Employee Misappropriation

Spring Cleaning: Tidying Up Your “Reasonable Efforts” to Maintain Trade Secrets

It’s among an in-house counsel’s worst nightmares. A former business partner, ex-employee, consultant, or competitor has stolen your company’s trade secret information. Company management demands swift action. You hire outside counsel who, after reviewing your company policies and interviewing stakeholders, tells you that he or she is concerned about being able to establish that your company took “reasonable efforts” to protect the information. Listening to the feedback, you realize with a sinking feeling that these were steps that you, as in-house counsel, may have been able to implement if you had only thought about the issue sooner. READ MORE

Race to the Finish: Autonomous Vehicle Technology at the Forefront of Alleged Trade Secrets Theft

The stakes couldn’t be higher in the race amongst Silicon Valley self-driving companies vying to be the first to bring the industry-changing technology to market.  With competition so steep, and the potential value counted in the trillions, the efforts to protect this technology have given rise to frequent trade secrets theft disputes.

In the most recent instance of alleged autonomous vehicle technology trade secret theft, a federal district court judge ordered the former director of hardware of WeRide Corp., Kun Huang, to return all files he allegedly downloaded from WeRide before his departure in 2018.  WeRide formerly credited Huang with its success in becoming the fastest autonomous vehicle company to complete its first public road test.  Now, WeRide alleges Huang copied confidential information from a company shared-laptop, deleted files from the laptop, cleared its web browsing history, and then erased the hard drive on his WeRide-issued personal MacBook.  Shortly thereafter, Huang began working at Zhong Zhi Xing Technology Co., Ltd. (ZZX), another defendant in the case, which WeRide alleges was founded by its former CEO, Jing Wang, also named as a defendant.

Based on these allegations, the Court granted WeRide a preliminary injunction against Huang and his new companies, ZZX and a related entity AllRide.AI, Inc., barring these parties from using or sharing WeRide’s trade secrets and requiring them to return all WeRide materials within four days of the order.

This case is but one of many recent trade secret disputes amongst Silicon Valley autonomous vehicle technology companies.  And with autonomous vehicle employee turnover high and trillions of dollars at stake, we expect to see many more trade secret disputes arise.

Third Circuit: Spying on Former Employee’s Social Media Account Does Not Constitute “Unclean Hands” to Bar Trade Secret Misappropriation Claim

Consider this: a former employee has just left his or her employer and may have taken trade secrets to a competitor.  Can the employer log in to that former employee’s personal social media account to search for potentially incriminating evidence?  For most employers, the answer may be “no,” as doing so may be unlawful or at a minimum, may constitute “unclean hands” (a doctrine barring equitable relief when the party seeking the relief has committed misconduct related to the claims at issue) possibly jeopardizing the employer’s trade secret misappropriation (and other claims) against the former employee. READ MORE

Intent to Use is Sticking “Pointe” In Denial of Preliminary Injunction

On October 25, the U.S. District Court for the District of Massachusetts denied motions for injunctive relief in a case involving trade secrets allegedly stolen by a departing consultant using his personal computer to sync with the company’s Dropbox.  This case established (1) Massachusetts’ newly enacted Uniform Trade Secrets Act (“UTSA”) does not apply retroactively even if the violation is continuing; and (2) intent to use a trade secret is a hurdle which Plaintiffs can struggle to show where there is not evidence of actual use and the defendant takes steps at remediation. READ MORE

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

Fishing for ESI

When National Fish and Seafood’s (NFS) head of research left for a new opportunity at Tampa Bay Fisheries, she may not have taken just her talents to the competition.  According to NFS’ lawsuit, the former employee transferred thousands of files containing confidential and proprietary information prior to her departure from the company.  NFS also alleges that the CEO of Tampa Bay Fisheries conspired with NFS’s former employee to steal trade secrets involving its proprietary clam production process.

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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

Automation of Our Auto Nation: New Tech Requires a New Look at Trade Secret Laws

Self-driving cars—once a thing of the future—are now becoming a reality. And, as with any new technology, there is a learning curve. Once consumers are able to test out new products, they adapt, preferences change, and what once seemed absurd or over-the-top becomes commonplace. Manufacturers then face perhaps an even steeper learning curve, trying to stay one step ahead of what the public will demand—and two steps ahead of the competition. READ MORE

Worse Than a Toothache: Dental Executive Alleged to Have Misappropriated Proprietary Business Leads

Earlier this month, a Nashville, Tennessee company filed a federal lawsuit against its former employee alleging trade secrets misappropriation under the Defend Trade Secrets Act, among other claims.  The plaintiff, Marquee Dental Partners, LLC, operates dental offices in Tennessee, Alabama, and Kentucky.  Marquee purchases existing dental practices and provides administrative services to those practices allowing the doctors and support staff to focus on clinic services and patient care.  In a particularly strongly-worded introductory sentence, the complaint reads: “This case shows what it means to be a faithless corporate executive.”  READ MORE