Posts Tagged: "trade secret"

Every year different groups provide rankings of patent prosecution law firms and a company’s patent count for the year.  Patent law firms will tout their rankings based upon the number of filings at the U.S. Patent and Trademark Office (USPTO) or the number of allowances they obtained for clients over the previous year.  And companies will boast about their patent prowess based upon the size of their portfolios. But things are changing. Innovative algorithms and even diagnostic methods may be easier and more effectively protected by trade secret.  Trade secret protection avoids the uncertainty of compliance with the vague patentability standard set forth by the Supreme Court.

What would you think if I told you that anyone from France or China or Brazil that was just thinking about some legal action in their country could come here and easily force discovery from a U.S. company, even though they couldn’t dream of getting the same information through their home courts? Crazy, right? That is exactly what has resulted from a law that’s so obscure it doesn’t even have a name, so we call it by its legal citation: 28 U.S.C. Section 1782.

Intellectual property (IP) often represents one of the largest asset classes that a company holds, and unlocking its value is a key element in any business sale. The value of intellectual property such as patents, trademarks, brands, databases, and trade secrets, can be valued using a number of methodologies. But what makes these intangible assets so valuable to a business?

With the June 9 deadline for national implementation fast approaching, we surveyed colleagues in our other European offices to check the state of play in their jurisdiction. The picture which emerged was mixed. Much progress has been made towards national implementation of the Directive in the UK, Italy, France, The Netherlands, Denmark, Sweden, and Hungary. Implementation in these jurisdictions is expected on or around the June 9 deadline. Work is also underway in Poland and Finland, but it’s possible that implementation could slip a few months past the deadline. Slightly further behind are Spain, Belgium, and the Czech Republic. Germany is currently lagging behind as the recent political deadlock surrounding the formation of the new government has delayed the legislative agenda, although a draft bill has been promised for the first half of 2018.

Today, the biggest reason to have a strict regime in place to protect trade secrets, according to Gambhir, is because technology has made misappropriation of trade secrets so much easier than ever before. Compare the days when trade secrets resided in physical forms (blue prints, coca cola formula etc.) and were stored in locked file cabinets, safes etc. with the trade secrets in the digital world. “In most situations, they may be stored in a computer file that has restricted access on a secure network,” he said. “Yet, even given all that, an unhappy employee can easily download that file on a USB drive and walk out of your building directly to your competitor’s office. Access to trade secrets has become so much easier. In turn, misappropriation has become so much easier.”

Dallas, TX-based online dating app developer Match Group filed a suit in the Western District of Texas alleging claims of utility and design patent infringement, trademark infringement, and trade secret misappropriation against Austin, TX-based dating app provider Bumble. Match alleges that Bumble, which was founded by former employees of Match’s Tinder dating service, copied major elements of the interface from Match’s app including swiping elements used to identify potential matches.

Modern discovery can be quite disruptive and expensive. Recognizing that there is a particular danger of abuse in trade secret cases, where defendants are often individuals or vulnerable start-ups, courts long ago began to manage this risk by requiring plaintiffs to identify the relevant secrets with “reasonable particularity.” In 1985, California decided to reinforce that requirement with a statute that prohibits a plaintiff from taking any discovery until it has complied. Some courts outside of California have embraced this approach as sensible case management, explaining that it prevents unbounded rummaging through the defendant’s own secrets. But a few have gone further, posing the issue as not just potential harassment of the defendant but also the risk that the plaintiff

How big of a role does IP play in Silicon Valley deals? “In almost any size transaction involving a technology company, our client asks us to look carefully at the company’s IP and the agreements the company has entered into with third parties to secure rights in IP and to permit others to use that IP,” said John Brockland, a technology and IP transactions partner at Hogan Lovells. “Depending on how a transaction is structured, the terms on which IP is assigned or licensed between the parties in a deal can also be a critical area of focus for our client.”

There are many lessons to be drawn from the Waymo v. Uber litigation. This is perhaps the most important. Lawsuits are about history, while business is about the future… Most trade secret litigation is fueled by emotional reactions to perceived wrongs. Plaintiffs feel betrayed and abandoned, and defendants feel blamed and misunderstood. Each side wants to fight in order to validate its perspective. So the lawsuit begins with great energy. But over time, new facts emerge, and the parties begin to reconsider the cost/benefit analysis of continuing the struggle.

Although the amount of the settlement was far less than $2.7 billion in amount sought by Waymo, the settlement apparently did include a payment from Uber of 0.34% of Uber equity—or about $244.8 million in stock based on a $72 billion valuation of Uber… Both sides had a lot riding on the outcome of the trial. In addition to the billions in damages, Waymo was seeking an injunction to prevent Uber from using any technology that may have originated from Waymo, which would have been a huge set back for Uber’s program. Indeed, during his first day of being questioned, the former CEO of Uber, Travis Kalanick, agreed that developing autonomous vehicles amounts to an “existential question” for Uber, and that the market for driverless cars is likely to be “winner-take-all.”

The decision whether to secure technology using a trade secret or a patent hinges as much on the technology as it does on access to capital. Small companies need funding to commercialize new inventions. A patent provides a private property right that can be leveraged to attract funding. However, most large companies like Waymo, one of the richest on the planet, do not need funding. This is no doubt why Alphabet and its Google subsidiary have lobbied to weaken the patent system. It is understandable because it is in the best interests of their well-funded enterprises. It is, however, not in the best interest of innovation more generally speaking, nor is it in the interest of society… The IP system as it currently exists acts to protect huge monopolistic enterprises at the expense of everyone else – employees, startups, job creation, innovation, and society at large. It is no wonder that startups in America continue to decline, as recently reported by none other than the NY Times.

Earlier today Alphabet subsidiary Waymo settled with Uber in the midst of a trade secret infringement trial. This lawsuit originated when Waymo brought suit against Uber in 2017, alleging that a former Waymo engineer Anthony Levandowski, who was hired by Uber to lead Uber’s self-driving car project, took with him thousands of confidential documents… The U.S. Department of Justice is conducting a separate, criminal investigation into the alleged theft of trade secrets. Levandowski has claimed a Fifth Amendment privilege and has not spoken about the events leading to this dispute.

Today, as social media becomes more essential for businesses, there will almost certainly be an increase in intellectual property disputes about social media account ownership. Lawsuits relating to Twitter followers, LinkedIn connections, or Facebook friends are not off limits. These intangible assets — social media IP assets — are becoming increasingly more valuable to businesses… According to Ball, companies should be clear about who owns a social media account and what an employee can do with the account… Sarfati says that employers also need to recognize that social media is not just one thing – but rather a grouping of various websites that represent unique threats and opportunities to the employer’s bottom line.

When the auctioneer’s hammer went down, the violin sold for almost $16 million. It was one of the masterpieces of Cremona, the small northern Italian town that was the 18th-century center of violin-making. Some critics of trade secret law have cited Cremona as an example of progress “lost” because it was buried instead of published through a patent application. There are several reasons why that argument fails, but for today let’s consider the possibility that the violin makers couldn’t have passed on their “secrets” if they wanted to, simply because they didn’t know what made their violins sound so good.

IP-protected innovation is now the principal driver of corporate value and is driving economic growth nationally. Developing an IP portfolio is now a basic requirement even for tech startups that hope to raise early stage financing… A large portion of the market cap of Silicon Valley companies can be directly attributed to intangible – or in other words intellectual property – assets. IP law is the primary tool used to protect the value of that innovation, and as we see from countries without meaningful IP laws there is simply no way to protect innovation absent a strong intellectual property system.