Competitor Misappropriation

Fourth Circuit Blows Away Nearly $1 Billion Kevlar Trade Secrets Award

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The Fourth Circuit has thrown out the second-largest trade secret jury verdict on record, an award of nearly $1 billion, on the grounds that the district court improperly excluded evidence relevant to the defense.

We have covered this case extensively, tracing its history of allegations of double agents, bribery, top-secret industrial facilities, and its (apparent) culmination with an enormous jury award.  Now, it seems, this epic legal saga will start anew.  On April 3,  the Fourth Circuit unanimously vacated the jury award and ordered a new trial. READ MORE →

Ex-SanDisk Employee Arrested in Japan, Civil Suits Filed in the Wake of Alleged Flash Memory Trade Secrets Misappropriation

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Technology firms SanDisk and Toshiba recently filed trade secrets lawsuits on opposite sides of the Pacific, each alleging misappropriation by a third party stemming from the two companies’ joint venture.

SanDisk filed in California (seeking damages and injunctive relief) and Toshiba in Japan for alleged misappropriation of trade secrets from SanDisk and a SanDisk-Toshiba joint venture. In Japan, the alleged perpetrator was arrested.  Engineer Yoshitaka Sugita, his former employer, SK Hynix, and two wholly-owned North American subsidiaries stand accused of misappropriation.  SK Hynix is accused in both the California and Japan actions. READ MORE →

Trade Secrets Watch 2013 Year-in-Review

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It’s been a hot year in the trade secrets field, with some huge verdicts and settlements, a renewed spotlight on cyberattacks, and an unusual flurry of trade secrets legislation.  Trade Secrets Watch’s 2013 Year-in-Review highlights the notable trade secrets activity from the past year. READ MORE →

HALLOWEEN EDITION: Cookie Maker Gets Early Treat when Court Protects Halloween Cookie Recipe as a Trade Secret

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In September 1995, Philadelphia-area cookie manufacturer Sweetzel, Inc. got an early Halloween treat when the U.S. District Court for the Eastern District of Pennsylvania found that the company’s cookie recipes and customer lists constituted trade secrets, and granted an injunction against Sweetzel’s competitor.  The dispute centered on Sweetzel’s “Spiced Wafers,” which are sold on a limited basis during the Halloween season and have been celebrated as a local food tradition that traces its roots to colonial times.

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Former Employee Allegedly Coughs up Cold Remedy Formula: Broad Non-Disclosure Agreement Largely Ineffective

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A New Jersey appellate court’s decision last week in UCB Mfg., Inc. v. Tris Pharma, Inc., serves as a cautionary tale for employers when drafting confidentiality agreements to protect their trade secrets and confidential information.  In UCB, the court found that the confidentiality provision in a pharmaceutical company’s employment agreement with one of its former employees was unenforceable because it was overly broad in time and scope, did not further a legitimate business interest, was contrary to public policy, and was unduly burdensome on the employee.

The case emerged when plaintiff pharmaceutical company UCB alleged that its former lead cough syrup formulator, Yu-Hsing Tu, disclosed confidential information about one of its cough syrup formulas after leaving UCB and joining the company’s competitor, Tris.  After Tu’s arrival, Tris became the first company to produce a generic form of one of UCB’s profitable cough syrups.  UCB sued Tu and Tris for misappropriation of trade secrets, breach of Tu’s confidentiality agreement with UCB, and unfair competition.  UCB later dropped its trade secrets claim after failing to secure a preliminary injunction.

While working for UCB, Tu had signed a confidentiality agreement which stated Tu would not disclose “secret or confidential information” without UCB’s consent.  The agreement specified that “secret or confidential information” included READ MORE →

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

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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 →

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

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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.

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Rubber Match? Resin Trade Secret Battle Results in a Multi-Jurisdictional Draw

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On the same day last week, two rival rubber resin companies issued press releases — each claiming legal victory in the same trade secret dispute.

SI Group, a developer of rubber resins and tackifiers, touted its “significant victory” over Sino Legend before the U.S. International Trade Commission.  On the same day, Sino Legend also claimed victory in a parallel Chinese action when the Shanghai No. 2 Intermediate People’s Court rejected SI’s claims concerning the same dispute.

SI ’s ITC complaint alleged that Sino Legend misappropriated SI’s secret manufacturing processes by poaching one of SI’s Shanghai-based employees, Xu Jie.  Xu was allegedly the only person at the plant who had access to the entirety of SI’s secret manufacturing processes.  Shortly after Xu’s departure from SI, Sino Legend began producing competing products.  SI accused Sino Legend of using SI’s secret processes and of filing patent applications that contained misappropriated Sino Legend information.

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The Intriguing World of Formula One Trade Secrets: Mercedes F1 Team, Pirelli Summoned by FIA Tribunal Over Secret Tire Testing

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128px-2012_Italian_GP_-_MechanicOn June 20, 2013, Formula One’s internal judicial system will convene in Paris to decide whether Mercedes and Pirelli violated the racing body’s governing agreements by conducting secretive tire testing last month. Mercedes and Pirelli claim the safety-related tests were authorized by the contract establishing Pirelli as Formula One’s exclusive tire supplier, but Mercedes’ F1 rivals claim the tests provided Mercedes with an unfair competitive advantage. This case provides some insight into the development and importance of trade secrets in an industry where fierce competition, rapidly-changing technology, and billions at stake make trade secret protection vital but often difficult.

Despite F1 teams’ shared interests in controlling costs, maximizing revenue, and promoting a common culture, Formula One is composed of a group of competing businesses out to win races, sponsorships, and prize money. So it’s no surprise that many teams push the envelope of what is permissible under Formula One’s governing documents in pursuit of speed, cash, and glory. As Le Mans legend Carroll Smith famously stated: “In any given racing series I will not start the cheating. If someone else starts it, I will appeal to them and to the officials to stop it. If my efforts do not succeed, then I’ll show them how it is done.” READ MORE →

It’s Not Just for Patents Anymore: Using the ITC to Combat Theft of Trade Secrets

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Trade secret theft knows no borders in an age of cybertheft and global corporate espionage.  But U.S. district courts are often too slow and procedurally ill-equipped to help in cases of international misappropriation, with several recent cases never getting off the ground because of problems serving foreign defendants.  Increasingly, victims of foreign misappropriation are turning to the U.S. International Trade Commission — a body armed to hit back at trade secret thieves anywhere in the world.

For companies seeking to remedy the theft of trade secrets by overseas perpetrators, the options have been limited, especially if the thief or the products the thief produces are outside of the United States.  Procedural hurdles like obtaining jurisdiction over a foreign company, or the perpetrator’s resident country being inhospitable to claims by an American victim, can thwart an American corporation’s ability to prosecute the foreign theft of its own trade secrets.

An ITC action doesn’t present these obstacles.  READ MORE →