Confidentiality Agreements

T-R-NO: Nevada District Court Denies Motion for TRO Despite Evidence of Mass Download of Company Files and Steps Taken to Cover Tracks

Our readers have seen enough of our blog posts to be familiar with the classic ex-employee trade secrets theft scenario:  employee downloads confidential files to his personal computer; employee attempts to cover his tracks with deletions of those files; employee resigns from the company to work for a competitor. When such a classic case results in litigation, the plaintiff company typically succeeds in obtaining injunctive relief against the ex-employee. We posted about one successful preliminary injunction motion last year. A recent district court decision out of the District of Nevada, however, shows that a motion for TRO on seemingly slam-dunk facts is never guaranteed. This decision highlights two important takeaways for litigators: (1) if your client is facing imminent business harm, seek an injunction immediately; and (2) in the Ninth Circuit, there is no presumption of irreparable harm, even if the evidence shows trade secret misappropriation or a breach of the employee’s confidentiality agreement. READ MORE

Trade Secret Sparks Beer Brawl in the Ninth Circuit: When is Your Word Enough?

On September 13, the Ninth Circuit heard oral arguments on an issue of first impression in Anheuser-Busch Cos. v. James Clark, No. 17-15591 (9th Cir. 2015).

Anheuser-Busch filed a complaint in the Eastern District of California against former employee James Clark, alleging that he violated California’s Uniform Trade Secrets Act (CUTSA) by unlawfully disseminating a document containing its beer recipe for use in a separate class action suit. To support its allegations, the company submitted a declaration stating that the leaked document contained “confidential information related to Plaintiffs’ brewing processes, including but not limited to, information regarding a variety of analytical characteristics for each of [Plaintiffs’] products.” READ MORE

Engineering a DTSA Claim: District Court Allows Broad Allegations to Survive Motion to Dismiss

The strange contraption in this photo is at the heart of a recent decision regarding the pleading standard for DTSA claims.  On June 15, Eastern District of Pennsylvania Judge Juan Sanchez denied a motion to dismiss counts of trade secret misappropriation against Joshua Andrew Adams, a former project engineer for PDC Machines, Inc. who left the company and later joined Nel Hydrogen A/S.  PDC and Nel collaborated in 2008 to develop high-pressure hydrogen gas diaphragm compressors and signed a nondisclosure agreement (NDA) barring Nel from replicating or reverse engineering the technology.  Adams was also subject to an NDA that prohibited him from using any of PDC’s confidential information and trade secrets without written permission.  In the complaint, PDC asserts that Adams now works for Nel, and that Nel has filed at least one patent application listing Adams as the inventor for a high-pressure diaphragm hydrogen compressor that is nearly identical to PDC’s version. READ MORE

Federal Circuit Illuminates Right to Disgorgement as Remedy for Trade Secret Misappropriation

The Federal Circuit recently issued an opinion, Texas Advanced Optoelectronic Solutions, Inc. v. Renesas Electronics America, Inc., that addressed several interesting issues impacting the calculation of damages in trade secret actions.  Perhaps the Court of Appeals’ ruling of greatest consequence involved its determination that there is no Seventh Amendment right to a jury decision on disgorgement of profits – a remedy also often commonly described as “unjust enrichment.”  The Federal Circuit instead ruled that the calculation of disgorgement damages is for the trial court to decide after making findings of fact and conclusions of law.  If the decision is extended by other federal courts, it could have wide-reaching implications for claims under the Defend Trade Secrets Act, which allows for unjust enrichment damages as a remedy for misappropriation of trade secrets. READ MORE

Upon Reflection, Some Trade Secrets May Be Less Secret Than They Appear

A recent case in Florida is a reminder that when dealing with government entities, trade secrets may be disclosed to the public, especially if that information has been aggregated.  The District Court of Appeal of Florida affirmed a circuit court’s ruling ordering Broward County to produce information that Uber claimed were trade secrets.  Uber and Broward County had entered into an agreement governing Uber’s services at the airport and Port Everglades.  Part of the agreement required that Uber provide Broward County with monthly self-reports.  These reports contained both aggregated data and granular data.  The aggregated data was comprised of the total number of pickups and drop-offs at the airport and seaport, multiplied by the fee in each of those zones.  The granular data included a time stamp, longitude and latitude of pick-ups or drop-offs, and the first three characters of the driver’s license plate.  Per the agreement, Uber marked these monthly reports as containing trade secrets exempt from Florida’s Public Records Act, which Broward County was required to keep confidential. READ MORE

Trade Secrets and Start-Ups: What to Do When Secrets Walk Out the Front Door

Start-ups often face a complex relationship with their trade secrets. Many of the strengths of early stage start-ups, such as collaborative work among a small number of business partners and open access to proprietary information by all team members, can obfuscate clear ownership rights and confidentiality obligations concerning trade secrets. The first employees of a company will also often feel a strong sense of ownership over his work, which can sometimes lead to the employee considering work developed for the company as his property, rather than the company’s. While proprietary information is often the lifeblood of the business, it can be expensive for young companies to protect. However, there are a number of inexpensive and overlooked best practices that can safeguard trade secrets without slowing down productivity or altering the company’s culture. READ MORE

Juicing Up Your Policies: How To Protect Your Trade Secrets

Recently, popular Southern California juice and aguas frescas chain Green Crush filed suit against up-and-coming rival juice bar Paradise Splash and several individuals. The lawsuit, filed in the U.S. District Court for the Central District of California, alleges 16 claims including misappropriation of trade secrets, trademark infringement, and breach of contract.

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Bread Company Litigation Over “Grandma’s Recipe” Ends With $2.1 Million Trade Secrets Verdict

On October 6, 2017, a federal jury in Utah entered a $2.1 million trade secret verdict in favor of Bimbo Bakeries USA.  Following a trial that wrapped up more than four years of litigation, the jury concluded that defendant Leland Sycamore knowingly used the trade secret recipe for Grandma Sycamore’s bread in the production of rival Grandma Emilie’s bread for defendant US Bakery, despite the fact that he had previously sold the rights to Grandma Sycamore’s to Bimbo.

Bimbo filed suit in 2013, alleging that US Bakery had hired Sycamore to produce a new version of Grandma Emilie’s bread that relied on Bimbo’s trade secret method and used confusingly similar packaging to sell the bread to consumers.

Back in 1998, Sycamore sold the Grandma Sycamore’s brand, which had been in his family since the 1970s, to a predecessor of Bimbo.  As part of this deal, Sycamore agreed to maintain the confidentiality of all associated manufacturing and assembly procedures, recipes and trade secrets.

Other than the fact that jury verdicts in trade secrets cases (or in any case, for that matter) are relatively rare, this case is notable for two reasons.

First, it explains what might qualify as a trade secret in the culinary arena, providing clarity in an area that, as we’ve observed, has long been plagued by confusion over what combination of IP protections and contractual agreements will protect valuable recipes.  Applying Utah’s enactment of the Uniform Trade Secrets Act, the court denied the defendants’ motion for summary judgment, noting that, even if Bimbo’s purported trade secret contained known elements, Bimbo could establish a trade secret by showing that its compilation of known elements was “outside the general knowledge and not ascertainable by proper means.”

Second, this case is an interesting reminder that even though a secret process might originate within a business, that same business may face legal risks down the road for using the process if it has been licensed or sold to a third party with the appropriate safeguards to ensure confidentiality and the third party’s right to use the process.

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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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