Trade Secrets Blog

Snooki Without Makeup - A Lost Trade Secret of "The Jersey Shore"

noreply@blogger.com (Todd) — Fri, 20 Jan 2012 19:15:00 +0000

It's Friday at Womble Trade Secrets and we're going to try a new argument on you before the weekend.

A trade secret is generally defined as information that (i) derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Fans of MTV apparently love this show "The Jersey Shore." We've never seen it, but we are students of the law and do our research and we know that the particular looks of the actors on this show is part of its commercial allure and value. Perhaps the most infamous star on that show is Nicole "Snooki" Polizzi. She prevails upon the shows fans with her ironic beauty - and allegedly her bad behavior. In one reported episode, she acknowledged this ironic allure while throwing a drink on a bouncer at a bar, as one witness reported: "While she threw the drink at him she yelled, 'I'm a f**king star, beautiful enough to do what I want.""

What does this have to do with trade secrets? Well, a picture of Snooki has been published WITHOUT HER MAKE-UP. She doesn't look like the made-up Snooki, with all that ironic, ahem, big-hair beauty. It made us recall the days when Gene Simmons and the other members of the rock-band KISS took off their make-up. They made a decision that the trade secret had run its course - and that it was valuable for their fans to see what they really looked like. But maybe, our thinking goes, the producers of "The Jersey Shore" don't want the fans to see what Snooki looks like without her caked-on tan, big eyelashes and mascara spray-painted to create the Snooki look that is known and loved.

Has she just sold MTV's trade secret down the river? We're not pre-judging this one but we'll let the pictures speak for themselves and let you decide. Happy Friday.

The Trade Secrets of . . . Helicopter-Aided Ski Companies?

noreply@blogger.com (Todd) — Thu, 19 Jan 2012 13:08:00 +0000

This just in from the Anchorage Daily News - heli-ski operators up in Haines, Alaska are apparently required to report to the public as follows: "Every commercial ski tour operator shall use global positioning system equipment capable of tracking and preserving information establishing the route taken by the helicopter to and from the skiing and snowboarding area and all landings."

Well, the heli-ski operators are apparently asking that the data be treated as their trade secrets and not subject to review by actual or would-be competitors as public records. One of the opponents of the proposed trade secret treatment of the heli-ski data suggested "Any competitor can go up and see where the helicopters are flying, where the ski tracks are. They do this in broad daylight … this does not need to be withheld from the public."

We'll report back how this one plays out.

29 Year Old Former Sanofi-Aventis Scientist Pleads Guilty to Economic Espionage

noreply@blogger.com (Todd) — Tue, 17 Jan 2012 18:27:00 +0000

The New Jersey Herald is reporting that a former research chemist in the New Jersey office of Sanofi-Aventis has pleaded guilty to one count of stealing trade secrets from her former employer.

Yuan Li of Somerset pleaded guilty in federal court in Trenton Tuesday.

The U.S. Attorney's office says the 29-year-old Chinese national made the secrets available for sale through the U.S. subsidiary of a Chinese chemicals company called Abby Pharmatech in which Li was a partner.

Li worked from 2006 through 2011 at Sanofi's U.S. headquarters in Bridgewater, researching potential future drugs.

She admitted to accessing, downloading and making available for sale on Abby's website internal Sanofi database information on compounds the company says were trade secrets.

Li will be sentenced on April 23rd.

Ex-Dow Chemical Scientist Gets 5 Year Sentence For Trade Secret Theft

noreply@blogger.com (Todd) — Mon, 16 Jan 2012 22:00:00 +0000

Bloomberg Businessweek is reporting that a five-year prison sentence against Wen Chyu Liu, also known as David W. Liou, was handed down yesterday by U.S. District Judge James J. Brady in Baton Rouge, Louisiana on Friday. A jury in February convicted Liu of perjury and conspiring to steal Dow trade secrets. He was indicted in 2005.

Liu, 75, of Houston worked for Dow from 1965 to 1992. At its Plaquemine, Louisiana, facility he had access to secrets related to the manufacture of chlorinated polyethylene or CPE, used in the making of vinyl siding, electrical cable jackets and industrial hoses, according to a U.S. Justice Department statement. Dow called the theft and sale of its intellectual property “a complete betrayal of the trust imparted to Mr. Liou as a Dow employee.”

Motorola Succesfully Defends Lemko's Summary Judgment Motion in Pugilistic Legal Battle

noreply@blogger.com (Todd) — Fri, 13 Jan 2012 14:45:00 +0000

Law.com is reporting that Chicago-based federal district court judge Matthew Kennelly rejected Lemko Corp.'s motion for summary judgment on Motorola's trade secrets claims, clearing the way for trial on Motorola's allegations that Lemko stole wireless networking technology and wrongly asserted ownership of a family of related patents.

Lemko's argument was that Motorola had not sufficiently identified the trade secrets allegedly misappropriated. You'll recall that Motorola and Lemko have been fighting an alley-like brawl over technology related to 4G technology. Judge Kennelly disagreed with Lemko's lack of specificity argument, concluding that Motorola "has referred to particular documents, files, inventions, and aspects of its technology, not simply general methods or areas of its business," as Lemko had asserted.

This case will be cleared for trial.

New Jersey Joins 46 Other States and D.C. - Adopts UTSA

noreply@blogger.com (Todd) — Wed, 11 Jan 2012 20:00:00 +0000

PolitickerNJ is reporting that New Jersey's Governor Chris Christie has signed into law NJ's version of the Uniform Trade Secrets Act ("UTSA"). The bill was sponsored by State Senator Nicholas P. Scuteri (D - Union).

“The success of so many companies in this state depends largely on their ability to keep information about their internal processes secure,” added Senator Scutari. “This law will go a long way toward protecting these businesses, and will place New Jersey on par with 46 other states and the District of Columbia in helping companies to guard their trade secrets.”

The New Jersey Senate approved the bill 39-0; the New Jersey Assembly approved the measure 79-0. The law takes effect immediately, except it does not apply to misappropriation that occurred prior to the effective date or to a continuing misappropriation that began prior to the effective date of the law and continued after the effective date of the law.

Welcome to the civilized trade secret protected world, New Jersey! Bravo.

Court Rules That Apple's Sealed Materials Can't Remain Sealed

noreply@blogger.com (Todd) — Thu, 05 Jan 2012 14:28:00 +0000

Ars Technica is reporting that a federal judge in the Northern District of California has denied, upon remand from the Ninth Circuit, Apple's motions to seal certain materials it filed in a successful trademark action against Apple-clone manufacturer Psystar.

You may recall that bloggers and others were able to discern the content of the redacted information in some of Apple's filings and Apple has now had to admit that the blogosphere contains accurate reportings of what had been redacted. Apple argued to the court that a company can't lose its trade secret rights just because the public has guessed correctly at the contents of the trade secrets. The court, disagreeing, referred to the public's work as reverse-engineering.

The judge's order makes an interesting read and the analysis is fairly persuasive. One wonders if Apple might try to appeal this new order.

Gundlach-TCW Dispute Settled

noreply@blogger.com (Todd) — Tue, 03 Jan 2012 14:50:00 +0000

Bloomberg Businessweek is reporting that the acrimonious and public litigation between the "Bond King" Jeffrey Gundlach and his former firm TCW has been settled. We've blogged about this case a number of times and you'll recall that the litigation and damages assessments had not concluded at the time of settlement.

TCW and the company founded by Gundlach, DoubleLine Capital LP, “jointly announce that they have settled all claims between and among themselves as well as DoubleLine Funds Trust, Jeffrey Gundlach, and other individuals,” TCW said yesterday in a statement. “The terms of the settlement are confidential and the parties will not discuss them.” DoubleLine separately issued a statement confirming the agreement.

Synthes Accuses Stryker in Federal Court in Pennsylvania of Raiding Employees in California

noreply@blogger.com (Todd) — Thu, 29 Dec 2011 17:08:00 +0000

Bloomberg BusinessWeek is reporting that a unit of Synthes Inc., a leading maker of bone-related medical devices, accused Stryker Corp. in a federal lawsuit of raiding its San Francisco sales force and using confidential information from former employees.

Stryker seeks to obtain “an improper competitive advantage” in the industry for medical implants and instruments used in spinal surgery, Synthes USA Sales LLC said in the complaint filed today in federal court in Philadelphia. Synthes also accused three former sales employees of misappropriating trade secrets and breaching their contractual and fiduciary obligations to the company. The former employees resigned from Synthes from August to early October, according to the complaint. They immediately began working for Stryker, one of the company’s direct competitors, and are soliciting former customers, according to the court filing.

Synthes, based in West Chester, Pennsylvania, was purchased by Johnson & Johnson in April of 2011 for $21.3 billion. We note that the employees are based in California but the suit has been filed in federal court in Pennsylvania. We forecast that the employees and Stryker will be arguing regarding the proper choice of law for this dispute, as California law and Pennsylvania law are rather different when it comes to the mobility of employees and what employees can and can't do having executed a contract restricting their post-resignation activities.

We'll keep an eye on this one for you.

"China Threat?" - Columnist Claims Western Stereotyping of China is Unfair But Predictable

noreply@blogger.com (Todd) — Wed, 28 Dec 2011 15:16:00 +0000

China.org.cn columnist Geoffrey Murray has made an interesting argument - that China is being stereotyped in the West as a nation of intellectual property thieves in a continuing campaign of misinformation and stereotyping going back over 150 years.

He writes: "The 'China Threat' is frequently evoked by others regarding its insatiable appetite for foreign investment, and when it has gone onto the world market to purchase large amounts of wheat to offset domestic shortages and, again, with its huge imports of crude oil, iron ore and other crucial minerals. Every time the West considers the challenge of modern China, the message tends to echo the basic theme begun two centuries ago. It brings to mind the old saying that there is 'nothing new under the sun.'"

Mr. Murray makes an interesting argument that the West continues to demonize China and its economic apirations as it always has historically. But there's a counter-argument and it was made and published in October 2011 by the Office of the National Counterintelligence Executive here: http://www.odni.gov/reports/20111103_report_fecie.pdf. The report suggests as follows: "China’s intelligence services, as well as private companies and other entities, frequently seek to exploit Chinese citizens or persons with family ties to China who can use their insider access to corporate networks to steal trade secrets using removable media devices or e-mail. Of the seven cases that were adjudicated under the Economic Espionage Act— both Title 18 USC § 1831 and § 1832—in Fiscal Year 2010, six involved a link to China. US corporations and cyber security specialists also have reported an onslaught of computer network intrusions originating from Internet Protocol (IP) addresses in China, which private sector specialists call “advanced persistent threats.” Some of these reports have alleged a Chinese corporate or government sponsor of the activity, but the IC has not been able to attribute many of these private sector data breaches to a state sponsor. Attribution is especially difficult when the event occurs weeks or months before the victims request IC or law enforcement help."

We've operated this blog since March of 2006 and in the close to five years that we've covered Economic Espionage Act prosecutions, we've noted that a noticeably large number involve former or existing Chinese citizens - including, ironically, older workers over the age of 40. Perhaps those data thieves' Chinese heritage is unimportant or unrelated to their crimes - but the ubiquity of Chinese nationals ending up in our economic espionage criminal system is still an undeniable fact. We welcome Mr. Murray's analysis of the data with or for us - and his explanation of whether "Project 863" is a myth perpetrated by the West or a state-financed program of catching up with the rest of the organized world's technologies. See, e.g., http://www.edu.cn/achievement_1509/20060323/t20060323_4403.shtml.

One of the things history has taught the co-authors of this blog, as trade secret litigators, is that the fastest, cheapest and most efficient way to match and surpass rivals' technological superiority is first to obtain, copy and then deconstruct it. To compete with and beat your rival, you first have to study his playbook. Our government's cybercrime watchdogs confirm our sneaking suspicions that there is something different about China's role in the race for competitive advantages generated by the control of trade secret information. We admit to not being certain why Chinese nationals seem to find themselves prosecuted for these economic espionage crimes at such high rates - but we hypothesize that "Project 863" has some causal relation or nexus to the data.

7 Year Prison Sentence in Dow AgroSciences Economic Espionage Case Against Former Scientist

noreply@blogger.com (Todd) — Fri, 23 Dec 2011 14:29:00 +0000

Bloomberg Businessweek is reporting former Dow Agro Scientist Kexue Huang, 46, was sentenced yesterday by U.S. District Judge William T. Lawrence in Indianapolis, according to an e- mailed statement from U.S. Attorney Joseph Hogsett’s office.

“The United States Attorney’s Office takes seriously its obligation to protect Hoosier businesses from economic espionage,” Hogsett said in the statement. Hoosier is a nickname for people from Indiana.

Huang, a Chinese national, pleaded guilty in October to economic espionage. He also admitted to stealing trade secrets from the Minneapolis-based grain distributor Cargill Inc., the U.S. Justice Department said in October. Financial losses from his conduct exceed $7 million, the U.S. said. It’s the first such prosecution in Indiana under a provision of the Economic Espionage Act that bans trade-secret theft to benefit a component of a foreign government, the government said.

Eight such cases have been brought since the law was enacted in 1996, the U.S. said.
James Edgar, Huang’s attorney, didn’t immediately respond to a voice-mail message seeking comment on the sentencing. Huang has been in federal custody since he was indicted and will begin serving his sentence immediately, said Tim Horty, a spokesman for the U.S. Attorney’s office in Indianapolis. The government will seek to deport him after his sentence, Horty said in a phone interview.

Huang worked for the Indianapolis-based unit of Midland, Michigan-based Dow Chemical Co., where he researched the development of organically derived pesticides, from 2003 to 2008.
While at Dow, he shared confidential information with at least two people, one of whom conducted research first at the Hunan Normal University in China and later in Dresden, Germany, according to a plea agreement, which didn’t name the people.

In 2008 Huang went to work for Cargill as a biotechnologist. He admitted that while at Cargill he stole one of the company’s trade secrets -- a key component in the making of a new food product -- which he gave to a student at Hunan Normal University, the U.S. said in a statement yesterday.

Prison Sentence in Akamai Trade Secrets Case

noreply@blogger.com (Press) — Wed, 21 Dec 2011 13:33:00 +0000

We posted on this one last June. The case involved a former employer of Akamai caught in a sting operation trying to sell company trade secrets to what he thought was Israel.

Now, UPI.com reports, Elliot Doxer of Brookline, MA has been sentenced to six months in prison and a $25,000 fine for foreign economic espionage.

According to reports, Doxer tried to sell trade secrets valued at $10 million including “confidential contracts between Akami and the FBI, [Department of Homeland Security], a leading aerospace company and several Department of Defense contractors."

Coca-Cola Moves "World's Most Valuable Trade Secret" to a New Vault in Atlanta

noreply@blogger.com (Todd) — Mon, 12 Dec 2011 14:17:00 +0000

The New York Daily News is reporting that Coca-Cola has moved the "secret formula" for its international brand-name soft drink to an impressively high security-looking vault in Atlanta.

Late last week, the company released photos of the formula’s new home as part of a promotional campaign for its shrine-like World of Coca-Cola museum, where the recipe is now entombed in a massive steel vault.

While this is all just for show and a marketing blitz - it still interests us at this blog in that the company recognizes and heralds not only that its secret, but the expense and caution with which it holds and maintains that secret. Not a bad message. http://www.thecoca-colacompany.com/dynamic/press_center/2011/12/coca-cola-secret-formula-moves-to-the-world-of-coca-cola.html

Profile of a Trade Secret Thief? 37 Years Old, Male and Probably a Programmer or Engineer

noreply@blogger.com (Todd) — Thu, 08 Dec 2011 14:15:00 +0000

Online e-zine computing.co.uk is reporting that Symantec has come out with another survey/report that reveals something new - the average trade secret data thief is 37 years old, male and probably either a programmer or engineer.

The piece notes: "According to Symantec's research, nearly two-thirds of those that commit IP theft will already have another job lined up. Three-quarters of insider thefts involve data the thief has authorisation to access. Typically IP thieves target trade secrets, business information such as billing details and price lists, source code, proprietary software, and business plans."

We are going to keep our eyes peeled for the Symantec report. One wonders what definition of "IP theft" they are working with - there are lots of examples of employees copying data on the way out the door but it certainly does not always constitute "IP theft." We also thought we'd post about this one because we've always liked the way the British spell "authorisation."

High Court Argument in Case Involving UConn Trade Secrets of Sporting and Cultural Supporters Has Twist at Oral Argument

noreply@blogger.com (Todd) — Wed, 07 Dec 2011 13:25:00 +0000

The Hartford Courant is reporting that there was an interesting twist the other day in the oral arguments at the Supreme Court of Connecticut in the case considering whether the University of Connecticut can rightfully withhold/shield records regarding its major ticket buyers for sporting and cultural events. Although we haven't read the brief, apparently the appellant (Connecticut's Freedom of Information Commission, represented by its attorney Clifton Leonhardt) argued that it is conceivable that the University of Connecticut COULD hold trade secrets, even though the Commission's brief contended the public institution could not.

The Courant reports: "Leonhardt caught both the justices and Pelto by surprise Monday when he stepped back from that position. He conceded that the school may have the right to maintain trade secrets, but that Pelto is entitled to the materials he requested for other reasons.
Minutes into Leonhardt's presentation to the court, Chief Justice Chase T. Rogers interrupted Leonhardt to point out that his argument sounded as if it were at odds with the commission's written brief. Later, Leonhardt said in an interview that he does not believe the commission, in its final decision, definitively settled the question of whether UConn can maintain trade secrets. If the commission had found definitively against UConn, he said, such a finding would contradict state law authorizing UConn to create and own intellectual property and to enter into research contracts with private businesses."

This admission in oral argument makes eminent sense to us. There is a significant amount of development of confidential and competitively sensitive IP going on at schools like UConn and the institutions have a right to seek and assert legal protections for that information. There was no need for the Commission to argue that a university has no ability to create and hold trade secrets - the case and argument needn't go that far. This appears to be the judgment call that Attorney Leonhardt made at oral argument and we'd predict it that concession and admission made for smoother sailing in that argument.

Feds in Utah Charge Scientist at Frontier Scientific of Stealing Secrets and Sending Them to Brother-in-Law in India

noreply@blogger.com (Todd) — Wed, 30 Nov 2011 14:23:00 +0000

Sometimes it's a particularly bad idea to go into business with family. Well - Prabhu Mohapatra is learning that lesson as he's been charged with violations of the federal Economic Espionage Act for allegedly stealing chemical-based secrets of his employer, Frontier Scientific, and then sending them to a brother-in-law in India for use there.

The Washington Post is reporting that Mohapatra apparently used a company computer to communicate with his brother-in-law, who was in the process of setting up a company called Medchemblox in India to compete against Frontier Scientific in producing the specific chemicals that Frontier Scientific has a niche place in producing. The government quotes Mohapatra in an apparent attempt to stop the brother-in-law from going too fast: “Please do not make any product currently present in Frontier Scientific’s catalogue. I will lose my job and even could face jail time.”

We'll keep an eye on developments in this matter for you.

DoubleLine's and Gundlach's Expert: TCW's Expert is Way Off on "Reasonable Royalty"

noreply@blogger.com (Todd) — Tue, 22 Nov 2011 16:02:00 +0000

So you'll recall that TCW and its former bond king, Jeffrey Gundlach, had a whopper trial out in California and the jury found that Gundlach and his friends had stolen some trade secrets of TCW but the issue of damages was left to the judge. You'll also recall that the same jury found that TCW had stiffed Gundlach and three of his compadres for some money owed and that they owed the group $67 million.

TCW and the court are now moving forward with the hearing on TCW's trade secrets damage. The facts seem clear that Gundlach and the team that left with him now control about $48 billion in assets under management and a good deal of those assets were from former clients they serviced at TCW. TCW's expert has looked at the departed customer files and the information the jury was convinced that Gundlach and his friends misappropriated. He opined that Gundlach and his friends would've had to have paid a royalty of $81.7 million if an arms-length negotiated transaction took place. That's TCW's argument.

Not so fast, says DoubleLine's expert. He says TCW wouldn't have negotiated a royalty for those $48 billion in royalties to leave with Gundlach. BusinessWeek quotes DoubleLine's expert saying: "TCW would not have allowed the transfer of the $48 billion in assets under management. It’s not a proper assumption for a hypothetical negotiation.” So now it is apparently up to the judge. What will he decide?

Stay tuned . . . .

Arbitration of Trade Secret Theft Claim Leads to $525 Million Award Against Western Digital

noreply@blogger.com (Todd) — Mon, 21 Nov 2011 14:29:00 +0000

Reuters is reporting that Seagate Technology LLC has been awarded $525 million in an arbitration that it brought against Western Digital and a former Seagate employee who joined Western Digital. The claims involved misappropriation of trade secrets. We have not seen the arbitration award but presume it is as nondescript as most arbitration awards prove to be - one usually has to guess which evidence they found persuasive or compelling.

"We do not believe there is any basis in law or fact for the damage award of the arbitrator," said Western Digital Chief Executive Officer John Coyne. The company said it will "vigorously" challenge the verdict that was awarded in an arbitration action in Minnesota.

Appeals of arbitration awards are particularly difficulty to win but we'll keep an eye on this one for you. This is a big one and we would imagine Western Digital is second-guessing its agreement to arbitrate this dispute.

Who Owns the Information Related to the Twitter Account - Employer or Employee or Neither?

noreply@blogger.com (Todd) — Thu, 17 Nov 2011 15:57:00 +0000

We're linking you to a great piece in Ars Technica by Venkat Balasubramani - an attorney who specializes in media, technology and internet issues. The piece examines a recent case in which the former employer, PhoneDog, sued a former employee, Noah Kravitz, for misappropriation of trade secrets, interference with economic advantage, and conversion of information related to a Twitter account Kravitz operated for the company Kravitz decided, alas, to change the password on is way out the door and PhoneDog was effectively shut out of the account. They, of course, sued.

We're interested in the trade secret claim, and Mr. Balasubramani is too. He notes that the court refused to dismiss the trade secret claim, stating "PhoneDog has sufficiently described the subject matter of the trade secret with sufficient particularity and has alleged that, despite its demand that Mr. Kravitz relinquish use of the password and Account, he has refused to do so. At this stage, these allegations are sufficient to state a claim. Further, to the extent that Mr. Kravitz has challenged whether the password and Account followers are trade secrets and whether Mr. Kravitz's conduct constitutes misappropriation requires consideration of evidence beyond the scope of the pleading."

Makes sense, right? The court is forestalling the question of whether the Twitter data and information is a trade secret or not - they want to hear more about that claim and the information will come from documents and testimony OUTSIDE of the complaint or answer. The piece goes on to examine the jurisdictional "amount in controversy" issue and we found that issue interesting, too. On the issue of whether the password for the Twitter account is a trade secret, that seems to us to be beside the point. The password is just the key to entry to the real trade secrets, if there even are any there. The independent commercial value is in the operation and cultivation of the followers - and this will be an interesting issue to watch as the court attempts to peel this onion.

More on the SEC and Trade Secrets

noreply@blogger.com (Press) — Tue, 15 Nov 2011 14:13:00 +0000

Back in 2006 and 2007 we ran a series of posts (the first one here) concerning hedge fund manager Phillip Goldstein whose firm, Bulldog Investors, was challenging the SEC’s Rule 13f which required him to publicly disclose the fund’s holdings when they crossed a certain threshold.

Mr. Goldstein was of the view that the constitution and/or trade secrets law ought to protect him from such disclosures.

Now the issue has come up again, albeit in a slightly different context of SEC waivers granted to certain investors, like Warren Buffet, while they amass positions in particular stocks. The New York Times has a column on the practice today.

The obvious questions are: first, do some investors get special treatment when it comes to non-disclosure waivers, and, second, can the exceptions effectively swallow the rule?

Trade Secrets of the “Better Beers”

noreply@blogger.com (Press) — Mon, 14 Nov 2011 20:38:00 +0000

From Huffington Post, an interesting story about a battle of the breweries in which Boston Beer Company (maker of Sam Adams beer) is suing Anchor Brewing (maker of Anchor Steam beer) over allegations of employee poaching and misappropriation of trade secrets.

Boston Beer executive Judd Hausner left Boston Beer earlier this year for Anchor. Boston Beer claims that just before leaving its employ, Hausner attended high-level meetings about Boston Beer's internal strategies.

According to Huffington Post, there’s also a market definition issue in the case:

Boston Beer defines their particular market at the "better beer" category that makes up 20 percent of total domestic beer consumption, as opposed to the "mainstream domestic beers" which comprise the other 80 percent. Anchor claims its products are instead in the "craft beer" category, which only makes up five percent of the total domestic market, and therefore isn't a direct competitor with Sam Adams.

The case is proceeding in Massachusetts, not in California where Hausner worked managing distribution in Marin, Napa and Sonoma counties. (Do they drink anything other than wine there?) Massachusetts is a lot more friendly to non-compete cases than California.

Choice of law issues are likely to be paramount and we'll try to keep you in the loop on this one.

U.S. Government: Chinese and Russian Spies are Infiltrating American Databases to Steal Trade Secrets

noreply@blogger.com (Todd) — Tue, 08 Nov 2011 16:20:00 +0000

The U.S. Office of National Counterintelligence Executive has issued a report (linked above - please click on title to this post) suggesting that foreign spies, including from key U.S. allies, are increasingly using cyber-theft to access and appropriate secrets of the U.S. and economically important companies here. China and Russia were singled out as the most pervasive threats to economically sensitive secrets.

“The nations of China and Russia, through their intelligence services and through their corporations, are attacking our research and development,” Robert “Bear” Bryant, the national counterintelligence executive , said during a news conference discussing the report. He added that foreign industrial espionage is a “very serious problem facing the economic viability of the United States." Cyberespionage will continue to represent a major challenge to U.S. economic security, the report concluded. The proliferation of portable devices that connect to the internet and the trend of pooling information processing and storage will further enable such activities.

It is refreshing to read that the government, and cooperating and coordinating agencies in the federal government, is aware of risks and threats that we've been detailing in this blog for years. What is even more important, however, will be the government's counter-measures to fend off these cyber-threats and its role in working with private industry to accomplish joint prerogatives. This report makes a fascinating read.

Trade Secrets of Major League Baseball Management?

noreply@blogger.com (Todd) — Tue, 01 Nov 2011 18:11:00 +0000

Boston attorney Debra Squires-Lee authored an interesting piece in last week's online magazine CFO.

Ms. Squires-Lee notes that the departure of Boston Red Sox General Manager Theo Epstein, a young wunderkind who helped lead the Red Sox to great success during his tenure, to the Chicago Cubs suggests that perhaps the Red Sox could've done something contractually to limit what Mr. Epstein could and could not share with the Cubs in terms of knowledge generated while with the BoSox.

She writes: " If they did their job right, the senior executives in the Boston club curbed Epstein’s ability to tap into its secrets to create a successful 2012 team in the Windy City. If Epstein was privy to any proprietary, secret, statistical method for analyzing baseball talent, that method could be considered a trade secret. If he uses that method to benefit the Cubbies, the Sox could try to fight its wrongful use, but that would be costly. The expense of litigating a trade-secret case can be game changing. The cost of the lost business advantage if the Cubs start using the Sox’s secrets may be season ending."

What Ms. Squires-Lee does not mention in her piece is the possible use of a noncompetition agreement. These agreements, which limit for some period of time the departing employee's ability to compete in a certain territory, are ubiquitous in many industries and are commonly enforced by courts across the country (with some limitations - California, for example) when they are well drafted and protect a legitimate business interest of the former employer. But this leaves us wondering - does Major League Baseball have a per se rule regarding any club's use of noncompete agreements for important non-performing employees, such as coaches, managers or general managers? We don't know.

Marketwire Sues PR Newswire Over Alleged Theft of Corporate News Release Secrets

noreply@blogger.com (Todd) — Mon, 31 Oct 2011 14:51:00 +0000

Toronto-based Marketwire distributes press releases via traditional methods (Associated Press, Bloomberg, etc.) as well as new media methods. Most of you have read or seen their work - we regularly read Marketwire pieces that assist companies in getting a particular message publicized.

Reuters is reporting that Marketwire has sued PR Newswire and several of its new employees who used to work for Marketwire. In its complaint, Marketwire accuses PR Newswire of hiring its former chief technology officer, co-defendant Shoeb Ansari, as part of a what it called a continuing campaign to steal its technology and gain access to customer data. Ansari, who was terminated from his Marketwire job in June 2010 and is now PR Newswire's chief information officer, allegedly has since lured several former colleagues to join him at New York-based PR Newswire.

A PR Newswire spokeswoman had no comment on the complaint, filed in the New York State Supreme Court in Manhattan.

TCW Says Gundlach and Doubleline Owe Over $80 Million for Royalties on Trade Secrets He Misappropriated

noreply@blogger.com (Todd) — Wed, 26 Oct 2011 14:33:00 +0000

Reuters is reporting now regarding the damages request that TCW has made of the court in this long-fought battle over Jeffrey Gundlach's departure as an employee of TCW. As you'll recall, TCW prevailed in its claim the famed fund manager took trade secrets, although it is now up to a judge to decide damages.

Bradford Cornell, a damages witness for TCW said that without the use of proprietary information obtained from his former employer, Gundlach would not have been able to build up his new rival business Doubleline Capital so quickly and effectively."Without trade secrets, Gundlach's business wouldn't have been ready," Cornell told California Superior Court Judge Carl J. West on Tuesday. The $81.7 million figure was based on a hypothetical negotiation that would have occurred in the fall of 2009 if Gundlach had tried to buy the information contained in the trade secrets, Cornell said. Research on the internet suggests that Dr. Cornell is a professor at Cal Tech and also provides expert testimony in high-profile lawsuits through the Charles River Associates firm.

Pensions & Investments is reporting that Dr. Cornell acknowledged the basis for his assumption regarding the hypothetical negotiation was a pro forma accounting that Gundlach's associates had made regarding the amount of assets they assumed would be generated in their new business. They report: "Mr. Cornell said he made his calculations based on a pro forma financial statement that Mr. Gundlach's associates had developed for a new hypothetical asset management company. The statement, which TCW officials had discovered during searches of computers used by Mr. Gundlach's securities team in fall 2009, showed that Mr. Gundlach and associates had estimated that they would take $48 billion in assets away from TCW and would bring in $197 million in revenue in their first 10 months of operations from March 1, 2010, through Dec. 31, 2010."

Lawyers for Gundlach and Doubleline insist they do not owe anything. On cross-examination Mr. Cornell said none of the $48 billion ever went to DoubleLine and that the pro forma statement was only a calculation for a potential company that had no direct relationship to any actual money management firm that Mr. Gundlach formed. http://www.pionline.com/article/20111025/DAILYREG/111029937/tcw-argues-it-should-get-82-million-from-gundlach

This case continues with Gundlach's and Doubleline's experts next . . . .