I wanted to continue my wrap up of some of the other high points from the American Intellectual Property Law Association (AIPLA) Trade Secrets Summit on Tuesday but there was so much fine content that I could not do it justice in a single post. Consequently, I will follow up with a final post on the Summit as well as high points from the cybersecurity and trade secret presentations from the AIPLA Annual Meeting last week. Here are some additional highlights:In the litigation and procedure session, Russell Beck of Beck Reed Riden, Kenneth Vanko of Clingen Callow and Anthony Sammi of Skadden Arps covered the important issues to consider when bringing a TRO or injunction in a trade secrets case. Decline of the Inevitable Disclosure Doctrine? Russell noted the realities of the increasingly high standard for injunctions in state and federal courts. He also started an interesting conversation within the panel about the inevitable disclosure doctrine (a doctrine that holds that even the most conscientious employee may not be able to avoid using a former employer's trade secrets if he/she joins a competitor). Russell noted that the recent case in Washington involving Amazon.com and Google -- which rejected the inevitable disclosure doctrine -- is consistent with what he is seeing by courts. In short, if the employee is clean when he/she leaves, it is simply very difficult to restrain him or her from working for a competitor in the absence of a non-compete.The Increasing Importance of Trade Secret Identification. Kenneth Vanko outlined the trend of recent cases requiring plaintiffs to identify their trade secrets early in a case. This was a key theme at the Summit and at the AIPLA Annual Meeting as it seemed each speaker observed greater emphasis from courts requiring plaintiffs to identify their trade secrets at key junctures. Ken emphasized the importance of specificity and doing your best to focus on pursuing the best trade secrets at issue throughout the proceeding. Ken noted that other jurisdictions are following the lead of California, Delaware and Minnesota in requiring some degree of disclosure early in a proceeding. For those asserting trade secrets that involve some compilation of publicly known information, Ken noted that courts have imposed a higher burden on those types of trade secrets -- requiring plaintiffs not only to identify those trade secrets but to explain how those compilations qualify as a trade secret.The Importance of Selecting Your Best Witness Early. Tony Sammi's presentation focused on the special challenges of trade secrets in highly technical cases. Tony emphasized the importance of identifying the witness who could best explain the technology and trade secrets to a judge or jury. Tony noted that the most knowledgeable witnesses in his cases are generally not the managers but instead the coders themselves. Negative Use. The panel emphasized the importance of "negative use" in trade secrets cases -- the concept that a defendant doesn't have to necessarily use or incorporate a trade secret into its product to receive a benefit from that trade secret. They agreed that this concept can be a tricky one and often does not get the attention it deserves despite the fact that a defendant can benefit from avoiding the blind alleys and goose chases of the development process by finding out what hasn't worked.
In the afternoon, the Summit focused on the criminal trade secrets front. Gabriel Ramsey of Orrick, Eduardo Roy, and Michael Weil of Orrick provided plenty of war stories in their panel discussion about their experiences in advising clients who bring, or are on the receiving end of, a criminal trade secrets prosecution.Know Your Federal District. The panel agreed that knowing the dynamics of your local federal prosecutors and investigators' office was key to securing a criminal referral. They noted that you will likely have to package your trade secret claim to the duty agent for the FBI or other contact. The panel observed that these agents and officials are no different from those in the private sector and they are most interested in cases that will bring attention and favorable press to them and their offices. Also, the panel emphasized that you may find that your best contact is not necessarily a prosecutor but a secret service agent or FBI agent. Every district is different and relationships matter.Factors that may make a trade secret case more sexy for a criminal referral include the potential for a powerful press release, high dollar numbers, travel opportunities for the officer, the existence of a foreign national in the alleged theft, or the potential for a civil case that might bring big fines. The panel acknowledged that only the most egregious cases between domestic competitors will get a prosecutor or agent's attention. They noted that there is frequently a bias against trade secrets cases because of the existence of a civil remedy.The panel also emphasized the importance of the absence of skeletons in the client's closet and that the client should be clean. Otherwise, the client might find itself in a situation where the prosecutor turns the tables and prosecutes the client, as these cases frequently involve former employee who can be expected to throw dirt right back at their prior employer (accusing them of securities violations, whistleblower, etc.).Miscellaneous Points. The panel agreed that in concurrent civil and criminal investigations, that while the government can’t use a civil case as a stalking horse for its criminal case and for discovery, there is nothing wrong with a civil defendant bringing evidence to prosecutors. The risk of course is that whatever is given to the prosecutor will have to be shared with the defendants’ legal team. Another interesting issue that the panel raised involved the company’s obligations to a former employee charged with stealing from that company – namely, is there insurance coverage? As readers of this blog know, this question is now front and center in Sergey Aleynikov’s long-running dispute with Goldman Sachs and is the subject of a pending declaratory relief action in New Jersey. The panel could offer no clear answers on this question but advised that companies need to be aware of their potential coverage.One point of discussion was how best to defuse criminal proceeding when representing the company. Eduardo noted that it may be in the company’s interest to clean house and fire everybody that was involved to mitigate the company's damages and exposure. The panel emphasized the importance of having a full legal team given the range of important legal issues – i.e., counsel skilled in internal investigations, labor and employment counsel for possible terminations.Again, I will wrap up next with a discussion of the final session of the Summit that covered prosecuting trade secret claims before the International Trade Commission as well as the trade secrets and cybersecurity presentations at the AIPLA's Annual Meeting.
Criminal Proceedings | Inevitable Disclosure | Injunctions | Trade Secrets
Reports of the Trade Secret Litigator’s death have been greatly exaggerated and in fact, I was spotted on Tuesday at the American Intellectual Property Law Association’s Trade Secrets Summit in Washington, D.C. For those unable to attend, I thought a quick wrap up of the high points of the day's excellent content would be helpful.Seyfarth’s Robert Milligan, David Rikker of Raytheon, Mark Mermelstein of Orrick and Christian Scali of The Scali Firm started out the day addressing the dynamics of trade secret litigation, focusing on the key points in successfully managing the in-house/outside counsel relationship. The panel covered an awful lot of ground, but the high points included:Cease and Desist Letters: The consensus seemed to be that they may be more trouble than they are worth. Each of the outside counsel panelists emphasized the importance of accuracy and timing, as there is always the risk that a client’s investigation may not be complete at the time of drafting the letter. However, the letters can achieve their initial desired effect as David Rikker says Raytheon takes them seriously. Ex parte TROs: No surprise here, the panel agreed that they are rarely granted except for preservation orders where there are egregious facts giving rise to concerns over spoliation or destruction of evidence.Special Dangers of Motions to Seal: Protective orders are no longer perfunctory and the panel reported that they are increasingly seeing defendants oppose motions to place trade secrets under seal as defendants use the protective order as an opportunity to lay out their objections to the bona fides of those trade secrets. Robert Milligan said they have almost become the equivalent of summary judgment disputes in California. Of course, the consequences of denial of a motion can be catastrophic so the panel emphasized the importance of making your record for an appeal to preserve your trade secrets.Criminal Referral: Mark Mermelstein spoke about the advantages of initiating a criminal investigation as opposed to a civil claim. Those pros include the fact that the government can, among other things, use false identities to gather evidence from the potential defendant (civil lawyers are prohibited by the ethical rules from using those means), issue a 2703 order to secure the identities for an ISP address associated with misappropriation or cybertheft, and ultimately issue a search warrant if necessary. Mark also noted that the federal government also can rely on multi-lateral treaties to enlist the help of foreign law enforcement. Finally, Mark observed that a criminal proceeding can be the most effective way of collecting ill-gotten gains as the leverage of jail time may persuade potential defendants to repatriate those moneys.Mark did identify several reasons why a company may not want to pursue a criminal option. The law of unintended consequences may reign, particularly as the client will ultimately lose control of any criminal investigation to the prosecutors or federal authorities. Fall out could also include damage to customer relationships, since some of those customers could be ensnared as witnesses or even targets. Finally, for publicly-held companies, depending on the scope of the breach and the resulting publicity, a public investigation and prosecution could affect share price or lead to shareholder litigation.Best Practices for Keeping In-House Counsel Happy: David Rikker listed the following best practices for a healthy counsel relationship: clear and timely communication, helping in-house counsel get the business unit’s buy-in for any investigation or litigation, thorough early case assessment to help manage expectations, and, not surprisingly, no surprises! David emphasized the importance of an early case assessment that includes looking at the pros and cons of a prosecution or litigation. He acknowledged that in-house counsel appreciate that outside lawyers cannot anticipate every eventuality but a frank conversation of uncertainty is important, particularly for the business unit personnel.On-Boarding: The issue of on-boarding is growing in importance as more companies are hiring people with restrictive covenants or trying to mitigate their risk from trade secret fall out. Robert put together a highly entertaining video of what companies should not do (that video, along with one addressing best practices for on-boarding is available on Youtube and I will provide a link in a future post). All of the outside lawyers emphasized the importance of getting the prospective employee’s written employment agreements as part of the hiring process. From the in-house perspective, David Rikker emphasized the need for a culture of ethics and responsibility -- that a company has to make clear that it is not soliciting its competitors’ trade secrets when it hires new employees, and that after hiring, new employees need to understand that they have to keep those trade secrets out of the new employer’s environment.Off-Boarding: As time was winding down, the panel did not have the opportunity to comprehensively address best practices in the departing employee context. David noted the need for clear rules on, among other things, thumb drive use, third party storage and use of DropBox. Above all, he emphasized the importance of a culture of responsibility.I will follow up with another post summarizing the rest of the day’s discussions. The content and speakers were generally superb and a special shout out is warranted to Peter Torren of Weisbrod Matteis & Copley, Seth Hudson of Clements Bernard, Orrick’s Warrington Parker and Intel’s Janet Craycroft for their efforts in putting this together for the AIPLA’s Trade Secret Law Committee.
Cease and Desist Letters | Criminal Proceedings | Discovery Issues | Injunctions | Trade Secrets
Here are some noteworthy posts from the past week and some catch-up on other posts from the past couple of weeks: Trade Secret and Non-Compete Cases, Posts and Articles:
Cybersecurity Posts and Articles:
Computer Fraud & Abuse Act Posts and Articles:
California | Computer Fraud and Abuse Act (CFAA) | Criminal Proceedings | Cybersecurity | Economic Espionage Act | Georgia | Massachusetts | Non-Compete Enforceability | Restrictive Covenants | Trade Secrets | Uniform Trade Secrets Act (UTSA) | Weekly Wrap-Up Posts
Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week, as well as one or two that I missed over the past couple of weeks:
Trade Secret and Non-Compete Cases. Posts and Articles:
China | Criminal Proceedings | Cybersecurity | Illinois | Non-Compete Enforceability | Pennsylvania | Texas | Trade Secrets | Weekly Wrap-Up Posts
Computer Fraud & Abuse Act Articles, Cases and Posts:
China | Computer Fraud and Abuse Act (CFAA) | Criminal Proceedings | Cybersecurity | Georgia | International | International Trade Commission | Legislation | Massachusetts | Non-Compete Enforceability | Restrictive Covenants | Trade Secrets | Weekly Wrap-Up Posts
The corrected version of today's Thursday Wrap-Up post is posted below. A technical glitch caused the post to inadvertently launch last night so we apologize to our subscribers. We appreciate your loyalty and work hard to deliver valuable content. Thank you for your patience.
Now, to the noteworthy trade secret, non-compete and cybersecurity stories from the past week:
Trade Secret and Non-Compete Cases, Posts and Articles:
California | China | Computer Fraud and Abuse Act (CFAA) | Criminal Proceedings | Cybersecurity | Discovery Issues | Economic Espionage Act | Patents | International | Massachusetts | New York | Non-Compete Enforceability | Restrictive Covenants | Trade Secrets | Weekly Wrap-Up Posts
Trade Secret and Non-Compete Posts and Articles:
Computer Fraud and Abuse Act Posts and Cases:
DuPont v. Kolon | International | Non-Disclosure Agreements | Weekly Wrap-Up Posts | International Trade Commission | Uniform Trade Secrets Act (UTSA) | China | Cybersecurity | Massachusetts | Non-Compete Enforceability | Criminal Proceedings | Legislation | Injunctions | Discovery Issues | Computer Fraud and Abuse Act (CFAA) | Florida | Illinois | California | Trade Secrets
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