New Measures to Combat Chinese Trade Secrets Theft: Will They Work?

For trade secret owners, international IP theft is of particular concern because of the difficulty in catching and enforcing remedies against the thieves.  For many U.S. companies with a global reach, an overriding concern has been how to combat economic espionage from Chinese state-owned companies or individuals.  During his campaign, President Trump certainly had China on his mind.

While the earlier part of his administration did not focus much on Chinese trade secrets theft, President Trump recently signed an executive memo, asking the U.S. Trade Representative to determine whether to launch an investigation into China’s alleged theft of IP under Section 301 of the Trade Act of 1974.  The hope is that an investigation would help protect American companies from having to share their valuable IP with the Chinese government or companies.  Current Chinese laws require U.S. companies in many industries to form joint ventures with local Chinese firms (and thus, engage in a forced technology transfers with Chinese partners), or store certain sensitive data within Chinese borders—often leading to leaks or outright theft.  An investigation under Section 301 could lead to broad penalties, including tariffs, quotas, or other restrictions on services.  Section 301 investigations are rarely used and their impact is questionable.  The last Section 301 case was initiated in 2010 by the United Steel Workers, and focused on the solar panel and wind turbine industries—industries that China has come to dominate.

While it may take months before any action is taken under the Section 301 investigation, the suggestion of the investigation may have spurred some action on the part of the Chinese government.  Earlier this week and ahead of a visit by President Trump to Beijing, China announced a crackdown on violations of trade secrets and other IP rights.  In particular, there will be a fourth-month campaign to attack theft of foreign trade secrets and violations of patents, copyright, and trademarks as the Chinese Ministry of Commerce’s goal is to increase foreign investment.  While the Chinese government will increase fines during this campaign, this type of action may not be enough without a real sea change in IP protection policies by the Chinese government.  How that will be best managed and implemented remains to be seen.  Perhaps the upcoming visit by President Trump to Beijing will provide additional guidance for IP-owners (and the world), but that visit has yet to be set.

EU Study: Trade Secrets Top Patents in European Union

Just as the U.S. Patent and Trademark Office has shown a keen interest in better understanding policy concerns and the needs of business stakeholders in the area of trade secrets (see our coverage of both USPTO symposia here and here) against the backdrop of a new federal law, the EU’s IP office is also stepping up its focus on trade secrets following the EU Trade Secrets Directive in 2016 (our coverage here).  READ MORE

TOTAL ECLIPSE EDITION: Trade Secret Disputes That Are Out of This World

Take off your eclipse glasses, close that NASA photo gallery, and stop thinking about how “path of totality” would make an awesome band name: it’s time to get back to work. As the country recovers from Eclipse Mania 2017, we take a look at some space-related trade secrets cases.

Turn Around…

Someone might be stealing your trade secrets behind your back! A federal court found that’s what happened to Pacific Aerospace & Electronic, Inc. (PAE), a company that designs components for electronic circuitry in the aerospace and space exploration industries and whose products are used on the Hubble Telescope and the International Space Shuttle.  According to PAE, the specialized nature of its business makes the identity of its customers—who are relatively few in number—critical to its business success.  That’s why it was a problem when two PAE employees who had access to proprietary information about PAE’s technologies and customers left for a rival company, RAAD Technologies, Inc.  One of the former employees allegedly copied backup tapes of design information weeks before leaving, and both employees allegedly compiled a list of prospective customers after leaving which they gave to RAAD’s sales representative for use in soliciting business.  PAE brought a claim for misappropriation of trade secrets (among others) against these former employees and RAAD in the Western District of Washington, and moved for a preliminary injunction.  The court ruled that PAE’s detailed customer information was a protectable trade secret, and that PAE risked irreparable harm in the absence of an injunction and would likely prevail on the merits of its misappropriation claim.  However, the court limited the scope of injunctive relief only to future misuse of the trade secret customer list, rather than ongoing misuse—i.e., continued sales to wrongfully-acquired customers—as PAE had requested.  The court reasoned that given the importance of PAE’s (and later RAAD’s) customers, public interest concerns favored permitting these ongoing business relationships and remedying any harm by an award of monetary damages.

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Excess Cargo? Shipping Common Law Claims Out of a Trade Secret Complaint

AFS, a company specializing in streamlining shipping costs and logistics, had its eight count amended complaint streamlined to only one—its Tennessee Uniform Trade Secrets Act (“TUSTA”) claim—primarily due to preemption and AFS’s lack of specificity as to its common law claims.

AFS filed suit in December 2016 against two prior employees, Christopher Cochran and Alessandro Rustioni, and their new competing company, Freightwise LLC.  AFS’s complaint set forth the classic case of defecting employee trade secret theft.  Among other things, AFS alleged that Cochran and Rustioni founded Freightwise in 2014 while still employed for AFS.  Both continued to work for AFS in sales leadership positions until late 2015 and early 2016.  And, they allegedly conspired to and secretly organized Freightwise by soliciting one of AFS’s major clients and maliciously interfering with its high-value contracts. READ MORE

EVEN BAMBI IS A TRADE SECRET: Eastern District Of Texas Finds That Lineage and Genetic Information of Deer Are Trade Secrets, Grants Preliminary Injunction

As surprising as it may be to city dwellers, the deer farming industry generates $3 billion per year for the U.S. economy. According to the North American Deer Farmers Association, “deer farming is one of the fastest growing industries in rural America.”  The corollary of the deer farming industry is a burgeoning deer breeding industry. As a court in the Eastern District of Texas recently noted, the “deer breeding industry is a potentially lucrative industry with single straws of buck semen selling for $5,000 to $20,000 on average, and ranging all the way up to $1 million to purchase the entire buck.” READ MORE

PILLOW TALK: A Threat to Trade Secrets?

It turns out that, even in romantic relationships, some things are best kept secret.  On July 7, 2017, Teva Pharmaceuticals USA, Inc. filed a complaint in the Eastern District of Pennsylvania alleging that a former executive disclosed confidential information to a romantic partner who happens to be an executive of one of Teva’s direct competitors. READ MORE

Courts Continue to Enforce Foreign Non-Competes in California While the Window for Such Agreements Slowly Closes

Contrary to common perception, California employees who signed restrictive covenants prior to January 1, 2017 are not completely immune to enforcement of all restrictions on competition. For the second time in several years, a foreign corporation, Synthes, Inc., successfully enforced a non-competition agreement against former employees who were California residents. In the most recent case, the U.S. District Court for the Eastern District of California, enforced the company’s agreement against a Sacramento resident. READ MORE

Pooley’s Corner: Was America’s Industrial Revolution Based on Trade Secret Theft?

When I was in Geneva trying to engage developing countries about the value of robust IP laws, occasionally I heard a response like this: “What hypocrites you are! The U.S. economy got its start by stealing from abroad. Why should today’s poor nations be denied the same opportunity to catch up?” The argument stung enough that I thought I should check out the real story. Here’s what I found.

On an early September day in 1789, Samuel Slater, 21 years old, boarded a ship in London to begin a voyage to New York. His family didn’t know he was doing this. He presented himself as a simple laborer, a farm hand. He was lying. Hidden in his pocket were his only official papers, identifying him as a recently released apprentice to a cotton mill. READ MORE

Amendments to Texas UTSA Bring it Closer in Line with DTSA, but Differences Remain

American and Texas state flags flying on the dome of the Texas State Capitol building in Austin Amendments to Texas UTSA Bring it Closer in Line with DTSA, but Differences Remain

(Editors’ note: Thanks to Orrick summer associate, Ruben Sindahl, for his help with this blog post.)

Just four years after the Lone Star State ended its holdout by becoming the 48th State to adopt the Uniform Trade Secrets Act, Texas passed a bill to amend its enactment. The bill was signed by Texas Governor Greg Abbott on May 19, 2017, and will take effect on September 1, 2017.

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