Practical Tips

Pooley’s Corner: What Divorce Court Teaches About Trade Secret Litigation

I still remember the day I decided never to do another divorce case. My client called to tell me that her ex was taking the kids to his mother’s house where she would look for holes in their socks and then rip them with her fingers. This surely was grounds for a restraining order! No, it wasn’t, I insisted.

Back then we accepted any kind of case that involved a courtroom: accidents, real estate, criminal, contracts, and “domestic relations.” It was the divorces that often involved the worst behaviors, seeming to require more therapy than legal advice.

These were also the early days of Silicon Valley, and it wasn’t long before commercial litigation, and trade secret cases in particular, came to fill up my calendar. Hardly a week went by without a group leaving to do a start-up or join the competition, provoking a lawsuit. After 30 or 40 of these, a common theme emerged: somebody always had done something foolish, like overheating the photocopier or bragging about how they were going to destroy their old employer. So it seemed to me that if people just understood the rules, they would never get into these scrapes. But the same kinds of mistakes were made even by experienced, sophisticated actors, and the lawsuits kept coming. I was baffled.

Then I married Laura-Jean, who is a psychotherapist. When she learned about my trade secret cases, it was immediately clear to her what was going on. These people were distracted—and sometimes blinded—by their emotions. And that’s when it hit me: trade secret disputes were a lot like divorces, and if you could understand the emotional forces at work, you could do a better job for your clients. The analogy wasn’t perfect, because people choosing to end their marriages were often consumed by their feelings to a level that didn’t usually apply in a business context. But the parallels were striking, and illuminating. READ MORE

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

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

“It’s a Free Country, Right?” Court Declines to Enjoin Ex-Free Country Ltd. Employees From Contacting Customers on Purloined Contact List

Within days of each other, your clothing company―Free Country Ltd.―loses two employees who decamp to a rival to set up a competing apparel line.  You discover that just before leaving, they transferred some 50,000 documents to a personal account—customer orders, your master contact list, and product design information.  Incensed, you file a trade secrets lawsuit and seek an injunction prohibiting the thieves from soliciting your customers.  Their defense amounts to, “so what if we took the documents―it’s a free country!”  Easy win, right?  Wrong.  These are the facts of a recent trade secrets lawsuit in the Southern District of New York, in which the court denied the plaintiff’s request that its former employee defendants be prohibited from soliciting plaintiff’s customers. READ MORE

Wake Forest Leaks Scandal May Offer “Playbook” For Businesses Seeking Trade Secret Protection

After a long political season that took many twists and turns due in part to revelations from WikiLeaks, the holiday season finally arrived. For many, that meant family traditions, time away from work, and massive amounts of college football, thanks to the current litany of televised bowl games.

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PUT YOUR DOCS WHERE I CAN SEE THEM: Seattle Police Enjoined From Disclosing Software Secrets in Public Records Act Dispute

What happens when trade secret protections collide with laws granting public access to government records? This question took center stage in a recent case involving the Seattle Police Department (“SPD”). A federal district court enjoined the SPD from disclosing a software vendor’s allegedly trade secret information in response to a reporter’s public records act request.  Besides serving as a reminder of the precautions that companies should take when disclosing intellectual property to public agencies, the case also raises interesting questions and strategic considerations. READ MORE

“Gist of Action” Doctrine: Don’t Contract Away Your Misappropriation Claim

The “gist of action” doctrine. Heard of it? Well, if you are dealing with Pennsylvania law, you need to know it. The “gist of action” doctrine asks whether the “gist” of a suit sounds in tort or contract. When applied to a claim of trade secret misappropriation, the doctrine questions whether the wrongful acts constitute a tort or a breach of contract. If the wrongful acts constitute a breach of contract, Pennsylvania law bars any trade secret claim. As evidenced by the case Wiggins v. Physiologic Assessment Services, LLC, whether a claim can be brought as a trade secret claim or a breach of contract claim can turn on the wording of the contract at issue. READ MORE

Trade Secrets v. Patents: Considerations in Choosing How to Protect Your IP

Intellectual property owners may seek to protect certain information either by obtaining a patent or by maintaining its secrecy. A patent provides strong, exclusive rights for a fixed period of time, generally twenty years. A trade secret may last indefinitely but protection can be lost through independent development, reverse engineering, or failure to maintain secrecy. (We previously published a chart comparing the features of patents and trade secrets.) This article discusses those instances when trade secret protection may be superior to patent protection.  READ MORE

These are Not the Trade Secrets You’re Looking For: Star Wars Model Maker Sues Ex-Employees for Misappropriation

In a tale of alleged betrayal and misappropriation of trade secrets in a courtroom (not) far, far away, a pioneering company in the area of special effects has sued its former employees and a vendor, claiming that they conspired to recreate the company’s primary business under a new name, erasing the evidence on the way out. The alleged tale is an illustration of how vulnerable a company and its trade secrets can be in times of ownership and business transition, especially when the company relies mostly on a single customer. READ MORE

Litigate Trade Secret Misappropriation Disputes in Chinese Courts

How can trade secret misappropriation disputes be litigated in Chinese courts, despite the system’s lack of US-style discovery tools? Many companies, especially foreign companies, might be hesitant to even think about bringing trade secret misappropriation actions in China for many reasons, but perhaps most importantly, based on concerns over how to collect evidence. READ MORE