The Pacific Coast Business Times is reporting that two medical device makers who focus on aesthetic or cosmetic procedures (however, they are not competitors) are locked in a battle over some files that an employee of one company emailed to an employee of another company. The complaint, filed in Santa Barbara County Superior Court, alleges that Mark Kelly, a consultant for Mentor Corporation emailed files to Jamie Diggs, a Den-Mat Holdings employee, after Diggs had requested certain files. The article is here.
Mentor alleges that the emailed files contained Mentor’s trade secrets and that many were stamped “confidential” or “trade secret” at the top.
“Before Kelly sent the contested message, Mentor had installed a software program to monitor e-mail for potentially sensitive file attachments making their way outside the company, Mentor said in court filings.
“The program flagged as suspicious Kelly’s e-mail to Diggs. The message was then forwarded all the way up to the executive suite, Mentor said in court declarations.”
I haven’t spoken much about this type of software, but with the increasing amount of trade secrets litigation stemming from employee actions and misappropriation, it could make sense to add it as part of your trade secrets protection plan on at least two levels: (1) it is further evidence in court that you were actively seeking to protect your trade secrets and to keep them from becoming generally known to the public, or to a competitor; and (2) more practically, a company might be able to detect a trade secrets leak early on and prevent altogether the need for litigation (and its attendant costs) by taking decisive action early on.
There are some good companies that make such software. I will post later on some of them.
An interesting issue that I am sure will come up in this litigation is the degree of competitive advantage the documents provided to Den-Mat since the companies are not necessarily competitive with each other. The article states that the documents at issue contained “quality management policies, various accounting forms and policies, corporate procedures for expenditures and dispositions, human resources policies, corporate policies regarding inventory, computer system policies, and codes of conduct and ethics.” While much of this could be considered trade secret because it would allow a competitive advantage between competitors, it is not so clear when the companies are not competitors. It could raise interesting issues. We will follow this litigation as it develops.
The Reason Foundation has an article by Steven Titch which highlights the increasing likelihood that, upon your return from travel abroad, a U.S. Customs Agent may ask to see your laptop or cell phone in order to inspect and copy the contents, including all business and personal information. You can read the article here.
According to the article, U.S. Customs and Border Protection are equating laptops and cell phones to suitcases (which they are allowed to search). I will not go into the very serious issues these kind of inspections raise–the article does an excellent job. However, I do believe it is important, from a trade secrets standpoint, to be aware of these practices so that we don’t put confidential information at risk.
Key graph: “The searches are becoming common enough that, according to the Washington Post, a number of companies are advising employees who travel internationally to wipe their hard drives before leaving the country in order to prevent disclosure of proprietary or highly secure information.” Very scary.
The Sacramento Business Journal reported last week that Allen Cotten, a former employee of Genesis Microwave, Inc., “admitted to stealing trade secrets from Genesis Microwave and offering them for sale to foreign governments.” Notice the emphasis on employee. Regular readers of this website will understand the significance of that fact.
According to the article, “Cotten worked for Genesis Microwave, Inc., in El Dorado Hills, and admitted that beginning in February 2004 he began to steal plans, designs, parts and specifications for components known as logarithmic video amplifiers. The technology has military applications for radar jamming, guidance, countermeasures and locating enemy signals during combat.”
This happens far too frequently–get your trade secrets protection plans in order and make sure they are followed. Your employees are not your friends.
Kudos to the FBI for doing the legwork that resulted in the confession.