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.
bostonherald.com is reporting that Andre Benjamin aka Andre 3000 of the musical group Outkast has been sued, along with the Cartoon Network and Turner Broadcasting, by Timothy McGee, a Boston postal worker, for $2 million in damages relating to animated series “Class of 3000.” The suit claims copyright infringement, breach of contract and misappropriation of trade secrets and requests damages “including but not limited to” all the profits from the show, legal fees and “whatever this court may deem additionally just and proper.” Unfortunately for McGee, the profits from the show aren’t that extensive as it has already been cancelled.
Timothy McGee, 33, a former art student, claims he developed “characters, artwork, storylines . . . and concepts” for an animated series he called “The Music Factory of the ’90s,” nearly 10 years before the oddly similar “Class” began airing on the Cartoon channel.
In 1997, the Boston guy submitted a proposal for his show to Michael Lazzo, then a vice president of programming for the Cartoon Network, and promptly received a rejection letter.
Nine years later, in November 2006, the Cartoon Network premiered “Class of 3000,” an animated series set in Atlanta.
Only time will tell if McGee has the goods to be able to hang this one on Andre. A good place to start will be any documentation he submitted to Lazzo in 1997, the rejection letter, and (if he’s lucky) a non-disclosure agreement. Oftentimes, when people pitch shows or ideas, the programming executive refuses to sign non-disclosures on the chance that they are pursuing a similar themed show already. These cases are notoriously hard to prove because of the passage of time and the difficulty of getting the right witnesses–is Lazzo still working for Cartoon Network (the article is unclear), and what documents still exist at Cartoon Network that might support McGee’s claim?
Another question, is it going to be worth it for McGee? This is not a question to be taken lightly. Even though you may have been wronged, a good business person will always, always conduct a cost-benefit analysis of pursuing a claim. If the damages aren’t great enough, there is little sense in filing a lawsuit and paying a lawyer lots of money just to achieve the satisfaction of knowing that a court of law agrees that you were wronged. A simple maxim: If the damages aren’t there, it is rarely worth it to litigate.
In this case, I see little reason to pursue this claim. Even if McGee were to win in spectacular fashion, the odds that an animated feature on the Cartoon Network that lasted for only two years will have generated enough profit to justify an award of $2 million is debatable.
We’ll keep you posted on this one.
Networkworld.com is reporting that Biswamohan Pani, a design engineer at Intel’s Hudson, Massachusetts offices before going to work for AMD, is accused of stealing $1 billion worth of trade secrets to help his new employer.
Key graph: “Pani is accused of accessing Intel’s network remotely and downloading 13 top-secret documents and other proprietary information related to methods for designing microprocessors, “including a document explaining how the encrypted documents could be reviewed when not connected to Intel’s computer system” the Telegram reports.”
Apparently AMD was unaware of the theft. “Prosecutors say Pani planned to use the secrets to advance his career at AMD. The information Pani allegedly downloaded “was worth more than $1 billion in research and development costs,” the Associated Press reported. Pani told investigators he downloaded the top-secret documents to help his wife, who works for Intel, the Telegram reports.”
The defense that he was just helping his wife is an interesting one. It will be interesting to see how it plays. Would the wife need the information that he accessed to do her job? Was the wife cleared to access the allegedly stolen documents? How did Pani access the documents? Using the wife’s clearance or his own clearance from when he used to work for Intel? There are a lot of unanswered questions and we’ll keep an eye out on this one. My guess is that the “I did it for my wife” defense won’t stand up to scrutiny. As far as trade secrets cases go, this is about as big as it gets and will be very interesting to follow.
One word of advice for Intel: If your ex-employees can access over $1 billion worth of information from a remote location after they have started work for your major competitor, your trade secrets protection plan needs some serious work. While it is all well and good to have confidentiality agreements, and the like in the event of something like this, doesn’t it just make sense to ensure that its secure from this type of misapproriation in the first place? $1 billion worth of information was available remotely? It’s an eye-popping amount of information to have floating in cyberspace, ripe for the plucking by ex-employees.
You’ll recall that Sears was hit with a $21.4 million damages claim several months back for stealing an inventors idea of combining two commonly found power tools in one. I wrote about it here. It seems that the Judge felt it wasn’t enough and hit Sears with another $3.7 million to bring the total to $25 million. IPLaw360 reports on the increase here.
In a scenario that is becoming all too familiar, Coldwell Banker has filed a federal lawsuit in the U.S. District Court in Baltimore, seeking $2 million in damages and a restraining order on soliciting its clients, against two former executives, John and Ann D’Ambrosia, who left to open a branch of GMAC.
The suit alleges that Coldwell Banker lost 10 listing agreements to GMAC within two weeks of the GMAC branch opening. The major evidence that Coldwell is banking on (excuse the pun) appears to be email transmitted using Coldwell Banker email accounts which were sent to future GMAC sales agents who were then working as independent contractors for Coldwell.
According to this article, the email messages discuss “recruitment of Coldwell Banker sales agents; how to convince Coldwell Banker clients to follow their individual brokers to the new GMAC office; and how to transfer data from computers.
“A common thread in the quoted e-mails is the D’Ambrosias’ alleged use of Coldwell Banker to springboard their upcoming affiliation with GMAC Real Estate, which has 1,300 franchised and company-owned real estate offices in the United States and Canada and 22,000 sales associates, according to its Web site.”
Coldwell Banker has alleged 14 counts in its complaint, including violations of the Federal Computer Fraud and Abuse Act, which governs unauthorized access to “protected computers” resulting in a business loss; breach of the duty of loyalty to Coldwell Banker; tortious interference with contractual and prospective economic relations; and violations of state trade secrets law.
This case is interesting because of the heavy reliance on emails as evidence that the D’Ambrosias were planning their business venture with GMAC, and were targeting Coldwell Banker listing agreements and sales agents while working for Coldwell Banker. This is a very typical trade secrets scenario. I have said many times that email is an important part of any trade secret case involving the departure of employees who leave to open a new business in competition with their former employer and begin taking their former employers’ employees, customers and other confidential information. I can’t say it enough, when you believe that this type of situation exists within your business, one of your first priorities should be to backup the email system so that you can prevent the accidental deletion of important emails due to a document retention policy.
It will also be interesting to see what the employment agreements said–were there non-disclosure agreements, confidentiality agreements? These items are critical to an effective trade secrets protection plan.
Financial Week is reporting that Aerotek, a staffing firm based in Maryland and run by Steve Bisciotti, who also owns the Baltimore Ravens of the NFL, has sued Michael Ponce, a former employee for breach of contract, misappropriation of trade secrets, interference with contractual relationships, unfair competition and false advertising. Aerotek has also asked the court to stop Mr. Ponce from using its trade secrets to solicit business and to force him to return confidential client information. The suit was filed on November 9, 2007, in Sacramento County Superior Court.
This is where it gets interesting–the allegations relate to Ponce leaving Aerotek to join Johnson Group Staffing Co., a company started by Chris Johnson, another former employee of Aerotek, who was already sued by Aerotek in June 2006. That lawsuit was settled–as part of the settlement the Johnson Group agreed to stop soliciting or serving Aerotek contract engineering clients for 15 months.
Now, Aerotek is going after another employee who defected to work for the Johnson Group. According to the Sacramento Business Journal, Ponce was hired by Aerotek in March 2005. According to the article, he signed a confidentiality and nondisclosure statement, promising not to divulge any trade secrets for the benefit of another company. The complaint alleges that Ponce made an unauthorized copy of a client binder which he is apparently now using to contact clients of Aerotek.
We’ll keep you updated on this case as it progresses.
Last January Silicon Image sued Analogix in California for copyright infringement, misappropriation of trade secrets, and unlawful, unfair and fraudulent business practices. Silicon Image alleged that Analogix, without authorization and in violation of Silicon Image’s intellectual property rights — copied and used Silicon Image’s proprietary register maps and semiconductor configuration software. In addition Silicon Image sought an injunction barring Analogix from its ongoing infringement of Silicon Image’s intellectual property rights.
If your confused, maybe this will clear it up. According to Silicon Image’s previous press release: “Semiconductor layout designs involve strategic placement of various electronic components, including small memory cells called registers, on interconnected layers of a chip. Silicon Image’s layout designs, including its register maps that identify locations of registers within its chip designs, are its guarded trade secrets. Documentation describing its designs is not publicly disclosed and is provided to Silicon Image’s customers or business partners only under strict non-disclosure agreements. Silicon Image alleges that Analogix copied and used Silicon Image’s register maps by gaining unauthorized access to Silicon Image’s proprietary and confidential information.”
“Along with its chips, Silicon Image has developed, at substantial expense, its semiconductor configuration software. Silicon Image provides the software to its customers who use it to configure Silicon Image chips incorporated in their consumer products. Under its software license agreements, Silicon Image’s semiconductor configuration software can only be used with Silicon Image chips and no other products. Such a restriction is common in the industry. The complaint charges Analogix with illegally copying and modifying Silicon Image’s semiconductor configuration software and knowingly encouraging its existing and prospective customers to modify and use Silicon Image’s semiconductor configuration software with Analogix’s chips, a use that is beyond the scope, and in violation of, the rights granted under Silicon Image’s software license agreements.”
Now that we have the lay of the land. On January 8, 2008, it was reported that the U.S. District Court denied Silicon Image, Inc.’s request for a preliminary injunction.
Both sides are spinning the story in their favor. Analogix released a statement emphasizing that the court denied the request stating that “the evidence gives rise to serious questions on the merits as to this claim.” You can find that press release here.
Silicon Image released its own statement emphasizing that the court had concluded that “Silicon Image has demonstrated a strong probability of success on the question of misappropriation” and that the judge ordered an expedited trial for April 2008 on that basis. The trial was originally set for September 2008. Silicon Image further stated that the judge accelerated the trial date “in light of the evident copying, the serious questions raised by Silicon Image on the merits, and the possibility of irreparable harm.” You can find that press release here.
This is an interesting turn of events and makes one wonder what exactly Silicon Image’s evidence of misappropriation was and why it was not enough for a preliminary injunction but was strong enough to find there had been “evident copying” and warranted an expedited trial. We will continue to follow this case as it progresses and keep you informed of the results.
I was going to post some practical information about the effect and validity of non-compete agreements in California (they’re generally not enforceable) and alternatives that California businesses have to non-compete agreements to protect their businesses from employees who go to work for competitors (hint: it has to do with confidentiality agreements and non-disclosure agreements–which are enforceable), but there is an interesting exchange occurring right now on the net regarding overall policy relating to non-compete agreements which was started by some comments of Bijan Sabet last weekend (Mr. Sabet is a partner at Spark Capital in Boston, Mass.).
Essentially, the invalidity of non-compete agreements in California has been a source of consternation for many business owners trying to protect their businesses from employees leaving for competitors. On the flip side, proponents of non-competes have pointed to the explosion of businesses and technology in Silicon Valley as evidence that the California legislature got it right when they invalidated the non-compete agreement because of its function as a barrier to free markets. So who’s right? Continue reading
For anyone following the Sears trade secrets case in Chicago where Roto Zip Tool Corp. alleged that Sears had breached a non-disclosure agreement and misappropriated a trade secret regarding a rotary cutting tool combined with a plunge base router, IP Law360 is reporting that a jury has found that Sears stole the trade secrets of Roto Zip and awarded Roto Zip (now known as RRK Holding Co.) damages of $21M ($8M of which was for punitive damages).
A family-owned company has won a $21 million verdict against national retailer Sears, Roebuck and Co. after a jury found the appliance store chain guilty of stealing the invention for a popular power tool.
Instructive in this case was the court’s denial of summary judgment relative to Sears’ argument that the tool was generally known within the relevant industry because it was comprised of two well-known tools and could thus not be considered a trade secret. However, the court found that “although a spiral saw and a plunge base router were marketed and known as separate products, the combination of the two into a single convertible product was not on the market, and was referred to as “new” and “innovative” by the Defendant itself. . . . The new combination of tools offered a lucrative and competitive product.” The court also stressed that the combination tool “had never been on the market before.”
Thus, this case may stand for the precedent that a trade secret does not have to be totally comprised of confidential information, but rather can be a “new” and “inventive” way of combining products already known to the industry and not protected by trade secret law because they have been previously disclosed to the public.