Cases from TBD

Circuit court of Harrison County, Mississippi
Isle of Biloxi Casino Claims Ex-Employee Took Trade Secrets to Margaritaville

On February 8, 2013 Riverboat Corporation of Mississippi, owner of the Biloxi Hotel Casino ("Biloxi"), brought suit against its competitor and ex-employees. The suit brings claims against defendants Doug Shipley, Stacey McKay and the Margaritaville Casino & Restaurant ("Margaritaville") both individually and collectively, including breach of contract and trade secret misappropriation

From September 14, 2008 through November 29, 2012, defendant Shipley served as Vice President and General Manger of Biloxi. Shipley’s employment agreement with Biloxi included non-compete and non-solicitation of employees clauses, as well as a confidentiality agreement. Shipley left Biloxi to work as General Manager at Margaritaville, which is located less than two miles from Biloxi. Biloxi alleges that Shipley not only initially lied about accepting the position, but also began actively soliciting employees of Biloxi and using Biloxi's confidential information. Shortly thereafter, McKay, who was Director of Marketing at Isle Biloxi, left to join Margaritaville.

Plaintiff seeks injunctive and declaratory relief, as well as monetary damages including compensatory and punitive damages, and attorney’s fees.

Supreme Court of Texas
Texas Supreme Court to Review Jurisdictional Dismissal of Misappropriation Suit Against Russian NG Producer

In December, the Texas Supreme Court granted review of a lower Texas court's dismissal, on jurisdictional grounds, of Texas-based plaintiff Moncrief's misappropriation suit against Russian natural gas giant Gazprom. Moncrief's petition for review (available below) was filed in 2011. A record of the court's grant of review is available Here.

United States District Court of the District of Colorado
Colorado Hospital Sues WebMD for Missappropriating Trade Secrets Related to "Tobacco Cessation and Weight Management" Software Programs

On October 25, 2012, National Jewish Health (“NJH”) brought suit against WebMD Health Services Group, Inc. and WebMD Health Corp.(collectively “WebMD”) in the United States District Court of the District of Colorado. The suit claims copyright infringement and contributory copyright infringement, misappropriation of trade secrets, tortious interference with prospective business relations, conversion, and unjust enrichment under Colorado law, and breach of contract under New York law.

NJH is a Colorado-based nonprofit hospital; U.S. News & World Report has ranked NJH the #1 respiratory hospital in the nation for fifteen consecutive years. According to the Complaint, between 2002 and 2008, NJH developed “a set of software implemented wellness programs, including its FITLogix® and QuitLogix® programs.” (collectively “Programs”) The Programs help assist users with obesity and tobacco addiction, respectively. On February 4, 2010, NJH entered into a non-disclosure agreement (“NDA”) with WebMD related to “Tobacco Cessation and Weight Management programs.” (“T&W programs”) Pursuant to the NDA, NJH presented WebMD with “Confidential Information” related to the Programs, including “operations, finances, plans and trade secrets . . . .” – all of which were proprietary information not known to the public.

In May 2010, NJH began negotiations with Lowes, Inc. (“Lowes”) to implement one or both of the Programs. After a “trial period,” during which NJH satisfied all of Lowes “approval criteria,” Lowes opted not to implement the Programs. NJH later learned that Lowes contracted with WebMD to implement WebMD’s program “My Lifetrack,” which “highly resemble(s)” the Programs. NJH alleges “My Lifetrack” uses “substantial portions of the [Programs’] sequencing, screen displays, textual material, and other content." Prior to its agreement with NJH, WebMD did not “offer either stand-alone obesity or smoking cessation programs.”

In its NDA with NJH, WebMD was only permitted to use the Confidential Information related to the Programs for an “Authorized Purpose” – this was loosely defined in the Complaint as relating to “a potential business relationship or transaction [between NJH and WebMD] related to [T&W programs].” NJH’s misappropriation of trade secrets claim is based on WebMD’s alleged use of NJH’s Confidential Information (including its trade secrets) for unauthorized purposes, including “enter[ing] into the market for [T&W programs] . . . .” NJH seeks to enjoin WebMD from further implementing “My Lifetrack,” and also seeks damages (including punitive), and reasonable attorney’s fees.

This is the second trade secret misappropriation suit that WebMD is currently litigating. The first, WebMD Health Corp. v. Anthony T. Dale, is pending trial in the Eastern District of Pennsylvania. It features WebMD in a reversed role - suing a former employee for alleged misappropriation of WebMD's trade secrets.

Supreme Court of the State of New York
ARS Accused Ex-Employee of Breaking "Code of Ethics" and Stealing Trade Secrets for New Employer UBS

On Thursday, October 18, 2012, investment firm A.R. Schmeidler & Co. Inc (“ARS”) brought suit against its former Senior Vice President Michael Kahn, as well as Kahn’s new employer UBS Financial Services, Inc. (“UBS”) (collectively “Defendants”). ARS alleged Defendants stole and unfairly utilized confidential and proprietary information related to ARS’ clientele. In addition to its common law claim for Misappropriation of Trade Secrets, ARS also brought causes of action for: Breach of Contract; Unfair Competition; Breach of Duty of Loyalty; Tortious Interference; and Conversion.

In its complaint, ARS alleged that after Kahn abruptly resigned from UBS, he “systematically contacted ARS’s clients” to discuss “their specific account and performance,” as well as “ different investment opportunities available at UBS.” His conduct – if true – could be in violation of a “Code of Ethics agreement” that Kahn had agreed to as part of his employment with ARS. The agreement requires Kahn to “maintain ARS’s confidential client information and not divulge such information to third parties” after termination. ARS asserts its client list is also a trade secret, as evidenced by the amount of resources ARS expended to compile the non-publicized list of “high net worth individuals in need of investment management and services.”

In addition to damages, ARS seeks both preliminary and permanent injunctive relief against Defendants. The proposed injunctions would enjoin Defendants them from using “ARS’s trade secrets or confidential client information, including client lists, client account values, performance, investments and holdings or by soliciting any of ARS’s clients that were procured by ARS . . . .”

Superior Court of the State of California
Zynga Alleges Ex-Employee Used a Personal Dropbox Account to Steal the Company's Trade Secrets

On October 12, 2012, Zynga Inc. (“Zynga”) brought suit in California Superior Court against former employee Alan Patmore for Misappropriation of Trade Secrets and Breach of Contract. The suits concerns theft of confidential information related to Zynga’s online games, and includes additional defendants (“DOES 1 through 50”) whom Zynga does not yet know the identity of, but who allegedly aided and abetted Patmore’s wrongful conduct.

Zynga, Inc. is a San Francisco-based online social gaming company, responsible for popular games such as CityVille and Words With Friends. Patmore was the General Manager for CityVille at Zynga, and signed a Confidentially Agreement with Zynga pursuant to his employment. The contract obligated Patmore to protect Zynga’s confidential, proprietary, and trade secret information. However, on August 16, 2012, Patmore resigned from Zynga. Zynga alleges that at that time (if not earlier), Patmore had been recruited by, and agreed to join, Zynga’s competitor Kixeye. On the day of his departure, Patmore allegedly transferred 760 confidential Zynga files to his personal Dropbox account without Zynga’s consent, which he intended to provide to Kixeye. During Patmore’s exit interview, he refused to sign a Termination Certification that he had complied with his prior contractual obligations.

Zynga alleged that the stolen information – which includes “unreleased game design documents” and other “strategic roadmaps”– could be used to improve Kixeye’s “internal understand and know-how of core game mechanics and monetization techniques, its execution, and ultimately its marketing standing to compete more effectively with Zynga.” According to the complaint, Patmore attempted to cover up his conduct by uninstalling Dropbox. However, Patmore’s attempts were apparently unsuccessful, and “he left a forensics trial of his wrongful conduct.” Both the relatively new subject matter of the claim (i.e. “free-to-play online social games”), as well as the defendant’s alleged use of cloud technology to misappropriate his employer’s trade secrets, make this an interesting case and one to follow as the litigation moves forward.

UPDATE: Kixeye's CEO Will Harbin fired back at Zynga: "Zynga is burning to the ground and bleeding top talent and instead of trying to fix the problems -- better work environment and better products -- they are resorting to the only profit center that has ever really worked for them: their legal department." Two weeks after making that statement, Zynga expanded the suit to include Kixeye as named Defendants.

234th Judicial District Court of Harris County, Texas
Trade Secret Holder Files for Injunctive Relief After Employee Confesses to Accepting Bribe from Competitor

On October 4, 2012, National Oilwell Varco LP (“NOV”) petitioned for a Temporary Restraining Order (TRO) and Injunction against its competitor Ceram-Kote, Inc., (“Ceram-Kote”), Ceram-Kote’s President Kevin Freeman, and former NOV employee Nelson Calderon (collectively “Defendants”). NOV brought the suit in Texas State court to stop Ceram-Kote from producing a “knock-off blast unit” that Ceram-Kote allegedly misappropriated from NOV.

NOV claims that “Ceram-Kote along with its president, Kevin Freeman, secretly recruited and paid Nelson Calderson – while he was still working at [NOV] --to build a knock-off of a . . . sophisticated piece of [NOV] industrial machinery,” which was an NOV trade secret. Calderon had access to highly confidential information by virtue of his employment with NOV, and had signed multiple confidentially agreement with the company. After NOV received an anonymous tip about a possible knock-off blast unit at Ceram-Kote, it approached Calderon, who confessed to accepting a bribe from Freeman and providing him with confidential designs.

Per NOV’s filing: “Rather than investing in research and development themselves, they decided to cheat — by paying a [NOV] employee $40,000 to design a large scale blast unit for them by using [NOV's] proprietary technology.” In addition to NOV’s claim for misappropriation of trade secrets pursuant to the Texas Uniform Trade Secrets Act, NOV brought additional causes of action for breach of contract[s], tortious interference with a contract, conversion, conspiracy, unjust enrichment and constructive trust.

Superior Court of the State of California
Former Stage Designer Sues Mötley Crüe Over Idea For "Tommy Lee Loop Coaster"

On September 20, 2012, Howard Scott King brought suit against popular rock band Mötley Crüe (itself, its touring company and bassist Tommy Lee as an individual, collectively “MC”), for misappropriation of trade secrets in the Superior Court of California. The suit relates to MC’s allegedly unlawful use of King’s proposal for a “Tommy Lee Loop Coaster” (“Coaster”).

According to his complaint, King developed the idea for the Coaster as part of his now defunct business “Stages ‘N’ Motion.” King described it as “a track on which [Tommy Lee] would play his drums on a platform on wheels which follow the track until Lee was in an upside down position playing the drums and he would continue playing the drums as the platform followed the track in a complete loop.” On or about November 21, 1991, King alleged that he discussed a proposal for the Coaster with Top Rock Development Corp. (MC’s agents). King claims that both the proposal, as well as a signed confidentiality agreement (which has since been lost or misplaced), expressly stated that the ideas were confidential, and that King was to be compensated should MC implement the Coaster. In June 2011, MC begin using the Coaster, or a substantially similar device, as a centerpiece for concerts, as well as in commercials and other promotions.

(link to video of device in question)

King brings trade secret misappropriation actions under both the California Uniform Trade Secret Act (CUTSA), as well as common law. The key difference between the claims is that the CUTSA claim seeks relief in the form of actual damages ($400,000), or in the alternative, a “reasonable royalty”; conversely, the common law claim does not seek a reasonable royalty damages award. Both claims seek injunctive relief, as well as punitive damages in light of MC’s alleged “willful and malicious” conduct.

United States District Court for the Eastern District of Virginia
Department of Justice Brings Criminal Trade Secret Misappropriation Charges Relating to Alleged Theft of DuPont's Kevlar™ Technology

On October 18, 2012, the Department of Justice unsealed an August 21st indictment against Kolon Industries, Inc. and five its executives (“Kolon”) in relation to Kolon’s alleged theft of E.I. du Pont de Nemours and Company’s (“Dupont”) Trade Secrets. The government brought criminal trade secret misappropriation charges pursuant to the Economic Espionage Act, accusing Kolon of engaging in massive industrial espionage over a six-year period in an effort to steal Dupont’s proprietary Kevlar™ technology.

DuPont had previously brought civil charges against Kolon in relation to the same alleged misconduct, which resulted in a damage award of almost $920 million and injunctive relief. In a statement responding to the charges, Kolon’s counsel accused the DOJ of “effectively assist[ing] DuPont in improperly extending [the company’s] monopoly over [Kevlar] technology beyond the limited term provided by the U.S. Patent laws.”

Circuit Court of St. Louis
Designing Group Claims Anheuser-Busch Pilfered Group's Confidential Design For a Home Beer Tap

AFA Dispensing Group B.V. and Dispensing Technology (collectively "plaintiffs") have brought suit against Anheuser-Busch InBev S.A., Anheuser-Busch InBev Worldwide, Inc. and Anheuser-Busch, LLC (collectively "defendants"), claiming violation of the Missouri Uniform Trade Secrets Act, as well as Breach of Contract. The basis of the claim is plaintiffs' allege trade secret in a "Confidential Dispensing Technolog[y]" dubbed a "'bag-in-bottle' dispensing system."

According to the Complaint, the parties had engaged in preliminary talks for defendants to license the technology. During these talks, plaintiffs took extensive efforts to alert defendants that the dispensing technology in question was a confidential trade secret. At some point, defendants broke-off negotiations, and proceeded to patent plaintiffs' confidential bag-in-bottle technology, which it eventually marketed under the name "Draftmark." Moreover, plaintiffs allege that this was not the first time that defendants engaged in such inscrutable behavior; a high-ranking executive at defendants' company allegedly bragged about stealing other companies intellectual property, using vulgar and obscene metaphors to describe its actions.

This situation -- in which confidential information is misappropriated through licensing negotiations -- is not uncommon, and often hinges upon the specific facts of the case, the precautions taken by the trade secret holder, and the relative industry standards. Since this claim is based in Missouri (a state with a Uniform Trade Secrets Act), plaintiffs will not have to prove the trade secret was "continuously used" in its business, which is required under the Restatement of Torts definition for a trade secret. The requirement can be an obstacle for companies that bring trade secret claims based on the misappropriation of a new product idea. However, given that the design would have lost secrecy as soon as it was sold to the public at large (or patented), it will be interesting to see how the court levies damages, assuming plaintiffs succeed on their claim.