Misappropriation

Bad Artists Copy. Good Artists Steal: Trade Secrets in the Art World

“Bad Artists Copy. Good Artists Steal” – Pablo Picasso

In the small world of exclusive and upscale art sales, competing galleries inevitably form and maintain relationships with one another.  This is the case for Lévy Gorvey gallery partner Dominque Lévy, and Lehmann Maupin Group co-founder Rachel Lehmann, who have known each other for over 20 years.  Now, Lehmann Maupin is involved in a trade secrets fight with their former sales director, Bona Yoo, who is currently employed by Lévy Gorvey.  In this tightknit artist’s community, the news of a trade secrets lawsuit against a former employee is admittedly more shocking than the typical Silicon Valley trade secret theft story, where employees leave for competitor companies as frequently as they come.  But it should not be surprising that trade secrets in the art industry are just as valuable to their owners as they are to tech industry leaders—because in both worlds, client relationships are key.

That’s why Lehmann Maupin Group is not taking lightly their suspicion that their former sales director destroyed company trade secrets and stole client information upon her departure to a competing gallery.  According to the complaint, when Bona Yoo left Lehmann Maupin to join Lévy Gorvey last fall, she copied files containing valuable trade secrets and “maliciously corrupted” or deleted other files.  Lehmann Maupin alleges that Ms. Yoo did so to gain a competitive advantage in the industry, while simultaneously impeding Lehmann Maupin’s business. The complaint “claims damages from the violation of the Defend Trade Secrets Act, the Stored Communication Act, confidentiality agreements, and New York law.

Dominque Lévy of the Lévy Gorvey gallery has come to Ms. Yoo’s defense, publicly stating that she is “tremendously saddened” by the allegations against Ms. Yoo, and adding that the art world “is not the place for this aggressive behavior.”   Lévy Gorvey gallery is not named as a defendant in this litigation.   Ms. Yoo’s response is due January 29.

This case brings to light some interesting issues that permeate across much larger, more publicized industries.  The first is that no industry is immune from trade secrets litigation.  When key employees bring invaluable and irreplaceable knowledge to the table, they often become embroiled in trade secrets litigation with their former employers.  Regardless of whether Ms. Yoo is liable for the allegations leveled against her in this case, it remains the case that departing employees are often unaware of their obligations with respect to protecting their former employees’ trade secrets.  It is important to counsel individuals on the laws surrounding trade secrets theft prior to their exit from one company to a competitor company—whether they work for an art gallery or a tech-industry giant.

To Patent or Not to Patent? Preserving Trade Secret Status During Prosecution

Amid a growing body of unsettled law regarding the patentability of software and business methods patents, companies are increasingly choosing to maintain their valuable innovations as trade secrets rather than risk a rejected patent application. There are pros and cons to both forms of intellectual property protection. However, the decision need not be binary – at least not during the pendency of the patent application. Instead, by opting to go the “non-publication” route, inventors can maintain trade secret protection over an invention during the patenting process and decide whether to forego trade secret status and allow the patent to issue at the end of the patent prosecution process. READ MORE

Titanic Texas Trade Secrets Verdict Contested as Colossal Collusion

A $700 million jury award for trade secrets misappropriation and fraud is the product of a collusive scheme to deceive the jury, claims title insurance and valuations provider Amrock, formerly known as Title Source, in its recent bid for a new trial.

The blockbuster award to technology start-up HouseCanary arose out of its 2015 contract to provide Amrock with access to its proprietary app designed to generate real estate valuations for house appraisers based on a proprietary automated valuation model. Several months later, Amrock accused HouseCanary of breaching the contract by failing to provide any usable products. Amrock terminated the agreement and sought a declaratory judgment in Texas state court that it need not pay HouseCanary the contracted $5 million in annual access fees.  HouseCanary countersued, claiming that Amrock used HouseCanary’s products and offerings without paying for them, collected a “critical mass” of HouseCanary’s proprietary data, and ultimately used that information to “secretly replicate” HouseCanary’s protected technology and intellectual property. HouseCanary ultimately convinced the San Antonio jury that Amrock lied about its intended purpose in entering the contract and that Amrock misappropriated HouseCanary’s data and technology to develop competing property analytics and software. In March 2018, the jury awarded HouseCanary $200 million for trade secrets misappropriation, $400 million in punitive damages for the misappropriation, $34 million for fraud relating to the contract, and $68 million in punitive damages for the fraud. In October 2018, the judge upheld the award and ordered Amrock to also pay $29 million in prejudgment interest and $4.5 million in attorneys’ fees. READ MORE

#SecretTweets: Protecting Social Media as a Trade Secret?

Social media today connects people more than ever. It can be a means to bring together long-lost friends, new acquaintances, and love interests, or the public with celebrities, sports teams, new products, and companies—to name just a few. It can be an effective way to market images and products, as it has the potential to reach thousands instantly with the click of a button. With such public uses and goals, social media seems like an odd candidate for trade secret protection. Yet, that is precisely what BH Media Inc. is seeking to protect in its complaint, filed with the Western District of Virginia on August 6, 2018 against a former employee, Andy Bitter. READ MORE

Kittens, Stephen Curry, and Cryptocurrency: This Trade Secrets Case Has It All.

What do kittens, three-time NBA Finals champion Stephen Curry, and cryptocurrency have in common?

On May 7, 2018, a subsidiary of Launch Labs, a Canadian corporation doing business as Axiom Zen, released cryptocollectibles called “CurryKittens.”  Cryptocollectibles are unique, digital tokens created using blockchain technology.  The CurryKittens, a type of Cryptocollectible, were virtual kittens with the likeness of NBA star Stephen Curry.  The CurryKittens were three of many virtual cats that could be securely bought, sold, traded, and bred on the multimillion dollar- generating CryptoKitties platform.  (An image of the now suspended “CurryKittens” can be found here.) READ MORE

When Friend Turns Foe: The Risks of Sharing Trade Secrets during M&A Negotiations

In the world of election politics, arms-length dealing with political adversaries is a delicate dance.  Recently, TargetSmart, a Democratic data firm learned how risky even negotiating with those on the same side of the aisle can be.  On June 28, 2018, TargetSmart filed a complaint in the District Court of Massachusetts against GHP, a Boston-based investment firm, and Catalist, TargetSmart’s competitor in the Democratic consulting space, seeking damages and permanent injunctive relief for misappropriation of trade secrets, breach of contract, and other claims arising from a merger negotiation gone-wrong. READ MORE

To Be Or Not To Be: NY High Court Rules that Data Copied to a Server is a Tangible Reproduction under the New York Penal Code

On May 3, 2018, the New York Court of Appeals held that data copied onto a server constitutes a tangible reproduction for purposes of liability under the New York Penal Code, marking the end of Sergey Aleynikov’s nine year battle with federal and state prosecutors.  Trade Secrets Watch has kept you up to date with the seemingly never-ending saga – most recently here, here, and here.

As a refresher, Programmer Sergey Aleynikov was accused of copying thousands of lines of code from his former employer, Goldman Sachs Group Inc. in July 2009.  The Second Circuit upheld Aleynikov’s conviction under the National Stolen Property Act (NSPA) and the Economic Espionage Act (EEA), but later prompted legislative changes when it reversed, finding that Aleynikov had not stolen a “good” as defined by the NSPA, nor a trade secret intended for use in interstate or international commerce, as required by the EEA. READ MORE

Seedy Business: Chinese Scientist Sentenced to Ten Years for Stealing Proprietary Rice Seeds

In 2013, U.S. Customs and Border Protection agents caught researchers attempting to smuggle a $75 million trade secret from the United States to China.  Unlike the trade secrets we usually discuss, the trade secrets in tow were rice seeds.  But not just any rice seeds:  these valuable seeds were genetically modified to create proteins used to treat gastrointestinal disease, antibiotic-associated diarrhea, hepatic disease, osteoporosis and inflammatory bowel disease.  READ MORE

That’s a Cut: “Textbook Reparable Harm” was “Showstopper” to Video-Streamers’ Preliminary Injunction Request

The lawsuit between Swarmify and Cloudflare recently produced an Order in which U.S. District Court Judge William Alsup denied Swarmify’s motion for a preliminary injunction, and also offers a cautionary tale about what activities might result in bloggers being hauled into Court.

In 2016, Swarmify, a start-up focused on affordable video streaming, and Cloudflare, a corporation that uses a network of data centers for content delivery, entered into confidential negotiations regarding Cloudflare’s potential acquisition of Swarmify. During these discussions, Swarmify disclosed to Cloudflare some confidential information about the company’s proprietary streaming method, including a pending unpublished patent application, but notably did not disclose any computer code. While the discussions were ongoing, Cloudflare offered employment to Swarmify’s CEO and the senior developer of Swarmify’s proprietary streaming method.  Both individuals declined, and informed Cloudflare any movement on their part would have to come through Cloudflare’s acquisition of their company. The companies ended negotiations and parted ways, but not for long. READ MORE

Defining Trade Secrets: Texas Supreme Court May Soon Decide How Particular Trade Secrets Owners Must Be in Court

In every trade secrets case, the plaintiff faces the same fundamental dilemma:  In order to enforce their rights in court, they must identify (at least to some degree) the trade secrets at issue. Although California has adopted a reasonable particularity requirement by statute, how much detail plaintiffs must provide when identifying their trade secrets in litigation continues to vary state-by-state.  The answer is no clearer under federal law, as the Defend Trade Secrets Act is silent as to this issue.

Notwithstanding, the level of particularity required is an ongoing issue that courts continue to grapple with.  For example, Texas’s highest court may weigh in for the first time on the degree of specificity plaintiffs must provide when identifying trade secrets allegedly misappropriated under the Texas Uniform Trade Secrets Act (TUTSA). READ MORE