Trade Secrets & Noncompete Blog

Trade Secrets & Noncompete Blog

News & Updates On Developments in the Law of Restrictive Covenants, Unfair Competition & Trade Secrets

Tag Archives: Trade Secrets and Confidential Information

Requested Injunction Against Former Flight Instructor Crashes At Take-Off

A federal judge in Chicago recently wrestled with two issues that we frequently blog about: what constitutes misappropriation of confidential information, and to what extent can a current employee prepare to compete with his employer without breaching his fiduciary duty?

In Chicagoland Aviation, LLC v. Richard R. Todd, et al., flight instructor Richard Todd left his job and started a rival business. Shortly thereafter, Chicagoland Aviation sued him for, among other things, breaching his fiduciary duty by allegedly misappropriating confidential information and starting a competing business while still employed by Chicagoland Aviation. Chicagoland Aviation eventually requested a preliminary injunction, … Continue Reading

Court Enjoins Former American Airlines Employee From Further Web Postings Of Confidential Information

Last week, American Airlines and one of its former employees, Gailen David, entered in to an agreed permanent injunction which prohibits David from disseminating certain confidential, proprietary or trade secret information through any medium.

The agreed injunction stems from a lawsuit filed by American against David in Texas state court. In an amended complaint filed last June, American accused David of various misdeeds on websites run by him, including publishing confidential passenger travel information about certain individuals.

American’s amended complaint included claims against David for Trade Infringement, Conspiracy, and Misappropriation of Trade Secrets. It also included claims against defendants “John … Continue Reading

Former Motorola Software Engineer Sentenced To Four Years In Prison For Trade Secret Theft

Yesterday, U.S. District Judge Ruben Castillo sentenced a former Motorola software engineer, Hanjuan Jin, to four years in prison for stealing Motorola trade secrets related to proprietary technology. The sentencing brought to a close a series of events worthy of a John Le Carré spy novel, including a random stop of Jin by U.S. Customs and Border officials at Chicago O’Hare International Airport as she attempted to board a flight to China with a one-way ticket. That stop resulted in the discovery that Jin was carrying, among other things, a variety of electronic storage devices, Motorola documents marked as "confidential … Continue Reading

Georgia Court of Appeals Finds Circumstantial Evidence Of Trade Secret Misappropriation Insufficient To Overcome A Former Employee’s Denials

The Georgia Court of Appeals recently ruled that a company failed to present sufficient evidence that its former employee had misappropriated its trade secrets, where the former employee’s denials conflicted with circumstantial evidence of misconduct. In this case, Contract Furniture Refinishing & Maintenance Corp. of Georgia d/b/a The Refinishing Touch v. Remanufacturing & Design Group, The Refinishing Touch ("TRT") alleged, among other things, that its former employee Scott Deutsch and his new firm Remanufacturing & Design Group ("RDG") used “several thousand pages” of market and sales recap reports provided to Deutsch during his employment to secure jobs that TRT … Continue Reading

A Mere Good Faith “Suspicion” That Defendants Misappropriated Trade Secrets Is Insufficient To Establish Plaintiff Did Not Engage In Objective Bad Faith

The commencement and continued prosecution of a misappropriation of trade secrets action without objective evidence of actual misappropriation can result in the imposition of attorneys’ fees against the plaintiff if it does not prevail on that cause of action.  On April 17, 2012, we blogged about this issue in connection with a malicious prosecution action that was filed against Latham & Watkins after the unsuccessful prosecution of a trade secrets action on behalf of a client.

On July 11, 2012, in SASCO v. Rosendin Electric, Inc., 2012 WL 2826955 (Cal.App. 4 Dist.), the California Court of Appeal, Fourth Appellate … Continue Reading

Virginia Supreme Court Overturns Multi-Million Dollar “Goodwill” Damages Award in Trade Secrets Conspiracy Case

Co-authored by Matthew H. Sorenson.

One of the most elusive forms of damage that a company may suffer when its trade secrets are misappropriated or its former employees breach their post-employment restrictive covenants is the loss of goodwill. Given its intangible nature, quantifying the dollar amount of the loss of a company’s goodwill can present significant difficulties. Nevertheless, such damages are often very real and very significant. When seeking money damages for lost goodwill, it is essential for businesses to carefully select their supporting evidence and legal arguments. One information technology service provider recently found out the hard way … Continue Reading

New York Court Requires Specific Identification of Stolen Trade Secrets Before Allowing Discovery to Proceed

In an important recent decision, the Supreme Court of the State of New York, New York County, required plaintiffs asserting a cause of action for misappropriation of trade secrets to identify the trade secrets with particularity before being able to proceed with discovery.

The plaintiffs — MSCI Inc., Financial Engineering Associates, Inc., RiskMetrics Group, Inc., and RiskMetrics Solutions, Inc. — offer sophisticated computer software to clients who participate in the global financial market. Plaintiffs’ allegations against their former worker Philip Jacob and his new employer Axioma, Inc. center upon computer source codes and their components and sequencing.

As discovery … Continue Reading

Are Employer Social Networking Accounts Protectable Trade Secrets?

Co-authored by Matthew H. Sorensen.

Social media has become an increasingly important tool for businesses to market their products and services. As the use of social media in business continues to grow, companies will face new challenges with respect to the protection of their confidential information and business goodwill, as several recent federal district court decisions demonstrate.

Christou v. Beatport, LLC (D. Colo. 2012), Ardis Health, LLC v. Nankivell (S.D.N.Y. 2011), and PhoneDog v. Kravitz (N.D. Cal. 2011) each involved former employees who took the login credentials for their employers’ business social media accounts when they left their … Continue Reading

Latham & Watkins Hit With Malicious Prosecution Suit After Unsuccessful Prosecution Of Trade Secrets Action

Co-authored by Ted Gehring.

On April 6, 2012, Latham & Watkins was sued for malicious prosecution in Los Angeles Superior Court. The suit alleges that the Plaintiffs, William Parrish and Timothy Fitzgibbons, were former officers and shareholders of Indigo Systems Corporation, which was purchased by FLIR Systems, Inc. in 2004. From 2004 to 2006 the Plaintiffs worked for FLIR, leaving in 2006 to start their own business. FLIR retained Latham and sued them for, among other things, misappropriation of trade secrets. The trial court denied FLIR’s request for a permanent injunction, found FLIR brought the trade secrets action in … Continue Reading

Connecticut Supreme Court Rules That A Public Agency Can Create And Maintain Trade Secrets

The Supreme Court of Connecticut has ruled that a public agency, the University of Connecticut, can create and maintain trade secrets that are exempt from disclosure under the state’s Freedom of Information Act (“FOIA”). The trade secrets are databases of customer lists identifying the persons who paid to attend, donated to, inquired about, or participated in educational, cultural or athletic activities at the University, such as season ticket holders, donors and program subscribers.

In University of Connecticut v. Freedom of Information Commission, 303 Conn. 724, __A. 3d__ (Feb. 21, 2012), the Court rejected the State Freedom of Information Commission’s … Continue Reading

Employee Use of Social Media in the Workplace: How Companies Can Protect Trade Secrets and Prevent the Misappropriation of Confidential Information

Complimentary Briefing/Webinar – Protect Trade Secrets and Confidential Information in a Social Media Workplace

April 18, 2012 – EpsteinBeckerGreen Washington, DC Office
9:00 AM – 10:30 AM EDT – Briefing and Q&A
(Webinar to start at 9:00 AM EDT)

In a world where employers must store confidential business-sensitive data in multiple locations and the number of devices through which such information can be copied and transferred is ever increasing, it is vital for companies to take appropriate steps to safeguard their confidential information from misappropriation. This is particularly important in the current economic climate, where employees have become increasingly mobile. … Continue Reading

Utah Decision Broadly Construes The Uniform Trade Secrets Act’s Preemption Provision

In a decision recently issued by the Utah Court of Appeals, CDC Restoration & Construction, LC v. Tradesmen Contractors, LLC et al., the court broadly interpreted the preemption clause in the Uniform Trade Secrets Act (“UTSA”) to hold that it “preempts claims based on the unauthorized use of information, irrespective of whether that information meets the statutory definition of a trade secret.”

With various modifications, the UTSA has been adopted by all but a handful of states. One of its provisions expressly preempts conflicting tort and other common law or statutory civil causes of action “for misappropriation of a … Continue Reading

Emotions Are No Substitute For Facts

It’s no secret that restrictive covenant and trade secrets claims are sometimes used as leverage in business disputes. However, the recent case of Sean Morrison Entertainment v. Thompson, et al. (pending in Chicago federal court as Case No. 11-cv-2462) serves as a reminder that the need for leverage does not obviate the need for a good faith basis for any claim that is filed.

Apparently, the dispute in that case began when a TV production company called Sean Morrison Entertainment (“SME”) hired a number of mixed martial arts fighters to participate in a reality TV show. After the show was … Continue Reading

New Jersey Adopts Statutory Trade Secret Protections

On Monday, January 9, 2012, Governor Chris Christie signed into the law the New Jersey Trade Secrets Act (NJTSA, http://www.njleg.state.nj.us/2010/Bills/S2500/2456_R1.HTM), the Garden State’s version of the Uniform Trade Secrets Act (UTSA). New Jersey, thus, becomes the forty-seventh state to adopt some form of UTSA. While the New Jersey Act will promote some level of uniformity in the approach to trade secrets issues, New Jersey specific changes to the uniform act promise that this statute will build upon, rather than depart from, New Jersey’s common law tradition of protection of trade secrets and other valuable business information.

Some New Jersey … Continue Reading

Eighth Circuit Holds That A Compilation Of Otherwise Public Information Can Be A Trade Secret

Co-authored by Viktoria Lovei.

The U.S. Court of Appeals for the Eighth Circuit recently held that compilations containing only minimal secret information nevertheless qualified for trade secret protection because the substantial investment involved in preparing them gave their owner a competitive advantage and because the owner undertook reasonable efforts to maintain their secrecy by labeling them with a proprietary legend and only distributing them to parties which signed a confidentiality agreement. AvidAir Helicopter Supply, Inc. v. Rolls-Royce Corporation, Case No. 10-3444 (8th Cir. Dec. 13, 2011).

The case concerned FAA approved procedures developed by Rolls-Royce for the overhaul and … Continue Reading

California Court Of Appeal Reverses Trial Court Order Compelling Disclosure Of Trade Secret Source Code

In Sybase, Inc. v. Superior Court of Alameda County, No. A132541, 2011 WL 5117117 (2011), the Court of Appeal of the State of California First Appellate District found, in an unpublished opinion, that the trial court abused its discretion when it ordered the production of a trade secret source code. The court found that the real party in interest did not meet the evidentiary burden imposed by the California Supreme Court in Bridgestone/Firestone, Inc. v. Superior Court, 7 Cal.App. 4th 1384 (1992) (“Bridgestone”) which set forth the standards governing whether a trade secret must be disclosed in litigation.

Plaintiff in … Continue Reading

Erroneous Jury Instructions Cause Kansas Supreme Court To Reverse Jury Verdict In Trade Secret/Restrictive Covenant Case

Co-authored by Viktoria Lovei.

The Supreme Court of Kansas recently issued an opinion in Wolfe Electric, Inc. v. Duckworth and Global Cooking Systems, LLC, No. 99,536 (Ka. Oct. 21, 2011), a trade secret misappropriation and restrictive covenant case brought by a manufacturer of conveyor pizza ovens, Wolfe Electric, against its former president, Duckworth, and his new conveyor pizza oven company, Global Cooking Systems. At trial, the jury had found in favor of Wolfe Electric on all causes of action, including breach of contract and misappropriation of trade secrets in violation of the Kansas Uniform Trade Secrets Act (“KUTSA”), and … Continue Reading

Another Instance of Alleged Trade Secret Misappropriation Results in Federal Criminal Indictment

Co-authored by Viktoria Lovei.

Following up on a recent post, U.S. v. Pu presents another instance of a trade secret theft case with an international component that the federal authorities have decided to prosecute. Yihao Pu, a former quantitative financial engineer for Citadel LLC, was arrested last Wednesday for allegedly stealing proprietary information related to the Chicago-based company’s trading system as part of a plan to launch his own hedge fund in China. After filing its own civil suit against Pu on August 29, 2011 and obtaining a temporary restraining order, Citadel brought the matter to the federal authorities. … Continue Reading

Once Again, An Alleged International Trade Secrets Heist Draws A Federal Indictment

* Co-authored by Viktoria Lovei.

As we have noted in prior blog posts, alleged thefts of trade secrets are generally handled through the civil court system, and rarely result in criminal prosecution. Nevertheless, where there is an international component to the case or where the magnitude of the alleged theft is particularly significant, the prosecuting authorities will step in, as recently happened in Chicago.

Last week, Chunlai Yang, a former senior software engineer for Chicago-based CME Group, Inc., was indicted in federal court in Chicago and charged with two counts of theft of trade secrets. In the indictment, the government alleges … Continue Reading

Download Guide To Connecticut Trade Secrets Laws, Published By EpsteinBeckerGreen And The Practical Law Company

The national law firm of EpsteinBeckerGreen, in conjunction with the Practical Law Company, recently wrote and published a statewide guide on the trade secrets laws of Connecticut.

Trade Secret Laws: Connecticut” is written by David S. Poppick of EpsteinBeckerGreen in a “question and answer” format, addressing trade secret and confidentiality laws affecting employers and employees. The focus is on the legal requirements related to protecting trade secrets and confidential information.

“Trade Secret Laws: Connecticut” is the latest in a line of similar guides which EpsteinBeckerGreen and the Practical Law Company have published, regarding non-compete laws of Illinois, Massachusetts, … Continue Reading

Judge Denies TRO In Chicago Hot Dog/Trade Secrets War

Vienna Beef, the official hot dog of the Chicago Cubs, recently struck out in its effort to obtain a temporary restraining order against hot dog rival Red Hot Chicago, Inc. and the grandson of one of the founders of Vienna Beef, Scott D. Ladany.

Among other beefs in its federal court lawsuit, Vienna Beef accused the defendants of misappropriating trade secrets by using Vienna Beef recipes. As evidence of misappropriation, Vienna Beef pointed to Red Hot Chicago advertising material which made reference to using “family recipes” – that is, recipes now owned by Vienna Beef, rather than the defendants.

In … Continue Reading

Just the Stats Please (Round II)! New Study Provides Statistical Snapshot of State Court Trade Secret Litigation

Last year, the Gonzaga Law Review published an exhaustive study of federal court trade secret litigation. This week, it published a companion study of state appellate court decisions involving trade secrets during the period between 1995 and 2009.

Among the state study’s more interesting findings are these:

  • “In the vast majority of trade secret cases, the alleged misappropriator was someone the trade secret owner knew. Specifically, the alleged misappropriator was an employee or a business partner 93% of the time in this state study.”
     
  • “both the state and federal studies confirm that confidentiality agreements with employees and business partners
Continue Reading

Let’s Meet on 1/26/11 in Washington, DC at Our Midterm Briefing

Please join me and other attorneys from my firm, EpsteinBeckerGreen, as we present a full-day program covering labor and employment law topics that have increasingly impacted employers over the past two years. In addition, we will offer an outlook of what we should expect in the coming two years. Our keynote speaker is Darrel Thompson, Senior Advisor to Senate Majority Harry Reid, who will offer comments concerning the agenda of the 112th Congress. We are particularly pleased that Norah O’Donnell, MSNBC Chief Washington Correspondent, is attending the event as our guest luncheon speaker.

For more details and registration information, please … Continue Reading

Update: Former Paint Company Technical Director Sentenced To 15 Months In Federal Prison For Trade Secret Theft

Last September, we wrote about David Yen Lee, a former Technical Director for a painting and coating company who pled guilty to downloading trade secrets from a secure computer system and transferring them to external thumb drives with the intention of using the trade secrets for the benefit of another.

Proving once again that crime does not pay, last week Lee was sentenced to 15 months in federal prison to be followed by three years of supervised release. As a condition of his supervised release, he is also barred from working in the paint industry.
 … Continue Reading

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