Month: July 2013

GIVE AND TAKE: Lofgren’s Twin Trade Secret Bills Would Curtail Actions Under One Law, Expand Them Under Another

When Rep. Zoe Lofgren, the Silicon Valley Democrat, introduced a pair of bills last month on trade secret misappropriation, we puzzled over her purpose.  Was this a response to the White House’s call for improved federal legislation to protect U.S. trade secrets?  Did the measures mark the start of a comprehensive federal civil “Trade Secrets Act” that would put trade secrets on par with other federally protected intellectual property such as patents, trademarks, and copyrights?

Trade Secrets Watch decided to investigate and tapped our congressional sources for the back story.  Turns out our musings were wrong.

First, a quick backgrounder on federal trade secret protection (and lack thereof): The federal government has declined to go all-in on protecting U.S. trade secrets, leaving this area primarily governed by state law.  When it comes to trade secrets, federal law consists of a patchwork of acts that leave yawning gaps in legal protection.  For example, the federal Economic Espionage Act, known as the EEA, prohibits trade secret theft but is solely a criminal law — it doesn’t provide for a federal civil cause of action (i.e., a right allowing private parties to sue).  And the Computer Fraud and Abuse Act, known as the CFAA, only covers certain types of thefts involving unauthorized access to computers.  It provides for criminal prosecution and grants a victimized company the right to sue.  But in a case last year (United States v. Nosal), the Ninth Circuit U.S. Court of Appeals interpreted the CFAA narrowly, finding that it was primarily intended to curtail hacking and that it does not bar employees from stealing trade secrets from their employers’ computers in more run-of-the-mill cases of trade secret theft.  READ MORE

BILL BANDWAGON: Senators Draft Measure to Expand the Economic Espionage Act

Yet another federal trade secrets bill may soon join the growing stack of legislation already under consideration in Congress.  This proposed bill would make modest changes to the Economic Espionage Act (“EEA”), which designates the theft of a trade secret a federal crime.

We emphasize that the “discussion draft” by Sens. Sheldon Whitehouse (D-R.I.) and Lindsey Graham (R-S.C.) is merely that—a draft bill that has not been introduced.  Still, the fact of the proposed bill, and the fact that the co-sponsors felt compelled to issue a press release about the measure while it is still on the drawing board, confirm that trade secret thieves (along with patent trolls) are the boogeymen du jour on Capitol Hill.

This proposed bill, if introduced and enacted, would incrementally extend the EEA’s application to foreign trade secret theft.  READ MORE

This Day in Trade Secrets: “Sawing a Woman in Half” Trade Secret Protected by NY Appellate Court

On this day in 1922, the New York appellate division granted magician Horace Goldin an injunction against Clarion Photoplays, Inc., preventing it from disclosing in a motion picture his trade secret for “Sawing a Woman in Half.”

The trial court record included an affidavit by Harry Houdini, who testified that this trick did indeed originate with Goldin:

shutterstock_84091750a“Harry Houdini, a producer of magical feats and illusions since 1882, and president of the Society of American Magicians and of the Magicians’ Club of London, states that, so far back as his memory and records go, he is positive that he never witnessed a production of the illusion ‘Sawing a Woman in Half’ by any one other than the plaintiff.”

The appellate court credited this and other affidavits, and rejected the defense that this trick actually originated in ancient Egypt: READ MORE

The Short Arm of the Law: U.S. Problems Prosecuting Foreigners for Trade Secret Theft

Revised post available here.

They say politics stops at the water’s edge. Increasingly, so does the power of the United States to thwart trade secret theft.

As the nation struggles to bolster its defenses against cyberattacks, recent cases have highlighted legal loopholes in prosecuting foreign-based companies and individuals for the theft of trade secrets. Defendants have grown adept at exploiting American procedural rules governing such things as service of process to stall prosecutions indefinitely.

Late last month, a federal grand jury in Wisconsin returned an indictment charging Sinovel Wind Group Co. and two of its executives with stealing trade secrets from American Superconductor Corp. (AMSC). Sinovel is China’s third-biggest maker of wind turbines, and until March 2011, AMSC supplied Sinovel with turbine-control software.

According to the indictment, Sinovel owed AMSC more than $100 million for delivered software, products, and services, and had contracted to buy another $700 million worth. But instead of paying its debts and making good on its orders, Sinovel and two of its executives plotted with a former AMSC employee to steal AMSC’s turbine-control source code and use it in Sinovel’s turbines. READ MORE

Italian Renaissance: Birthplace of Invention Updates Its Trade Secrets Laws

shutterstock_81841951

Italy, the country that enlightened the world with the Renaissance, has given us some of the greatest inventors and geniuses in history, from Leonardo da Vinci and Galieo Galilei to Georgio Armani.

But Italy is learning that a great invention is sometimes only as good as the trade secret laws that protect it.  Italy is modernizing its trade secret laws to bring them into greater conformity with international standards such as the TRIPS Agreement. A quick primer of Italy’s trade secret laws is available here.

FOURTH OF JULY EDITION: Family Fireworks: Plot to Steal Client Lists Goes up in Smoke

fireworks220For many, Fourth of July festivities wouldn’t be complete without a baseball game, a family barbecue, and of course, fireworks.  But for one family-operated fireworks company in California, its members had an unhappy reunion in court when a great-grandson’s decision to leave the family business exploded into a dazzling dispute over trade secrets.

According to court papers, Manuel de Sousa and his family immigrated to the San Francisco Bay Area from Portugal in the early 1900s and set up a fireworks business for local Portuguese community celebrations.  Manuel eventually passed the family business to his son Alfred, who then passed it on to his grandson Bob.

READ MORE

White House Issues Another Strategy Plan to Protect U.S. Trade Secrets

Last week, the White House unveiled its “2013 Intellectual Property Enforcement Coordinator Joint Strategic plan,” a roadmap to help the Department of Homeland Security combat intellectual property theft in the next three years.  This is the Administration’s second joint strategic plan on IP (its first plan issued in 2010), and its fourth statement this year on protecting U.S. trade secrets.

The latest plan reviews the progress made since 2010 and lays out 26 specific action items to strengthen IP protection, increase enforcement efforts, and encourage multi-national coordination.

The 88-page plan covers a lot of ground, taking on issues such as patent trolls and counterfeit drugs.  Trade Secrets Watch reviewed the plan’s implications for trade secret protection—especially in light of the White House’s recent efforts and requests for public comments earlier this year. READ MORE