Posts by: Editorial Board

Chinese Translation: Protecting Trade Secrets in China Requires Knowing Complex Layers of Laws and Practices

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As President Obama and Chinese President  Xi Jinping prepare for a summit this week in Rancho Mirage, California, the rhetoric over China’s alleged plundering of American government and corporate secrets might lead you to think that the country is lawless when it comes to the theft of trade secrets inside its own borders.

You would be mistaken.  China has intricate layers of trade secret laws and government agencies that deal with them.  This body of law flows from its statutes, including its 20 year-old “Anti-Unfair Competition Law of China,” its regulations such as its “Certain Provisions on the Prohibition of Misappropriation of Trade Secrets,” and its courts.  What China lacks are formal discovery tools and effective remedies for misappropriation.

All of this can make China a complex place in which to operate for a company trying to protect its trade secrets.  Start getting up to speed with our primer on China’s trade secret laws, available here.

(Practically) No Comment: White House Plea for Public Input on Trade Secret Theft Draws 13 Responses

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When the White House rolled out its new strategy for combating trade secret theft, Attorney General Eric Holder warned ominously of “a significant and steadily increasing threat to America’s economic and national security interests.”  Trade secret theft, he said, “can inflict devastating harm on individual creators, start-ups, and major companies.”  Rallying the nation for all-out war against a shadowy enemy, he declared: “There are only two categories of companies affected by trade secret theft: those that know they’ve been compromised and those that don’t know yet.”

Apparently there is a sizable third category: those that don’t care.

When it released its strategy in February, the White House said it would review potential policy changes that would help fight trade secret theft.   With a notice in the Federal Register, it solicited public comments on how best to do that.

The response was underwhelming: only 13 people or entities weighed in.  (By contrast, the U.S. Patent and Trademark Office received 374 public comments on America Invents Act rulemaking.) One commenter used the invitation to air some generalized gripes about the government.  The other dozen represented such diverse interests as Intel Corporation, IP valuation experts Ocean Tomo, LLC, the Intellectual Property Owners Association, the American Intellectual Property Law Association (AIPLA), and the U.S. Chamber of Commerce.  They weighed in with substantive comments touching on four common themes: (1) problems with the Economic Espionage Act (“EEA”) and the Computer Fraud and Abuse Act (“CFAA”); (2) the need for a right to sue in federal court for trade secret theft; (3) proposed domestic policy changes; and (4) proposed international policy changes. READ MORE →

Memorial Day Weekend Edition: Century-Old Third Circuit Opinion on Warship Documents Shows Courts’ Historic Hostility Toward Trade Secrets

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This Memorial Day weekend, we would like to stop and honor the sacrifice that American servicemen and women have made, and take a brief look at an early case involving the military and trade secrets.

In 1910, the Third Circuit Court of Appeals issued a decision involving a contract with the United States Navy and a dispute over the disclosure of documents related to the construction of destroyers.  At the time of this decision, European powers had begun an arms race that would later escalate, and geopolitics were causing tensions that would lead to the First World War.

In re Grove, 180 Fed. 62 (3rd Cir. 1910) originated as a patent case, and a dispute arose as to whether Henry Grove, president of the defendant shipbuilding company, was in contempt for refusing to produce copies of plans and specifications for the Navy destroyers.  Grove had refused to produce the documents on the advice of counsel, on the grounds that disclosure would harm the public interest by disclosing military secrets, and would result in the unnecessary disclosure of trade secrets.  The Navy’s advertisement for bids had contained numerous requests that information related to bids be kept confidential.  The Secretary of the Navy had also stated that disclosure of the documents “would be detrimental to the interests of the United States.” READ MORE →

Terror Tactics: Report Urges Government to Use Financial, Trade and Immigration Systems to Squeeze Theft of IP

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A new report on halting the theft of trade secrets and other intellectual property reads like a blueprint for fighting terrorism­—not surprising, given that it was co-authored by the nation’s former spy chief and a member of the 9/11 Commission.

On Wednesday, the Commission on the Theft of American Intellectual Property released its report detailing the scale and scope of the problem.  The Commission is an independent, bipartisan body made up of members from national security, foreign affairs, academia, politics and the private sector.  It is chaired by former director of national intelligence Dennis C. Blair and former U.S. Ambassador to China and ex-Utah Gov. Jon M. Huntsman Jr.  Its report is the product of an eleven-month study. 

The Commission’s report pulls no punches: it calls IP theft “one of the most pressing issues of economic and national security facing [the United States]” and singles out China as “the biggest IP offender in the world.”  Along with documenting patent, trademark, and copyright violations, the report dedicates a full chapter to trade secret theft.  Among its alarming findings:

  • In 2009, U.S. firms lost at least $1.1 billion from the misappropriation of trade secrets to China alone.  Russia is also an aggressive collector of sensitive U.S. economic information and technologies, especially in cyberspace.
  • In the past two years, an unprecedented number of cyberattacks have been perpetrated against major corporations, nonprofit institutions, and governments, with the majority of these attacks originating in China.  Our blog discussed the real lesson of Chinese cyberhacking earlier this month.
  • Cyberattacks are common, with some companies experiencing 72 successful attacks per week.  All sectors and all types of companies, large and small, are the targets of attacks.

Just as the 9/11 Commission reported the intelligence failings that led to the terrorist attacks,
READ MORE →

I Thought We Broke Up Years Ago! Why You Should “Throw Out” Trade Secrets as Soon as a Business Relationship Ends

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The Fifth Circuit’s affirmance last week of a $44.4 million trade secrets award in the Wellogix v. Accenture case is a weighty reminder of the power of circumstantial evidence in trade secrets cases, and the importance of getting rid of your collaborator’s trade secrets after a co-development or joint venture project ends.

Although the oil and gas industry spends billions of dollars a year to construct oil wells, oil companies apparently clung to their practice of using paper records to track project costs.  Wellogix tried to modernize this practice by developing a computerized system for planning, procuring, and paying for “complex services” involved in such projects.  But it still needed others to perform accounting and marketing services, so it collaborated with two other companies: SAP and Accenture.

As with the most successful relationships, Wellogix remembered to READ MORE →

Texas Insiders Say Businesses Champing at the Bit for New Trade Secrets Law to Take Effect

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For decades, Texas was the wild west of trade secrets law, governed by the state’s outdated common law with no trade secrets statute on the books.  That changed May 3 when Governor Rick Perry signed legislation making Texas the 48th state to adopt the Uniform Trade Secrets Act.  The lawyers who helped push the legislation across the goal line are now eagerly focused on September 1, when the new law takes effect.

The common law, or the accumulated body of Texas court decisions on trade secrets, just wasn’t up to the task any more, said Joseph F. Cleveland, Jr., an attorney at the firm Brackett & Ellis, P.C.  Cleveland and a handful of other attorneys on the State Bar of Texas Trade Secret Committee testified before legislative committees as the bill worked its way through the Texas Statehouse. READ MORE →

Benefits and Pitfalls of Referring Trade Secret Cases for Criminal Prosecution

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Wednesday, May 29, 2013 (12:00 PM – 1:00 PM PST)

Scenario: Your client’s star employee has resigned and gone to work for the competition, taking your client’s trade secrets with him or her. You have reason to believe the ex-employee has improperly revealed those trade secrets to his or her new employer, who is now using that information to compete against your client. You know that under the federal Economic Espionage Act of 1996 and the Theft of Trade Secrets Clarification Act of 2012, such conduct can be prosecuted criminally. Do you refer your case to the federal government? Do you bring a civil action against your ex-employee? Or both? READ MORE →

IPO’s Trade Secrets Committee to Hold Roundtable in Silicon Valley

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Intellectual Property Owners Association’s Trade Secrets Committee will hold a roundtable discussion at the offices of Fenwick & West in Mountain View, California on Wednesday, May 15, 2013 from noon to 1:30p.m. (PT).  Registration for the roundtable is free.  During the interactive session, attendees will discuss the pros and cons of federal legislation similar to the “Protecting American Trade Secrets and Innovation Act,” which was introduced by former Senator KOHL as S. 3389 in 2012 and would have created a federal civil cause of action for trade secret theft. READ MORE →

BREAKING NEWS: Don’t Mess with Texas Trade Secrets: Lone Star State Becomes 48th State to Adopt Uniform Trade Secrets Act

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​In the battle to harmonize trade secret law, Texas was the Alamo—the biggest state to hold out against the rising tide of states adopting the Uniform Trade Secrets Act. But the Lone Star State is an outlier no more. Today Governor Rick Perry signed into law the Texas Uniform Trade Secrets Act, making Texas the 48th State to enact the model statute.

​The measure closely tracks the uniform act that 47 other states have adopted, providing for definitions of “trade secret,” “misappropriation” and “improper means.” The new law makes small tweaks to the uniform act, such as by expressly providing that a “trade secret” can include a “process, financial data, or list of actual or potential customers,” provided other requirements of the statute are met. As in the uniform act, the new law prohibits the unauthorized acquisition, use, and disclosure of trade secrets. It specifies that independent development and authorized reverse engineering are not prohibited. The act also includes the UTSA’s pre-emption clause, expressly providing that it displaces “conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.” This means that the Texas UTSA will READ MORE →

The Real Lesson of Chinese Cyberhacking

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The Real Lesson of Chinese Cyberhacking

There’s been a lot of news lately about the Chinese military allegedly launching cyber attacks to steal U.S. trade secrets.  This has gotten people riled up, including the President of the United States, who issued a 5-point plan for protecting American trade secrets.  The White House called on the public to make suggestions for new federal legislation to combat this growing threat.  (Submissions were due April 22, 2013.)

This is a time of great opportunity to do something big to protect U.S. trade secrets.  Unfortunately, some proposed solutions aren’t taking advantage of this opportunity.  Some industry groups, for example, have suggested adopting new federal trade secret legislation that would not preempt state laws and only cover cases of “international misappropriation,” or only cover misappropriation by or for the benefit of foreign governments, companies, or individuals.

Respectfully, measures of this type don’t address the real issue and aren’t seizing the moment.  The real lesson of Chinese cyberhacking is not that China has hackers targeting America, but that U.S. companies’ trade secrets are READ MORE →