Plaintiff sued its competitor in the mobile payment space for, among other things, trade secret misappropriation. Plaintiff claimed that defendant created its products using source code copied from plaintiff by two of plaintiff’s former employees who now work for defendant.
Defendant moved for summary judgment, arguing that plaintiff did not own the source code (and the trade secrets in it), because an independent contractor created the source code.
The court denied the motion for summary judgment. Plaintiff had provided evidence that the source code was written by a number of parties (including its own employees) and not just the independent contractor that defendant claimed owned the source code. The court held that plaintiff had presented evidence to raise genuine issues for trial as to who wrote what code.
Citcon, USA, LLC v. RiverPay Inc., 2019 WL 2327885 (N.D. Cal., May 31, 2019)
Plaintiff – a small online marketing company – sued a large, publicly-traded competitor for copyright infringement, misappropriation of trade secrets, deceptive and unfair practices, and breach of contract. The parties had previously signed a nondisclosure agreement and an agreement whereby plaintiff would provide defendant with access to plaintiff’s technology used to monitor the scope of companies’ online presence and the accuracy of information appearing in search engines. The parties had also engaged in discussions about defendant acquiring plaintiff. But after the negotiations broke off, plaintiff discovered that it appeared defendant had appropriated plaintiff’s technology (including copyright-protected materials) into defendant’s own product offerings.
The lower court entered a preliminary injunction against defendant, barring it from offering the allegedly infringing and misappropriating technology. Defendant sought review of the entry of preliminary injunction with the U.S. Court of Appeals for the Eleventh Circuit. The appellate court affirmed the order.
The appellate court rejected defendant’s argument that the lower court had not described specifically enough those trade secrets of plaintiff that defendant had allegedly misappropriated. It also rejected defendant’s arguments that plaintiff’s delay in bringing suit undermined its argument of irreparable harm, that plaintiff failed to show that it was likely to succeed on the merits of its underlying claims, and that the district court erred in weighing the balance of harm and in considering the impact on the public interest.
Advice Interactive Group, LLC v. Web.com Group, Inc., 2018 WL 2246603 (11th Cir., May 16, 2018)
About the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.
IBM doesn’t let its employees use Siri, out of concern Apple may store and use sensitive IBM data. This decision on IBM’s part underscores an important business concern that companies of all sizes — not just behemoths like IBM — either have or should have.
Apple’s data usage policy that governs how it treats Siri inquiries says that Apple can use the information it collects to, among other things, improve the service. That’s a pretty broad grant of authority. Because the system that makes Siri available is so complex and multifaceted, Apple could reasonably justify extracting and using the information contained in just about any question people ask Siri. When that information comes from another major player in the competitive space, the implications of the appropriation of proprietary information become obvious.
IBM’s big concern is likely focused squarely on the protection of its trade secrets. State law provides the contours of trade secrets law, so the elements vary from state to state. But in general, a company can enforce its exclusive rights to possess and use information that (1) gives that company a competitive advantage, and (2) which is subject to efforts to keep secret. That latter part — keeping the information secret — is a big reason for nondisclosure agreements, password protected servers, and sensible restrictions on employee use of third party technologies (like social media and search tools like Siri).
Evan Brown is a Chicago technology and intellectual property attorney, representing businesses and individuals in a variety of situations, including matters dealing with the identification and protection of confidential business information.
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Copying of employer computer files central to trade secrets claim
Mobile Mark, Inc. v. Pakosz, 2011 WL 3898032 (N.D.Ill. September 6, 2011)
Defendant used to work for plaintiff. Before he left that organization to work for a competitor, he allegedly accessed plaintiff’s computer system and copied proprietary information to a laptop that plaintiff had loaned him. He then allegedly transferred the proprietary data to a number of external storage devices, and then installed and repeatedly ran a “Window Washer” program on the laptop to delete files and other data in order to conceal his activities.
Plaintiff sued, putting forth several claims, including a claim of misappropriation of trade secrets under the Illinois Trade Secrets Act, 765 ILCS 1065/2. Defendant moved to dismiss. The court denied the motion.
One of the bases for plaintiff’s trade secret misappropriation claim was that defendant, by going to work for a competitor, would inevitably disclose the proprietary information he had obtained while working for plaintiff. Looking to Illinois law, the court noted that “[i]nevitable disclosure is not assumed when an employee has general information in his head as a result of working for a company.” But “where evidence exists that the employee copied the employer’s confidential information, it leads to the conclusion of inevitable disclosure.”
Reed Construction Data v. McGraw Hill Companies, No. 09-8578 (S.D.N.Y. September 14, 2010)
Court refuses to dismiss lawsuit in which plaintiff accused its competitor of paying others to subscribe to plaintiff’s proprietary database to get confidential information.
Plaintiff and defendant are fierce competitors that provide project news and information to the construction industry. (Really the parties are the only nationwide providers in this market space.) The companies sell subscriptions to their respective databases. Plaintiff requires its subscribers to sign a nondisclosure agreement, making them promise not to share information obtained from the database with others outside the subscriber’s company.
After plaintiff figured out that a copule of its subcribers worked for sham enterprises, it got wise to the notion that defendant had hired those subscribers to access the database. Plaintiff sued, claiming, among other things, misappropriation of confidential information under New York law.
Defendant moved to dismiss for failure to state a claim. The court denied the motion.
To state a claim for misappropriation of confidential information, plaintiff had to allege that defendant used plaintiff’s confidential information for the purpose of securing a competitive advantage. Defendant argued that a tort action for misappropriation was not proper because all that had happened was a use of information in violation of the nondisclosure agreements with the individuals allegedly hired by defendant to access plaintiff’s database.
The court rejected this argument for two reasons. First, plaintiff had not alleged that defendant was a party to the contract. So the liability could not be constrained to just breach of contract. Moreover, the court found, that the tortious conduct of misappropriation had a separate and additional existence apart from any contractual relationship, even if such a relationship did exist. The misappropriation sprang from circumstances extraneous to, and not constituting elements of, the subscription agreements with the parties defendant allegedly hired to access plaintiff’s information.