Trade Secrets

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.

RICO Killer: DTSA Non-Retroactivity Wipes Out Racketeering Claim Based on Trade Secret Theft

On May 11, 2016, the U.S. Defend Trade Secrets Act (DTSA) created a federal remedy for trade secret misappropriation and added trade secret theft as an act that can form a predicate for Racketeering Influenced and Corrupt Organizations Act (RICO) violations.  Since the DTSA’s enactment, a number of courts have held that the DTSA does not apply retroactively to misappropriation occurring prior to enactment unless there is continuing use (i.e., an act constituting misappropriation after the DTSA’s enactment despite the acquisition occurring pre-enactment).  Recently, a court in the Northern District of California found the same to be true for RICO claims predicated upon misappropriation occurring prior to the DTSA’s enactment.  In Eli Attia v. Google, the court dismissed with prejudice plaintiff’s fifth amended complaint alleging RICO violations based on criminal trade secret theft and misappropriation that occurred in 2011 and 2012. READ MORE

FOIA Exemption 4 Tightens the Spigot on Public Disclosure of Bottled Water Sourcing Records

The Freedom of Information Act (“FOIA”) grants the public a powerful right of access to records in the possession of federal agencies.  However, this right of access is subject to nine distinct exemptions.  As demonstrated by D.C. District Court Judge Trevor N. McFadden’s opinion in Story of Stuff Project v. United States Forest Service, it is relatively easy for the federal government to withhold records under Exemption 4 which protects “trade secrets and commercial or financial information obtained from a person” which are “privileged or confidential.”  5 U.S.C. § 552(b)(4). READ MORE

“Aloha” to Federal Jurisdiction Over Trade Secrets Claims

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

Senate Judiciary Committee Creates IP Subcommittee to Combat IP Theft

Last week, the United States Senate Judiciary Committee announced the creation of a new subcommittee on intellectual property.  The IP subcommittee will address a range of IP issues, including theft by state actors such as China.  The announcement of the subcommittee comes in the wake of increasing tension over trade with China and shortly after the Department of Justice announced criminal charges against China’s Huawei Technologies for alleged trade secrets theft. READ MORE

Using Non-Compete Agreements in Employment Contracts to Protect Trade Secrets

Employers in many industries use non-compete agreements as a key tool to protect trade secrets.  According to U.S. Treasury reports, non-compete agreements impact approximately 30 million – nearly one in five – U.S. workers, including roughly one in six workers without a college degree.

Some employers have imposed non-compete agreements across a broad segment of their workforce, including imposing them on low-wage earning employees and employees who are not privy to trade secrets or other confidential information.  Non-compete agreement opponents argue that such broad non-compete agreements can interfere with the employee’s right to make a living without any off-setting benefit for the employer.  In the past few years, state attorneys general have been successfully suing companies to invalidate what many see as overly-expansive non-compete agreements.

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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. READ MORE

Possession is not 9/10ths of the Law in Continuing Use Misappropriation Under DTSA

When Congress enacted the DTSA on May 11, 2016, it left open the issue of whether the DTSA would apply to misappropriation that occurred prior.  As we previously reported, many federal district courts have since found that it does apply if there were continuing acts of misappropriation after enactment of the statute.  Now, the 10th Circuit Court of Appeals has weighed in, upholding a district court’s dismissal of a DTSA claim where the plaintiff failed to allege a continued act of misappropriation after the date of enactment. 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

One Step Away from Uniform: Taking a Closer Look at Massachusetts’ New Trade Secrets Law

As we reported in August, Massachusetts became the penultimate state to enact the Uniform Trade Secrets Act (UTSA), leaving New York as the sole remaining holdout. Massachusetts’ new law, which took effect October 1, 2018, significantly expanded the state’s existing trade secrets law by broadening protections for trade secret owners and narrowing the scope of noncompete agreements. As we reported earlier this month, the new law does not apply retroactively even if the violation is ongoing in nature.

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