I wanted to continue my wrap up of some of the other high points from the American Intellectual Property Law Association (AIPLA) Trade Secrets Summit on Tuesday but there was so much fine content that I could not do it justice in a single post. Consequently, I will follow up with a final post on the Summit as well as high points from the cybersecurity and trade secret presentations from the AIPLA Annual Meeting last week. Here are some additional highlights:
In the litigation and procedure session, Russell Beck of Beck Reed Riden, Kenneth Vanko of Clingen Callow and Anthony Sammi of Skadden Arps covered the important issues to consider when bringing a TRO or injunction in a trade secrets case.
Decline of the Inevitable Disclosure Doctrine? Russell noted the realities of the increasingly high standard for injunctions in state and federal courts. He also started an interesting conversation within the panel about the inevitable disclosure doctrine (a doctrine that holds that even the most conscientious employee may not be able to avoid using a former employer’s trade secrets if he/she joins a competitor). Russell noted that the recent case in Washington involving Amazon.com and Google — which rejected the inevitable disclosure doctrine — is consistent with what he is seeing by courts. In short, if the employee is clean when he/she leaves, it is simply very difficult to restrain him or her from working for a competitor in the absence of a non-compete.
The Increasing Importance of Trade Secret Identification. Kenneth Vanko outlined the trend of recent cases requiring plaintiffs to identify their trade secrets early in a case. This was a key theme at the Summit and at the AIPLA Annual Meeting as it seemed each speaker observed greater emphasis from courts requiring plaintiffs to identify their trade secrets at key junctures. Ken emphasized the importance of specificity and doing your best to focus on pursuing the best trade secrets at issue throughout the proceeding. Ken noted that other jurisdictions are following the lead of California, Delaware and Minnesota in requiring some degree of disclosure early in a proceeding. For those asserting trade secrets that involve some compilation of publicly known information, Ken noted that courts have imposed a higher burden on those types of trade secrets — requiring plaintiffs not only to identify those trade secrets but to explain how those compilations qualify as a trade secret.
The Importance of Selecting Your Best Witness Early. Tony Sammi’s presentation focused on the special challenges of trade secrets in highly technical cases. Tony emphasized the importance of identifying the witness who could best explain the technology and trade secrets to a judge or jury. Tony noted that the most knowledgeable witnesses in his cases are generally not the managers but instead the coders themselves.
Negative Use. The panel emphasized the importance of “negative use” in trade secrets cases — the concept that a defendant doesn’t have to necessarily use or incorporate a trade secret into its product to receive a benefit from that trade secret. They agreed that this concept can be a tricky one and often does not get the attention it deserves despite the fact that a defendant can benefit from avoiding the blind alleys and goose chases of the development process by finding out what hasn’t worked.
In the afternoon, the Summit focused on the criminal trade secrets front. Gabriel Ramsey of Orrick, Eduardo Roy, and Michael Weil of Orrick provided plenty of war stories in their panel discussion about their experiences in advising clients who bring, or are on the receiving end of, a criminal trade secrets prosecution.
Know Your Federal District. The panel agreed that knowing the dynamics of your local federal prosecutors and investigators’ office was key to securing a criminal referral. They noted that you will likely have to package your trade secret claim to the duty agent for the FBI or other contact. The panel observed that these agents and officials are no different from those in the private sector and they are most interested in cases that will bring attention and favorable press to them and their offices. Also, the panel emphasized that you may find that your best contact is not necessarily a prosecutor but a secret service agent or FBI agent. Every district is different and relationships matter.
Factors that may make a trade secret case more sexy for a criminal referral include the potential for a powerful press release, high dollar numbers, travel opportunities for the officer, the existence of a foreign national in the alleged theft, or the potential for a civil case that might bring big fines. The panel acknowledged that only the most egregious cases between domestic competitors will get a prosecutor or agent’s attention. They noted that there is frequently a bias against trade secrets cases because of the existence of a civil remedy.
The panel also emphasized the importance of the absence of skeletons in the client’s closet and that the client should be clean. Otherwise, the client might find itself in a situation where the prosecutor turns the tables and prosecutes the client, as these cases frequently involve former employee who can be expected to throw dirt right back at their prior employer (accusing them of securities violations, whistleblower, etc.).
Miscellaneous Points. The panel agreed that in concurrent civil and criminal investigations, that while the government can’t use a civil case as a stalking horse for its criminal case and for discovery, there is nothing wrong with a civil defendant bringing evidence to prosecutors. The risk of course is that whatever is given to the prosecutor will have to be shared with the defendants’ legal team. Another interesting issue that the panel raised involved the company’s obligations to a former employee charged with stealing from that company – namely, is there insurance coverage? As readers of this blog know, this question is now front and center in Sergey Aleynikov’s long-running dispute with Goldman Sachs and is the subject of a pending declaratory relief action in New Jersey. The panel could offer no clear answers on this question but advised that companies need to be aware of their potential coverage.
One point of discussion was how best to defuse criminal proceeding when representing the company. Eduardo noted that it may be in the company’s interest to clean house and fire everybody that was involved to mitigate the company’s damages and exposure. The panel emphasized the importance of having a full legal team given the range of important legal issues – i.e., counsel skilled in internal investigations, labor and employment counsel for possible terminations.
Again, I will wrap up next with a discussion of the final session of the Summit that covered prosecuting trade secret claims before the International Trade Commission as well as the trade secrets and cybersecurity presentations at the AIPLA’s Annual Meeting.