Last week, in a significant development in the simmering IP and technology dispute between the U.S. and China, the U.S. Department of Justice unsealed an indictment filed in the U.S. District Court for the Western District of Washington against Chinese telecommunications manufacturer Huawei for the theft of trade secrets from T-Mobile. This salvo is the latest in an increasingly high stakes confrontation between the U.S. and China arising from longstanding concerns in the U.S. about China’s involvement in and support for the theft of trade secrets from U.S. companies. Huawei, which was also the subject of a FBI sting last month in another unrelated trade secret investigation involving a U.S. smartphone screen manufacturer, is now at the center of this international IP superpower row. What’s the international context that led to this indictment, what did Huawei do to trigger the indictment, and what forces are now in play that will shape the prosecution going forward? Read on for my thoughts below. Continue Reading Tappy’s Revenge: What You Need to Know About the DOJ’s Momentous Trade Secret Indictment of Huawei
As you will see, I have changed the format of my monthly wrap up post in two ways. First, I am going to start including links to noteworthy decisions that I come across or are forwarded to me. Unfortunately, since neither I nor other bloggers writing in this space can cover everything, this will be a useful feature for those practicing in this area. Second, I am going to provide more commentary on some posts and cases, in the hope of creating further dialogue on many trade secret and non-compete issues. Given the hot button nature of some of these issues, I am going to share my thoughts, for whatever they are worth. Now, on to posts and links from the last month:
- Last week, Democratic Senators Elizabeth Warren, Chris Murphy and Ron Wyden announced their intention to introduce the Workers Mobility Act (WMA) that would abolish non-competes throughout the United States. As many of you will recall, Senator Murphy previously introduced a similar bill, the Mobility and Opportunity for Vulnerability Employees Act (MOVE) but that bill stalled on the Senate floor. Russell Beck has a post with a link to the House and Senate bills, along with his well-reasoned concerns about the breadth and scope of the bills.
- A blog post about legislation over non-competes wouldn’t be complete if there wasn’t some mention of some activity in Massachusetts. Key features of the latest bill under serious consideration would limit non-competes to 12 months (unless the employee stole trade secrets or breached his fiduciary duty) and finally adopt the UTSA. For more details, see Russell Beck’s post in his Fair Competition Blog.
- Idaho (repealing its recent changes in 2016) and Utah (restricting their use against broadcasters) have recently amended their statutes addressing restrictive covenants. See Russell Beck again.
- Colorado has modified its law affecting physician non-competes, carving out protections for physicians treating patients with rare genetic disorders to eliminate any interruption of care for those patients. Peter Greene summarizes the changes in Epstein Becker’s Trade Secrets & Employee Mobility Blog.
The 10-year legal brawl between Goldman Sachs and its former programmer Sergey Aleynikov has spilled over into multiple courts — a federal conviction that was overturned, another conviction by a New York state jury still on appeal today, and finally, the fight in two different courts over payment of his defense fees. While the prosecutions have garnered considerable media attention, the civil litigation over Aleynikov’s demand for advancement of his $10 million in legal fees from Goldman is the most relevant for civil litigators. Why? An order granting advancement, which requires the employer to pay for the former employee’s attorneys fees, can fundamentally alter the course of a trade secret litigation. Last week, the U.S. District Court for New Jersey rejected Aleynikov’s claims for advancement, declining to essentially reconsider a Delaware court’s ruling that Aleynikov had failed to demonstrate that he qualified for advancement under Goldman’s bylaws. As I explain below, the ruling is an important reminder for both employers and employees in trade secret disputes of the power of advancement claims, and the determined resistance an employee may face if he or she pursues that claim.
Continue Reading How Sergey Aleynikov’s 10 Year Legal Battle Highlights The Pros and Cons of Advancement Claims in Trade Secret Disputes
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.
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.
Here are the noteworthy trade secret, restrictive covenant and cybersecurity posts from the past month or so:
The Defend Trade Secrets Act
- The U.S. District Court for the Eastern District of Texas has found that certain deer registry information qualified as a combination trade secret under the DTSA and Oklahoma’s version of the UTSA, as explained by Michael Weil and Tierra Piens for Orrick’s Trade Secrets Watch blog.
- The issue of whether the DTSA applies to misappropriation that may have taken place prior to the DTSA’s enactment has been one of the more frequent areas of litigation under the DTSA. Jonathan Shapiro of Epstein Becker has a summary on these cases for Law360.
A recent opinion from the U.S. District Court for the Northern District of Illinois has stirred up a hornets’ nest of commentary because it appears to recognize the viability of the inevitable disclosure doctrine under the Defend Trade Secrets Act (DTSA). Those familiar with the DTSA will recall that the inevitable disclosure doctrine was supposed to be prohibited under the DTSA because of California Senator Diane Feinstein’s concern that the doctrine might be enforced against California residents. Now, in what appears to be the first federal appellate court opinion construing the DTSA, the U.S. Court of Appeals for the Third Circuit may have further muddied the waters about the inevitable disclosure doctrine in Fres-co Systems USA, Inc. v. Hawkins, Case No. 16-3591, ___ Fed. Appx. __ (3rd Cir. 2017), 2017 WL 2376568 (June 1, 2017) (a link to the opinion can found here). Continue Reading Fres-co Systems v. Hawkins: Did The Third Circuit Just Create More Confusion Around The DTSA’s Ban On The Inevitable Disclosure Doctrine?
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