Recent Decisions and Case Developments

February 24, 2017 | United States District Court for the Eastern District of Pennsylvania
Jury Awards Fig Jam Maker Millions in First DTSA Verdict

On February 24, 2017, a federal jury handed down the first verdict under the Defend Trade Secrets Act (DTSA). Dalmatia Import Group and Maia Magee (“Plaintiffs”) develop and sell various flavors of high quality fig jam. After their business relationship deteriorated, Plaintiffs sued their former distributors, Foodmatch, Inc. and Lancaster Fine Foods, Inc. (“Defendants”). In the suit, Plaintiffs alleged that Defendants’ competing fig jam impersonated Plaintiff’s product, more specifically, that Defendants stole the recipe for Plaintiff’s fig jam. Furthermore, Plaintiffs claimed that Defendants sold and distributed rejected jars of Plaintiff's fig spread, using Plaintiff’s trademark, without consent.

Plaintiffs brought claims for breach of contract, trademark infringement, counterfeiting, and misappropriation of trade secrets. After a four-week trial in the United States District Court for the Eastern District of Pennsylvania, the jury found Defendants liable for misappropriation of trade secrets, trademark infringement and counterfeiting. The jury awarded Plaintiffs $2.5 million in damages, which Plaintiffs’ attorneys estimate will double to roughly $5 million after the damages are trebled. Plaintiffs' attorneys also stated the court will issue an injunction enjoining Defendants from using Plaintiff’s trade secrets in the future.

The case is Dalmatia Import Group v. Foodmatch, Inc. et al., 16-cv-02767 (E.D. Pa. Feb. 24, 2017).

February 23, 2017 | United States District Court for the Northern District of California
Battle of Self-Driving Cars

Waymo LLC, a self-driving car startup under Alphabet (originally known as Google’s Self-Driving Car Project), filed a complaint in California’s Northern District accusing Uber of violating the Defense of Trade Secrets Act and the California Uniform Trade Secret Act, as well as patent infringement. Waymo alleges that a former Google employee, Anthony Levandowski, secretly downloaded 14,000 files of “highly confidential data” from Google’s hardware systems before resigning a month later and launching a self-driving truck startup called Otto. Uber acquired Otto in August 2016 and put Levandowski in charge of its self-driving efforts. Waymost alleges that Levandowski used the information from Google’s system to launch Otto.

The complaint very specifically names the ways in which Levandowski stole the data. The data revolves around a key piece of technology called LiDAR ("Light Detection and Ranging"), which uses high-frequency, high-power pulsing lasers to measure distances between one or more sensors and external objects to build a detailed map of the environment around the car. Waymo has invested millions in its own LiDAR hardware and alleges that Levandowski misappropriated this data in developing Otto and working for Uber.

Filed complaint: http://nyti.ms/2mMwBcA

January 24, 2017 | Appellate Division, First Department, New York State Supreme Court
Sergey Aleynikov Found Guilty (Again) of Stealing Software from Goldman Sachs

On January 24, 2017, the New York State Supreme Court Appellate Division, First Department, reinstated defendant Sergey Aleynikov's ("Aleynikov") guilty conviction for stealing trading software from Goldman Sachs ("Goldman"). The decision came after a series of litigation that sought to determine whether Aleynikov violated federal or state law by making an electronic copy of the software on an external hard drive just before he left Goldman to work at a competing company.

Aleynikov was formerly an employee of Goldman Sachs, where he worked as a computer programmer. During his time with Goldman, Aleynikov wrote and maintained software for high frequency trading computer programs, which are central to Goldman's business. Goldman took several measures to safeguard the software, some of which included increasing security, limiting employee access, and requiring all employees to sign a confidentiality and nondisclosure agreement. In 2009, Aleynikov left Goldman to work for Teza Technologies, one of Goldman's competitors. Before he left, he transferred a digital copy of Goldman's trading software to a hard drive outside the company's server. As a result, he faced criminal charges in federal and state court.

In February 2010, Aleynikov was charged with violating the National Stolen Property Act and the Economic Espionage Act. In December 2010, the United States District Court for the Southern District of New York convicted him. However, on appeal the US Court of Appeals for the Second Circuit reversed his conviction in April 2012.

Shortly after, in September 2012, Aleynikov was charged by the state of New York in New York County with two counts of unlawful use of secret scientific material and one count of unlawful duplication of computer related material. After trial in July 2015, the jury acquitted Aleynikov on the unlawful duplication of computer related material charge, and the court dismissed the charges for unlawful use of secret scientific material. The People appealed, and on January 24, 2017, the New York Supreme Court Appellate Division reversed, and reinstated his conviction with respect to the unlawful use of secret scientific material charge.

The Appellate Division reasoned that the evidence was sufficient to establish that Aleynikov misappropriated scientific information. According to the court's decision, Aleynikov did not challenge the People's contention that he electronically copied the Goldman software, nor did he deny that the software constitutes secret scientific material. Furthermore, the court rejected Aleynikov's arguments that he did not possess requisite intent to commit the offense and that he did not make a tangible copy of the software.

The case is The People of the State of New York v. Sergey Aleynikov, New York State Supreme Court, Appellate Division, First Department, No. 4447/12. A copy of the court's opinion can be found here: http://tsi.brooklaw.edu/cases/people-state-new-york-v-sergey-aleynikov/filings/sergey-aleynikov-found-guilty-again-stealing-

December 20, 2016 | California Superior Court of San Francisco County
Employee Sues Google for Overbroad Confidentiality Agreements

Plaintiff “John Doe,” a project manager at Google, sued the company in California State Court, claiming they illegally require employees to sign broad confidentiality agreements. Doe filed the complaint in the California Superior Court of San Francisco County on December 20, 2016.

The agreements essentially state that Google employees cannot disclose any company information that is not generally known with anyone, including other Google employees. According to the complaint, these confidentiality agreements are contrary to state law because they can prevent employees from discussing their wages or disclosing information to government agencies. Furthermore, the complaint alleges that Google enforces its confidentiality policy through an internal program called “Stopleaks” which essentially asks employees to spy on each other and report any disclosure of confidential information.

Google defends the confidentiality agreements as an attempt to protect sensitive company information and maintains it is committed to maintaining an open culture within the company.

The case is Doe vs. Google Inc. et al., Docket No. CGC16556034 (Cal. Super. Ct. Dec. 20, 2016). A copy of Doe’s complaint can be found here: http://tsi.brooklaw.edu/cases/doe-vs-google-inc-et-al/filings/employee-sues-google-overbroad-confidentiality-agreements

December 6, 2016 | U.S. Supreme Court
Samsung Electronics Co. Ltd. Et al v. Apple Inc.

On Tuesday, December 6, 2016, In the Samsung Electronics Co. Ltd. Et al v. Apple Inc. case, case number 15-777, the U.S. Supreme Court, reversed a Federal Circuit ruling that found that Samsung must pay its profit from the entire phones found to infringe Apple’s design patents, which covered the front face of the phones and the arrangement of icons on the home screen.

Justice Sonia Sotomayor said that owners of design patents are not always entitled to the total profits from the infringing product sold to consumers. In this case, the device has multiple components and thus the award may be limited to those specific features that infringed.

Chief Justice John Roberts also commented that “It seems to me that the design is applied to the exterior case of the phone. It’s not applied to all the chips and wires… so there shouldn’t be profits awarded based on the entire price of the phone.”

Apple did not dispute that it is entitled to profits only from the infringing articles of manufacture, but said that Samsung bared the burden to prove that the relevant article of manufacture was something less than the entire smartphone and failed to do that. The Supreme Court did not resolve whether, for each of the design patents at issue in the case, the article of manufacture was the smartphone or a component of the phone. This issue has been left to the Federal Circuit on remand.

The patents-in-suit are U.S. Patent Numbers D593,087, D604,305 and D618,677. The case is Samsung Electronics Co. Ltd. et al. v. Apple Inc., case number 15-777, in the U.S. Supreme Court.

November 17, 2016 | Austin Division, United States District Court for the Western District of Texas
Texas Agency Sued in Trade Secrets Lawsuit

On November 17, 2016 pharmaceutical giant Pfizer, Inc. (“Pfizer”) sued Texas’s Health and Human Services Commission (“HHSC”) in federal court. Pfizer alleges that the HHSC misappropriated confidential information regarding its prices and rebate information for Texas Medicaid when it revealed the information to state lawmakers.

Pfizer claims the HHSC sent confidential detailed information regarding its drug prices and rebate protocol to two state senators. In its complaint, Pfizer argues this was a violation of 42 U.S.C. §1396r-8(b)(3)(D), which, in part, states that information disclosed by manufacturers or wholesalers is confidential, and cannot be disclosed a state agency. Furthermore, Pfizer alleges the HHSC violated a Texas law, which also prohibits the unauthorized disclosure of information obtained by the HHSC regarding drug rebate negotiations or other related trade secrets. Pfizer also claims that the HHSC has refused to specifically disclose which company information it released to the senators. Pfizer expresses concern in its complaint that the pricing information released would give competitors an unfair advantage in bidding situations.

Pfizer seeks a declaratory judgment in its favor and injunctive relief to prevent further release of its confidential information.

The case is Pfizer, Inc. v. Texas Health and Human Services Commission et al.

Pfizer’s complaint can be found here:
http://tsi.brooklaw.edu/cases/pfizer-inc-v-texas-health-and-human-services-commission-et-al/filings/pfizer-inc-v-texas-healt

October 31, 2016 | Suffolk County Superior Court
America’s Test Kitchen Sues Former Host for Misappropriating Tasty Trade Secrets

America’s Test Kitchen Inc. (“Plaintiff”) owns multimedia publications and productions, including television programs such as America’s Test Kitchen, cooking magazines and books, and several websites. Plaintiff sued Christopher Kimball (“Defendant”), a celebrity chef and the former host of its TV shows. Plaintiff alleges that Defendant misappropriated its trade secrets and breached his fiduciary duty to the company. Plaintiff filed the lawsuit on October 31, 2016.

Defendant left Plaintiff’s program in November 2015, and recently developed his own program called Christopher Kimball’s Milk Street. Plaintiff alleges that Defendant created his company using its image to attract new customers, and marketed his program as an enhanced version of America’s Test Kitchen. Plaintiff also contends that Defendant stole from its collection of recipes, TV show ideas, media contacts, and subscriber information. It seems Plaintiff and Defendant did not have a formal non-compete agreement in place.

Plaintiff is seeking damages against Defendant and a disgorgement of all profits that he has derived through the use of the trade secrets he allegedly misappropriated from America’s Test Kitchen. Plaintiff’s complaint also names Melissa Baldino (Defendant’s wife), Christine Gordon, and Deborah Broide as defendants, and claims that they aided and abetted Defendant’s breach of his fiduciary duties.

The case is America’s Test Kitchen, Inc., v. Christopher Kimball et al., 1684-cv-03325.

Plaintiff’s complaint can be found here: http://tsi.brooklaw.edu/cases/americas-test-kitchen-v-christopher-kimball-et-al/filings/america%E2%80%99s-test-kitchen-sues-former-h

October 20, 2016 | US International Trade Commission
Jawbone Loses Fight to Ban Fitbit Imports

According to a ruling issued by the US International Trade Commission (ITC), Fitbit did not steal Jawbone's trade secrets, and the ITC will not revive Jawbone's efforts to seek an import ban on fitness-tracking devices by Fitbit for allegedly misappropriating trade secrets.

The trade secrets case between Jawbone and Fitbit began in July 2015 when Jawbone initially accused Fitbit of infringing six of its patents and of poaching its employees to use their knowledge of Jawbone's trade secrets. Jawbone hoped that the ITC would ban Fitbit from importing its products to the US from its overseas manufacturing partners. Fitbit manufactures its devices overseas and imports them to the US.

Administrative Law Judge Sandra Lord found in August 2016 that Fitbit had no violated the Tariff Act because "no party has been shown to have misappropriated any trade secret." Violating the Tariff Act would have given the commission the ability to block importation of products that infringe U.S. intellectual property. The ruling by the ITC in October 2016 confirms the previous ruling and is the full commission's third ruling in Fitbit's favor in the past five months.

October 6, 2016 | United States District Court for the Southern District of Iowa
Chinese National Sentenced to Three Years for Conspiring to Steal Trade Secrets

On October 5, 2016, U.S. District Judge Stephanie M. Rose sentenced Mo Hailong (“Robert Mo” or “Mo”) to 3 years in prison for conspiracy to steal trade secrets from DuPont Pioneer and Monsanto. Mo was a legal resident living in Florida at the time of his arrest.

In the plea agreement, Robert Mo admitted he participated in a long-term conspiracy to steal trade secrets from DuPont Pioneer and Montsanto. Mo stole genetically modified seeds from both companies and sent them to scientists in Beijing, China. He was one of three other men from China arrested in 2013 for sending stolen, genetically modified seeds to China to be counterfeited. The stolen seeds are for a strain of corn that is one of the agricultural industry’s most valuable secrets.

The Judge opted to sentence Mo to prison time rather than community service to deter Chinese companies from engaging in such criminal behavior. In addition to sentencing Robert Mo, the Court ordered the forfeiture of two farms in Iowa and Illinois that Mo purchased with others during the course of the conspiracy.

September 27, 2016 | UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA-TAMPA DIVISION
DTSA Remedies Potentially Available Even When Misappropriation Began Before Its Enactment

A federal district court in Florida has ruled that in cases of continuous misappropriation where a plaintiff can establish that at least one occurrence took place after the effective date of the Defend Trade Secrets Act (May 11, 2016), that plaintiff is entitled to at least partially recover under the DTSA. Neither party raised the question of whether this butts against the notion that you cannot apply a statute retroactively.

In this case, Plaintiff Adams Arms, which specializes in military-grade rifles, alleges that Defendant Unified Weapon Systems, Inc. ("UWS") both improperly acquired and disclosed its trade secrets. Adams Arms says that its rifles’ unparalleled reliability is the result of certain mechanical processes, mixes of parts, and the vendors used to supply them. Plaintiff disclosed this information to Defendants because they had been working together to win a bid with the Peruvian military. They also granted a tour of their facility, and handed over pricing information. Prior to this exchange, in 2014, parties executed a "Mutual Confidentiality and Nondisclosure Agreement," which was to be binding upon the companies and their representatives and officers.

However, relations between the parties soured when Defendant began locking Plaintiff out of meetings with the Peruvian client, and—Plaintiff alleges—attempted to sell to the client UWS rifles that were actually retooled Adams Arms rifles, following Plaintiff’s mechanics and designs.

Plaintiff Adams Arms seeks to recover under the DTSA, while Defendants believe the trade secrets misappropriation claim (Count 5 of the complaint) should be dismissed because the UTSA governs all incidents prior to May 11, 2016. The Court rejected Defendants’ motion to dismiss. Judge Hernandez Covington said that UWS signed a contract with the Peruvian military after May 11th, using the Adams Arms designs, specifications, and processes, which enables Plaintiff’s disclosure claim to advance in court. However, all trade secrets were acquired pre-DTSA, so Plaintiff’s misappropriated acquisition claims cannot be remedied under that statute.

Read the full case here: https://www.bloomberglaw.com/public/desktop/document/Adams_Arms_LLC_v_Un...