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Time To Rethink Your Trade Secret Strategy? Legislation is Looming.
Originally Posted: Friday, June 17th, 2016
Are you trade secret reliant? If yes, take two minutes to read this post. Why? Well, federal Representatives OK’d a bill that, if fully passed, may impact your intellectual property protection strategy.
Summary of Proposed Trade Secret Law: Addition Of Federal Jurisdiction Privileges
Dubbed the Defend Trade Secrets Act (DTSA), it’s been described as the “most significant expansion of federal law in intellectual property since the Lanham Act in 1946.”
Currently, trade secret governance is a state issue. If, however, DTSA becomes law, certain people could file trade secret claims in federal court. To qualify, potential plaintiffs would have to supply “evidence of actual or threatened misappropriation before a court [could] issue an injunction to prevent it.”
Back in the day, trade secret disputes were “largely a local matter.” Typical cases involved a departing employee smuggling confidential customer lists to their new job…down the street.
Enter the Internet. Many a tech fortune was built on the back of a trade secret (i.e., Google’s infamous algorithm). Or, to put it in cash-money terms: Trade secrets represent trillions of publicly traded dollars!
On account of their exalted economic position, people feel that federal courts are best equipped to handle complex, high-dollar trade secret claims.
Objection! The Opposition’s Standpoint…
Not everyone is cheering for this new trade secret law. Opponents say the measure is superfluous. States, they argue, are well-equipped to handle all manners of trade secret claims. Also, DTSA detractors think the bill’s wording — specifically the phrase “extraordinary circumstances” — is too vague.
Pundits portend a trade secret litigation spike if politicians pass the law.
Gershman, J. (2016, April 27). Congress May Be About to Shake Up Trade Secret Law: Is That a Good Thing? Retrieved June 17, 2016, from http://blogs.wsj.com/law/2016/04/27/congress-may-be-about-to-shake-up-trade-secret-law-is-that-a-good-thing/
Legal Lessons 101: Can I Get An Injunction?
Originally Posted: Monday, July 20th, 2015
Occasionally, aggressive business competitors may cross legal lines when elbowing their way to #1 — and injunctions can come in handy. So, let’s review a few “injunction law” basics. If you still have questions when we’re done, get in touch.
Real Talk: Injunctions Are Tough To Get
Before you start the injunction process, it’s important to understand one thing: injunctions are tough to get. Why? Simply Stated: free speech and fair competition are are the philosophical cornerstones of the U.S. marketplace. Courts are exceptionally cautious about dolling out injunctions that could impede another party’s First Amendment rights or free market ambitions.
What You Must Prove To Get An Injunction
You may be thinking: “What must I prove to successfully motion for an injunction?”
The answer isn’t simple – because litigation strategies are largely dependent on the details. That said, we’ve outlined some “ballpark” parameters regarding the acquisition of either a temporary or permanent injunction related to unfair competition, defamation or unfair and deceptive marketing.
#1: Ongoing Damage
To get a content removal injunction, the requesting party must convince a judge that failing to remove the content will cause ongoing damage.
#2: Probability of Success
As stated above, judges don’t hand out court orders willy-nilly. Instead, to get an injunction, judges must be convinced that you will most likely win the lawsuit associated with the request.
#3: Keeping the Information Published Will Cause Great Harm “In the Absence of Preliminary Relief”
If a published statement is likely to cause long term harm if not removed, the statement may be a candidate for an injunction action (if the other tests are also met). To win this point, plaintiffs must demonstrate how the statement will cause actionable harm and why temporal concerns are likely to exacerbate said harm.
#4: The Public’s Interest Is Best Served by Granting an Injunction
Laws protect citizens’ interests. So, for a court or judge to grant an injunction, the potential impending harm must be detrimental to the public’s best interest in some capacity.
Questions? Speak With An Unfair Competition Lawyer About Your Chances Of Securing An Injunction
Do you have more questions about how to get an injunction? If yes, contact the online reputation and removal lawyers at Kelly Warner. We’ll review the details of your situation and provide potential solutions.
Internet Law Case: Android App Developer Lawsuit Example
Originally Posted: Monday, June 15th, 2015
Below is a summary of an app developer v. app developer lawsuit. Anyone interested in tech lawsuits will find it informative. If you’ve landed here in search of an app developer lawyer, head here.
APUS Group is an app development startup. Cheetah Mobile Inc. is an established app development firm. The two companies are going head-to-head in a legal battle. Why? Because they’re pushing similar products, and aggressive marketing may have morphed into unfair competition.
Why is one App Company Suing Another App Company?
Cheetah Mobile Inc. (“Cheetah”) and APUS Group (“APUS”) have competing apps, Clean Master and Launcher respectively. Both are “optimizer” apps that improve device functionality.
Cheetah sued APUS because the former believes the latter committed intellectual property infringement and an egregious act of defamation by telling users that Clean Master is “stealing…data.”
Press Release Informs Defendants of App Developer Lawsuit
Cheetah announced the suit with a press release. Apparently, APUS may have learned of the lawsuit along with the rest of us, via the press release.
International App Developer Using U.S. Courts For Unfair Competition Grievances; Is It A Smart Move?
Cheetah filed this app developer lawsuit in a California court. Why California? Speculation is that:
Higher U.S. litigation costs may encourage APUS to settle out of court;
If Cheetah wins in a U.S. court, the possible award damages, for the cited claims, are higher in the U.S. than China.
Justifying a Jurisdiction
How did Cheetah justify filing in a U.S. court? Since the Google Play store distributes APUS’ Launcher in California, California residents are affected by the alleged violations.
Sure, technically it’s a valid argument — but tenuous. It wouldn’t be surprising if the plaintiff moves for a change in venue.
Hypothetical Scenario: Successfully courted by a competitor, a once trusted employee quits. Tim is his name, and on the way out, he leaves with confidential information.
Maybe it’s knowledge of a bespoke formula or innovative accounting process. Or perhaps it’s a confidential list of contacts. Either way, the information with which our fictitious, but ambitious, Tim absconds is not registered with the United States Patent and Trademark Office, rendering a potential intellectual property claim moot.
In this hypothetical – but all too common – situation, what are the legal options?
If, during his tenure, Tim signed the proper agreements, you may be able to move forward with a successful breach of confidentiality, breach of loyalty, or a breach of non-compete duty claim(s). And even if such an agreement didn’t exist, you may have a solid trade secret misappropriation claim, if you can establish all of the requisite elements of a trade secret.
101 Definition: What Are Trade Secrets?
First things first: what “things” can be a trade secret?
A whole lot: customer lists, devices, formulas, processes, algorithms, instruments, patterns, business procedures, designs, software code, financials, practices, and informational compilations have all been successfully argued as trade secrets. Expense reporting methods and the data contained within such reports can even be deemed a trade secret – so long as the “thing” meets the trade secret test.
No Single Federal Trade Secret Statute
Currently, there isn’t a single federal trade secret statute, but most states adhere to the Uniform Trade Secrets Act. New York and Massachusetts are the holdouts, but have either common law principles or non-uniform acts to protect corporate secrets and offer comparable remedies for misappropriation. Luckily, there are federal statutes that do provide remedies for misappropriation, infringement, or unauthorized access of matters not covered by trade secret laws (Economic Espionage Act, Computer Fraud and Abuse Act, federal conspiracy statutes, etc.).
Legal Trade Secret Test: What Judges Consider When Determining If Something Is A Trade Secret
What makes a trade secret a trade secret? Exact parameters vary from jurisdiction to jurisdiction; but, typically, judges consider three legal tests.
Generally Common Knowledge: For judges to declare something a trade secret, it can’t be generally known to the public.
Competitive advantage: This a cornerstone of trade secret law. A thing cannot be deemed an actionable trade secret if it doesn’t confer an independent economic value, material benefit, or advantage to a company.
Confidentiality: To win a trade secret misappropriation lawsuit, the plaintiff must prove that reasonable measures were taken to keep the trade secret…well…secret. You won’t win a claim by attempting to retrofit confidentiality. The test is not absolute secrecy, but rather, reasonable protections to prevent unauthorized disclosure.
Whether all elements are met is a very fact intensive inquiry, which can be complicated to prove.
Reverse Engineering & Trade Secret Law: The Ultimate Legal Nuance
Depending on the situation, reverse engineering may be an acceptable business practice; stealing is not. Cases become complicated, though, when employees who never signed a proper confidentiality agreement are hired away by competitors. In such instances, if you can’t produce a signed non-compete or another type of confidentiality agreement, then you may be leaving yourself open to a non-actionable trade secret leak.
Of course trade secrets are, by virtue of their definition, not disclosed to the public (or anyone that does not have a bonafide need to know). This is contrary to patents, which are made public, but cannot be reverse engineered without legal consequences. Conversely, one can never be certain that they have successfully “cracked” (i.e., reversed engineered) a trade secret. Why? Because, absent misappropriation, there is nothing with which to cross-reference the cracked version. The downside risk is obvious: if someone cracks a trade secret, you may have no legal recourse.
How Can A Company Protect Its Trade Secrets?
For a court to side with a trade secret misappropriation plaintiff, said plaintiff must prove that their “thing”: (1) has independent economic value; (2) is not capable of being readily ascertainable; (3) and is subject to reasonable privacy measures. This is more easily accomplished by presenting employees and contractors with strategically written agreements and policies.
Additionally, internal policies should restrict access to economically valuable information, logging visitors and access, password protecting files, compartmentalizing key research and development such that no one person or department knows all of the “secret sauce.”
One of the main reasons lawsuits are dismissed is failure to file on time. For civil suits, the trade secret statute of limitations is usually between 1 and 3 years. If you miss the cut off by one second, that’s that. A court isn’t going to take pity on you – the law is the law.
What Legal Actions Can Be Taken If A Trade Secret Is Stolen?
Saul Goodman may have some alternative options in the face of theft, but the only legal way to address trade secret misappropriation is through the courts.
In most situations, the first thing to do in the wake of a misappropriated trade secrets is to seek an injunction to preclude any further exploitation.
Contact A Trade Secret Lawyer
Do you have a trade secrets legal issue? Get in touch with Kelly / Warner to learn more about your legal options.
Trade Secret Law: 2-Minute Crash Course
Originally Posted: Sunday, March 15th, 2015
What differentiates trade secret protection from other intellectual property protections – like patents and copyrights? Several things, but most importantly: Federal registration isn’t required for trade secrets to be 100% enforceable.
Basic Trade Secret Definition: What You Must Prove To Win A Trade Secret Case
To win a trade secret misappropriation case, plaintiffs must satisfy the preponderance of evidence established in both case law and the Uniform Trade Secrets Act.
Existence: In order to win a trade secret law case, plaintiffs must prove that the material under review was confidential information and that the defendant knew it was confidential information.
Access: A plaintiff must prove that the defendant had access to the material.
Notice: A plaintiff can’t win a case unless he or she can prove that the defendant knew the information was private and purposefully kept from public knowledge.
Use: Claimants must prove that defendants used the trade secret under review.
Confidentiality Agreements Ensure Actionability
Mere W-2 status within an organization is not an automatic confidentiality contract. An additional agreement – that clearly outlines the parameters of a given trade secret – is needed to win in court. Without signed terms, a judge may deem that a trade secret, which was developed BY an employee, to be the property of an employee, not a company.
Kelly / Warner: Trade Secret Law Attorneys
Kelly / Warner law works with startups and businesses on various trade secret issues. We’ve successfully secured emergency injunctions, drafted air-tight confidentiality agreements to ensure trade secret validity, and represented clients – as both plaintiffs and defendants – in trade secret lawsuits.
Kelly / Warner is an AV-rated practice, with a 10-out-of-10 rating on lawyer review website AVVO.com that practices trade secret law.
Trade Secret Example Lawsuits & Attorney Contact
Originally Posted: Monday, March 2nd, 2015
Below are three trade secret example lawsuits. To speak with a trade secret attorney, get in touch here.
Trade Secret Example Lawsuit #1: Company v. Company
In 2014, California’s Top Agent Network Inc. (“TAN”) – a real estate “pocket listing / networking” firm – filed a lawsuit against online real estate company, Zillow.com. The accusations? Trade secret theft in service of Zillow’s highly hyped “coming soon” feature.
Investment Negotiations Lead To Alleged Trade Secret Theft
The lawsuit alleged that Zillow unlawfully accessed confidential TAN information under the guise of investment interest. According to TAN, the two parties agreed that any confidential information divulged by TAN during investment talks would only be used to consider a partnership agreement.
But after working with TAN, Zillow launched a new service suspiciously similar to the one examined during the Tan investment meetings. A huge success, Zillow’s new feature resulted in an 18% share price increase.
Since Zillow profited from the new feature, and TAN feels that new feature was made possible because of confidential information shared during investment negations, TAN sued Zillow for trade secret theft.
At the time of this writing, a decision has yet to be made in this case. Source
Trade Secret Example Lawsuit #1: Company v. Former Employee
In 2012, following an exodus of several key employees, game company Zynga filed a trade secret lawsuit against a departing general manager. The accusation? He allegedly stole “sensitive and commercially priceless data.” Specifically, Zynga executive believe he absconded with 760 confidential corporate documents.
Ultimately, the two parties reached a confidential settlement. And in a show of contrition, the accused general manager lamented:
“I accept responsibility for making a serious mistake by copying and taking Zynga confidential information when I resigned from Zynga. I understand the consequences of my actions and I sincerely apologize to Zynga and my former colleagues.”
Trade Secret Example Lawsuit #3: Competing Game Developers
In 2012, gaming company NC Soft filed a lawsuit against a group of former employees. Company brass suspected them of stealing confidential data related to an MMPO game called Lineage 3 to create a similar MMPOG.
An international issue, in 2009 a Korean court ruled against the cabal of employees, deciding they had unlawfully misappropriated NC Soft’s trade secret. However an appeals court, though it upheld the ruling, reversed the amount of awarded damages.
At the time of this writing, the case is working its way through the appeals process in both Korea and the United States.
Kelly / Warner attorneys have considerable experience with trade secret misappropriation law. We’ve obtained emergency injunctions in the wake of a suspected theft and guided clients through the process of establishing a legally viable trade secret.
To learn more about how trade secret contracts can be used to secure valuable information, get in touch.
Defamation lawsuits aren’t exclusively matters of personal scorn and trash-talk. More often than not, libel and slander suits are nuanced, business law battles.
A recent legal tussle between Puma SE (“Puma”) and the Parigi Group Ltd. (“Parigi”) illustrates how defamation and trade secret torts can be leveraged in unfair competition lawsuits.
Background: Longstanding Licensing Agreement
The backbone of this trade libel example lawsuit is a longstanding licensing agreement.
For over ten years, Puma and Parigi enjoyed an amicable business relationship. A mutually beneficial agreement, Puma licensed its marks to Parigi, who then manufactured child-sized versions of Puma’s tracksuits and sportswear.
The Breakup: Longstanding Licensing Deal Broken Without Much Notice
The proverbial $#!+ hit the legal fan when Puma allegedly started *cheating* with United Legwear and Apparel Co. (“United”) behind Parigi’s back. According to Parigi, not only did Puma initiate clandestine talks with United, but executives from the fashion conglomerate supposedly bad-mouthed Parigi to several influential department stores. According to reports:
“’Puma intentionally and fraudulently made repeated misrepresentations to Parigi that Puma intended to renew the parties’ more than 10-year-long license agreement.’ It also alleges that Puma disclosed trade secrets and proprietary business information to United Legwear & Apparel Co. and tried to discredit Parigi among retailers such as Bloomingdale’s and Macy’s.”
Puma spokespeople swear that company representatives did nothing untoward, and the company is looking “forward to presenting [their] case.”
Trade Libel Example Case: Licensing Partner Problems
Full disclosure, we’ve not yet read the entire Parigi v. Puma filing. But judging from available reports, the crux of the lawsuit appears to be binary, in that the suit addresses both trade libel and trade secret issues.
Generally speaking, trade libel is the unfair disparagement of a product, service, or business. (Read more about trade libel here.) Conversely, trade secrets are confidential, quasi-intellectual property holdings. (Read more about trade secrets here.)
In this case, Parigi is arguing:
Trade Secret Claim: Puma violated a trade secret agreement with Parigi by sharing information with United, before formally inking the deal.
Trade Libel / Defamation Claim: Puma executives purposefully and negligently spoke disparagingly of Parigi to executives at several department stores.
In Parigi v. Puma, the former insists the latter wasn’t forthcoming about its intentions to terminate a contract. Puma’s alleged reticence to renew the contract, however, isn’t the legal issue anchoring this case; it’s simply the branch on which the actual unfair competition claims — trade libel and trade secret misappropriation — were hung.
Puma and Parigi are two big business players in the fashion world. So, expect this lawsuit to be well-fought and long-lasting. In the words of Parigi spokesperson:
“We will see some very ugly things. Puma’s a major name in the industry, and my client’s a major name in the industry, and they’re going to war.”
Famous Trade Secret Lawsuit: “Oscar” People v. GoDaddy
Originally Posted: Monday, December 29th, 2014
**We’re travelling back in time to review one of the more famous trade secret cases of the past decade.**
In 2012, Google won a major trade secret battle. A complicated lawsuit, GoDaddy and The Academy of Motion Picture Arts and Sciences – the folks who give out Oscars — were the named parties, not Google. But the search engine giant got yanked into the fray because of its AdSense program.
AMPAS v. GoDaddy: A Lawsuit That Turned Into Famous Trade Secret Case Involving Google
At its core AMPAS v. GoDaddy was a cybersquatting lawsuit. In short, AMPAS felt GoDaddy’s “CashParking” program unfairly capitalized on the Academy’s name and reputation.
For example, piggybacking off the “Oscar” brand, one enterprising domain marketer purchased oscarliveblogging.com and oscarlist.com and signed up for the GoDaddy parked pages revenue program. When Oscar season hit, the forward-thinker earned a chunk of change.
Exhibiting the inflexibility now characteristic of traditional entertainment lobbying groups, The Academy filed a lawsuit against GoDaddy, claiming the domain registrar was unfairly profiting from AMPAS’ name.
Wait, NO! It’s Google’s Fault!
In an attempt to deflect responsibility, both GoDaddy and AMPAS blamed Google’s AdSense program. AMPAS wanted access to AdSense’s inner workings to ensure proper anti-copyright precautions were taken. The group also wanted to examine Google’s revenue share calculations. Meanwhile, GoDaddy argued that Google is “solely responsible” for any misappropriated funds generated via domain advertising violations.
Hand Over Your Famous Trade Secret, Google! Judge Says: Not So Fast.
Basically, GoDaddy and AMPAS wanted Google to hand over corporate secrets, under the pretext of a lawsuit. But Judge Paul Grewal sided with the search engine, deeming the request burdensome. Grewal reasoned that legitimizing the discovery motion would unnecessarily – and unfairly — expose Google to an avalanche of third-party legal hassles.
“AMPAS has not shown that the 4,000 pages of documents Google already produced does not provide the information it needs or why at least some of the additional discovery it wants was not obtained from GoDaddy or public sources.”
Crux of the Issue: No Bad Faith Intent To Profit
The legal heart of AMPAS v. GoDaddy was whether or not GoDaddy engaged in a “bad faith intent to profit.” In online intellectual property lawsuits, proof of a domain being used “inappropriately” isn’t enough (exceptions exist). Plaintiffs also need to demonstrate that the defendant is profiting from the infringement.