Tags: Trade Secrets, Audits, Non-Competes, Safeguards, Agreements
Intellectual Property | Restrictive Covenants | Trade Secrets
Tags: Trade Secrets, First Amendment, content neutral, injunction, TRO, AIPLA, WikiLeaks, Internet
General | Intellectual Property | IP Litigation | Trade Secrets
Tags: Trade Secrets, WikiLeaks, Intel, San Francisco, AIPLA, American Intellectual Property Law Association, Whisteblower
Intellectual Property | IP Litigation
The WikiLeaks scandal has generated widespread concern about how to manage a crisis where a disgruntled employee seeks to post confidential information or trade secrets on the Internet. This scandal arose when PFC Bradley Manning allegedly stole hundreds of thousands of classified diplomatic files and documents and delivered them to the Internet organization, WikiLeaks. WikiLeaks holds itself out as a tool for helping individuals “safely get out the truth” about government and other institutions, and it posted those classified documents on its website for the world to see.
WikiLeaks has not confined its efforts to government information and has also posted confidential information taken from large banks and other private companies that it deemed newsworthy. For example, WikiLeaks has published internal information from Bank of America documenting its internal dialogue on confronting the unique threats posed by WikiLeaks.
An unsuccessful attempt by the Swiss bank, Julius Baer, to restrain WikiLeaks from posting information on its website in 2008 has now received renewed attention because of the recent scandal [See Bank Julius Baer & Co. Ltd., et al. v. WikiLeaks, et al., Case No. 3:08-cv-0824-JSW, U.S.D.C., N.D. Calif]. Side Note: For those who are interested, I will be speaking on this issue at the American Intellectual Property Law Association's Spring Meeting on Friday, May 13, 2011.
The Julius Baer case is worth re-examining in several respects because of the renewed interest in the harm that WikiLeaks or a similar self-styled whistleblower can cause by attempting to post information on the Internet. According to Julius Baer's complaint, a disgruntled former employee, Rudolf Elmer, took client records and data in violation of a confidentiality agreement he signed with Julius Baer. After Elmer’s termination, Julius Baer discovered that Elmer had begun posting hundreds of those records on WikiLeaks’ website. The district court was initially receptive to Julius Baer’s claims and granted Julius Baer’s request for a TRO, enjoining WikiLeaks from further posting or displaying that information and directing WikiLeaks to remove all copies or images from the websites under its control.
While Julius Baer did not join Elmer as a defendant, it did join the WikiLeaks domain administrator, Dynadot, LLC, to ensure that the party responsible for the WikiLeaks’ domain name and/or website would comply with any potential order. Julius Baer and Dynadot reached a stipulated permanent injunction order that Dynadot would, among other things, immediately “lock the wikileaks.org domain name to prevent transfer of the domain name" and "disable the wikileaks.org domain name and account to prevent access to and any changes from being made to the domain name and account information.”
In the meantime, the district court’s entry of the TRO did not prevent WikiLeaks’ posting of the customer information. While it appears Julius Baer was successful in locking down and disabling the WikiLeaks’ domain name registered through Dynadot, the order did not prevent the posting of that customer information on other “mirror” websites.
In addition, media and public interest groups immediately moved to intervene in the case, arguing that the stipulated permanent injunction improperly interfered with their news-gathering efforts and amounted to a violation of the First Amendment. The district court, in the face of these concerns and the frustration of the order due to the mirror websites, subsequently dissolved that permanent injunction.
The trade secret implications of this case could fill a law review article and warrant further posts on the First Amendment issues, the use of "mirror" websites, among other important points. However, an increasingly common issue is to what degree a trade secret loses protection if it is posted on a website.
Milgrim, the key commentator in trade secret law, has noted that at least one court has “cautioned under the basic principles of equity, recognized in the trade secret context, a wrongdoer cannot rely on his own postings to avoid the imposition of an injunction by arguing the works posted have lost their secrecy” [4 Milgrim on Trade Secrets, §17.03 at 17-12 (citing Religious Tech. Ctr. V. Netcom On-Line Commun. Servs., 923 F. Supp. 1231, 1256 (N.D. Cal. 1995), trade secret holding revised (N.D. Cal. Jan. 6, 1997)]. Another court has found that the information is now effectively in the “public domain” and refused to issue an injunction [See American Hearing Aid Assocs., Inc. v. GN ReSound N. Am., 309 F. Supp. 2d 694, 705-706 (E.D. Pa. 2004) (conversion claim rejected because customer lists posted on plaintiff’s website could not qualify as trade secrets)].
The law is far from settled and the facts of each case may prove critical. As Milgrim notes, publication on the Internet may not necessarily terminate trade secret status, as the facts and circumstances surrounding each disclosure may differ; for example, if prompt and effective action resulted in the postings being taken down, it can be argued that any disclosure was fleeting in nature and did not become known to the relevant audience, i.e., competitors [4 Milgrim, §17.03 at 17-16]. In addition, to the extent that the wrongdoer participated in the posting, he or she should be equitably estopped from making that argument [Id.; see also id, §15.01[a][ii] and authorities cited therein; see Silicon Image, Inc. v. Analogix Semiconductor, Inc., 2007 U.S. Dist. LEXIS 96073 at ** 44-46 (N.D. Calif., Dec. 20, 2007) (finding that source code published on Internet did not destroy the secrecy of information at issue)]. However, in the case of third parties (such as media who intervene and rely upon or cite to the postings), that equitable basis may not apply. Finally, it should be noted that the factual circumstances may vary from case to case and the kind of remedy sought in the case (injunction or damages) may further shape the impact of a defense rooted in this issue.
In short, the answer is “it depends" on many facts, including the length of time that the information was posted on the Internet, when it was posted, and who may have viewed it while it was there. As a result, if a company moves promptly to take the information down, it should be in a strong position to protect any trade secrets that were improperly posted.
Tags: Trade secrets, First Amendment, posting, Internet, Milgrim, WikiLeaks
The phenomena of social media and its near exponential growth has generated tremendous dialogue within the IP community about its impact. Facebook now has more than 640 million members, Twitter now has over 175 million users, and LinkedIn has more than 101 million users. Given these staggering numbers, and the inevitability that some users will eventually misuse or attempt to display confidential information or trade secrets of their employers, it makes sense to review the recent cases addressing trade secrets, as well as the steps a client can take to minimize that risk.
One of the first noteworthy cases comes from the Eastern District of New York and it illustrates the challenges that an employer may face when trying to protect a customer list in this new era. In Sasqua Group, Inc. v. Courtney, 2010 U.S. Dist. LEXIS 93442 (E.D.N.Y. Aug. 2, 2010), affirmed, Sept. 7, 2010, the plaintiff, Sasqua, was a recruiting and search firm that built its niche in the area of executives for the financial services industry. According to Sasqua, its founder, Christopher Tors, had worked for over 20 years as a precious metals and foreign currency trader for Goldman Sachs, AIG and UBS, and had used that experience to form Sasqua and compile a substantial client database. That client database included, among other things, client contact information, individual profiles, contact hiring preferences, employment backgrounds, descriptions of previous interactions with clients, and resumes. Tors claimed that he hired and trained his niece, Lori Courtney, as a recruiter for Sasqua. After Courtney left Sasqua to form a competing firm, Sasqua and Tors concluded that Courtney was using the contents of their client database, which they believed contained highly confidential information.
Because Sasqua did not have a written non-competition or non-solicitation agreement with Courtney, they commenced an injunctive action for misappropriation of trade secrets. However, in a withering opinion rejecting that effort, the U.S. District Court Magistrate who presided over the injunction proceeding found that their customer database and the information contained within that database were not trade secrets.
In particular, the Magistrate found it significant that Courtney was able to demonstrate in court how the information in Sasqua's database could be found through internet searches of websites such as FX Week, Google, Bloomberg.com, and LinkedIn. The Magistrate was impressed with Courtney’s testimony about “how such a search could be conducted on Linkedin, which [Courtney] described as being 'like Facebook but for business' and as being more searchable than Bloomberg 'because people put their whole profile on LinkedIn.'" (Sasqua Group, at p. 24).
The Magistrate was not troubled by the fact that Courtney admitted she did not use the internet to get the information at issue and all but conceded that she had taken it from Sasqua. In holding that the information was not confidential information or a trade secret, the Magistrate noted how the internet had changed the business landscape: "The information in Sasqua's database concerning the needs of its clients, their preferences, hiring practices, and business strategies, as well as Sasqua’s acquaintance with those decision-makers may well have been a protectable trade secret in the early years of Sasqua's existence when greater time, energy and resources may have been necessary to acquire the level of detailed information to build and retain the business relationships at issue here. However, for good or bad, the exponential proliferation of information made available through full-blown use of the Internet and the powerful tools it provides to access such information in 2010 is a very different story" (Sasqua Group, at p. 39).
Three lessons can be drawn from the Sasqua Group decision. First, it is critical to have written non-competition, non-solicitation or confidentiality agreements with employees, contractors and vendors with whom confidential customer information may be shared. Second, an employer needs to have agreements and policies that make clear that sensitive customer information gathered while an employee is the property of the employer and is to be protected. Such an acknowledgement would have necessarily bolstered Sasqua’s claim of proprietary information at the TRO and preliminary injunction stage. Third, an employer has to ensure that its confidential customer information does not find its way into social media websites. This means that that the employer must monitor its employees’ social media profiles, descriptions and blogs to ensure that they are complying with the employer’s policies and agreements.
Tags: Social media, trade secrets, customer list, non-compete agreement, non-disclosure agreement, Facebook, LinkedIn, Twitter
General | Intellectual Property | IP Litigation | Licensing | New York | Social Media | Trade Secrets
Tags: Arbitration, Trade Secrets
Intellectual Property | IP Litigation | Licensing | Technology Transactions | Trade Secrets
Welcome to The Trade Secret Litigator.
Last year, a lawyer attending a seminar that I was presenting asked me what websites she could follow to stay current on developments in the area of trade secrets and non-compete law. It occurred to me that while there has been a tremendous growth in the number of blogs by lawyers, there had not been a corresponding growth in the number of blogs dedicated to the commercial, practical and legal issues arising out of trade secret law and the law of non-competes. That is not to say there are not excellent blogs that are out there that cover trade secrets issues, but I believe that this area remains under-represented, particularly given the dramatic growth of trade secret law.
About 10 years ago, my practice began to increasingly consist of TROs, injunctions, and other forms of emergency litigation. As I did more of this work, trade secret and covenant not to compete cases came to dominate my practice. Since the beginning of the economic downturn in late 2007, I sensed that companies were filing more trade secret cases and that coverage of them by the mainstream media such as The Wall Street Journal, Forbes and others had increased significantly. The infamous Mattel/Bratz dispute, the Starwood/Hilton case, the EMC/Donatelli dispute and the Hewlett Packard/Hurd case have all received significant media attention and have reinforced that there is indeed something going on here.
David Almeling's two outstanding empirical analyses on the growth of trade secrets litigation published in 2009 and 2010 in the Gonzaga Law Journal clinched it for me. For anyone seriously practicing law in this space, these two articles are required reading. The growth in my practice and the increasing interest and growth in this area of the law were confirmed by these groundbreaking articles by David and his colleagues.
This growth has coinceded with certain economic realities. First, a brutal economy has served to further fray the relationship between employer and employee. Desperate people do desperate things. As 93% of the disputes analyzed by one of the Almeling article arose out of relationships where the parties knew each other, the deterioration of this relationship presents kindling for trade secret disputes. Second, the increasing mobility of employees has created more flashpoints for disputes over non-competes and similar agreements. Third, the ongoing developments in mobile device technology that allow for the compressing and movement of tremendous amounts of information present greater opportunities for unscrupulous actor. Finally, as companies scale back and attempt to be more efficient in their intellectual property budgets, many are reacquainting themselves with the benefits of using trade secret law, rather than its more expensive relation, patent law, to protect their intellectual property (more to follow on this possible trend). For these and other reasons, I believe that this area of the law is experiencing a true renaissance.
So why I am writing this blog? The simple answer is I enjoy what I do and I enjoy sharing my experiences with others. Of course, I also hope this blog becomes a resource for and kindles a dialogue among others truly interested in this area of the law. As a result, in addition to posts about recent and noteworthy legal decisions, this blog will also speak to practical litigation issues that frequently accompany trade secret litigation, consider larger societal and technological trends that affect this area, and, finally and perhaps most importantly, speak to administrative and human resources issues that also arise in this context and that need to be considered to protect trade secrets.
Having been on both sides of the aisle, representing plaintiffs as well as defendants, I will attempt to cover both sides of the debate on issues as they arise in this area; however, I'll admit in advance that since my bias is toward the side of the plaintiff, my posts will likely ultimately reflect that perspective.
Again, welcome aboard!
Tags: trade secrets, almeling, patents
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