Trade Secrets Trends

Trade Secrets Trends

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

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.

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Parties Settle $100M Trade Secret Case on Eve of Trial

Posted in Data Protection, U.S. Litigation

Fera Pharmaceuticals LLC, Akorn Inc., and Perrigo Co. PLC have settled a $100 million trade secrets case three weeks before trial was set to begin in the U.S. District Court for the Southern District of New York.  The case primarily involved trade secrets related to the production of erythromycin.  In its lawsuit filed in 2012, the plaintiff, Fera, alleged that defendant Akorn misappropriated trade secrets received from Fera under the guise of needing that information to fulfill a contract between the parties, in which Akorn was a supplier and manufacturer for Fera.  The complaint further alleged that Akorn used the trade secrets to begin its own production of erythromycin and that Akorn began selling the medicine in direct competition to Fera.  In its complaint, Fera sought compensatory damages in excess of $100 million, as well as punitive damages.

In 2015, Akorn filed counterclaims against Fera as well as Perrigo, alleging that those two entities had engaged in a conspiracy to keep Akorn out of the market for a separate Bacitracin ophthalmic ointment.  Had the parties not settled the matter, trial on all claims would have begun on February 20, 2018.

According to a letter submitted to the district court by legal counsel for Perrigo, the parties “reached an agreement in principle for a global resolution of all claims,” though the terms of the settlement were not disclosed.

When You Do the Crime, You Must Do the Time

Posted in Asia, U.S. Litigation

Sinovel Wind Group Co. Ltd. (“Sinovel”) was convicted on January 24, 2018 for stealing trade secrets from AMSC, a U.S. based company. In March 2011, Sinovel, a manufacturer and exporter of wind turbines based in the People’s Republic of China, contracted with AMSC to sell more than $800 million in products and services for its wind turbines.

On June 27, 2013, Sinovel was charged of conspiracy to commit trade secrets theft, theft of trade secrets, and wire fraud, along with Su Liying, Sinovel’s Deputy Director of Research and Development Department; Zhao Haichun, a technology manager for Sinovel; and Dejan Karabesevic, a former employee of AMSC Windtec Gmbh, a wholly-owned subsidiary of AMSC. The evidence presented at trial showed that Sinovel conspired with the other defendants to obtain AMSC’s copyrighted information and trade secrets in order to produce wind turbines and to retrofit existing wind turbines with AMSC technology without paying AMSC the more than $800 million it was owed under the contract.

Because of the theft of its information and trade secrets, AMSC lost more than $1 billion in shareholder equity and approximately 700 jobs, over half its global workforce. Sentencing is set for June 4, 2018. U.S. Attorney Scott C. Blader stated that the “verdict sends a strong and clear message that the theft of ideas and ingenuity is not a business dispute; it’s a crime and will be prosecuted as such.”

A Trade Secret Telenovela: Defendants Alleged to Have Misappropriated Trade Secrets, Engage in Tortious Interference, and Unfair Trade Practices

Posted in U.S. Litigation

Earlier this month, Sunbelt, a North Carolina Corporation, filed a federal lawsuit against Vortex companies and Vortex Turnkey Solutions (hereinafter named “Vortex”) alleging misappropriation of trade secrets, tortious interference, and unfair trade practices. In a case of follow the “footprints,” Sunbelt alleges that Vortex, through a serious of events, “willingly accepted information from Ghent, a former employee of Sunbelt that they knew or should have known to be Sunbelt’s trade secret and/or confidential information.” Furthermore, the complaint states that Vortex solicited, encouraged, or otherwise incentivized, through salary negotiations, said disclosures and breach of the agreement. Vortex and Sunbelt are direct business competitors in selling and renting industrial and construction equipment and providing services, such as turnkey pumping bypass solutions. There are two key parts to this complaint: 1) Can confidential materials including customer lists and rental histories, and other records and documents pertaining to business transactions be considered a trade secret?; 2) Can Sunbelt successfully prove that Vortex had actual or constructive knowledge of Ghent’s agreements with Sunbelt.

Ex-Employee of IBM Sentenced to Prison for Theft of Source Code

Posted in Criminal Prosecution, Data Protection

On January 18, 2018, a former software developer for IBM Corp. was sentenced to five years in prison after he had pleaded guilty of theft of a trade secret and economic espionage.  As part of his work for IBM, Xu Jiaquiang had access to proprietary source code which facilitates faster computer performance by coordinating work among multiple servers.  Despite IBM’s precautions in place to protect the secrecy of the code, including a firewall and express authorization required for any employee to obtain access, Xu stole and used portions of the code as part of an attempt to sell the code to undercover FBI agents.

Xu pleaded guilty to the charges on May 19, 2017.  The Department of Justice’s press release from that same day provides further details regarding the circumstances of the FBI’s investigation and the allegations against Xu.  That press release is publicly available here.

Advanced Video: Time to Check Your Agreement Provisions

Posted in U.S. Litigation

On January 11, 2018, the Federal Circuit issued a game-changing decision that addressed the pitfalls of an entity’s attempt to secure the ownership of intellectual property rights through an employment agreement. The Court held that three different provisions that the employer argued effected an assignment of intellectual property rights were not sufficient to convey those rights to the employer.

In Advanced Video Technologies, Inc. v. HTC Corporation, the employment agreement under review had three provisions that the employer unsuccessfully tried to rely upon: (i) a provision that the employee “will assign” to the company the employee’s rights to any inventions, (ii) a provision whereby the employee agreed to hold in trust for the employer any intellectual property rights, and (iii) a provision, whereby the employee agreed that she waived and quitclaimed all interests that the employee had assigned under the employment agreement. The Court held that none of these was enough to confer ownership of the patent at issue. Therefore, the Court ruled that because the company did not own the patent in suit, it lacked standing to bring the lawsuit. All of this because one inventor out of three did not assign her rights to the company.

The patent at issue lists three co-inventors and the invention was created while the co-inventors were all employed with a predecessor in interest to Advanced Video. Two of the three co-inventors assigned their ownership interests during prosecution, so the entire dispute as to ownership in the company centered on whether the third inventor had assigned her interest in the patent to the company. The third inventor asserted that she had not assigned her patent rights to the company. Therefore, HTC moved to dismiss on this basis. In response, Advanced Video argued that the inventor’s ownership rights transferred under the terms of the Employment Agreement. The relevant language is:

I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and will assign to the Company all my right, title, and interest in and to any and all inventions, original works of authorship, developments, improvements or trade secrets which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time I am in the employ of the Company. Id. at 6.

The Court stated that “[t]he ‘will assign’ language alone does not create an immediate assignment of [the inventor’s] rights in the invention to [the company].” Id. at 6. The Court reasoned that the “will assign” provision was only a promise to do something in the future, but did not mean that the employee had already effectuated an assignment.

Next, Advanced Video argued that the “will hold in trust” language created an immediate trust under California law in favor of the transfer. But, according to the Court, even if that were the case and the interests were placed into a trust, “ it does not follow that that these interests were automatically, or ever, actually transferred out of trust in favor of [the company].” Id. at 7. Under California trust law, a trust beneficiary “generally is not the real party in interest” and has no standing to bring a patent infringement action. Id. at 7.

Finally, Advanced Video maintained that it has standing to bring this action because it acquired the inventor’s rights in the invention through the quitclaim provision in the Employment Agreement. The quitclaim provision states:

I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may thereafter have infringement of [sic] of any patent, copyrights, or mask work rights resulting from any such application assigned hereunder to the Company. Id. at 8−9.

The Court stated that the language in the quitclaim provision “waives [the inventor’s] rights to interests in any patent rights that she assigned under the agreement.” Id. at 9. Since no patent rights were ever assigned to Advanced Video, the quitclaim provision has no application. Id. at 9. Therefore, the quitclaim provision in the Employment Agreement did not effectuate an assignment of the patent rights.

The takeaways from the Advanced Video decision are relatively simple. First, employers should take a hard look at their employment and/or any confidentiality agreements that address ownership of intellectual property rights. Second, employers should ensure that the provisions dealing with ownership are written to clearly effectuate a current assignment of intellectual property rights instead of a promise to do something in the future.

Florida Fourth District Court of Appeal Affirms Decision to Produce Uber’s Airport Business Reports

Posted in U.S. Litigation

Uber continues to find itself in the midst of trade secret-related controversy. Last Wednesday, the Florida Fourth District Court of Appeal affirmed the trial court’s decision in ordering Broward County to produce redacted monthly Uber reports to Yellow Cab. These monthly reports contain information regarding the number of pickups and drop-offs, time stamps, latitude and longitude, and driver’s license plate information. Following the trial court’s in camera inspection of the un-redacted reports, it held that the “aggregate number of pick-ups and the sum of money paid by [Uber] to the County as a usage fee at the [airport] does not constitute trade secret information such that it would be exempt found no abuse of discretion by the trial court, noting that the Public Records Act is construed “liberally and favors openness”, and citing Cotter v Lyft, Inc., No. 13-cv-04065-VC, 2016 WL 3654454, at *2 (N.D. Cal. June 23, 2016), which held that Lyft’s commissions and revenue from certain products were not trade secrets. The Court thus held that “[n]othing indicates the fees or total pickups provide an advantage to Yellow Cab or that Uber derives independent economic value from keeping that information secret.”

Case: Rasier-DC, LLC v. B & L Serv., Inc., 4D16-3070, 2018 WL 354557 (Fla. 4th Dist. App. Jan. 10, 2018).