Here are some noteworthy articles, cases and posts from the past week:  Trade Secrets and Non-Competes:
  • Todd Sullivan’s Trade Secrets Blog is reporting that Motorola and Lemko have settled their long-running trade secret dispute. On January 13, 2011, the Northern District of Illinois denied Lemko’s motion for summary judgement, paving the way to trial and presumably putting greater pressure on the parties to settle. Motorola filed the lawsuit four years ago against Lemko, a company formed by several former Motorola employees, and former Motorola software engineer Hanjuan Jin. Jin was about to board a one-way flight to China in 2007 when she was subjected to a random search at O’Hare Airport that turned up hundreds of documents from Motorola.
  • In another high profile trade secret case in Chicago, Groupon’s two former managers have filed counterclaims against Groupon claiming that the complaint is abusive and specious. I wrote about this case last November, which was filed with a flourish just before Groupon’s IPO. Groupon has accused the two employees of improperly using its trade secrets after they left to join Google Offers. Lawyers for the managers are now accusing Groupon of using “sham litigation” to bully and silence these former employees and obtain intelligence on a burgeoning competitor. This tactic worked famously well here in Columbus, Ohio in American Chemical Abstracts v. Leadscope, to the tune of over $25 million for the counterclaimants (the case is on appeal before the Ohio Supreme Court). 
  • Bloomberg’s Business Week has an article this week emphasizing the increasingly large verdicts in trade secret cases, and details the DuPont v. Kolon and St. Jude Medical disputes. The article notes, among other things, the growth of trade secret litigation and the factors contributing to its growth (employee mobility, technology making it easier to copy or download information, etc.).
  • Speaking of DuPont, a federal criminal case brought in connection with the alleged theft of trade secrets relating to titanium dioxide, an ingredient used in paints and other industrial materials, is back in the news. The Wall Street Journal is reporting that federal prosecutors successfully opposed bail for Walter Liew, a Chinese national who has admitted to obtaining DuPont’s trade secrets and selling them to companies affiliated with the Chinese government. Liew has been charged with providing false statements to authorities and obstruction of justice, and he is expected to be indicted on trade secret theft charges soon as well.
  • Neil Weinrich has done a fine post in the Georgia Non-Compete & Trade Secret News Blog cautioning defendants against removing an injunction case to federal court that does not specify the amount in controversy. Neil’s post discussed a recent decision from the Northern District of Georgia that remanded the non-compete case back to state court, reasoning that evidence of the employee’s past salary was too speculative to establish the amount in controversy. I believe the standard in the Sixth Circuit (where I frequently practice) is a little more lenient in injunction cases but this is a useful post for those considering removal of a case in the Eleventh Circuit.
  • The Technology Law and Marketing Blog has reported that the remaining claims for intentional and negligent interference in the PhoneDog v. Kravitz dispute have recently survived a motion to dismiss. This case has generated tremendous media and blogosphere interest; last month, the district court found that the other claims, including a dubious misappropriation of trade secrets claim, were sufficiently plead to survive an earlier motion to dismiss. PhoneDog has sued its former employee Noah Kravitz over the ownership of a high profile Twitter account (17,000+ followers).
  • In the patent and trade secret context, Dennis Crouch of Patently O testified before Congress yesterday about the prior commercial use defense under the America Invents Act. As readers of this blog will recall, James Schweikert and I have written several posts about the impact this new defense may have on trade secret protection. Dennis’ take? He planned on testifying that it was “unlikely to have any real or measurable impact on the market for U.S. patents, demand for innovation, or process of patent litigation.” As a review of the comments accompanying that post indicate, many of his readers disagree.
Cybersecurity:
  • I recently stumbled across a website called Cyberscrime Review launched last year by Jeffrey Brown, an enterprising third-year law student from the University of Mississippi. The blog provides a good summary of Computer Fraud and Abuse cases and other cybersecurity issues and is worth following.
News You Can Use:
  •  For those worried about the security of their smartphones, the New York Times’ Personal Tech site has a good article on precautions you can take to protect you and your phone.
  • For those not suffering from post-SOPA fatigue, take a look at Jesse Saviar’s solid analysis of both sides’ arguments in “No SOPA for you! Why SOPA Led to Such an Acrimonious Fight and What We Can Learn from It.”

There has been a fair amount of activity in the DuPont v. Kolon dispute pending in the U.S. Eastern District of Virginia over the past few weeks.  On Friday, January 27, 2012, U.S. District Court Judge Robert Payne denied Kolon’s post-trial motions seeking to set aside the $920 million jury trade secret verdict against it last September. 

Judge Payne summarily rejected Kolon’s Motions for Judgment Notwithstanding the Verdict, Motion for Remittitur and Motion for a New Trial through a pair of short orders, links to which can be found below.  As DuPont’s post-trial request for punitive damages was addressed last fall (Judge Payne limited the punitive award to $350,000 under Virginia law), the case now appears ready for appeal.
 
Meanwhile, DuPont and Kolon continue to bitterly fight on other fronts.  In a litigation that threatens to become even more acrimonious than the trade secret case, the parties continue to exchange body blows in the remaining antitrust litigation brought by Kolon.  When DuPont brought its trade secret case in February 2009, Kolon counterclaimed, asserting that DuPont had monopolized the body armor market through improperly restrictive agreements with its customers.  Judge Payne dismissed the claim in 2009 but it was reinstated by the Fourth Circuit.

Alyson Frankel’s “On the Case” Blog has a solid summary of the acrimonious antitrust litigation. Since its reinstatement, Kolon has been sanctioned and moved to disqualify Judge Payne based on his former partnership with DuPont counsel McGuire Woods (links to those pleadings can be found on Alyson’s article).  Last week, DuPont filed a Motion for sanctions under Rule 11, arguing that the entire antitrust litigation was baseless and filed for no other reason than to distract DuPont, the Court and the public from Kolon’s misappropriation of DuPont’s Kevlar trade secrets.

Last summer, I likened this case to the East Coast version of the Mattel v. MGA litigation, which has been become the standard-bearer for bare-knuckles, bet-the-company trade secret litigation.  Given the developments of the past few weeks, DuPont v. Kolon may become the new champ.

DuPont Order No. 1.pdf (53.73 kb)

DuPont Order no. 2.pdf (262.92 kb)

I shared my thoughts earlier this week on the impact of the America Invents Act’s (AIA) expanded prior commercial use defense on trade secret law. In this post, my colleague, James Schweikert offers his thoughts on the impact of that defense from the patent lawyer’s perspective:

James’ Take: From a patent perspective I am a little more concerned with the impact of this change earlier in the development of an invention, rather than later, say at the time of litigation. Because this is a defense to a charge of patent infringement, many people are focused on what this means during litigation and trial.  However, the defense has several requirements that need to be satisfied for the defense to be successful.
 
Thus, I see the crucial point in the analysis to be at the time when a new development is evaluated for its business potential. Crudely, this analysis may include the determination of whether or not to file a patent, and if not, then whether or not to maintain it as a trade secret. 

In this case, I purposely use the term “maintain” rather than the word “keep,” as the requirements of the defense place some maintenance cost upon the trade secret holder. To have decided to keep something as a trade secret but not implement the requirements of the prior commercial use defense will serve you no benefit if an accusation of infringement arises later. 
 
Generally, the cost of obtaining a patent after the AIA should be similar to the cost before. However, the cost to maintain a trade secret after the AIA may be much greater than the cost to keep a trade secret before. Now, in order to be able to assert the prior use defense, a trade secret holder must document reduction of the subject matter to practice at least 1 year before the effective filing date of the patent, and support that reduction with commercial use before the effective filing date of such patent. 

Additionally, depending upon variance in particular claims of an asserted patent, and changes in the accused product of the defendant, in my opinion, it is necessary to continually monitor and update these trade secret records that are maintained by the trade secret holder. 
 
I believe that the analysis of new developments will now include a further prong: if a company decides to hold a development as a trade secret, it must then be decided whether or not that secret will be kept for merely enforcement in a trade secret action or if that secret will be maintained so that it is viable as a defense to patent infringement. 
 
In any case, due to these increased costs, I am not so sure that trade secrets have suddenly gained ground on patents. Certainly, both patent and trade secret attorneys need to be prepared to discuss these options with their clients as new developments arise and be prepared to consider the cost/benefit of the options.

John’s Take: James makes some good points here. However, I don’t know that the paperwork issue above will be overly onerous. First, most companies maintain many categories of documents in the ordinary course of the conception, development or maintainence of a process or invention, so those documents should be available if a business elects to rely on the prior commercial use defense instead of a patent. 

Second, as James properly notes, a company will have committed some investment of time and resources at the time of conception. Presumably, it has already made the decision at this time that the invention or process has value. Thus, the decision that remains is whether the company is better served by protecting that invention or process as a patent or as a trade secret. Records reflecting this process should exist and can be maintained.

From this standpoint, I still suspect that the cost associated with maintaining those records, when compared to the costs associated with identifying, deciding and prosecuting a patent application, will still be cheaper than that of a prosecuting and maintaining a patent. 

Third, I don’t think this defense imposes any greater burden on a trade secret holder than existed in any other trade secret case. In order to defend a trade secret at the TRO or preliminary injunction stage (the most frequent proceeding for a trade secret dispute), a trade secret holder has to demonstrate he or she adequately safeguarded the trade secret by clear and convincing evidence, the same standard required for the prior commercial use defense. 

As the patent and trade secret community continue to study the AIA and its impact on intellectual property law generally, we will continue to reflect and share our thoughts on these developments.

Here are some noteworthy posts and articles that I came across over the past week:   Trade Secrets and Non-Competes: According to the Virginia Non-Compete Law Blog, Virginia’s House of Representatives is considering House Bill 1187 which would ban all non-competes, except those accompanying the sale of a business or a partnership. It will be interesting to see how far that bill gets. Corporate Counsel’s Jan Wolfe does a nice summary “Rounding up the 10 Biggest IP Litigation Wins of 2011.” Two of the ten are trade secret cases (DuPont v. Kolon and Mattel v. MGA).   Paige Mills, an IP lawyer in Nashville, Tennessee, recently launched a blog which focuses primarily on copyright, trade secret and trademark issues. A recent post entitled “15 provisions that should be in your employment agreement if you want to protect your trade secrets” provides a thorough list of provisions to consider in a non-compete agreement. It is hard to argue with most of her suggestions, which are excellent (the lone recommendation with which I disagree is Paige’s suggestion of a mandatory arbitration provision; I abhor arbitration, and have advocated all IP or trade secret disputes be specifically carved out). Welcome to the blogosphere Paige and keep up the good work!   A former Sanofi-Aventis chemist, Yuan Li, recently pleaded guilty to trade secret theft in the U.S. District Court of New Jersey. Li, who is a Chinese national, admitted that between October 2008 and June 2011, she accessed a Sanofi database and downloaded trade secrets arising from more than 6,000 compounds and chemical structures.  She will be sentenced in April.   Littler’s Unfair Competition & Trade Secrets Counsel Blog has a post detailing a recent case out of the Western District of Pennsylvania that imposed sanctions against the plaintiff for bringing a bad faith claim under the Pennsylvania Uniform Trade Secrets Act. According to the post, the district court applied a two-pronged test that analyzed whether the claims were objectively specious and whether there was evidence of subjective bad intent.     Cybersecurity:  Foley Hoag’s Security, Privacy and the Law Blog has a post about the recent sentencing of an Atlanta, Georgia man, Eric McNeal, to 13 months in prison for unlawfully accessing a computer of a competing medical practice and taking patients’ personal information. McNeal accessed these files so he could send marketing materials to patients for another practice. This post highlights some of the unique security risks posed in the healthcare space.   The Wall Street Journal had an interesting (and disturbing) article this week entitled “Hackers-for-Hire are Easy to Find” which described the ease in which someone can hire a hacker to torment a rival, or in this case, a billionaire Kuwaiti brother. Computer forensic specialists say some hackers-for-hire openly market themselves online. The billionaire in this case apparently hired several Chinese hackers for $400.   Check out this interesting article by Gerry Silver, a litigator with Chadbourne & Parke, entitled “5 Key Considerations When Litigating Cloud Computing Disputes.” It provides a good checklist of things to consider if you find yourself suing a client’s cloud storage provider. In a guest post for Forbes entitled “2012 Data Security Trends: A Look At The Risks Ahead,” Erin Nealy Cox, a Managing Director and Deputy General Counsel for the digital management firm Stroz Friedberg, outlines the risks for the coming year. Smartphones remain a key entry point and expect increased attacks in the healthcare sector. News You Can Use: Is your client thinking of doing business in China? Here is a sobering link from the Foreign Enterpreneurs in China Blog entitled “A China Joint Venture Survival Guide. 22 Facts and 22 Practical Tips.” I wonder what a blog post on doing business in the U.S. would look like? The New York Times had a fascinating but depressing article earlier this week detailing “How the U.S. Lost Out on iPhone Work.” It wasn’t wages. Rather, for Steve Jobs’ successor, Timothy Cook, the focus on Asia came down to two things: Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.”  Apple concluded that the U.S. “can’t compete at this point.”  Finally, for those feeling challenged by distractions, Tony Schwartz of the Harvard Business Review’s Blog Network advocates “‘No’ is the New ‘Yes’: 4 Practices to Reprioritize Your Life.” The best advice? Take on the most important tasks first thing in the morning (good advice, which I have already failed to heed today).

In an important development for trade secrets, the United States Patent and Trademark Office (USPTO) submitted a report to Congress on January 13, 2012 affirming the “prior commercial use” defense to the recently-enacted America Invents Act (AIA). The USPTO’s website, which provides a PDF link to the 64-page Report, can be found here. 

As James Schweikert and I wrote last month, the prior commercial use defense was expanded from business methods patents to patents for all technologies, a change that is universally believed to favor trade secret protection. This defense requires clear and convincing evidence that the invention or process has been commercially used for more than one year prior to the filing of the patent application.

In its Report, the USPTO finds that the expanded prior use defense “strikes the appropriate balance” between patent rights and trade secret protection. Prior to the Report, the USPTO held a hearing on October 25, 2011, after having made a request for comments. The USPTO ultimately received 29 written comments from large and small companies, inventors, leading patent practitioners, universities, academics and professional organizations. At the hearing, 5 patent community stakeholders attended and gave their full support for the AIA’s expanded prior user rights, with none expressing any concerns either about any constitutional issues or negative impact on innovation.

One of the reasons that Congress expanded the prior use defense was to bring the U.S. in line with other countries that provide a similar defense and level the competitive playing field. Although the USPTO does not identify any data tying prior user rights in other countries to innovation, it notes that the speakers did identify several countries that provide prior user rights and discussed them in the context of how having rights overseas but not in the United States plays out competitively.

This Report will only intensify the alarm raised by many in the patent community over the prior use defense. Gene Quinn of IP Watchdog, for example, continues to be one of the most vocal critics of the new provision and insists that it is a “big mistake.” Gene has argued that the defense shifts the balance of power from patent law to trade secret law and has likened it to a Trojan Horse that will dilute patent protection and innovation (these comments were provided last fall in a fine panel presentation in PLI’s “American Invents Act: How the New Law Impacts Your Clients and Your Patent Practice”). Others have argued that the expanded defense violates the Takings Clause of the Fifth Amendment and that Congress exceeded its constitutional authority by eliminating the exclusivity of patent protection in favor of trade secrets.

The Trade Secret Litigator’s Initial Take on the Prior Commercial Use Defense: While I do agree that this new provision does have the potential to shift the balance of power from patent law to trade secret law, it hardly sounds the death knell for patent protection in the U.S.  Here are some of the reasons that I think the defense is a good idea:

No. 1:  Greater flexibility. The expanded defense provides small and large businesses with an additional option for their technology. If a company or inventor wants to patent an invention or process, they can patent it. If, however, a small or large company doesn’t want to incur the expense of a patent, it now can elect to use the underlying invention or process in secret if they so desire. Again, nothing prevents a company or inventor from filing for a patent and there is nothing that would put that patent at risk because it is simply a defense, not a means for challenging the validity or enforceability of the patent. 

No. 2:  Less costly.  Lawyers sometimes fail to appreciate the expense that accompanies a patent prosecution and application, let alone the staggering legal fees that can accompany a patent infringement case. The prior user defense permits a company to avoid those expenses and still commercialize its invention or process.

Protecting an invention or process as a trade secret is significantly less expensive then as a patent. However, it is critical to remember that given the clear and convincing standard for proving this defense, there will be a premium on thoroughly documenting the prior use.  Lab notebooks, quality control documents, engineering drawings and specifications will all need to be preserved for the inventions and processes that a user elects not to patent.

The defense should also reduce the number of “defensive” patent filings in which companies file patent applications simply to avoid being precluded from using or developing an invention, process or technology. These defensive patents, while a boon to the patent bar, are a drain on the resources of businesses and a strain on an already over-burdened USPTO. (Thanks to Xerox’s patent counsel, David Arthur, for making this point).

No. 3: No harm to a patent owner.  ll that a patent applicant loses is the potential monetary recovery from someone who can demonstrate that they were using it BEFORE in secrecy. If a company decides the invention is sufficiently novel or important, it can decide to patent the invention. As a result, I don’t see how this will dissuade anyone from filing a patent application if they think it is a truly important invention or process.
 
Impact on Innovation? Too early to tell. Gene Quinn’s primary objection to the expanded defense is that it will lead to greater use of trade secrets as opposed to patents, which will in turn lead to less disclosure, and less innovation as a result. This argument was made to the USPTO but there was no empirical data to support this position. The USPTO, however, emphasized the fact that prior user rights were included in U.S. patent law between 1836 and 1952 and that there was no evidence that those rights weakened innovation rates or economic growth during that time. It also noted that the prior use defense did not appear to have a significant impact on business method patents since its enactment in 1999. 

In sum, the USPTO has provided important support to the prior commercial use defense. Stay tuned as James Schweikert will provide the patent lawyer’s perspective later this week.

After a spirited groundswell that had been building over the past few weeks finally overflowed into the mainstream media yesterday, it appears that SOPA (the House bill known as the Stop Internet Piracy Act) and its sister bill in the Senate, PIPA (the Protect IP Act), are on life support, if not dead. After President Obama expressed concern about some of SOPA’s measures over the weekend, several legislators have now indicated that they have misgivings about the bill. 

For those hiking in the Congo yesterday, Google, Wikipedia and other Internet advocates went “black” to protest SOPA. Others, including Mark Zuckerberg of Facebook, also made their public opposition known to the bill. There were 2.4 million tweets yesterday about SOPA, and I am willing to bet virtually all of them were anti-SOPA. The debate has been cast as a parable of Old World technology (lumbering Hollywood) v. New World technology (nimble innovators) but it can probably be shoehorned into whatever narrative a writer or blogger wants.
 
It would be fair to say that the majority of those for and against SOPA agree with its purpose — namely, addressing or preventing the wholesale theft of copyrighted materials (i.e., bootleg movies, videos and music). However, where they differ, not surprisingly, is on the means of addressing those concerns. For a balanced summary of the arguments of both sides, check out this link. People whom I follow and respect (such as Eric Goldman’s Technology Law & Marketing Blog, Ron Coleman’s Likelihood of Confusion Blog and Tim O’Reilly’s many media missives) have been pretty critical of SOPA.
 
I don’t have a dog in this fight. As a distant observer of the fray, I tend to agree with the opponents of the bill that some of the proposed procedures for attacking the alleged piracy and counterfeiting under SOPA seem heavy-handed. 

SOPA’s success or failure should not directly affect trade secret or non-compete law, as SOPA is primarily directed at copyright, counterfeiting and piracy misconduct. However, if SOPA does ultimately fail, my fear is that it could be perceived as a further erosion in the larger battle of protecting IP rights over the Internet or generally in our society. Let’s be honest: There is a subtle but increasingly pervasive view by many that all information should be shared and that no one person or company should have the right to any information. That view now permeates our dialogue about technology and its role in our world. We can debate the cause of that view (i.e., fraying of the employer/employee relationship, the fruit of Napster and unlawful file-sharing, bad economy, greater temptation posed by technological advances, decline in moral and ethical values), but we really can’t dispute that it is out there and that it is growing.

At the micro level, that view, through the process of osmosis, might influence an employee’s decision to walk out the door with source code or strategic documents because that employee concludes that his employer has no right to exercise ownership over that information because it really should not “belong” to anyone. It is this corrosive assault on basic standards of ownership that concerns me. In that respect, SOPA’s over-reach and its apparent defeat would not be a good thing for the trade secret community.

Employees of 16 newspapers recently acquired by Halifax Group Media celebrated last week when Halifax was forced to back down from its demand that they sign non-competes as a condition of continued employment. 

Halifax, which purchased the regional newspapers from the New York Times Co. in December, faced a near-insurrection from its new employees and also received absolutely withering media criticism about the non-competes. (To get a flavor of the coverage, see “A Newspaper Company’s Atrociously Exploitative Noncompete” and “A Troubling Approach to Employee Relations“). Indeed, Twitter continues to reverberate over this story (just type in the search words “non-compete” and you will see dozens of Tweets on this story).

Like all past public relations disasters, Halifax made several critical missteps. The first and most obvious was the very decision to use non-competes. 

Many businesses and industries have cultures that are antithetical to non-competes. The fact that the previous employer, the New York Times, did not require them should have served as a clue that the employees would react unfavorably. Although some have argued that non-competes are used for high-profile broadcast talent, it appears that print journalists and editors are seldom asked to sign them. As a result, this firestorm should have been expected, especially in the context of the present economy and the increasing dislocation within the newspaper industry, which has been devastated from competition by Internet news sites and cable news. 

Halifax’s second mistake was failing to recognize the existing dynamics that would make actually imposing the non-competes difficult, if not possible. No one likes non-competes. However, in most negotiations, the employer has the leverage to impose a non-compete on an individual employee, whether at the outset of a hire or during the course of employment. 

Here, however, Halifax should have recognized that it lacked that leverage because it was negotiating with all of its employees. Those employees, by virtue of their numbers, had the ability to band together and push back. In addition, Halifax should have recognized that its position was even weaker because these employees were inherently vocal and media-savvy and likely try to use their skillls to marshall public opinion in their favor.   

Finally, the broad scope of the non-competes added fuel to the fire. As the non-competes covered all of Halifax’s operations — which would include the 16 different newspapers all over the country — the employees argued that they would be unfairly limited from finding other work. Moreover, the non-competes, at least as drafted, survived even if the employee was terminated or laid-off, which was seen as rubbing salt in the wounds of the employees. For these reasons, going in with a broad non-compete ensured that a difficult task would be even more so.

The takeaway? As an employer, make sure that non-competes are necessary and that you have the bargaining power to get them signed. In this case, if Halifax believed that they were critical, perhaps insisting that the non-competes be executed as part of the acquisition might have solved this problem. 

As an employee, if you are faced with a non-compete or agreement that you feel is unfair, the lesson here is that there is strength in numbers. Also, rallying industry pressure, particularly where these agreements are frowned upon or perceived as unnecessary, could make the difference.

Is a customer list still protectable as a trade secret? Two recent cases suggest that, as a practical matter, it is getting tougher to protect this category of trade secret claims, and it is a valid question as to whether it is worth attempting to protect at all.

About 10 days ago, I wrote about the Eagle v. Morgan case in the Eastern District of Pennsylvania that addressed the ownership of a LinkedIn account. Given the buzz over who owns what in a social media account, this case has generated a tremendous amount of commentary within the blogosphere and merited coverage by the Wall Street Journal. 

The employer in that case, Edcomm, initially claimed that the LinkedIn contacts qualified as trade secrets, but later ceded that position during the course of a motion to dismiss. That was probably a prudent move, given what happened to the employer in Sasqua Group, Inc. v. Courtney, 2010 U.S. Dist. LEXIS 93442 (E.D.N.Y. Aug. 2, 2010), who made a similar claim and lost. In that case, the Eastern District of New York found that the customer list and information at issue did not qualify as a trade secret because it could be found on LinkedIn and other sites on the Internet, and as a result, was readily ascertainable. (For a more detailed analysis of this case, see my post from last year). In short, contact information displayed on LinkedIn probably won’t qualify as a trade secret.

Another case out of the Tenth District Court of Appeals in Ohio reinforces the challenge in protecting customer lists as trade secrets, although from a more conventional approach. In Columbus Bookkeeping & Business Services, Inc. v. Ohio State Bookkeeping, Case No. 11AP-227 (Dec. 30 2011), the Tenth District reversed a preliminary injunction issued against several former employees who were alleged to have misappropriated the customer list in question. (A copy of the opinion is attached below). 

The Tenth District was unimpressed with the customer list at issue. It emphasized that “the evidence does not indicate that the client list consists of any information but the names of the entities that do business with plaintiff and perhaps a billing address” and that “[n]othing in the evidence suggests that any sensitive information, otherwise unavailable to the public, is included in the list.” Reading between the lines, I suspect that the Tenth District was troubled by the absence of non-competes or other agreements and what it perceived to be an end-run effort to create them through a relatively weak trade secret claim. (For fellow trade secret geeks here in Ohio, this opinion reminds me of Hydrofarm, Inc. v. Orendorf, 180 Ohio App.3d 339 (10th Dist., Dec. 23, 2008), another Tenth District opinion troubled by the absence of a non-compete and rejecting an inevitable disclosure claim).

The future of customer lists remains a topic of debate within the trade secret community. For those active in LinkedIn, I would encourage you to join the Trade Secret Protection Group, where Dylan Wiseman, a trade secret lawyer with Littler Mendelson in California, has forcefully argued that protection of the customer list in California remains viable particularly because California’s version of the Uniform Trade Secret Act (UTSA) does not have the “readily ascertainable” limitation. 

I remain a skeptic. In my experience, customer lists are among the more challenging trade secrets to protect.  There is the invariable argument likening them to phonebooks and they may appear, at times, to be thinly-disguised efforts to impose non-solicitation agreements when none exist. In the era of LinkedIn and the Internet, protecting customer lists will only be more difficult and good luck to the claimant that rushes into court with that as its only trade secret.

Columbus Bookkeeping v. Ohio State Bookkeeping.pdf (105.14 kb)

They say everything’s bigger in Texas, which apparently includes sarcastic disdain for out-of-state lawyers who deign to send cease and desist letters into the Lone Star State. What may be the latest Internet viral sensation in the legal community comes courtesy of Scott Metzger, CEO of Freetail Brewing Company in San Antonio, Texas.  

As you can see below, Mr. Metzger did not take kindly to a C&D letter sent to him by an as-of-yet-unidentified attorney for another brewer (rumored to be Steelhead Brewery in Oregon), who alleged that Freetail had infringed upon its “HOPASAURUS REX” trademark. Metzger gets the last laugh, thanks to that great leveler of playing fields, the Internet (the crudely-drawn picture at the end is priceless).

This letter, which may become as popular as Kentucky Judge Martin Sheehan’s folksy order or Austin Federal Judge Sam Sparks’ infamous “kindergarten party” order, should serve as a reminder for those of us who would rather not be remembered as the sap who picked this fight. 

 

 

 

Yesterday, Governor Christie signed The New Jersey Trade Secrets Act (S-2456/A-921) into law. As I had written last November, the Act had been approved by the New Jersey Senate and was sent to the Governor for his signature.
 
New Jersey now joins the other 46 states and District of Columbus that have adopted some or all of the Uniform Trade Secrets Act (UTSA); Massachusetts, New York and Texas are now the only hold-outs. According to the press release from Senator Nicholas P. Scutari, the Act’s sponsor, the law takes effect immediately but will not apply to the misappropriation of trade secrets that occurred prior to the Act’s effective date or to a continuing misappropriation that began prior to that effective date and continued afterwards. 
 
Robert Rohrberger, who practices with Fox & Rothschild in New Jersey and blogs on trade secret issues, and Philip Kirchner of Flaster Greenberg, also an attorney in New Jersey, have advised me that the law will not contain the language providing a presumption of confidentiality for requests seeking to place confidential information or disputed trade secrets under seal.  I am sure that Robert and Philip are correct but I have not been able to yet locate the Act’s final language to confirm the standard that will be applied in this situation.  I will update this post with a link to the new statute when it becomes available.
 
Again, good news for the trade secret community in New Jersey.