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On August 20, 2020, the United States Court of Appeals for the Seventh Circuit upheld a jury’s $140 million compensatory damages award in Epic Systems Corp. v. Tata Consultancy Services Ltd. The Seventh Circuit held that there was enough evidence to support the jury’s conclusion that Tata Consultancy Services Ltd. (TCS) stole Epic Systems Corp.’s (Epic) confidential information, including trade secrets, and in doing so, avoided incurring significant research and development costs. Although the jury awarded Epic an additional $700 million in punitive damages, the Seventh Circuit ultimately reduced that award to $140 million.

Epic sued TCS in the United States District Court for the Western District of Wisconsin, alleging that “TCS used fraudulent means to access and steal Epic’s trade secrets and other confidential information.” Epic asserted that TCS “downloaded, from 2012 to 2014, thousands of documents” and used the confidential information contained in those documents to develop a “spreadsheet comparing TCS’s health-record software” with Epic software. TCS’s internal communications showed that “TCS used this spreadsheet in an attempt to enter the United States health-record-software market, steal Epic’s client, and address key gaps” found in TCS software.

Continue Reading Epic v. Tata: Trade Secret Damages Reduced to $280M

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Acer has petitioned to the U.S. Supreme Court after the Federal Circuit rejected its attempt to remove a case from state to federal court based on two federal statutes and Gunn v. Minton, 568 U.S. 251 (2013).

The underlying dispute is between Acer America Corporation and Acer Inc. (collectively, “Acer”), on one side, and Intellisoft, Ltd., and its president, Bruce Bierman (collectively, “Intellisoft”), on the other. Intellisoft sued Acer in California state court in 2014, alleging that Acer violated a nondisclosure agreement by using Intellisoft’s trade secret information in Acer’s applications for a group of related patents. Intellisoft brought various state-law claims, including a claim for trade secret misappropriation. Continue Reading Acer Seeks Supreme Court Intervention After Federal Circuit Tossed Its Patent-Related Dispute from Federal Court

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On August 4, 2020, U.S. District Judge for the Northern District of California William Alsup sentenced former Uber executive Anthony Levandowski to 18 months in prison after Levandowksi pleaded guilty to stealing trade secrets relating to Google’s self-driving vehicle project. The judge also ordered Levandowski to pay over $700,000 in restitution.

Levandowski was a Google engineer and a founding member of Google’s light detection and ranging engineering team. His team worked on Google’s self-driving car project from 2009 until he abruptly resigned from the company in January 2016. Levandowski then formed his own company, Ottomotto LLC, which he sold to Uber. Uber fired Levandowski in May 2017 after Google’s self-driving car unit sued Uber for trade secret theft relating to self-driving car technology. The civil lawsuit was settled in 2018, but this did not stop the federal authorities from continuing an investigation into Levandowski’s departure from Google.

In August 2019, federal prosecutors charged Levandowski with 33 counts of theft and attempted theft of trade secrets from Google. The U.S. Department of Justice alleged that Levandowski downloaded thousands of files relating to Google’s development of self-driving cars from Google’s secure database before resigning from his job. The indictment alleged that the files included circuit board schematics, instructions for light detection and ranging calibration and testing, and an internal tracking document. In March 2020, Levandowski pleaded guilty to one count of trade secret theft.

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The court in Planner 5D v. Facebook, one of the first cases about trade secrets in artificial intelligence datasets, has granted the motion to dismiss on the copyright claims and denied the motion on the trade secret claims.

Trade secrets. The court held that the amended complaint sufficiently pleaded that the Planner 5D data files were trade secrets and that the defendants used improper means to acquire those trade secrets.

Defendants first argued that the Planner 5D files were not trade secrets. Princeton contended that Planner 5D designed its website to transmit object or scene data files to users’ browsers, where they were automatically stored in the browser’s cache, which enabled any user to access and reproduce those files. While the terms of use prohibited downloading material generally and prohibited using scraping tools, the terms of use expressly excluded “page caching” from the list of prohibited activities. Princeton relied on multiple exhibits and a declaration purportedly showing these technical details, but the court rejected much of that evidence because courts typically do not consider extrinsic evidence (e.g., exhibits not attached to the complaint) to resolve a motion to dismiss. Continue Reading Planner 5D v. Facebook: Trade Secrets and Copyright Update

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One of the ways trade secret disputes differ from other IP litigation is that in a trade secret dispute it is not always clear what the intellectual property actually is. Trade secrets aren’t disclosed to the patent office or registered like trademarks. Nor are they as clearly defined as copyrights. Thus, a threshold question in every trade secret case is what the trade secrets actually are. This creates a natural tension, as the very definition of a trade secret includes that it be kept secret. Nonetheless, litigation cannot proceed in the dark and there must be some disclosure at some time before a case can be meaningfully resolved. Courts vary widely in their approach to the what and the when of these disclosures. Some require detailed specificity before any discovery can occur, sometimes even at the pleading stage. Other courts are more lenient and will allow discovery to proceed without first requiring early and detailed disclosures. Continue Reading Sedona Conference Lists Principles for Identification of Trade Secrets

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Judge William Orrick of the Northern District of California held a hearing last week to address 12(b)(6) motions to dismiss by Facebook and Princeton University in UAB “Planner5D” v. Facebook, Inc., et al., Case No. 19-CV-03132 (N.D. Cal.). This appears to be one of the first trade secret misappropriation and copyright cases relating to artificial intelligence datasets.

Plaintiff Planner 5D has a website with a home design tool to allow customers to digitally design their own home, office, or landscape. As alleged by Planner 5D, the tool uses thousands of object and scene files as seed data sets to train machine learning algorithms. The complaint alleges that Princeton used software tools to obtain secret internet addresses where the object and scene files were hidden and then scraped the website to obtain the files, ultimately making the data available to Princeton researchers. Princeton then allegedly shared that data with Facebook. Planner 5D contends that, although the images themselves are viewable on the internet, the underlying datafiles and secret internet addresses that were scraped by Princeton, as well as the file locations, are trade secrets. Continue Reading Planner 5D v. Facebook: Trade Secrets and Artificial Intelligence Hearing

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A Texas appellate court recently affirmed the principle that state free speech rights don’t provide immunity for trade secret misappropriation. Collaborative Imaging v. Zotec Partners. Zotec Partners provides revenue cycle and practice management services to healthcare providers. Dhruva Chopra worked at Zotec as a client service manager. In 2018, Chopra resigned and began working with Texas Radiology Associates, LLP (which had been a Zotec client) on a competing business. Chopra allegedly had knowledge of Zotec trade secrets involving, among other things, Zotec’s technology platform and software, billing, clients, and business processes. Continue Reading Trade Secrets Suit Doesn’t Infringe Free Speech

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A Texas appellate court reversed a $740 million trade secret theft and fraud judgment for real estate analytics company HouseCanary against rival Amrock, holding flawed jury instructions require a new trial.

In 2014, Title Source Insurance (TSI), a property valuation and settlement services company, contracted with HouseCanary, a real estate analytics company, to design an app that would allow TSI to perform appraisals more efficiently. The parties specifically agreed not to “decompile, disassemble, reverse translate, reverse engineer, or otherwise attempt to discover or directly access the source code of [the app] or any component or portion thereof.” HouseCanary’s work on the app involved multiple alleged trade secrets, including a complex data dictionary of property valuation attributes and a number of internal calculations and formulas used to evaluate property value. While HouseCanary built TSI’s app, TSI allegedly started developing its own products, utilizing HouseCanary’s protected data and formulas. Eventually the parties’ relationship deteriorated, and TSI accused HouseCanary of failing to deliver on the parties’ contract and sued for breach of contract and fraud. HouseCanary counterclaimed for breach of contract, misappropriation of trade secrets, and fraud. A jury found for HouseCanary and awarded actual and punitive damages. Continue Reading Texas Court Orders New Trial After $740M Judgment

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Computer forensic information often becomes an issue in trade secret cases, as computer artifacts or other electronic information (such as on external hard drives, cell phones, etc.) can sometimes prove or disprove whether a person accessed, used, transferred, or destroyed trade secret material. If the parties or the judge determines that the computer forensic information is relevant, the next key question is how much needs to be exchanged and what limitations will be in place. The producing party often will argue that computers include numerous irrelevant files and artifacts, privileged communications, and private information that should not be subject to discovery. One middle ground is to use a neutral examiner, in which the electronic data is never handed directly to the opposing party. Instead, a neutral computer expert will field requests and/or create reports of the pertinent data. Continue Reading Chinese Self-Driving Car Company Must Make Its Source Code Available in Lawsuit Against Tesla but Only Through a Neutral Examiner

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UAB dba Planner 5D sued Facebook and Princeton for copyright infringement and trade secret misappropriation under both the Defend Trade Secrets Act and California UTSA, based on use of an AI dataset. The plaintiff alleges that it owns a large dataset of three-dimensional objects and scenes. Princeton allegedly downloaded thousands of scenes by scraping the plaintiff’s website and used the dataset for scene-recognition activities. Princeton later published the data it gathered publicly. Later, Facebook allegedly sponsored an AI competition wherein contestants were directed to use the dataset. The complaint alleges that both Princeton and Facebook have used the dataset to train artificial intelligence applications to recognize 3D interior scenes.

The complaint asserts that each object in the dataset and the dataset compilation comprise copyrights that Defendants infringed. Plaintiff also alleges the Defendants misappropriated trade secrets in the datasets by scraping them from Plaintiff’s website.