You would think that evidence of the improper downloading of 5,000 files by a former employee who then invokes his Fifth Amendment privilege against self-incrimination, coupled with the remarkable similarity between inventions (see the picture alongside) would be enough to demonstrate circumstantial evidence of the misappropriation of trade secrets. If you thought so, you would be wrong. In one of the highest profile trade secret case since Waymo v. Uber, the plaintiff Wisk Aero thought it had its competitor dead to rights after expedited discovery revealed these and other facts. However, U.S. District Court for the Northern District of California Judge William H. Orrick disagreed, rejecting the circumstantial evidence presented by Wisk Aero because it did not tie the alleged trade secrets with the circumstantial evidence of misappropriation. As explained below, this case is the latest in a line of decisions declining to find that evidence of improperly downloaded information may be sufficiently compelling circumstantial evidence of misappropriation. (A copy of the opinion can be found here). …
Continue Reading Wisk Aero LLC v. Archer Aviation Inc.: A High Profile Trade Secrets Case Shows the Limits of Circumstantial Evidence
Given the ubiquity of thumb-drives and use of personal devices for work, it should come as no surprise that former employees frequently download and even retain their former employer’s sensitive information on their personal devices. A Symantec study in 2013 found that ½ of the employees surveyed admitted to keeping confidential corporate data from their previous employer and 40% planned to use it in their new jobs. However, is the fact that an employee downloaded confidential information, standing alone, enough to trigger a lawsuit and possibly an injunction? A recent case out of the U.S. District Court for the Southern District of New York, AUA Private Equity Partners, LLC v. Soto, Case No. 1:17-cv-8035 (April 5, 2018), held downloading and refusing to return confidential information was enough to give rise to a claim under the Defend Trade Secrets Act (DTSA) (for more on that case, see William Brian London’s post for Fisher & Phillips’ Non-Compete and Trade Secrets Blog). As for the other question — whether a court will be willing to enter an injunction based on downloading — the answer is less clear.
Continue Reading Is Downloading Confidential Information Enough For An Injunction Under The Defend Trade Secrets Act?
The issue of trade secret identification, on its face, seems like an elementary and uncontroversial one. In concept, every trade secret plaintiff should be expected to identify the trade secrets in the lawsuit it brings. After all, the plaintiff knows best what it considers to be a trade secret and what it doesn’t consider to be a trade secret, and the defendant shouldn’t be left to guess what those trade secrets might be. For these and other reasons, California, a key bellwether state for trade secret law, has long required by statute that a party claiming trade secret misappropriation identify those trade secrets with specificity before being permitted to conduct discovery relating to its trade secret claim. However, nothing tests the limits of common sense like the realities of litigation, and plaintiffs in California have complained that this procedure has been misused by defendants to frustrate or derail otherwise meritorious trade secret cases. Perhaps for these reasons, courts outside California remain divided over the so-called California rule as several recent rulings have demonstrated.
Continue Reading Are Other States Following California’s Lead On Trade Secret Identification?
Here are the noteworthy trade secret and restrictive covenant posts from September and some of October:
- Massachusetts is once again contemplating multiple bills regarding non-competes as well as a possible adoption of what appears to be the DTSA advises Russell Beck in his Fair Competition Blog. Russell and his team also have summaries of legislative activity in Maryland, Maine, Michigan, New York, Oregon, Pennsylvania, Washington and West Virginia, among others.
One of the most hotly contested disputes in the Waymo v. Uber trade secrets lawsuit has centered around the disclosure of a forensic consultant’s due diligence report that Uber commissioned after learning that its former star engineer, Anthony Levandowski, had taken confidential files from his former employer Waymo. Uber and Levandowski had vigorously resisted the production of the report but the court order directing its production was recently affirmed by the U.S. Court of Appeals for the Federal Circuit. That due diligence report, which was prepared by the reputable forensics firm Stroz Friedberg, has now been made public. As I discuss below, the report is a jarring document and it has information that may be damaging to both sides. However, its most significant contribution to the lawsuit may be the fact that Uber’s own consultant (Stroz Friedberg) was providing multiple red flags to Uber that it was going to pay $680 million to someone that Stroz Friedberg suspected had lied, destroyed key documents and orchestrated efforts with other former Waymo employees to frustrate its investigation. Waymo is not unscathed by the report either, as it is evident that substantial amounts of highly confidential information made its way out the door, calling into question the safeguards Waymo had in place to protect trade secrets it is now valuing at over $1.8 billion. A copy of the due diligence report can be found here.
Continue Reading Waymo v. Uber: How Damaging is the Stroz Friedberg Due Diligence Report?
Here are the noteworthy trade secret, restrictive covenant and cybersecurity posts from the month of August (warning, there are a lot):
Defend Trade Secrets Act
- Munger Tolles’ Miriam Kim, Carolyn Hoecker Luedtke and Laura Smolowe have put together another fine summary of the trends they are tracking under the Defend Trade Secrets Act. There are several interesting findings in the summary. For example, state courts and state law remain the preferred forum and substantive law for trade secrets claimants, at least at this time. According to the summary, while 378 DTSA cases have been filed in federal and state courts, more than 515 complaints with trade secret claims have been filed with no DTSA claims in federal and state courts throughout the U.S. I have to admit that I was surprised by this finding, as I expected that litigants would be eager to secure a federal forum using the DTSA. I suspect that most of those state law cases involve restrictive covenants and that the plaintiffs are more comfortable with a local judge enforcing a non-compete or want to avoid entanglements arising from the DTSA’s limitations on injunctions. Or it might be that they simply want to go with the law they know best, which would be the more developed state trade secret law regime. In any event, a very interesting finding.
- One of the more recent (and unexpected) developments under the DTSA has been the number of motions to dismiss challenging DTSA claims. Olga May has a post for Fish & Richardson’s Litigation Blog detailing those decisions on those motions, which range from challenges to the specificity of the trade secrets pleaded to whether the complaint comports with the standards under Twombly and Iqbal.
- For an update on the modest number of ex parte seizure order filings under the DTSA, see Michael Renuad of Mintz Levn’s article in the National Law Journal.
Two federal courts have issued important rulings scaling back the use of the Computer Fraud & Abuse Act (“CFAA”), 18 U.S.C. 1030, et seq., for alleged violations of online agreements. These decisions are noteworthy in the trade secret area because employers and businesses have used the CFAA when they believe that a former employee or competitor has improperly accessed their electronic records. In the first decision, EarthCam, Inc. v. OxBlue Corp., et al., 2017 WL 3188453 (11th Cir. Aug. 1, 2017), the U.S. Court of Appeals for the Eleventh Circuit rejected a claim that a competitor’s access of a customer account violated the CFAA (a link to the opinion can be found here). And in the second, hiQ Laboratories, Inc. v. LinkedIn Corp., Case No. 3:17-cv-03301 (EMC) (N.D. California Aug. 14, 2017), Judge Edward Chen of the U.S. District Court for the Northern District of California found that a violation of LinkedIn’s online terms and conditions did not support a CFAA claim. (A link the opinion can be found here). Judge Chen’s opinion is particularly noteworthy because it appears to depart from some of the reasoning of a recent decision by the U.S. Court of Appeals for the Ninth Circuit that allowed Facebook to invoke the CFAA. As explained below, these rulings may signal a growing judicial reluctance to allow the CFAA to be used to limit otherwise publicly-available information.
Continue Reading Two Important Rulings Scale Back the Computer Fraud & Abuse Act for Violations of Digital Service Contracts
Yesterday, Uber released a letter that it had sent to Anthony Levandowski notifying him of its intention to terminate him as an employee because of his failure to cooperate with an Order issued on May 11, 2017 by U.S. District Court Judge William Alsup. While most of the media coverage of the case had previously focused on the portion of the Order effectively quarantining Levandowski from Uber’s development of its LiDAR technology, perhaps the most noteworthy portions of the Order proved to be Judge Alsup’s directives to Uber to get to the bottom of what Waymo trade secrets Levandowski might have shared with others at Uber. (A link to Judge Alsup’s Order can be found here). As I explain below, those two paragraphs of Judge Alsup’s Order inevitably set Uber against Levandowski and led to his termination.
Continue Reading Why Uber’s Firing of Anthony Levandowski Became Inevitable
There have been two significant developments in the Waymo lawsuit against Uber, which is unquestionably the highest profile trade secrets case of the year. In the first ruling, U.S. District Court William Alsup referred the record of the case to the U.S. Attorney’s office for investigation of possible theft of trade secrets. In the second, Judge Alsup released a copy of his opinion yesterday explaining the injunction that he entered against Uber last week. Significantly, Judge Alsup declined Waymo’s primary request to shut down Uber’s driverless car business.
Instead, he ordered that Uber continue to quarantine former Waymo engineer Anthony Levandowski from its development of Uber’s Lidar technology, the technology that was the subject of the trade secrets he was alleged to have stolen. Judge Alsup declined to shutdown of Uber’s driverless program because Waymo could not establish that Uber had used the trade secrets that Levandowski allegedly took with him.
Referring the record for a pending civil case to the local federal prosecutor is highly unusual (in fact, I can’t remember it being done) and appears to be directed at Levandowski and his other former Waymo colleagues who joined him at Uber. However, the injunction looks like a victory for Uber, at least at this early stage in the proceeding.
Continue Reading Waymo v. Uber: What Judge Alsup’s Injunction and Criminal Referral Mean for Uber