Posts Tagged: "Trade Secrets"

Last year at this time we thought we had been through the worst of it and, with the new vaccines arriving, that life would return to normal in 2021. Hahaha, how naïve we were! But take heart; some things hold steady through the storm, such as the popular sport of trade secret litigation. Unlike most patent and copyright cases, every dispute is guaranteed to unfold as a morality play—a story of good guys and bad guys. Let’s now look back on the year when remote work dug in to become a permanent fixture, and remind ourselves of the broad sweep of trade secret law by looking at some of the more instructive and interesting opinions issued by the courts – and one inexplicable decision by our government.

Question: how do you make money from a secret formula for a product that smells and tastes horrible and that no one wants? Answer: you make everyone believe they have a medical problem that only this stuff can solve. Back in 1879, Joseph Lawrence, a St. Louis doctor, was experimenting with surgical disinfectants. This was a new thing. In the 1860s, a British surgeon named Joseph Lister was the first to perform surgery antiseptically, using carbolic acid as a disinfectant. Inspired by Lister, Lawrence came up with a compound of alcohol and essential oils that seemed to kill whatever bugs it touched. To honor Lister (and presumably to take advantage of his fame), Lawrence named the concoction “Listerine.”

Have you ever shopped for something dangerous? Back in the 1950s, my mother wanted to buy a pressure cooker to make dinner faster (and use cheaper cuts of meat). That wasn’t an easy decision, because the early models had a reputation for occasionally exploding (there was no Consumer Product Safety Commission then). My father, a self-taught steam engineer, was skeptical that a kitchen appliance could safely contain double the normal atmospheric pressure. But Mom did her homework, researching what the problems were (usually a single pressure valve prone to clogging) and finding cookers with redundant pressure relief systems. It worked for years, and no one went to the hospital. Companies shopping to buy other companies, or to acquire a license to their technology, also entertain risk. That’s because in the process of interviewing potential targets they can become exposed to highly valuable trade secrets. If any particular transaction doesn’t go forward, but the shopper implements similar technology, the disappointed seller may file a lawsuit claiming misappropriation.

You may remember 2014 as the year when we all discovered a plague of noncompete agreements threatening our economy. No? Let me help you. In June that year, the New York Times published an expose of sorts relating the story of a 19-year-old summer camp counselor who couldn’t get hired by a certain camp because the year before she signed a contract with another camp that blocked her from working for any nearby competitor. Noncompete contracts, the article suggested, had previously been reserved for high level corporate executives, and suddenly (and “increasingly”) they were being foisted on rank and file employees engaged in event planning, investment management, and even yoga instruction. A follow-on piece in the Times confirmed the emerging crisis by revealing that the Jimmy John’s fast food chain had forced noncompete clauses on all its sandwich makers (acknowledging, however, that there was no evidence that the company had ever tried to enforce the contracts).

The category of “trade secrets” is broad and encompasses information that people may not ordinarily associate with the term. Easy, iconic examples of trade secrets include the secret recipe for Coke or the secret formula for creating the nooks and crannies in Thomas’ English Muffins. Others, such as the algorithms that determine what appears in our social media feeds, or how much an office supply store charges a particular client for a box of paper clips, may not be so apparent. In reality, a “trade secret” is any secret, commercially valuable piece of information to which its owner restricts access and takes reasonable steps to protect. But even if you knew how wide-ranging the category is, you may not have considered “catcher’s signs” a trade secret. That is exactly what a former Major League Baseball (MLB) pitcher is contending in a recent lawsuit filed in Texas state court. This case is generating much debate in the legal and baseball communities. Time will tell whether this suit is a dribbler that does not get past the pitcher or a line drive into the gap for extra bases, so let’s step up to the plate and take a good look at this recent case.

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.

In late June, medical technology firm Masimo Corporation and its consumer device subsidiary Cercacor Laboratories filed a complaint with the U.S. International Trade Commission (ITC) asking the agency to institute a Section 337 investigation into several versions of the Apple Watch. Masimo’s allegations, which also include trade secret litigation ongoing in U.S. district court, follow an increasingly familiar narrative in which a Big Tech player, in this case Apple, engages in licensing negotiations with a small tech developer, only to poach employees and ideas from the smaller firm without paying the original developers.

When one thinks of cybercrime, it can be easy to imagine a mysterious figure in a dimly lit room sending out various phishing emails to unsuspecting victims. However, this is not always the most dangerous tactic used by hackers, according to the United Kingdom (UK) Government Communications Headquarters’ (GCHQ’s) cybersecurity arm. On June 14, the UK National Cyber Security Centre claimed that ransomware represented the biggest threat to online security for most people and businesses, with the number of incidents soaring worldwide in the last two years. And it is a problem and a threat that we must all be wary of.

We’ve all seen him when driving by the strip mall. Trying to focus on the traffic, our eyes are diverted by “Tube Man,” a 10-foot tall hollow, collapsible stick figure with a fan at the bottom, adjusted so that the body repeatedly folds and then jumps upright, with arms whipping around in a constant frenzy, trying to grab our attention. And that’s the point. Tube Man accomplishes nothing except to demand that we look at what he’s doing…. And that, in my view, describes very well the recent rush of legislative attempts to punish China. That is not to say that China is our best friend. We are in serious competition, and it’s obvious that our leading position in some critical technologies has been targeted. That “giant sucking sound” you hear in the direction of China may be some cutting-edge secrets being displaced. We should be deeply concerned. We need a thoughtful, long-term strategy to respond.

All the fuss surrounding the proposal by India and South Africa to suspend the TRIPS Agreement to help them produce vaccines to fight COVID-19 has obscured some critical truths. In spite of the rallying cry “Patents versus People,” it’s not really about patents. And merely lifting TRIPS obligations will do nothing to address the current suffering of the world’s poorer populations. In fact, it would hamper efforts to secure global distribution of vaccines, as well as cause real harm in the long term.

“Need to know” is a bedrock tenet of information security. You only get to see it if you need to see it. The reasoning is that the fewer people who know the details, the lower the risk that information will be compromised by reaching the competition. Another term used among professionals is the “principle of least privilege,” borrowed from the notion in computer science that a user account should be given only that level of privilege that is absolutely necessary to its operation within the system, making failures less likely. By whatever name, the principle increases control by limiting access. The idea that any one person in an organization probably doesn’t need to know much is rooted in the industrial revolution. When we moved from the age of craftsmen who made an entire product to the assembly line, the worker mounting the wheel didn’t have to know anything about the rest of the car…. Keeping secrets has long been viewed through the same lens: compartmentalization helps keep things under control. But interestingly, it doesn’t always make things more efficient or productive.

In over 40 years of handling trade secret disputes, I have seen plenty of “successful” results, but never a time when my client said, “Gee that was fun; let’s do it again!” They may tell me they’re happy with the outcome, but hey, I know that it also feels good to stop hitting yourself with a hammer. It’s a fact that more than 90% of trade secret cases settle without a trial. But too often those settlements only happen after years of litigation. There are ways to make that process less painful, and in an earlier article we looked at the advantages and limitations of arbitration and private judging as means to recapture some amount of control over the dispute. But unless the parties already had an arbitration agreement before the problem arose, one of them will probably see an advantage to playing it out in court….This is precisely why that other form of alternative dispute resolution, mediation, is the perfect method for resolving trade secret disputes.

Fundamental to building and executing any successful patent licensing program is the ability to find and prove evidence of infringement, often through reverse engineering methods. A product is purchased and deconstructed to understand how it was built, how it works and what it is made of. The process of reverse engineering usually involves multiple types of analysis; which type of reverse engineering to apply is determined by the type of technology and the industry in which the patented invention is being used.   Intellectual property law does not discourage innovators from dismantling the inventions of their competitors, whether the technology is software, electronic, chemical, or mechanical. But there are still limits on how the results of a reverse engineering effort can be exploited.

On March 12, the U.S. Court of Appeals for the Federal Circuit (CAFC) affirmed the Middle District of Florida’s decision directing the clerk to unseal the amended complaint of Plaintiff DePuy Synthes Products, Inc., DePuy Synthes Sales, Inc. (Collectively Depuy), deciding that the district court did not abuse its discretion in ensuring public access to court documents (Depuy v. Veterinary Orthopedic Implants). The CAFC agreed with the district court that VOI “did not establish that it took reasonable measures to protect the Manufacturer Identity.” VOI didn’t enter into an agreement to keep the relationship confidential, but the lack of express agreement is not dispositive of the issue. Where an express agreement doesn’t exist, there must be some other indicia that both parties wanted to maintain a confidential relationship.

A common refrain is that an invention is only as valuable as the patent that protects it. But what happens when you cannot secure the patent? This is a frequent hurdle for inventors seeking to patent products utilizing artificial intelligence (AI). While still in its infancy, at least compared to the lofty expectations of technology enthusiasts, AI has proven integral to driving innovation, but it has also proven equally vexing to fit into the intellectual property legal regime.