Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week, as well one or two that I missed over the past few weeks (better late than never):
Noteworthy Trade Secret and Non-Compete Posts and Cases:
Computer Fraud and Abuse Act Posts:
Cybersecurity Posts and Articles:
News You Can Use:
California | China | Computer Fraud and Abuse Act (CFAA) | Cybersecurity | Inevitable Disclosure | Intellectual Property | Copyrights | IP Litigation | Patents | International | Non-Compete Enforceability | Restrictive Covenants | Texas | Trade Secrets | Weekly Wrap-Up Posts
Here are the noteworthy posts, articles and cases of the past week:
Trade Secret and Non-Compete Cases and Posts:
News You Can Use:
CBS v ABC Order 06 21 12.pdf (63.65 kb)
Tags: trade secrets, covenant not to compete, non-compete, cybersecurity
Cybersecurity | Inevitable Disclosure | Intellectual Property | Copyrights | IP Litigation | Patents | International Trade Commission | Mattel v. MGA | Non-Compete Enforceability | Restrictive Covenants | Social Media | Trade Secrets | Weekly Wrap-Up Posts
Yesterday in Los Angeles, U.S. District Court Judge Gary Feess advised that he was unlikely to grant CBS' request for a Temporary Restraining Order to forbid ABC from airing its new reality show, The Glass House. While he did not issue a formal opinion or written order, the throngs of media assembled have reported on his statements before a packed court house. (I have attached the minute order and parties' respective briefs in PDF format below). Given that The Glass House show is set to premiere on Monday, June 18, it is highly unlikely that Judge Feess will change his mind and restrain ABC from rolling out the show.
CBS brought the lawsuit last month, contending that a team of 19 individuals who had worked on its Big Brother reality show were using its trade secrets and violating its copyrights by working on ABC's new show. The template of of the two shows was very similar — i.e., a show following a group of unrelated people living together in a house all summer, with individuals being eliminated until a finalist wins a prize. For more background on the show, please see my earlier post.
The minute order (which is a short filing in which federal courts simply memorialize that a conference or hearing took place with a brief description of the subject matter) does not provide any insight on the court's inclination. However, the many media reports indicated that Judge Feess applied an appropriate balancing test, by looking at the relative strength of the trade secret and copyright claims, the harm to CBS, and the harm to ABC and other third parties (such as the contestants).
The Hollywood Reporter, The New York Times and other media have reported that the judge was unimpressed with CBS' claims. According to The New York Times, Judge Feess started the Friday hearing "by saying he was not inclined to accept CBS’s arguments that it would win a copyright lawsuit against ABC and its corporate owner, Walt Disney. At the conclusion of the argument by lawyers from each side, the judge said he was not granting CBS the injunction request Friday and was unlikely to do so before the start of ABC’s show on Monday. He said he would read the accompanying materials before making a final decision."
As for the trade secrets claim, CBS' Motion for TRO emphasized that its production process, multiple camera feeds, and its production manual outlining the manner of maintaining the show's fast pace were trade secrets. The Hollywood Reporter reported that Judge Feess rejected those claims, reasoning that "he did not see that there were trade secrets being stolen because CBS has allowed tours of the Big Brother set and control room, and much of what is being done is common industry practice." As for the copyright claims, the media quotes the judge as stating that many of the elements of the show were "generic" and that while there were similarities between the two shows, “the idea, in my view, cannot be copyrighted.”
Judge Feess was apparently also unpersuaded that CBS would be irreparably harmed and was quoted as saying he believed that ABC would be damaged by an injunction because ABC would lose its investment in the show, the crew would lose their jobs, and the contestants would lose the time and effort they put into the show.
CBS has announced its intention to fight on (after waging such a high profile campaign, it really cannot say anything else at this stage). However, as a practical matter, the loss of an important and contested injunction at the outset of a case is generally fatal to a trade secrets claim. In the normal course, an unsuccessful trade secret claimant will quietly dismiss the case at an opportune time. However, as ABC has apparently filed a counterclaim against CBS, that option has been taken off the table.
CBS TRO Motion.pdf (332.51 kb)
ABC Opposition.pdf (92.71 kb)
CBS v ABC Minute Order.pdf (8.33 kb)
Tags: CBS, ABC, trade secrets, copyright, The Glass House, Big Brother
California | Injunctions | Intellectual Property | Copyrights | IP Litigation | Trade Secrets
CBS followed through on its threat to sue ABC for allegedly misappropriating CBS' trade secrets for ABC's new reality show, Life in the Glass House, and it is seeking an injunction against ABC and 19 former producers and staffers who worked on CBS' long-running reality show, Big Brother. In the lawsuit filed in federal court in Los Angeles last Thursday, CBS argues that the ABC show also infringes its copyrights and that the producers are violating non-disclosure agreements they signed with CBS when they worked on the Big Brother series. (I have attached a PDF of the complaint, courtesy of The Hollywood Reporter's website, below).
For those not familiar with the Big Brother series, it involves a contest among guests who live in a house and who are filmed continuously, perform challenges and tasks, and then ultimately vote one another off of the show. According to CBS, Glass House "replicates every key aspect of Big Brother, including, among other things, its plot, theme, mood, setting, pace, characters, sequence of events, and other concrete elements."
Of course, none of those elements represent a trade secret as they are available for the world to witness. Rather, CBS identifies a number of technical processes that better enable the show to quickly cycle and capture various story lines and assist in streaming around the clock to maintain its fast pace and unique format. In the context of the breathless allegations of copying and theft, these appear to be somewhat mundane trade secrets, although we have witnessed relatively weak trade secret cases succeed in the past (see the AvidAir Helicopter v. Rolls Royce decision by the Eighth Circuit last year).
In essence, this dispute really boils down to a misappropriation of idea case. While the elements and standards for this type of claim differ from state to state, these cases have traditionally proven to be tough ones to win. (See, for example, NBC's successful defense of The Biggest Loser from a writer who claimed it stole her idea, "Phat Farm/Fat Farm — A Weight Loss Adventure," as well as Tom Cruise and the producers of The Last Samurai's recent jury verdict against two brothers who said they pitched them the idea for the movie first).
Glass House is set to debut on ABC on June 18 so there will likely be a request for a temporary restraining order, or perhaps even a preliminary injunction, over the next few weeks. As always, I will keep you posted on any developments.
CBS_ABC.pdf (1.81 mb)
Tags: CBS, ABC, Big Brother, Glass House, trade secrets, copyright
California | Injunctions | Intellectual Property | Copyrights | IP Litigation | Non-Disclosure Agreements | Trade Secrets
Here are some noteworthy articles, cases and posts from the past week: Trade Secrets and Non-Competes:
Tags: trade secrets, non-competes, Computer Fraud and Abuse Act, DuPont, Kolon, cybersecurity, cybercrime
California | China | Computer Fraud and Abuse Act (CFAA) | Cybersecurity | DuPont v. Kolon | Economic Espionage Act | Illinois | Injunctions | Intellectual Property | Copyrights | IP Litigation | Patents | International | Legislation | Non-Compete Enforceability | Restrictive Covenants | Social Media | Trade Secrets | Weekly Wrap-Up Posts
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.
Tags: SOPA, PIPA, counterfeiters, copyright, piracy, trade secrets, non-compete
General | Intellectual Property | Copyrights | Trade Secrets
Today's post features Nos. 4 through 6 of the Top Ten Trade Secret and Non-Compete Decisions of 2011. They are:
6. IBM v. Visentin (U.S. District Court for the Southern District of New York and U.S. Court Appeals for the Second Circuit) and Aspect Software v. Barnett (U.S. District Court for Massachusetts)These two cases presented the same issue -- to what extent should a non-compete be enforced when the new employer and former employee have put safeguards in place to protect the plaintiff's trade secrets and customer relationships. Both of these cases provide a fine example of what a company should do if it wants to hire an employee with a non-compete but minimize potential entanglements with the former employer (see my previous blog post on the Aspect Software case where the former employee and new employer incorporated 8 steps to safeguard the plaintiff's interests). However, taken together, these two cases also reinforce another feature of non-compete and trade secret cases -- their unpredictability. In Visentin, the Southern District of New York (and later, the Second Circuit) found that the former employee and the new employer (HP) had acted reasonably to protect the business interests of the former employer (IBM) and that the non-compete should not be enforced to prevent the employee's new job with HP. In contrast, in Aspect Software, although the district court commended the former employee and his new employer, Avaya, for "the scrupulous steps" they took to safeguard the plaintiff's trade secrets and customer relationships, it still enforced the non-compete because of concerns that the employee would inevitably use his former employer's trade secrets.
As increased employee mobility and a poor economy continue into 2012, look for more cases like Visentin and Aspect Software. Courts will be forced to balance the interests of all parties and still protect the legitimate interests of the former employer. These cases may have a profound impact on the viability of the inevitable disclosure doctrine, the traditional counterweight to an employee's assurances about his or her good faith efforts to protect the former employer's trade secrets.
5. Mattel v. MGA (U.S. District Court for the Southern District of California, Los Angeles)Will it ever end?
When I first started putting this list together, I thought about using movie titles to highlight the key qualities of each case. When it came to selecting a title for this bitter case, plenty came to mind -- "There Will Be Blood" and "Drag Me to Hell" certainly would have captured it nicely. However, the most fitting title is probably "Reversal of Fortune" as this epic lawsuit, at least in its most recent round, has swung decisively in favor of MGA.
If you are reading this post, you are likely familiar with the history of this dispute which began in 2003, when Mattel first sued MGA for stealing the idea for the pouty-lipped Bratz Line through a former Mattel employee. In 2008, Mattel won a $100 million jury verdict, only to see that judgment reversed by the Ninth Circuit. Then, in April 2011, MGA prevailed during the second jury trial, not only persuading the jury to reject Mattel's claims but also to award MGA $83 million on its trade secret counterclaims. That award swelled to $310 million when the district court imposed exemplary damages and attorneys fees in post-trial proceedings. What will the next ruling bring? No one really knows, as the trade secret version of Jarndyce and Jarndyce continues to work its way through California's federal courts.
4. U.S. v. Nosal (U.S. Court of Appeals for the Ninth Circuit)The scope of the Computer Fraud and Abuse Act (CFAA) continues to beguile litigants and courts alike, and no CFAA case raised more eyebrows in 2011 than the Ninth Circuit's decision in U.S. v. Nosal, 642 F.3d 781 (9th Cir. Apr. 28, 2011). In Nosal, the Ninth Circuit held that the violation of a computer use policy that placed "clear and conspicuous restrictions on the employees’ access” to the employer’s computer system and the specific data at issue could be enough to qualify as conduct that exceeded authorized access, a necesssary element of a CFAA claim.
We will reveal our top three cases next week, so please stay tuned. In the meantime, have a safe and happy new year.
Tags: trade secrets, non compete, covenant not to compete, confidential information, IBM, Visentin, Aspect Software, Avaya, Barnett, Nosal, Computer Fraud and Abuse Act, CFAA, Mattel, MGA, Facebook, MaxBounty
Computer Fraud and Abuse Act (CFAA) | General | Intellectual Property | Copyrights | IP Litigation | Non-Compete Enforceability | Restrictive Covenants | Trade Secrets
As many of you know, the challenges posed by the Internet and the potential for abuse by self-styled whistleblowers are two things near and dear to my heart. A thoughtful but potentially troubling decision on November 9, 2011 by the U.S. District Court for the Northern District of California in Art of Living Foundation v. Doe, Case No. 5:10-cv-05022-LHK, may make it more difficult for trade secret plaintiffs to litigate against anonymous bloggers who post trade secrets on a website.
The Art of Living Foundation (AOLF), a religious group based in Bangalore, India with chapters in more than 140 countries, was accused of being a cult by the Doe Defendant, a blogger who uses the pseudonym "Skywalker." As a result, AOLF sued Skywalker last November, claiming that two of his posts misappropriated some of its trade secrets, infringed its copyrights, and defamed it. AOLF claimed that Skywalker and other defendants published AOLF's copyrighted Breathe Water Sound manual and trade secret teaching methods in his blog and also made numerous false and disparaging remarks about AOLF and Ravi Shankar, who apparently holds himself out as an "enlightened being" and leader of this movement.
AOLF issued various subpoenas on several Internet Service Providers to discover Skywalker's identity, and Skywalker moved to quash those subpoenas on First Amendment grounds. The Magistrate denied the Motion to Quash, but that decision was subsequently overturned by District Court Judge Lucy H. Koh, who balanced the rights of Skywalker against the needs of AOLF to discover Skywalker's identity. Using a practical approach, Judge Koh ultimately concluded that discovery of the blogger's identity was premature because motions for summary judgment and to strike AOLF's claims were fully briefed and ripe for decision. This part of the decision makes sense, since Judge Koh had already dismissed the defamation claim on First Amendment grounds on June 15, 2011.
My Concerns About The Ruling: I think addressing the First Amendment question on the identity of the blogger was unnecessary. AOLF may or may not be a cult, Skywalker may or may not be a disgruntled former member, and it is hard to argue against a blogger's First Amendment right to criticize a large religious institution on what appears to be a genuine issue of public interest. That being said, in its desire to reach the First Amendment issues, the district court ended up engaging in circular reasoning. For example, Judge Koh recognizes that the nature of the underlying speech (is the speech political, religious or literary, or is it merely commercial?) will trigger the rigor of the standard to be applied to the speech in question.
For this reason, the district court distinguished decisions ordering the identity of defendants in copyright cases where unidentified defendants are alleged to have illegally downloaded and distributed a plaintiff's copyrighted songs using a "peer to peer" file copying network. Judge Koh reasoned that the individual's motivation in those cases was commercial (i.e., to obtain music for free) as opposed to trying to communicate an idea or thought. This analysis is consistent with Ninth Circuit's 2010 decision in In re Anonymous Online Video, which ordered the identity of the speakers because the speech was commercial and directed to the commercial and business practices of the plaintiff. (For a fine analysis of that decision, see this post from the IP Law Blog).
However, how can a party adequately determine whether the speaker in question is motivated by commercial interests if he can hide behind a veil of anonymity? After all, as the Second Circuit has recently held, a Doe defendant's arguments may raise "questions of credibility and plausibility that cannot be resolved while [a Doe Defendant] avoids suit by hiding behind a shield of anonymity." Arista Records LLC v. Doe, 604 F.3d 110, 124 (2d Cir. 2010). By foreclosing discovery regarding the defendant's identity, a plaintiff may be precluded from determining whether there is in fact a commercial component to the speech in question.
The second problem that I have with the district court's reasoning was its willingness to readily accept Skywalker's protestations of harm. Holding that "to the extent that Skywalker's anonymity facilitates free speech, the disclosure of his identity is itself an irreparable injury." (Opinion at p. 13). The problem with this reasoning is that any disclosure of a blogger's identity is equated with irreparable injury. Mark my words, we will see this language again in some other opinion in the future. Similarly, Judge Koh acknowledged that the blogger's claims of potential retaliation were "not particularly reliable." (Id. at p. 14). Yet on this weak record, she found that it still outweighted AOLF's right to discover the blogger's identity.
This is a pet peeve of mine. When issues of the First Amendment are raised, some federal courts are too eager to race to embrace them, particularly when public interest groups like the ACLU or First Amendment Coalition fan the flames. In this case, the district court could have easily punted based on the procedural posture of this case alone, the position that it ultimately settled on in deferring discovery. Unfortunately, the district court unnecessarily engaged in an involved First Amendment analysis that may prove problematic when applied later in another case to a less worthy defendant.
Finally, should the mere fact that a motion to dismiss or summary judgment is filed be enough to prevent discovery on the issue of the identity of the blogger? Again, the cloak of anonymity may frustrate the ability to meaningfully respond to such a motion. One would hope that, under different facts, that the balancing test used by a district court would yield a different result.
I am a big believer in transparency and, as a result, I am always skeptical of those who claim that they should be free to criticize or do anything else under the cloak of anonymity. We all know this is especially true given the potential harm that the Internet can cause. Courts sometimes are too willing to accept the narrative of the noble but at-risk whistleblower, when the story may turn out just as easily to be that of someone who has an axe to grind or is simply unhinged. Yes, AOLF is hardly a sympathetic plaintiff, and yes, AOLF probably wanted the identity of the blogger for reasons other than service of process. However, another court may now take this reasoning and apply it to a situation where the identity of the blogger is simply not worthy of First Amendment protection.
As WikiLeaks' funding has dried up and as the federal government presses ahead in its prosecution of those behind it, the risk posed by that once-dangerous phenomenon appears to be waning. Throw in the recent SyncSort v. Innovative Resources decision holding that mere publication on the Internet does not destroy trade secrecy, and a trade secret plaintiff should feel better about its chances of prevailing these days in these cases. However, the unnecessary First Amendment reasoning used in this case could lead to mischief later.
Tags: trade secrets, copyright, download, First Amendment, blogger, anonymous, Art of Living Foundation, WikiLeaks, Internet, commercial speech
General | Intellectual Property | Copyrights | IP Litigation | Trade Secrets
Has Mattel finally had enough? A press release issued after a withering ruling by U.S. District Court Judge David Carter suggests that the embattled toymaker may be prepared to finally throw in the towel in its epic battle with rival MGA. Yesterday, Judge Carter assessed an additional $85 million in punitive damages and $139.5 million in attorneys fees against Mattel. This will be added to the $88 million that a Southern California jury awarded to MGA last spring when it found Mattel had misappropriated MGA's trade secrets.
The following lines from Judge Carter's opinion have generated the most media attention: "Mattel asserted a copyright claim that was stunning in scope and unreasonable in relief it requested," Judge Carter wrote. "The claim imperiled free expression, competition, and the only serious competitor Mattel had faced in the fashion doll market in nearly 50 years." Ouch.
Some day, someone will write a very, very, very long book about this case, which is best described as the legal equivalent of an ultimate fighting cage match between the two very bitter rivals. Mattel won round one, persuading a jury to award $100 million against MGA in 2008 for the theft of trade secrets for the Bratz dolls line, arguing that the idea was conceived by former employee Carter Bryant while he was still employed by Mattel. However, after the Ninth Circuit reversed, MGA won round two earlier this year, securing an $88 million verdict against Mattel on evidence that Mattel employees slipped into MGA’s showrooms at toy fairs using phony business cards. The jurors awarded MGA $3.4 million for each of the 26 instances in which they found that Mattel had misappropriated a trade secret; in his post-trial rulings, Judge Carter reduced the overall award to $85 million. (As a matter of full disclosure, I litigated a commercial injunction case against Mattel several years ago).
Now to the "tell" in the Mattel press release: "Mattel strongly believes that the outcome at the trial level is not supported by the evidence or the law," Mattel said in a statement. "We remain committed to finding a reasonable resolution to the litigation." Roberto Duran could not have said it better.
The takeaway? Avoid blood feuds.
Tags: Mattel, MGA, Bratz, Judge Carter, punitive damages, trade secrets, copyright, attorneys fees
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