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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 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 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 7, 2012): Noteworthy Trade Secret, Non-Compete and Cybersecurity Posts from Around the Web

 
by John Marsh 7. June 2012 11:45

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

Trade Secret and Non-Compete Cases and Posts:

  • Automobile dealers from around the U.S. have sued India-based truck manufacturer Mahindra & Mahindra, Ltd. and its U.S. affiliate for trade secret theft and fraud. The lawsuit alleges that Mahindra defrauded hundreds of U.S. auto dealers and walked away with more than $60 million in cash and trade secrets. "Mahindra told the dealers that its light trucks and SUVs were ready for delivery to the US market," said the plaintiffs' lawyer, Michael Diaz. Diaz also says that Mahindra intentionally delayed certification of its vehicles after it obtained the dealerships' fees and trade secrets, and that it then began pursuing other partners in the U.S. and elsewhere in violation of its commitments.
  • Kenneth Vanko asks "What is in John Kanas' Wallet?" after the U.S. District Court for the Eastern District of Virginia enforced Capital One's non-compete against the senior executive restricting him from working in New York, New Jersey and Connecticut. According to Kenneth, the court was persuaded by Capital One's emphasis on the sophistication of the parties and the significant compensation provided to Kanas in deciding to enforce the agreement.
  • Last Friday, the Delaware Supreme Court rejected Martin Marietta's expedited appeal from Judge Leo Striner's 130+ page opinion barrring Martin Marietta from its hostile bid for Vulcan Materials because of its breach of the parties' non-disclosure agreements. The short order indicated that a more comprehensive opinion would be forthcoming. For more, see my earlier posts here and here
  • CBS and ABC continue to brawl over ABC's "Glass House" show. The Hollywood Reporter has a breathless summary of the latest discovery and motion practice in that trade secrets and copyright dispute.  (For more on the complaint, see my earlier post).
  • A Chinese scientist employed by one of that country's primary pharmaceutical research firms was found guilty of stealing and selling medical compounds owned by Merck, according to The Wall Street Journal. The court sentenced the junior scientist, Wang Hu, to the equivalent of 18 months probation and ordered him to pay $7,000 in restitution.
  • The Wall Street Journal is also reporting that hedge fund Citadel LLC is arguing its diminished profits in the division weakened by departures to rival Jump Trading are proof that its trade secrets were stolen. In an article entitled "Citadel Says Other Firm's Profit Shows Strategy Theft," Citadel has claimed that if a rival were to copy even part of its trading model, Citadel could lose hundreds of millions of dollars.
  • "Trade Secret Theft: Businesses Need To Beware And Prepare" advises Pamela Passman, the CEO and Founder of CREATe, for Forbes. 
  • Frith & Ellerman's Virginia Non-Compete Blog has a "Podcast: Non-Compete Agreements for Virginia Doctors." 
  • Sound advice from Susan Stobbart Shapiro who recommends "Non-Competes: Get More by Asking for Less."
  • Strasburger's Noncompete Blog also provides some good advice on the importance of including geographical limitations in the post "Noncompete Lessons from Late Night TV: Does Geography Matter?"
  • Not to be outdone, Fisher & Philips Noncompete and Trade Secrets Blog has a practical post for small businesses, "Eight Reasons Small Businesses Should Use Non-Competes." 
  • "APIs, Trade Secrets and Law Suits: one of these things is best avoided" notes the software blog The Issues List.

Cybersecurity Posts and Articles: 

  • The big news was yesterday's revelation that a Russian hacker had stolen 6 million passwords for LinkedIn accounts. In an article, "That Was Fast: Criminals Exploit LinkedIn Breach For Phishing Attacks," The New York Times Bits Blog reports that spearphishing attacks were launched shortly after the hacking was reported, using malware to cause even more problems.
  • "Should a Corporation Report the Risks of a 'Cyber Theft'?" wonders Peter Toren.
  • "FBI Issues New Warning on Social Networking Risks" advises Baker & Hostetler's Data Privacy Monitor Blog.
  • Judge sentences Cybercriminals to Jail and Orders $39.1 Million in Restitution" reports Peter Vogel's Internet, Information Technology & e-Discovery Blog.
  • "Secret memo warns of Canadian cyber threat after Nortel attack" proclaims The Financial Post's Tech Desk.
  • Finally, "Google Starts Showing Users Alerts For Accounts Hacked By 'State-Sponsored Attackers'" according to Forbes' Andy Greenberg. Just let that headline sink in. Wow.

News You Can Use: 

  • "32 Innovations That Could Change Your Tomorrow" announces The New York Times. Say "hello" to the The Shutup Gun.
 

Thursday Wrap-Up (May 24, 2012): Noteworthy Trade Secret, Non-Compete and Cybersecurity Stories from Around the Web

 
by John Marsh 24. May 2012 12:00

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

Trade Secret and Non-Compete Cases and Posts:

  • A Utah jury has awarded more than $130 million to the developer USA Power LLC, after finding that utility PacifiCorp stole trade secrets from USA Power in order to build a power plant based on USA Power's design. PacifiCorp must pay damages of nearly $18.2 million, along with $112.5 million for its unjust profits from the use of the trade secrets. And in an interesting twist, USA Power secured a verdict of $3.2 million against its former lawyers, Utah law firm Holme Roberts & Owen and attorney Jody Williams, for breaching their fiduciary duties to USA Power. 
  • The U.S. Court of Appeals for the Fifth Circuit recently vacated a $1.4 million judgment against the U.S. Navy for misappropriation of trade secrets on jurisdictional grounds, concluding that the case should have proceeded before the Federal Court of Claims. The plaintiffs, United States Marine Inc. and VT Halter Marine Inc., charged the Navy had disclosed designs for a high-speed military vessel to a competitor. 
  • In a rare trade secret case before the International Trade Commission (ITC), SI Group, Inc. has filed a complaint with the ITC requesting an investigation of Sino Legend (Zhangjiagang) Chemical Co., Ltd., Red Avenue Chemical Co. Ltd., and affiliates of those companies. SI Group, a manufacturer of chemical intermediates, is asking the ITC to grant, among other things, an order excluding from entry into the United States all rubber resins, including tackifiers, manufactured using SI Group trade secrets. It appears that the Federal Circuit's holding in TianRui Group may now be taking hold and inspiring more trade cases before the ITC.
  • Caveat partners of Wisconsin law firms: Don't even think about trying to impose non-competes on your associates, warns the State Bar of Wisconsin. For more on whether lawyers can be bound by non-competes, see my recent post.
  • Does a promotion and increased compensation result in a material change that voids a non-compete?  According to one Superior Court of Massachusetts, it does not, advises Michael Rosen in Foley & Hoag's Massachusetts Non-Compete Blog. In Sentient Jet LLC v. Mackenzie, the court rejected the employee's argument of material change because the parties did not act as it there was a change in the agreement's fundamental terms.
  • Digital forensics expert Jim Vaughn has the second of his series on "The Use of Digital Forensics in Trade Secrets Matter" in Seyfarth Shaw's Trading Secrets Blog.
  • "Is the Michigan Basketball Playbook a Trade Secret?" asks Rob Dean of Frith & Ellerman's Virginia Non-Compete Blog? I know some people in Columbus that would pay a pretty penny for Michigan's football playbook.

Computer Fraud and Abuse Cast Posts and Articles:

  • "Alleged voyeur boss cannot pursue Computer Fraud and Abuse Act claim," advises Evan Brown in his Internet Cases Blog.

Cybersecurity Articles and Posts:

  • The Wall Street Journal has thrown its support behind the Cyber Intelligence Sharing Protection Act (CISPA) in a recent editorial, "Who is afraid of #CISPA?"
  • David Fagan and Stephen Satterfield report the "10 Steps for Responding to a Corporate Data Security Breach" in Corporate Counsel.
  • Catherine Dunn of Corporate Counsel has another interesting cybersecurity article, this one is entitled "Corporate Boards Still In the Dark About Cybersecurity."
  • "Gmail's Security Hole Could Lead to Mass Harvesting of Accounts" writes MIT's technology review.

News You Can Use:

  • "Use social media? Memorize these vital 12 words" writes Suzanne Lucas of CBS Money Watch.
 

Thursday Wrap-Up (May 17, 2012): Noteworthy Trade Secrets, Non-Compete and Cybersecurity Stories from the Web

 
by John Marsh 17. May 2012 11:30


Here are the noteworthy posts, articles and cases of the past week:
 
 
Trade Secret and Non-Compete Cases and Posts

  • Could PepsiCo's most valuable trade secrets be at risk? USA Today and The Wall Street Journal's Law Blog are both reporting that the heirs of one of the men who developed the soft drink's successful formula have sued PepsiCo in the Southern District of New York for a declaration that they can publish documents related to a 1931 reformulation of the Pepsi soda by their father, Richard Ritchie.
  • The Delaware Supreme Court has granted Martin Marietta's request for an expedited appeal and ordered oral argument on May 25, with final case briefs due the day before. As readers of this blog know, Martin Marietta was enjoined from its hostile bid for Vulcan Materials because it was found to have improperly used confidential information in violation of its confidentiality agreements with Vulcan. 
  • The battle in the DuPont v. Kolon case rages on, as Kolon was unable to persuade U.S. District Court Judge Robert Payne to lift an order barring Kolon from making large asset transfers without giving DuPont an opportunity to challenge each transaction. Judge Payne also granted DuPont's motion to compel certain asset-related discovery in its quest to collect on its $920 million judgment. (Copies of the opinions are attached as PDFs below).
  • North Carolina continues to be a less than hospitable forum for trade secrets claims, as Seyfarth Shaw's Trading Secrets Blog and Littler's Unfair Competition & Trade Secrets Counsel Blog both report on a recent case requiring greater specificity when pleading damages.
  • The Missouri Supreme Court recently upheld a verdict for tortious interference against a former manager who improperly encouraged employees to abandon her former employer and also improperly diverted a customer to her new company. Epstein Becker's Trade Secrets & Noncompetes Blog notes these decisions are rare but that they can be compelling cases if an employer can prove the former employee was violating his or her duty of loyalty.
  • The Supreme Court of Wyoming has also been busy, as it recently held that continued employment is sufficient consideration for an invention assignment agreement, reports Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • A scientist accused of stealing secret formulas from a Utah chemistry company has pleaded guilty to one count of unlawful acess to a protected computer. Prabhu Mohapatra entered the plea on Friday in the U.S. District Court of Utah in exchange for prosecutors dropping 25 other trade secret theft charges against him. 
  • A former programmer for the Chicago hedge fund Citadel LLC has been indicted on federal charges of stealing its trade secrets, according to The Chicago Tribune. Yihao "Ben" Pu is charged with multiple counts of theft of confidential computer code used to develop trading strategies, according to the federal indictment filed last Friday. 
  • The FBI has launched an ad campaign stressing the importance of protecting trade secrets (see the picture above). The campaign consists of billboards in nine cities throughout the U.S.
  • Want to know more about Georgia's non-compete statute? Seyfarth Shaw's Trading Secrets Blog has a good summary on its provisions as it approaches its one-year anniversary.

Cybersecurity:

  • "Cyber-Threat Cooperation Emerging Between U.S. Industry and Government" reports Catherine Dunn of Corporate Counsel

Social Media and Trade Secrets:

  • A CFO of a publicly-traded fashion retailer lost his job over Twitter posts that disclosed confidential information. Francesa's Holdings fired Gene Morphis because he "improperly communicated company information through social media," reports The Wall Street Journal.

News You Can Use:

  • "Is the Obsession with Devices a Sickness?" asks The New York Times Bits Blog.
  • "How Mobile is Rapidly Evolving the World," explains Mark Fidelman of Forbes.
  • "After Yahoo: Why do Powerful People Lie?" wonders Katherine Reynolds Lewis on CNN/Money.

DuPont v Kolon Memo Opinion.pdf (461.19 kb)

DuPont v Kolon Memo Opinion re Motion to Compel.pdf (330.92 kb)

 

Join Me for "Drafting and Enforcing Covenants Not to Compete in the Present Economy: Noteworthy Legal Developments and Practical Pointers" This Friday at the Ohio State Bar Association

 
by John Marsh 16. May 2012 16:45

The Ohio State Bar Association has invited me to speak at 2:00 p.m. this Friday afternoon as part of its annual "Advising Corporate Directors and Officers" Seminar. I'll be presenting on the topic, "Drafting and Enforcing Covenants to Not Compete in the Present Economy: Noteworthy Legal Developments and Practical Pointers." The seminar will provide a total of 6.0 CLE hours. 

Here is a rundown of all of the speakers and topics being offered:

8:30 a.m. - "Duties of Directors and Officers Under Ohio Law," John Beavers & Kevin Kinross, Bricker & Eckler LLP (Columbus)

10:15 a.m. - "The SEC Whistleblower: Corporate Best Practices," James Cummins, Waite Schneider Bayless & Chesley (Cincinnati) & Phyllis Brown, The Law Offices of Phyllis Brown, LLC (Cincinnati)

12:45 p.m. - "Seven Habits of Highly Ineffective Global Contract Negotiations," Anthonio Fiore & Martijn Steger, Kegler Brown Hill & Ritter (Columbus)

2:00 p.m. - "Drafting and Enforcing Covenants to Not Compete in the Present Economy: Noteworthy Legal Developments and Practical Pointers," John Marsh, Hahn Loeser & Parks LLP (Columbus)

3:00 p.m. - "Records Retention Policies," Martin Susec, Nationwide (Columbus)

Registration begins at 8 a.m. at the offices of the Ohio State Bar Association (1700 Lake Shore Drive in Columbus). I have attached a PDF of the flyer with further information for those that are interested. Hope to see you there.

OSBA Seminar and Schedule.pdf (234.65 kb)

 

Thursday Wrap-Up (May 10, 2012): Noteworthy Trade Secrets, Non-Compete and Cybersecurity Stories from the Web

 
by John Marsh 10. May 2012 10:45

Here are the noteworthy posts, articles and cases of the past week:
 
Trade Secret and Covenant Not to Compete Articles, Cases and Posts: 

  • Are CBS and ABC about to get in a row over the theft of trade secrets? According to The Hollywood Reporter, CBS attorneys have sent a strongly worded cease and desist letter that claims that a new ABC reality series, Life in the Glass House, is being produced by 18 Big Brother veterans who might reveal private information about the inner workings of the show. Spats over the misappropriation of ideas and pitches are common in the entertainment industry but rarely do you have two major networks threating to litigate against one another. 
  • Can a church assert a trade secrets claim? Northern California District Court Judge Lucy Koh has answered in the affirmative, rejecting a plaintiff's claim that the Free Exercise clause would entangle courts in thorny constitutional issues, reports Professor Howard Friedman in his Religious Clause Blog. For more about this fascinating case, The Art of Living Foundation v. Doe, check out my post about this case last fall; it involves some interesting questions about determining the identity of anonymous whistleblowers who disclose confidential information over the Internet. 
  • If you want to enforce your non-compete in Massachusetts, you'd better comply with your own agreement, advises Foley & Hoag's Massachusetts Non-Compete Blog. In that recent case, Ace Precision v. FHP Associates, a Massachusetts court concluded that the plaintiff, who was attempting to enforce a covenant accompanying an asset sale, could not enforce the non-compete because it had defaulted by failing to pay royalties under the agreement. 
  • A Sanofi Aventis scientist has been sentenced to 18 months in prison for stealing the pharmaceutical company's trade secrets and putting them up for sale through the U.S. branch of a Chinese chemicals company. Yuan Li, 30 years old, was sentenced by New Jersey District Court Judge Joel Pisano as part of a plea agreement reached in January.
  • Former Silicon Valley engineer Subin Zhang was convicted of stealing trade secrets from his former employer Marvell Semiconductor by Northern California District Court Judge Ronald Whyte. Zhang was found guilty on three counts of theft and copying of trade secrets for downloading the trade secrets from a secure database, one count of duplication of trade secrets for loading those trade secrets onto a laptop, and one count of possession of stolen trade secrets. 
  • A recent New York trial court opinion, MSCI Inc. v. Jacob, has received a lot of attention from trade secret bloggers because it may be the first New York case requiring a plaintiff to identify its trade secrets before proceeding further with discovery. Womble Carlyle, Seyfarth Shaw, Littler and Epstein Becker's blogs all have fine posts about the case. 
  • Ken Vanko has a good wrap-up of some recent developments, including a discussion of a recent Pennsylvania case, Outdoor Lighting Perspectives Franchising, Inc. v. OLP-Pittsburgh, Inc., involving a franchisee's successful effort to scale back a broad non-compete. 
  • Russell Beck has updated his 50 state non-compete survey for those looking for developments in their state.

Cybersecurity:

  • Hacker Fight! "Pirates Bay Scolds Anonymous for Cyberattacks on Its Behalf," reports Andy Greenberg of Forbes.

News You Can Use and Other Articles of Interest: 

  • Want to keep Google and others from tracking you? The New York Times has some tips on "How to Muddy Your Tracks on the Internet." 
  • The Times also advises that "Taking E-Mail Vacations Can Reduce Stress, Study Says." 
  • As for light reading, Mark Zuckerberg is getting a lot of attention as the Facebook IPO draws near, as New York Magazine gushes about "The Maturation of the Billionaire Boy-Man."
 

Thursday Wrap Up (Feb. 16, 2012): Noteworthy Trade Secret, Non-Compete and Cybersecurity Articles from the Web

 
by John Marsh 16. February 2012 11:00

Here are the noteworthy trade secret, covenant not to compete and cybersecurity stories from the past week; as you will see, it was an extremely busy week and a significant number of the posts address China, no doubt because of the U.S. visit of Chinese Vice President Xi Jinping:

Trade Secrets and Non-Competes:

  • Any reversal of the TianRui Group v. ITC decision will have to come from the U.S. Supreme Court as the Federal Circuit just declined to reconsider the decision en banc (thanks to Wil Rao for the update; Wil represented the American company that initiated the underlying ITC action). TianRui Group was one of the most significant trade secret decisions of 2011 as it provided for a remedy (a ban on importation) for products incorporating misappropriated trade secrets overseas.  (A copy of the order entering judgment is attached below).
  • The Delaware Non-Compete Law Blog describes a recent case, Chesapeake Insurance Advisors, Inc. v. Williams Insurance Agency, Inc., that confirms the Delaware Chancery Court's unwillingness to "blue pencil" an overly broad non-compete or non-solicitation provision. Let this serve as a warning to anyone drafting an agreement governed by Delaware law.
  • Hanjuan Jin, a former Motorola Engineer, was convicted last week of stealing Motorola's trade secrets but avoided the more serious economic espionage charges. (I have attached a PDF copy of the 77-page opinion below). In a story that borders on being an urban myth in trade secret circles, Jin was detained by federal agents at Chicago's O'Hare International Airport in 2007 during a random security search before she could board a flight to Beijing on a one-way ticket. That discovery led to the subsequent litigation between Motorola and a number of its former employees, a case that settled last month after the district court denied the former employees' motions for summary judgment and set it for trial.
  • Senator John Kerry apparently gave visiting Chinese VP Xi an earful about the experience of a Massachusetts company that believes its trade secrets were stolen in China and has been frustrated by the Chinese legal system. In a New York Times article entitled "U.S. to Share Cautionary Tale of Trade Secret Theft With Chinese Official," the company, American Superconductors, "saw 70 percent of its business evaporate last year after a Chinese partner enticed one of its employees to steal the crown jewel of its technology." 
  • Seyfarth Shaw's Trading Secrets Blog has a nice summary of the recent decision by the Illinois Appellate Court, Second District, in Hafferkamp v. Llorca retroactively applying the Illinois Supreme Court's holding in Reliable Fire Insurance v. Arrendondo. As readers of this blog will recall, in Reliable Fire Insurance, the Illinois Supreme Court required that a court determine whether there was in fact a legitimate business interest in support of a non-compete.
  • Kenneth Vanko's Legal Developments in Non-Compete Law Blog is reporting that the Illinois legislature is considering leveling the playing field for employees who prevail in non-compete disputes. According to Kenneth, House Bill 5198 would amend the Illinois Code of Civil Procedure to allow a circuit court to shift attorneys' fees to a prevailing defendant if a contract under which a plaintiff sues allows for the plaintiff to recover fees.
  • The Connecticut Supreme Court has sided with the University of Connecticut's decision to withhold information about its boosters. The university said lists naming its donors and other supporters qualify as trade secrets that other institutions could use to lure away its fans' dollars and loyalty and are therefore exempt from public records requests under Connecticut law.

Cybersecurity:

  • Both the New York Times and Wall Street Journal ran stories this week about the present efforts within the Senate to move forward on the Cybersecurity Act of 2012. The New York Times wonders whether the ghosts of SOPA and PIPA will complicate passage of that legislation.
  • The New York Times' Bits Blog entitled "How Much Have Foreign Hackers Stolen?" quotes Mike McConnell, the former director of national intelligence and now vice chairman at Booz Allen Hamilton, as estimating that foreign cyberthieves steal 867 terabytes of data from the United States, or “nearly four times the amount of data collected in the archives of the Library of Congress” on a daily basis. That, my friends, is a lot of data.
  • The Wall Street Journal also ran a major story (it was on the front page in the print edition) describing the nearly-decade long efforts of Chinese hackers directed towards Nortel. According to the article, "Chinese Hackers Suspected in Long-Term Nortel Breach," the hackers had the passwords of Nortel's CEO and six other senior executives and unfettered access to its trade secrets from 2000 to 2009. It is a chilling read.

News You Can Use:

  • Planning on traveling to China anytime soon? In an article entitled "Traveling Light in a Time of Digital Thievery," the New York Times (who else this week?) quotes security experts that recommend leaving laptops, smartphones and other mobile devices behind and bringing "clean" loaner devices. 
  • For those looking to protect their trade secrets in the cloud, David McGrath and Charles Stewart have an interesting article, "Minimizing the Risk of Data Theft Through Cloud Computing."

TianRui Group v. ITC Judgment Issued as Mandate.pdf (85.46 kb)

U.S. v. Hanjuan Jin Memorandum.pdf (2.16 mb)

 

Thursday Wrap-Up (Feb. 9, 2012): Noteworthy Trade Secret, Non-Compete and Cybersecurity Stories from the Web

 
by John Marsh 9. February 2012 11:30

It was a busy week for trade secret and non-compete law and an especially busy week in the cybersecurity realm. Here are some of the most noteworthy stories:
 
Trade Secrets and Non-Competes:

  • In what promises to be a contentious new trade secret case, Ocean Tomo, LLC, a self-described IP merchant bank, has secured a TRO in California against former employee Steven Lee. Lee was allegedly going to divulge its trade secrets and privileged information to another former employee, Jonathan Barney, who is embroiled in an Illinois arbitration with Ocean Tomo. This promises to be a nasty one and I will keep everyone posted on future developments.
  • Todd Sullivan's Trade Secret Blog is reporting that Western Digital is now attempting to appeal from the $630 million arbitration award against it in its trade secret dispute with Seagate Technology. As the post notes, one of the supposed benefits of arbitration is finality, until of course you think you got hosed by the arbitrator.
  • I wrote last week about the recent criminal case against Walter Liew who is accused of stealing DuPont's trade secrets. Reuters is reporting that federal prosecutors have now indicted a state-owned Chinese manufacturer, Pangang Group, as the party that directed him to steal that technology.  While there have been plenty of criminal cases involving Chinese nationals over the past few years, I can't recall prosecutors so directly calling out the Chinese government in a trade secrets case.  The timing is particularly interesting as Chinese Vice President Xi Jinping is scheduled to visit the U.S. next week on a range of economic, trade, regional and global issues.
  • In what has been characterized as a landmark decision, the Canadian Supreme Court defined a trade secret for purposes of an exemption under Canada's Access to Information Act. Justice Thomas Cromwell rejected Merck's efforts to prevent the disclosure of certain documents, holding Merck failed to demonstrate that they qualified as trade secrets. Justice Cromwell ruled that a trade secret "is known only by one or a relatively small number of persons," "must be capable of industrial or commercial application," and "the possessor must have an interest worthy of legal protection."
  • Kenneth Vanko's fine Legal Developments in Non-Competition Agreements Blog provides some practical advice for both employers and employees when it comes time to terminate employment. The post notes the importance, particularly for employees, of ensuring that any termination is "without cause," which some courts hold guts a non-compete.
  • Russell Beck's Fair Competition Law Blog has been doing a very, very thorough monthly compilation of trade secret, non-compete and cybersecurity posts, cases and issues.  It is a great source of relevant information and commentary.  

Cybersecurity:

  • Cyberattacks targeting lawyers continue to be in the news; this week, representing an unpopular client may be enough to make a law firm a target. Ericka Berg of Nelson Mullins posted an article from SC Magazine entitled "Anonymous raids law firm over its defense of Marine" that details a cyberattack by Anonymous on the law firm Puckett & Faraj, which represents a Marine accused of killing 24 Iraqi civilians in 2005. After the firm secured a favorable deal for the soldier, Anonymous raided the firm's site and boasted that it stole "court mails, faxes, transcriptions, etc."  
  • The Massachusetts Data Privacy Law Blog quotes Symantec for the following staggering statistic:  $113 BILLION was stolen by cyberthieves last year. To give you a sense of the vastness of that number, bank robbers stole a mere $43 billion.  
  • Symantec was the subject of an extortion effort by Anonymous hackers. According to Andy Greenberg's "As Hackers Leak Symantec's Source Code, Firm Says Cops Set Up Extortion Sting Operation," the hostage (the source code) is now dead as the sting effort failed to nab the bad guys. It is a good read.

News You Can Use:

  • Andrew Martin of Scott & Scott has put together a nice article entitled "Five Top Provisions in Technology Vendor Agreements." It's a useful cross-reference.
  • If you use the popular Internet photo sharing service Path with your iPhone, watch out for your contact information!  CNET first reported that Path has uploaded a number of iPhone user's contacts without their permission. Path initially said it did so to enhance its customers' use of the site, and then, realizing a brewing PR storm, apologized yesterday.
  • And, finally, at long last, a device to better enable employees to transfer trade secrets from their tablets and smartphones: Say "hello" to Airshaft!

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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