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Alleged spoliation of evidence is unfortunately a somewhat common feature of many trade secret misappropriation cases. A recent district court order out of the Northern District of California, WeRide Corp. v. Kun Huang, highlighted just how serious the penalty for spoliation can be. No. 5:18-CV-07233-EJD, 2020 WL 1967209 (N.D. Cal. Apr. 24, 2020).

In WeRide, the defendant deleted entire email accounts, failed to disable its email server’s setting that automatically deleted all emails older than 90 days, and deleted relevant source code even after the court entered a preliminary injunction specifically enjoining the parties from destroying relevant documents. Taking into account the vast quantity of data deleted, along with the willful nature of the spoliation, the court granted sanctions of default, striking the defendants’ answers and directing judgment for the plaintiff. Continue Reading The Northern District of California Reminds Everyone How Serious Spoliation Sanctions Can Be

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In an April 16, 2020 ruling, the District Court for the District of Massachusetts re-affirmed that a plaintiff bringing a claim under the Defend Trade Secrets Act (DTSA) must allege “ownership of confidential information” to survive a motion to dismiss. The court in Focused Impressions, Inc. v. Sourcing Grp., LLC, No. 19-CV-11307-ADB, 2020 WL 1892062 (D. Mass. Apr. 16, 2020) granted a motion to dismiss a third-party complaint against a Plaintiff’s former COO where the third-party complaint failed to adequately allege ownership of confidential information.

Plaintiffs Focused Impressions, Inc. (FII) and Focused Impressions Technology, LLC (FIT) sued (among others) Lynn Smith, the former chief operating officer of FII and a former member of FIT, for violation of the DTSA. The third-party complaint alleged that Smith used confidential pricing information about FII’s clients, the Regal Press (Regal) and Wright Business Graphics, LLC (Wright). Smith moved to dismiss the complaint, arguing that Plaintiffs failed to allege ownership of confidential information, as required by the DTSA. The court agreed. Continue Reading Federal District Court in Massachusetts Dismisses DTSA Complaint that Failed to Allege Ownership of Confidential Information

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The Southern District of New York denied defendant Lionbridge Technologies, Inc.’s (Lionbridge) motion to dismiss, holding that TransPerfect Global, Inc. (TransPerfect), sufficiently pleaded that information disclosed to potential bidders in an online auction constituted trade secrets and that Lionbridge misappropriated these trade secrets. In 2014, the Delaware Chancery Court ordered the dissolution through modified auction of TransPerfect, a translation, website localization, and litigation support company. The auction had three phases. At each phase the bidding pool narrowed, and the bidders received increasingly detailed and sensitive information about TransPerfect. HIG, an investment firm that had just submitted a bid to purchase Lionbridge (TransPerfect’s largest competitor), participated in the auction. According to TransPerfect’s complaint, HIG participated in all three phases, even though it never intended to purchase TransPerfect because TransPerfect would not agree to require its former owner to enter into a noncompetition agreement. During the final stages of the auction, HIG gained access to thousands of competitively sensitive documents, including detailed pricing and cost information. TransPerfect alleged that after the sale, HIG shared this confidential information with Lionbridge, which then used the information to undercut TransPerfect’s pricing. Continue Reading Use of Information Outside Scope of Confidentiality Agreement as Misappropriation

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CleanFish LLC, a seafood wholesaler and importer, faced an early setback in its case against its founder who allegedly started a competing company by using CleanFish’s confidential customer lists and information. CleanFish alleged state and federal trade secret misappropriation claims and breach of contract based on confidentiality and proprietary-rights agreements.

In a March 17, 2020 ruling, the U.S. District Court for the Northern District of California dismissed CleanFish’s trade secret claims because it failed to identify any trade secret with sufficient particularity. CleanFish’s general descriptions of “customer lists, customer purchasing data, customer sales figures[,] and other related customer purchasing analysis and trends” were too broad and vague, making them indistinguishable from matters of general knowledge in the seafood-distribution business. On the other hand, the court allowed that the breach-of-contract claim could proceed because the contracts did not require CleanFish to allege a defined trade secret. (CleanFish has since amended its complaint, and defendants moved to dismiss). Continue Reading CleanFish, LLC v. Sims

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In 2013, Bloomberg and iSentium began a business relationship to consider incorporating iSentium’s sentiment-analysis app (iSENSE) into the Bloomberg platform. The app identified and analyzed market-related opinions posted to social media, anticipated changes in the price of publicly traded stocks, and made information available to traders. Id. The parties entered a non-disclosure agreement and an agreement titled “Developer Agreement for Bloomberg Application Portal” (the Development Agreement). Id. at *2. The Developer Agreement provided that “no action arising out of it may be brought by iSentium more than one year after the cause of action’s accrual.” Id. The iSENSE app appeared on Bloomberg for an unspecified amount of time, but in February 2016, iSentium requested that Bloomberg remove the app because it was no longer technologically compatible with the Bloomberg platform. Id. Shortly thereafter in July 2016, Bloomberg announced its own sentiment-analysis app. Id. Subsequently in October 2017, iSentium brought a claim for misappropriation of its trade secrets. Id. Continue Reading Artificial Intelligence Company Fails to Sustain Trade Secret Claims

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In October 2018, a non-compete reform bill when into effect in Massachusetts (the Massachusetts Noncompetition Agreement Act (“MNCA”)). The MNCA is still being refined through the courts with only the second published decision regarding the MNCA being decided recently in NuVasive, Inc. v. Day, 1:19-cv-10800-DJC. The District Court there granted the employer a preliminary injunction, and found that regarding the MNCA (1) non-competes in Massachusetts may include a choice of law provision outside of Massachusetts so long as the non-compete still complies with the requirements of the MNCA; and (2) that “garden leave” (i.e., keeping the employee on the payroll during the term of the non-compete period) is not required under the MNCA as long as there is still some “mutually-agreed upon consideration.” You can read a bit more about this decision here.

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On May 8, Governor Jay Inslee signed House Bill 1450, making it more difficult for employers to enforce noncompete agreements. The new law goes into effect Jan. 1, 2020, and limits the employees who can be bound by noncompete agreements, creates penalties for employers’ noncompliance, and invalidates existing noncompete agreements that do not align with the new requirements. However, in addition to other exceptions, the new requirements do not apply to nonsolicitation agreements, confidentiality agreements, or agreements prohibiting disclosures of trade secrets or inventions. The authors of this Law 360 article suggest that the language of the new law raises a question as to whether employers that grant employees equity interest have to comply with the new law at all, and predict this issue to be the subject of future litigation.

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Zomm, LLC (“Zomm”) sued Apple Inc. (“Apple”) in April 2018, asserting claims for patent infringement, breach of contract, and unfair competition.  On June 17, 2019, the District Court dismissed Zomm’s breach of contract claim, which relates to Apple’s alleged violation of a confidentiality agreement that the parties executed for purposes of sharing information about the “Wireless Leash,” finding that Zomm only alleged that “Apple began to exploit Zomm’s confidential information in December 2011,” but December 2011 “was after both the Wireless Leash Plus’s release” and the corresponding patent’s publication.  Because the terms of the confidentiality agreement provided that “information either reverse engineerable from the Wireless Leash Plus product” or contained in the corresponding patent “no longer constituted confidential information,” Zomm’s complaint failed “to allege exploited confidential information.”  Apple’s victory may be short lived, however, because the Court also granted Zomm leave to amend its complaint to add details from pre-December 2011.  You can read more about the case here, and you can read the District Court’s entire order here.

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The Third Circuit partially reversed a lower court ruling granting the defendant, Esschem Inc. (“Esschem”), partial summary judgment in a lawsuit claiming that it used plaintiff’s, Heraeus Medical GMBH’s (“Heraeus”), trade secrets to help another company compete with plaintiff’s bone cement product.  Haraeus claims that its competitor used its proprietary bone cement formula and then shared it with Esschem to manufacture.  The lower court held that Haraeus’s trade secret misappropriations claims under the Pennsylvania Uniform Trade Secret Act were time-barred because the original misappropriation occurred more than three years prior to Haraeus filing its complaint (the PUTSA has a three year statute of limitations).  But the Third Circuit partially reversed the district court, holding that under the separate accrual rule, Haraeus can sue Esschem for any purported misappropriation that happened within three years of filing the lawsuit.  The Third Circuit agreed with the district court that any alleged misappropriations that occurred more than three years prior to the filing of the lawsuit would be time barred under the statute of limitations.  You can read more about the case here, and you can read the entire Third Circuit’s opinion here.

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The U.S. District Court for the Southern District of New York held that a forum selection clause contained in an expired nondisclosure agreement did not preclude Samsung for pursuing patent challenges against NuCurrent at the Patent Trial and Appeal Board. In 2015, NuCurrent’s CEO had visited Samsung’s headquarters and demonstrated the company’s wireless charging technology for cellphones and other mobile devices. NuCurrent filed a trade secrets case in 2018 alleging that Samsung stole its trade secrets and incorporated the wireless charging technology into its Galaxy S7 and S8 cellphones. NuCurrent has also sought to obtain patents for the technology at issue, which Samsung is now challenging. NuCurrent sought a preliminary injunction to require Samsung to withdraw its requests that the Patent Trial and Appeal Board examine the validity of NuCurrent’s patents pursuant to a nondisclosure agreement between the parties that required legal disputes to be litigated in New York. The agreement, however, expired over a year before Samsung challenged the patents. Although the agreement states that confidentiality obligations will survive expiration, the federal district court held that the forum selection clause did not similarly survive. Moreover, Samsung’s patent challenge is based on prior art, rather than any confidential information disclosed under the nondisclosure agreement. Notably, U.S. District Judge Denise Cote distinguished this case from a recent Federal Circuit ruling requiring MechSource to drop its challenges to several patents pursuant to a forum selection clause.

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