Recent Decisions and Case Developments

November 5, 2014 | United States District Court Central District of California
LinkedIn Contacts May Be Trade Secrets

Operating under the California Uniform Trade Secrets Act, the Central District of California denied summary judgment in favor of the defendant and found that there was a material issue of fact regarding whether LinkedIn contacts that a former employee made while working for Cellular Accessories For Less (“Cellular”) are Cellular’s protectable trade secrets. The defendant argued that the LinkedIn contacts are not a trade secret because “Cellular encouraged its employees to create and use LinkedIn accounts, and [the defendant’s] LinkedIn contacts would have been ‘viewable to any other contact he has on LinkedIn.’” On the other hand, Plaintiff argued that the LinkedIn contacts are only available “to the degree that the user chooses to share it.”

The Central District found that the parties’ statements did not make it sufficiently clear whether and to what degree defendant’s LinkedIn contacts were public and if so, whether this was done with Cellular’s explicit or implicit permission. The court held that this dispute regarding the publicity of LinkedIn contacts was an issue of fact which a jury must decide.

For a primer on the development of social media and trade secrets click here.

October 27, 2014 | E.D. Texas, United States District Court
Medical Device Company Steals Doctor's Trade Secret - Now it Pays the Price

Medical Device Company Globus met with Dr. Bianco back in 2007 to tell them about his idea for a new device to be used as an interbody spacer. The spacers that existed at the time did not have the ability to expand and contract at the surgeon's will, and thus Dr. Bianco's innovation was to create a design that was capable of doing so. Globus told Dr. Bianco that they would let him know whether they wanted to pursue his invention, but after a short period, they told him they were not interested. In 2011, however, Dr. Bianco learned that they had pursued his idea, when Globus tried to sell one of their products employing the technology to Dr. Bianco.

Ultimately, the jury awarded over $4 million to Dr. Bianco for the theft of his Trade Secrets. No recovery would have been possible if not for the mutual NDA both parties had agreed to prior to their initial meeting. Followings the jury's award, Globus filed for a judgment as a matter of law, but Judge Bryson was unconvinced by Globus' numerous legal arguments, and denied the motion in a decision issued on October 27.

October 22, 2014 | confidentiality agreements, trade secrets
7th Circuit Case Serves as a Reminder of Trade Secrets Best Practices

The 7th Circuit ruled in favor of Defendants Block and Company, Inc. on October 22, 2014 on the issue of breach of confidentiality agreement. The Court cited a previous 7th Circuit case which stated that in the 7th Circuit, courts "will enforce [confidentiality] agreements only when the information sought to be protect is actually confidential and reasonable efforts were made to keep it confidential." See Tax Track Sys. Corp. v. New Investor World, Inc., 478 F.3d 783, 787 (7th Cir.2007).

Since the Plaintiff nClosures Inc. did not make additional efforts to have individuals who access the designs at issue sign confidentiality agreements, keep the designs under lock and key, or store the designs on a limited-access computer, the Court found that nClosures did not engage in "reasonable steps" to protect the confidentiality of its designs. Therefore, the Court concluded that confidentiality agreement between nClosures and Block and Company is unenforceable as a matter of law.

September 16, 2014 | Central District of California (Western Division - Los Angeles)
Are LinkedIn Contacts Protectable Trade Secrets?

In a recent District Court opinion in the Central District of California, Judge Pregerson denied a defendant's motion for summary judgment on the issue of trade secret misappropriation under the California Uniform Trade Secrets Act (“CUTSA”), Cal. Civil Code § 3426 et seq. Central to the trade secret claim, is the controversial issue of whether and to what extent LinkedIn contacts are trade secrets.

In the opinion, Judge Pregerson explains that while a list of business contacts can be protected as a trade secret, certain conditions must be met. Essentially, the list must have been difficult to create, and the list cannot be easily obtained through public sources. In this situation, it remains unclear how difficult it was to obtain the information, since many of the individuals the Defendant had contacted, had already been contacted by competitors, and "LinkedIn suggested contacts to [the defendant] automatically."

Also unclear, is the issue of whether the contacts were permissibly made available to the public. Defendant argues the company encouraged him to have a LinkedIn account, and his LinkedIn contacts would have been viewable to "any other contact he has on LinkedIn." In contrast, Plaintiff argues that LinkedIn information is "only available to the degree that the user chooses to share it."

These issues will likely be decided when the case goes to trial, and could have a serious impact on the role that LinkedIn currently plays in the corporate world.

August 27, 2014 | 127th Judicial District Court
Schlumberger Case Potentially Raises the Stakes in Texas Trade Secrets Litigation

The 127th Judicial District Court of Harris County, Texas might have raised the stakes of bringing Trade Secrets litigation in Texas by allowing for the grant of attorney’s fees and sanctions in such cases under the Texas Citizens’ Participation Act (“TCPA”).

Schumberger originally sued Charlotte Rutherford, former Schumberger chief intellectual property attorney, for Rutherford’s use of the company’s confidential information to help Acacia launch two patent infringement suits. Schumberger filed claims of misappropriation of trade secrets, conversion, breach of fiduciary duties, violations of the Texas Theft Liability Act and breach of contract.

Rutherford denied the claims and filed a motion to dismiss the suit under the TCPA. To survive the TCPA motion, Schumberger had to produce “clear and specific” evidence that the Rutherford had used the company’s trade secrets against it. Judge Sandill ruled that the company did not meet this burden and dismissed all causes of action save for the breach of contract claim, ordering Schlumberger to pay $350,000 in attorney’s fees and $250,000 sanction fees.

The TCPA is a statute passed to curb lawsuits threatening free speech. Various sources have voiced concern over the expansive reading of the TCPA that led to this hefty penalty against the Plaintiff and the resultant heightened burden of proof that the Plaintiff must meet to survive a TCPA motion to dismiss.

August 18, 2014 | Court of Appeals of the State of Washington, Div. I
Plaintiff's Burden to Show Sales but not Damages from Sales

According to a Washington state appeals court, once a plaintiff in a trade secrets misappropriation case has established sales, the burden then shifts to the defendant to establish what portion of those sales were not attributable to the misappropriated trade secret.

The appeals court overturned a jury's finding of no damage from the misappropriation on the grounds that the jury instructions had misstated the law, and in doing so had improperly shifted the burden of proof from the defendant to the plaintiff.

The instruction, the appeals court held, was a “misstatement of law” given that “the plaintiff's initial burden is to prove only ‘sales,' not ‘damages from sales,' before the burden shifts to the defendant.”

July 15, 2014 | U.S. Court of Appeals for the Eighth Circuit
$31 Million Trade Secrets Verdict Affirmed

The Eighth Circuit affirmed a $31.1 million jury verdict, including $10 million in putative damages, in favor of Hallmark Cards, Inc. against a private equity firm that misappropriated confidential information including Hallmark’s Power Point presentations on consumer behavior which constituted trade secrets. This appellate ruling is merely the latest development in a long-running legal battle between Hallmark and Clipper, coming more than a year after U.S. District Judge Ortrie D. Smith awarded Hallmark $103,000 — slightly under 20% of the greeting card company's $519,000 it sought in court fees.

June 30, 2014 | Minnesota Court of Appeals
Trade Secrets are not Synonymous with Confidential Information

Relco LLC of Willmar, Minnesota, sued former employees in May 2011, alleging they took confidential information to their new jobs at Custom Fabricating & Repair Inc. of Marshfield, Wisconsin, and violated terms of their employment agreement. As a reminder that confidential information and trade secrets are not synonymous, the Minnesota Court of Appeals held that the Uniform Trade Secrets Act does not necessarily apply to all confidential information. As a result, however, it is not necessary information be a trade secret to be protected, since a trial court may issue an injunction against a party who has, in violation of an explicit agreement or a common law duty, wrongfully used confidential information or trade secrets obtained from his employer.

June 24, 2014 | United States District Court for the Northern District of California
Man sentenced for theft of Trade Secrets from DuPont

Walter Liew was sentenced to 15 years in prison, and fined $28 million following his conviction under the Economic Espionage Act. The conviction arose from the theft of trade secrets from DuPont, particularly information and documents pertaining to the production process of a white pigment, titanium dioxide (TiO2). The pigment is what DuPont uses to achieve its whitest whites in everything from cars to paper.

Judge White, writing in the Northern District of California on a post-conviction motion for acquittal, explained that the evidence demonstrating the intent to injure Dupont, and intent to benefit a foreign government was sufficient for a rational juror to find Liew guilty. It was also noted that the money was tracked to various accounts in Singapore and China, but could not be recovered.

May 13, 2014 | California Court of Appeal Third Appellate District
California Courts Affirms Attorneys' Fees for Defendants

As a reminder that attorneys’ fees can be awarded to a defendant under the uniform trade secrets act, where a misappropriation claim is brought in bad faith, a California appellate court, in an unpublished opinion, affirmed such an award on May 13, 2014. The attorney's fees were the sole issue on appeal in a case that had proceeded through two trials, and dates back to 2007. In the second trial, the court awarded defendants attorneys fees and a "lodestar" multiplier of 1.33 even though attorney Peter Scott agreed to represent defendants free of charge in order to settle a malpractice claim by defendants.