Crowell & Moring invites you to attend the webinar, 2020 Trade Secrets Year in Review, taking place on Thursday, January 28 at 12:00 pm ET. We will cover what you need to know about the big cases, changes, and developments relating to trade secrets from the past year.
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
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:
- the identification of an asserted trade secrets during a lawsuit is not an adjudication of the merits or a substitute for discovery;
- the party claiming trade secret misappropriation should identify in writing the asserted trade secret at an early stage of the case;
- 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
- the identification of an asserted trade secret may be amended as the case proceeds.
Given the value of trade secrets in the global economy, businesses should always be on high alert for signs of misappropriation of trade secrets or other confidential information. COVID-19 has only increased the importance of doing so given employee mobility and a growing remote work force, which not surprisingly has spurred litigation by businesses attempting to protect trade secrets.
One recent example, CourtAlert.com (“CourtAlert”), a company offering case monitoring software for the legal industry, brought suit against a former employee and its competitor American LegalNet, Inc. (“ALN”) alleging trade secret misappropriation, unfair competition, and unjust enrichment among other claims. See CourtAlert.com, Inc. v. American LegalNet, Inc., No. 1:20-cv-07739 (S.D.N.Y.).…
Continue Reading Trade Secret Battle Waged in Legal Services Market
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.
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.
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
It’s no secret that trade secret litigation can be expensive. Whether you are bringing a lawsuit to protect your crown jewels or defending against alleged trade secret misappropriation, we offer some useful strategies for managing and mitigating costs in trade secret litigation:
- Get Ready, Go! Identifying trade secret misappropriation is only the beginning of the story. Well before filing a trade secret lawsuit, plaintiffs must work to locate relevant documents, interview witnesses with knowledge, identify the trade secrets at issue, and explore strategic considerations including the appropriate venue, the applicable law, and legal claims including related breach of contract and common law claims. Defending against a trade secret case requires getting up to speed quickly, identifying key defenses, and often rapidly preparing oppositions to requests for injunctive relief or expedited discovery.
- Budget Wisely. Trade secret litigation can move quickly from complaint to emergency injunctive relief or stretch on for years when mired in contentious discovery disputes or debates over the nature and contour of often technical or complex trade secrets. Budgeting clearly from the start ensures that litigation goals are met and cost expectations are understood. Proposed budgets should include breakdowns of (1) staffing, including level, location, years of experience, expected work, hourly rate, and projected hours for each team member; (2) forecasting fees and costs at each phase and expected milestone throughout the life of a trade secrets litigation, (3) regular interim updates in addition to year-to-date or matter-to-date costs and fees, and (4) assumptions or limitations built into the budget. Electronic task management systems can collect data on billing unique to each phase of the litigation or milestones such as resolution of initial injunctive relief or preparing trade secret identification to stay on track with budgeted goals. Planning for unexpected budget excesses, which may occur due to early disputes over trade secret identification or early expedited discovery, help manage expectations and avoid rejection of invoices. We provide tips for creating and maintaining a budget in Crowell’s Legal Project Management Guidebook.
- Don’t Lose Sight of Discovery Costs. Discovery can be the single most expensive phase of any litigation so keeping a close eye on these costs can lead to big savings.
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