Recent Decisions and Case Developments

Apple, Inc. must pay a subsidiary of Acacia Research Corp, a large patent licensing company, $22.1 million after a federal jury found that it had willfully infringed a cellular network-related patent. An Eastern District of Texas jury found that Apple Inc.'s iPhones and iPads infringe a patent on wireless communication technology owned by a subsidiary of Acacia Research Corp.

Plaintiffs, Cellular Communications Equipment, filed suit in 2014 alleging that Apple's mobile devices infringed six patents. At the time of trial, only one patent remained. The patent at issue (U.S. Patent No. 8,055,820) was acquired by Cellular Communications Equipment and covered technology for managing the resources used to send data over communications network and increasing the efficiency of communicating.

The jury said that Apple did not prove with clear and convincing evidence that any asserted claims of the patent are invalid as obvious or based on improper inventorship. Since the jury found that Apple's infringement was willful, the judge could ultimately award plaintiff Cellular Communications Equipment LLC three times the damages, or $66.4 million.

In Conxall Corp v. ICONN Systems, LLC, at al. the Illinois Appellate Court determined what constitutes “bad faith” under §5 of the Illinois Trade Secret Act for purposes of awarding attorneys’ fees. In a divided decision, the court proposed two standards for defining “bad faith” under the statute.

Section 5 of the Illinois Trade Secret Act states that if “a claim of trade secret misappropriation is made in bad faith . . . the court may award reasonable attorneys’ fees to the prevailing party.” The majority held that Illinois courts should determine the meaning of “bad faith” by examining if the pleadings were frivolous or in some way abuse the judicial process. The concurring judge followed California’s approach, which held that a claim is made in “bad faith” under California’s Trade Secret Act if it consists of “(1) objective speciousness and (2) subjective bad faith." The majority noted that the California approach has been adopted in a number of federal courts.

Despite taking different approaches to defining “bad faith,” the judges all agreed to remand the issue to the lower court for consideration.

A copy of the opinion can be found here: http://www.tradesecretsnoncompetelaw.com/files/2016/09/Conxall-Corp-v-ICONN-Systems-LLC_-Illinois-App-Court-1st-Dist_opinion-from-court-site.pdf

The Commonwealth Court of Pennsylvania has ruled against Lyft, Inc.’s (Lyft) request to designate its aggregate trip data as a trade secret. This ruling comes out of two consolidated petitions for review filed by Lyft and Kim Lyons, a reporter for PG Publishing, Inc., d/b/a The Pittsburgh Post-Gazette (collectively, PG) from two orders of the Public Utility Commission (PUC).

In 2014, Lyft briefly attained experimental authority to operate as a transportation network company (TNC) in both Allegheny County and the entire Commonwealth. Shortly thereafter, the Bureau of Investigation and Enforcement (BIE) filed a complaint against the company, which prompted PUC to terminate Lyft’s authority to operate in the area. Administrative law judges for BIE have requested data from Lyft—including the number of rides utilized in certain areas before Lyft had full authority to operate—which Lyft objects to providing on the basis that this information constitutes a trade secret.

On review, PUC initially found and then reaffirmed that the data Lyft sought to protect merely constituted aggregate data, which rarely attains trade secret status from the Commission and did not here. Additionally, PUC found that the economic harm Lyft would face as a result of releasing such information did not outweigh the public’s interest. In fact, “the number of trips during the period before Lyft received authority to operate posed a risk to public safety.”

Speaking in the case at bar, Judge Simpson of the Commonwealth Court affirmed PUC’s determination. Judge Simpson notes that PUC properly analyzed what constitutes a trade secret pursuant to its own regulation, 52 Pa. Code §5.365, (Regulation), which differs from the definition of trade secret provided in Pennsylvania’s Uniform Trade Secrets Act. The differences between the Regulation and the Act had the effect of nullifying Lyft’s arguments in reliance on any state court precedent.

Specifically, PUC’s Regulation places the burden on the moving party (Lyft) to 1) prove that disclosure will result in substantial harm and 2) that the harm outweighs public interest in a transparent hearing. In balancing these two prongs, the PUC clearly supports an analysis of these factors: (1) The extent to which the disclosure would cause unfair economic or competitive damage. (2) The extent to which the information is known by others and used in similar activities. (3) The worth or value of the information to the party and to the party’s competitors. (4) The degree of difficulty and cost of developing the information. (5) Other statutes or regulations dealing specifically with disclosure of the information.

Judge Simpson ruled that the data requested by PUC is not detailed enough to trigger economic harm to Lyft as demanded by the factors above. He also denied Lyft’s argument that its competitors could extrapolate detailed information from the aggregate data to gain a competitive market edge. The Court called this argument “speculative and vague.” Therefore, Lyft had failed to prove the first prong of PUC’s Regulation, losing its opportunity to obtain a protective order for its ride data.

Finally, the Court denied PG’s request for an Interim Emergency Order to intervene in the case in the public interest, on the basis that PG’s aims have already been achieved. Judge McCullough, concurring in the majority’s ruling that Lyft’s aggregate data is not proprietary, dissents on this issue. Judge McCullough believes PG, as a conduit of information to the public, has the right to attain party status in this case, especially since Lyft is likely to repeat its attempts to keep certain vital information private as the case moves forward.

Read the full opinion here: http://www.pacourts.us/assets/opinions/Commonwealth/out/843cd15_8-31-16....

Background:
Patrick Daugherty was a partner and senior executive at Highland Capital Management, L.P. ("Highland") until he left to start a competing business. Highland sued Daugherty for theft of trade secrets and for breach of his employment contract. At trial, Highland presented evidence showing that Daugherty forwarded Highland documents to his personal email address, kept printouts of other emails, and kept 40,000 documents on his laptop that included portfolio and pricing information, as well as documents regarding Highland's internal management and operations.

At trial, the court found that that while Daugherty had breached his contracts with Highland, Highland's damages from the breaches of contract were $0. The jury found that the information that Daugherty took did not constitute trade secrets but did constitute "Confidential Information" as that term was defined in Daugherty's employment agreement with Highland. However, the jury awarded Highland $2.8 million in attorney's fees. The trial court upheld the findings and issued a permanent injunction against Daugherty, preventing him from further retaining or disclosing Highland's confidential information.

Daugherty appealed, challenging the judgment's award of $2.8 million in attorney's fees to Highland. He argued that Highland failed to please or tender a jury question for contractual attorney's fees, and was thus not entitled to attorney's fees by statute because the jury found zero damages on Highland's claim for breach of contract. Texas Civil Practices and Remedies Code Section 38.001(8) states that awarding attorney's fees for breach of contract should only occur when there is a finding of damages. The Dallas Court of Appeals rejected Daugherty's arguments and affirmed the jury verdict and trial court injunction.