The Trade Secrets Blog

Following Trade Secrets Litigation

Activision Ordered to Hand Over Source Code

According to Gamespot.com, A Judge has ordered Activision to hand over the source code for the DJ game, Scratch: The Ultimate DJ. This case has gotten interesting fairly quickly. Let’s recap.

Activision was sued on April 14 by Genius Productions and Numark Industries for “intentional interference with contract, breach of contract…and misappropriation of trade secrets” after Activision purchased Scratch developer 7 Studios. 7 Studios is under contract to develop Scratch: The Ultimate DJ, for Genius and Numark.

Gamespot.com reported on April 16, 2009, the following: “Genius and Numark’s [April 14] filing claimed that Activision contacted them via the cash-strapped 7 Studios expressing interest in buying Scratch: The Ultimate DJ. However, after announcing its own DJ Hero game and seeing a demo of Stratch, Activision allegedly broke off negotiations and promptly bought 7 Studios. The suit then contends that 7 Studios slowed work on the game and refused to turn over software and a Numark turntable-inspired controller when Genius terminated its contract.

In addition to “substantial damages” and a return of its assets, Genius and Numark sought a restraining order against Activision’s release of DJ Hero so Scratch could retain its “‘first to market’ status.”

Then, Activision released statement announcing that a Los Angeles judge had rejected the request for a restraining order, citing a lack of evidence:

“Activision Publishing strongly denies the allegations made by Genius Products and Numark Industries and believes that the claims are disingenuous and lack any merit. Yesterday, the L.A. Superior Court found that there was no evidence of any wrongdoing by Activision and refused to grant any restraining order against Activision.

“These allegations are nothing more than an attempt by Genius to place blame for the game’s delay, as well as to divert attention from the cash flow, liquidity, and revenue challenges Genius detailed in its March 30, 2009, SEC filing. By their own admission in October 2008, the game had fallen behind in production, which was well before Activision had any involvement with Genius, Numark or California 7 Studios regarding the game.”

So, that’s the background.

On April 20, 2009, gamespot.com reported that “Genius and Numark are claiming that it was they, not Activision, who prevailed in court last week. Through an external publicity agency, the companies made public the transcript of the April 15 hearing, which was presided over by Judge James C. Chalfant.”

The hearing began with the judge saying that, “There isn’t any evidence against Activision. …There is no reason to restrain Activision from doing anything.” However, the judge quickly added that “There is evidence that…7 Studios has a duty to return the work product, source code, and software of the plaintiff [Genius].”

“It is actually very straightforward. They hired you. They have terminated the deal. Their agreement requires return of materials,” said the judge. “No matter how you slice this banana, they are entitled to the work product back. I don’t know why your client would want to continue working on a project for which they have been terminated.”

Chalfant then ordered Activision to make its 7 Studios subsidiary turn over the Scratch source code by today, April 20, in preparations for a subsequent hearing next month. “You [Activision] turn over the source code, and then if you want it back, you can argue on May 6th as to why you should get it back. I can’t under any circumstance think why you would be entitled to keep the source code.”

Next step is the May 6 hearing on damages. We’ll keep you posted.

April 24, 2009 Posted by | Intellectual Property, misappropriation, trade secret theft, Trade Secrets, Uncategorized | , , , , , , | Leave a comment

ClearOne Maintains Its Award

I reported on this jury verdict back in November here. According to websitegear.com, it appears that the Judge has entered a Final Order awarding $9.6 million, not much less than the jury’s award.

It appears the Judge was pretty convinced of BiAmp’s wrongful actions:

As to defendant Biamp, the court ruled that the finding of willful and malicious trade secret misappropriation by Biamp was supported because “Biamp deliberately ignored numerous warning signs suggesting that the AEC technology offered by WideBand was not WideBand’s to sell. Given all the facts presented to Biamp at the time, it could not have held a good faith belief that its use of the WideBand code was valid,” and that Biamp earned over $1.5 million “by purchasing the WideBand technology at half the price offered by ClearOne and then selling the technology at the same price it charged when dealing with ClearOne.” The court also wrote that “having reviewed the testimony of Biamp’s witnesses…the court finds that the jury (who has the sole responsibility to assess witness credibility) reasonably found by clear and convincing evidence that Biamp’s behavior was willful and malicious.” For these and other reasons, the court concluded that “an award of exemplary damages against Biamp is appropriate to punish Biamp for ignoring its due diligence duties in order to profit at the expense of a competitor and to send a message deterring other companies from engaging in similar conduct.”

April 24, 2009 Posted by | Intellectual Property, misappropriation, trade secret theft, Trade Secrets | , , | Leave a comment

Luna Innovations Eclipsed By $36 Million Award

Law.com is reporting that a California jury hit Luna Innovations for $36 million in damages for breaking an agreement Luna had with hansen Medical to develop a robotic catheter and misused trade secrets to land a contract with Hansen’s competitor, Intuitive Surgical, Inc.

Key sentence: “The jury found that Luna breached its contract with Hansen in five ways, including breaking a nondisclosure agreement and failing to offer Hansen the first opportunity to negotiate an exclusive license to the technology they were developing together.”

It’s worth noting that Hansen had the opportunity to win this one because there was a nondisclosure agreement signed before any information of Hansen’s was disclosed to Luna. It is critical for small businesses looking to partner up that they execute nondisclosure agreements to protect their trade secrets.

April 24, 2009 Posted by | Intellectual Property, misappropriation, non-disclosure agreement, trade secret theft, Trade Secrets | , , , | Leave a comment