As two recent cases show, how one pleads its case under the Defend Trade Secrets Act can be the difference between whether “aloha” means hello or goodbye to federal jurisdiction.
A district court in Hawaii recently dismissed a plaintiff’s claim under the DTSA because it failed to establish subject matter jurisdiction. In that case, DLMC, Inc., a health care service provider for elderly and infirm residents of Hawaii, accused a former employee of stealing client lists. The cause of action under the DTSA was the only federal claim in the complaint and, therefore, the only basis for federal jurisdiction. However, to plead a cause of action under the DTSA, the trade secret must be “related to a product or service used in, or intended for use in, interstate or foreign commerce.” The only argument DLMC made as to this required nexus was that its clients “have federal patient identification numbers so as to allow for their receipt of federal funds for the services provided to them by [DLMC].” DLMC also argued that because it was an entity whose very existence relies on and is conditioned upon federal application, certification and approval,” its services “are subject to federal law….” Neither of these arguments persuaded the court as they both failed to show whether and how the alleged trade secrets themselves (as opposed to DLMC’s business generally) related to interstate commerce. The court granted defendants’ motion to dismiss, however, with leave for DLMC to amend its complaint to allege a DTSA (or other federal) claim. READ MORE
A recent case from the Federal Circuit upholding a jury’s finding in favor of defendant offers lessons to both defendants and plaintiffs on preparing for trade secrets misappropriation actions. Both plaintiff, Raytheon, and defendant, Indigo, are companies in the infrared imaging equipment business. Of the four Indigo founders, three of them were former Raytheon employees, causing Raytheon to accuse Indigo of misappropriating its trade secrets. Specifically, Raytheon accused Indigo of using Raytheon’s sequential vacuum bake recipes and in situ solder seal package assembly process taken by the former Raytheon employees to develop Indigo’s recipes and processes. READ MORE
Just days after the European Union’s widely-discussed new data privacy regulations, the General Data Protection Regulation (“GDPR”), took effect on May 25, 2018, another EU-wide legal change quietly occurred. (And if you’re still puzzling through GDPR compliance, fear not: We have plenty of resources for you here.)
But on to the less familiar date: June 9, 2018, was the deadline for EU member states to comply with the new Directive on the Protection of Trade Secrets. As we’ve reported before, the European Parliament adopted the Directive in 2016 to harmonize national laws regarding trade secrets protection. Under the Directive, trade secrets owners across Europe should enjoy increased protection and uniformity—welcome news, given that the laws have historically differed significantly from country to country.
Last week, multinational mining giant Rio Tinto asked a federal court in Manhattan to shield its document disclosures to the Securities and Exchange Commission (SEC) from the public eye. Unlike the typical cases we discuss involving former employees working for competitors, Rio Tinto is defending against fraud claims brought by the SEC that implicated the company and two of its former top executives. READ MORE
Article 123 of the General Provisions of the Civil Law of the People’s Republic of China (effective Oct. 1, 2017) confirmed that trade secrets are intellectual property, signifying China’s recognition of the importance of trade secret protection. Nevertheless, trade secret misappropriation remains rampant in the country. READ MORE
AFS, a company specializing in streamlining shipping costs and logistics, had its eight count amended complaint streamlined to only one—its Tennessee Uniform Trade Secrets Act (“TUSTA”) claim—primarily due to preemption and AFS’s lack of specificity as to its common law claims.
AFS filed suit in December 2016 against two prior employees, Christopher Cochran and Alessandro Rustioni, and their new competing company, Freightwise LLC. AFS’s complaint set forth the classic case of defecting employee trade secret theft. Among other things, AFS alleged that Cochran and Rustioni founded Freightwise in 2014 while still employed for AFS. Both continued to work for AFS in sales leadership positions until late 2015 and early 2016. And, they allegedly conspired to and secretly organized Freightwise by soliciting one of AFS’s major clients and maliciously interfering with its high-value contracts. READ MORE
After a long political season that took many twists and turns due in part to revelations from WikiLeaks, the holiday season finally arrived. For many, that meant family traditions, time away from work, and massive amounts of college football, thanks to the current litany of televised bowl games.
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
Intellectual property owners may seek to protect certain information either by obtaining a patent or by maintaining its secrecy. A patent provides strong, exclusive rights for a fixed period of time, generally twenty years. A trade secret may last indefinitely but protection can be lost through independent development, reverse engineering, or failure to maintain secrecy. (We previously published a chart comparing the features of patents and trade secrets.) This article discusses those instances when trade secret protection may be superior to patent protection. READ MORE
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