Posts Tagged: "Trade Secrets"

It’s Time for Congress to Start Protecting Trade Secrets

While trade secrets have become more important, advances in electronics like flash drives and smartphones have made data theft almost infinitely easier and faster. And unlike the threats of a generation ago, when trade secret theft typically benefited a local competitor, globalization of business means that today’s insiders often steal on behalf of companies located in other states or countries.

Federal Trade Secret Legislation Would Strengthen U.S. Economy and Promote the Rule of Law

In a 2014 Heritage Foundation Legal Memorandum, I highlighted the growing problem of trade secret misappropriation faced by American business, and explained that an appropriately crafted federal law would help American victims recover damages for theft of their trade secrets, make it easier to stop thieves before they leave the country, and thereby strengthen the American economy, without undermining federalism.…

Defend Trade Secrets Act ready for markup in Senate Judiciary Committee

Earlier today the Senate Judiciary Committee held a hearing on the Defend Trade Secrets Act, which is authored by U.S. Senators Chris Coons (D-DE) and Orrin Hatch (R-UT). This is an important issue for Congress because trade secret theft puts American jobs at risk and threatens incentives for continued investment in research and development in the United States. Currently, civil trade secret laws can and do vary state-to-state, and while the differences may not be substantively large it is truly odd that in a global economy the United States has left trade secret law to the States to individually regulate. It is long since time for Congress to act.

NY v. Aleynikov: NY Penal Code, Federal Criminal Law Unprepared to Deal with Source Code Theft

Employers often assume that they have the same weapons in their arsenal to prevent theft of virtual trade secrets as they have against other types of loss. As the prosecution of Sergey Aleynikov in Federal and New York courts showed, however, that simply isn’t true. Even though juries in both courts found him guilty of downloading confidential computer code from his employer, judges ultimately found that the laws under which he was prosecuted did not cover the acts he committed. A careful employer should therefore make sure it puts precautions in place that prevent theft of computer code, rather than relying on the threat of criminal prosecution.

Aleynikov was a computer programmer employed by Goldman Sachs to write high-frequency trading code. In 2009, he accepted a job offer to join a potential competitor, where he would create a new high-frequency trading platform from the ground up. Before he left Goldman, however, he sent portions of Goldman’s high frequency trading code to a German server for his own future use. After Goldman found out, it went to the FBI; Aleynikov was then arrested on a flight home from a visit to Chicago. With that arrest began his circuitous journey through the U.S. legal system, governed by two different sovereigns and under two different legal regimes.

A fear of trade secret trolls is completely unfounded

Fears about trade secret trolls are based in mythology, not on fact. If those claiming federal trade secret legislation would lead to trade secret trolls actually understand trade secret law they simply couldn’t possibly come to a conclusion that there is any risk there will be a single trade secret troll, let alone some kind of zombie-like rise. Simply stated the fear is pure fiction. In addition to seeing absolutely no evidence of trade secret trolls on the State level, trade secrets require a relationship or some nexus between the parties to the dispute. You simply cannot commoditize trade secret litigation in the same way patent trolls can and do commoditize patent litigation.

Trade Secrets: Managing Information Assets in the Age of Cyberespionage

The titans of the 19th Century made fortunes because they controlled access to the raw materials and infrastructure of commerce: steel, oil, lumber, railroads, canals, shipping. In contrast, the Third Industrial Revolution creates value not just from ideas that improve our ability to transform materials, but from information itself. This shift to intangible assets has been profound, but so swift that few have paid sufficient attention to the magnitude of the change. In the Information Age, your secrets – a new technology, a business plan, insights extracted from data analytics – define your competitive advantage. And because business is global, competition can emerge anywhere, anytime.

Chinese support of indigenous innovation is problematic for foreign IP owners

The definition of indigenous innovation is “enhancing original innovation through co-innovation and re-innovation based on the assimilation of imported technologies.” Those familiar with China’s joint venture rules for foreign businesses, which require them to transfer some patent licensing powers to Chinese companies in order to enter their market, are wary of statements like this that essentially support a siphoning of foreign intellectual property.

Congress expected to take up federal trade secret legislation in 2015

There was a lot of action on this in the last Congress. There is a group of law professors that have expressed some opposition to the proposal to add a civil remedy, in spite of widespread support among industry stakeholders. There was some controversy around some seizure provisions that were suggested in one version of the legislation. And I think those discussions will usefully inform what will be done in this Congress. But I believe there is a great deal of support for making that basic change to allow companies to have another—not a displacement, not preemptive of state law but an additional place to go to get the benefit of nationwide service of process and other special advantages of being in federal court.

A 2015 IP Policy Outlook

House Judiciary Committee Chairman Bob Goodlatte (R-VA) will keep copyright high on the Judiciary Committee’s agenda in the 114th Congress. Given that Chairman Goodlatte has already held nearly twenty hearings as part of his copyright review, it is safe to say that the initial hearing stage of the review is coming to a close, although he is expected to hold several additional hearings early this year. The Copyright Office has recommended that Congress should consider providing new and more efficient processes to enable the resolution of small claims. Moreover, senior House Judiciary Committee staff has expressed support for a small copyright claims remedy.

Working toward settlement where reasonably possible

It’s important, particularly for technology companies in fast moving industries, to keep their eyes focused on the future and competing in the marketplace rather than focused on the past and competing in the courtroom, other than in a small number of cases where that focus really is absolutely necessary… When we deal with nonpracticing entities in mediation, we have to take them seriously. They are the parties to the lawsuit. They operate the kinds of businesses that they operate. They take positions and have underlying interests that need to be acknowledged as real and sincere. And the parties opposing the nonpracticing entities have to deal with them straight up and sometimes make some difficult decisions as to whether to settle and how much money to pay.

Trade Secrets – A Viable Alternative to Patents

While trade secrets cannot fully replace patent protection in all respects, they do offer a viable alternative to patents for protecting intellectual property in some cases. In addition, while the value of patents in protecting IP has been under attack this year, trade secret protection has been on the rise with, for example, the California appellate court decision in Altavion, Inc. v. Konica Minolta Systems Laboratory, 226 Cal.App.4th 26. 171 Cal.Rptr.3d 714 (1st Dist. 2014) that broadened the definition of what information can qualify as a trade secret. Moreover, there is a real possibility that Congress will finally pass a civil trade secrets protection law, which will mean that trade secrets will not be considered patent’s ugly step sister any longer.

What is Intellectual Property?

Generally speaking, “intellectual property” is probably best thought of (at least form a conceptual standpoint) as creations of the mind that are given the legal rights often associated with real or personal property. The rights that are obtained by the creator are a function of statutory law (i.e., law created by the legislature). These statutes may be federal or state laws, or in some instance both federal and state law govern various aspect of a single type of intellectual property. The term intellectual property itself is now commonly used to refer to the bundle of rights conferred by each of the following fields of law: (1) patent law; (2) copyright law; (3) trade secret law; (4) the right of publicity; and (5) trademark and unfair competition law.

The Trade Secret Value Proposition: The Secrecy Requirement

While normally no single factor is dispositive in determining whether information has been kept secret enough to qualify as a trade secret, the focus is on determining whether reasonable efforts to preserve secrecy were employed is of paramount importance. What is reasonable will, of course, vary depending upon the resources of the company or individual claiming the trade secret and the value of the secret being protected. Notwithstanding, the failure to employ any protection protocols would suggest that the information is not a trade secret. In other words, while what is reasonable will vary, failure to do anything to protect the valuable information will not be reasonable. Said another way, reasonable efforts to preserve secrecy necessarily means that there must be at least some effort to preserve secrecy.

Private Election Companies Should Have Benefit of Trade Secrets

The general value of trade secret protection, perhaps taken for granted in less scrutinized trades, also applies to the private election equipment industry. The private election companies that create election equipment and software are in competition with other companies supplying their own versions. Trade secret protection provides incentives to put effort and capital into product development, product innovation, and advances in procedure and industry innovation. There are less incentives to do this, however, when competitors can appropriate the benefit of the work as soon as it is released. Those companies investing in computer source code development particularly benefit from trade secret protection.

Trade Secret Policy and Election Companies

There is some conflict with trade secrecy policy application to private election companies and a desire for transparency in government. When the issue is as critical to the interaction between the citizens and their government as elections are, the policy behind trade secrets must be examined to determine whether an exception should be made. Transparency is generally a desired trait in government. It is a means of holding elected officials accountable for their actions and reducing corruption among those officials. If the consequences are serious enough, there are exceptions to the desire for government transparency, however, such as when national security is determined to be at stake. Government itself does not necessarily suffer consequences for lack of innovation if not granted trade secret protection of its governmental secrets and the public policy reasons do not apply as much.