Pooley’s Corner: When Taking Trade Secrets Becomes a Crime

In the recent lawsuit filed against Uber by Waymo for hiring the head of its driverless car project, what would have been a normal discovery dispute over access to a report suddenly became a lot more complicated when the former Waymo executive asserted the fifth amendment, claiming that forcing disclosure of the document could incriminate him.

Trade secret litigation between companies is common, but criminal charges—or the threat of them—isn’t. So how is it that commercial disputes become criminal?

The answer usually is that the trade secret holder believes it has very strong evidence of theft and decides to approach the authorities. If you are located in a state with criminal trade secret laws, you have a choice of reporting to the county prosecutor or going to the FBI or Department of Justice, who operate under the authority of the Economic Espionage Act. In a number of states, and in each of the 93 federal districts, there will be prosecutors and investigators trained in handling technology cases. If yours seems sufficiently serious, they may agree to take it on.

But would you want them to? The answer may not be obvious. READ MORE

SOUR GRAPES: Fig Spread Verdict Under DTSA Doesn’t Stick, Argue Jam Company Defendants

In a dispute over ripped off recipes, counsel for victorious plaintiff Dalmatia Import Group hailed the jury verdict as the first of its kind under the Defend Trade Secrets Act, as we previously reported.  Not so fast, sulked the defendants, Dalmatia’s erstwhile manufacturer Lancaster Fine Foods and distributor FoodMatch, in a filing this month.  While acknowledging their defeat under the Pennsylvania Uniform Trade Secrets Act, the defendants nevertheless urged  the court not to enter judgment under the DTSA.

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A Bump in the Road: An Update on the Waymo v. Uber Litigation

The Waymo v. Uber trade secrets litigation has been underway for less than two months but the case has already hit quite few speed bumps with multiple discovery battles, Waymo’s efforts to obtain a preliminary injunction from Judge William Alsup of Northern District of California, a fight over arbitration, assertions of 5th Amendment rights, and now an appeal to the Federal Circuit that has temporarily halted a portion of the district court proceedings.

As a quick recap of how we got here, Waymo alleges that one of its former key managers in charge of Waymo’s driverless car business, Anthony Levandowski, downloaded more than 14,000 files to start a competing company—Otto—that Uber later purchased.  The key technology relates to a LiDAR system, which is mounted on top of the car and gives the driverless car the ability to “see” other cars and obstacles.  Waymo is seeking a preliminary injunction enjoining Uber from using or disclosing any of Waymo’s trade secrets and from selling any devices based on Waymo’s patents.  In aid of the PI hearing on May 3, 2017, the parties are engaging in expedited discovery. Since this case started, the docket has been quite active and full of interesting, thorny legal issues. READ MORE

It’s Positioning That Matters: Texas Court of Appeals Holds Proof Of Actual Use Not Required At The Temporary Injunction Phase

Christopher Hughes worked for Age Industries, Ltd. (“AI”) for nearly 20 years. He was the general manager of one of AI’s branch facilities and a limited partner of the company.  In this role, Hughes had access to much of AI’s proprietary and trade secret information, including specialized customer pricing information, financial reports, and business strategies.  After leaving AI, Hughes became the operations manager of a new competitor in the corrugated packing materials market—Diamondback Corrugated Container, LLC. READ MORE

(Alleged) Spammer Squares Off With (Alleged) Hacker, Highlighting Risk of Cyber Threats

What’s in a name?  Obviously a lot, as businesses in all industries invest significant time and money to protect their reputations.  But, in some sectors, the line between positive and pejorative can be quite thin.

Take email marketing and cybersecurity, for example:  What exactly distinguishes a successful high-volume email marketer from a spammer?  And how can we distinguish a well-intentioned security analyst exposing vulnerabilities from a nefarious hacker?  (Those familiar with techspeak will surely recall the familiar “white hat” and “black hat” dichotomy, but even that, as Wired has observed, is subject to gray areas of its own.) READ MORE

Pooley’s Corner: Losing Secrets to Foreign Companies: How to Reduce the Risk

During a recent seminar I was asked, “What can companies do to stop the loss of trade secrets to places like China?” The questioner seemed stressed and a bit angry, perhaps reflecting a certain frustration that there may not really be an answer. Although there is no way to entirely eliminate information security risks when doing business overseas, we certainly can reduce them.

The modern commercial environment is inescapably digital and global. Long supply chains and open innovation strategies require sharing valuable information with actors in countries where legal protection systems are not robust. Companies increasingly employ foreign nationals, both in the United States and in installations abroad, and just like any other employees with knowledge of your secrets, they tend to move about. READ MORE

DTSA’s First Verdict “Fig”-ure: Jam’n to the Tune of $500,000

In little under a year after its enactment, a Federal Court jury in the Eastern District of Pennsylvania issued the first verdict under the Defend Trade Secrets Act in favor of the Plaintiff Dalmatia Import Group, Inc. The jury awarded Dalmatia $2.5 Million in total damages for all claims, with $500,000 attributed to its DTSA and Pennsylvania Uniform Trade Secrets Act claim. Just this week, Dalmatia filed a motion for judgement on the verdict,  seeking treble damages for its related trademark and counterfeiting claims.  If the court awards treble damages, total damages could exceed $5 Million.

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Thinly Pled Allegations of Trade Secret Misappropriation under DTSA Are Vulnerable to Dismissal

A dismissal with prejudice is a plaintiff’s worst fear realized. When it comes to alleging a proper claim for trade secret misappropriation, the Western District of Kentucky recently reminded plaintiffs just how critical it is to “kick the tires.” In Raben Tire Co., LLC v. McFarland, Case No. 5:16-cv-00141 (W.D. Ken.), plaintiff Raben Tire Co., LLC, alleged misappropriation of trade secrets against two former employees under the Defend Trade Secrets Act of 2016 (“DTSA”), 18 U.S.C. § 1831 et seq., and the Kentucky Uniform Trade Secrets Act (“KUTSA”), Ky. Rev. Stat. § 365.880 et seq., along with a handful of additional common-law claims. READ MORE

Full* Disclosure: A Middle Road in Fracking Fluid Law

Many oil and gas companies operate within incredibly tight margins and subject to ever-volatile commodity market prices. In such a competitive sector, the ability to innovate with improved extraction and transmission techniques can be make-or-break.  As we have previously written, one way to gain an advantage in the process of hydraulic fracturing is to use specially chosen or designed chemical additives that can make a frack job more successful than it otherwise may be. Oil and gas companies often rely on trade secrecy to protect these special fracking fluid compositions.  As can be expected, many environmental groups express concern that these chemicals could contaminate groundwater and, in turn, argue that landowners and the public have a right to know if potentially harmful chemicals are being injected into the ground. READ MORE

Pooley’s Corner: How to Recruit and Hire While Avoiding Data Contamination

When we think about trade secrets, we usually focus on keeping our own data safe. But an even bigger risk comes from hiring employees who can infect our systems with confidential information from a competitor. Companies often learn this the hard way. Boeing’s hiring several managers from Lockheed led to a $615 million fine and indictments of the individuals. Hilton poached two Starwood executives to create a competing hotel brand, but they came with thousands of documents and prompted a lawsuit that killed the project and cost $150 million to settle. Recently, a similar situation at Zillow required a $130 million settlement. READ MORE