Not long ago I wrote a long, detailed piece on the potential pitfalls involved in blogging. What is not mentioned in that article in any detail is mico-blogging.
Micro-blogging is defined by Wikipedia as a form of blogging “that allows users to send brief text updates or micromedia . . . to be viewed by anyone or by a restricted group. . . .” Think Twitter or Facebook, MySpace, LinkedIn or Xing: Micro-blogging typically consists of short pieces, almost like “sound bites” or “blog bites,” if you will. They provide short, immediate commentary, and often related to such important, breaking news as “What I’m doing now is . . . .”
Because one often uses micro-blogging only with respect to one’s close friends (or expanded circle of friends), one’s micro-blogged persona may differ from one’s professional persona. Ask yourself this: would I “friend” my boss on Facebook and let him or her see everything that’s going on in my personal life? If the answer is “no,” you’ll understand why a number of companies no insist that job applicants “friend” them so they can check out the what isn’t on the resume.
Is this legally acceptable? Seems that it. I put the question to one of my colleagues who practices in the firm’s Labor & Employment Group, and her response was that it would seem to pass legal muster. (I’m omitting a slew of caveats, but that was the general idea.)
What’s more, a colleague in our Atlanta office chimed in with an anecdote about having found the “smoking gun,” which allowed his team to prevail on a lawsuit, on the plaintiff’s Facebook page. Hey, an admission is an admission no matter where you find it. But with the advent of the Internet, and the proliferation of micro-blogging sites, there are more opportunities to make potentially case-killing statements, and a greater chance that, once made, they won’t simply disappear into the ether.
Add into this mix, the Federal (and California, etc.) rules on electronic discovery, and you can see a storm brewing. In a nutshell, the Federal Rules explicitly incorporate e-discovery as subject to disclosure requirements. While certain “safe harbors” exist, for example where the e-information sought is automatically deleted as part of good-faith, routine system operations (and not as part of a plan to destroy evidence), the fact is that most of what we create in cyberspace (micro-blogs included) would be subject to such discovery, and we – and our clients – would have a duty to preserve such data, search for it and (gulp!) disclose it (provided it is relevant, not privileged and "reasonably accessible" of course).
So, what happens when Web 2.0 (social networking, Twitter, Facebook, etc.) meet e-discovery? The answer may depend on how – and if – such data can be archived. In other words, is it there when the opposing counsel asks for it? Certainly one could ask for a print out of everything available as of the date of the request.
Moreover, if the data resides on the Twitter, Facebook or LinkedIn server, it may be obtainable by subpoena, and if it has been stored on the responding party’s internal computer RAM, there seems to be no question that it is subject to discovery.
While this area of law is sure to evolve in the coming months, it is something to remember when seeking discovery, or representing a company in their hiring issues. After all, you don’t a blog bite to come back and bite you in the . . . .
Jonathan Pink is a member of the Intellectual Property Service Group at Bryan Cave, LLP. He can be reached at jonathan.pink@bryancave.com
Thursday, March 26, 2009
Monday, March 16, 2009
An Italian Fling
So I’m sitting in my office the other day, generally depressed about the depression, when my phone rings and (trumpets sound) a new case lands on my desk.
Now, I love the thrill of a new case. It’s like a new love (as best I can remember from way back when). Everything is new, and bright and interesting. And get this: this one was Italian. Actually, an Italian copyright case, to be exact.
Seems that my client – located in Italy -- had been accused by an American company of hacking into the Yank’s computer (located in the U.S.), and then copying software code (from Italy) that is covered by a valid, U.S. Copyright registration. And, of course, the U.S. company was threatening a parade of nasties all covered by the U.S. Copyright Act.
But that really begs the question, doesn’t it: if this was infringement, is it governed by the U.S. Copyright Act? Or is this a dispute that would have to be litigated in Italy?
In general, “United States copyright laws do not have extraterritorial effect, and therefore, infringing actions that take place entirely outside the United States are not actionable.” Subafilms, Ltd. v. MGM-Pathe Comm’ns Co., 24 F.3d 1088, 1091 (9th Cir. 1994) (en banc); Peter Starr Prod. Co. v. Twin Continental Films, Inc., 783 F.2d 1440, 1442-1443 (9th Cir. 1986). In other words, even if the plaintiff is a U.S. based company, and the method of copyright violation occurs by internet connection (as would have been the case if my clients had infringed as alleged), “[a]t least one alleged infringement must be completed entirely within the United States.” Allarcom Pay Television, Ltd. v. Gen. Instrument Corp., 69 F.3d 381, 387 (9th Cir. 1995); see also Danjac, LLC v. Sony Corp., 1998 U.S. Dist. LEXIS 22231, at *22 (C.D. Cal. 1998) (scope of injunction limited to domestic activities).
In Allarcom, the plaintiff was the authorized Canadian distributor of certain television and movie rights, while defendant, Showtime, had U.S. rights to some of the same material. 69 F.3d at 383-384. Co-defendant, General Instrument, manufactured a descrambling device that allowed unauthorized users to receive protected television signals from companies such as Showtime (e.g. they received the content for free by stealing it with the use of the descrambling device). The plaintiff sued for copyright infringement, filing its claim in a U.S. district court. The court held that the Copyright Act did not apply to infringement at issue, as it had occurred in Canada. Id. at 387. Specifically, the court held that although the signal was from the United States, it had been received and decoded in Canada, and thus “the potential infringement was only completed in Canada once the signal was received and viewed.” Id.
So bringing this back to my case, these facts will weigh heavily when negotiating a settlement. That is, while the plaintiff has asked for a boatload of money, I’ve pointed out that if she wants to litigate this case, she’d better brush up on her Italian (where, by the way, the penalties for alleged infringement are not as steep as they are in the U.S.). I’ll let you know haw this goes.
Jonathan.pink@bryancave.com
Now, I love the thrill of a new case. It’s like a new love (as best I can remember from way back when). Everything is new, and bright and interesting. And get this: this one was Italian. Actually, an Italian copyright case, to be exact.
Seems that my client – located in Italy -- had been accused by an American company of hacking into the Yank’s computer (located in the U.S.), and then copying software code (from Italy) that is covered by a valid, U.S. Copyright registration. And, of course, the U.S. company was threatening a parade of nasties all covered by the U.S. Copyright Act.
But that really begs the question, doesn’t it: if this was infringement, is it governed by the U.S. Copyright Act? Or is this a dispute that would have to be litigated in Italy?
In general, “United States copyright laws do not have extraterritorial effect, and therefore, infringing actions that take place entirely outside the United States are not actionable.” Subafilms, Ltd. v. MGM-Pathe Comm’ns Co., 24 F.3d 1088, 1091 (9th Cir. 1994) (en banc); Peter Starr Prod. Co. v. Twin Continental Films, Inc., 783 F.2d 1440, 1442-1443 (9th Cir. 1986). In other words, even if the plaintiff is a U.S. based company, and the method of copyright violation occurs by internet connection (as would have been the case if my clients had infringed as alleged), “[a]t least one alleged infringement must be completed entirely within the United States.” Allarcom Pay Television, Ltd. v. Gen. Instrument Corp., 69 F.3d 381, 387 (9th Cir. 1995); see also Danjac, LLC v. Sony Corp., 1998 U.S. Dist. LEXIS 22231, at *22 (C.D. Cal. 1998) (scope of injunction limited to domestic activities).
In Allarcom, the plaintiff was the authorized Canadian distributor of certain television and movie rights, while defendant, Showtime, had U.S. rights to some of the same material. 69 F.3d at 383-384. Co-defendant, General Instrument, manufactured a descrambling device that allowed unauthorized users to receive protected television signals from companies such as Showtime (e.g. they received the content for free by stealing it with the use of the descrambling device). The plaintiff sued for copyright infringement, filing its claim in a U.S. district court. The court held that the Copyright Act did not apply to infringement at issue, as it had occurred in Canada. Id. at 387. Specifically, the court held that although the signal was from the United States, it had been received and decoded in Canada, and thus “the potential infringement was only completed in Canada once the signal was received and viewed.” Id.
So bringing this back to my case, these facts will weigh heavily when negotiating a settlement. That is, while the plaintiff has asked for a boatload of money, I’ve pointed out that if she wants to litigate this case, she’d better brush up on her Italian (where, by the way, the penalties for alleged infringement are not as steep as they are in the U.S.). I’ll let you know haw this goes.
Jonathan.pink@bryancave.com
Trade Secret Cloak and Dagger: the Economic Espionage Act of 1996
As if getting hit with a claim for misappropriation of trade secrets were not enough, many people do not realize (OK, it came as a surprise to me) that there is a criminal component to misappropriation. That is, at least where the theft is done for purposes of passing off the secrets to a foreign government.
Cloak and dagger: the Economic Espionage Act of 1996 (18 U.S.C. § 1831–1839) criminalizes the theft or misappropriation of a trade secret. Moreover, the offense applies even where the information taken is not top secret. (Although it makes the story so much more interesting if it is highly classified). The EEA involves any commercial information that is neither classified nor related to national defense (in which case it is falls under the run-of-the-mill espionage act).
This EEA in a nutshell: The Act is broken into two parts. The first, 18 U.S.C. § 1831(a), criminalizes the misappropriation of trade secrets (including conspiracy to misappropriate trade secrets and the subsequent acquisition of such misappropriated trade secrets) with the knowledge or intent that the theft will benefit a foreign power. The second, 18 U.S.C. § 1832, criminalizes the misappropriation of trade secrets related to or included in a product that is produced for or placed in interstate (including international) commerce, with the knowledge or intent that the misappropriation will injure the owner of the trade secret.
So far as I can tell, the EEA isn’t used all that often, and when it is, the cases seem to look to the Uniform Trade Secret Act for guidance as to what is -- or isn’t – a trade secret. There was one fairly high profile case decided in August, 2007 in the Northern District of California (before District Court Judge Jeremy Fogel). In that case, Judge Fogel sentenced a Canadian citizen, Xiaodong Sheldon Meng, to 24 months in federal prison "for stealing military software from a Silicon Valley defense contractor and trying to sell it to the Chinese military."
According to my sources, another case is poised to go to trial this May in the Central District of California. That case also involves efforts to sell (or at least deliver) to the Chinese government material that was gleaned by an employee of a military contractor.
Like most criminal conduct, the penalties for violation of the EEA are steep. Penalties for violation of Section 1813(a) include fines of up to $500,000 and imprisonment of up to 15 years. (Organizations can also be guilty of this Act, and while they won’t do any prison time, they will pay a fine of up to $10 million.) Penalties for violation of section 1832 are imprisonment for up to 10 years for individuals (no fines) and fines of up to $5 million for organizations.
jonathan.pink@bryancave.com
949-223-7173
Cloak and dagger: the Economic Espionage Act of 1996 (18 U.S.C. § 1831–1839) criminalizes the theft or misappropriation of a trade secret. Moreover, the offense applies even where the information taken is not top secret. (Although it makes the story so much more interesting if it is highly classified). The EEA involves any commercial information that is neither classified nor related to national defense (in which case it is falls under the run-of-the-mill espionage act).
This EEA in a nutshell: The Act is broken into two parts. The first, 18 U.S.C. § 1831(a), criminalizes the misappropriation of trade secrets (including conspiracy to misappropriate trade secrets and the subsequent acquisition of such misappropriated trade secrets) with the knowledge or intent that the theft will benefit a foreign power. The second, 18 U.S.C. § 1832, criminalizes the misappropriation of trade secrets related to or included in a product that is produced for or placed in interstate (including international) commerce, with the knowledge or intent that the misappropriation will injure the owner of the trade secret.
So far as I can tell, the EEA isn’t used all that often, and when it is, the cases seem to look to the Uniform Trade Secret Act for guidance as to what is -- or isn’t – a trade secret. There was one fairly high profile case decided in August, 2007 in the Northern District of California (before District Court Judge Jeremy Fogel). In that case, Judge Fogel sentenced a Canadian citizen, Xiaodong Sheldon Meng, to 24 months in federal prison "for stealing military software from a Silicon Valley defense contractor and trying to sell it to the Chinese military."
According to my sources, another case is poised to go to trial this May in the Central District of California. That case also involves efforts to sell (or at least deliver) to the Chinese government material that was gleaned by an employee of a military contractor.
Like most criminal conduct, the penalties for violation of the EEA are steep. Penalties for violation of Section 1813(a) include fines of up to $500,000 and imprisonment of up to 15 years. (Organizations can also be guilty of this Act, and while they won’t do any prison time, they will pay a fine of up to $10 million.) Penalties for violation of section 1832 are imprisonment for up to 10 years for individuals (no fines) and fines of up to $5 million for organizations.
jonathan.pink@bryancave.com
949-223-7173
Sunday, February 1, 2009
I'm Just Copying for a Friend
Here’s an interesting one to watch. The Supreme Court issued a one-line order yesterday in the Cable News Network vs. CSC Holdings case indicating that the solicitor general “is invited to file a brief in this case expressing the views of the United States.”
This case involved Cablevision Systems Inc.’s plan to copy its broadcasts for its customers. In other words, rather than copying the program yourself, at home (via Tivo or video, for example), Cablevision would do it for you. Not a bad offer, sort of a customer-centric, friendly service. Except that the movie studios and networks didn’t see it that way. They regarded this as copyright infringement pursuant to 17 U.S.C. § 106.
Section 106, as you will recall, gives the owner of the copyrighted work the right to prepare derivative works based on the copyrighted work, and to display and distribute copies of it to the public. 17 U.S.C. § 106 (1), (4) and (5). But under Sony Corp. of America v. Universal City Studios, Inc. (aka the “Betamax” case), 464 U.S. 417 (1984), the Supreme Court ruled that the making of individual copies of complete television shows for purposes of time-shifting does not constitute copyright infringement. The Court said this was fair use, and ruled that manufacturers of home video recording devices, such as Betamax or other VCRs, cannot be liable for infringement. In short, the case created a legal safe haven for the copying of content for personal use.
At trial, Cablevision argued that its copying was akin to the individual copying that is permitted under the holding in Sony. The studios and networks argued that it was nothing of the sort; that it was a violation of Section 106 as Cablevision received a benefit from this service, even if it did not directly charge for it. The trial court sided with the studios, but on appeal, the Second Circuit agreed with Cablevision. It held that this conduct was more akin to one’s own personal copying (e.g. with a home videocassette recorder and therefore the ruling in Sony), and thus not infringement at all.
While I like Cablevision’s argument, I’m not sure that I really buy it. That is, while it was not an issue at the time, I think it is fair to say that Sony stood for the proposition that the copying was fair use when it was done by the individual, not by a licensed content distributor who offered the copying service – albeit on the individual’s behalf — as a customer “perk.” Is this really that much different than a VCR just because someone else is pushing the “record” button? If it’s not, why can’t I walk into any Blockbuster, show them my cable bill (thus proving that I’m a subscriber), and demand a free copy of the Sopranos, Season II? And if they won’t hand over one for free, how about just letting me copy it? That is, if Cablevision can make a copy for me and that isn’t infringement, why is it infringement for me to copy of the disk I pick up at Blockbuster?
So, not surprisingly, the Supreme Court granted cert to slap somebody – it just remains to be seen who. Infringement or fair use . . . any bets on this? Given the current make-up of the Court, I’m going with a finding of infringement. Stay tuned.
This case involved Cablevision Systems Inc.’s plan to copy its broadcasts for its customers. In other words, rather than copying the program yourself, at home (via Tivo or video, for example), Cablevision would do it for you. Not a bad offer, sort of a customer-centric, friendly service. Except that the movie studios and networks didn’t see it that way. They regarded this as copyright infringement pursuant to 17 U.S.C. § 106.
Section 106, as you will recall, gives the owner of the copyrighted work the right to prepare derivative works based on the copyrighted work, and to display and distribute copies of it to the public. 17 U.S.C. § 106 (1), (4) and (5). But under Sony Corp. of America v. Universal City Studios, Inc. (aka the “Betamax” case), 464 U.S. 417 (1984), the Supreme Court ruled that the making of individual copies of complete television shows for purposes of time-shifting does not constitute copyright infringement. The Court said this was fair use, and ruled that manufacturers of home video recording devices, such as Betamax or other VCRs, cannot be liable for infringement. In short, the case created a legal safe haven for the copying of content for personal use.
At trial, Cablevision argued that its copying was akin to the individual copying that is permitted under the holding in Sony. The studios and networks argued that it was nothing of the sort; that it was a violation of Section 106 as Cablevision received a benefit from this service, even if it did not directly charge for it. The trial court sided with the studios, but on appeal, the Second Circuit agreed with Cablevision. It held that this conduct was more akin to one’s own personal copying (e.g. with a home videocassette recorder and therefore the ruling in Sony), and thus not infringement at all.
While I like Cablevision’s argument, I’m not sure that I really buy it. That is, while it was not an issue at the time, I think it is fair to say that Sony stood for the proposition that the copying was fair use when it was done by the individual, not by a licensed content distributor who offered the copying service – albeit on the individual’s behalf — as a customer “perk.” Is this really that much different than a VCR just because someone else is pushing the “record” button? If it’s not, why can’t I walk into any Blockbuster, show them my cable bill (thus proving that I’m a subscriber), and demand a free copy of the Sopranos, Season II? And if they won’t hand over one for free, how about just letting me copy it? That is, if Cablevision can make a copy for me and that isn’t infringement, why is it infringement for me to copy of the disk I pick up at Blockbuster?
So, not surprisingly, the Supreme Court granted cert to slap somebody – it just remains to be seen who. Infringement or fair use . . . any bets on this? Given the current make-up of the Court, I’m going with a finding of infringement. Stay tuned.
I'm Just Copying for a Friend
Here’s an interesting one to watch. The Supreme Court issued a one-line order yesterday in the Cable News Network vs. CSC Holdings case indicating that the solicitor general “is invited to file a brief in this case expressing the views of the United States.”
This case involved Cablevision Systems Inc.’s plan to copy its broadcasts for its customers. In other words, rather than copying the program yourself, at home (via Tivo or video, for example), Cablevision would do it for you. Not a bad offer, sort of a customer-centric, friendly service. Except that the movie studios and networks didn’t see it that way. They regarded this as copyright infringement pursuant to 17 U.S.C. § 106.
Section 106, as you will recall, gives the owner of the copyrighted work the right to prepare derivative works based on the copyrighted work, and to display and distribute copies of it to the public. 17 U.S.C. § 106 (1), (4) and (5). But under Sony Corp. of America v. Universal City Studios, Inc. (aka the “Betamax” case), 464 U.S. 417 (1984), the Supreme Court ruled that the making of individual copies of complete television shows for purposes of time-shifting does not constitute copyright infringement. The Court said this was fair use, and ruled that manufacturers of home video recording devices, such as Betamax or other VCRs, cannot be liable for infringement. In short, the case created a legal safe haven for the copying of content for personal use.
At trial, Cablevision argued that its copying was akin to the individual copying that is permitted under the holding in Sony. The studios and networks argued that it was nothing of the sort; that it was a violation of Section 106 as Cablevision received a benefit from this service, even if it did not directly charge for it. The trial court sided with the studios, but on appeal, the Second Circuit agreed with Cablevision. It held that this conduct was more akin to one’s own personal copying (e.g. with a home videocassette recorder and therefore the ruling in Sony), and thus not infringement at all.
While I like Cablevision’s argument, I’m not sure that I really buy it. That is, while it was not an issue at the time, I think it is fair to say that Sony stood for the proposition that the copying was fair use when it was done by the individual, not by a licensed content distributor who offered the copying service – albeit on the individual’s behalf — as a customer “perk.” Is this really that much different than a VCR just because someone else is pushing the “record” button? If it’s not, why can’t I walk into any Blockbuster, show them my cable bill (thus proving that I’m a subscriber), and demand a free copy of the Sopranos, Season II? And if they won’t hand over one for free, how about just letting me copy it? That is, if Cablevision can make a copy for me and that isn’t infringement, why is it infringement for me to copy of the disk I pick up at Blockbuster?
So, not surprisingly, the Supreme Court granted cert to slap somebody – it just remains to be seen who. Infringement or fair use . . . any bets on this? Given the current make-up of the Court, I’m going with a finding of infringement. Stay tuned.
This case involved Cablevision Systems Inc.’s plan to copy its broadcasts for its customers. In other words, rather than copying the program yourself, at home (via Tivo or video, for example), Cablevision would do it for you. Not a bad offer, sort of a customer-centric, friendly service. Except that the movie studios and networks didn’t see it that way. They regarded this as copyright infringement pursuant to 17 U.S.C. § 106.
Section 106, as you will recall, gives the owner of the copyrighted work the right to prepare derivative works based on the copyrighted work, and to display and distribute copies of it to the public. 17 U.S.C. § 106 (1), (4) and (5). But under Sony Corp. of America v. Universal City Studios, Inc. (aka the “Betamax” case), 464 U.S. 417 (1984), the Supreme Court ruled that the making of individual copies of complete television shows for purposes of time-shifting does not constitute copyright infringement. The Court said this was fair use, and ruled that manufacturers of home video recording devices, such as Betamax or other VCRs, cannot be liable for infringement. In short, the case created a legal safe haven for the copying of content for personal use.
At trial, Cablevision argued that its copying was akin to the individual copying that is permitted under the holding in Sony. The studios and networks argued that it was nothing of the sort; that it was a violation of Section 106 as Cablevision received a benefit from this service, even if it did not directly charge for it. The trial court sided with the studios, but on appeal, the Second Circuit agreed with Cablevision. It held that this conduct was more akin to one’s own personal copying (e.g. with a home videocassette recorder and therefore the ruling in Sony), and thus not infringement at all.
While I like Cablevision’s argument, I’m not sure that I really buy it. That is, while it was not an issue at the time, I think it is fair to say that Sony stood for the proposition that the copying was fair use when it was done by the individual, not by a licensed content distributor who offered the copying service – albeit on the individual’s behalf — as a customer “perk.” Is this really that much different than a VCR just because someone else is pushing the “record” button? If it’s not, why can’t I walk into any Blockbuster, show them my cable bill (thus proving that I’m a subscriber), and demand a free copy of the Sopranos, Season II? And if they won’t hand over one for free, how about just letting me copy it? That is, if Cablevision can make a copy for me and that isn’t infringement, why is it infringement for me to copy of the disk I pick up at Blockbuster?
So, not surprisingly, the Supreme Court granted cert to slap somebody – it just remains to be seen who. Infringement or fair use . . . any bets on this? Given the current make-up of the Court, I’m going with a finding of infringement. Stay tuned.
Saying So Long to the Eastern District of Texas
“The stars at night, are big and bright, deep in the heart of . . . .” Well it ain’t Texas anymore.
In a ruling that issued last week from the United States Court of Appeals for the Federal Circuit, the Court seems to have put an end to the Eastern District of Texas as the “rocket docket” for patent claims. See In Re TS Tech USA Corp. (on Writ of Mandamus from United States District Court for the Eastern District of Texas in Case No. 2:07-CV-406 [Lear Corp. v. TS Tech]).
As you may know, recall, could-care-less, the Eastern District of Texas was the place for plaintiffs to file patent infringement claims. Why? Well it wasn’t for the scenery (or the caliber of intelligence associated with the recent Presidents they’ve produced). No, it was because of the amazing results so many patent plaintiffs had obtained there. Analogizing to another Western desert forum, the Eastern District was a slot machine that paid out more often than not. OK, so who could blame the plaintiffs bar for filing there?
In addition to the steady stream of successful plaintiffs’-patent cases, the Eastern District was notorious for refusing defendants’ motions to transfer venue. (Venue is governed by 28 U.S.C. Section 1404(a), and it generally provides that “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to another district court or division where it might have been brought.” The Eastern District has traditionally translated this language to “Never.”
So, along comes TS Tech (”TST”), who is sued by Lear Corp (”Lear”) for the alleged infringement of Lear’s patent relating to pivotally attached vehicle headrest assemblies (for purposes of this blog, the “Thingies”). TST made the Thingies for Honda Motor Corp. whom (you will be surprised to hear) actually sells their cars into the Eastern District of Texas. (Yes, I was surprised to hear this too; it’s not all horses down there any more. Although one portion of the a horse is – in my mind – closely related to George W. Bush, but don’t get me started.)
Based on the presence of the Thingies on the Hondas in the Eastern District, Lear claimed that the courts there had jurisdiction, and – no surprise – the courts agreed. TST challenged that jurisdiction by way of a motion to transfer. The Texas district court sided with Lear and denied the transfer. It found that TST had failed to demonstrate that the inconvenience to the parties and witnesses clearly outweighed the deference entitled to Lear’s choice of bringing suit where it was sure to win – uh, I mean where it wanted to. Specifically, the court head that because several vehicles with the allegedly infringing headrest had been sold in the venue, the Eastern District had a “substantial interest” in having the case tried locally.
TST appealed. In a nutshell, TST argued that the district court had ignored precedent and clearly abused its discretion as the case had no connection to the Eastern district other than Lear’s decision to file there.
The Court of Appeals analyzed 28 U.S.C. Section 1404(a) and held that “[d]espite correctly applying some of the factors, the district court’s Section 1404(a) analysis contained several key errors.” First, the Court said that the trial court had given “too much weight to Lear’s choice of venue under Fifth Circuit law.” The Court noted that while such choice is “accorded deference,” it may not be a “distinct factor in the Section 1404(a) analysis.” Secondly, the Court said that the district court ignored the substantially increased cost associated with trying the case in Texas, as opposed to Ohio, where TST is based (and thus where witnesses and other documentary evidence would be found). Finally, the Court said that the lower court had “disregarded Fifth Circuit precedent in analyzing the public interest in having localized interest decided at home.” The Court observed (as had the lower court) that the Federal judges in Ohio were every bit as qualified to hear this case as were their brethren in Texas.
Based on this reasoning, and having further determined (through separate analysis) that the lower court’s ruling was therefore “patently erroneous,” the Court of Appeals determined that TST had met its burden of proof and therefore granted TST’s petition for Writ of Mandamus and transferred the venue from Texas to Ohio.
Is this the end of the Eastern District as the patent-go-to-rocket-docket? As much as I love to travel, I hope so. We’ll have to keep an eye on this issue, but it seems the wall has begun to crumble.
Jonathan Pink is a member of Intellectual Property Group at Bryan Cave, LLP. He is resident in the firm’s office in Irvine, California. He can be reached at jonathan.pink@bryancave.com or by dialing 949-223-7173.
In a ruling that issued last week from the United States Court of Appeals for the Federal Circuit, the Court seems to have put an end to the Eastern District of Texas as the “rocket docket” for patent claims. See In Re TS Tech USA Corp. (on Writ of Mandamus from United States District Court for the Eastern District of Texas in Case No. 2:07-CV-406 [Lear Corp. v. TS Tech]).
As you may know, recall, could-care-less, the Eastern District of Texas was the place for plaintiffs to file patent infringement claims. Why? Well it wasn’t for the scenery (or the caliber of intelligence associated with the recent Presidents they’ve produced). No, it was because of the amazing results so many patent plaintiffs had obtained there. Analogizing to another Western desert forum, the Eastern District was a slot machine that paid out more often than not. OK, so who could blame the plaintiffs bar for filing there?
In addition to the steady stream of successful plaintiffs’-patent cases, the Eastern District was notorious for refusing defendants’ motions to transfer venue. (Venue is governed by 28 U.S.C. Section 1404(a), and it generally provides that “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to another district court or division where it might have been brought.” The Eastern District has traditionally translated this language to “Never.”
So, along comes TS Tech (”TST”), who is sued by Lear Corp (”Lear”) for the alleged infringement of Lear’s patent relating to pivotally attached vehicle headrest assemblies (for purposes of this blog, the “Thingies”). TST made the Thingies for Honda Motor Corp. whom (you will be surprised to hear) actually sells their cars into the Eastern District of Texas. (Yes, I was surprised to hear this too; it’s not all horses down there any more. Although one portion of the a horse is – in my mind – closely related to George W. Bush, but don’t get me started.)
Based on the presence of the Thingies on the Hondas in the Eastern District, Lear claimed that the courts there had jurisdiction, and – no surprise – the courts agreed. TST challenged that jurisdiction by way of a motion to transfer. The Texas district court sided with Lear and denied the transfer. It found that TST had failed to demonstrate that the inconvenience to the parties and witnesses clearly outweighed the deference entitled to Lear’s choice of bringing suit where it was sure to win – uh, I mean where it wanted to. Specifically, the court head that because several vehicles with the allegedly infringing headrest had been sold in the venue, the Eastern District had a “substantial interest” in having the case tried locally.
TST appealed. In a nutshell, TST argued that the district court had ignored precedent and clearly abused its discretion as the case had no connection to the Eastern district other than Lear’s decision to file there.
The Court of Appeals analyzed 28 U.S.C. Section 1404(a) and held that “[d]espite correctly applying some of the factors, the district court’s Section 1404(a) analysis contained several key errors.” First, the Court said that the trial court had given “too much weight to Lear’s choice of venue under Fifth Circuit law.” The Court noted that while such choice is “accorded deference,” it may not be a “distinct factor in the Section 1404(a) analysis.” Secondly, the Court said that the district court ignored the substantially increased cost associated with trying the case in Texas, as opposed to Ohio, where TST is based (and thus where witnesses and other documentary evidence would be found). Finally, the Court said that the lower court had “disregarded Fifth Circuit precedent in analyzing the public interest in having localized interest decided at home.” The Court observed (as had the lower court) that the Federal judges in Ohio were every bit as qualified to hear this case as were their brethren in Texas.
Based on this reasoning, and having further determined (through separate analysis) that the lower court’s ruling was therefore “patently erroneous,” the Court of Appeals determined that TST had met its burden of proof and therefore granted TST’s petition for Writ of Mandamus and transferred the venue from Texas to Ohio.
Is this the end of the Eastern District as the patent-go-to-rocket-docket? As much as I love to travel, I hope so. We’ll have to keep an eye on this issue, but it seems the wall has begun to crumble.
Jonathan Pink is a member of Intellectual Property Group at Bryan Cave, LLP. He is resident in the firm’s office in Irvine, California. He can be reached at jonathan.pink@bryancave.com or by dialing 949-223-7173.
Sunday, November 30, 2008
Yield Dynamics Delivers Dynamic Trade Secret Defense
In Yield Dynamics, Inc. v. TEA Systems Corp. 154 Cal.App.4th 547, 66 Cal.Rptr.3d 1 (007), the court of appeal concluded that a claim for misappropriation of trade secrets could not be found absent a showing of independent economic value. In Yield, plaintiff claimed that its former employee had wrongly misappropriated plaintiff’s proprietary source code by placing a sequence string of that code into defendant’s newly released product. The trial court granted defendant’s motion for nonsuit on the basis that the plaintiff company failed to demonstrate that the allegedly misappropriated source code had an independent economic value.
California’s Uniform Trade Secrets Act (”UTSA” or “Act”) defines a trade secret as certain types of information (e.g. formulas, plans, designs) that a company has taken reasonable steps to protect, and which is valuable because it has been kept secret. See Civil Code section 3426.1. The Act defines “misappropriation” as the acquisition by improper means, and subsequent use or disclosure of such trade secrets. Id.; Morlife, Inc. v. Perry, 56 Cal.App.4th 1514, 1526 (1997) (former employee’s use or disclosure of confidential customer information to solicit new accounts on behalf of a new employer constitutes the misappropriation of a trade secret); Merrill, Lynch, Pierce, Fenner & Smith, Inc. v. Garcia, 127 F.Supp.2d 1305, 1306 (C.D. Cal. 2000) “Improper means” includes “theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means.” Civil Code section 3426.1(a).
While most defense lawyers focus on establishing that the purported trade secrets fail to qualify for protection because the plaintiff neglected to take reasonable steps to secure their secrecy, or because the defendant either does not use the “secrets” or the “secrets” are in the public domain, few take the tact that the information taken lacks value to anyone beyond the parties themselves. This is precisely the argument levied by Terrence Zavecz, the founder and, as relevant here, sole employee of defendant TEA Systems Corporation in the Yield case. Zavecz argued that where the defendant cannot exploit the information allegedly misappropriated in order to gain a competitive advantage over (or to the disadvantage of) the original owner, then despite any reasonable efforts to maintain the secrecy of the information at issue, the plaintiff’s trade secret claim must fail.
The Court of Appeal agreed. Upholding the lower court’s conclusions, the Sixth Appellate District held that the allegedly misappropriated items were properly defined as “trade secrets” because plaintiff had not established any independent economic value associated with their secrecy. Specifically, the Court ruled that Yield had failed to establish that the segments of computer code at issue in Yield possessed independent economic value entitling the plaintiff to trade secret protection in that code. The Yield Court held that in order to establish the independent economic value element necessary to maintain a trade secret misappropriation claim, the plaintiff must prove more then simply secrecy and usefulness. The plaintiff must establish a discrete competitive advantage to the persons who could utilize the information to the economic disadvantage of the plaintiff, thus creating an economic value in the plaintiff maintaining secrecy over the information. The Court stated that a trade secret misappropriation claim will fail where the defendant cannot exploit the information, and thereby gain a competitive advantage, to the disadvantage of the original owner. 154 Cal.App.4th at 560-572.
In reaching its ruling, the Court adopted the definition of a trade secret found in the Restatement (Third) of Unfair Competition (1995). The Restatement defines a trade secret as business or technical information “that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.” (Rest.3d, Unfair Competition, sec. 39.) The Court acknowledged that this advantage “need not be great,” but must be “more than trivial.” (Rest.3d, Unfair Competition, sec. 39, com. e, p. 430.) That is, merely stating that information was helpful or useful to another person in carrying out a specific activity, or that information of that type may save someone time, does not compel a factfinder to conclude that the particular information at issue was “sufficiently valuable . . . to afford an . . . economic advantage over others.” (Rest.3d, Unfair Competition, § 39.) Rather, the factfinder is entitled to expect evidence from which it can determine how useful the information is, e.g., how much time, money, or labor it would save, and that these savings would be “more than trivial.” (Rest.3d., Unfair Competition, sec. 39, com. e.)
Thus, the Yield case ruled that where the information taken lacks value to anyone beyond the parties themselves, and provides no genuine competitive advantage to others, it will not qualify as a trade secret under the UTSA. This ruling provides another viable attack for invalidating a plaintiff’s alleged trade secrets. Not only should the defense attack the plaintiff’s efforts to protect its purported secrets, and argue that the information was in the public domain (or never actually employed by the defendant), but where appropriate, it should strongly consider an attack based on demonstrating that the information lacks “independent economic value.”
Jonathan Pink can be reached at jonathan.pink@bryancave.com or 949-223-7173
California’s Uniform Trade Secrets Act (”UTSA” or “Act”) defines a trade secret as certain types of information (e.g. formulas, plans, designs) that a company has taken reasonable steps to protect, and which is valuable because it has been kept secret. See Civil Code section 3426.1. The Act defines “misappropriation” as the acquisition by improper means, and subsequent use or disclosure of such trade secrets. Id.; Morlife, Inc. v. Perry, 56 Cal.App.4th 1514, 1526 (1997) (former employee’s use or disclosure of confidential customer information to solicit new accounts on behalf of a new employer constitutes the misappropriation of a trade secret); Merrill, Lynch, Pierce, Fenner & Smith, Inc. v. Garcia, 127 F.Supp.2d 1305, 1306 (C.D. Cal. 2000) “Improper means” includes “theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means.” Civil Code section 3426.1(a).
While most defense lawyers focus on establishing that the purported trade secrets fail to qualify for protection because the plaintiff neglected to take reasonable steps to secure their secrecy, or because the defendant either does not use the “secrets” or the “secrets” are in the public domain, few take the tact that the information taken lacks value to anyone beyond the parties themselves. This is precisely the argument levied by Terrence Zavecz, the founder and, as relevant here, sole employee of defendant TEA Systems Corporation in the Yield case. Zavecz argued that where the defendant cannot exploit the information allegedly misappropriated in order to gain a competitive advantage over (or to the disadvantage of) the original owner, then despite any reasonable efforts to maintain the secrecy of the information at issue, the plaintiff’s trade secret claim must fail.
The Court of Appeal agreed. Upholding the lower court’s conclusions, the Sixth Appellate District held that the allegedly misappropriated items were properly defined as “trade secrets” because plaintiff had not established any independent economic value associated with their secrecy. Specifically, the Court ruled that Yield had failed to establish that the segments of computer code at issue in Yield possessed independent economic value entitling the plaintiff to trade secret protection in that code. The Yield Court held that in order to establish the independent economic value element necessary to maintain a trade secret misappropriation claim, the plaintiff must prove more then simply secrecy and usefulness. The plaintiff must establish a discrete competitive advantage to the persons who could utilize the information to the economic disadvantage of the plaintiff, thus creating an economic value in the plaintiff maintaining secrecy over the information. The Court stated that a trade secret misappropriation claim will fail where the defendant cannot exploit the information, and thereby gain a competitive advantage, to the disadvantage of the original owner. 154 Cal.App.4th at 560-572.
In reaching its ruling, the Court adopted the definition of a trade secret found in the Restatement (Third) of Unfair Competition (1995). The Restatement defines a trade secret as business or technical information “that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.” (Rest.3d, Unfair Competition, sec. 39.) The Court acknowledged that this advantage “need not be great,” but must be “more than trivial.” (Rest.3d, Unfair Competition, sec. 39, com. e, p. 430.) That is, merely stating that information was helpful or useful to another person in carrying out a specific activity, or that information of that type may save someone time, does not compel a factfinder to conclude that the particular information at issue was “sufficiently valuable . . . to afford an . . . economic advantage over others.” (Rest.3d, Unfair Competition, § 39.) Rather, the factfinder is entitled to expect evidence from which it can determine how useful the information is, e.g., how much time, money, or labor it would save, and that these savings would be “more than trivial.” (Rest.3d., Unfair Competition, sec. 39, com. e.)
Thus, the Yield case ruled that where the information taken lacks value to anyone beyond the parties themselves, and provides no genuine competitive advantage to others, it will not qualify as a trade secret under the UTSA. This ruling provides another viable attack for invalidating a plaintiff’s alleged trade secrets. Not only should the defense attack the plaintiff’s efforts to protect its purported secrets, and argue that the information was in the public domain (or never actually employed by the defendant), but where appropriate, it should strongly consider an attack based on demonstrating that the information lacks “independent economic value.”
Jonathan Pink can be reached at jonathan.pink@bryancave.com or 949-223-7173
Subscribe to:
Posts (Atom)