We Have Your Data. Pay Up or Else…

You wake on a Tuesday morning expecting to have an average day at work.  You are skimming through the emails that came in while you were asleep, when you notice an email from one of your employees.  He is not only giving his resignation, but is also, more importantly, demanding a ransom in exchange for not disclosing company trade secrets and other highly confidential information.  What do you do?
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Ex-Citadel Employee Pleads Guilty To Wire Fraud And Theft Of Trade Secrets; Accomplice Left To Fight Trial Alone

Yihao “Ben” Pu is probably coming to grips with the phrases “crime doesn’t pay…” and “don’t do the crime unless you’re willing to do the time….”  In federal court in Chicago, on Thursday, August 7, 2014, Pu, a former quantitative engineer for Citadel LLC, plead guilty to stealing trade secrets and other private information from an unnamed “Company A” located in Red Bank, New Jersey, and financial firm Citadel, related to their high-frequency trading platforms. (See United States of America v. Yihao Pu et al., Case No. 1:11-cr-00699 (N.D. Ill.))

Company A developed “high-performance technology and computer source code” to support rapid stock trading—known as “high frequency trading” or “HFT.” Read More

The House Introduces Another Trade Secrets Bill: Is It Really Any Better Than Before?

The Trade Secrets Act of 2014 (H.R. 5233) was introduced in the House by Congressman George Holding on July 29, 2014.  Representatives Steve Chabot (R-OH), Howard Coble (R-NC), John Conyers (D-MI), Hakeem Jeffries (D-NY), and Jerrold Nadler (D-NY), are cosponsors of the bill.

While the House Bill is very similar to the Bill introduced in the Senate on April 29, 2014 Defend Trade Secrets Act of 2014 (DTSA) (S. 2267), there are some major differences between the two.  Specifically, the House Bill is much more protective of defendants facing ex parte seizure orders. Read More

Roses Are Red, Violets Are Blue, Giving Someone Trade Secrets Injures the Owner, and Using Them Does Too

How do two companies end up liable for nearly $50 million in damages relating to confidential, trade secret materials?  Like many romances gone awry, this tale arose from actions taken under cover of secrecy that did not look as good in the clear light of day.

The sordid affair involved the greeting card company Hallmark, the consulting company Monitor Company Group, L.P. (“Monitor”), and a related private equity firm called Monitor Clipper Equity Partners (“Clipper”). Read More

Federal District Court in San Francisco Sentences More Defendants in Trade Secret Cases

The U.S. District Court in San Francisco was busy this month sentencing defendants in two of the year’s biggest trade secrets cases.

First, on July 10, U.S. District Court Judge Jeffrey S. White sentenced Walter Lian-Heen Liew to serve 15 years in prison, to forfeit $27.8 million, and to pay $511,667 in restitution for stealing trade secrets from E.I. du Pont de Nemours & Company and then selling them to a state-owned Chinese company. Liew had been convicted in March of this year on more than 20 criminal counts, including conspiracy to commit economic espionage and trade secret theft.

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UPDATE: A New Top 10 Disclosed Trade Secret Settlement

A new trade secrets settlement has shaken up our top 10 disclosed settlements of all time.  Business Logic, a Chicago-based developer of financial software, reports that the investment firm Morningstar, Inc. has agreed to pay it $61 million to settle a trade secrets action.

According to Business Logic’s press release, the company alleged that Morningstar and its subsidiary, Ibbotson Associates, violated a contract and took Business Logic’s intellectual property in a case involving software for managing 401(k) retirement accounts. Read More

Of Documents and Dumpsters: The Sixth Circuit Affirms Convictions for Theft of Hybrid Car Secrets from GM

Last month, the Sixth Circuit affirmed the convictions of co-conspirator couple Yu Qin and Shanshan Du, who were convicted in 2012 of trade secrets theft.  A jury in the Eastern District of Michigan had found that Du absconded with GM’s proprietary documents, passing them to Qin, who then used them to start his own business.

The trade secrets comprised the specially engineered and highly complex “motor control source code” of a hybrid car—the program that directs how and when the electric motor of a hybrid car runs.  The jury bought the government’s argument that the hybrid car secrets were on their way to China via Qin and Du, both engineers. Read More

DONATE, DON’T TELL? The Red Cross says it has trade secrets, upsetting activists

Can a non-profit charity have trade secrets?  The Red Cross thinks so.  Its claim to trade secret protection over information related to Hurricane Sandy relief efforts made headlines and left some journalists and activists feeling, well, cross.  But is the Red Cross’s trade secrets claim really so unusual?  And what can other non-profits learn from it?

The Red Cross’s trade secrets claim grew out of a letter from the New York State Attorney General’s office seeking information on how the Red Cross spent Hurricane Sandy relief donations Read More

Hedge Fund Hack Results in Trade Secret Loss, and Raises SEC Reporting Issues

Data breaches may be nothing new, but they are certainly evolving into bigger and more notorious infractions. While the data breaches of yesterday may have involved accidental disclosure or disgruntled former employees, the data breaches of today are often carried out by outsiders and highly organized and sophisticated criminal groups. And hackers aren’t just after credit card information, they are often seeking proprietary information. In short: trade secrets, watch out. Read More