Confidentiality Agreements

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

The Saga Continues: New York’s Highest Court Will Weigh in on Aleynikov’s Fate

On April 20, 2017, the New York Court of Appeals issued a brief order continuing former Goldman Sachs programmer Sergey Aleynikov’s eight-year voyage through the state’s and country’s legal systems.  Here’s the issue:  does making a digital copy of misappropriated source code instead of physical copy constitute a “tangible reproduction or representation” of the source code?   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

Growing Small Satellite Market Spawning Litigation

Virgin Galactic expanded and continued its attack on its former VP of Propulsion, Thomas Markusic, and his new company, Firefly Space Systems, this month. Markusic co-founded Firefly around the time he left Virgin Galactic, and the two companies compete in the market for rockets capable of launching small and medium sized satellites into lower earth orbit. As the demand for services from such satellites increases steadily; the race to provide a more cost effective method for delivering those satellites into space is also growing and becoming more competitive. READ MORE

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

No Explicit Efforts to Maintain Secrecy? No Problem, Suggests the Ninth Circuit

In Direct Technologies, LLC v. Electronic Arts, Inc., the Ninth Circuit set forth an interesting take on what is sufficient to demonstrate reasonable efforts to maintain secrecy under the California Uniform Trade Secrets Act (“CUTSA”). In the case, plaintiff Direct Technologies, LLC asserted a trade secret misappropriation claim against defendant Electronic Arts regarding the disclosure of its usb drive prototype for Electronic Arts to a third-party. The district court granted summary judgment for Electronic Arts, finding that no reasonable jury could find that Direct Technologies had taken reasonable efforts to maintain the confidentiality of its prototype. 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