Last week, a District Court in the Southern District of New York imposed a $40,000 sanction on SIMO Holdings, Inc. (“SIMO”) for violating a pretrial discovery protective order. SIMO disclosed four documents covered under the protective order to persons not permitted to view those documents, and the Court determined that a $10,000 sanction for each document was warranted.
Continue Reading Plaintiff Sanctioned for Violating Protective Order by Sharing Discovery
ITC Decision Adds New Wrinkle to Ban of Botox Competitor in Trade Secret Misappropriation Case
On December 16, the U.S. International Trade Commission (“ITC”) affirmed in part and reversed in part Administrative Law Judge David P. Shaw’s final initial determination from July against a South Korean manufacturer of an anti-wrinkle beauty treatment made from the botulinum toxin bacteria called Jeuveau. The ITC affirmed the ALJ’s findings with respect to the manufacturing process trade secrets but overturned the ALJ’s finding that Complainants Medytox and Allergan had any protectable interest in the bacterial strain itself. As a result, the ITC rejected the ALJ’s recommendation that a 10-year ban be imposed and concluded that Respondents Daewoong and Evolus should be barred from importing Jeuveau for 21 months instead. The ITC’s decision also issued a cease and desist order to prevent Evolus from selling any products previously imported unless it posts a bond equal to $441 for each 100-unit vial of Jeuveau. A full opinion on the ITC’s decision will be available roughly two weeks from now.
Continue Reading ITC Decision Adds New Wrinkle to Ban of Botox Competitor in Trade Secret Misappropriation Case
Ninth Circuit Opens the Door to Modifying a Trade Secret Identification After Discovery
Under the California Uniform Trade Secrets Act (CUTSA), and many other states’ trade secret acts, a plaintiff must identify its alleged trade secrets as a prerequisite to conducting discovery. Cal. Civ. Code § 2019.210. The Ninth Circuit recently held that the Defend Trade Secrets Act (DTSA) also includes this requirement to identify alleged trade secrets with sufficient particularity. The Ninth Circuit was considering whether the U.S. District Court for the Central District of California had abused its discretion in granting summary judgment for a defendant on CUTSA and DTSA claims by finding that the plaintiff had not identified its trade secrets with sufficient particularity without any discovery. (Spoiler alert: It did.)
Continue Reading Ninth Circuit Opens the Door to Modifying a Trade Secret Identification After Discovery
Court Denies TRO in “The Lost Lincoln” Misappropriation Case
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
Pot Got Your Tongue? Company Alleges Former COO Disclosed Trade Secrets to Competitors
A new lawsuit in the medical marijuana industry raises questions about the enforceability of noncompetes under Massachusetts’ new statute. On August 26, 2020, Alternative Compassion Services, Inc., (“ACS”) filed a federal lawsuit against its former Chief Operating Officer, Defendant Matthew Radebach (“Radebach”).
Continue Reading Pot Got Your Tongue? Company Alleges Former COO Disclosed Trade Secrets to Competitors
First Circuit Reverses Misappropriation Verdict, Citing Lack of Specificity
On July 21, 2020, the First Circuit clarified the high burden that a plaintiff faces when asserting that certain types of business materials are protected trade secrets. In TLS Mgmt. & Mktg. Servs., LLC v. Rodriguez-Toledo, No. 19-1104, 2020 WL 4187246, at *6 (1st Cir. July 21, 2020), the court reversed a district court’s bench trial verdict in favor of the plaintiff in a trade secret misappropriation case on the ground that the business materials at issue did not constitute trade secrets. Plaintiff TLS Management and Marketing Services, LLC, a Puerto Rico-based tax planning and consulting firm, argued that the defendants misappropriated two of its protectable trade secrets: (1) a portion of its “Capital Preservation Reports,” which contained tax recommendations specific to an individual TLS client based on an analysis of applicable statutes and regulations; and (2) its “U.S. Possession Strategy,” which consisted of a scheme that would allow Plaintiff’s clients to take advantage of a lower tax rate on outsourced services by contracting with Plaintiff and buying its shares.
Defendant Rodriguez-Toledo was the founder of Plaintiff’s competitor, Defendant ASG Accounting Solutions Group, Inc., and for some time worked for Plaintiff TLS as a Managing Director under a subcontract between Plaintiff and ASG. After departing from TLS, Rodriguez-Toledo provided tax advice to Plaintiff’s former clients regarding how to avoid certain tax penalties triggered by terminating their relationships with TLS, which TLS’s U.S. Possession Strategy was also intended to avoid. Rodriguez-Toledo also allegedly downloaded the Capital Preservation Reports from TLS’s Dropbox account without authorization before he left TLS. TLS filed suit against both ASG and Rodriguez-Toledo for misappropriation of the two trade secrets and violation of a nondisclosure agreement. The district court found they had misappropriated both trade secrets following a bench trial, and the defendants appealed.Continue Reading First Circuit Reverses Misappropriation Verdict, Citing Lack of Specificity
Caught between a rock and a hard place; that is, a subpoena and a protective order
A federal judge in Colorado declined to sanction Plaintiff DTC Energy Group Inc. (“DTC”) for disclosing information governed by a civil protective order. DTC Energy Group, Inc. v. Hirschfeld, 1:17-cv-01718 (D. Colo. July 27, 2020).
DTC, a consulting and staffing firm serving the oil and gas industry across the United States, filed suit in July 2017 against Defendants Ally Consulting, LLC (“Ally”), a former business partner and direct competitor of DTC, and two former DTC employees.
The amended complaint alleged a variety of claims, including trade secret misappropriation, unfair competition, breach of employment contract, and civil conspiracy to steal trade secrets.
During discovery, and subject to an oral protective order issued by the court, Ally produced to DTC documents and information that contained certain of Ally’s trade secrets. DTC later shared documents produced as “confidential” in the litigation with both its outside criminal attorney and with a Denver assistant district attorney after receiving a grand jury subpoena for those documents. Ally and the other defendants accused DTC of malfeasance and of willful violation of the protective order, and sought sanctions in the litigation.Continue Reading Caught between a rock and a hard place; that is, a subpoena and a protective order
Eleventh Circuit Solidifies Protection of Trade Secrets Threatened By “High-Tech Corporate Espionage” Under Florida’s Trade Secret Law
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
Livestock Feed Trade Secrets Case Put Out to Pasture
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.
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A Story of Disloyalty and Deception: The Third Circuit Chimes in on Ownership Requirements in Trade Secrets Act Cases
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