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.
Continue Reading Under Alcom v. Temple, Speculative Harm Does Not Meet the Irreparable Harm Requirement

When does a cause of action come close enough to a trade secret claim to become preempted by the California Uniform Trade Secrets Act (“CUTSA”)? CUTSA preempts statutory and common law claims “based upon misappropriation of a trade secret.” In other words, with some exceptions, claims predicated on trade secret misappropriation allegations may only be asserted through a CUTSA claim.

California courts have articulated two different CUTSA preemption tests: (1) the “common nucleus” test and (2) the “dependence” test. In many cases, the two tests will yield the same result. Sometimes, however, the tests will produce divergent outcomes.
Continue Reading Two Tests for Trade Secret Preemption under California Law

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).
Continue Reading “Authorized Access”: The Supreme Court’s First Foray Into The Computer Fraud and Abuse Act

In an effort to further combat the international theft of intellectual property, the U.S. government has taken multiple steps to restrict certain companies’ ability to operate within the United States and to prevent those companies from profiting off of their illegal activities. The governmental activity also underscored the increasingly important role that tech companies have in the administration’s national security policies.

Earlier this year, the President signed into law. H.R. 4998, the Secure and Trusted Communications Networks Act of 2019 (‘the Legislation”), which prohibits certain Federal subsidies from being used to purchase communications equipment or services from Huawei and other providers that are deemed to pose a risk to national security.
Continue Reading Tech Companies, National Security, Trade Secrets, and the Increased Controls on the Export of Emerging Technologies

The COVID-19 pandemic presents unique and unprecedented challenges to the ongoing need to protect confidential information and trade secrets. With entire workforces working remotely, employees are increasingly relying on video services to remain connected, but the increasing prevalence of video services does not come without problems. For example, Zoom Video Communications Inc. (“Zoom”) is a videoconferencing app which allows multiple people to be in the same “virtual room” at once and which has seen an uptick of users since the COVID-19 crisis. While Zoom permits employees to remain in contact, it and other video services also permit employees to use and share confidential information and trade secrets from their home. Now more than ever companies need to be extra vigilant in what platforms they allow their employees to use and how their employees use the platforms.
Continue Reading Is the Platform You’re Using a Potential Threat to Protecting Your Trade Secret?

As autonomous vehicles quickly move farther towards the mainstream, the underlying technology has become increasingly more valuable and has led to an uptick in the theft of autonomous vehicle (“AV”) trade secrets. Indeed, criminal prosecutions of former employees for trade secret theft have been on the rise, especially in the autonomous vehicle segment. Two recent cases underscore the enforcement agencies’ efforts to stem the rise in trade secret theft in the AV segment. Anthony Scott Levandowski was a former executive at both Uber and Google. He departed Google and created a new company named Ottomotto, LLC that was later purchased by Uber. Levandowski pled guilty to theft of trade secrets from Google, admitting that he downloaded approximately 14,000 files from an internal, password-protected Google server to his personal laptop, including a key internal tracking document from Google that detailed the status of its self-driving car program. Levandowki faces a maximum sentence of 10 years in prison, and $250,000 fine plus restitution.
Continue Reading Prosecutions of Trade Secret Theft by Former Employees in Autonomous Vehicle Development

Coronavirus-related emergency measures may limit litigants’ ability to protect trade secrets in state court. State courts are drastically altering their operations in response to the novel coronavirus pandemic, including closing courthouses, continuing trials and other deadlines, suspending rules requiring paper filings, and encouraging, if not requiring, telephone and videoconferencing.

New York State, which as of the publishing of this piece was the state with the highest number of confirmed cases in the United States, has imposed some especially restrictive measures for litigants in state court. New York’s Chief Administrative Law Judge, has restricted all non-essential filings (and has also postponed all “nonessential” services). New York courts are only accepting filings pertaining to emergency matters, which the Administrative Order defines to include criminal matters; family court; certain Supreme Court matters including guardianship matters, emergency election law applications, and extreme risk protection orders; and civil housing matters, including landlord lockouts, serious code violations, serious repair orders, and applications for post-eviction relief. The Order is available here. Filings in most civil suits are, accordingly, restricted.
Continue Reading Coronavirus Related Restrictions on Emergency Trade Secrets Filings in New York

A recent decision by the Federal District Court for the Eastern District of New York reinforces that owners of trade secret computer programs should carefully approach copyright registration in order to maintain both copyright and trade secret protection. This includes being conscious of copyright regulations allowing the partial and redacted registration of computer code with the Copyright Office.

In a recent manifestation of this principle, Capricorn Management Systems accused GEICO of misappropriating Capricorn’s trade secret source code for medical billing software. Last week, the court granted GEICO’s motion for summary judgment, holding that the code was not entitled to trade secret protection, in part because it was registered, unredacted, with the U.S. Copyright Office, and was therefore publicly available.
Continue Reading GEICO Earns Victory at Intersection Between Copyright and Trade Secret Law Covering Source Code

Recently the District Court for the Southern District of New York issued a decision that illustrates the risks of taking an informal approach to protecting confidential business information. As described below, in Pauwels v. Deloitte et al., No. 19-CV-2313 (RA), 2020 U.S. Dist. LEXIS 28736 (S.D.N.Y. Feb. 19, 2020), the court dismissed Plaintiff’s complaint, finding that the facts alleged by Plaintiff failed to give rise to a valid claim for misappropriation because (among other issues) Plaintiff failed to impose adequate protections on his alleged confidential business information.

The Plaintiff worked as an “independent advisor” to the Bank of New York Mellon (“BNYM”), earning upwards of $750,000 per year for his advice on how to optimize BNYM’s investments in alternative energy companies (e.g., wind farms).  No contract governed the relationship; instead, Plaintiff submitted periodic invoices for his advisory work. In the course of his work, Plaintiff developed an investment model as a tool for analyzing BNYM’s alternative energy investments, and in his complaint he alleged that the tool was his proprietary information. Over the course of several years, Plaintiff sent BNYM more than 100 spreadsheets showing implementations of his investment model. Eventually, BNYM retained Deloitte to provide the analyses and severed its relationship with Plaintiff. Plaintiff alleged that Deloitte improperly used his proprietary model when advising BNYM.
Continue Reading Pauwels v. Deloitte: A Cautionary Tale About Informal Approaches to Protecting Confidential Business Information

Source: Claudia Künkel (Flickr)

A lawsuit seeking $1 billion in damages based on allegations that the rideshare company was founded based on stolen trade secrets can now move forward after a jury in San Francisco Superior Court decided last month that the plaintiff’s claim was timely filed. The complaint alleges that former Uber CEO Travis Kalanick and others misappropriated Plaintiff Kevin Halpern’s idea for a startup called Celluride Wireless Inc. – a peer-to-peer service enabling passengers to summon drivers and track them with their cell phones. Halpern claims that he disclosed information about his idea to Kalanick under the promise of secrecy around 2006. The Uber app was launched four years later.

In defense, Kalanick claims that Uber Chairman Garrett Camp, also an individual defendant in the lawsuit, came up with the idea that later became Uber when the two were in Paris. According to Kalanick and Camp, Camp’s initial concept was for a limo timeshare service.
Continue Reading Billion Dollar Trade Secret Misappropriation Lawsuit Against Uber to Move Forward