Recent Decisions and Case Developments

February 4, 2011 | Eastern District of Michigan
Dantec alleges that a direct competitor received stolen information about existing and prospective customers from a former employee

Dantec alleges defendant and direct competitor LaVision received confidential information about existing and prospective customers from a former Dantec salesperson, Michael Kotas who began work for LaVision after he was terminated. Kotas allegedly accessed Dantec's computer systems in order to obtain the information about Dantec’s customers then subsequently deleted electronic information to cover his tracks. Dantec claims that LaVision used the information to solicit business from its customers.

A scheduling/settlement conference is set for April 20, 2011.

January 26, 2011 | Eastern District of New York
Allegation of misappropriation of valuable customer information by independent contractors

Plaintiff, Liberty Power Corp. (LPC), brought suit against Defendants, Stewart Katz, Stewart A. Katz, Inc. (SAK) and Foundation Energy Services, LLC (FES), alleging misappropriation of certain customer information protectable as trade secrets. LPC is a supplier of electricity in states with deregulated energy markets that employs an in-house sales staff, as well as independent contractors, to carry out its work. Defendants, SAK and FES, are entities owned by defendant Stewart Katz that served as independent contractors to Plaintiff. Plaintiff alleges misappropriation of trade secrets and unfair competition, contending that certain customer specific information constituted trade secrets. Defendants contend the specific information at issue can be obtained from the customers and acquired from a commercially available sales lead list.

The court determined this information likely would constitute a trade secret and had been misappropriated by defendant. On Jan. 26, 2011, the court denied Plaintiff’s motion for a preliminary injunction on the grounds that it failed to sufficiently establish that it will suffer irreparable harm if the court does not issue a preliminary injunction.

December 15, 2010 | United States District Court for the District of Massachusetts (Boston)
Alleged misuse of software beyond the life of license agreement to discover software's unique processes

According to a copyright infringement complaint filed in the U.S. District Court for the Central District of California, Merriam-Webster continued to use Questrel's “Just-in-Time English” software after negotiations between the two companies for a new license agreement fell through. Questrel’s lawsuit also alleges breach of contract and misappropriation of trade secrets. According to the complaint, the trade secret is Questrel’s software and related methods, techniques, or processes, which were misappropriated when Merriam-Webster continued to use the software without Questrel’s consent.

Pursuant to a forum selection clause in the License Agreement between the parties, the suit was transferred to the United States District Court for the District of Massachusetts on March 24, 2011.

December 6, 2010 | Southern District of Texas
Accusation of abuse of confidential consumer info revealed by pharmacy benefit claims process

Six Texas pharmacies have brought suit against CVS Caremark for racketeering and misappropriation of trade secrets, accusing the company of requiring patients to buy maintenance medications at CVS retail pharmacies. The lawsuit, filed in September of 2010, claims that CVS does not maintain a “firewall” between its retail pharmacies and the pharmacy benefits management side of its business as required by the Federal Trade Commission. According to the complaint, each of the plaintiff pharmacies owns a trade secret in its patient lists, prescription files, and integrated patient information. The lawsuit claims that CVS misappropriated this confidential patient information, which was disclosed to CVS through the claims adjudication process.

Defendants moved to dismiss and compel arbitration on December 6, 2010. The deadline for plaintiffs to file their reply to defendants' motion to dismiss and compel arbitration was April 25, 2011.

April 30, 2010 | Southern District of New York
Hilton and Starwood Hotels reach settlement in suit alleging theft of trade secrets and use of secrets to develop competing luxury brand of hotels

The court consented to the settlement reached in January, 2011 between Starwood and Hilton Hotels in the trade secrets case initiated by Starwood in 2009. The suit filed in the U.S. District Court for the Southern District of New York in 2009, related to the defection of two senior executives from Starwood to Hilton. In April 2009, Ross Klein and Amar Lalvani moved to Hilton, taking hundreds of thousands of electronic documents which were essentially the blueprints for the beginning of a hotel brand. The settlement included a $75 million cash payment to Starwood and a permanent injunction which prohibits Hilton from opening any new “luxury and lifestyle” hotels for two years.

Status: A federal grand jury in Manhattan continues to investigate whether Hilton and its former executives should face criminal charges.

Complaint filed Apr. 16, 2009
Permanent injunction issued Dec. 22, 2010.

January 31, 2009 | Southern District of New York
Alleged exploitation of "technological resources" by Oracle competitor

Oracle Systems Corporation, formerly Passlogix (a wholly owned subsidiary of Oracle Corporation that has since dissolved), sued 2FA Technology, LLC. alleging that 2FA threatened illegitimate legal action, breached contractual obligations, exploited Passlogix’s resources, and sought to injure Passlogix's competitive position and reputation. Oracle Systems Corp. filed a motion for partial summary judgment, which is currently pending before the court.

This case is related to 2FA Technology, LLC v. Oracle Corp. (10-cv-9648), a later-filed case by the defendant in this action, currently stayed pending the disposition of the summary judgment motion here.

| Southern District of New York
New York Office of the Chief Medical Examiner moves for summary judgment in a suit filed by Gene Godes Forensics for improper sharing of trade secrets

Gene Codes Forensics, Inc. (GCF), a Michigan-based company, has accused the New York Office of the Chief Medical Examiner (OCME) of improperly sharing proprietary information about its software with the FBI. The software, named Mass-Fatality Identification System (M-FISys) was used to help identify victims of the September 11, 2001 (9/11) attacks. According to GCF, OCME employees were extracting information from M-FISys software in order to help the FBI develop its own software. In response, the city claims that 1) it obtained a "perpetual, royalty-free" license to use the M-FISys software for noncommercial purposes; 2) it helped developed the software; and 3) had some ownership rights. The court is currently deciding the defendant's motion for summary judgment.

| Northern District of Illinois
In Fire 'Em Up's suit for patent infringement and trade secrets misappropriation, both parties seek to dismiss the other's claims

Fire 'Em Up (FEU) brought a suit including claims of patent infringement and trade secret misappropriation against multiple defendants. The trade secret misappropriation claims pertain to misappropriation of customer lists, supplier lists, as well as materials necessary to create FEU's product, and software technology which is known to only one of FEU’s employees, software developer Jeffrey Bach.

FEU voluntarily dismissed claims against Intigreen Technologies, Inc. on February 24, 2011 and against David Shea, Peter Gordon, and Jeffrey Buecheler on March 16, 2011. The remaining defendants, Technocarb Equipment (2004) Ltd. and Aurora Electronics, Ltd. filed an answer on April 11, 2011 containing affirmative defenses and counterclaims, as well as a motion to dismiss FEU’s claims of trade secret misappropriation, conversion, fraud and accounting. FEU, in turn, filed on May 16, 2011 a motion to dismiss the defendants’ counterclaims for deficiencies.

| United States District Court for the Eastern District of New York (Brooklyn)
GEO Group sues former executive for misappropriating its trade secrets to secure a multi-million dollar contract from the U.S. Government

On April 7, 2011, GEO Group Inc. (GEO), a corrections services agency, sued a former executive, Jack A. Brown III, claiming Brown misappropriated its trade secrets to secure a multi-million dollar government contract from the U.S. Department of Justice's Bureau of Prisons. Brown was employed at GEO as Vice President of Community Corrections from October 2005 to March 2009. During this period, he allegedly was running another business on the side, Community First Services Inc. (CFS), without GEO's knowledge. GEO claims that it planned to submit a bid for the Bureau of Prisons project, but Brown accessed GEO’s confidential proposal materials and information in order to compose a lower bid for CFS. Brown then abruptly resigned from GEO and submitted the CFS bid. CFS was awarded the contract by the Department of Justice. GEO claims that its proposal materials and information were a trade secret.