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Episode 6 of the Fairly Competing Podcast: Practical Considerations When Seeking Injunctive Relief

by John Marsh 15. April 2013 12:45

Kenneth Vanko, Russell Beck and I have completed our sixth Fairly Competing Podcast, "Practical Considerations When Seeking Injunctive Relief." 

Because they are the most common form of relief in non-compete and trade secrets cases, preliminary injunctions and TROs require parties to act and respond very quickly.  In this episode, Russell, Ken and I each discuss what businesses need to consider when moving for injunctive relief, the differences between temporary restraining orders and preliminary injunctions, expedited discovery, and local practice related to injunctions in various courts throughout the United States.

You can listen to the podcast by visiting the Fairly Competing website or clicking the link below.  Or subscribe to the podcast on iTunes.  We'd appreciate your feedback. 

Our next podcast will address issues accompanying trade secret cases involving self-styled whistleblowers, such as the recent case brought by Anheuser-Busch InBev against James Clark.

Listen to This Episode


Injunctions | Non-Compete Enforceability | Podcast Episodes | Restrictive Covenants | Trade Secrets


Friday Wrap-Up (March 22, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

by John Marsh 22. March 2013 16:30

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 Posts and Articles:

  • Does a law firm have to reveal its client's non-compete to the client's business partners? In "Texas Firm Beats Fraud Suit For Keeping Mum On Noncompete," Law360 reports that the answer is "no." The Texas Court of Appeals held that there was no duty to disclose the client's non-compete by the law firm and its attorney when they negotiated legal documents with those third parties.
  • "Non-Compete Fight in the World of Surgical Robotics: MAKO Surgical Sues Competitor, Former Employee," advises Jonathan Pollard for the non-compete blog.
  • "FBI arrests NASA contractor employee trying to flee to China," reports The Washington Examiner.
  • "Stryker Exec Who Jumped Ship Must Hand Over Trade Secrets," reports Law360.
  • "Protecting Trade Secrets with a Mobile Workforce and Telecommuters," reports Cliff Atlas for Jackson & Lewis' Non-Compete & Trade Secrets Report.
  • Even The Economist is writing about the importance of trade secrets, asking, "Can you keep a secret? To patent an idea, you must publish it. Many firms prefer secrecy."
  • "Mediating Non-Competes in the Medical Device Industry," explains Michael Greco for Fisher & Phillips' Non-Compete and Trade Secrets Blog.
  • Will the ability to preserve an invention as a trade secret lead patentholders to withhold the best mode of that invention in their patent applications? In "Patent law's 'best mode' requirement a conundrum for attorneys," Erin Geiger Smith warns that could be the case for Bloomberg.
  • "5 ways in-house lawyers can support innovation at their companies: Inside counsel have a duty to help drive innovation to success, within the limits of existing law and policy," advises Eric Esperne in Inside Counsel.
  • Want to enforce a non-compete against a Chinese employee? You need to read, "China Employee Non-Competes. Do Not Try This At Home," by Dan Harris for his China Law Blog.

Cybersecurity Posts and Articles:

  • "After a Data Breach, Do You Need an Investigator or a Lawyer?" asks Catherine Dunn for Corporate Counsel.
  • "Take Chinese Hacking to the WTO," urges James P. Farwell for The National Interest.
  • "Infographic: How Criminals Guess Your PIN," warns Gina Smith for Tech Page One.

Computer Fraud and Abuse Act Posts and Cases:

  • "U.S. v. Nosal: Back In the District Court, the Defendant Isn't as Fortunate," reports Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • "The Split in the Circuit Courts Over the Proper Interpretation of the Computer Fraud and Abuse Act Actually Goes Three Ways," updates Brian Bialas for Foley & Hoag's Massachusetts Noncompete Law Blog.
  • Is journalist Matthew Keys the latest Aaron Swartz? asks Garance Burke in his article for The Huffington Post entitled, "Matthew Keys' LA Times Hack: Security Breach Or Harmless Prank?"
  • And in another high profile CFAA prosecution, Orin Kerr writes, "United States v. Auernheimer, and Why I Am Representing Auernheimer Pro Bono on Appeal Before the Third Circuit," for The Volokh Conspiracy.

Airvana Network Solutions v. Ericsson: Threat of Going Out of Business Bolsters Claim of Irreparable Injury in High Profile New York Trade Secrets Dispute

by John Marsh 21. March 2013 22:30

In an interesting trade secret case out of New York Supreme Court, Airvana Network Solutions Inc, a Massachusetts broadband network company, has won a preliminary injunction against Ericsson in a trade secrets lawsuit that seeks more than $330 million from the Swedish telecommunications network equipment maker.  On Tuesday, Manhattan State Supreme Court Judge Barbara Kapnick enjoined Ericsson from using certain hardware based on Airvana's design unless it secures a software license from Airvana.  (A PDF of the opinion can be found below and Law360 has reported on the case fairly extensively).
Airvana, founded in 2000 by former Motorola executives, had supplied Ericsson and predecessor Nortel Networks Inc. with hardware and software used to run large wireless data networks.  Under the terms of its agreement with Nortel, Airvana gave Nortel responsibility over the hardware, so long as Nortel used Airvana's software and paid royalties on any hardware that might be built based on Airvana's designs.  Ericsson acquired much of Nortel's wireless equipment business in North America through Nortel's bankruptcy in 2009, including Nortel's obligations under the agreement with Airvana
In June 2010, Ericsson began working with a joint venture partner, LG Electronics, to develop software that would run on Ericsson's version of the hardware.  Several months later, Ericsson told Airvana that it no longer needed Airvana's software because it was developing an alternative solution that would not be based on Airvana's hardware designs.
Airvana alleged that the hardware developed by both Nortel and Ericsson was based on design documents Airvana had transferred as part of their agreement and that the hardware misappropriated the trade secrets of Airvana.

Overcoming Obstacles to Irreparable Injury:  Most of Judge Kapnick's opinion addresses the parties' varying interpretations of the agreement and whether Ericsonn's software was based on the design of the Airvana software, but her analysis of irreparable injury is the most significant part of the opinion.  As those in New York know, proving irreparable injury in the context of a license agreement is very difficult because of New York's embrace of the Second Circuit's flawed opinion in Faiveley Transport Malmo AB v. Wabtec Corporation, 559 F.3d 110 (2d Cir. 2009).   As readers of this blog may remember, Faiveley essentially held that a former licensee could misappropriate trade secrets so long as it did not disclose them, a ruling that has been inexplicably followed by New York courts.

It appears that Airvana was able to avoid the deadly embrace of Faiveley by arguing that it would go out of business in the absence of injunctive relief ordering payment of royalties by Ericsson.  Of course, the loss of a plaintiff's enterprise is the quintessential example of irreparable injury, since a monetary judgment has little or no value to a company that has been forced out of business.   However, proving irreparable injury still can be difficult since license disputes by their nature have readily calculable damages by virtue of their previous royalty stream.

The Takeaway:  Never underestimate the power of the "going out of business" claim, even in a licensing dispute.  Ericsson attempted to argue that Airvana's financial predicament was largely of its own "irresponsible" over-leveraging, an argument that seems to have fallen flat.  Surprisingly, it does not appear, at least from the opinion, that Ericsonn argued that the damages were readily calculable by virtue of the $330 million demand in the complaint.

Airvana v. Ericsonn.pdf (1.68 mb)


Injunctions | IP Litigation | Trade Secrets


Friday Wrap-Up (March 8, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

by John Marsh 8. March 2013 16:30

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 Posts and Articles:

  • "Eaton-Frisby fight that started with trade-secrets theft claims set for trial in Mississippi," reports Alison Grant for The Cleveland Plain Dealer. Todd Sullivan also has his take on the case in his Trade Secrets and Employees Defection Blog.
  • "Judge Trims Fuhu's Trade Secrets Suit Over Toys R Us Tablet" reports Law360.
  • For an update on the Eagle v. Morgan dispute over ownership of a LinkedIn account, see "Federal Court Questions Whether Damages Exist in LinkedIn Account Ownership Dispute," by Jessica Mendelson for Seyfarth Shaw's Trading Secrets Blog.
  • "MGA Maneuvers to Rescue Big Bratz Trade-Secrets Award," advises Amanda Brondstadt for The American Lawyer.
  • "Can the public interest trump a non-compete?" asks Rob Radcliff in The Smooth Transitions Blog, and his answer is "yes," at least in the healthcare industry.
  • "Trade Secrets Injunction Order Demonstrates Difficulty of Balancing Competing Interests" advises Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • Fisher & Phillips' Michael Greco has his monthly post on highlights in trade secret and non-compete law for February 2013.
  • And Brian Bialas has a similar post of 10 recent noteworthy trade secret and non-compete cases and posts for Foley & Hoag's Massachusetts Noncompete Law Blog.

Cybersecurity Posts and Articles:

  • "Unintended Consequences of 'Bring Your Own Device,'" advises Susan Ross for Corporate Counsel.
  • And given the recent news of cyberattacks, David Stewart has decided to revisit the debate over whether U.S. companies should be permitted to "hackback" against foreign cyberspies and crooks in Steptoe's Cyberblog.

Computer Fraud and Abuse Act Posts and Cases:

  • "Attorney General: Aaron Swartz Case Was a ‘Good Use of Prosecutorial Discretion,’" advises David Kravets for Wired.
  • "Thinking Of Bringing A Computer Fraud And Abuse Act Claim In Federal Court? Consider This Recent Opinion," warns Josh Durham for Poyner Spruill's Under Lock & Key Blog.
  • And for an account of a reluctant witness in the Aaron Swartz prosecution, see Quinn Norton's post for The Atlantic entitled, "Life Inside the Aaron Swartz Investigation."

Thursday Wrap-Up (February 28, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

by John Marsh 28. February 2013 10:45

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 Posts and Articles:

  • There is a lot of good stuff analyzing the Obama Administration's trade secrets initiative from last week.  You should check out out Peter Toren's post, Morrison & Foerster's Dan Westman and Jessica Childress' analysis, Jessica Mendelson's post for Seyfarth Shaw's Trading Secrets Blog, Press Millen's post in Womble Carlyle's Trade Secrets Blog, and the article, "Private Sector's Role In White House Trade Secrets Plan" by David Fagan of Covington Burlington for Law360.
  • For the latest in the epic DuPont v. Kolon saga, see "Judge Kills DOJ's Summons Of Kolon In Trade Secrets Action," as reported by Law360 and Todd Sullivan in his Trade Secrets and Employee Defections Blog.
  • "Pfizer Gets New Trial After $39M Trade Secrets Verdict," reports Law360.
  • Interested in the latest on Massachusetts' proposed non-compete statute?  Then check out Brian Bialas' post at Foley& Hoag's Massachusetts Noncompete Law Blog, where Brian has the latest language proposed under the bill.
  • Speaking of non-compete statutes, Kenneth Vanko analyzes the proposed Michigan non-compete statute, which is modelled after New Hampshire's recent statute requiring an employer to give notice of a non-compete to a prospective employee before an offer of employment.
  • "Race to California Courthouse Fails in Recent Non-Compete Dispute," reports Jonathan Pollard in the non-compete blog.
  • Epstein Becker's Trade Secrets & Noncompete Blog reports on an unfortunate employee whose employer's merger with another company triggered his non-compete. Because his newly-merged employer failed to take steps to safeguard the former employer's protectible interests, the U.S. District Court of Connecticut enforced the covenant not to compete.
  • Can a non-signatory to a covenant not to compete move to compel arbitration of that provision? A California federal court has answered in the affirmative, ordering that the company of a former employee can also invoke arbitration as to claims arising out of that agreement. Kenneth Vanko's Legal Developments in Non-Competition Agreements Blog and Paul Freehling for Seyfarth Shaw's Trading Secrets Blog have posts on the case.
  • For the litigators, "Anonymous Yelp Review Counts as Evidence" advises Jacob Gershman for The Wall Street Journal Law Blog.

Cybersecurity Posts and Articles:

  • "In Cyberspace, A New Cold War," advises The New York Times.
  • "If China wants respect abroad, it must rein in its hackers," warns The Economist, although it also notes that "Old-fashioned theft is still the biggest problem for foreign companies in China."
  • Are we worrying too much about China? Jon Evans thinks so, in an article for TechCrunch entitled "The Chinese Are Coming! The Chinese Are Coming!"
  • But then again, one can't be too careful: "Data Security for Lawyers Traveling to China," warns Alan Cohen for Corporate Counsel.
  • "Employees May Be a Company's Greatest Cybersecurity Vulnerability," recognizes Catherine Dunn for Corporate Counsel.
  • "Keeping your data Cloud-secure," advises JJ Milner for the Global Micro Blog.

Computer Fraud and Abuse Act Posts and Cases:

  • "Aaron Swartz Prosecutors Weighed 'Guerilla' Manifesto, Justice Official Tells Congressional Committee," reports Ryan Reilly for The Huffington Post.

Thursday Wrap-Up (February 21, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

by John Marsh 21. February 2013 18:00

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:

Cybersecurity Posts and Articles:

  • After the Obama administration's announcement of its initiative to combat international trade secret theft, the other big news this week was The New York Times front-page article calling out China's army for its role in hacking U.S. companies. In "Chinese Army Unit Is Seen as Tied to Hacking Against U.S.," The Times cited a report by the security firm Mandiant that fingered Unit 61398 of the Peoples Liberation Army as having a role in 141 attacks in recent years.
  • Spearphishing -- i.e., using targeted attacks against employees based on information gleaned from social media -- was used in these cyberattacks, according to an article by Kim Zetter for Wired, "Chinese Military Group Linked to Hacks of More Than 100 Companies."
  • "Claims of cyberstealing by China prompt administration to develop more aggressive responses," reports The Washington Post.
  • "Cyberwar With China Is Here, Like It or Not," laments Arik Hesseldahl for All Things Digital.
  • "U.S. ready to strike back against China cyberattacks," reports Associated Press.
  • "Successful hacker attack could cripple U.S. infrastructure, experts say," reports Erin McClam for NBC News.
  • "Cloud Data Security: How to Analyze your Risk," recommends Emma Byrne for Forbes.

Trade Secret and Non-Compete Posts and Cases:

  • In the most recent social media decision in the trade secret and non-compete context, the U.S. District Court of Oklahoma has recently found that a former employee's Twitter invitations and Facebook posts did not violate the provisions of a non-solicitation agreement.  Venkat Balasubramani of the Technology & Marketing Law Blog (Feb. 18 post) and Seyfarth Shaw's Justin K. Beyer both have posts on this decision (if time permits, I may do a post with my thoughts on this decision this weekend).
  • Ernst & Young has been sued for allegedly stealing the trade secrets of its client, Express Scripts, after having been engaged to provide consulting services to Express Scripts in its acquisition of Medco Solutions last year, reports Todd Sullivan in his Trade Secrets & Employee Defections Blog. Ernst & Young says a former employee did violate its policies.
  • "South Carolina Court of Appeals Upholds Physician Non-Compete and Forfeiture Provisions," reports Parker Poe's EmployNews.
  • In another healthcare trade secret case, "Indiana Univ. Health Misused Trade Secrets, Suit Says" reports Law360.
  • "The End of Noncompete Agreements in Minnesota?" asks Mark E. Dooley for Thompson Hall as he describes a recent bill proposed in Minnesota to ban non-competes along the lines of California.
  • "Analysis of a Winning Argument for Enforcing a Non-Compete Agreement at the Preliminary Injunction Stage," reports John Paul Nefflen for Burr & Forman's Noncompete Trade Secrets Blog.
  • "Is Mattel raising the white flag in Bratz copyright case?" asks Alison Frankel in her On The Case Blog.
  • Considering what discovery you might need for your next trade secrets or non-compete case? Then check out Kenneth Vanko's post, "Some Thoughts On Pursuing Expedited Discovery," which provides some practical pointers on what you need to do.
  • "5 Trade Secret Trends That Could Shape 2013," predict Randall Kahnke, Kerry L. Bundy and Peter C. Magnuson of Faegre Baker Daniels LLP for Law360.

Computer Fraud and Abuse Act Posts and Cases:

  • "IP: Why companies need clear policies against giving computer access to non-employees," advise James Ware and Mindy Ware for Inside Counsel.

Friday Wrap-Up (February 8, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

by John Marsh 8. February 2013 14:00

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 Posts and Cases: 

  • In an unusual ruling, the U.S. Court of Appeals for the Sixth Circuit upheld the convictions of two engineers for stealing Goodyear's trade secrets, but vacated the sentences, essentially holding that they were too lenient, reports Law 360. Both Todd Sullivan and Kenneth Vanko provide their takes on the decision.
  • In what may be the final installment of the trade secret case that will live in infamy, the U.S. Court of Appeals affirmed a district court's finding that train equipment manufacturer Wabtec Corp. copied rival Faiveley Transport USA Inc.’s trade secrets involving braking technology used in New York City's subway system, but knocked the jury's damages award down to $15 million. This case caused great consternation in the trade secret community several years ago when the Second Circuit inexplicably reversed an injunction and held that a defendant could use a plaintiff's trade secrets so long as it did not disclose them.
  • "Recent California Supreme Court Decision Stokes Debate Over Scope of Trade Secret Preemption" advises James D. McNairy for Seyfarth Shaw's Trading Secrets Blog.
  • "Court Finds Common Law Causes of Action Not Preempted by New Jersey Trade Secrets Act" writes Michael Kessel for Littler's Unfair Competition & Trade Secrets Counsel Blog.
  • "Orrick wins $23 million award vs MGA, Bratz maker sues to vacate" advises Alison Frankel's On The Case Blog.
  • "A Surge In Trade Secret Misappropriation Cases at ITC" report Jeffrey Telep and Taryn Williams of King & Spalding for Law360.
  • "Failing to Trust the Public: The Process of Submission of the Enabling Amendment to the Georgia Constitution for the Restrictive Covenant Act Was Unconstitutional" writes David Pardue for his Trade Secrets and IP Today Blog.
  • Jonathan Pollard has a post about an interesting non-compete case in the broadcast industry that was recently filed in Alabama.
  • "Florida Appellate Court Says: “'Independent Contractor' Still an Employee for Purposes of Enforcing Non-Compete Agreement" advises Peter Vilmos for Burr & Forman's Trade Secrets Noncompete Blog.
  • "Calif. Noncompete Clauses — Still Unenforceable" reports David Bloom of Milbank Tweed for Law360.
  • "IBM Suit Over Corporate Raiding Illustrates Use of Social Media Evidence" advises Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • "10 Steps to Take When Hiring from a Competitor" recommends Peter Steinmeyer for Epstein Becker's Trade Secrets & Noncompete Blog.

Computer Fraud and Abuse Act Posts and Cases:

  • For those looking for the latest on Aaron's Law, see "Congresswoman Posts Revamped 'Aaron's Law' on Reddit" as reported in Mashable.
  • "Employment Agreement Restrictions Determined Whether Employees Exceeded Authorized Access Under Computer Fraud and Abuse Act" advises Shawn Tuma about a recent federal decision out of Oklahoma that elected not to follow the reasoning of U.S. v. Nosal.
  • "How 'Aaron's Law' Is Good for Business" advises Doc Searls for the Harvard Business Review.
  • "We Need to Think Beyond the Aaron in ‘Aaron’s Law" writes Micah Schaeffer for Wired.

 Cybersecurity Posts and Articles:

  • The big cybersecurity story this week were the reports by The Washington PostThe New York Times and The Wall Street Journal that they believed Chinese hackers had penetrated their defenses to spy on their communications with critics of the Chinese government.
  • "Here a Hack, There a Hack, Everywhere a Cyber Attack" laments Arik Hesseldahl for All Things Digital.
  • "Calling General Counsel to the Front Lines of Cybersecurity" reports Sue Reisinger for Corporate Counsel.

Thursday Wrap-Up (January 24, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

by John Marsh 24. January 2013 10:45

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:

Computer Fraud and Abuse Act Posts and Cases:

The commentary criticizing the prosecution of technology activist Aaron Swartz continues to mount. (For those who have not been following it, Swartz committed suicide after plea negotiations with the U.S. Attorney for the District of Massachusetts broke down; he had been charged with violations of the Computer Fraud & Abuse Act for allegedly hacking into an academic database affiliated with MIT). I am hoping to get a post with my perspective on this important case out this weekend. In the meantime, those interested in more on this case should see the following articles:

  • Professor Orin Kerr has written two posts for The Volokh Conspiracy, the first evaluating whether the prosecutors abused their discretion (he concludes that they were not out of bounds under normal prosecutorial standards) and the second proposing changes to the CFAA.
  • And in The Public Domain, James Boyle voices his disagreement in "The Prosecution of Aaron: A Response to Orin Kerr."
  • The Wall Street Journal had an editorial last Friday, "Cyber Crime and Punishment," which expressed concern over the proportionality of the penalties sought by U.S. Attorney Carmen Ortiz.
  • The New York Times had an op-ed piece by Lincoln Caplan entitled "Aaron Swartz and Prosecutorial Discretion" and also ran an article detailing MIT's role in the case, "How M.I.T. Ensnared a Hacker, Bucking a Freewheeling Culture."
  • In Harper's Magazine, Scott Horton is critical of the prosecution in '"Carmen Ortiz Strikes Out."
  • For those interested in finding out more about some of the statistics behind recent CFAA prosecutions, Professor Kyle Graham has a fine summary in his post entitled "Some Thoughts on the Computer Fraud and Abuse Act" for the blog.

Trade Secret and Non-Compete Posts and Cases: 

  • Could the National Labor Relations Board find an employer's confidentiality provisions to be overbroad? An interesting post by Epstein Becker's Trade Secrets & Noncompete Blog notes a recent decision in which a NLRB administrative law judge that  found confidentiality and non-disparagement provisions contained in a mortgage banker’s employment agreement were violative of the NLRA. 
  • "Judge Strips Richtek Claims In UPI Trade Secrets Case," reports Law360.
  • "Analyzing the Non-Competition Covenant as a Category of Intellectual Property Regulation," from the Hastings Science & Technology Law Journal (a hit tip to Jonathan Pollard for tweeting this article).
  • "Federal Court Finds Choice of Law that Permits Blue Penciling Does Not Violate Virginia Public Policy," reports Paul Kennedy for Littler's Unfair Competition & Trade Secrets Counsel Blog.
  • "California Appellate Decision Clarifies Standard for Injunctive Relief Carve-Outs Within California Arbitration Agreements," reports Robert Milligan for Seyfarth Shaw's Trading Secrets Blog.
  • If you are in the aerospace industry, you need to be particularly careful with your Chinese partners and suppliers, advises Todd Sullivan in his Trade Secrets & Employee Defections Blog. Todd cites a recent article from The New York Times, which addresses security and trade secret concerns for that industry in China.
  • "US Manufacturer Accuses Chinese Agent Of Stealing IP," notes Law360.
  • "The China NDA (Non-Disclosure Agreement). Shut the Barn Door BEFORE the Horse Bolts," warns Dan Harris in his China Law Blog.

Cybersecurity Articles and Posts:

  • "The BYOD Thicket: Some Tips Basis Steps to Take for Businesses," advises Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • And if you are interested in how law firms should balance BYOD and security, check out Sean Martin's article, "Top Mobile Use Cases in Law Firms," for Law Technology News.
  • "Protecting Companies' Intellectual Property From Cyber Crime," advise Ernest Badway and Daniel Schnapp for Law Technology News.

Thursday Wrap-Up (January 17, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

by John Marsh 17. January 2013 15:30
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:

Computer Fraud and Abuse Act Posts and Cases:
As many of you know, technology activist Aaron Swartz committed suicide last week after plea negotiations with federal prosecutors over his indictment under the CFAA broke down. Swartz was facing a criminal trial in April on charges relating to his effort to “liberate” the JSTOR database, a database of academic and scientific journals maintained by the Massachusetts Institute of Technology. His profoundly sad story has struck a chord with many, and as a result, there has been an outpouring about his death and the propriety of the criminal charges brought against him. 
Many are calling for an amendment to narrow the scope of the CFAA and heeding those requests, Congresswoman Zoe Lufgren (D-CA) has introduced a bill that she believes will address the CFAA's shortcomings.
Here are some of those and other relevant posts that I have come across this week:
  • "Web Activist's Suicide Highlights Tech Law," writes Joe Palazzolo for The Wall Street Journal.
  • "How To Honor Aaron Swartz: In the wake of the brilliant technology activist's death, let's fix the draconian Computer Fraud and Abuse Act," advises Marcia Hoffman for Slate
  • "Anti-hacking law questioned after death of Internet activist," writes John Roach for
  • "Swartz death immortalizes hacking law woes," notes Scott Martin for USA Today.
  • Harvard Law School Professor Lawrence Lessig also advocates reform in a post entitled "Aaron's Law" for The Atlantic.
  • George Washington Professor Orin Kerr, who is former federal prosecutor but no fan of a broad interpretation of the CFAA, has written a post for The Volokh Conspiracy
    analyzing the prosecution. In that post, Professor Kerr concludes that the charges were brought under a fair reading of the CFAA. He has promised a follow up post on whether the federal prosecutors exercised their discretion properly in this case.
  • Finally, Robert Milligan and Jessica Mendelson provide their timely take on the prosecution for Seyfarth Shaw's Trading Secrets Blog. 
Trade Secret and Non-Compete Posts and Cases:
  • Preemptive filings over whether the law of California (which forbids non-competes) or other states applies are common in non-compete disputes. Kenneth Vanko has a post detailing a recent decision by New York's influential First Appellate Department, Aon v. Cusack, rejecting an effort by a group of employees to race to California and secure that forum to invalidate their non-competes. Epstein Becker's Trade Secrets & Noncompete Blog and Jackson Lewis' Non-Compete & Trade Secret Report Blog also have posts on this decision.
  • AMD has secured a TRO against 4 former employees who left to join competitor Nivida in Massachusetts, reports Todd Sullivan in his Trade Secrets & Employee Defections Blog.
  • The Department of Justice has issued what it purports to be a summary of all of the trade secret prosecutions undertaken since 2007 (it is hardly a summary as it's 82 pages long, single-spaced).  For those actually looking for a summary, Jessica Mendelson has a post and link to the report on Seyfarth Shaw's Trading Secrets Blog.
  • Kenneth Vanko has another post providing an update on a Maryland bill that has been introduced to ban non-competes.
  • Employers would do well to remember the bitterness that might flow enforcement of a non-compete, advises Brian Bialas for Foley & Hoag's Massachusetts Noncompete Blog in a post, "The Human Factor in Noncompete Disputes: Howie Carr is Still Upset Over 5 Years After His Lawsuit with WRKO."
  • A Pittsburgh hospital has threatened to enforce its non-competes against former staff and physicians, Jonathan Pollard is reporting in the non-compete blog.
  • "2012 Showed Courts Willing To Enforce Noncompetes," writes Ben James for Law360.
  • For those who have not gotten enough of the Amazon v. Powers (Google case), check out "Legal lessons from Amazon’s ‘noncompete’ battle with Google," by William Carleton for Geekwire.
  • "12 Ways to (Legally) Spy on Your Competitors," recommends Carol Tice for Entrepreneur.
Cybersecurity Articles and Posts:
  • "Cyberlaw Predictions: Data Security, Cloud Computing, and Identity Management," foresees Thomas O'Toole for BNABloomberg's e-Commerce & Tech Law Blog. 
  • "The Internet of Things Has Arrived — And So Have Massive Security Issues," announces Wired in an opinion piece by Andrew Rose.

The Trade Secret Litigator's Top 3 Trade Secret and Non-Compete Cases of 2012

by John Marsh 9. January 2013 10:30

We are now down to the final three cases.  Each one of them received significant media attention and generated important rulings that will impact other trade secret cases in the future.  Each one could have been No. 1 in their own right in any other year. 

3.  U.S. v. Nosal (U.S. Court of Appeals for the Ninth Circuit, April 2012) and WEC Carolina Energy v. Miller (U.S. Court of Appeals for the Fourth Circuit, July 2012)  These two cases heaved a significant split within the federal appellate circuit over the scope of the Computer Fraud and Abuse Act (CFAA) by narrowing its application to hacking cases as opposed to trade secret theft cases.   Nosal in particular was remarkable because it was a 9-2 en banc decision from the influential Ninth Circuit that reversed a ruling last year issued by a 3-member panel of that court.  In that earlier decision, that panel of the Ninth Circuit had followed the holdings of the Fifth, Seventh and Eleventh Circuit and essentially found the CFAA could be applied to violations of computer use policies. 

Both cases involved situations where former employees had violated computer use policies to misappropriate trade secrets, and presented the question of whether the violation of those policies amounted to "access without authorization" as required for a claim under the CFAA.  The decision in Nosal, which was issued in April, found that it did not apply and expressed concern that holding otherwise might lead to the criminalization of violations of other computer use policies (such as reading at work).  The Fourth Circuit followed that reasoning in WEC Carolina Energy.

Like several of the cases in the Top 10, Nosal and WEC Carolina Energy received tremendous media attention, especially the Nosal holding.  The New York Times even had an editorial applauding Chief Judge Alex Kozinski's entertaining majority opinion.  Concerns over the potential criminalization of violations of computer use policies had resonance with the public at large.

Unfortunately, the split between federal courts of appeal will remain for the foreseeable future as WEC Carolina Energy's writ of certiorari to the U.S. Supreme Court was dismissed last week.
2.  DuPont v. Kolon (E.D. Va. 2012).  This epic trade secret case, which was the Trade Secret Litigator's most significant trade secret case of 2011, would have been the winner again in almost any other year.  As regular readers know, I have written extensively about this case as it moved from an important spoliation of evidence ruling on the eve of trial to a $920 million verdict last year. (Previous posts can be found here and here).

In August, U.S. District Court Judge Robert Payne granted a sweeping 20 year injunction banning Kolon from making Heracron, the synthetic fiber that he found incorporated the trade secrets misappropriated from DuPont.  Judge Payne's thorough opinion wrestled with the issue of whether irreparable injury was present and whether it was required for a permanent injunction under Virginia's version of the Uniform Trade Secrets Act.  As permanent injunctions become more and more difficult to secure (compare, for example, Judge Koh's recent decision to reject a permanent injunction in the Apple v. Samsung case), this opinion may prove to be very important for trade secret claimants seeking permanent injunctive relief.  (My thoughts on that opinion can be found here).
In October, the U.S. Attorney for the Eastern District of Virginia indicted a number of Kolon managers from South Korea for stealing DuPont's trade secrets in connection with this case.  Kolon has appealed Judge Payne's ruling to the Fourth Circuit so unless the parties settle, this battle will continue to generate headlines in 2013.
1.  U.S. v. Aleynikov (U.S. Court of Appeals for the Second Circuit, April 2012).  Why did this case get my vote for the top trade secret case of 2012?  Any case that directly causes Congress and President Obama to amend an important criminal statute, a criminal statute that might serve as the basis for a federal civil remedy this year, deserves that title.

For the uninitiated, in December 2010, a federal jury in New York convicted Sergey Aleynikov of stealing source code for Goldman Sachs' proprietary high frequency trading (HFT)  program under the Economic Espionage Act (EEA).  The circumstances surrounding the charges were pretty egregious:  Aleynikov was responsible for developing Goldman's HFT computer programs for various commodities and equities markets. In April 2009, Aleynikov resigned from Goldman and accepted a job at Teza Technologies to help develop that firm’s own version of a computer platform that would allow Teza to engage in HFT. On his last day, Aleynikov transferred thousands of computer files, including source code to the HFT trading system, to a server in Germany that was not blocked by Goldman’s firewall. That evening, at his home, Aleynikov downloaded the material from the German server to his personal computer and then to his laptop and a thumb drive so that he could make it available to Teza.

The collective jaw(s) of the trade secret community dropped in April last year when the U.S. Court of Appeals for the Second Circuit issued the grounds for its reversal of Aleynikov's conviction.  Essentially, the Second Circuit imposed a requirement that the product be intended to be sold in an open market to qualify for prosecution under the EEA. Of course, this interpretation removed a number of potentially important trade secrets from the scope of the statute.

As a result, in late November, Senator Patrick Leahy approved the Theft of Trade Secrets Clarification Act, S. 3642, which specifically sought to remedy the Aleynikov construction by broadening the statute's scope to cover trade secrets that are "related to a product or service used in or intended for use in interstate or foreign commerce."  The House approved the amendment, 388 to 4, and President Obama signed it into law on December 31, 2012.  As this broader language will likely be part of any proposed amendment adding a civil remedy under the Protecting American Trade Secrets and Innovation Act, the Aleynikov decision has had an important impact beyond the criminal prosecution.

The Aleynikov and Goldman saga will continue into 2013, as the Manhattan District Attorney has also launched a criminal proceeding against Aleynikov and Aleynikov has filed a lawsuit in New Jersey against Goldman seeking indemnification for the criminal prosecutions brought against him.

In sum, 2012 was a fascinating year, and 2013 promises to be just as interesting as many of these cases will continue to unfold on different fronts.

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


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