Following up on yesterday's post, I would like to detail the terrific Trade Secret Law Committee Meeting we had on Thursday with Assistant U.S. Trade Representative (AUSTR) Stanford McCoy. AUSTR McCoy had spoken earlier in the day on a panel about protecting intellectual property through foreign trade agreements and emphasized how trade secrets had emerged from an "obscure" issue to a "big priority" within the Administration. Afterwards, I approached him in the hope that he might join our Committee meeting; he told me he would have liked to but he was committed to another meeting while in Seattle.

Peter Toren's Presentation on the Obama Trade Secret Initiative and Strategy

At the Committee Meeting, Peter Toren provided a summary of the Obama Trade Secret Strategy announced on February 20, 2013 and shared his concerns that the Administration presently lacked the resources to prosecute trade secret theft under the Economic Espionage Act (EEA). He provided some sobering statistics that showed that there had been only 127 prosecutions under the EEA since its inception in 1996, and that with the exception of the Northern District of California, the majority of U.S. Attorney's offices had not been vigorously pursuing those prosecutions (for example, less than 45% had prosecuted a single EEA case).

Peter emphasized that while the Obama Administration's action items certainly represented a step in the right direction, its success would depend on whether the government actually followed through with the proposed action. Moreover, Peter noted that even if the Administration implemented the programs and increased protection of trade secrets, it could only do so much in this era of government cutbacks, a fact evidenced by his statistics on the EEA. Peter ultimately concluded that businesses must do more to protect their trade secrets. A copy of Peter's blog post on the presentation and his PowerPoint can be found here.

The Panel Discussion and AUSTR McCoy's Surprise Visit
 
After Peter's presentation, I moderated a panel discussion with Peter, Dan Westman of Morrison & Foerster, John Durham of Poyner Spruills, and Seth Hudson of Clements Bernard regarding our thoughts over the recent Obama initiative. The concensus was that it was a welcome step but that a private right of action was needed. 
 
About mid-way through the panel discussion, AUSTR McCoy joined us unexpectedly. He participated in the discussion and after listening to our initial comments, he advised that he appreciated our comments but indicated that the administration needed to hear from the Committee more often. He said the administration would like to have had our input on recent requests for input on Section 301 proceedings and he asked that we work with Victoria Espinel, the U.S. Intellectual Property Enforcement Coordinator (IPEC) to provide comments to legislation affecting trade secrets.
 
Dan Westman then spoke, emphasizing that there was a serious need for a civil remedy under the EEA. Dan said it was his understanding that the Administration might be privy to even more about China's role in the cyberattacks and trade secret theft than had been reported or suspected in recent months.  For this reason, Dan noted that the time was right, especially given the fact that leading IP associations like the AIPLA and IPO had supported the civil remedy in their public comments. AUSTR McCoy indicated that he obviously could not comment other than to note that the Administration was obviously very concerned and that trade secret theft was now a big issue for the Administration.

Consistent with his presentation, Peter echoed that the Justice Department simply did not have the resources or the manpower to pursue the trade secret claims that were out there and that a private right of action would be the most effective way to ensure that American trade secrets were protected. I of course eventually chimed in and noted that in my experience, foreign companies were not enamored with American litigation and discovery. I said that arming American companies and their attorneys with a private right of action would allow the Administration to unleash the proverbial army of private attorney generals to enforce American trade secret laws much to the chagrin of those foreign companies who so loathe and fear the American court system.
 
In terms of a timetable on the public comments, AUSTR McCoy said the IPEC was reviewing the public comments (13 of which were filed by the April 22 deadline), would circulate her thoughts to relevant constituencies within the Administration (with special emphasis with the Justice Department) and make a recommendation regarding the legislative proposals.

It was a marvelous and fun discussion. Members of the Committee that were present were active participants as well and asked questions not only of the panel but also AUSTR McCoy. We look forward to working with AUSTR McCoy and his office in the future.

The American Intellectual Property Law Association's (AIPLA) Spring Meeting in Seattle has wrapped up and I thought an update would be in order, especially of the Trade Secret Committee Meeting, in which we had an unexpected visit from Assistant U.S. Trade Representative (AUTR) Stanford K. McCoy. During that meeting, AUTR McCoy very patiently listened to the members of our panel vent and share their concerns that the Administration needed to engage the private sector by supporting enactment of a civil cause of action to the Economic Espionage Act. 

To do the meeting justice, I will divide it up into two posts with the summary of the Committee meeting to follow in my next post. Today, I'll provide a summary of a genuinely entertaining afternoon session on the Computer Fraud & Abuse Act (CFAA) as well as fine presentations on litigating trade secrets before the International Trade Commission and an in-house perspective on protecting trade secrets overseas.
 
Computer Fraud & Abuse Act Debate (a/k/a "The Thrilla in Seattle")

I had hoped that Professor Eric Goldman (whose Tech & Marketing Law Blog is a mainstay in the AmBlawg 100) and Morrison & Foerster's Dan Westman's program would turn into a spirited debate and it did not disappoint. (Before the battle, Eric warned me that he was not going to hold anything back; I told him I couldn't wait). It evoked memories of the classic 60 Minutes debates between James Kilpatrick and Shana Alexander (or, better yet, the brilliant SNL spoof by Dan Akroyd and Jane Curtin). Josh Durham played the moderator role splendidly, playing Dan and Eric off against each other and letting it rip.
 
Dan opened with a discussion of the emerging Circuit Court split within the CFAA and emphasized the importance of retaining the broader interpretation of the CFAA espoused by the Fifth, Seventh and Eleventh Circuits. He emphasized the importance of having a federal remedy in the event that a state court might not hospitable to a particular claim or out-of-town client.
 
Eric came out swinging, challenging Dan on the problems with the CFAA, the fact that it was not drafted to address trade secrets and identified the problems with its overuse. Eric rejected the idea of "computer exceptionalism," that the mere fact that a computer might be used to steal trade secrets should result in a criminal statute being created solely for that manner of stealing trade secrets. 

Dan survived the initial flurry, and counter-punched effectively by emphasizing that the advances of technology and mobility rendered the computer a "very scary" thing in the hands of the wrong employee.  He argued that the fact that the CFAA had both civil and criminal remedies had contributed to the present confusion, because courts would apply the rule of lenity (i.e., construe the CFAA's language narrowly) in criminal cases but that those narrower holdings in criminal cases would then be used in later civil proceedings. Eric weathered Dan's volleys, and emphasized that the CFAA remedy was something that Dan wanted, but not something that he truly needed. 

Like Rocky and Apollo Creed, the two exhausted panelists agreed there "ain't gonna be no rematch."  At the close, Dan tendered an olive branch, offering that his position for the CFAA in civil cases would be vitiated if the claim could be effectively moved into a federal trade secret statute where it would better fit. Eric magnanimously considered the proposal, noting that the Economic Espionage Act would be a better fit for the types of claims that Dan was seeking. A heart-warming hug followed and there was nary a dry eye in the room.
 
Extra-Territorial Protection of Trade Secrets and Mobile Employees

Jay H. Reiziss of Brinks Hofer Gilson & Lione spoke next and he addressed international trade secret misappropriation, focusing on remedies within the Federal Trade Commission (FTC). Jay and his firm represented the American company Armsted, which prevailed in the Federal Circuit's seminal opinion in TianRui Group v. FTC. In TianRui Group, the Federal Circuit held in 2011 that the FTC could issue rulings for disputes involving the misappropriation of trade secrets or other unfair competition that took place entirely overseas. (For more on the ruing, see my post here).
 
Jay discussed the uptick in trade secret cases before the FTC and also addressed the pros and cons of a FTC action, as compared to a traditional litigation. In fact, Jay described one very interesting advantage favoring a FTC proceeding -- namely, the leverage Jay said that comes from an ITC proceeding to force a foreign firm to open its plant to inspection to see if an American company's trade secrets have been incorporated or integrated into processes or equipment at that facility.

Jay noted that in traditional civil litigation, a party may find itself hamstrung by the limitations upon discovery imposed by the Hague Convention that could limit, interfere with or prevent the inspection of a foreign plant. However, he indicated that Administrative Law Judges have been persuaded to threaten to impose an adverse inference against a foreign company that refuses to allow such an inspection, which inevitably forces the foreign company to open their plant.

Paik Saber of IBM Corporation spoke next and began with some sobering statistics about employee mobility, an important factor in any trade secret protection program: U.S. employees change jobs on average every 4.6 years, and those between the ages of 25 to 34 change jobs every 3.2 years (these statistics come from the U.S. Census). For multi-national corporations, Paik said the turnover rate was 25% of the workforce. 

As a former IT manager, Paik emphasized that an ounce of prevention was worth a pound of cure, especially in emerging markets. Paik noted that there remained a lack of cultural appreciation for IP in those emerging markets and that because laws and enforcement procedures remained a concern in some of those markets, it was critical to have a strong trade secret protection program overseas.

Paik emphasized the importance of implementing traditional safeguards in overseas operations, such as written agreements, ongoing and thorough education, monitoring of employees' use of confidential information, and notification of confidentiality policies. He emphasized the importance of clearly communicating a commitment to confidentiality and he shared an effective anecdote: at the start of each employee's tenure, a foreign manager would send him or her a polite but direct letter clearly spelling out the importance of preserving the confidentiality of the company's trade secrets. This letter, -- firm, cordial and clear -- was some times more effective to these employees than the perceived "legalese" accompanying any comprehensive policy or agreement drafted by an attorney.

Finally, Paik noted the importance of employee retention as part of a company's program of protecting trade secrets. He noted the tremendous financial investments made by companies in their overseas employees. He cited lack of career growth and money as the two main reasons for losing employees and he identified Google and Zynga as examples of two companies that had minimized the loss of trade secrets beecause they effectively retained key employees.

Again, a special thanks to Seth Hudson for organizing a tremendous panel and presentation.

As promised, I am posting my intended letter to the Obama Administration's U.S. Intellectual Property Enforcement Coordinator, Victoria Espinel, in response to her recent request for public comments on potential trade secret legislation. 

Executive Summary:  Regular readers of this blog will not be surprised as I advocate that a civil cause of action be added to the existing framework of the Economic Espionage Act (EEA), preferably by enacting a modified version of the Protecting American Trade Secrets and Innovation Act (PATSIA) proposed last year by U.S. Senator Chris Coons. 

I have proposed three modifications to PATSIA (explained in greater detail in my letter below):

(1) that the statute be confined to international trade secret misappropriation;

(2) that objections to venue, such as forum non conveniens, be prohibited so long as the requirements of 28 U.S.C. §1391 are met; and

(3) that PATSIA's ex parte seizure order be scaled back and modelled after what are commonly known as Anton Piller orders which are used in Commonwealth nations to prevent the destruction of evidence.

For those that have not provided their comments to the Administration yet but wish to do so by Monday, April 22, 2013 (tomorrow), the link to provide comments can be found here. 

Here is my letter:

--------------------------------------------------------------------------------------------------------------------------------------

The Honorable Victoria Espinel                                   

Re:      Response to Request for Public Comments for “Trade Secret Theft Strategy Legislative Review” (78 Fed. Reg. 16875, March 19, 2013)

Dear Ms. Espinel:

I am submitting this letter in response to the Administration’s “Request for Comments and Notice for Trade Secret Theft Strategy Legislative Review” as published in the Federal Register (the “Notice”).

The Growing International Trade Secret Threat and The Need for Further Legislative Action.  The rise in the theft of trade secrets from U.S. companies by foreign hackers and international misappropriation has been widely reported and is well documented.  Last year, the National Security Agency described trade secret theft as the greatest transfer of wealth in history, estimating the losses of theft of trade secrets and cyber breaches to be in excess of $334 billion per year.  In February 2013, the security company Mandiant Corporation reported that the Chinese government was sponsoring cyber-espionage to attack top U.S. companies.  Likewise, CREATE.org has recently released a white paper that highlights how far-reaching and challenging the risks of trade secret theft are for companies operating on a global scale.

The Missing Component:  A Federal Civil Cause of Action.  For these reasons, I believe that the Administration should use its considerable influence and resources to support legislation creating a federal civil cause of action and remedy for international trade secret misappropriation utilizing the existing framework of the Economic Espionage Act (“EEA”). 

This federal civil cause of action or remedy should not undermine, preempt or disturb existing state law causes of action and remedies, which are more than adequate to address domestic trade secret theft.  Rather, the federal civil cause of action would be directed exclusively to remedying situations involving the theft of trade secrets by international misappropriation.  Any federal civil cause of action should provide remedies similar to those provided in the Uniform Trade Secret Act (“UTSA”), including providing for appropriate injunctive relief, unconditional royalty damages, attorneys’ fees, and exemplary damages equal to at least the twice any award of damages.

A federal cause of action empowering companies to protect their own trade secrets from international misappropriation would help relieve the federal government, in this time of limited government resources, of sole responsibility for the protection of American trade secrets abroad.  In addition, enforcement would be enhanced because U.S. companies understand their own technology and trade secrets best and they are incentivized to litigate aggressively to protect those assets.  In addition, despite their best efforts, government agencies and prosecutors may not be able to move as quickly or with the nimbleness of a private litigant in some circumstances.  Given the importance of speed and injunctive relief in trade secret cases, a federal private right of action would be a powerful tool in the case of international trade secret misappropriation.

While state trade secret laws afford U.S. companies many protections, they cannot match the potential international scope and procedural remedies or protection that a federal court can provide in the case of international trade secret misappropriation.  The ability to issue and serve subpoenas throughout the U.S. and the broad jurisdictional powers of federal courts would greatly assist many trade secret claimants in cases of international misappropriation. 

The Administration Should Support the Protecting American Trade Secrets and Innovation Act with Three Modifications.  Senator Chris Coons previously introduced legislation (S. 3389, 112th Congress), known as the Protecting American Trade Secrets and Innovation Act of 2012 (“PATSIA”), that seeks to  amend the EEA to provide, among other things, a private civil cause of action for trade secret theft. 

The Administration should support enactment of PATSIA.  In addition, I would respectfully propose the following three modifications:

1.      PATSIA should be focused and confined to international trade secret misappropriation.  Existing state law trade secret remedies are more than adequate to protect domestic trade secret misappropriation.

2.      To ensure that the civil cause of action’s remedial purpose (i.e., providing American companies with a federal forum for international misappropriation) is not frustrated, PATSIA should preclude objections to venue, such as challenge on the grounds of forum non conveniens, so long as the action satisfies the venue requirements of 28 U.S.C. §1391.

3.      The ex parte seizure order proposed under PATSIA should be narrowed and additional safeguards should be added to ensure that it is not misused.  I would propose that the seizure order be modeled on Anton Piller orders that have been utilized by courts in Australia, Canada and the United Kingdom to seize and protect evidence.  To secure an ex parte seizure order, I would propose that an applicant be required to establish the following by clear and convincing evidence: (a) a strong prima facie case against the defendant; (b) that the alleged misappropriation is serious and that there is a probability of irreparable injury; and (c) that there is a possibility that the defendant will destroy or remove relevant evidence or misappropriated product.  Finally, to ensure protection and preservation of the material to be seized, a judicial officer should be appointed to oversee execution of the order and to retain possession of any evidence or product that is seized until the defendant has an opportunity to challenge the seizure.

Thank you for the opportunity to be heard.  If I can provide any further assistance or information, please do not hesitate to let me know.

Very truly yours,

John F. Marsh

Wow, it was a busy week. 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:

• Federal prosecutors were dealt a severe blow in the Economic Espionage Act case brought against affiliates of the Pangang Group (a company with ties to the Chinese government), as U.S. District Court Judge Jeffrey White quashed summons against them in the U.S. v. Liew case.  As reported by Bloomberg and Law360, this is the second time that summons have been quashed and it increasingly appears that the government will not be able to serve, let alone prosecute, these companies for their alleged role in the theft of DuPont's titanium dioxide trade secrets.
• "New Jersey Legislators Propose Banning Non-Compete Agreements With Employees Who Can Claim Unemployment," reports Jessica Mendelson for Seyfarth Shaw's Trading Secrets Blog. Also see Law360's article, "NJ Bill Targets Noncompete Restrictions On Unemployed."
• Honey, I stole the trade secrets!  "Can an Employee Use a Spouse to Circumvent Restrictive Covenants? Georgia Court of Appeals Says 'No,'" advises Amy Dehnel for Berman Fink Van Horn's Georgia Non-Compete and Trade Secret News.
• "Merrill Lynch Says Ex-Advisers Stole Client Info," reports Law360, when they joined competitor Wells Fargo.
• "Wisconsin Researcher Accused of Economic Spying for China," reports Bloomberg.
• "Plaintiff’s Foreign Operations Result in 'Lessened' Deference to Choice of Home Forum in Trade Secret Misappropriation Case," advises John C. Law, Ph.D. of McDermott Will & Emery for the National Law Review.
• "Frisby-Eaton Whistleblower Settles with Frisby, Tolling Agreement Persists with Eaton," advises Alison Grant for The Plain Dealer and Todd Sullivan for his Trade Secrets Blog.
• "Get Smart About Noncompetes," advises Alan Bush for The Texas Lawyer.
• Don't forget the importance of "Trade Secrets and Due Diligence," a reminder by Eric Ostroff for his Trade Secrets Law Blog.
• For a recent non-compete case out of Florida's Fifth District Court of Appeal, see "A Court’s Order Must Comply With The Restrictive Covenant It Seeks To Enforce," by Kain & Associates' ComplexIP.com.
• "Enforcing a Non-Compete Agreement in Florida: What Evidence is Relevant?" asks Jason Cornell for Fox Rothschild's South Florida Trial Practice Blog.
• "Non-competes: HR’s version of the Prenup," proclaims Steve Boese for Fistful of Talent.
• "5 Privacy and Data Security Measures That Can Protect Your Company Against Trade Secret Theft," recommends Lindsey Tonsager for Covington's Inside Privacy Blog.
• Kenneth Vanko has the first of three posts on why certain non-compete and trade secrets cases may not settle for his Legal Developments in Non-Competition Agreements Blog.
• And for the litigators, "Don't Forget about E-Discovery When Moving to The Cloud," advises Jay Yurkiw for Porter Wright's Technology Law Source Blog.

Cybersecurity Posts and Articles:

• As many of you may have noticed last week, The Wall Street Journal launched a Risk & Compliance Reporter that will cover, among other things, developments in cybersecurity.  It is worth bookmarking. To that end, here is one of the introductory posts, "Three Tactics for Cyber defense" by Mark G. Graff.
• "How To Mitigate The IP Risks Of Data Breaches," advises Carol Anne Been and Andy Blair of Dentons for Law360.
• In an op-ed piece for The New York Times "Closing the Door on Hackers," Marc Maifret, CTO for BeyondTrust wonders whether software companies are incentivized to allow hacking.
• "Insider Theft: the Real Cyber Threat?" asks The Wall Street Journal's Corruption Currents Blog.  The post quotes Mike Dubose of Kroll as estimating the average time between an internal breach and its discovery is 32 months.
• "As more hackers target lawyers, here’s how to protect client data," recommends Rachel Zahorsky for the ABA's Techshow.
• "U.S. Undersecretary to Discuss Hacking With Chinese Officials," reports Bloomberg.
• "Silicon Valley Fights Restrictions on Chinese Tech," reports The Wall Street Journal.
• "A Different Approach To Foiling Hackers? Let Them In, Then Lie To Them," recommends Andy Greenberg for Forbes. (And don't forget to at least buy them a drink).

Computer Fraud & Abuse Act Posts and Cases:

• The trial in the prosecution of David Nosal is underway in San Francisco and expected to go about 12 days. Here are some of the articles covering it: "In High-Tech Hacking Trial, a Battle of Low-Tech Openings," notes Max Taves, who is covering the Nosal trial, for The Recorder. Also check out Vanessa Blum's article, "Amid Calls for Reform, a Rare Trial of Hacking Law," also for The Recorder.
• "Here are eight cyber crooks who got less prison time than Andrew Auernheimer," advises Dan Kaplan for SC Magazine.
• "NY Times Reporter Jenna Wortham Accidentally Reveals How She Violated Both The CFAA & The DMCA," reports Techdirt.
• "7th Circ. Won't Resurrect Employer Email Hack Suit," reports Law360, as the plaintiff was unable to demonstrate that the alleged invasion of privacy cost him more than $5,000.

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:

• House Intelligence Committee Chairman Mike Rogers (R-MI) has announced that he will be presenting a bill later this year that will penalize foreign countries that sponsor hackers that attempt to steal trade secrets from U.S. companies. In an article for Main Justice, Katy O'Donnell writes that Rogers will be considering some unconventional remedies such as suspension of visas and other tools.
• "DuPont Wins Kolon Property In $920M Recovery Effort," reports Law360.
• For the latest on the Eagle v. Morgan social media ownership case, see Jessica Mendelson's post for Seyfarth Shaw's Trading Secrets Blog. As Jessica details, the trial court found that Dr. Eagle's former employer misappropriated her LinkedIn profile but that Dr. Eagle failed to prove her damages.
• "Live Events Agency Sues Former Employees And Independent Contractor For Breach Of Non-Solicitation Agreements," advises John Paul Nefflen for Burr & Forman's Non-Compete Trade Secrets Blog.
• "Patterson Atty Gained Secrets Through Ruse, Doc Says," reports Law360. According to the article, the attorney approached a Pennsylvania physician to advise him and then extracted information from the inventor of surgical stapling technologies in order to give a client a leg up in licensing negotiations.
• "Cease and Desist Letters Enjoy an Absolute Privilege from Libel Claims," advises Kara Maciel for Epstein Becker's Trade Secrets & Non-Compete Blog.
• "MGA's Trade Secrets Claim On Brink In Bratz Case," reports Law360, as MGA fights upstream to revive its trade secrets claim.
• "Restaurant Industry Giant Landry’s Sues Former Employee & Rival Restaurant Company," advises Jonathan Pollard in the non-compete blog.
• "Many U.S. Businesses in China Cite Data Theft," reports Carlos Tejada for The Wall Street Journal's Corruption Currents Blog. According to the survey, 26% of companies with a presence in China have had their trade secrets stolen and 40% see the risks rising.
• "How New Trade Secret Legislation Impacts Pharma Compliance Programs," reports Fish & Richardson's Jose Sierra for the Pharmaceutical Compliance Monitor.
• "Practice Tip: Don't Call Your Liquidated Damages Clause a 'Penalty In the Contract," cautions Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
• For the litigators: "Sanctions For Deleted Facebook Give Employers A Boost," reports Law360. Epstein Becker has a post about the case as well.

Cybersecurity Posts and Articles:

• In The Wall Street Journal's "Weekend Interview" entitled, "Why China is Reading Your Email," cyber expert Timothy Thomas believes the recent cyber attacks are part of a military strategy and that an offensive strategy may be needed.
• "Cyberattacks Seem Meant to Destroy, Not Just Disrupt," notes Nicole Petlroth for The New York Times Bits Blog.
• "New Hacking Study Shows What Good Guys Are Up Against," advises The Wall Street Journal's Digits Blog.

Computer Fraud and Abuse Act Posts and Cases:

• "Aaron Swartz’s Prosecutors Were Threatened and Hacked, DOJ Says," reports David Kravets for Wired.
• "Is the Computer Fraud and Abuse Act a Failed Experiment?" asks Brian Bialas in Foley & Hoag's Massachusetts Noncompete Law Blog, in a rejoinder to Eric Goldman's post on the CFAA last week.

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:

• "Always be the good guy." That is the title of an excellent post by Brian Bialas for Foley & Hoag's Massachusetts Noncompete Law Blog that should serve as an important reminder to lawyers that in injunctive proceedings, which are so dependent on the exercise of equity, that your client (employer or employee) have the moral high ground.
• "House Dems Push For China Trade Secret Theft Designation" reports Law360.  Congressmen Sander Levin ( D-Mich.) and Charles Rangel, (D-N.Y.) asked acting U.S.Trade Representative (USTR) Demetrios Marantis  to consider designating China as a “priority foreign country” under Section 182 of the Trade Act of 1974.  According to Law360, the law requires the USTR to identify countries that have inadequate protection of intellectual property rights, and those with the most egregious IP protection records can be targeted as priority. Once the USTR designates a priority foreign country, the trade agency is required under Section 301 of the act to complete an investigation, the results of which may lead to President Obama imposing import duties or taking other action. The Congressmen said that, “as evidence mounts” that the Chinese government is engaging in cybertheft, China may deserve the special designation.
• Liu Sixing was sentenced to five years by a New Jersey federal judge for stealing defense trade secrets from L-3 Communications, reports the BBC. The trade secrets included information on U.S. missile, rocket and drone technology.
• New blogger Erik Ostroff advises "Federal Circuit Addresses Uniform Trade Secrets Act Discovery Rule" in his Trade Secrets Law Blog.
• "Worker stole trade secrets to ‘lure away’ clients, tobacco company says" reports Ken Bradley for the Knowledge Effect Blog for Thomson-Reuters.
• "Enviros Can't Make Wyo. Reveal Halliburton Fracking Formula" advises Law360.
• For those in New York, Neal Dlausnera and David Fisher ask "Are Restrictive Covenants Enforceable Against Employees Terminated Without Cause? 'Hyde' indicates the answer may be yes." In their fine article for The New York Journal, Neal and David consider the recent case of Hyde v. KLS, which may have eroded New York's longstanding ban on non-competes against terminated employees. (For more on the Hyde case, see my post last year).
• "Protecting Company Information When Employees Bail: California Alternatives to Employee Non-Compete Agreements" advise Robert Milligan and Jessica Mendelson for Seyfarth Shaw's Trading Secrets Blog.
• "Plaintiffs' Attorneys, Rest Easy: Cease and Desist Letters Likely Aren't Defamatory," reports Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
• "Litigating Theft of Trade Secrets before the International Trade Commission," details Peter Toren.
• "7 Steps to Enhance Post-Employment Restrictive Covenants," reports Jeffrey Boxer for Corporate Counsel.
• At last, something they can agree on: the latest on "Apple Inc. (AAPL), Samsung And Their Trade Secrets," and their appeal to the Federal Circuit reports Michelle Jones for ValueWalk.
• "The non-compete that didn't happen," advises Rob Radcliff for his Smooth Transitions Blog.

Cybersecurity Posts and Articles:

• "New U.S. law says government agencies will need OK before buying Chinese IT equipment" reports Danielle Walker for SC Magazine.
• "How to Avoid Getting Duped By A Hacker," advises The Wall Street Journal's Digits Technology Blog. 
• "The Question of ‘International Law of Cyberwar," posits Stewart Baker for Steptoe's Cyberblog.

Computer Fraud and Abuse Act Posts and Cases:

• "The Computer Fraud and Abuse Statute is a Failed Experiment," laments Eric Goldman in a guest post for Forbes.
• "Another Court Construes the CFAA Narrowly and More of My Thoughts on the Statute," ponders Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog. Ravindra Shaw provides her take on the same case out of New York, in her post for Jackson Lewis' Non-Compete & Trade Secrets Report Blog.

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.

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:

• Add Illinois to the list of states considering legislation over their non-compete laws, as Kenneth Vanko advises in "A Brief Commentary on Illinois' Proposed Noncompete Agreement Act" in his Legal Developments in Non-Competition Agreements Blog. Ken reports that, unlike the legislation in Minnesota, Michigan and Massachusetts which seeks to scale back or limit non-competes, the proposed legislation would tend to benefit employers.
• "Schwab Says Ex-Advisers Diverted $47M In Accounts To Rival," reports Law360.  Epstein Becker's Peter Altieri has a post about the dispute as well.
• "DuPont Trade-Secret Prosecutors Add Charges Against Liew," reports Bloomberg.
• "Recent Non-Compete Case Highlights Pennsylvania’s 'Worthless Employee Doctrine' advises Jonathan Pollard for the non-compete blog. This poorly-named doctrine holds that an employer cannot enforce a non-compete against an employee that it just terminated for poor performance.
• The Unintellectual Property Blog has a post about a recent software trade secret dispute in Delaware against Cisco. In ExpertUniverse v. Cisco, the court applied the California Uniform Trade Secret Act and dismissed ExpertUniverse's claims because it failed to adequately describe its trade secrets and demonstrate misappropriation.
• "Want to avoid a prosecution under the Economic Espionage Act? You might want to consult "Economic Espionage Act: Seven Tips to Close a Fast-Growing Compliance Gap" by Lauren M. Papenhausen and Benjamin Franklin of McDermott, Will & Emery, LLP for Bloomberg Law.
• Looking for a primer on forensic computer examinations?  Then check out "Nuts and Bolts for Terms Commonly Used in Trade Secret Computer Forensic Investigations" by Jonathan Karchmer for Seyfarth Shaw's Trading Secrets Blog.
• "It takes a village to protect trade secrets," advises Naomi Fine of Pro-Tech for Forbes.
• "Protecting Your Closely Held Business," recommends Peter Vilmos for Burr & Forman's Trade Secrets Non-Compete Blog.
• In "Trade Secrets for Sale," Douglas Alexander proposes a robust and aggressive trade secret protection program for EBN.
• In "A Little-Publicized Change in Patent Law on Secret Prior Art," Paul F. Prestia details changes in the America Invents Act that may permit an inventor to preserve an invention as a trade secret indefinitely for Corporate Counsel.  For more on this issue of the newly revised section §102(a)(1), see my post last fall.

Cybersecurity Posts and Articles:

• Lots of articles on the Obama Administration upping its calls for China to address the reported cybersecurity attacks.  The New York Times is reporting that "Cyberattacks Prominent in Obama Call With New Chinese President." Also check out "U.S. Demands That China End Hacking and Set Cyber Rules," also by The Times, and "Obama Aide Demands China Stop Hacking" by The Wall Street Journal.  The Journal also had an op-ed piece this week by John Wohlsetter entitled "Chinese 'Hackers' Is a Misnomer. They're Spies."  Finally, Todd Sullivan provides his thoughts and takes the Administration to task for taking so long to single out China.
• "How to avoid being hacked: Strong passwords and other security tips" recommends Anick Jasdenun for SiliconValley.com. 

Computer Fraud and Abuse Act Posts and Cases:

• Looking for an update of recent CFAA cases? Then check out Shaw E. Tuma's excellent summary here.
• "When leaving your job, make sure you do this if you really want to violate the Computer Fraud and Abuse Act!", another fine post by Shawn Tuma.

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.

On Wednesday, the Obama Administration announced its five point initiative, "Strategy on Mitigating the Theft of U.S. Trade Secrets,” for combating the increasing threat posed by international trade secret misappropriation.  I was in the midst of gearing up for a preliminary injunction hearing, so while I was able to briefly report on the press conference and resulting media reports, I didn't have the opportunity to carefully review the report and its specific strategies.  I now have had the weekend to look at it; while there is a lot to like, there is some significant room for improvement, particularly on efforts to engage and unleash the private sector.
 
The Plan:  The Administration's roll out of the strategy on February 20, 2013, was accompanied by statements from senior administration officials covering six agencies with economic and security responsibilities.  The report identifies five action items: (1) focused diplomatic efforts to protect trade secrets overseas; (2) promoting voluntary best practices by private industry to protect trade secrets; (3) enhanced domestic law enforcement operations; (4) improved domestic legislation; and (5) public awareness and stakeholder outreach.

The Good:  This Administration has built up some credibility based on its willingness to use the Economic Espionage Act to prosecute offenders.  It has been assertive in its criminal prosecutions to date (the Liew/Pangang Group prosecution, the Aleynikov prosecution, the Hanjuan Jin prosecution, etc.) and has been thoughtful and considered in identifying the problem.  It also deserves credit for using the bully pulpit to acknowledge the problem and commit its resources to remedying it.

The Elephant in the Room:  Curiously, the Administration's report does not explicitly identify China, althought it repeatedly references prosecutions involving Chinese nationals.  To its credit, the Justice Department has not hesitated to push ahead against Chinese nationals and companies -- most notably, its indictment of the Pangang Group, a company owned and controlled by key members of the Communist party.  However, it was a little disappointing that the Administration was reluctant to identify China as the prime culprit and catalyst for the initiative.

What Hasn't Worked Yet and Probably Won't Work in the Near Term:  Diplomatic engagement is important, but if a nation's policy is to affirmatively steal trade secrets, it is going to take a fair amount of time to dissuade it from that course.  In the meantime, trade secrets and know how will be usurped and the the misappropriators will be the first to market.  Last year, the National Security Agency described trade secret theft as the greatest transfer of wealth in history, estimating the losses of theft of trade secrets and cyberbreaches to be in excess of $334 billion per year.  With numbers like that, don't expect any offending nation to go gently.

Criminal prosecution, if you have the individuals detained here in the U.S., can be effective but we have seen that service of process and extraterritorial complications have bedevilled prosecutors and can limit the effectiveness of this approach (the Pangang Group prosecution has been effectively derailed because of this problem and this same approach is now being used in other high profile prosecutions). 

Likewise, the renewed emphasis on best practices should be commended.  But sophisticated companies like DuPont, Ford and GM certainly have these safeguards in place and have still been victims of trade secret theft, as the report notes.  Public awareness and training can only protect companies so much.  A determined and committed competitor (especially one supported by its government) will probe, and ultimately find, either cyber or employee weaknesses and exploit them.  Prevention is important but it is simply not enough.

Private Attorney Generals?  More can and should be done.  Not surprisingly, the report is fairly heavy on reliance on governmental administration.  This doesn't come as a great surprise given the political philosophy of the Administration and the fact that this is a report that is after all being issued by the government.  But frankly my jaw dropped when I looked at the section of the report emphasizing legislative priorities, and there was no mention of the Protecting American Trade Secrets and Innovation Act (PATSIA), the civil remedy that was sponsored by three Democratic senators.  This is a pretty serious omission.

There are limits to what the government can achieve on this front.  Public enforcement by nature lacks the nimbleness and expertise that one will find when private companies commence litigation to protect their own commercial interests. 

No one would expect the federal government to prosecute a patent infringement as effectively as the patent owner and its lawyers.  Trade secret litigation is no different; a company and its lawyers will understand the technology best and will have the incentive to litigate hard and aggressively over a coveted invention.

I remember from law school that the Sherman Act's civil remedy was enacted to create an incentivized "private army of attorney generals" to enforce the antitrust laws and challenge the monopolies of that day.  The problem of international cyberattacks and trade secret theft is no less important, and that same aggressive approach should be encouraged here through enactment of PATSIA.