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.
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China Increases Focus on Protecting Against Intellectual Property Infringement
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.
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DOJ Indictment of Chinese Hackers for Break-Ins at 100 Companies Reinforces The Importance of Protecting Trade Secrets and Implementing Security Protections
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.
Crowell & Moring Presents Webinar on The U.S. Response to China’s Theft and Acquisition of Trade Secrets
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
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.
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Misappropriation Claims Brought Over Tax Trade Secrets
A recent case is a helpful reminder to companies with valuable intellectual property to be diligent in protecting trade secrets and monitoring compliance by employees with access to this confidential information.
On June 15, 2020, Ryan, LLC (“Ryan”) filed a lawsuit in Texas state court against S.K. Thakkar (“Thakkar”), who was employed by a company acquired by Ryan, and Ernst & Young, LLP (“Ernst & Young”), his new employer, seeking a temporary restraining order and permanent injunction based on alleged (1) trade secret misappropriation, (2) tortious interference with contract, and (3) breach of contract.
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IP and the Novel Coronavirus: Developing a Vaccine
During these unprecedented times, some people are itching to get back to “normal.” As evidenced by the excitement over the recent re-opening of some states and cities, there is an obvious desire to return to the way of life we remember. However, this likely won’t be fully possible without the development of a vaccine, which, along with health-treatment drugs, is understandably the subject of intensive development efforts.
There are lurking intellectual property (“IP”) law issues in this rush to develop a vaccine. Most notable are the potential issues surrounding possible patent infringement, and sharing (or misappropriation) of trade secrets. Drug manufacturers are racing to find treatment drugs that they can mass-produce and make a sizable profit on. But, should these manufacturers rely on patents or trade secrets to protect their drugs and vaccines? Considerations to be weighed include:
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Under Alcom v. Temple, Speculative Harm Does Not Meet the Irreparable Harm Requirement
On May 6, 2020, the U.S. District Court for the District of Maine denied plaintiff Alcom’s request for a temporary restraining order (“TRO”), which sought to enjoin a competitor’s alleged misappropriation of trade secrets. The court denied the request for a TRO, holding that Alcom’s speculation about the potential harm it would suffer absent the TRO was not enough to show a likelihood of irreparable harm, as required to obtain a TRO. The case serves as a reminder that when proving irreparable harm, courts require more than just speculation.
In 2015, Alcom (a trailer manufacturer) hired Mr. Temple (defendant) as a sales representative for its horse and livestock trailers. As the sole salesperson in North America for the Frontier line of trailers, Mr. Temple gained significant responsibilities including developing and maintaining sales leads, as well as growing Alcom’s customer base for those trailers. Mr. Temple signed various agreements as conditions to his employment, including (i) confidentiality agreement, (ii) non-disclosure agreement, (iii) non-compete agreement, and (iv) a non-solicitation agreement. Alcom required Mr. Temple to sign the agreements as a precondition for accessing highly valuable and confidential company information relating to customer incentive program details, sales and marketing information, and unique insights into the needs and operational requirements of the trailer dealers he solicited.
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“Authorized Access”: The Supreme Court’s First Foray Into The Computer Fraud and Abuse Act
On April 20, 2020, the Supreme Court granted cert in Van Buren v. United States, to resolve an important circuit split over the meaning of “authorized access” under the Computer Fraud and Abuse Act (CFAA). This is the Court’s first foray into analyzing the precise contours of CFAA liability. Van Buren may have far-reaching implications for any individual or business operating in the digital domain, as the scope of civil and criminal liability under the CFAA can impact just about any sort of relationship involving access to computer systems, whether it be employer-employee relationships or third-party relationships.
The CFAA was enacted in 1986 as a first-of-its-kind statute designed to combat computer-related crimes, and has become an important and powerful tool for not only for the government but any business seeking to protect its intellectual property and computer systems. The CFAA imposes criminal liability on any person who “intentionally accesses a computer without authorization” or “exceeds authorized access” and, in doing so, obtains information from any protected computer. The CFAA also provides a civil cause of action for similar conduct. See 18 U.S.C. §§ 1030(a)(2), 1030(a)(4), 1030(a)(5)(B)-(C).
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Patents as Evidence of Trade Secret Theft Does Not Create Federal Subject Matter Jurisdiction
The Federal Circuit recently rejected an attempt to avoid a trade secret trial in state court by invoking federal jurisdiction under patent law. Intellisoft discovered, in the early 2010’s, that Acer had applied for a patent which incorporated its alleged trade secrets. Intellisoft sued Acer in March 2014 in California state court asserting various state law claims, including trade secret misappropriation. The Acer patent was thus a key component of Intellisoft’s trade secret misappropriation evidence and was the subject of fact and expert discovery by both parties.
The case proceeded in state court for three years. As discovery wrapped up, one of Intellisoft’s experts opined that an Intellisoft employee – who created some aspects of the trade secrets at issue – should be named as an inventor on Acer’s patent. Additionally, a second Intellisoft expert opined that portions of the Acer patent’s claims corresponded to various Intellisoft trade secrets.
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