Competitor Misappropriation

On May 22, the Eleventh Circuit clarified trade secrets misappropriation analysis under the Florida Uniform Trade Secrets Act (“FUTSA”), strengthening the trade secret protection offered by the statute. The decision vacated a magistrate judge’s finding that the defendants had not misappropriated trade secretes following a bench trial in the Compulife Software Inc. v. Newman et al. matter (No. 18-12004). The court found error in the magistrate’s failure to “consider the several alternative varieties of misappropriation” contemplated by FUTSA and the magistrate’s reasoning that the public availability of life insurance quotes on the plaintiff’s website “automatically precluded a finding that scraping those quotes constituted misappropriation.”

“At its essence, it’s a case about high-tech corporate espionage,” Circuit Judge Kevin C. Newsom’s opinion begins. The plaintiff, Compulife Software Inc. (“Compulife”), sells access to its online database of insurance premium information, which synthesizes publicly available insurers’ rate tables using Compulife’s proprietary method and formula. Compulife also provides life insurance quotes sourced from its online database. The database itself is valuable because it consistently updates with current information about life insurers’ rate tables and allows for direct comparison across dozens of providers. Compulife licenses access to the database to its customers—primarily insurance agents who in turn seek to provide reliable insurance rate estimates to policyholders. In direct competition with Compulife, the defendants likewise generate life insurance quotes through their various websites.


Continue Reading Eleventh Circuit Solidifies Protection of Trade Secrets Threatened By “High-Tech Corporate Espionage” Under Florida’s Trade Secret Law

A Kansas District Court judge recently dismissed a trade secrets misappropriation action between two competing livestock nutrition companies.

In Biomin Am. Inc. v. Lesaffre Yeast Corp., Plaintiff Biomin America, Inc. (“Biomin”) sued competitor Lesaffre Yeast Corporation (“Lesaffre”) and two former Biomin employees who now work for Lesaffre, asserting trade secret misappropriation under the Federal Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836 (“DTSA”) as well as a handful of state law claims, including breach of contract, tortious interference, civil conspiracy, and unfair competition.

Specifically, Biomin alleged that the two employees misappropriated trade secrets and violated restrictive covenants contained within their Biomin employment agreements by soliciting Biomin employees and customers and marketing Lesaffre’s competing products at a lower price.
Continue Reading Livestock Feed Trade Secrets Case Put Out to Pasture

Plaintiffs wishing to sue for patent, copyright, or trademark infringement all have one thing in common: they must prove they own the IP at issue. Not so for trade secrets. Last month, the United States Court of Appeals for the Third Circuit held that the Pennsylvania Uniform Trade Secrets Act only requires a plaintiff to lawfully possess, rather than formally own, the trade secrets it wishes to vindicate. With this opinion, the Third Circuit affirmed a district court decision awarding $3.5 million in damages and fees to NASA subcontractor Applied Fluid Systems Inc. (“AFS”) in its suit for trade secret misappropriation.

The “sorry story of disloyalty and deception piled upon deception” began in 2009, when AFS entered into a three-year contract with the Virginia Commonwealth Space Flight Authority (the “Authority”) to build, install, and maintain a hydraulic system for a NASA rocket launch facility. However, the Authority experienced financial difficulty, and eventually had to cede control of the launch system to a private entity, Orbital Sciences Corp. (“Orbital”). Through this acquisition, Orbital inherited the AFS contract. Importantly, the initial contract between AFS and the Authority made any materials generated by AFS for the Authority the property of the Authority.
Continue Reading A Story of Disloyalty and Deception: The Third Circuit Chimes in on Ownership Requirements in Trade Secrets Act Cases

We continue our coverage of English Confidentiality Protections in Trade Secret and IP Cases by exploring a recent decision involving access of party experts to confidential information and trade secrets as part of confidentiality rings.

In Infederation Limited v Google LLC & Ors [2020] EWHC 657 (Ch), Infederation Limited a/k/a Foundem – a provider of online shopping comparison services – brought a case against Google alleging Google’s search result algorithms purportedly reduced its “ranking” in violation of competition law. The parties agreed to three confidentiality rings: (1) a top “confidential” ring including the founding members of Foundem, external solicitors, counsel, and economic experts; (2) an external solicitors, counsel, and economic experts ring (the legal eyes only or “LEO” ring); and (3) a further restricted “RLEO” ring, which was 10 named external solicitors and counsel. Google made an application to strike some of Foundem’s claims in part relying on evidence related to search algorithms designated as confidential, LEO, or RLEO. In order to review and evaluate these specially designated exhibits, Foundem requested that its search engine optimization (“SEO”) expert Mr. Klöckner, who was already part of the outer confidentiality ring, be added to the LEO and RLEO rings. Google pushed back, claiming that how it ranks search results should be kept confidential or its value would be lost and that it was unlikely that Mr. Klöckner could keep the knowledge he gained from his role in the proceedings separated from his independent work as an SEO consultant. Infederation Limited v Google LLC & Ors [2020] EWHC 657 (Ch) [24-26].
Continue Reading English Trade Secrets Proceedings: Experts May Be Permitted Access to Information In Confidentiality Rings

Companies and other organizations increasingly must face serious and complex threats to their business and infrastructure.  Whether the threat is trade secret theft, rogue insiders, cybercrime adversaries, aggressive competitors, or misconduct by business and supply chain partners, companies should remain constantly vigilant and defense ready. Adversaries, including especially cybercriminals operating exclusively in the digital domain, are often highly motivated, sophisticated, resourced, and innovative. The opaque, pervasive, and global nature of modern digital networked environments presents opportunities for criminals. The sophistication and relentless creativity of these bad actors pose significant challenges to companies and law enforcement agencies in being able to detect, assess, mitigate, attribute, and deter these threats. Because available tools and real-world practices to address these threats often outpace the law, companies are called upon to develop their own comprehensive approaches to investigate and remediate these forms of risk. In doing so, companies must be willing to assume a certain level of risk to effectively investigate and obtain sufficient insight to counter the problems.
Continue Reading Complex Threat Investigations: Tips for Investigating Trade Secret Misappropriation and Other Digital Crimes

The U.S. District Court for the Western District of Pennsylvania recently ruled that a forum-selection clause in a former employee’s non-compete agreement may bind their new employer for purposes of establishing personal jurisdiction.

Matthews International Corporation (“Matthews”), a manufacturer of cremation furnaces, filed an action in the Western District of Pennsylvania against former employees and two competitors, Implant Recycling, LLC (“Implant”) and IR Environmental Solutions, Inc. (“IR Environmental”), alleging misappropriation of trade secrets and unfair competition. According to Matthews’s complaint, its former employees saved confidential company information and trade secrets on their personal USB drives and emailed company files to themselves before leaving Matthews to join Implant or IR Environmental. These former employees were subject to non-competition agreements that required them to submit to personal jurisdiction in the Allegheny County Court of Common Pleas or the Western District of Pennsylvania.
Continue Reading Hirer Beware: Your Employee’s Non-Compete Agreement with their Former Employer May Determine Where You Can be Haled to Court

The Southern District of California recently confirmed that the California Uniform Trade Secrets Act (“CUTSA”) does not preempt other civil claims to extent they are based on wrongful conduct relating to non-trade secret intellectual property.

The case involves an employee leaving a company and allegedly commercializing its trade secret with a competitor. Defendant Mr. Corey was an original co-founder of Plaintiff Javo – which sold coffee, tea, and botanical extracts. He played a key role in developing Javo’s proprietary process for making extracts. The process involved using a specially made extraction vessel and particular levels of water quality, temperature and pressure. In 2011, as a result of Chapter 11 bankruptcy proceedings, Javo terminated Mr. Corey’s employment. Importantly to this case, his employment agreement had included an assignment of all his rights and interests in any trade secrets to Javo.

Mr. Corey went on to work for the Defendant, California Extraction Ventures (“CEV”). Shortly thereafter, Mr. Corey filed patent applications disclosing some of Javo’s allegedly proprietary information, including purported trade secret information, as well as other confidential (but not trade secret) information. Rather than assign the patent applications to Javo, Mr. Corey assigned them to CEV, his new employer. Eventually seven patents issued, and seven additional applications were published.
Continue Reading CUTSA Does Not Preempt Contractual Interference Claim Based on Confidential (But Not Trade Secret) Information

On November 5, 2019, Black Knight Inc. brought suit in Florida state court against PennyMac Loan Services LLC (“PennyMac”) alleging breach of contract and trade secret misappropriation under the Florida Uniform Trade Secrets Act. PennyMac allegedly used its access to Black Knight’s trade secrets and other confidential information relating to its proprietary mortgage servicing software

On September 23rd, 2019, the District Court for the District of Colorado awarded Atlas Biologicals, Inc. a total of $2 million against Defendant Thomas Kutrubes and his company, Peak Serum, Inc. Kutrubes, a part owner and former employee of Atlas, was found liable for trademark infringement, misappropriation of trade secrets, and breach of fiduciary duty.

After a week-long trial in June, a jury in the Southern District of Texas awarded digital marketing firm Six Dimensions, Inc. (Dimensions) $287,000 for its breach of contract claim against its former employee, Lynn Brading. However, the jury rejected Dimensions’ $50 million lawsuit against its competitor, Perficient Inc. (Perficient) for stealing its trade secrets.
Continue Reading Employee Wrongdoing Does Not Guarantee Favorable Trade Secrets Verdict