The Trade Secrets Blog

Following Trade Secrets Litigation

Ninth Circuit Rules that Laptop Searches Don’t Require Reasonable Suspicion

The Electronic Frontier Foundation is reporting that the Ninth Circuit has recently held in United States v. Arnold that the Fourth Amendment does not require reasonable suspicion in order to allow Customs and Border Patrol agents to search a laptop computer or other digital devices.

EFF argues that “[t]he opinion is almost certainly wrong to classify laptop searches as no different from other property searches. Fourth Amendment law constrains police from conducting arbitrary searches, implements respect for social privacy norms, and seeks to maintain traditional privacy rights in the face of technological changes. This Arnold opinion fails to protect travelers in these traditional Fourth Amendment ways.” I agree. I don’t think that routine laptop searches are the same as the search of luggage. It is fundamentally different and I believe that this decision will most likely move up the chain in the appeals process.

In the meantime, for readers of this blog, be forewarned: “travelers carrying their corporation’s trade secrets, personal emails, or health and financial information are at risk of arbitrary and capricious fishing expeditions at the border.” And remember, this ruling would also apply to cell phones, digital cameras, blackberrys, zip-drives, etc.

April 25, 2008 Posted by | confidentiality, Intellectual Property, Trade Secrets | , , , , | Leave a comment

Bad “Karma” in Silicon Valley?

The New York Times reports that Tesla Motors, the Silicon Valley electric sports car maker, has filed suit in San Mateo Superior Court in California against Fisker Automotive and two employees, including Henrik Fisker. Fisker was hired by Tesla last year to design a four-seat sedan, codenamed White Star.

Key graph: “The Tesla lawsuit contends that Mr. Fisker and his chief operating officer, Bernhard Koehler, doing business under the name Fisker Coachbuild, fraudulently agreed to take on Tesla’s $875,000 design contract to gain access to confidential design information and trade secrets, then announced a competing vehicle [the aforementioned “Karma”]. Last fall Mr. Fisker founded Fisker Automotive, which is backed by the venture capital firm Kleiner Perkins Caufield & Byers.”

The Tesla lawsuit seeks to stop Mr. Fisker from using Tesla design documents, along with a return of the money from the contract and unspecified punitive damages.

For what it’s worth, earth2tek.com is reporting that Fisker Automotive has said that the suit is “ridiculous” and that it will “vigorously defend” itself from “these meritless claims.”

My question is what design documents did he take, if any. It’s not stated in the article that he took anything, only that he had access to design documents while he was working for Tesla. Also, is Tesla referring to design documents that existed before Fisker arrived, or the very design documents that Fisker was hired to produce? This question shouldn’t matter if Fisker “walked out the door” with design documents (whether he produced them or not) because they would clearly fall under the ownership of Tesla based on the “work made for hire” doctrine–and I assume that Tesla had confidentiality agreements and non-disclosure agreements in place (if not, then they haven’t been reading this blog). However, if Fisker was designing his own car (the Karma) from memory it may present a more interesting question.

You’ll recall that we reported a case in Ohio where the court found that trade secrets did not lose their status as trade secrets simply because someone memorized them. You can read about that here. California has no such ruling. Did Fisker memorize his designs? Is that even possible in this situation? Might this be the case that reviews the issue of memorization of trade secrets?

Also, remember that there are no non-compete agreements in California. This case could become very interesting because of the short amount of time that Fisker was with Tesla. Stay tuned…

April 25, 2008 Posted by | confidentiality agreement, Intellectual Property, misappropriation, trade secret theft, Trade Secrets | , , , , | Leave a comment

Spygate Revisited Again

Many of you will recall the earlier posts here and here on Spygate II – the allegations that the New England Patriots taped a walk-through practice of the St. Louis Rams prior to SuperBowl XXXVI. We discussed the potential trade secret implications of the allegations and the stonewalling that the NFL was doing to Arlen Specter. It appeared that Matt Walsh, an ex-employee of the Patriots, may have been the individual who taped the walk-through but he wasn’t talking and it seemed the NFL didn’t want him to–until now. According to ESPN, the NFL has reached an agreement with Walsh. The article is here. You can read the full text of the agreement here in .pdf.

Key Graph: “Commissioner Goodell will meet with Mr. Walsh … on May 13, the earliest date that Mr. Walsh, who lives in Hawaii, will be available on the East Coast,” the NFL said in a statement released Wednesday. “The agreement also requires Mr. Walsh to return any tapes and other items in his possession that belong to the Patriots. In return, the NFL and the Patriots have promised not to sue Mr. Walsh. They also will indemnify him for any expenses, including legal fees that he incurs in connection with the interview.”

Looks like Mr. Walsh got what he was asking for–total indemnity. We’ll see how this one continues to develop–either Walsh knows something and this could get real interesting real fast, or what he knows is not terribly consequential and all this will have been much ado about nothing. Of course, there is still the hurdle of finding out what he tells the NFL, or what is on the tapes he turns over to the NFL. If the NFL continues to stonewall, it will be pretty evident that Walsh’s information was pretty damaging.

Arlen Specter, the Senator pursuing this issue, says he will not be backing down.

When asked if he wanted to see the materials, Specter said, “I sure do,” adding that he would ask the league to allow him access to whatever videotapes and notes Walsh turns over.

“To whatever extent the league’s approval is necessary, I will ask them for it in a formal way,” Specter said.

Specter will not be part of the NFL’s interview of Walsh but confirmed he expected to be meeting with Walsh in Washington also on May 13.

As for what he wants to learn from Walsh in their conversation, Specter said: “I want to know everything. I would begin chronologically. When did the first taping occur? Who directed it? And who knew about it? Who participated in it, and what use was made of it? And what effect did it have on the game, as best he could tell? Was there ever any disagreement about using it?”

What he learns from Walsh, as well as the materials the former video assistant turns over, will determine whether Specter will ask the judiciary committee to look into the matter.

As I said, this could get messy for the NFL if Walsh has the goods on the Patriots. As for the trade secrets implications of all this, I will post on that should it appear that Walsh really has what he says he has.

April 23, 2008 Posted by | Uncategorized | , , , , , , , | Leave a comment

Good Hands or Just a Middle Finger – Revisited

Back in January I posted on Allstate Insurance’s refusal to turn over documents regarding its claims process, the so-called McKinsey documents. That post is here. Allstate claimed that the documents were trade secrets.

Now, as reported by the Kansas City Business Journal here, Allstate has decided not only to turn the documents over to the court, but has posted the documents online. And insurance industry watchdogs are having a heyday with the documents. Go here.

Key graph:

“The company said in a release that it still thinks the documents are trade secrets but that it decided to release the 150,000 pages online because it wanted to dispel the “inaccurate picture” that had been painted of its claims process.”

So, you get to decide, are you in Good Hands, or are they still giving you the middle finger?

April 11, 2008 Posted by | Uncategorized | Leave a comment

$600 Million in Trade Secrets Stopped From Getting to China

Very interesting article.  Apparently, a former software engineer for a telecomm company based near Chicago was indicted based on a random search of her luggage, prior to travel to China, which revealed trade secret information worth $600 million.  Note that she was an employee of the telecomm company–if I’ve said it once, I’ve said it a thousand times–your employees are the greatest threat to your trade secrets.  Make sure you are adequately protected from this type of exposure.

April 9, 2008 Posted by | trade secret theft, Trade Secrets | , | Leave a comment