In January of this year, Chinese wind turbine manufacturer Sinovel Wind Group Co. Ltd. was convicted of stealing trade secrets from U.S. company AMSC Inc. The theft caused AMSC, more than $800 million in losses and forced the company to lay off more than half its global work force. Sinovel’s sentencing—which could include fines exceeding $1 billion and a multiyear probationary period—is scheduled for June 2018. READ MORE
On Tuesday, April 3, the California Supreme Court will hear arguments in Hassel v. Bird. Case No. S235968. While seemingly a defamation case, it has direct implications on trade secrets owners and the rights of internet publishers.
In that case, a lawyer, Dawn Hassell, sued her former client, Ava Bird, for defamation in California state court because of a negative Yelp review. 247 Cal. App. 4th 1336 (2016). Bird never responded to the lawsuit, so the trial court entered a default judgment in Hassell’s favor. The court ordered Bird and Yelp to remove her the reviews, even though Yelp was not a party to the lawsuit. Yelp appealed on numerous grounds, including that (1) the court denied Yelp due process because Yelp wasn’t a party; (2) the order was an improper prior restraint; and (3) Yelp had immunity under the Communications Decency Act. The court of appeal rejected all of these arguments.
This fight between the rights of internet publishers and those allegedly aggrieved by third parties who post information or statements on the publishers’ websites is an ongoing battle. While often fought in the defamation space, many of these disputes involve trade secrets owners who claim others, including former employees, posted trade secrets on an internet publisher’s site. See, e.g., Glassdoor, Inc. v. Superior Court, 9 Cal. App. 5th 623 (2017). The Hassell case will have direct impact on this ongoing battle. If upheld, it will create a potential roadmap for trade secrets owners to take down offending content published on the internet. For the internet publishers, it creates a serious headache because it allows plaintiffs to sidestep the publisher’s right to defend against an injunction.
Trade Secrets Watch will monitor the oral argument and report back.
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
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
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
As our United States readers prepare for the holiday weekend, we look back to a post from the archives where we dished about franchise relationships gone awry and a trade secrets dispute over turkey sandwiches. The takeaway: Savvy franchisors should consider revisiting their agreements with an eye toward gaining admissions from franchisees that certain materials constitute trade secrets.
And while our readers in the rest of the world wrap up the work week, companies in the United Kingdom may have a reason to be thankful. As our colleagues over at the Employment Law and Litigation blog discuss, a recent High Court decision granted an order allowing an employer to image a departing employee’s computer to see if it contained confidential information.
This post is a good read not only for those in the UK but for any company interested in protecting its trade secrets and confidential information. For example, the post includes this tip, which has fairly broad impact: You will be more likely to persuade a court to rule in your favor if you offer limitations and controls in the carrying out of a forensic search of a computer or other device.
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
Competition from Chinese companies shows no signs of slowing. Likewise, allegations of trade secret theft against Chinese companies are increasingly common. In this case, the U.S. Department of Justice linked allegations of trade secret theft with wire transfers from a Chinese company in order to freeze bank accounts and real property held by several defendants charged with conspiracy to steal trade secrets. READ MORE
Just as the U.S. Patent and Trademark Office has shown a keen interest in better understanding policy concerns and the needs of business stakeholders in the area of trade secrets (see our coverage of both USPTO symposia here and here) against the backdrop of a new federal law, the EU’s IP office is also stepping up its focus on trade secrets following the EU Trade Secrets Directive in 2016 (our coverage here). READ MORE
Take off your eclipse glasses, close that NASA photo gallery, and stop thinking about how “path of totality” would make an awesome band name: it’s time to get back to work. As the country recovers from Eclipse Mania 2017, we take a look at some space-related trade secrets cases.
Turn Around…
Someone might be stealing your trade secrets behind your back! A federal court found that’s what happened to Pacific Aerospace & Electronic, Inc. (PAE), a company that designs components for electronic circuitry in the aerospace and space exploration industries and whose products are used on the Hubble Telescope and the International Space Shuttle. According to PAE, the specialized nature of its business makes the identity of its customers—who are relatively few in number—critical to its business success. That’s why it was a problem when two PAE employees who had access to proprietary information about PAE’s technologies and customers left for a rival company, RAAD Technologies, Inc. One of the former employees allegedly copied backup tapes of design information weeks before leaving, and both employees allegedly compiled a list of prospective customers after leaving which they gave to RAAD’s sales representative for use in soliciting business. PAE brought a claim for misappropriation of trade secrets (among others) against these former employees and RAAD in the Western District of Washington, and moved for a preliminary injunction. The court ruled that PAE’s detailed customer information was a protectable trade secret, and that PAE risked irreparable harm in the absence of an injunction and would likely prevail on the merits of its misappropriation claim. However, the court limited the scope of injunctive relief only to future misuse of the trade secret customer list, rather than ongoing misuse—i.e., continued sales to wrongfully-acquired customers—as PAE had requested. The court reasoned that given the importance of PAE’s (and later RAAD’s) customers, public interest concerns favored permitting these ongoing business relationships and remedying any harm by an award of monetary damages.
