Grounded in California’s recognized hostility against restraints on competition, a recently published opinion from the California Court of Appeal, Hooked Media Grp., Inc. v. Apple Inc.[1], held that to establish trade secret misappropriation under California law,[2] it is not enough to show that the defendant has knowledge of the plaintiff’s trade secrets. Rather, in addition to proving that the subject information constitutes a trade secret,[3] the plaintiff must prove that the defendant improperly acquired or actually used the information. The ruling should be of interest to both former and new employers, as we explain below.
Continue Reading As A Reminder That California Has Rejected The Doctrine Of Inevitable Disclosure, Court of Appeal Rules Knowledge Of Former Employer’s Trade Secret Information Does Not By Itself Constitute Misappropriation

Why should companies considering trade secret litigation consider their patent portfolios?  After all, trade secrets, by definition, are secret.  They have value in the marketplace by virtue of not being disclosed.  And like the formula for Coca-Cola, that value can continue perpetually as long as the secrecy of trade secrets is maintained.  Patents, on the other hand, represent a limited monopoly granted to the patent-holder in exchange for an enabling disclosure of the patented invention, a disclosure sufficient to enable those skilled in the art to practice the invention.  Of course, this public disclosure requirement for patentability destroys secrecy.  This means that once the invention is disclosed in a published patent or application, it cannot be subject to trade secret protection.  In the context of a litigation concerning whether a claimed trade secret is covered by a patent, the interface between trade secret protection and patent protection can become existential.  The defendant may contend that once the claimed trade secrets found their way into the patent’s enabling disclosure, they lost any trade secret protection.  The plaintiff will try to delineate sharply between technology covered by the patent and its disclosures, and technology that remains undisclosed and thus properly subject to trade secret protection.  So a proper understanding of the interplay between trade secret protection and patent protection can be critical to the outcome in a trade secret case.
Continue Reading Why Patents Can Matter In Trade Secret Cases

As the COVID-19 pandemic spreads throughout the United States and Americans anxiously await the arrival of a vaccine, biotech companies are grappling with the uncertainty of patent protection for COVID related biomedical advances and, as a result, are turning to trade secret protection instead.  For policy-makers looking to incentivize the search for the magic bullet of an effective vaccine, this raises tough questions:  What is the best policy or mix of policies to incentivize industry and stimulate a rapid, effective vaccine?  And should that policy tilt towards sharing information or towards protecting monetary incentives?  This article addresses the limitations on patent eligibility, the role of trade secret protection, and the current federal policy landscape on biological innovation incentives during the pandemic.
Continue Reading Trade Secret Protection & the COVID-19 Cure: Observations on Federal Policy-Making & Potential Impact on Biomedical Advances

Given the prevalence of trade secret misappropriation litigation among members of the fashion, beauty, and retail industry, those in that industry should (1) take care to protect their trade secrets from misuse by others and (2) consider steps to try to reduce the risk of misappropriation claims against them by others.  Both situations – loss of a valuable trade secret and burdensome litigation – can be devastating to a business.  We offer here some potential measures that businesses can take to attempt to avoid such undesirable situations.
Continue Reading Members Of The Fashion and Retail Industry: Trade Secret Claims Are In Vogue These Days

While traditionally healthcare businesses have tended to look to patent protection, it would behoove them to also think about trade secret protection to protect their valuable inventions.  Given the financial strains on businesses from the COVID-19 pandemic, some businesses may find trade secret protection a cost-efficient alternative to the patent process. Trade secret enforcement also potentially can yield hundreds of millions, sometimes even over a billion, dollars for the trade secret holder.[1] Further, patent protection is not always available.[2]
Continue Reading Admonition To Members Of The Healthcare Industry: Don’t Give Trade Secret Protection The Short Shrift!

The United States Court of Appeals for the Third Circuit recently affirmed a District Court opinion awarding punitive damages against a former employee who stole confidential information from his former employer, even though the employer did not “own” the stolen information.  Advanced Fluid Sys., Inc. v. Huber, 958 F.3d 168 (3rd Cir. 2020).  This is a first of its kind decision in the federal circuit courts.  The Third Circuit held that the non-owner employer still had the right to bring trade secret claims because it had possessed and taken appropriate safeguards to keep that information secret from its competitors and the public prior to the theft.  The Court of Appeals further determined that the employer could recover damages, including punitive damages, against the former employee who stole that information for the benefit of a competitor.  The case is further detailed below.
Continue Reading Federal Court of Appeals Rules That Ownership of Trade Secret Not Necessary to Recover Punitive Damages for Its Theft

A brazen and sophisticated computer intrusion into the records of over 145 million Americans launched from computer hackers based in China led to recent criminal prosecutions under the Computer Fraud and Abuse Act. [1] Courts are willing to extend American law beyond U.S. boundaries often when criminal misconduct takes place overseas that injures Americans. The Constitution grants Congress broad powers to enact laws with extraterritorial scope.[2] The Computer Fraud and Abuse Act, 18 U.S.C. § 1030 (“CFAA”),  is one such statute that provides criminal and civil remedies resulting from unauthorized access to computers used in interstate commerce or communications.[3]  And, it further provides for extraterritorial jurisdiction for criminal or civil violations of the CFAA. Increasingly, U.S.-based companies have become victims of significant computer misconduct launched from overseas.[4]  And, with the increased widespread use of social media platforms during the Covid-19 pandemic, computer mischief in an effort to gain confidential business information is on the rise.[5]

Continue Reading Extraterritorial Application of the Computer Fraud and Abuse Act

Reprinted with permission from the May 21, 2020 issue of The Recorder. © 2020 ALM Media Properties, LLC. Further duplication without permission is prohibited.  All rights reserved.

Video conferencing has been available for years but given its new popularity in these COVID-19 times,[1] it behooves businesses to take care to protect their trade secrets during video conferencing.  Here, we address some potential risks to trade secrets from video conferencing –including hidden ones – and offer some potential measures to limit them.
Continue Reading Who’s Watching? Hidden Dangers To Trade Secrets From Video Conferencing

In a vacuum, the mere notion of giving a rival company access to your business’s confidential and proprietary materials would be unthinkable.  After all, this is the “secret sauce” that has helped expand your company, drive market share, and generate immense value.  If a competitor gained access to your trade secrets, the very foundations of your success could be in peril.
Continue Reading Protecting Trade Secrets During An Acquisition: Showing Off The Goods Without Giving Away The Store

For the first time, the Supreme Court has agreed to review the Computer Fraud and Abuse Act (CFAA). The Court’s initial review of the CFAA comes in the wake of a federal circuit split as to whether the statute can only be deployed against hackers and unauthorized users of electronic systems, or also against authorized users who use the information for unauthorized purposes. The Court’s decision may significantly affect not only how law enforcement uses the CFAA, but also whether civil litigants, such as employers, may use the CFAA to defend against unauthorized employee activities.
Continue Reading U.S. Supreme Court Case Preview—Van Buren v. United States: Does Use of a Computer for an “Improper Purpose” Violate the Computer Fraud and Abuse Act?

Although employers may not think that the COVID-19 pandemic is threatening their trade secrets, it is.  The massive layoffs resulting from the COVID-19 pandemic[1] place employer trade secrets at risk.  Here, we offer 6 steps employers can consider to protect their trade secrets in these extraordinary times.
Continue Reading 6 Steps to Protect Your Trade Secrets During Covid-19 Layoffs