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Thursday Wrap-Up (August 16, 2012): Noteworthy Trade Secrets, Covenant Not to Compete and Cybersecurity Stories from Around the Web

 
by John Marsh 16. August 2012 23:00

Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week, as well one or two that I missed over the past few weeks (better late than never):
 
Noteworthy Trade Secret and Non-Compete Posts and Cases: 

  • Manhattan District Attorney Cyrus Vance has arrested ex-Goldman Sachs programmer Sergey Aleynikov for the alleged theft of Goldman's proprietary code for its high frequency trading program.  Aleynikov was previously convicted by a Manhattan jury under the Economic Espionage Act but that verdict was overturned by the U.S. Court of Appeals for the Second Circuit in February.  (My take on the Second Circuit's opinion (hint:  I didn't agree) can be found here).  The New York Times quotes Vance as follows:  “This code is so highly confidential that it is known in the industry as the firm’s 'secret sauce.' Employees who exploit their access to sensitive information should expect to face criminal prosecution in New York State.  According to The Times, Vance charged Aleynikov with the unlawful use of secret scientific material and duplication of computer-related material, both felonies under New York State law. If convicted, he could serve 1 to 4 years in prison.
  • In the final chapter of another noteworthy criminal trade secret proceeding, former-Intel engineer Biswamohan Pani was sentenced to a 3 year prison term after pleading guilty to stealing Intel's computer chip manufacturing and design secrets.  Prosecutors say the 36-year-old Pani downloaded secret documents from Intel in May 2008, shortly after he announced he was leaving to join rival Advanced Micro Devices.  Intel valued those documents at between $200 million and $400 million. 
  • And in yet another criminal trade secrets case, a former Bridgestone scientist, Xiaorong Wang, has pleaded not guilty to charges that he stole trade secrets from his former employer in Akron and then lied to federal investigators.  Wang's trial is set for September 25, 2012. 
  • If you are advising companies in the healthcare industry, you will want to read an article by Kathryn Hacket King of Snell & Wilner about the "Enforceability and interpretation of agreements prohibiting 'direct and indirect' solicitation of health care employees."  In ProTherapy & Associates, LLC v. AFS of Bastian, Inc., the Fourth Circuit not only upheld the non-solicitation provisions in question but enforced a liquidated damages clause as well. 
  • "Avoiding Trade Secret Litigation in the Life Sciences" by Choate Hall & Stewart LLP's Eric J. Marandett and Margaret E. Ives provides some sound tips when negotiating collaboration agreements with potential partners. 
  • "Mergers & Acquisitions: Don't Forget About Employee Compliance with Nondisclosure Agreements" advises The Michigan Employment Law Advisor
  • And speaking of mergers and non-disclosure agreements, the Delaware Supreme Court has issued its formal opinion affirming the Chancery Court's injunction against Martin Marietta for breaching its NDA and using confidential information in its hostile bid for Vulcan Materials.  The Delaware Corporate & Commercial Law Blog has a post about the decision and link to the opinion.  (For more on this case, see my posts here and here). 

Computer Fraud and Abuse Act Posts 

  • Confusion over the scope of the Computer Fraud and Abuse Act continues, as there is now a split within the First Circuit according to Foley & Hoag's Massachusetts Noncompete Blog.  The U.S. District Court for the District of New Hampshire has recently adopted the narrow reasoning of U.S. v. Nosal, thus separating itself from an earlier decision by the U.S. District Court for the District of Massachusetts, which had applied the broader rule permitting the use of the CFAA for violations of computer-use policies. 

Cybersecurity Posts and Articles 

  • "Cybersecurity Becoming No. 1 Concern for GCs and Directors" notes Catherine Dunn forCorporate Counsel. 
  • "Why It Pays to Submit to Hackers" explains Wired. 
  • "How To Create and Remember Strong Passwords" advises Larry Magid for Forbes
  • "Don’t forget these 5 security issues in your BYOD policy" reminds Jon Hyman's Ohio Employer's Law Blog. 

News You Can Use:

  • "How to make your lost phone findable" by David Pogue of The New York Times.
 

Thursday Wrap-Up (August 9, 2012): Noteworthy Trade Secrets, Non-Compete and Cybersecurity Stories from Around the Web

 
by John Marsh 9. August 2012 10:30

Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week, as well one or two that I missed from the previous week:

Noteworthy Trade Secret and Non-Compete Articles, Cases and Posts:

  • A San Jose jury has awarded $112 million to networking equipment supplier Brocade Communications Systems Inc., finding that A10 Networks Inc. stole its trade secrets and infringed its intellectual property to start a competing business with ex-Brocade workers, reports Law360. Brocade's press release also indicated that Brocade had asserted claims for patent and copyright infringement that covered all of A10’s AX Series load balancing server products.
  • In a high profile healthcare dispute, Renown Heath has reached an agreement with the Federal Trade Commission and the Nevada Attorney General's office over its non-competes with 10 staff cardiologists it formerly employed in Nevada. Renown had cornered about 97% of the cardiology market and its acquisition of previously independent cardiology groups was perceived as likely to result in price increases to health plans and individuals paying for cardiology services in the area. The settlements will allow those cardiologists to join competing practices without penalty.
  • Many settlement agreements and consent decrees have non-disparagement provisions, but are those provisions enforceable? According to Berman Fink Van Horns' Georgia Non-Compete and Trade Secret News Blog, they may not. In Sesolinc Group, Inc. v. Metal-con Inc., 2012 WL 2119768 (S.D. Ga. June 11, 2012), a Georgia federal court declined to approve a consent decree presented by the parties because it might entangle the court in First Amendment issues such as potentially enforcing an order forbidding constitutionally-protected commercial speech. 
  • What are holdover clauses and are they enforceable? Kenneth Vanko answers both questions in his recent post on the South Carolina Supreme Court's decision in Milliken & Co. v. Morin upholding the enforceability of these provisions, which are designed to protect the ownership and assignability of inventions created with an employer's confidential information after an employee's departure.
  • Another court has signalled that circumstantial evidence of misappropriation is insufficient to overcome an employee's denials, advises Epstein Becker's Trade Secrets & Noncompete Blog.  In a Georgia appellate decision, Contract Furniture Refinishing & Maintenance Corp. of Georgia d/b/a The Refinishing Touch v. Remanufacturing & Design Group, the court ruled that while the plaintiff TRT produced strong circumstantial evidence that the defendant Deutsch may have misappropriated or disclosed its trade secrets, the “evidence is also consistent with the direct evidence that Deutsch did not in fact do so. The circumstantial evidence therefore has no probative value, and TRT cannot demonstrate a genuine issue of fact with regard to its misappropriation of trade secrets claim.”
  • Indiana businesses better have reasonable time, subject matter and geographic limitations in their confidentiality agreements or they may not be enforceable, warns Seyfarth Shaw's Trading Secrets Blog
  • If you have clients in the financial and investment communities, you should read "For some firms, brokerage-hiring protocol no longer holds value" by Dan Jamieson for Investment News.
  • Interested in the "State of Texas Non-Competes"? Consult Rob Radcliffe's Smooth Transitions Blog, where he has posted an article he recently wrote on the matter (the news is good for employers).
  • E. Patrick Ellisen and Daniel T. McCloskey have advice for "Protecting Confidential Information and IP Amid Employee Mobility" in an article for Corporate Counsel.
  • At long last, something upon which members of Congress can agree. Last week, the U.S. House of Representatives voted to approve H.R. 6029, the Foreign and Economic Espionage Penalty Enhancement Act of 2012, which increases the penalties under the Economic Espionage Act from the statutory maximum for economic espionage and the theft of trade secrets for the benefit of a foreign entity to 20 years from 15, raises the fine that can be imposed to a maximum of $5 million from $500,000, and adds criminal penalties for passing trade secret information that would benefit a foreign government.  A companion bill, S. 678, with similar language is under review by the Senate.

Computer Fraud and Abuse Act Posts:

  • Foley & Lardner's Privacy & Security Source Blog is not happy about the recent decisions in Nosal and WEC Carolina in its post "De-CFAA-nating Federal Law: Recent Appeals Courts Decisions Weaken Statutory Protections Against Unauthorized Use of Electronic Data." For the views of other trade secrets blogs on the WEC Carolina decision, see Seyfarth Shaw's post, Fisher & Phillips' post, Epstein Becker's post and Littler's post (my take can be found here). 
  • A California federal court has allowed a CFAA claim arising out of the violation of a computer use policy to go forward because the policy limited the access of the former employee, reports Eric Goldman in his Technology & Marketing Law Blog. In Weingand v. Harland Financial Solutions, C 11 3109 EMC (N.D. Cal.; June 19, 2012), the Northern District found that the reasoning in U.S. v. Nosal did not apply because the policy in question prohibited the access at issue.

 
Cybersecurity Posts and Articles:

  • For those interested in finding out what sank the Cybersecurity Act of 2012, there are plenty of opinions from which to choose. Steptoe & Johnson's Cyberblog and Peter S. Vogel share their thoughts. Shockingly, The New York Times blames the Republicans while The Wall Street Journal blames the Democrats. And, as always, Catherine Dunn of Corporate Counsel has a fine piece entitled, "A Long, Hot Summer for Corporate Cybersecurity."
  • "Protect your IP: hashing your passwords" counsels Scott Flaherty of Briggs and Morgan. 
  • "'Spearphishing' Fraud Hooks More Victims: How cybercriminals disguise themselves as your bank, your boss, or even the IRS" advises Jen Weiczner of SmartMoney.

News You Can Use:

  • And The New York Times Bits Blog provides some advice on "What You Can Do to Better Protect Your Apple Account."
 

Thursday Wrap-Up (August 2, 2012): Noteworthy Trade Secrets, Covenant Not to Compete and Cybersecurity Stories from Around the Web

 
by John Marsh 2. August 2012 12:55

Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week:
 
 
Noteworthy Trade Secret and Non-Compete Posts and Cases: 

  • Mitsubishi Electric & Electronics USA Inc. has persuaded a trial court to set aside a $124 million jury verdict against it arising from Grail Semiconductor Inc.'s claims that Mitsubishi breached a non-disclosure agreement by disclosing confidential information for a memory chip to an affiliate, Mitsubishi-Japan and a jointly owned Japanese company, Renesas.  Bloomberg is reporting that Santa Clara Superior Court Judge Kenneth Barnum concluded that the jury's damages analysis was flawed but that he upheld the jury's findings of liability.  The verdict was the 13th largest jury verdict in the U.S. so far in 2012.
  • In yet another bad faith case, Judge Jane Magnus-Stinson of the U.S. District Court for the Southern District of Indiana has imposed attorneys fees and costs against a plaintiff and its lead counsel, finding that the action was "essentially a vendetta" against the former employees "designed . . . to litigate them to death, rather than out of a genuine concern about protecting intellectual property."  In Loparex, LLC v. MPI Release, LLC, Judge Magnus-Stinson was influenced by the fact that Loparex had filed, but quickly dismissed, an action against one of the former employees in Illinois, after warnings from the Illinois court about its concerns about Loparex's ability to identify its trade secrets, and then refiled that action before her.  (A PDF copy of the opinion can be found below).
  • Non-competes do not violate the Texas Deceptive Trade Secrets Act, reports Gray Plant Moody.  The article details the recent decision by the U.S. District Court for the Northern District of Texas in Mary Kay, Inc. v. Amy Dunlap, 2012 U.S. Dist. LEXIS 86499 (N.D. Tex. June 21, 2012), which also rejected a challenge under the Sherman Act.
  • For those in Illinois, the Illinois Fourth Appellate District has recently applied the new analysis supplied under Reliable Fire Equip. v. Arrendondo to enforce a non-compete, reports DeBlasio Donnell's Litigation Blog.  In Zabaneh Franchises, LLC v. Walker, the Fourth Appellate District reversed the trial court's decision not to uphold the covenant not to compete, reasoning that the employee was only restricted from soliciting customers that she had serviced for her former employer. 
  • Oklahoma companies and attorneys interested in "Dissecting the Oklahoma Non-Compete Statute Phrase by Phrase" should consult Shawn J. Roberts' post. 
  • For a good summary of the pending In re Certain Rubber Resins trade secret case before the International Trade Commission, see Brian Vogel's article at Inside Counsel
  • Interested in finding out more about the Protecting American Trade Secrets and Innovation Act of 2012? Check out Crowell & Moring's Mark Klapow's article, "The Latest Attempt to Federalize Trade Secret Law," in Law360.
  • If you are thinking of sending a cease and desist letter, you might want to consider the approach used in Jack Daniels' splended letter, which has gone viral (it was even commented upon in The Atlantic). You will be sure to avoid the ridicule that came from the clever response to the Hopasaurus Rex cease and desist letter.

 
Cybersecurity Posts and Articles: 

  • If you are looking for the latest on the pending cybersecurity legislation, there is plenty to sink your teeth into. Foley & Hoag's Security, Privacy and The Internet Blog reports on the Obama administration's decision to throw its weight behind Senator Joseph Lieberman's Cybersecurity Act of 2012. 
  • Also check out  The New York Times two articles, "Senators Force Weaker Safeguards Against Cyberattacks" and "Again, Wrangling Over Surveillance in the Cybersecurity Bill."
  • For Baker & Hostetler's Data Privacy Monitor Blog's take on the Cybersecurity Legislation, check out its posts asking "Can National Security Trump Politics This Close to the Election?"
  • Steptoe & Johnson's Sally Abertazzie's E-Commerce Law Week shares her thoughts on the legislation, as well as a nice summary of the First Circuit's recent decision in  Patco Construction Company v. People’s United Bank holding that a bank's security was commercially unreasonable in connection with a claim over cybertheft of a customer's funds.
  • Finally, The Washington Post weighed in last week on the legislation with its editorial entitled "Stockpiling arms against cyberattacks" and appears convinced the threat is real and that our private and public bodies need to take some action.
  • "Smartphones are becoming top targets for cyber attacks" reports MoneyWeb, particularly because they are expected to become the equivalent of wallets, replacing credit cards and cash.

News You Can Use: 

  • The Wall Street Journal's Digits Blog cautions that "Do You Use Free Wi-Fi? It May Be Legal to Sniff All Your Data." 
  • And for the highly paranoid, Forbes' Andy Greenberg advises "How To Bust Your Boss Or Loved One For Installing Spyware On Your Phone."

Loparex Order 07.31.12.pdf (109.26 kb)

 

Thursday Wrap-Up (July 26, 2012): Noteworthy Trade Secrets, Non-Compete and Cybersecurity Stories from Around the Web

 
by John Marsh 26. July 2012 17:45

Greetings from Rehoboth Beach!  Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week:
 
 
Noteworthy Trade Secret and Non-Compete Posts and Cases: 

  • The Northern District of California has ruled that federal authorities have not properly served Chinese defendants in the DuPont/Pangang Group criminal proceeding arising out of the alleged theft of trade secrets for DuPont's titanium dioxide process. The district court found that service of Pangang's U.S. subsidiary (of which it owns 75%) did not constitute proper service as there was insufficient evidence that Pangang controlled that affiliate (can't say that I understand that reasoning but will see if I can get a copy of the court's opinion). Prosecutors have until Aug. 16 to report back to the court on how they intend to proceed; it is being reported that this is a significant blow to the prosecution. As readers of this blog may recall, this case is one of the highest profile cases yet brought under the Economic Espionage Act because Pangang Group is owned by the Chinese government and one of the parties indicted by the government. (A special thanks to Janet Craycroft of Intel for reporting this development to me). 
  • Speaking of trade secrets and China, a recent survey of Chinese executives shows that 2/3rds of them have non-competes. It would be interesting to see how Chinese courts have responded to efforts to enforce them.
  • Pharmaceutical and medical device companies: Be careful what you share with the FDA as the Medical Device and Diagnostic Industry Blog is reporting that the FDA is now being accused of having improperly released trade secrets that were provided to it in an article, "How FDA Dumped Device Secrets in Cyberspace." The FDA has also taken a beating for allegedly spying on a number of its whistle blower employees whom it believed were disclosing trade secrets; The New York Times had a recent editorial, "The Spy Hunt for Whistle-Blowers," criticizing the FDA for those efforts.
  • It's not all "touchy feely" in the organic dairy market, as the gloves have come off in a trade secrets dispute between Horizon Organic and rival Organic Valley over the hiring of a former employee of Horizon. The employee, Larry Hansen, was dairy operations manager for milk quality and supply at Horizon for four years before taking a similar job at Organic Valley. Horizon claims that Hansen had access to its supplier list, which it keeps confidential, as well as its purchasing price “tolerances and strategies” and sales demand projections, which it also safeguards. Horizon believes that he is violating a non-disclosure agreement that he signed while at Horizon. 
  • What is the status of non-compete reform legislation in Massachusetts? Brian Bialas has an update in Foley & Hoag's Massachusetts Non-Compete Blog.
  • Memo to Florida employers hiring new employees with non-competes: Do NOT agree to indemnify them for any potential claims or litigation, warns Burr & Forman's Trade Secrets & Non-compete Blog.
  • For those in Connecticut, Daniel Schwartz's Connecticut Employment Law Blog has a practical post "Drafting the Restrictive Covenant to Protect Your Interest" under Connecticut law. 
  • Electronic discovery and litigation holds can be a prominent part of any trade secret case, so defendants are breathing a sigh of relief as the U.S. Court of Appeals for the Second Circuit has rejected District Court Judge Scheindlin's ruling that a failure to issue a litigation hold is reckless per se.  Peter S. Vogel's Internet, Information Technology and e-Discovery Blog details this recent ruling in Chin v. Port of Authority of New York, overturning a decision by Judge Scheindlin that has been criticized as utopian and impossible to meet.
  • Did the CEO of an Irish pharmaceutical-services company breach a non-disclosure agreement when he publicly stated that a rival was on the block? The Wall Street Journal is reporting this imbroglio in an article entitled, "Study in How Not to Keep a Deal Secret."

Computer Fraud and Abuse Act Posts:

  • Another district court from Michigan has adopted the reasoning of the Ninth Circuit in U.S. v. Nosal, reports Jessica Mendehlson in Seyfarth Shaw's Trading Secrets Blog. In Dana Ltd. v. American Axle & Mfg. Holdings, the district court found that several former employees did not exceed their authorized access when they erased a number of files that would have presumably shown that they were taking their employer's trade secrets with them.  

Cybersecurity Posts and Articles: 

  • For more on the pending cybersecurity bill, see The Wall Street Journal's article, "Cyber Bill Relies on Voluntary Security." The article indicates that the Obama administration is not happy with the present bill as Republican House members are resisting giving any further control over cyber issues to the Department of Homeland Security.
  • From The New York Times Bits Blog, "Hackers Demonstrate a Rising Vulnerability of Smartphones" according to experts speaking at the Black Hat security conference in Las Vegas.

News You Can Use:

  • Suffering from "Digital Overload?" The New York Times has some advice on how to take a deep breath and take a step away from your devices. Baby steps, people, baby steps.
 

Friday Wrap-Up (July 13, 2012): Noteworthy Trade Secrets, Covenant Not to Compete and Cybersecurity Stories from Around the Web

 
by John Marsh 13. July 2012 15:30

Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week:
 
Noteworthy Trade Secret and Non-Compete Posts and Cases:
  • A Washington federal judge issued a writ of garnishment on behalf of DuPont last week against Kolon Industries Inc., ordering an associated company to become a garnishee following DuPont's $920 million trade secret verdict against Kolon last fall, Law360 is reporting. A PDF copy of the order can be found below. The parties are waiting on a ruling on DuPont's motion for permanent injunction from U.S. District Court Judge Robert Payne back in Richmond Virginia. For more on the DuPont v. Kolon case, see my previous posts here and here. 
  • An Illinois court has recently found that breach of an agreement must be material to void a non-compete reports Epstein Becker's Trade Secrets and Noncompete Blog.  The case, InsureOne Indep. Insur. Agency v. Hallberg, involved the enforcement of a non-compete that accompanied a sale of a business.  For what it is worth, in my experience, courts tend to be less forgiving of a breach by an employer in non-competes involving an employee.
  • Michigan is the latest state to consider scaling back its enforcement of non-competes. Senate Bill 786, which was introduced in late 2011, would require Michigan employer to advise a potential employee of the requirement to sign a non-compete agreement as a condition of employment. This requirement is gaining traction nationally, as New Hampshire recently adopted a similar statute imposing a similar requirement upon its employers, which becomes effective tomorrow. 
  • What are the risks and benefits of suing the company that hires a former employee with a non-compete? The Delaware Non-Compete Blog has a practical post outlining the practical considerations every company should weigh before joining a competitor in a dispute over a covenant not to compete. 
  • For those interested in working through the legal thicket of garden leave provisions -- i.e., provisions that pay an employee for a post-employment waiting period so that he/she does not compete -- check out the Burr & Forman Non-Compete and Trade Secrets Blog's recent post, which provides a good summary of the caselaw construing these provisions.

Computer Fraud and Abuse Act Cases and Posts:

  • The Solicitor General has been granted a 30 day extension so he can continue to evaluate whether he wants to appeal from the Ninth Circuit's en banc decision in U.S. v. Nosal, reports Seyfarth Shaw's Trading Secrets Blog.  That decision narrowly applied the CFAA, finding that a violation of a computer use policy was insufficient to trigger that statute.  For more detail, see my earlier post.
  • A New York state court has recently decided to follow Nosal's holding in a short decision dismissing a CFAA claim, reports Foley & Hoag's Massachusetts Non-Compete Blog. The opinion MSCI Inc. v. Jacob, 2012 N.Y. Slip. Op. 05107 (N.Y. App. Div., 1st Dep't June 26, 2012), provides little detail but signals the growing divide over the scope of the CFAA. 
  • Littler's Unfair Competition & Trade Secrets Counsel Blog has a post about another recent CFAA decision, Del Vecchio v. Amazon, where the plaintiff's CFAA claim was dismissed because it failed to provide specific facts showing the actual value of the trade secrets at issue or the actual profits lost as a result of the theft.

Cybersecurity Posts and Articles: 

  • The big news this week was the breach of 400,000 Yahoo accounts but The New York Times is reporting that the breach extends beyond Yahoo to Gmail, Hotmail, and AOL Users. 
  • "Cybercriminals Sniff Out Vulnerable Firms" advises The Wall Street Journal
  • Forbes' Andy Greenberg details the plan on "How To Hijack 'Every iPhone In The World.'"
News You Can Use: 
  • Can this relationship be saved? "He Texts, She Tweets—Are They E-Compatible? Setting Digital Ground Rules to Become E-Compatible With Family and Friends" writes Elizabeth Bernstein in The Wall Street Journal.

 Dupont v Kolon - Writ of Garnishment.pdf (86.82 kb)

 

Thursday Wrap-Up (July 5, 2012): Noteworthy Trade Secrets, Non-Compete and Cybersecurity Stories from Around the Web

 
by John Marsh 5. July 2012 12:00

Here are the noteworthy trade secrets, non-compete and cybersecurity stories from the past week:


Noteworthy Trade Secret and Non-Compete Posts and Cases:

  • The big news in the trade secret blogosphere this week was Todd Sullivan's announcement that he will be leaving Womble Carlyle and forming a litigation boutique firm, Graebe Hanna & Sullivan. Todd has been blogging since 2006 and his contributions to the Trade Secrets Blog made it one of the best, and funniest, trade secret blogs. Hopefully, he will find the time to launch a new blog after he hits the ground with his new firm. 
  • Google has been sued for allegedly copying portions of its video chat platform from the company Be In, which offers its own video chat program, CamUp. Be In alleges that it discussed a business deal with Google at a meeting in London last April. According to the complaint, after signing a non-disclosure agreement with Google, "Be In provided a live demonstration of its CamUp product, and proposed that a 'Watch with your Friends' button be embedded within all YouTube pages."
  • Law360 is reporting that trade secret claims brought by Therason against former McDermott Will & Emery partner John Fuisz have been dismissed as untimely. Therason, at the time a client of McDermott, had alleged that Fuisz had shared its trade secrets with a pharmaceutical company formed by his family members.
  • Are you an employee looking down the barrel of a cease and desist letter from your former employer? Then you should review Rob Dean's latest post on the Virginia Non-Compete Blog for advice on how to respond.
  • For those practicing in Illinois, Kenneth Vanko reports that Illinois courts are all over the place in their application of the Illinois Supreme Court's Reliable Fire v. Arredondo decision last year. In Reliable Fire, the Supreme Court found that an employer had to come forward with evidence of a legitimate business interest to justify enforcement of any covenant not to compete. As Kenneth and I both predicted, this fact-based approach has made non-compete cases highly unpredictable and more uncertain for employers and employees.
  • The IPKat Blog has an interesting post about how trade secrets may serve to enhance the reputation of some companies.
  • Although it is a relative newcomer to the blogosphere, Burr & Forman's Non-Compete & Trade Secrets Blog continues to churn out good, practical posts. This week's post, "Court Says It’s Time to Pay The Piper, Even if the Piper Hasn’t Paid: Fee Provisions and Third Party Payments," looks at the enforceability of prevailing party provisions in non-compete disputes


Cybersecurity Posts and Articles:

  • Concerns about confidentiality, privilege and cloud computing continue to swirl, and Peter S. Vogel's Internet, Information Technology and e-Discovery Blog has some helpful links to a recent interview that Peter gave on the subject as well as a Texas CLE on the subject.


News You Can Use:

  • "Fix That Password—Now!" says The Wall Street Journal, with some advice on what passwords work best.
 

Thursday Wrap-Up (June 28, 2012): Noteworthy Trade Secrets, Non-Compete and Cybersecurity Stories from Around the Web

 
by John Marsh 28. June 2012 10:45

Here are the noteworthy posts, articles and cases of the past week:

Trade Secret and Non-Compete Cases and Posts:

  • U.S. District Court Judge Gary Keess issued his opinion explaining his reasons for denying CBS' Motion for TRO to prevent the premiere of ABC's Glass House reality show.  A copy of the Opinion can be found in the PDF below. As expected, Judge Keess expressed "serious doubts" about whether CBS had any trade secrets, let alone whether ABC had misappropriated them. He dismantled CBS' claims that its Big Brother "House Guest" manual qualified as a trade secret (labelling it "generic") and found that the "filming, editing and production techniques" were commonplace in the industry. Judge Keess also rejected any claim of irreparable injury, reasoning any harm was readily compensable by a damages award.  For more on this case, see my earlier posts here and here.
  • MGA's insurers have sued for their share of the $137 million in lawyers' fees and costs award in the epic MGA v. Mattel "Bratz" case according to Alison Frankel's On The Case Blog. National Union Fire Insurance Company of Pittsburgh and Crum & Forster Specialty Insurance Company have filed a declaratory action for those fees and MGA is expected to oppose the complaint as premature.
  • The "inevitable disclosure doctrine" appears to be on life support in Massachusetts, according to recent posts in Kenneth Vanko's Legal Developments in Non-Competition Agreements Blog and Seyfarth Shaw's Trading Secrets Blog. Both posts describe the U.S. District Court of Massachusetts' ruling in U.S. Elec. Svcs., Inc. v. Schmidt, 2012 U.S. Dist. LEXIS 84272 (D. Mass. June 19, 2012), that the doctrine cannot be applied in the absence of a non-compete, at least under Massachusetts law. 
  • For those practicing before the International Trade Commission, the ITC 337 Blog has a comprehensive summary of the latest trade secret cases filed before the ITC. 
  • In a post entitled "Can I Protect My Trade Secrets Via Social Media Policy," James Douglass provides a nice recap of the recent National Labor Relations Board's opinion on social media and how to draft enforceable social media policies to protect your trade secrets in Fisher & Philips' Trade Secrets and Noncompete Blog
  • "You Want to Enforce a Non-Compete? Bad Facts, Sir, Give Me Some Bad Facts!"  advises the Mass Law Blog. Well stated, Mass Law Blog, well stated.
  • "Employers beware: Revisions of non-compete agreements are becoming essential" writes Richard Glovsky for Inside Counsel. Richard's article details the challenges of enforcing non-competes against employees who are promoted, reassigned or take on additional responsibilities. 
  • How will the America Invents Act's "prior user rights" impact the bio and pharma industries? The Patent Docs Blog has a post that concisely summarizes the debate at the recent BIO International conference (the post concludes that the impact may be minimal). 
  • Are you representing both the employee accused of stealing trade secrets and his/her new employer? Then you should read "Three Pitfalls of Joint Representation in Non-Compete Cases" by W. Mark Bennet for Strasburger's NonCompete Blog

 
Cybersecurity: 

  • "Lawyers Get Vigilant on Cybersecurity" reports The Wall Street Journal. For more on this issue, please see my February post detailing increasing cyberattacks directed at lawyers. 
  • The latest headache in BYOD? "Who Owns the Email?" asks Gardere's Peter Vogel in his Internet, Information Technology and e-Discovery Blog
  • Monica Bay details "The Fast Rise of the 'Bring Your Own Device' Buzzword" in Corporate Counsel
  • For an interesting take on the ongoing debate over the pending cybersecurity legislation, check out Forbes writer Ken Silverstein's "Cyber Security Debate Pits Corporate Interests Against National Security."
  • Looking for "An App that Encrypts, Shreds, Hashes and Salts"?  Check out this post on The New York Times Bits Blog.

News You Can Use: 

  • The Time Management Ninja has "10 Apps to Make Your iPad More Productive."
  • In "Stunning Progress in Technology: The Death of Unskilled Labor," Forbes' Aaron Franks details the changes in tech manufacturing that may mean these jobs are never coming back.

CBS v ABC Order 06 21 12.pdf (63.65 kb)

 

Thursday Wrap-Up (June 21, 2012): Noteworthy Trade Secrets, Non-Compete and Cybersecurity News from the Web

 
by John Marsh 21. June 2012 10:45

Here are the noteworthy posts, articles and cases of the past week:

Trade Secret and Non-Compete Cases and Posts:

  • Capital One has squeezed $20 million from former executives John Kanas and John Bohlsen on the eve of a jury trial that might have prevented their new employer's expansion into New York, reports Reuters' Alison Frankel in her On The Case Blog. As readers of this blog may recall, I posted Kenneth Vanko's fine report on this case when U.S. District Court Judge Liam O'Grady of the Eastern District of Virginia enforced the former executives' non-competes after taking into account their sophistication and commercial expertise. The two men had signed an agreement that awarded restricted stock deals worth $24 million for Kanas and $18 million for Bohlsen in exchange for the non-compete clauses.
  • Alliant has scored a big victory in its ongoing dispute with Aon over allegations that former Aon employees had improperly poached clients. In June 2011, Alliant and former Aon employees Peter Arkley, Ken Caldwell and Michael Parizino sued to challenge the enforceability of the non-competes the men signed while at Aon.  Last Wednesday, Judge Dale Fischer of the U.S. District Court for the Central District of California struck down the non-compete provisions in Aon's employment agreements. 
  • Don't identify your general counsel (GC) as a witness in a trade secret case cautions Womble Carlyle's Trade Secrets Blog in a recent post. After an unsuccessful injunction against its competitor Logoplaste, the plaintiff Portola was ordered to produce its GC's damaging emails because he was listed as a witness.  The emails revealed he had urged Portola to sue just to hurt Logoplaste’s business interests and had hired Logoplaste’s regular counsel in an unrelated matter to create a conflict. Finally, although Portola claimed that its confidential documents were used to lure an employee away, the emails showed the very opposite -- that the GC  knew the employee approached Logoplaste first. As a result, the court ordered Portola to pay all of Logoplaste’s attorneys’ fees for the three years of litigation.
  • In another post about a trade secret case gone wrong, Foley & Hoag's Massachusetts Non-Compete Law Blog reports that the counterclaim arising from the unsuccessful case brought by Brocade Communications against its former employee, David Cheung, has been dismissed. The court dismissed the counterclaim because the only evidence in support of the claim arose from settlement discussions and was therefore inadmissible. Law 360 has since reported that the parties have agreed to dismiss their respective claims against one another.
  • In an article entitled "Arbitrators Slam SunTrust's Legal Tactics In Non-Solicitation Case Against Former Employee," Forbes' Bill Singer writes about a recent FINRA arbitration decision scaling back a covenant because of the "hardball" tactics of SunTrust's counsel. According to Bill, the panel was unhappy with the fact that SunTrust secured an ex parte TRO despite knowing the former employee had an attorney who had requested notice of any legal proceeding.
  • Burr & Forman's Non-Compete and Trade Secrets Blog has a good post about the benefits of a seldom-used provision called a "Full Time and Attention" provision. This provision requires that an employee dedicate his or her full efforts to her job up until departure. As many employees may use the bulk of their final weeks planning and readying to leave, this provision could provide another arrow for the employer to have in its quill for a breach of contract claim in a potential lawsuit.
  • Good news for employees in New Hampshire, reports Seyfarth Shaw's Trading Secrets Blog. Beginning July 14, 2012, employers in New Hampshire will have to disclose that they will require a non-compete or anti-piracy agreement as a condition of employment prior to making offers of new employment and to existing employees with an offer of change in job classification.

Computer Fraud & Abuse Act Cases and Posts: 

  • Covington's Inside Privacy Blog details the recent dismissal of CFAA and trespass claims against Amazon. In Del Vecchio v. Amazon, a district court in Washington dismissed the claims that Amazon “exploit[ed]” browser controls in Internet Explorer by publishing a “gibberish” P3P compact policy and using Flash cookies for tracking. The court found, among other things, that the plaintiff failed to meet the requisite $5,000 showing for damages.

Cybersecurity Posts and Articles: 

  • In an article entitled "The promises and perils of the cloud" for Inside Counsel, James Kunick explains things in-house counsel should consider before making the big move to cloud computing.
  • "Negotiate a Source Code Audit to Resolve Software Theft Disputes" advises Daniel T. McClosky for Corporate Counsel.
  • "BYOD wave sparks big security concerns" warns Barb Darrow for Gigaom
  • "Insider threat: The game has changed" writes Bill Anderson for SC Magazine.

News You Can Use: 

  • David Donoghue's Chicago IP Litigation Blog's recent post, "Rocky Mountain IP Institute: Judge Kozinski’s Advocacy Lessons for IP Lawyers," is a good, quick reminder for all of us.
  • "Reading This Might Just Preserve Your Identity and Reputation" advises Baker & Hostetler's Data Privacy Monitor Blog.
 

Thursday Wrap-Up (June 14, 2012): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

 
by John Marsh 14. June 2012 11:30

Here are the noteworthy posts, articles and cases of the past week:

Trade Secret and Covenant Not to Compete Cases, Articles and Posts:

  • What was the value of Georgia House Bill 173, a bill that sought to update Georgia's non-compete law after a voter referendum approved those agreements in 2010? Not much, according to the U.S. Court of Appeals for the Eleventh Circuit which found that the law was unconstitutional and therefore could not support a claim that Georgia's public policy favored non-competes. In Becham v. Crosslink Orthopaedics, LLC, the Eleventh Circuit elected to apply what it found to be existing Georgia law at the time of the contract that disfavored non-competes (rather than Pennyslvania law, which the covenant had identified as the governing law) and ultimately affirmed the district court's decision not to enforce the covenant at issue. The Georgia General Assembly has since enacted HB 30, which replaced HB 173, but for non-competes in Georgia that pre-date May 11, 2011, it remains an uphill battle for enforcement. (A copy of the decision is attached as a PDF below).
  • It's like watching a car wreck, you want to avert your eyes, but you . . . just . . . can't . . . stop. The media frenzy over the CBS v. ABC kerfuffle over the Glass House reality show continues unabated: "CBS throws legal stones at 'Glass House': Eye claims ABC reality show a 'Big Brother' ripoff" reports The Chicago Tribune, "CBS Demands ABC Hand Over Tons of Internal 'Glass House' Documents," claims The Hollywood Reporter, among others. Glass House is supposed to debut on Monday, June 18, so a ruling may be issued by the court by the end of this week.
  • "Under Armour former employee sues over non-compete agreement," reports the Baltimore Business Journal. A former employe has taken the unusual step of a pre-emptive action to declare her non-compete unenforceable so that she can take a job in Vancouver. 
  • For more on the latest battle in the Mattel v. MGA saga, see, "MGA Insurer Takes Bratz Defense Dispute To 9th Circuit" as reported by Law360. 
  • The Virginia Supreme Court continues to be hostile to trade secret and non-compete claimants. In a post by Epstein Becker's Trade Secrets & Non-Compete Blog, the Virginia Supreme Court reduced a $14 million trade secrets award to $1.4 million on the grounds that the evidence did not support that verdict. 
  • "One Year after Marsh and No Non-Compete Answers" notes Texas lawyer Rob Radcliff about the fallout from the big Texas Supreme Court decision last year in his Smooth Transitions Blog
  • "It's Never Too Early to Start Protecting Trade Secrets and IP" emphasizes Shannon Green in Corporate Counsel
  • "Six Steps to Prevent Data From Walking Out the Door" by Charles T. Graves and Laura M. Merritt in a guest article for Law Technology News.
  • "Could Siri Be Stealing Your Trade Secrets?" asks Sheldon Mak & Anderson's EyeonIp Blog.
  • "How Does Apple Keep Trade Secrets So Well?" asks Kim Scheinberg. 
  • Russell Beck has his always exhaustive summary of recent trade secret and non-compete developments.

Cybersecurity Articles and Posts:

  • "Cloud Computing: Understanding Security and Jurisdictional Issues," advises Skadden Arps in JDSupra.
  • "The Importance of Knowing Where in the World Cloud Data is Stored," another fine article by Catherine Dunn of Corporate Counsel.

News You Can Use: 

Becham v. Crosslink.pdf (93.14 kb)

 

What We Can Learn from the LinkedIn Password Hack: Steps Employees and Employers Should Be Taking Now

 
by John Marsh 9. June 2012 17:35

On Thursday, LinkedIn announced that over 6.5 million of its members' passwords were taken and posted on a Russian hacker's site. If you were one of the 6.5 million (I was apparently one, according to the sites LeakedIn and Lastpass), you should know that ComputerWorld is reporting that more than 60% of the unique hashed passwords that were accessed and posted online this week have already been cracked, according to security firm Sophos. They have also been posted online for other hackers to exploit. 

What happened? LinkedIn’s user credentials were apparently compromised because it stored log-in information on its main Web servers instead of isolating those files on separate, secure machines whose only function would have been to verify log-in details. As ComputerWorld's report on the LinkedIn attack explains, there are multiple steps for hackers seeking to snatch and reveal users’ passwords. First, they must gain access to the passwords on a company’s computers. Once a hacker has gained access, he or she must overcome the next obstacle -- encryption, as most companies encrypt their passwords using protocols designed to protect users’ passwords from hackers’ incursions. 

That said, programs designed to defeat these protocols are ubiquitous. Once a hacker has his or her hands on the encrypted password bank, he or she merely uses the encryption breaking program to reveal the plain text of the passwords.

In order to defend against hackers and the encryption-defeating programs, organizations have developed a process known as “salting,” which strengthens the passwords before they are encrypted (by adding characters, for example), thus effectively creating a second layer of protection. It is at this stage that LinkedIn’s security methods are being criticized for being lax; rather than “salt” their passwords, LinkedIn apparently relied on a well-known encryption protocol that offered little resistance once the hackers had gained access to the passwords. 

This leak is not the first time that LinkedIn has been criticized for this kind of laxity. According to The Daily Mail, the LinkedIn mobile application was sending calendar entries, including phone numbers and passwords (when contained in the entry), to the LinkedIn servers without encrypting the data. 

Not suprisingly, criticism of LinkedIn continues to come from all quarters. For example, as a sign that LinkedIn does not take these security issues seriously enough, LinkedIn has been criticized because it does not have a C-level executive in charge of information or information security (it does have a Senior Vice-President, Operations).

Unfortunately, the perceived problem of weak corporate protection of users’ passwords is not unique to LinkedIn. According to the UK's International Business Times, the problem is endemic, particularly in softer targets like social networks. Throw in the rise of spearphishing and whaling (i.e., targeted cyberattacks that use social media and other publicly available information to deceive unwary users) and you have the proverbial witch's brew over the Internet.

What Should You Do?  If you are one of the 6.5 million:
 
1.  Change your LinkedIn password immediately.

2.  Change all of your other passwords. Yes, I know it is a hassle, but I began doing it after learning that my password was leaked. In fact, if you have used your LinkedIn password or a simple variation of that password for other accounts or sites, you can bet that someone has or will try to access that account using that password.
 
What Can You Do to Protect Yourself and Your Company? Even if your password was not breached, the LinkedIn incident serves as an important reminder of password protection. Here are some basic steps that we all should be taking:

1.  Change your passwords every three months. Make it part of your quarterly routine.

2.  Don't use the same password for sensitive accounts, for the reasons noted above.

3.  Don't use the dictionary for passwords and avoid simplicity. Avoid favorite sports teams, pet names and other information that might be easily gleaned from social media. Slate has a nice article detailing techniques for coming up with hard-to-crack phrases and ideas for passwords.

4.  Choose your security questions wisely. As I noted last fall, cyberthieves are willing to spend the time trolling through your social media pages and if you have revealed information (anniversary dates, high school mascot, etc.), the answers to typical security questions can be provided through this publicly-available information.

5.  Store your passwords safely, preferably through a password manager. With all this password activity, it will be tough to keep track of all of your ever-changing passwords, so you should consider using a password manager, which is password-protected software that enables you to store all your usernames and passwords in a single place. The New York Times Bits Blog article on the LinkedIn attack identifies a number of password managers that work across platforms, including Splash Data, which offers password-management software for Windows, Macs and mobile devices, and Agile Bits with its 1Password software. Also, see Top Ten Reviews which has reviews of password managers for PCs.

6.  For employers, encourage your employees to follow these guidelines and have your IT staff force employees to change their passwords quarterly or face getting locked out.

A special thanks to my colleague Michael Shoenfelt, who helped me assemble this information quickly for this post. 

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Cybersecurity | Social Media

About John Marsh

John Marsh Hahn Law AttorneyI’m a Columbus, Ohio-based attorney with a national legal practice in trade secret, non-compete, and emergency litigation. Thanks for visiting my blog. I invite you to join in the conversations here by leaving a comment or sending me an email at jmarsh@hahnlaw.com.

Disclaimer

The information in this blog is designed to make you aware of issues you might not have previously considered, but it should not be construed as legal advice, nor solely relied upon in making legal decisions. Statements made on this blog are solely those of the author and do not necessarily reflect the views of Hahn Loeser & Parks LLP. This blog material may be considered attorney advertising under certain rules of professional attorney conduct. Regardless, the hiring of a lawyer is an important decision that should not be based solely upon advertisements.

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