The U.S. government is continuing its endeavor of prosecuting individuals for the theft of U.S. trade secrets and for allegedly selling or bringing these trade secrets to China. The U.S. government is demonstrating that it considers the protection of trade secrets, particularly those used in national defense and other essential technology, to be a priority.

On October 1, 2020, the U.S. Attorney’s Office for the District of Massachusetts reported that Haoyang Yu, a U.S. citizen who was born in China, his wife Yanzhi Chen, and their company Tricon MMIC LLC, were charged in a 24-count indictment for the alleged theft of American trade secrets worth millions of dollars from Analog Devices. Analog Devices, which has its headquarters in Norwood, Massachusetts, is an international semiconductor company. Yu was charged in 2019 with stealing, downloading, and copying Analog Devices’ trade secrets. Now, he and his wife have been charged with possession and attempted possession of a trade secret; transporting stolen goods; smuggling; visa fraud; and procuring U.S. citizenship unlawfully. Continue Reading Chinese Individual Indicted for Alleged Trade Secret Theft from Semiconductor Company

Given the value of trade secrets in the global economy, businesses should always be on high alert for signs of misappropriation of trade secrets or other confidential information. COVID-19 has only increased the importance of doing so given employee mobility and a growing remote work force, which not surprisingly has spurred litigation by businesses attempting to protect trade secrets.

One recent example, CourtAlert.com (“CourtAlert”), a company offering case monitoring software for the legal industry, brought suit against a former employee and its competitor American LegalNet, Inc. (“ALN”) alleging trade secret misappropriation, unfair competition, and unjust enrichment among other claims.  See CourtAlert.com, Inc. v. American LegalNet, Inc., No. 1:20-cv-07739 (S.D.N.Y.). Continue Reading Trade Secret Battle Waged in Legal Services Market

On October 2, 2020, a federal judge for the Central District of California denied a motion for a temporary restraining order (“TRO”) to enjoin the Discovery Channel from airing “The Lost Lincoln,” a documentary about an allegedly long-lost photograph of Abraham Lincoln on his deathbed.  Only 130 photographs of Lincoln are known to exist.

Plaintiffs Jerry Spolar and Terry Williamson own the photograph, known as an ambrotype, and spent years researching and authenticating it.  In 2018, they partnered with Whitny and James Braun to make a documentary about the photo and shared the details of their authentication efforts with the Brauns pursuant to non-disclosure agreements.  The project fell through at first, but late last month, Plaintiffs learned that their former partners had created a documentary about the photograph for the Discovery Channel. Continue Reading Court Denies TRO in “The Lost Lincoln” Misappropriation Case

On September 14, 2020, China’s highest court, the Supreme People’s Court of the People’s Republic of China, released the “Opinions on Increasing Enforcement Against Intellectual Property Infringement According to Law” (关于依法加大知识产权侵权行为惩治力度的意见) (“Opinions”).

The Opinions cover four main areas: (1) Evidence Preservation, (2) Injunctions, (3) Monetary Relief, and (4) Criminal Enforcement

  • Evidence Preservation
    • Articles 1-4 cover evidence preservation.  Evidence preservation is a measure taken by Chinese courts to investigate, collect, and preserve evidence when it may be destroyed or difficult to collect in the future.  Article 2 directs courts to promptly review and decide an application for an injunction and an application for evidence preservation when a party applies for both.  Article 4 allows courts to make inferences in favor of an intellectual property rights holder when the alleged infringer damages or transfers evidence subject to an evidence preservation order.

Continue Reading China Increases Focus on Protecting Against Intellectual Property Infringement

Recent United States Department of Justice (“DOJ”) indictments of Chinese hackers provide a reminder that trade secrets and other intellectual property stored on databases are attractive targets to bad actors. The DOJ announced that seven international defendants were charged in connection with computer intrusion campaigns impacting more than 100 victims in the United States and abroad.

The victims of the cyberattacks included software development companies, computer hardware manufacturers, telecommunications providers, social media companies, video game companies, non-profit organizations, universities, think tanks, and foreign governments. The hacking facilitated the theft of source code, software code signing certificates, customer account data, and other valuable business information. These cyberattacks also enabled the defendants’ other criminal schemes, including ransomware attacks and “crypto-jacking” schemes, which involve the unauthorized use of victim computers to “mine” cryptocurrency.

Continue Reading DOJ Indictment of Chinese Hackers for Break-Ins at 100 Companies Reinforces The Importance of Protecting Trade Secrets and Implementing Security Protections

Not surprisingly given the hundreds of billions of dollars of American intellectual property lost to China each year, trade secret theft and China is a hot topic for the public and private sector alike.

On September 29, 2020 2:00 -3:00 pm EDT, Caroline Brown and Jim Stronski will share their thoughts on the latest developments in this space including enforcement trends and best practices to protect trade secrets.

We encourage you to register here to benefit from their insights on this important topic.

In Epic Systems Corp. v. Tata Consultancy Services Ltd., Epic Systems Corp. (“Epic”) filed a case in the U.S. District Court for the Western District of Wisconsin accusing Tata Consultancy Services Ltd. (“TCS”) of stealing documents and confidential information related to software applications performing billing, insurance benefits management, and referral services for health care companies.

In 2016, a federal jury ruled in Epic’s favor on all claims, ordered TCS to pay $140 million for uses of the comparative analysis, $100 million for uses of “other” confidential information, and $700 million in punitive damages. We reported on the jury verdict here and permanent injunction here. The district court later struck the compensatory award for “other uses” and reduced the punitive damages award from $700 million to $280 million because of a Wisconsin statute capping punitive damages at two times compensatory damages. See Wis. Stat. § 895.043(6).

Shortly thereafter, both TCS and Epic appealed the verdict – TCS challenged the punitive damages decision and Epic appealed the decision to vacate the $100 million award relating to uses of “other” confidential information. On August 20, 2020, the Seventh Circuit issued an opinion which reduced the punitive damages amount, but upheld the jury’s $140 million verdict. The Seventh Circuit held that TCS gained an advantage in its development and competition from its use of the comparative analysis and stolen information and that “the jury would have a sufficient basis to award Epic $140 million in compensatory damages” based on TCS’s use of Epic’s information to make a comparative analysis. In addition, the Seventh Circuit concluded that Epic did not provide “more than a mere scintilla of evidence in support of its theory that TCS used any other confidential information” such that the $100 million award could not stand. Continue Reading Seventh Circuit Upholds $140 Million Compensatory Damages Award and Caps Punitive Damages at $140 Million in Trade Secret Case

On September 2, 2020, a Southern District of California judge granted Defendant Road Runner Sports, Inc.’s motion to dismiss, finding that Plaintiff, Profade Apparel, LLC, failed to state a trade secret misappropriation claim under the federal Defend Trade Secrets Act (“DTSA”).

At Road Runner’s request, Profade designed a “Trigonomic Arch Support Sock” for sale in Road Runner running stores.  But, after ordering just a few small batches of the socks, Road Runner allegedly stopped buying the socks from Profade.  According to Profade, Road Runner then contracted with a separate vendor to manufacture socks using Profade’s design.

In asserting a DTSA claim, Profade described its trade secrets as “proprietary and confidential information regarding the development, design, and manufacture of the Trigonomic Arch Support Sock.”  It also claimed Road Runner misappropriated the “roadmap” for producing the Trigonomic Arch Support Sock.  To support these allegations, Profade attached a contract between the parties to its complaint.  The contract contemplated the parties exchanging confidential information relating to the socks’ design and production. Continue Reading Beep, Beep: Road Runner Escapes DTSA Claim, for Now

On August 6, 2020, the U.S. International Trade Commission (“ITC”) released a public version of the Final Initial Determination (“ID”) in the Matter of Botulinum Toxin Products (Inv. No. 337-TA-1145), that, if upheld by the ITC Commission, might signal an expansive view of the ITC’s territorial jurisdiction and the scope of trade secret protection. The ITC’s jurisdiction in trade secret investigations is limited to matters that destroy or substantially injure a “domestic industry in the United States.” An interesting aspect of the ID is that it recommends banning importation of a Botox-competitor product (Jeuveau®) that was found to incorporate misappropriated trade secrets of a foreign Complainant whose domestic licensee and Co-Complainant have yet to make any sales of that product in the United States. The ID also found “domestic injury” based on the licensee’s industry, not the licensed trade secret’s industry. The Commission will issue a final decision in November. Continue Reading ITC Administrative Law Judge Decision Implicates Scope of Trade Secret Protections

It’s no secret that trade secret litigation can be expensive. Whether you are bringing a lawsuit to protect your crown jewels or defending against alleged trade secret misappropriation, we offer some useful strategies for managing and mitigating costs in trade secret litigation:

  1. Get Ready, Go! Identifying trade secret misappropriation is only the beginning of the story.  Well before filing a trade secret lawsuit, plaintiffs must work to locate relevant documents, interview witnesses with knowledge, identify the trade secrets at issue, and explore strategic considerations including the appropriate venue, the applicable law, and legal claims including related breach of contract and common law claims. Defending against a trade secret case requires getting up to speed quickly, identifying key defenses, and often rapidly preparing oppositions to requests for injunctive relief or expedited discovery.
  2. Budget Wisely. Trade secret litigation can move quickly from complaint to emergency injunctive relief or stretch on for years when mired in contentious discovery disputes or debates over the nature and contour of often technical or complex trade secrets.  Budgeting clearly from the start ensures that litigation goals are met and cost expectations are understood.  Proposed budgets should include breakdowns of (1) staffing, including level, location, years of experience, expected work, hourly rate, and projected hours for each team member; (2) forecasting fees and costs at each phase and expected milestone throughout the life of a trade secrets litigation, (3) regular interim updates in addition to year-to-date or matter-to-date costs and fees, and (4) assumptions or limitations built into the budget.  Electronic task management systems can collect data on billing unique to each phase of the litigation or milestones such as resolution of initial injunctive relief or preparing trade secret identification to stay on track with budgeted goals.  Planning for unexpected budget excesses, which may occur due to early disputes over trade secret identification or early expedited discovery, help manage expectations and avoid rejection of invoices. We provide tips for creating and maintaining a budget in Crowell’s Legal Project Management Guidebook.
  3. Don’t Lose Sight of Discovery Costs. Discovery can be the single most expensive phase of any litigation so keeping a close eye on these costs can lead to big savings.

Continue Reading Trade Secret Litigation Strategies: Tools for Managing Costs