Trade Secret Misappropriation

A new indictment alleging misappropriation of U.S. oil and gas trade secrets by a Chinese energy company, its U.S.-based affiliate, and an executive is another example in a recent string of prosecutions for trade secrets theft involving China, a topic that we have covered on the blog here.

Continue Reading Grand Jury Indicts Chinese Energy Company, U.S. Oil and Gas Affiliate, and Chinese National on Trade Secrets Charges

A fundamental question in every trade secret misappropriation case is: what are the alleged trade secrets that are the subject of the claim?  To assist parties and courts in answering this question, the Sedona Conference recently published Commentary on the Proper Identification of Asserted Trade Secrets in Misappropriation Cases (“Commentary”) which is available for download here.

The Commentary provides four guiding principles for identifying different types of asserted trade secrets:

  1. the identification of an asserted trade secrets during a lawsuit is not an adjudication of the merits or a substitute for discovery;
  2. the party claiming trade secret misappropriation should identify in writing the asserted trade secret at an early stage of the case;
  3. the party claiming the existence of a trade secret must identify the asserted trade secret at a level of particularity that is reasonable under the circumstances; and
  4. the identification of an asserted trade secret may be amended as the case proceeds.


Continue Reading Sedona Conference Publishes Commentary on Proper Trade Secret Identification

Why litigate a case for months or years, only to arrive at a settlement that would have been possible before the case began?  In many cases, neither litigant would choose this approach, but it happens quite often nonetheless.  According to Lex Machina data, about 60% of trade secret cases filed in federal court in the last decade ended in either a voluntary (8%) or stipulated (52%) dismissal.  Of course, many of these settlements were likely informed by discovery and the arguments made by the parties in court.  But in other cases, resolutions probably could have been reached before both parties incurred unnecessary litigation expenses.

Continue Reading Trade Secret Strategies: Using Standstill Agreements to Resolve Disputes Out of Court

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

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

In Epic Systems Corp. v. Tata Consultancy Services Ltd., Epic Systems Corp. (“Epic”) filed a case in the U.S. District Court for the Western District of Wisconsin accusing Tata Consultancy Services Ltd. (“TCS”) of stealing documents and confidential information related to software applications performing billing, insurance benefits management, and referral services for health care companies.

In 2016, a federal jury ruled in Epic’s favor on all claims, ordered TCS to pay $140 million for uses of the comparative analysis, $100 million for uses of “other” confidential information, and $700 million in punitive damages. We reported on the jury verdict here and permanent injunction here. The district court later struck the compensatory award for “other uses” and reduced the punitive damages award from $700 million to $280 million because of a Wisconsin statute capping punitive damages at two times compensatory damages. See Wis. Stat. § 895.043(6).

Shortly thereafter, both TCS and Epic appealed the verdict – TCS challenged the punitive damages decision and Epic appealed the decision to vacate the $100 million award relating to uses of “other” confidential information. On August 20, 2020, the Seventh Circuit issued an opinion which reduced the punitive damages amount, but upheld the jury’s $140 million verdict. The Seventh Circuit held that TCS gained an advantage in its development and competition from its use of the comparative analysis and stolen information and that “the jury would have a sufficient basis to award Epic $140 million in compensatory damages” based on TCS’s use of Epic’s information to make a comparative analysis. In addition, the Seventh Circuit concluded that Epic did not provide “more than a mere scintilla of evidence in support of its theory that TCS used any other confidential information” such that the $100 million award could not stand.
Continue Reading Seventh Circuit Upholds $140 Million Compensatory Damages Award and Caps Punitive Damages at $140 Million in Trade Secret Case

On September 2, 2020, a Southern District of California judge granted Defendant Road Runner Sports, Inc.’s motion to dismiss, finding that Plaintiff, Profade Apparel, LLC, failed to state a trade secret misappropriation claim under the federal Defend Trade Secrets Act (“DTSA”).

At Road Runner’s request, Profade designed a “Trigonomic Arch Support Sock” for sale in Road Runner running stores.  But, after ordering just a few small batches of the socks, Road Runner allegedly stopped buying the socks from Profade.  According to Profade, Road Runner then contracted with a separate vendor to manufacture socks using Profade’s design.

In asserting a DTSA claim, Profade described its trade secrets as “proprietary and confidential information regarding the development, design, and manufacture of the Trigonomic Arch Support Sock.”  It also claimed Road Runner misappropriated the “roadmap” for producing the Trigonomic Arch Support Sock.  To support these allegations, Profade attached a contract between the parties to its complaint.  The contract contemplated the parties exchanging confidential information relating to the socks’ design and production.
Continue Reading Beep, Beep: Road Runner Escapes DTSA Claim, for Now

On August 6, 2020, the U.S. International Trade Commission (“ITC”) released a public version of the Final Initial Determination (“ID”) in the Matter of Botulinum Toxin Products (Inv. No. 337-TA-1145), that, if upheld by the ITC Commission, might signal an expansive view of the ITC’s territorial jurisdiction and the scope of trade secret protection. The ITC’s jurisdiction in trade secret investigations is limited to matters that destroy or substantially injure a “domestic industry in the United States.” An interesting aspect of the ID is that it recommends banning importation of a Botox-competitor product (Jeuveau®) that was found to incorporate misappropriated trade secrets of a foreign Complainant whose domestic licensee and Co-Complainant have yet to make any sales of that product in the United States. The ID also found “domestic injury” based on the licensee’s industry, not the licensed trade secret’s industry. The Commission will issue a final decision in November.
Continue Reading ITC Administrative Law Judge Decision Implicates Scope of Trade Secret Protections

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

On August 13, 2020, a Delaware District Court judge granted Defendant Azstrazeneca Pharmaceuticals LP’s motion to dismiss, finding that Plaintiff Lithero, LLC failed to plead a plausible trade secret misappropriation claim under the federal Defend Trade Secrets Act (“DTSA”).

Lithero’s complaint alleged that Azstrazeneca misappropriated Lithero’s confidential and proprietary information regarding Lithero’s Automated Regulatory Assistant (“LARA”), including information regarding how it is trained and the process by which it learns, as well as “years of past research and development, the current capabilities of LARA coming as a result of that research and development, and detailed plans for future areas of growth.” But none of these allegations were sufficient to survive dismissal at the pleadings stage.


Continue Reading Too Much or Never Enough? Another Trade Secret Misappropriation Claim Dismissed