The U.S. Department of Justice has secured yet another conviction against a Chinese national for trade secret theft which is part of a larger push to protect valuable intellectual property.
 

 
Li Chen, a long time biotech researcher in a medical lab at Nationwide Children’s Hospital Research Institute in Ohio, pled guilty to conspiracy

On October 7, 2019, the U.S. Department of Justice (“DOJ”) issued a Step-by-Step Guide for Determining if Commercial or Financial Information Obtained from a Person is Confidential Under Exemption 4 of the FOIA. The Step-by-Step Guide is used by agencies, in conjunction with guidance from the Office of Information Policy (“OIP”) to determine whether commercial or financial information provided by a person is “confidential” under FOIA Exemption 4. FOIA Exemption 4 protects trade secrets and commercial information that is privileged or confidential. The DOJ Guidance is another tool that can be used by practitioners to determine when information must be disclosed under a FOIA Request.

The DOJ Guidance followed on the heels of the Supreme Court’s decision in in Food Marketing Institute v. Argus Leader Media (described in a previous blog post) where the Supreme Court addressed the question of “when does information provided to a federal agency qualify as confidential.” The Supreme Court held that information is confidential and protected if: (1) the information is “customarily kept private, or at least closely held” and (2) where the receiving party provides “some assurance” that the information will be kept secret.

The DOJ Guidance outlines three questions to help determine if information is confidential under FOIA Exemption 4.
Continue Reading DOJ Step-by-Step Guidance to Determine if Trade Secrets are Confidential Under the Freedom of Information Act (FOIA)

This week, the U.S. government continued its enforcement activity against Chinese government-sponsored trade secret theft, indicting two Chinese hackers for allegedly stealing data from 25 domestic and international companies, including targeting those now researching COVID-19 testing, vaccines, and treatment. The two defendants had allegedly acquired hundreds of millions of dollars worth of trade secrets and other valuable business information across a span of nearly eleven years. This announcement follows in the wake of the indictment of Dr. Charles Lieber, a former Harvard professor, who allegedly lied about his participation in China’s “Thousand Talents Plan,” a program that has been accused of facilitating the stealing of American trade secrets. Our coverage of that indictment is here.

On Tuesday, July 21, 2020, the U.S. Department of Justice (“DOJ”) announced charges against Li Xiaoyu and Dong Jiazhi in the Eastern District of Washington, alleging that they hacked the computer networks of 13 United States and 12 international companies in industries ranging from high tech manufacturing and medical device engineering to solar energy and pharmaceuticals, all between September 2009 and July 2020.
Continue Reading DOJ Targets Chinese Hackers for Stealing United States Trade Secrets

The trade secrets of American industries and research institutions are often the target of foreign interests, as this blog has detailed in the past. Most recently, on June 9, 2020, the U.S. Department of Justice (“DOJ”) indicted the former Chair of Harvard University’s Chemistry and Chemical Biology Department and nanoscientist, Dr. Charles Lieber, for allegedly making false statements to federal authorities about his participation in China’s “Thousand Talents Plan.” This Plan, according to a 2019 Senate report, is part of China’s “strategic plan to acquire knowledge and intellectual property from researchers, scientists, and the U.S. private sector.” Past participants in the Plan have included a former General Electric engineer, Xiaoqing Zheng, who was indicted in April 2019 for allegedly stealing GE’s trade secrets related to turbine technology while employed at GE Power & Water in Schenectady, New York.

China’s Thousand Talents Plan began in 2008 and has been a concern of the U.S. government for some time. A 2019 Senate report characterized the Plan as a danger to American national security and proprietary information and stated that it “incentivizes individuals engaged in research and development in the United States to transmit the knowledge and research they gain [in the United States] to China in exchange for salaries, research funding, lab space, and other incentives.”
Continue Reading Harvard Professor Indicted for Allegedly Lying About Participation in Chinese Talent Recruitment Program

China’s National People’s Congress has released a draft law for comment that would impose harsher criminal penalties for any trade secret theft from Chinese companies that benefits foreign companies.

China’s current law imposes a maximum sentence of 3 years imprisonment for “serious” instances and 10 years for “particularly serious” instances of trade secret theft. The proposed law would impose harsher sentences for trade secret theft benefiting a foreign entity, resulting in 5 years for “serious” instances and a minimum of 5 years with no maximum for “particularly serious” instances.
Continue Reading China Proposes Harsher Penalties for Trade Secret Theft in Draft Amendment

Companies looking to protect valuable trade secrets and confidential information routinely employ multiple precautions ranging from employee training to technological safeguards.

Another potential tool in the arsenal, and worth careful consideration for companies operating in the government contract space, is the National Institute of Standards and Technology’s (NIST) recently released final public draft of enhanced security requirements. NIST Special Publication (SP) 800-172, formerly known as Draft NIST SP 800-171B, provides 34 enhanced requirements to protect Controlled Unclassified Information (CUI) associated with critical programs or high value assets from the risks posed by advanced persistent threats (APTs).
Continue Reading Companies Protecting Trade Secrets Should Consider Role of NIST’s Enhanced Security Requirements

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.
Continue Reading Misappropriation Claims Brought Over Tax Trade Secrets

The legal saga between L’Oreal USA Inc. and Olaplex LLC (“Olaplex”) over a hair-coloring product continues. In August 2019, a Delaware federal jury found that L’Oreal misappropriated Olaplex’s trade secrets, willfully infringed two Olaplex patents, and breached a nondisclosure agreement. The jury awarded Olaplex $22.3 million for willful infringement of trade secrets, $22.3 million for breach of contract, and $47 million for patent infringement. On March 24, 2020, the court entered a $66.2 million final judgment including attorneys’ fees and prejudgment interest.

Earlier this month, L’Oreal appealed and asked the Federal Circuit to reverse this judgment based on purported errors by the district court in (1) improperly excluding two witnesses and (2) improperly granting summary judgment on patent infringement.
Continue Reading L’Oreal Appeals $66 Million Trade Secret Judgment

On June 3, 2020, the Fourth Court of Appeals of Texas overturned a jury verdict awarding HouseCanary, Inc. (“HouseCanary”) $740 million in damages for trade secret theft and fraud against Title Source, Inc., now known as Amrock.

Amrock and HouseCanary are competitors in the real estate sector. Amrock provides title insurance, property valuations, and settlement services in real estate transactions. HouseCanary is a real estate analytics company that developed software to determine property values. HouseCanary agreed to provide this software to Amrock, and, according to HouseCanary, Amrock reversed engineered it. After the relationship between the two broke down, Amrock sued HouseCanary for breach of contract and fraud, and HouseCanary counterclaimed for breach of contract, fraud, misappropriation of trade secrets, among other claims. The jury found for HouseCanary, awarding it compensatory and punitive damages as well as attorney’s fees.
Continue Reading Faulty Jury Instruction Wipes Out $740 Million Verdict

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