Trade Secrets Trends

Trade Secrets Trends

Analysis and commentary on the latest developments in trade secrets protection, disputes, and enforcement

Facebook Settles $300+ Million Data Center Trade Secrets Case in the Middle of Trial

Posted in U.S. Litigation

On Monday, April 9, Facebook settled a trade secrets case brought against it in California federal court by BladeRoom Group Limited.

BladeRoom, a data center construction company, alleged that Facebook had used and divulged its trade secrets, specifically its methodology regarding efficient construction and implementation of pre‑fabricated data centers. BladeRoom had first presented to the social network giant in confidential discussions in 2011. BladeRoom sought damages in excess of $300 million.

After voluminous discovery and a week of trial, the parties settled the case, although BladeRoom’s case against another defendant based on similar allegations is still proceeding.

The settlement amount and terms were not immediately disclosed to the United States District Court for the Northern District of California, where the case was being tried.

PharMerica Learns the Hard Way: One Must Have a Trade Secret In Order to Survive a Motion for Summary Judgment

Posted in U.S. Litigation

PharMerica Corporation (“PharMerica”) is a Delaware corporation headquartered in Louisville, Kentucky that provides institutional and hospital pharmacy services throughout the United States.  The company filed a lawsuit in September 2016 in the Federal District Court of Pennsylvania alleging several employment and tort-related claims, and claims of misappropriation of Trade Secrets under the Pennsylvania Uniform Trade Secrets Act (“PUTSA”) and the Federal Defend Trade Secrets Act (“DTSA”) against former Pharmaceutical executive, Lena Sturgeon (“Sturgeon”) and ContinuaRx.  ContinuaRx is a start-up, long term care pharmacy that serves facilities and institutions with pharmaceutical needs. While the DTSA and the PUTSA use different wording to define a trade secret, they essentially protect the same type of information, and create a private right of action for the misappropriation of trade secrets.

Sturgeon and ContinuaRx filed a Joint Motion for Summary Judgment alleging that PharMerica failed to show it has protectable trade secrets.  At issue is whether PharMerica’s internal information about PharMerica’s service methods, market opportunities, marketing plans, current and prospective customers, and pricing information constitute protected trade secrets. On March 16, 2018, the judge sided with Sturgeon and ContinuaRx stating that while “PharMerica may have certain ‘trade secrets’ that deserve protection … in this instance [the company] failed to identify a single quality, attribute, or feature of any of these alleged trade secrets.”

Furthermore, PharMerica admitted that the majority of underlying materials that create its services, marketing opportunities, and pricing information are publically available, and “largely fixed by Medicare and Medicaid reimbursement rates.” Therefore, the court not only found that PharMerica failed to prove it had a protectable trade secret but also that there was no evidence that Sturgeon and/or ContinuaRx improperly acquired, disclosed, used, or threatened to use any specific trade secret.

Remember: “to warrant legal protection, a trade secret must be, in fact, a secret.”

Pennsylvania Judge Throws Out Pharmaceutical Trade Secrets Lawsuit

Posted in U.S. Litigation

A Pennsylvania federal judge grants Ex-PharMerica Executive’s motion for summary judgment. PharMerica, a company that provides long-term care pharmacy services to organizations such as senior living communities, filed suit against ex-executive Lena Sturgeon and two other ex-PharMerica employees in September 2016. A decision on defendant’s motion for summary judgment was released on March 16, 2018.

The company accused the ex-employees of misappropriating trade secrets after leaving PharMerica to launch a rival company called ContinuaRX LLC. PharMerica argued that trade secrets arose from its marketing plans, software, training programs, and customer service metrics, along with documents created to assist PharMerica’s employees with doing their jobs. In its decision, Judge Cercone noted that PharMerica admitted, however, that: there was nothing trade secret or confidential about the customers in its market; pricing and margins in long-term care pharmacy marketplace are largely fixed by Medicare and Medicaid reimbursement rates; nearly all pharmacies follow state Medicaid comparable reimbursement strategies; and PharMerica trains customers on software that contains no prohibition against customer disclosure, among other relevant facts invalidating PharMerica’s arguments. Continue Reading

USTR: China Discriminates Against U.S. Firms Related to Tech Transfer, IP, and Trade Secrets

Posted in Asia

On August 18, 2017, the Office of the United States Trade Representative (USTR) launched a formal investigation pursuant to Section 301 of the Tariff Act of 1974 on the People’s Republic of China (PRC). The probe sought to determine whether the acts, policies, and practices of the PRC related to technology transfer, intellectual property, trade secrets, and innovation were discriminatory towards U.S. firms and undermined the United States’ ability to compete fairly in the global market. Section 301 allows the President to seek removal of any act, policy, or practice of a foreign government that violates an international agreement or that unfairly burdens or restricts U.S. commerce.

On March 22, President Trump issued a Memorandum stating the USTR found PRC actions do undermine U.S. firms’ ability to compete fairly in the global market by (1) requiring or pressuring U.S. companies to transfer technology to Chinese companies; (2) imposing restrictions on, and intervening in, U.S. firms’ investments and activities, including through restrictions on technology licensing terms; (3) obtaining cutting-edge technology by directing and facilitating the investment and acquisition of U.S. companies by Chinese companies; and (4) conducting and supporting intrusions and theft from the computer networks of U.S. companies.

In response, the President has directed the USTR to address these violations via a combination of retaliatory tariffs, World Trade Organization (WTO) dispute settlement, and the Department of the Treasury to address via investment restrictions. Continue Reading

IBM v. Microsoft, Part II: Decision Suggests Diversity Data May Be a Trade Secret

Posted in Non-Competes, U.S. Litigation

As first reported in a C&M Trade Secrets Blog Post last week, IBM filed a lawsuit in New York federal district court in early February against Microsoft’s newly hired diversity executive, Lindsay-Rae McIntyre. Ms. McIntyre had been at IBM more than 20 years, finishing her employment as its Chief Diversity Officer. She also signed a one-year non-compete and non-solicit agreement set to expire on January 29, 2019.

When Ms. McIntyre left IBM to join Microsoft, IBM filed the lawsuit and sought an order to prevent her from working at Microsoft until January 29, 2019. IBM argued that “it is inevitable” that McIntyre would use IBM’s confidential information and trade secrets to further Microsoft’s diversity practices. IBM further argued that McIntyre can work virtually anywhere except a direct competitor of IBM, so her move to Microsoft was “especially serious, and unnecessary.”

On February 12, 2018, the U.S. District Court granted IBM’s request to restrain Ms. McIntyre temporarily from commencing employment with Microsoft, setting a hearing date of March 12 to determine whether that restriction would become permanent through January 29, 2019 based on the non‑compete agreement.

However, on March 5, one week before the hearing on the preliminary injunction hearing, the parties filed a notice to the court that they had settled the case. No settlement details were immediately made public or provided to the court.

Is China Discriminating against U.S. Firms Related to Technology Transfer, IP, Trade Secrets, and Innovation?

Posted in Asia

U.S. Trade Representative (USTR) Ambassador Robert Lighthizer initiated an investigation on August 18, 2017 pursuant to Section 301 of the Trade Act of 1974. The probe will determine whether acts, policies, and practices of the People’s Republic of China (PRC) related to technology transfer, intellectual property, trade secrets, and innovation are discriminatory towards U.S. firms by undermining the United States’ ability to compete fairly in the global market. Section 301 allows the President to retaliate by removing any act, policy, or practice of a foreign government that violates an international agreement.

The investigation began after PRC President Xi Jinping unveiled a cybersecurity law to “protect personal information and individual privacy,” as reflected in China’s Made in China 2025 initiative. The law requires foreign companies operating in China to store their data on local servers. U.S. companies are now also being instructed to participate in joint ventures with Chinese enterprises, therefore sharing valuable technology information with their Chinese counterparts.

USTR allegedly finalized its report in December 2017, and the remedies are undergoing vetting in the interagency process. However, the U.S. may partner with the European Union and Japan to seek consultations through the WTO, rather than solve the issue unilaterally.

Pursuant to the Trade Act, Ambassador Lighthizer must determine within 12 months from the date of the initiation whether the Chinese government violated U.S. intellectual property laws. The retaliatory action proposed by USTR, if any, must be implemented within 30 days of the determination. USTR may delay the implementation up to 180 days if the agency determines that substantial progress could be made by the foreign government. If the determination is affirmative, then USTR will decide what action to take.

If Ambassador Lighthizer recommends retaliation under Section 301, the President could impose sanctions on certain Chinese industries, specifically steel. The current administration has demonstrated a tough stance on overcapacity by imposing a 25 percent global tariff on imported steel products, and a 10 percent global tariff on imported aluminum products.

As expected, the Chinese government is already demonstrating “tit for tat” retaliation by self-initiating anti-dumping (AD) and countervailing (CVD) investigations on imports of sorghum from the United States. In addition, China is already among one of the countries that has requested consultations from the WTO regarding the safeguard measures on solar cells and residential washing machines.

The USTR is expected to release its findings to the President within the coming months.

Diversity is Important – But Is It A Trade Secret?

Posted in Non-Competes

On January 14, 2018, IBM’s Chief Diversity Officer resigned to go work for Microsoft in the same role. The caveat: she had a twelve month non-compete clause.

On February 12, 2018, IBM filed a lawsuit to enjoin its former diversity officer to honor her non-compete agreement with IBM and to recover damages. The suit, filed in Southern District New York court, alleges that the IBM non-compete agreement that the defendant signed has a New York federal and state choice of forum provision and is, therefore, enforceable. In addition to a breach of the non-compete agreement, IBM asserts a claim for misappropriation of its trade secrets. According to IBM, if its former diversity officer “is permitted to work for Microsoft, [she] will inevitably (if inadvertently) use and/or disclose IBM trade secrets for her own benefit and for the benefit of Microsoft.” In addition to injunctive relief (seeking an order requiring its former employee to honor the non-compete agreement), IBM is also seeking compensatory damages. It has also demanded that its former employee remit to them her equity compensation because of this alleged breach of her employment agreement. As to the demand that the employee return the equity compensation she had earned as an employee, IBM’s theory is that the employee is engaging directly in a business which is competitive with IBM. Furthermore, IBM asserts that this is considered a “detrimental activity” under the Long Term Performance Plan agreement in which the employee’s equity awards are governed by and, subject to cancellation and in certain circumstances like this, are subject to repayment. Continue Reading

Extending the Scope of a Search: Searching iCloud Storage

Posted in Data Protection, U.S. Litigation

On November 2, 2017, Foltz Welding LTD filed a motion for preliminary injunction against its former employee and operations manager in the United Stated District Court Southern District of Illinois. The company filed a nine-count complaint against its former employee and requested injunctive relief and damages. Foltz Welding claimed that the former employee may have trade secrets on his personal computers or iCloud storage that could be given to his new employer.

On February 12, 2018, the Court granted Foltz’s motion for preliminary injunction, ordering that the former employee allow a computer expert that Foltz chooses. Specifically, the Court noted that the expert would be allowed to go through the former employee’s personal home computer, his daughter’s laptop, his iCloud storage, any other electronic device and any other data storage and be permitted to remove any emails or files.

The Court noted that the files being searched for could include “Foltz’s trade secrets or other proprietary data consisting of bidding strategies, bid files, project estimation files, project pricing files, project cost information, project construction specifications and as-built construction information, pricing strategies, labor or equipment rate sheets, customer lists, profit margins and financial relationships with its suppliers and customers, sales strategies and competitive bidding.strategies.”

Self-Driving Car Dispute Comes to a Halt: Uber Settles with Waymo

Posted in U.S. Litigation

Uber and Waymo’s high-profile legal battle has come to an abrupt halt, as the parties agree to settle the case a mere five days into trial. For its part of the deal, Waymo will get a 0.34% stake in Uber, worth about $245 million based on Uber’s present valuation. In prior negotiations, Waymo had been seeking $1 billion and just earlier in the week  had proposed $500 million. Uber rejected both offers. But after four days of testimony there was scant evidence showing that Uber actually used Waymo’s trade secrets. The settlement was entered into late last Thursday and announced last Friday.

Please click here to read more.