purposes and revealing secrets to competitors.
To continue reading this article click here.

Celebrity Chef Curtis Stone, Home Improvement Authority Eric Stromer and Decorating Expert Kelly Edwards Offer Consumer Tips with GMC Vehicle Integration

NEW YORK--(BUSINESS WIRE)--AOL and GMC have extended their "Trade Secrets" video series on AOL Living, http://living.aol.com, featuring cooking, home entertaining and home improvement tips with leading lifestyle experts. The videos, http://www.gmctradesecrets.com, integrate GMC Sierra, Acadia and Yukon Hybrid into professional trade tips from Curtis Stone, Eric Stromer and Kelly Edwards.

The GMC sponsored Trade Secrets videos offer professional grade advice, guides and instructions that consumers can use at home, and feature select GMC vehicles as a key component of each video. The site also is branded with GMC banner ads, rich media placements and GMC video ads. Featured stories on AOL Living, as well as a co-branded buy across Time Warner digital properties, direct consumers to Trade Secrets and regular content updates encourage repeat visits.
To continue reading this article click here.

This outstanding contribution is from our friends at SpicyIP Blog

Posted by Mihir Naniwadekar

A previous post on this blog looked at some of the important provisions in the National Innovation Bill, 2008. I now look at the impact which the Bill may have on the important area of protection of trade secrets. In particular, this post will deal with (a) the nature of the protection granted under the Bill, (b) the subject-matter entitled to protection, and (c) the duties cast on third parties who have received any confidential information.

The Nature of Protection:

Typically, claims concerning protection of trade secrets are brought to enforce confidentiality agreements, or on the grounds of the tort of breach of confidence. Equitable obligations often tend to arise in this regard - for instance, directors of a company are under a fiduciary duty to the company; and one of the duties of directors as fiduciaries is to prevent misuse of corporate information and to refrain from using corporate information for their personal benefit.

Provisions in connection with trade secrets are found in Chapter VI of the Innovation Bill, titled "Confidentiality and Confidential Information and Remedies and Offences". The draft Section 8 (1) allows parties to "contractually set out the terms and conditions governing rights and obligations in respect of confidential information, including with a view to maintain confidentiality and prevent misappropriation." On the face of it, this does not alter the position of law - parties were always, it would seem, able to do this.

It is interesting to note that in cases where such contracts existed, the employee could try to avoid the contract on the basis of Section 27 of the Indian Contract Act (contracts in restraint of trade). Indeed, several decisions have attempted to draw a line between "restrictions" on employment and protection of employers' rights. Section 16 of the draft Bill says that the provisions of the Bill would have effect "notwithstanding anything inconsistent therewith contained in any other law." One possible argument is that a conjoint reading of Sections 8 (1) and 16 would mean that agreements between parties concerning rights and obligations in respect of confidential information cannot be challenged under Section 27 of the Contract Act.

This argument, however, is not fully convincing - Section 8 uses the words "contractually set out" and not "set out by agreement". It appears then that any agreement in this connection must nonetheless be a valid contract under the Indian Contract Act. With this interpretation, it is clearly possible to avoid any conflict between Section 8 of the Innovation Bill and Section 27 of the Contract Act. One may then conclude that Section 8 (1) of the Bill does not change the existing legal position.

Further, the Bill does not do away with the non-contractual basis for the protection of confidential information. Section 8 (3) says that notwithstanding anything in sub-section (1) "parties may nevertheless enforce any rights in Confidential Information arising in equity or as a result of circumstances imparting the obligation of confidence." This, it appears, would cover equitable and tortious claims arising under breach of confidence.

The addition in this scheme is in terms of Section 8 (2) which - subject to the contract between the parties - gives the appropriate government the power to set out the terms and conditions governing the rights and obligations of parties in respect of confidential information. Thus, the specific enumeration of the rights and obligations of parties is left for a later stage.

What is protected?

Having looked at the nature of the protection of trade secrets, I now turn to the important aspect of the subject-matter of protection. What exactly is "confidential information" which can be protected under the Bill?

It might be useful in this connection to look at the US position. In the US, laws protecting trade secrets are enacted by the states, but most such laws are based on the model Uniform Trade Secrets Act linked here.

Under this model US draft (which has been adopted by 46 states), a "trade secret" is defined as "information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) 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 (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

This might very well be compared with the rather similar Section 2 (3) of the Indian Innovation Bill which defines "confidential information".

"Confidential Information means information, including a formula, pattern, compilation, program device, method, technique or process, that: (a) is secret, in that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within circles that normally deal with the kind of information in question; (b) has commercial value because it is secret and (c) has been subject to responsible steps under the circumstances by the person lawfully in control of the information, to keep is secret.

It is debatable whether "information" is to be treated as property. In the US, in addition to the model Trade Secrets Act, trade secrets are protected under the Economic Espionage Act which, under some circumstances, makes "theft" of confidential information a crime. This might lend credence to the view that confidential information is "property". Under (English) common law principles, the protection of confidential information is looked at as an equitable right rather than a property right. In such circumstances, it might be necessary to be cautious before borrowing straight from the US position.

However, the definition in the Innovation Bill also appears to be based (more than the US model law) on Article 39.2 of the TRIPs agreement. A note on Article 39.2 on the WTO website says, "The Agreement does not require undisclosed information to be treated as a form of property, but it does require that a person lawfully in control of such information must have the possibility of preventing it from being disclosed to, acquired by, or used by others without his or her consent in a manner contrary to honest commercial practices. "Manner contrary to honest commercial practices" includes breach of contract, breach of confidence and inducement to breach, as well as the acquisition of undisclosed information by third parties who knew, or were grossly negligent in failing to know, that such practices were involved in the acquisition." The definition in the Bill is thus consistent with the nature of the right sought to be protected.

Impact on third parties:

Moving on to another aspect, Section 9 of the Bill says that when confidential information been received by a third party without the consent of the complainant, "obligations of confidentiality and equitable considerations" may also create rights and obligations in respect of the confidential information. The tort of misappropriation was originally developed in American Courts to impose liability on third parties for the use of trade secrets. English Courts have followed this lead; but have held third parties to be liable only when the information is both unknown in public, and is known to be confidential by the defendants (Fraser v. Thames Television, [1983] 2 All ER 101; reference may also be made to Vandana Pai and Ramya Seetharaman, "Legal Protection of Trade Secrets" [2004] 1 SCC Jour. 22 linked here.) Under Section 9, this common law position is unchanged.

Conclusion:

The full text of the draft Bill is available online here. So far as the matters discussed in this post are concerned, it appears that the Bill does not radically change the existing legal position.

There is a strong case for a more flexible approach leaving the matter to the Courts. In the absence of any specific delineation of rights and obligations in the Bill itself, however, the issue is likely to generate greater debate after the Bill in enacted and the specific principles are notified in separate Rules (in accordance with Section 8, sub-section 2). The danger, of course, is that the Rules would impose a degree of rigidity which would not suit the equitable nature of the rights in question. It is therefore worth asking whether a statutory model of protection is necessary. Even if a statutory model is appropriate, it needs to be considered whether the principles governing the rights and obligations of parties should be a matter left for the Rules. Perhaps, it would be better if broad terms and conditions were set out in the Bill itself. First, there is the possibility of the Bill once enacted being challenged on grounds of excessive delegation. Secondly, it will be easier to debate these terms and conditions in the Bill itself, rather than waiting for specific Rules. Of course, there may be a need for Rules to take into account the needs of specific industries - that should not prevent general principles being laid down in the Bill itself.

The second part of this post will look at some of the potentially controversial parts of the Bill, including the 'public interest' exception and the power of the Court in connection with the payment of 'reasonable royalties'.

(I would like to thank Mr. Shamnad Basheer for his useful suggestions regarding this post)

NEW YORK--Two former employees of a fashion industry company have been charged with computer hacking and stealing trade secrets.

Jeffrey White, 27, of Brooklyn and Morgan Gantt, 24, of Jersey City, NJ, face charges arising out of an alleged scheme to hack into a computer network belonging to ENK International LLC ("ENK") and to steal confidential business information from ENK

White and Gantt are former employees of ENK, a trade show organization based in Manhattan that serves the fashion industry. ENK terminated White's employment in July. Gantt was terminated on Aug. 21 after ENK management learned through investigation that she was operating, during her ENK work hours, a temporary employment agency targeting exhibitors at fashion shows, including shows sponsored by ENK, and that Gantt was using ENK resources to operate her outside business.
To read the totality of the article from North Country Gazette please click here.

By: Jeremy Kirk, IDG News Service

Enterprises are stepping up efforts to counter spying operations that aim to steal their trade secrets, according to a former U.S. Federal Bureau of Investigation agent who now works for Xerox.

Companies such as Wal-Mart, DirecTV and Motorola have in recent years been victimized by employees or others who stole sensitive data, said David Drab, a principal in Xerox's information and content security services section. Drab spent 27 years in the FBI fighting organized crime and economic espionage.

A study by PricewaterhouseCoopers found that economic espionage costs the world's top 1,000 companies £22.4 billion (US$34.7 billion) annually, Drab said. Another study by the Society for Competitive Intelligence Professionals found companies spent $2 billion on spying activities in 2004.
To read the rest of this article from PC World please click here.

Connecticut Law Tribune
Vol 34, No. 43
Christian Nolan

Nobel Biocare USA LLC v. Keystone Dental Inc., et al: An upstart company in the dental implant market that was accused of stealing 18 employees from the industry leader has agreed to pay $2 million in damages as part of a settlement agreement.

Nobel Biocare, which claims to be the world's leader in dental implants (an artificial tooth root put into the jaw to hold a replacement tooth or bridge), filed the lawsuit last year in Waterbury Superior Court.

The lawsuit claims that Keystone Dental, headquartered in Burlington, Mass., and founded in March 2006, was specifically targeting Nobel Biocare's sales and marketing employees.

The Connecticut Law Tribune
Vol 34, No. 43
David S. Poppick

A former employee, with a few computer keystrokes, sends his employer's confidential, proprietary documents and information from his work computer to his personal home computer before joining a competitor. He faces harsh civil and criminal penalties if the employer sues under the Computer Fraud and Abuse Act, a federal statute that intensifies the arsenal of familiar claims for breach of restrictive covenants and fiduciary duties, misappropriation or unfair competition.
The Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030, was passed in 1984 to protect classified, financial and credit information on government and financial institution computers ('federal interest computers'). It initially provided only criminal penalties (fines and imprisonment) and only prohibited unauthorized access or hacking into federal interest computers. It did not protect against improper use by authorized users of such computers.
As amended in 1994, the CFAA includes civil remedies (compensatory damages and injunctive and other equitable relief) and expands protection to include damage or loss caused both by outsiders and insiders or other authorized computer users. It also criminalizes certain types of reckless conduct and other intentional acts.

Metropolitan Corporate Counsel
Volume 16, Number 9
Northeast Edition

The Editor interviews Robert R. Baron, Jr., Partner, Ballard Spahr Andrews & Ingersoll, LLP.
Editor: Mr. Baron, would you tell our readers something about your practice and professional background?
Baron: My practice is focused on intellectual property litigation and complex business litigation. I am based in Ballard's Philadelphia office, but the cases I handle are throughout the country, as well as here in Pennsylvania.
My intellectual property litigation practice includes all manner of intellectual property disputes, with a significant portion of it devoted to trade secret litigation. My IP cases are diverse and always interesting, involving the misappropriation of everything from software code, aerospace technology and biotech inventions, to pricing information, the likenesses of major league athletes, and the particular shape and method of making a well-known ice cream product.
My business litigation practice runs the gamut of commercial litigation, with a particular emphasis on significant breaches of contracts, the breakdown of commercial acquisitions or other business relationships, contract interference and unfair competition, and licensing disputes. This coming January, I will become the Chair of the Business Litigation Committee of the Philadelphia Bar Association, which is an honor and responsibility I am looking forward to beginning.
A common denominator in my cases is that I often am handling litigation between business competitors. These cases usually have important strategic business implications for the client and its adversary.
Editor: Please tell us about the firm's trade secrets practice. For starters, how is this organized?
Baron: Our trade secrets practice is comprised of litigators and other practitioners from both our IP Department and our firm's Labor and Employment practice. These practice groups both have a national reputation, which results in a trade secrets team with extraordinary bench strength and a broad range of knowledge and experience.
Editor: What credentials and skill sets do these lawyers bring to the practice?
Baron: When there is litigation, our most important job is to present a clear, credible and compelling case to the judge, jury or arbitration panel. We need to make complicated issues comprehensible. That is what a good trial lawyer does, and we are very proud of our ability to do this.
Second, we act quickly. When employees move or business deals terminate, we need to be able to swiftly assess our clients' claims or exposure and be prepared to go to court quickly to prosecute or defend such claims, including in preliminary injunction trials. I remember successfully defending three related preliminary injunction trials in three straight months, in Georgia, Tennessee and Florida. Being able to put together a response team and trial story so quickly was a big part of our success in those cases.
Third, we have tremendous technical experience. For example, we recently opened an office in Atlanta with the acquisition of Needle & Rosenberg, one of the premier intellectual property firms in the country. That was a fantastic addition to our practice. For any technical issue - and many trade secrets and patent cases include such issues - I can call on a sizable group of lawyers and other professionals with Ph.Ds and Masters degrees that cover the spectrum of scientific disciplines.
Editor: You mentioned that some of the members of the group have an employment law background. Is this because employees who might have access to trade secrets can be lured away to a competitor?
Baron: Yes. Most trade secrets disputes arise, generally, from two situations. The first involves employee movement from one company to another. The second occurs when two companies enter into a transaction, for example a licensing or joint venture arrangement, that involves the sharing of confidential information. When the arrangement comes to an end, one party's use of the other party's confidential information sometimes does not.
Editor: What types of client organizations and what kind of cases are you working with in this practice?
Baron: Our trade secrets practice represents a wide range of national and international clients, including one of the world's largest chemical companies, software developers, aerospace companies, pharmaceutical and biotech companies, and equipment manufacturers. We represent clients, as both plaintiffs and defendants, in both injunction and money damages cases. We litigate our cases in court and before arbitration panels. We provide trade secrets counseling and analysis to our clients, and also conduct investigations. For example, I recently concluded an investigation where we were asked to determine whether there had been a trade secrets misappropriation, and the extent of any potential loss.
Editor: You mentioned trade secrets analysis and counseling. What does that entail?
Baron: Companies sometimes know they have trade secrets but have not taken the steps to identify them with specificity. We work with our clients to identify the information that is confidential and to ensure that it is adequately protected. We discuss whether trade secrets protection - instead of patent or other IP laws - makes sense as the best way to protect the information. We review and draft contracts with employees, vendors, licensees and joint venture partners to assign ownership of newly created IP, to define and prohibit improper use or disclosure, and to specify what can and cannot occur upon termination. We advise our clients to supplement these agreements with non-solicitation and non-compete provisions when appropriate. We work with HR to create a checklist of questions they can ask both arriving and departing employees, to better protect against trade secrets improperly coming in or going out the door. We emphasize focused training to make sure our clients' employees know what is confidential and to be vigilant in maintaining it that way. As an example, management may want to claim that its customer list is a trade secret, but it will not be able to do so if its sales force is touting that same list to potential customers.
Finally, clients call for advice when they seek to terminate business relationships or employees in order to assess exposure and assist with negotiations that can avoid protracted litigation.
Editor: You also mentioned arbitration. Have you found that clients are gravitating toward arbitration because of the cost of litigation?
Baron: I think businesses are no longer flexible about inserting arbitration clauses into their agreements. Rather, they are thinking through whether arbitration makes sense given the contract, the nature of any anticipated litigation, and the confidential information at issue.
Without question, trade secrets litigation can be expensive. It usually includes a large production of documents and electronically stored information, forensic analysis to ascertain if and when certain information has been accessed, and expert testimony. However, arbitration of a complex case is not cheap, nor is it necessarily the best choice if, for example, your client foresees needing a preliminary injunction. Depending on the case, however, arbitration can make sense if you are a defendant or if you are a plaintiff in a strict money damages case. For example, last year we had a terrific result representing a leading software developer as a plaintiff in just such a trade secrets case. Because we were in the Large Complex Commercial Case program of the American Arbitration Association, we were able to get the documentary and electronic evidence we needed for trial, while securing money-saving limitations on depositions, interrogatories, and expert reports. JAMS operates in much the same way.
Editor: As you know, our publication is directed toward an audience composed of general counsel and the members of corporate legal departments. Are there trends in the trade secrets arena that we should be alerting our corporate counsel readership about?
Baron: With the downturn in the economy, I believe we will see an increase in trade secrets cases. Unfavorable economic conditions lead to employee layoffs and relocations. Key lateral hiring may replace more expensive research and development. Similarly, in hard times, companies try to mitigate risk by sharing it with others, and the volume of joint ventures and licensing arrangements goes up. When those enterprises later fail - and they often do in such times - there is trade secrets exposure.
In such an economic environment, I think it is important for your corporate counsel readership to consider taking proactive steps to ensure they have adequate systems in place to identify and protect their company's trade secrets. The time and money it may take to do this is never as high as the cost of being unprepared when a problem or litigation does arise, or worse, the cost of losing the trade secret status of a valuable asset because the company did not take appropriate measures. The bottom line is that very often trade secrets are a company's most important asset, so it is essential that they be treated in a manner commensurate with their value.

A field marketing organization, which offered sales and marketing support to insurance marketing entities, brought action in state court against at-will, independent contractor, alleging misappropriation of trade secrets and conversion. Contractor obtained removal, and filed counterclaims, alleging, inter alia, copyright infringement, unfair competition, and misappropriation of trade secrets. The United States District Court for the Southern District of California, Jones, J., granted summary judgment in favor of organization. Thereafter, the District Court, Rudi M. Brewster, J., 2007 WL 2669482, denied contractor's motion for reconsideration. Contractor appealed.

The Court of Appeals, Milan D. Smith, Jr., Circuit Judge, held that:

(1) contractor impliedly granted organization an unlimited license;

(2) organization could not have misappropriated contractor's trade secret; and

(3) non-competition agreements were invalid.

Affirmed.

This outstanding series of posts is from our friends at SpicyIP Blog

Posted by Mihir Naniwadekar

In an earlier post, I had looked at some of the provisions in the Innovation Bill, 2008 dealing with the protection of trade secrets. This post continues that discussion, and I now focus on a few areas in the Bill which are likely to be controversial.
'Public interest' and 'Reasonable royalties'?
Section 11 of the Bill, "Exceptions to Misappropriation of Confidential Information", is a rather fascinating provision. Particularly interesting is Section 11 (c) which says "Confidential information shall not have been misappropriated where disclosure of the confidential information is held to be in the public interest by a court of law." Is this really a change from the position of law? In the SCC article mentioned in the earlier post, the authors argue, "It is well established that no liability attaches to the use of information, which it was in the public interest to use or disclose..." A 'public interest' exception has also been recognized under case-law in England, for instance in Attorney General v. Guardian Newspapers (No 2) [1990] 1 AC 109. In a famous observation, Lord Goff stated "(the public interest protecting confidence) may be outweighed by some other countervailing public interest which favours disclosure."
Nevertheless, the 'public interest' exception in the draft Bill has already drawn criticism. For instance, Mr. Pravin Anand is reported to have criticized the public interest exception, in the context of Section 11 (c) along with Section 12 (4). Section 12 (4) says that "In exceptional circumstances, an injunction may stipulate conditions for future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited." According to Mr. Anand's comments reported here, these proposed rules virtually create a "compulsory licensing" system in trade secrets. The provisions are also likely to be considered by some as too vague.
Undoubtedly, a comprehensive definition of 'public interest' is impossible. However, it might seem better to exclude certain activities from the purview of the term. It might well be (although the proposition will not always be free from doubt) in the public interest to enable access to medicines at cheaper prices. It appears unreasonable, though, to say that providing for cheaper access to the formula for preparation of soft-drinks is in the public interest. Perhaps, it could be considered whether an explanation can be added to Section 11 - something along the lines that mere economic benefit shall not be deemed to be in the public interest.

On the other hand, is there really any harm in leaving open the meaning of 'public interest' to the Courts? There might be cases when even an economic benefit on its own would be in the public interest. Why take away the discretion of the Courts in this connection? Under common law, Courts recognize the public interest in protecting trade secrets. That public interest may, however, need to be balanced against another countervailing public interest. The meaning of 'public interest' is then best left to Courts. One of the biggest merits of 'public interest' is its ability to be used to achieve a just result in peculiar factual circumstances. Defining public interest will take away this virtue. Seen in this light, the 'public interest' exception is more 'flexible' than 'vague'.
The 'public interest' exception should be understood not as moving away from the policy of protection of trade secrets, but as recognizing that there may be stronger public interest issues which in certain circumstances would require a result where the secrets are not protected. In this light, the 'public interest' exception as it stands may well be praiseworthy; and certainly does deserve deep consideration before it is rejected.
So too is the case with Section 12 (4) where future use of the secret may be allowed on the payment of a reasonable royalty. Again, this must be understood not as an 'anti-protection' measure. The power in Section 12 (4) is to be exercised only under exceptional circumstances. As Mr. Anand noted, this might well appear to be a form of compulsory licensing. This, however, need not be a bad result on its own and may well have the important advantage of allowing Courts to mould the relief according to the specific circumstances.
Other issues:
Another interesting issue arises in Section 14 - this provides that "No legal proceeding or any other claim or action shall lie against any person for anything one in good faith under this Act or the Rules and Regulation made thereunder." Now this is perfectly fine if the provision said that it was to apply to provide immunity to any of the officials/authorities acting under the Act. The use of the term "against any person" might open the door for a general good faith exception. I am not sure whether a broad good faith exception is useful - after all, the Act provides for civil remedies such as injunction and damages. Why should good faith prevent a remedy in these cases? Indeed, section 13 (which deals with mandatory damages) provides for three times the mandatory damages in cases of willful or malicious intent. It seems that policy behind the Bill is not to insist upon a requirement of "intent". Also, the effect of the good faith exception is magnified by the public interest exception - if the defendant believes in good faith that disclosure is in public interest, he will be protected even if in reality the disclosure is not in public interest. Also, the 'good faith' provision is not found in the Section on exceptions (Section 11), but occurs at the end of the Chapter.
Presumably, then, 'good faith' is not intended to be a general exception. It might, therefore, be clearer to use the terminology found in several other enactments - "No legal proceeding or any other claim or action shall lie against any person exercising any power or discharging any function under this Act, for anything one in good faith under this Act or the Rules and Regulation made thereunder..."
Conclusion:
As an earlier post on this blog had noted, making the Bill available to public scrutiny is indeed a welcome step. Nonetheless, this is only a first step. Certain aspects of the Bill need to be subjected to public debate, and it might be necessary to clarify these aspects and other issues raised by such debate. Hopefully, there will indeed be such a critical discussion, and the outcome of the discussion will be taken into consideration before the Bill is enacted.
(I would like to thank Mr. Shamnad Basheer for his guidance on this post in general, and for his invaluable suggestions on 'public interest' and 'reasonable royalties' in particular.)

When Trade Secrets Become Shackles: Fairness and The Inevitable Disclosure Doctrine

Elizabeth A. Rowe
Tulane Journal of Technology & Intellectual Property, Vol. 7, 2005

Should an employer be able to enjoin an employee from working for a competitor when the employee did not sign a non-competition agreement? Under the inevitable disclosure doctrine, an employer may obtain such an injunction on the theory that the employee knows so much of the employer's trade secrets, that it is inevitable she will disclose these secrets to the competitor.

The doctrine has faced enormous criticism by virtually all of the legal scholars who have addressed it to date. They question its utility and fear its dangers. The crux of the opposition appears to be that (i) it is not fair to enjoin an individual from earning a living, especially without a non-competition agreement, and (ii) courts are too unpredictable and inconsistent in ruling on these cases.

In this article the author takes a different view of the doctrine recognize its usefulness and its powerful reach, in that it touches on the intersection of employment law, intellectual property trade secret law, and the law of unfair competition. After careful review the author suggests that it is the application of the doctrine rather than the doctrine itself that seems to be in disfavor. Like many other types of cases that are fact intensive and decided on a case by case basis, the challenge is to make application of the doctrine more consistent, more predictable, and ultimately more fair.

To read the entire article click here.

By Michael Levensohn
Times Herald-Record

Taylor, located in Montgomery, has been working for several years on a gasification process that turns organic waste into a gas that can be burned to generate electricity. The lawsuit stemmed from an aborted joint venture between Taylor and FERCO Enterprises, now known as SilvaGas.
To finish reading the rest of this article please click here.