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Posts in Trade Secrets

Pardon Me? Levandowski Case Highlights Need for Proactive Approach to Avoid Trade Secret Problems in Hiring

My head was turned by the recent news of President Trump’s final-day pardon of Anthony Levandowski, the former head of Google’s self-driving car unit who was recruited into Uber with full knowledge that he had downloaded 14,000 confidential files on his way out, and who was later convicted of trade secret theft. I was struck by the White House statement of justification. It said that Levandowski – who hadn’t yet served a day of his 18-month sentence – “has paid a significant price for his actions.” I have no doubt that Levandowski has “paid a significant price” for his misdeeds, but it caused me to think about the price paid by others who were involved in this fiasco of a hiring, most specifically Uber. Salacious stories like this one serve as a reminder of all the things that can go wrong when we hire someone from the competition. Especially when we stop thinking about risk and see only upside. So, let’s talk about that risk and what you can do to keep yourself out of trouble – and never, ever need a presidential pardon.

Department of Justice’s ‘China Initiative’: Two Year Recap

One of the key trade secret trends in 2020 that was not mentioned by James Pooley in his excellent recap of the year’s trends was the continued focus by the government on Chinese economic espionage. Last year marked the two-year anniversary of the Department of Justice’s “China Initiative,” which was announced by Attorney General Jeff Sessions on November 1, 2018, and which was intended to increase the focus on the investigation and prosecution of trade secret theft and economic espionage under the Economic Espionage Act (EEA) and other “unfair trade practices” committed by the Chinese government and Chinese Nationals. The China Initiative reflects the strategic priority of countering Chinese national security threats and reinforces the government’s overall national security plan. The China Initiative is led by the Department of Justice’s National Security Division, which is responsible for countering nation-state threats to the United States.

Take Heed: Lessons from the Top Trade Secret Cases of 2020

One of the uniquely fascinating aspects of trade secret disputes is that they are laced with unbridled emotions, accusations of treachery, and actors who angrily disagree over basic facts. In other words, they provide a perfect metaphor for the year 2020. Let’s take a look back at the cases this year that are worthy of comment, either because they involved some unusual set of facts or because they provide useful guidance for behaving better in 2021.

ITC Issues Limited Exclusion Order on Botox Products, Partially Reverses Trade Secret Finding

In September, the International Trade Commission (ITC) decided to review an initial final determination (FID) in the Matter of “Certain Botulinum Toxin Products, Processes for Manufacturing or Relating to Same and Certain Products Containing Same,” Investigation No. 337-TA-1145, a complaint filed by Allergan against Botox products made by Daewoong and its partner, Evolus, a “performance beauty company”. On Wednesday, the ITC issued a Final Determination in the case, finding that the sale and importation of the products into the United States violated Section 337 of the U.S. Tariff Act. The Commission issued a Limited Exclusion Order (LEO) prohibiting importation of the products by Daewoong and Evolus for a period of 21 months, as well as a cease and desist order against Evolus preventing the Company from selling, marketing, or promoting the products in the United States for a period of 21 months. However, the Commission reversed the FID’s finding that a trade secret exists with respect to Medytox’s bacterial strain.

Supreme Court Ponders Proper Application of the Computer Fraud and Abuse Act

In Van Buren v. United States, argued December 1, the Supreme Court has a chance to address how the Computer Fraud and Abuse Act applies when a defendant is authorized to access and obtain information from a computer but subsequently uses this information for a purpose that is not permitted. The outcome of this case is important to every company that has computer data and will provide guidance on how best to protect that data.

When it Pays to Talk About Your Secrets

The conversation begins, “Can you keep a secret?” “Yes, of course,” they say. What happens next? Naturally, you tell them what it is that you are going to trust them with. That’s the way it happens in personal relationships. In business, it’s usually more complicated. And it depends a lot on who you’re talking to. Let’s first consider the employee confidentiality agreement. In some smaller businesses, especially in the “low tech” economy, employee non-disclosure agreements (NDAs) may not be necessary, because workers neither create nor are they exposed to company secrets. But if you’re making things from a private recipe, or if employees learn sensitive information about customers, it’s a good idea to have these contracts. And if you’re in a knowledge-based industry, they’re more or less essential.

It’s 10:00 PM: Do You Know Where Your Secrets Are?

In the wake of urban unrest in the early 1960s, local governments imposed nightly youth curfews, and a Massachusetts legislator suggested that all radio and television stations begin their 10:00 evening programming with an announcement: “It’s 10:00 PM. Do you know where your children are?” The phrase was quickly picked up across the country and became a common (and sometimes mocked) cultural artifact of the era…. For modern business, if you can indulge the metaphor, we may think of data assets as the children of the enterprise, at least in the sense that valuable information is vulnerable to loss or compromise. Reminding companies of the need to be vigilant makes a lot of sense.

Defending Trade Secrets with Protective Orders

Plaintiffs in trade secret cases are often faced with the difficulty of protecting their trade secrets, especially during trial, when different rules apply than during the pre-trial proceedings. It certainly makes little sense for a party to seek to prevent a defendant from disclosing their trade secrets only to have them disclosed to the public during discovery or trial. In recognition of this dilemma, Congress included Section 1835(b) (“Rights of Trade Secrets Owners) in the Defend Trade Secrets Act, which seeks to address this issue by requiring district courts to permit the trade secret owner the “the opportunity to file a submission under seal that describes the interest of the owner in keeping the information confidential.”

A Massive Threat to Innovation Dodged—for Now

When people think of innovation at this moment, odds are they are thinking about innovation in the biotech and pharmaceutical sector, as the industry scrambles to invent a dependable vaccine for COVID-19, more reliable tests and other treatments. The immediate need for such innovation is real, but the U.S. economy has a constant, ongoing need for innovation across all industry sectors because we are no longer the cheapest place to make things or to grow things. We are the place that invents and innovates things. As such, our economy depends on a robust innovation ecosystem. That means we must maintain a system of abundant risk-capital, affordable and accessible quality educational options, a culture of risk-taking, and a strong intellectual property system so that if an invention succeeds, those who took the risks have a chance to reap the rewards.

ITC Decision to Review Final Initial Determination in Botox Case Could Have Big Implications for Trade Secrets

Last week, the United States International Trade Commission (ITC) issued a notice in the Matter of “Certain Botulinum Toxin Products, Processes for Manufacturing or Relating to Same and Certain Products Containing Same,” Investigation No. 337-TA-1145, stating that the ITC has “determined to review in part a final initial determination (FID) of the presiding administrative law judge (ALJ) finding a violation of section 337 of the Tariff Act of 1930.”Last year, Allergan, the U.S. manufacturer of Botox, and Medytox, the Korean manufacturer of a similar product, filed a joint complaint against Daewoong, a Korean drug maker, under Section 337 of the Tariff Act of 1930, alleging that Daewoong had stolen Medytox’s botox strain trade secret in Korea and introduced it to the U.S. market. The FID was issued on July 6, 2020, wherein the ALJ found that certain products sold by the Korean drug maker Daewoong and its partner Evolus, Inc. violated section 337 through their importation and sale in the United States of a botulinum neurotoxin product “by reason of the misappropriation of trade secrets.”

Gathering Business Data? Be Careful, Mom is Watching – A Comment on Data Scraping and the Compulife Case

When people say that “data is the new oil,” they’re talking about new ways of creating wealth. No matter what business you’re in, success today depends on learning everything you can about your customers and competitors. And there’s so much information sloshing around the internet, every industry—from restaurants to manufacturers to sports teams—is busy extracting insights from “big data” analysis. But, like drilling for oil, prospecting for data sometimes gets your hands dirty. Recently, a court ruled that a startup company providing life insurance quotes to consumers had created its database – the engine of its busines – by taking data from an existing company (Compulife) that had built theirs from scratch.

Acer v. Intellisoft Petition Rebukes CAFC for Disrespecting SCOTUS Precedent, Ignoring District Court

Greenberg Traurig and The Rader Group – which is headed by retired Chief Judge of the U.S. Court of Appeals for the Federal Circuit, Randall Rader – have submitted a petition for certiorari to the U.S. Supreme Court on behalf of Acer America Corp. asking the Court to review the CAFC’s precedential opinion in Intellisoft v. Acer. On April 3, the CAFC held that the United States District Court for the Northern District of California (the district court) erred in refusing to remand a case to California state court where removal to a district court was improper under 28 U.S.C. § 1441 and §1454. Despite Acer’s contentions, the CAFC found that Intellisoft’s trade secret misappropriation claim did not “necessarily” raise patent law issues that would result in district court original jurisdiction.

Four Out of Eight Doesn’t Cut It: The IP Safeguards that Most Lawyers Miss When Protecting Software

Software is an extremely valuable good for those who produce it because it provides value to the software’s end users. That value, however, also makes it a target for those who would prefer to obtain the value without compensating the software producer. As a result, like with any valuable asset, software suppliers and Internet of Things (IoT) companies must implement safeguards to protect it. Since software is intellectual property, attorneys who work for or advise software producers (which, let’s be honest, is just about every technology company these days, given the addition of hardware manufacturers via the ubiquity of their “smart” devices to the existing desktop, mobile, and SaaS applications that we all use in both our personal and business lives), are frequently asked to advise on how to best protect this valuable asset. Unfortunately, as discussed below, most lawyers only deliver half of what they should.

Trade Secrets Lessons from Epic Systems v. Tata Consultancy Services

On August 20, the Seventh Circuit in Epic Systems Corp. v. Tata Consultancy Services Ltd & Tata America Interntional Corp d/b/a/ TCS America No. 1950 (7th Cir. Aug. 20, 2020) upheld an award of damages against Tata for theft of trade secrets relating to Epic’s health care software. After a jury trial in 2016, a jury found that Tata must pay $240 million in a compensatory damages to Epic, and $700 million in punitive damages. The district court later struck $100 million in compensatory damages and reduced the punitive damage award from $700 million to $280 million under a Wisconsin statute that caps punitive damage awards at two times compensatory damages. In the August 20 decision, the Seventh Circuit agreed with the district court that the jury could award punitive damages but found that the $280 million punitive damages amount was excessive and remanded the case with instructions to reduce that award.

Don’t Focus on the Fight: When it Comes to Trade Secrets, it’s the Transaction that Counts

Tuning in to the recent sentencing of Anthony Levandowski for criminal trade secret theft, I was reminded of the wise observation about relationships, that remembering the ending is a way to forget about the beginning. But while that way of thinking can be a salve for the heart, it’s not so helpful when it comes to the kind of critical self-analysis that we need to improve our behavior, or at least certain outcomes, in business. It’s natural for us to be attracted to the drama of trade secret litigation. These cases typically involve claimed treachery of some kind, contrasted against an alternate narrative of entrepreneurship and helpful market disruption. Indeed, as I have often remarked to my students, trade secret cases are a trial lawyer’s dream, because you are dealing with the kind of emotional issues that can draw in a jury and make it easy to keep attention focused on the story you’re trying to tell.