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WikiLeaks and Trade Secrets: The Perfect Storm

 
by John Marsh 10. May 2011 07:45

The WikiLeaks scandal has generated widespread concern about how to manage a crisis where a disgruntled employee seeks to post confidential information or trade secrets on the Internet. This scandal arose when PFC Bradley Manning allegedly stole hundreds of thousands of classified diplomatic files and documents and delivered them to the Internet organization, WikiLeaks. WikiLeaks holds itself out as a tool for helping individuals “safely get out the truth” about government and other institutions, and it posted those classified documents on its website for the world to see.

WikiLeaks has not confined its efforts to government information and has also posted confidential information taken from large banks and other private companies that it deemed newsworthy. For example, WikiLeaks has published internal information from Bank of America documenting its internal dialogue on confronting the unique threats posed by WikiLeaks. 

An unsuccessful attempt by the Swiss bank, Julius Baer, to restrain WikiLeaks from posting information on its website in 2008 has now received renewed attention because of the recent scandal [See Bank Julius Baer & Co. Ltd., et al. v. WikiLeaks, et al., Case No. 3:08-cv-0824-JSW, U.S.D.C., N.D. Calif]. Side Note: For those who are interested, I will be speaking on this issue at the American Intellectual Property Law Association's Spring Meeting on Friday, May 13, 2011

The Julius Baer case is worth re-examining in several respects because of the renewed interest in the harm that WikiLeaks or a similar self-styled whistleblower can cause by attempting to post information on the Internet. According to Julius Baer's complaint, a disgruntled former employee, Rudolf Elmer, took client records and data in violation of a confidentiality agreement he signed with Julius Baer. After Elmer’s termination, Julius Baer discovered that Elmer had begun posting hundreds of those records on WikiLeaks’ website. The district court was initially receptive to Julius Baer’s claims and granted Julius Baer’s request for a TRO, enjoining WikiLeaks from further posting or displaying that information and directing WikiLeaks to remove all copies or images from the websites under its control. 

While Julius Baer did not join Elmer as a defendant, it did join the WikiLeaks domain administrator, Dynadot, LLC,  to ensure that the party responsible for the WikiLeaks’ domain name and/or website would comply with any potential order. Julius Baer and Dynadot reached a stipulated permanent injunction order that Dynadot would, among other things, immediately “lock the wikileaks.org domain name to prevent transfer of the domain name" and "disable the wikileaks.org domain name and account to prevent access to and any changes from being made to the domain name and account information.” 

In the meantime, the district court’s entry of the TRO did not prevent WikiLeaks’ posting of the customer information. While it appears Julius Baer was successful in locking down and disabling the WikiLeaks’ domain name registered through Dynadot, the order did not prevent the posting of that customer information on other “mirror” websites.    

In addition, media and public interest groups immediately moved to intervene in the case, arguing that the stipulated permanent injunction improperly interfered with their news-gathering efforts and amounted to a violation of the First Amendment. The district court, in the face of these concerns and the frustration of the order due to the mirror websites, subsequently dissolved that permanent injunction.

The trade secret implications of this case could fill a law review article and warrant further posts on the First Amendment issues, the use of "mirror" websites, among other important points. However, an increasingly common issue is to what degree a trade secret loses protection if it is posted on a website. 

Milgrim, the key commentator in trade secret law, has noted that at least one court has “cautioned under the basic principles of equity, recognized in the trade secret context, a wrongdoer cannot rely on his own postings to avoid the imposition of an injunction by arguing the works posted have lost their secrecy” [4 Milgrim on Trade Secrets, §17.03 at 17-12 (citing Religious Tech. Ctr. V. Netcom On-Line Commun. Servs., 923 F. Supp. 1231, 1256 (N.D. Cal. 1995), trade secret holding revised (N.D. Cal. Jan. 6, 1997)].  Another court has found that the information is now effectively in the “public domain” and refused to issue an injunction [See American Hearing Aid Assocs., Inc. v. GN ReSound N. Am., 309 F. Supp. 2d 694, 705-706 (E.D. Pa. 2004) (conversion claim rejected because customer lists posted on plaintiff’s website could not qualify as trade secrets)]. 

The law is far from settled and the facts of each case may prove critical. As Milgrim notes, publication on the Internet may not necessarily terminate trade secret status, as the facts and circumstances surrounding each disclosure may differ; for example, if prompt and effective action resulted in the postings being taken down, it can be argued that any disclosure was fleeting in nature and did not become known to the relevant audience, i.e., competitors [4 Milgrim, §17.03 at 17-16]. In addition, to the extent that the wrongdoer participated in the posting, he or she should be equitably estopped from making that argument [Id.; see also id, §15.01[1][a][ii] and authorities cited therein; see Silicon Image, Inc. v. Analogix Semiconductor, Inc., 2007 U.S. Dist. LEXIS 96073 at ** 44-46 (N.D. Calif., Dec. 20, 2007) (finding that source code published on Internet did not destroy the secrecy of information at issue)]. However, in the case of third parties (such as media who intervene and rely upon or cite to the postings), that equitable basis may not apply. Finally, it should be noted that the factual circumstances may vary from case to case and the kind of remedy sought in the case (injunction or damages) may further shape the impact of a defense rooted in this issue. 

In short, the answer is “it depends" on many facts, including the length of time that the information was posted on the Internet, when it was posted, and who may have viewed it while it was there. As a result, if a company moves promptly to take the information down, it should be in a strong position to protect any trade secrets that were improperly posted.

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About John Marsh

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

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

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