Trade Secrets

The DOJ’s China Initiative—Protecting Your Assets

As anticipated in May, rising trade tensions between the U.S. and China have led to a series of escalating measures including tariffs and trade investigations.  In July 2019 testimony to the Senate Judiciary Committee, FBI Director Christopher Wray noted that more than 1,000 active investigations on intellectual property theft “lead[] back to China.”  Against the backdrop of these issues, the Department of Justice announced the “China Initiative” on November 1, 2018.  The DOJ explained that the Initiative was launched against the background of prior findings by the Administration regarding China’s trade practices.  One of the China Initiative’s key goals is to “[i]dentify priority trade secret cases, ensure that investigations are adequately resourced; and work to bring them to fruition in a timely manner and according to the facts and applicable law.” READ MORE

Worried About Trade Secret Poaching? Check in With Your Third-party Service Providers

Hiring external contractors is common practice in the fast-paced tech-industry where talent is scarce and in high-demand, but such a practice can expose a company’s most valuable IP to the confidentiality measures, or lack thereof, of those external contractors. This type of common business model is an area ripe for trade secret theft. University Accounting Services (“UAS”) alleges that this is exactly what happened when their point person at ScholarChip, an external tech company hired by UAS to design and maintain their tuition collection software “eUAS,” left ScholarChip and formed a product in direct competition with UAS. UAS filed suit in Oregon against ScholarChip and its former employee, and both filed a motion for summary judgement. The court denied the motion and held that there were genuine disputes of material fact surrounding the breach of contract and misappropriation of trade secrets claims, among others. READ MORE

Are State Governments Immune From Suit For Misappropriation Of Trade Secrets?

You are a state-government contractor. You respond to an RFP issued by a state-government entity. In your bid proposal, you submit documents that contain your trade secrets. You do not get the contract, but you later learn that the state-government entity gave your trade secret information to your direct competitor who did get the contract. Do you have any options under federal or state trade secret laws to sue the state? READ MORE

Making Memories: Trade Secrets Need Not Be in Tangible Form to Be Protectable

Developments in technology have led to advanced ways of protecting trade secrets. In an age where passwords, metadata, and paper trails are often the stories told to demonstrate misappropriation, it may seem that trade secrets must be reduced to a tangible form to be protected. However, a recent Oregon Court of Appeals opinion reminds us that this is not the case—if information is maintained as a trade secret it is equally protected regardless of form. READ MORE

Tariff Chess Match Escalates Between China and the United States

Trade Secrets Watch has been covering the escalating economic tension between China and the U.S., including the U.S. Trade Representative’s investigation on China’s alleged IP theft under Section 301 of the Trade Act of 1974, dueling imposition of tariffs in March 2018, and the USTR announcement of products against which it proposed to impose 25 percent import duties. 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.

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