On September 14, 2018, a former scientist at GlaxoSmithKline (“GSK”) pled guilty to conspiring to steal trade secrets from his former employer. Dr. Tao Li was accused of stealing confidential information about anti-cancer drugs from a GSK facility in Upper Merion, Pennsylvania after conspiring with other GSK employees who provided information to him via email, in person, and on a thumb drive. Dr. Li had established a rival company in Nanjing, China with financial backing from the Chinese government. The trade secrets allegedly stolen from GSK included detailed information about multiple products under development and information about manufacturing these products. This case is part of a larger trend, as federal authorities seek to crack down on the theft of trade secrets used to establish competitor companies in China. The United States Attorney for the Eastern District of Pennsylvania, William McSwain, commented “[n]ot only is this a serious crime, but it is literally a form of economic warfare against American interests. Such criminal behavior must be prosecuted to the fullest extent of the law.” Dr. Li will be sentenced on January 4, 2019 and faces up to 10 years in federal prison.
On August 1, 2018, Xiaoqing Zheng was arrested for alleged theft of trade secrets belonging to General Electric (“GE”). Mr. Zheng, a graduate of MIT and an engineer who worked in the Power division of GE, is accused of stealing dozens of encrypted computer files related to turbine operation. In order to get the files out of the building, Mr. Zheng allegedly hid the data in the code for a picture of an “innocuous looking” sunset, which he then emailed to his personal email address. However, GE had been monitoring Mr. Zheng’s computer activity after it learned that he had downloaded 19,000 other files to an external hard drive. According to a company statement, GE had been in “close cooperation with the FBI for some time on this matter.” The statement continued, “At GE, we aggressively protect and defend our intellectual property and have strict processes in place for identifying these issues and partnering with law enforcement.” The FBI complaint alleges that Mr. Zheng was using the trade secrets to benefit an aeronautical company he owns in China. This isn’t an isolated incident. Just last month, China-based Sinovel Wind Group paid a $57.5 million dollar settlement related to stolen data regarding wind turbine technology that it took from Massachusetts-based technology company American Superconductor Inc.
On March 15, 2018, HouseCanary, a data-analytics startup, was awarded $706 million in damages by a jury in Texas in its lawsuit against Title Source, an affiliate of Quicken Loans. The jury found Title Source misappropriated trade secrets including HouseCanary’s technology and appraisal analytics and breached both confidentiality and other agreements between the parties. While Title Source engineers were building the automated valuation model (“AVM”), HouseCanary alleged they helped themselves to other intellectual property, algorithms, analytics, and proprietary data without paying for it. In fact, an email from a Title Source employee encouraged colleagues to “think big and wide about how to maximize the value of the HouseCanary data to our business.” The jury found that a combination of lost profits and the benefit that Title Source obtained from the trade secrets misappropriation warranted $235 million in damages but tripled the damages due to a finding of deliberate conduct resulting in a final damages award to over $700 million. A big number indeed.
In what is likely the first case of its kind, the United States District Court for the Eastern District of Pennsylvania dismissed a counterclaim for infringement of trade secrets, which the pharmaceutical company Lanett brought in the context of a wrongful termination suit initiated by a former employee. The Defend Trade Secrets Act was passed in May 2016 and allows the holder to a trade secret to bring suit in federal court when their trade secret has been misappropriated. However, in Christian v. Lannett Co., Inc., the alleged misappropriation happened during a document production made pursuant to a court order, which the court held is immunized by the Defend Trade Secrets Act.
In Krawiec v. Manly, owners of a ballroom dance studio sued two former employees pursuant to a non-compete clause in their employment contracts. The plaintiffs claimed their former employees began working at a competing dance studio where they shared “original ideas and concepts for dance productions, marketing strategies and tactics, as well as student, client and customer lists and their contact information.” However, the studio’s claim under North Carolina’s Trade Secrets Protection Act was dismissed by the North Carolina Business Court based on the pleadings, which did not specifically state each of the required components of a trade secrets claim. In upholding the dismissal, the North Carolina Supreme Court stated, “To plead misappropriation of trade secrets, a plaintiff must identify a trade secret with sufficient particularity so as to enable a defendant to delineate that which he is accurse of misappropriating and a court to determine whether misappropriation has or is threatened to occur.”
In the most recent installment of the long running saga between Waymo and Uber over autonomous vehicle technology, Waymo has accused Uber of intentionally withholding evidence from discovery. Specifically, Waymo alleges that Uber failed to produce a letter of resignation from its former Global Intelligence Manager, Richard Jacobs. Waymo asserts that the letter is “[e]vidence that the Jacobs documents [that allegedly had been taken from Waymo and ultimately brought to Uber] were broadly known within Uber … [and] would confirm that these documents were not mistakenly withheld (as Uber’s witnesses have claimed), but that they were instead intentionally concealed as part of an overall cover-up.” The existence of the letter and related correspondence came to light when a prosecutor, working on a separate (criminal) investigation, turned it over to U.S. District Judge William Alsup, the presiding judge in the civil case. Judge Alsup has not yet ruled on Waymo’s motion.