Posts Tagged: "trade secret misappropriation"

It was February 2017 when Waymo, Google’s self-driving car unit, sued Uber in what would become the biggest trade secret case of the century. Waymo alleged that its former manager, Anthony Levandowski, had organized a competing company while still at Waymo, and before leaving had downloaded 14,000 confidential documents. As it turned out, Uber had known about this when it agreed to pay $680 million for Levandowski’s brand new startup; and we’ve already looked at how the hubris of that hasty transaction provides lessons for hiring in new markets driven by emerging technology.

On September 2, the U.S. Court of Appeals for the First Circuit issued a decision in Amyndas Pharmaceuticals, S.A. v. Zealand Pharma AS affirming the District of Massachusetts’ decision to dismiss trade secret misappropriation claims between former drug development partners. However, the First Circuit found that the district court abused its discretion in denying Amyndas’ motion to file an amended complaint and vacated the dismissal of trade secret claims against Zealand’s U.S. subsidiary.

Corporate espionage is as old as the day is long. The modern digital world has made it easier than ever to gain access to sensitive “secret sauce”, such as software, customer and vendor lists, business methods, techniques, formulas and recipes. With a significant shift to a remote working environment and the relative ease of employee portability, protecting and defending confidential information and trade secrets must be at the top of the priority list for any organization. In May 2022, in Appian v. Pegasystems, a jury awarded likely the largest sum in the history of Virginia state court proceedings, finding that Pegasystems was liable for $2 billion-plus in damages to Appian for planting a corporate spy at Appian for over 10 years…. While the facts of the Appian case are not particularly unusual, the measure of damages is quite stunning.

The job of the trial lawyer starts with figuring out what happened and collecting evidence to use in telling a compelling story to a judge or jury. Direct evidence takes you immediately to the fact you’re trying to prove and is most commonly seen in eyewitness testimony. Betty saw John shoot the gun at Phil, who collapsed on the floor. That’s direct evidence that John murdered Phil. But if Betty had been outside the bar, heard an argument and then a gunshot before entering and seeing John holding a smoking gun, that’s indirect, or circumstantial, evidence of the murder…. In the realm of trade secret disputes, there are special challenges in trying to sort out the truth because one side knows the facts and the other doesn’t.

On May 6, the U.S. Court of Appeals for the Federal Circuit (CAFC), reversed in part, affirmed in part, vacated in part, dismissed in part, and remanded a judgment in an appeal from the U.S. District Court for the District of Delaware. L’Oréal USA, Inc., L’Oréal USA Products, Inc., L’Oréal USA S/D, Inc., and Redken 5th Avenue NYC, LLC. (collectively, “L’Oréal”) appealed the district court’s ruling in favor of plaintiffs Liqwd, Inc. and Olaplex, LLC, which sued L’Oréal for patent infringement, misappropriation of trade secrets, and breach of a non-disclosure agreement. 

On August 14, the United States Court of Appeals for the Eighth Circuit affirmed in part and vacated in part a district court decision in MPAY Inc. v. Erie Custom Computer Applications, Inc, et. al. In particular, the Circuit Court affirmed the district court’s conclusion that MPAY had not shown a likelihood of success on the merits of its copyright infringement or trade secret misappropriation claims. The Circuit court also affirmed the district court’s decision to deny preliminary injunctive relief for MPAY’s source-code claim, but vacated in part the district court’s Order and Judgment denying that relief and remanded for the district court to consider whether a preliminary injunction against Erie Custom Computer Applications and Payroll World is appropriate.

Much has already been written in a relatively short period of time since the Eleventh Circuit decided Compulife Software, Inc. v. Newman, __ F.3d __, 2020 WL 2549505, (11th Cir. May 20, 2020). However, such commentaries have not addressed whether this decision is legally supportable and whether other circuits should follow this decision, which would provide a legal basis for website operators under certain circumstances to pursue unwarranted scraping of their websites. This is particularly important because the Supreme Court is currently considering whether to grant certiorari in a case involving whether website scraping is legal under the Computer Fraud and Abuse Act (CFAA). Depending on the outcome of this matter, website operators may be extremely restricted to prevent scraping under that statute.

In a precedential opinion, Intellisoft v. Acer, the Court of Appeals for the Federal Circuit (CAFC), in a decision authored by Judge Dyk, held that the United States District Court for the Northern District of California (the district court) erred in refusing to remand a case where removal 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. The CAFC first noted that ownership of a trade secret under state law does not require proof of patent ownership.

The primary purpose of the Defend Trade Secrets Act (DTSA) is to provide federal remedies to individuals and companies that have had their trade secrets misappropriated. That is not, however, its sole purpose. One of the DTSA’s more controversial provisions actually protects certain alleged misappropriators by precluding DTSA liability when an individual discloses trade secrets in the context of “whistleblowing” activity. Indeed, the DTSA’s immunity provision dictates that a whistleblower may not be held criminally or civilly liable for disclosing a trade secret, provided that the disclosure satisfies certain requirements. 18 U.S.C. § 1833. This immunity provision creates serious risk for companies: A whistleblower could expose a company to civil and criminal penalties stemming from the company’s alleged misconduct and simultaneously reveal valuable trade secrets, and the company would have no recourse. Fortunately, the immunity provision itself and the applicable case law, which is still in its infancy, can be used to develop a strategy for trade secret holders to avoid and/or mitigate this risk.

In general, a trade secret is any information used in business if the owner has taken reasonable measures to keep such information secret, and the information derives independent economic value, from not being generally known to, and not being readily ascertainable through proper means by the public. Almost every state has adopted some form of the Uniform Trade Secrets Act. In addition, with the enactment of the Defend Trade Secrets Act of 2016 (DTSA), trade secrets are also protected under civil and criminal federal law. See 18 U.S.C. § 1831, et seq. Due to the enactment of this Act and the weakening of patent protection in the United States, trade secrets are becoming an increasingly important means for companies to protect their intellectual property. This article provides a summary of important 2019 trade secret decisions and trends.

The normally staid world of intellectual property law was buzzing last year about one of the biggest trade secret cases and largest punitive damages awards in American history. The case involves automated valuation models (AVMs), which are computer models typically generated by machine learning—a form of artificial intelligence—and used to estimate property values by analyzing the property’s attributes, comparable properties, and the like. Jaws dropped last March when a Texas jury awarded HouseCanary, a Silicon Valley company specializing in residential real estate data and analytics, more than $700 million in compensatory and punitive damages after accepting its claims that it possessed AVM-related trade secrets that were allegedly misappropriated by Amrock (formerly Title Source), one of the nation’s largest appraisal and title service companies. The jury’s verdict might lead you to believe that Amrock is guilty of one of the most blatant and outrageous intellectual property thefts in history. But when you look closer, it is the jury’s verdict that is outrageous and nearly impossible to justify. I say that not only as a lawyer, but also as someone who built AVMs much like those at issue here before attending law school.

It’s football season, so of course we should be talking about beer. Specifically, beer secrets. For fourteen years James Clark had an enviable job at Anheuser-Busch, where he had access to the brewer’s confidential recipes. For unexplained reasons he resigned. Instead of joining a competitor, he went to see a lawyer about planning a class action against his former employer for “intentionally overstating the alcohol content” of the company’s “malt beverages.”… Anheuser-Busch sued him for misappropriation of its secrets for making beer.

Trade secret holders must take reasonable precautions to maintain the secrecy of their secrets, such as keeping such information on a “need-to-know” basis. Companies should have clear IP, confidentiality, and employment agreements describing which types of information are considered trade secrets. These agreements should also describe an employee’s responsibility for maintaining the secrecy of such information. In spite of reasonable precautions by a trade secret holder, bad actors may maliciously misappropriate trade secrets.