Indiana Business Litigation and Collections Law

Receiverships in The News

2010-03-03T07:40:00.000-05:00

From The Indianapolis Business Journal comes Fair Finance going along with appointment of receiver:

"Attorneys for Tim Durham’s Fair Finance Co. on Wednesday filed court papers saying they don’t object to putting the Akron, Ohio-based company under the control of a receiver."

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In Wednesday’s filing, attorneys with the Indianapolis office of Taft Stettinius & Hollister representing Fair and its parent—a holding company owned by Durham and fellow Indianapolis businessman Jim Cochran—denied any fraud occurred but said putting both firms into receivership nonetheless made sense.

And this from The Indianapolis Star, Receivers named for rental complexes:

Indianapolis -- Court-appointed receivers were named recently to run apartment complexes on the Westside and Southeastside taken over by lenders. Alexandra Jackiw of Buckingham Management was named receiver to run Cedars Apartments, near 34th Street and Lafayette Road. Mark Figg of NAI Olympia Partners was named receiver for Emerson Apartments, 5140 Emerson Village Place. The projects were run by corporations headed by Gustan L. Cho, Hoffman Estates, Ill.

“It is in the best interests of Fair, [its investors] and other creditors that some order and structure replace the wild speculation and reckless accusations that have permeated the environment since Fair’s offices were raided in late November,” Wednesday’s filing said.

What If The Non-Compete Is Too Tough?

2010-03-02T08:39:00.000-05:00

LEGAL FORUM from November of 1996 may have an answer in A Too-Tough Noncompete Clause Could Defeat Its Own Purpose:

"Many groups are willing to compromise on their noncompete provisions. When I represent physician employees, I often negotiate such compromises. But I also resist them strongly when representing an established medical group."

Here is my reasoning. The enforceability of a noncompete provision is directly related to its reasonableness. Part of what makes the covenant reasonable is that it is necessary to prevent the departed physician from taking something (the group's market leverage) that would harm the medical group. But if the medical group starts allowing exceptions to the noncompete clause, it effectively has stated that the employee's departure is not harmful to the group, or that the harm is O.K. in certain circumstances. This is dangerous, because it suggests that the noncompete clause may not be an essential protection for the group, increasing the chances that a court may find it inappropriate and thus unenforceable. There certainly are reasons why this vulnerability may not apply in certain circumstances, or why this vulnerability may otherwise be acceptable. But weigh the issues carefully before you agree to compromise.

A medical group that is open to compromise has a number of options to consider. A covenant may only apply if the employee physician is terminated for cause, or departs the group without cause. (Be sure to define "cause" carefully!) Or the covenant may only preclude independent medical practice, so that the departed physician may become a hospital employee. Or the noncompete provision may disappear or change its focus after a certain period of continued employment. There are many permutations. In general, though, an employer should only agree to compromises that can be justified in the contract as both fair and consistent with the premise that underlies the covenant.

Gardening Leave Remedies

2010-02-14T08:29:00.002-05:00

I wrote about the uses of gardening leave here. What if an employee decides to breach the gardening leave contract? I thought only injunction relief until I read Protect your firm when staff leave from Microscope in the UK.

Getting an injunction as set out in this paragraph ought to be familiar to anyone filing a suit on a non -compete agreement:

The employer can apply for a court order, an "injunction", to enforce either the employee’s implied duties of honesty, loyalty and faithful service; and/or any express term such as a garden leave clause which will prohibit the employee from having other business interests during the course of employment - which includes employment with another employer.

When does the litigation being? When there is a garden leave agreement in place and the employee quits without giving the notice required under the agreement.

By resigning without notice the employee is breaching the contract. To enforce a garden leave clause, the employer should refuse to accept the attempted termination of the contract, hold the employee to the obligation to give notice and (assuming the contract so empowers you) suspend them for the entire notice period. Where, however, despite these steps, the employee commences work elsewhere, injunction proceedings (see above) may be required.

It is for the client to decide if suit needs filed, but with the remedy being an injunction the time spent on reaching a decision can be injurious to both the business and the suit.

Although framed as a breach of fiduciary duty, Bartholomew v. Alstom Power, Inc., (SD Ohio, Eastern Div. 2005)does involve a garden clause. Violating the garden clause was used by the former employer as one basis for the lawsuit. On the other hand, the jury decided against the employer.

The New South Wales (Australia) courts limited any remedy during garden leave. Mallesons Stephen Jaques noted this in its Can an employer enforce restraints during gardening leave?

The Supreme Court of New South Wales has held that an employer could enforce restraints against an employee on extended gardening leave only to the extent that the restraints were reasonable.

The employee, a broker, was on a fixed term contract which included a restraint on taking up employment with a competitor or soliciting clients or employees. The restraint purported to apply during the term and for three months afterwards. The employee resigned more than a year before the end of the term to take up a position with a competitor. The employer continued to treat the contract as on foot. It placed the employee on gardening leave (that is, continued to pay him but did not require him to attend for work), and sought an injunction preventing him from working for the competitor for the balance of the contract term.

The Court held that while the contract had not been terminated by the employee’s resignation (because it was for a fixed term, and the employer had not agreed to termination), the employment relationship had come to an end. While non-compete and non-solicit restraints are generally enforceable during employment, after employment they are only enforceable to the extent they are reasonable and not contrary to public policy. Based on the nature of the employment and the employer’s business, the Court held that in this case a reasonable period was six months. This meant the employee was prevented from competing or soliciting clients or employees for only six months after he resigned (despite the fact that the fixed term contract continued for a longer period, and the employee would have been paid for the time he was out of the workforce).

Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852

Trust Litigation - Indiana,The Simon Trust

2010-02-04T13:03:00.001-05:00

Here is some news from Indianapolis. Deborah Simon says other potential trustees have conflicts

Deborah Simon, who’s seeking to remove her stepmother from overseeing a trust that holds her late father Melvin’s fortune, is asking a court to pass over the two Indianapolis businessmen who normally would be next in line for the job.

Language in the trust stipulates that if the stepmother, Bren Simon, is unable to serve as trustee because of incapacitation, resignation or death, Deborah’s brother, David, Simon Property Group’s chairman and CEO, would step into the role. And if he couldn’t serve, retired Katz Sapper & Miller partner Bruce Jacobson would become trustee.

But in a filing Monday seeking Bren’s ouster, Deborah instead favors appointment of a disinterested corporate trustee. The filing, first reported by IBJ, says that neither David Simon nor Jacobson should fill the role because both will be witnesses in the lawsuit she filed Jan. 7 contesting changes in the will that Melvin executed in February 2009—seven months before he died at age 82.

The changes boosted the portion of Melvin’s estate going directly to Bren, 66, from one-third to one-half. They also wiped out the portion that was to go to Deborah, David and their sister, Cynthia Simon-Skjodt.

The point to take from all this? Regardless of how much planning there is in preventing litigation, there is just no way to prevent all litigation. But as I learned in Boy Scouts, being prepared helps more a whole lot more than no preparation.

Without any business succession planning, this kind of fight would have no boundaries. As it stands now, the fight has boundaries.

What planning have you done to prevent the business from being swallowed whole by litigation? If you have not done any, why not?

Litigation as War 2 - More Thinking About Stategy

2010-01-16T07:02:00.000-05:00

In Litigation as War 1 - Thinking About Stategy, I wrote: "These questions are to find out your goals and what we have to do to reach those goals and how much you money and effort you want to put into getting to your goals." Today, I am borrowing from Deception and Settlement: The Application of Sun Tzu's Ancient Strategies of War to the Law to expand on these themes.

"A lawsuit, like any competition, is essentially a form of warfare. The strategies of prosecuting or defending a suit are much the same as those mustered on the battlefield. Victory often goes not to the party with the stronger case, but to the party that makes the best use of the process, understanding tactics and strategy."

Goals, got to know what you want from the lawsuit - settlement or trial depend on knowing this point:

Settlement driven by common sense and efficiency will achieve the best results for the client. This is best seen in personal injury litigation, where the more time invested in a case often means a lower recovery for the attorney, with little additional benefit for the client.
Many business litigators forget this point, in part, because in business lawsuits the parties do not limit themselves to the pursuit of compensation. Businesses also seek justice, punishment and a leg-up over their competitor. Generally speaking, business litigators also do not depend on settlement for compensation. They are paid hourly, often at premium rates. The motivation of some attorneys might be to keep the case going and avoid settlement.

While that is a good argument against the hourly fees paradigm, the client drives the litigation, too. Some clients think settlement is a sign of weakness. I say that depends on the terms of the settlement. Keep reading as both the original author's statement and mine are explained below.

This also brings me to my third theme: how much you money and effort you want to put into getting to your goals.

Sun Tzu advises against this purposeless destruction. Each of the steps taken in a lawsuit should have a goal of encouraging settlement, albeit on your terms. This goal should be at the forefront whenever discovery is taken, motions are filed, and meetings with the opposition are held. This may not assure that fees and costs will be limited. Rather, it means that when money must be spent, it should be to encourage resolution of the matter. If it does not, then one should consider choosing a more effective course.

This strategy should be pursued even when it appears that your opponent has failed to appreciate the benefits of settlement. If your opponent is bent on the destruction of your business at any cost, the skillful course is to encourage the opponent to spend frivolously. But even this is with the goal of exhausting the opponent and encouraging settlement. The important lesson to be learned from Sun Tzu, is that a mindless push for victory at any cost can destroy not only your opponent, but your business as well. (My emphasis.)

If you do not have much knowledge of history, you will probably not have heard of Pyrrhus or of a Pyrrhic victory. The phrase wining every battle and losing the war may mean something then. That is what we are talking about here - putting so much into a case that after trial the company has no profit in its success. Put more drastically, the "successful" litigation drives the plaintiff into bankruptcy. I cannot accept that a litigation client wants me to pursue a case to the point that my client becomes bankrupt.

Downside of Trade Secrets

2010-01-13T08:03:00.000-05:00

As a lawyer, I should be able to see both sides of this story from The Manchester Democrat Examiner, A trade secret no one wants but it is not so easy:

FairPoint Communications has presented a plan to address a long list of customer complaints. But pieces of that plan are being kept from the public because, according to the company, they are trade secrets.

Which begs the question:

Why would anyone want a trade secret from a company that, so far, has performed so poorly? It's not like they're doing so well that any of their practices would be copied anytime soon.

Spurious claims of trade secrets undermines legitimate business interests.

Electronic Discovery & Computer Records - A Canadian Opinion

2010-01-11T08:26:00.001-05:00

I clipped Slaw's Well worth a read – George Paul’s “Foundations of Digital Evidence” quite a while back but never got around to publishing. I think the following probably lies outside mainstream thinking but it is a provocative piece. Since the Christmas bomber managed to show how screwed up software can be, the last paragraph resonates even stronger.

Paul starts with evidence law’s preference for original records and argues it is both irrelevant and dangerous. It is irrelevant because digital records are comprised of “pure information” and can be modified without creating any evidence of change (metadata aside). It is dangerous because it invites inflated assumptions about a document’s authenticity, a problem aggravated because we often proffer digital information after it has been recorded on paper. That is, we proffer a physical rendition of digital information that appears to have integrity. Paul argues “trivial showings” based on inspection of paper documents should not support admissibility:

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Paul also argues that the hearsay doctrine ought to bar the admission of computer-generated records – the output of computer processing – without special assurance of trustworthiness. He demonstrates, with case citations, that American courts have largely failed to recognize the risk posed by admitting out of court “statements” made by computers, often by utilizing the business records exception in a manner treats computer-generated as far more reliable than they deserve to be treated given the commonplace challenges in processing data: “Just because businesses rely on faulty computer programs does not necessarily mean that courts should follow suit.”

Now let us consider these points:

Applied Discovery
The court held that “name” terms should be used with particular technological references because searches of names alone would result in positive hits on virtually every document held by defendants’ relatively small business in which most employees were “key” employees. However, terms relating to the licensing of source code should not be used in conjunction with other terms, according to the court, because licensing activity of defendants’ company was “relatively small” and the result of a search of license terms only when found with other terms could be “excessively narrow.” The court invited the parties to return if results from the first search suggested some other search protocol might be needed.
e-Discovery Team
Clearone Communications v. Chiang, 2008 WL 704228 (D. Utah Mar. 10, 2008). Plaintiff filed a motion for sanctions in this case involving claims of misappropriation of trade secrets, breach of contract, and conversion. Plaintiff argued that sanctions were warranted because of Defendant’s misrepresentations concerning the late source code production and Defendant’s failure to produce “smoking gun” email, which was produced by another party to the litigation. The other party was the recipient of the “smoking gun” email. Defendant argued that its computer system did not retain copies of any sent emails.

With our increasing dependence on digital technology, these problems will come down to businesses of all sizes. Be ready fo rit.

Litigation as War 1 - Thinking About Stategy

2010-01-09T07:02:00.004-05:00

I think some people think of litigation as needing no strategy. I cannot explain why they think so. Maybe watching too much Judge Wapner and his successors. Those television shows have as much reality to litigation as Jerry Springer has to civilized discourse. Perhaps people just do not understand that mere bluster does make for a successful case any more than its for a successful war.

If you are a potential client, I will ask a lot of questions about where you want to go with a case and about the facts and how much you want to want to put into the case. These questions are to find out your goals and what we have to do to reach those goals and how much you money and effort you want to put into getting to your goals.

Several years ago I had a client get into a snit over that last question. We parted ways over that very question. In that matter, the company looked to get $24,000.00. That could easily be eaten up by attorney fees. I am not averse to clients who want to spend as much as they will get back in a judgment but I do think clients need informing of the costs of litigation. If the client wants to pay me more than they will get back from the case, that is their business. My business is informing my client so that they can make the decision of telling me to go after the other party.

If you are a potential client reading this, then should you not expect to be informed of the risks and benefits of a case? Expect a dialog with this office, please. I freely admit my thinking on litigation strategy came from reading Sun Tzu's Art of War several times over the past twenty some years. This passage from The 'Trial Warrior': Applying Sun Tzu's The Art of War to Trial Advocacy captures my own opinion quite well:

...Most trial lawyers will likely identify themselves as a combination of two or all three conceptual models offered; however, the term “Trial Warrior” has a degree of verisimilitude: for the “zealous advocate”, The Art of War provides a blueprint for developing and executing a comprehensive client-focused litigation strategy....

I also strongly urge reading Machiavelli’s The Prince Meets Sun Tzu’s The Art of War. It does a very good job of describing how the mindset for litigation parallels that for war.

Electronic Discovery Resources

2010-01-06T10:14:00.001-05:00

Electronic discovery poses one of the biggest - if not the biggest - issues in modern litigation. Here is a list of online resources dealing with the issue:

Want to Start A Business in Indiana

2010-01-05T11:05:00.000-05:00

Then stop and take a look the Indiana Government site - Access Indiana. One page exists as pretty much a portal for businesses wanting to start up here or relocate here. Just follow this link.

I use pretty much as I do not find easily a link to the Indiana Secretary of State's Business Services Division page. A rather important page as it with the Secretary of State that registers corporations, and limited liability companies.

James Alexander Tanford 's Wine Litigation List

2010-01-04T12:40:00.000-05:00

Yes, it has not been updated since 2005 but still a useful start for research on wine shipping litigation. The page is here.

A Listing of False Claims/Qui Tam

2010-01-02T10:36:00.005-05:00

I still have my interest in False Claims Act litigation. If you think you have this kind of case, then take a look at these sites. If you still think you have one, give me a call.

I give these in no particular order:

Trade Secrets - Criminal Case and Interesting Issues

2009-10-30T10:44:00.000-04:00

Not too often do I make a big deal about a criminal case, but Silicon Valley 'Spies Like Us': Trial begins for 2 engineers accused of economic espionage involving China doe shave interestng points.

First, the facts:

According to the indictment, the defendants allegedly created a company, SICO Microsystems, "for the purpose of developing and marketing products derived from and using the stolen trade secrets," which were related to computer chip design and development. The defendants also allegedly sought to obtain venture capital funding for their company from the government of China, in particular the 863 Program and the General Armaments Department (GAD). The 863 program is a funding plan created and operated by the government of China. It was designed by leading Chinese scientists to develop and encourage the creation of technology in China, with an emphasis on military applications. Meanwhile, GAD of the People’s Liberation Army was responsible for the army, navy, and air force in China and oversaw the development of weapons systems used by the country. GAD had a regular role in, and was a major user of, the 863 program, according to the DoJ.
The case is being heard in US District Court for the Northern District of California and actually dates back some seven years when in 2002 the CEO of NetLogic received an e-mail from Ge's wife tipping him off to the alleged theft. She also made an anonymous call to the FBI, according to reports.

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According to reports, most of the documents found on Lee's and Ge's computers had to do with business agreements between SICO and China-based venture capital firms regarding the 863 program.
Prosecutors are relying on a somewhat rarely used provision of the Economic Espionage Act (EEA) of 1996, which deals with the theft of trade secrets for the benefit of a foreign nation. The EEA was passed to protect US trade secrets and IP from foreign government-sponsored theft, however, is difficult to prove in court. Indeed, only a handful of have been indicted under EEA, with less actually found guilty.

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It's a highly complicated case from both the legal argument and IP/entrepreneurial sides that will surely stump even the most law-savvy and technically astute member of the jury. That being so, the case could be seen as one that perhaps evidences that US laws don’t match or keep up with technology, so-called trade secrets or IP, and tech business practices. If these two engineers were indeed acting as spies for China and indisputably offering true trade secrets/IP that would not only hurt proprietary company information but also damage US security or ability to innovate, then off to jail they should go. There's no question about that. But if these engineers do turn out to be entrepreneurs who did not steal trade secrets/IP and were instead truly trying to build an honest start-up, with investment only from 863 no further government interference, then they have not gone wrong.

The article ends with what - for me is a truly interesting question:

What do you think? Is this a case of espionage or a misinterpretation of tech industry business practices? What defines a trade secret? Will more cases like this come down the pike regarding IP rights?....

My imagination fails to think of another industry where its busines spractices might be confused with stealing

Non-Competition - Policy Ideas

2009-10-29T08:02:00.001-04:00

I have written before about Massachusetts liberality towards non-compete agreements here and here. NECN reported a potential change its Mass. non-compete culture to change?

Warner said he believes limiting or banning non-competes would lead to more companies like Google, Cisco Systems, and Avid getting launched in this area instead of Silicon Valley or other parts of the country.

"Here's what happens with non-competes: People think about starting a new company, but they can't leave their current company and go to a competing company,'' Warner said in an interview at a Massachusetts Technology Leadership Council conference this week. "The non-compete issue is hurting us more than you might ever know.''

It's unclear if this bill moves this year. The state's biggest business lobby, Associated Industries of Massachusetts, which represents over 7,000 employers, isn't opposing or backing the bill, saying it sees deep division on the issue. AIM said it thinks fixing other issues -- like taxes, unemployment insurance and electricity costs -- would do far more to improve the Bay State business climate than would the change in non-competes.

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Beck said he agrees some more could be done to unlock the flow of tech talent in Massachusetts, short of a total Silicon-Valley-style ban on non-competes. He's working pro bono with Brownsberger and Ehrlich and advocates on various sides of the issue to find middle ground and get legislation enacted -- building on the two legislators' own agreement to mesh their previously separate non-compete reform bills. "We're trying to find a compromise between the legitimate business interests of the employer and the right of the employee to continue to work" in their field after leaving an employer, Beck said.

I remain unconvinced that Indiana's conservative approach to non-competition agreements makes Indiana any more attractive to businesses than other states. I think Massachusetts has not been able to translate its academic talents for technology (remember that MIT stands for Massachusetts Institute of Technology) as California has because of its non-compete policy.

Trade Secret Litigation News - Ideas About Evidence

2009-10-28T08:02:00.000-04:00

Reading New Hampshire news, business and sports - Stonyfield secrets dispute heading toward trial from UnionLeader.com had me thinking:

Before its relationship with Agro-Farma, Stonyfield had not produced or marketed Greek yogurt and did not have the knowledge and expertise necessary to do so, LaPlante wrote in his opinion and order. "Agro-Farma, however, did have such knowledge and expertise."

I would call that pretty good prima facie evidence that there is a trade secrets leak.

Cossing The Border With Trade Secrets

2009-09-01T07:49:00.000-04:00

On the border laptops remain an interest to Obama's Department of Homeland Security as much as guns and bullets (my apologies to Al Stewart).

From The Los Angeles Times: Taking an international trip? Scrub those hard drives!.

As News.com's Declan McCullagh reported, the Obama administration continues to take an extremely permissive view toward the power of federal agents at the border. The new directives from Immigration and Customs Enforcement and U.S. Customs and Border Protection reiterate the Bush administration's stance that agents have the authority to search any digital storage device entering the country, even when there is no suspicion of wrongdoing. They'll need to show probable cause only if they want to seize the device or retain copies of its contents. The primary change in policy is more administrative oversight over how the devices and data are handled after they're seized....
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The best argument that the DHS makes for its approach is that criminals are using new electronic storage devices to smuggle illegal items into the United States:
As the world of information technology evolves, the techniques used by CBP and ICE and other law enforcement agencies must also evolve to identify, investigate, and prosecute individuals using new technologies in the perpetration of crimes. Failure to do so would create a dangerous loophole for criminals seeking to import or export merchandise contrary to law.

No way can I summarizeGovernment Directive Addresses Traveler’s Attempt To Prevent Search In A Timely Fashion with its information dumps of DHS regulations and so I will not. From what I see, the article contains good research.

That article did lead me to DHS: Expect your computer to be seized without suspicion with sources and some interesting points:

The guidelines for Customs & Border Patrol (CBP) agents says pretty much the same thing, adding that whenever a CBP agent encounters technical trouble figuring out how a mechanism works, or what the meaning of some piece of information is, he can seek help from other US government sources. "In such situations, Officers may transmit electronic devices or copies of information contained therein to seek technical assistance from other federal agencies," reads the CBP guidelines (PDF available here).

What's been a subject of contention ever since the government tightened border inspection policies in the wake of 9/11 hasn't been so much agents' rights to act without suspicion (although for some, that already crosses the line) as the authority DHS grants them to transmit the information they find elsewhere, under the auspices of "seeking help." Both guidelines now state that agents may only seek help from other federal sources, but they are not explicit with regard to what level -- for example, whether a private consultant under retainer for the FBI would qualify.

In their assessment of the extent of the risks this clarified policy might pose to citizens' and visitors' personal privacy, published last Tuesday (PDF available here), both border agencies, acting jointly, identified six specific areas: "(1) travelers may need additional information regarding the authority [agents have] to conduct border searches; (2) the traveler may be unaware of the viewing or detention of his/her information by CBP and ICE; (3) personally identifiable information (PII) may be detained where it is not needed; (4) PII may be misused by CBP and ICE officers; (5) CBP and ICE may disclose PII to other agencies that may misuse or mishandle it; and (6) new privacy risks may arise as the technology involved in this activity is ever-changing."

The Cyberskank Case

2009-08-27T09:05:00.000-04:00

Beware what you do online.

Cybersmear - the Skank Blogger Plans to Sue Google for $15m for Disclosing Her Identity:

A recent ruling about an alleged anonymous slanderous blogs about a New York City model made it to the front page of every news media on the Internet when a New York City Judge ruled that Google had to identify the name of the person who ran the blog called “Skanks of NYC.” When Liskula Cohen (the defamed model ) learned the identity of the anonymous blogger was Rosemary Port, a 27-year-old student at the Fashion Institute of Technology, Cohen decided to not pursue any slander claims against Port. In an interesting turn of events, now Port claims that Google somehow breached a fiduciary duty and Port’s attorney is bringing a claim against Google for $15M.

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In this instance Port claims the only person on the Internet who saw "Skanks of NYC" blogs was Cohen, and ironically because of Cohen’s lawsuit and the alleged violate by Google of Port’s rights, now everyone on earth knows. I’m sure there a lesson in this case but generally I’m reminded of the New Yorker Cartoon where two dogs are talking and one says to the other “I had my own blog for a while, but decided to go back to pointless, incessant barking.”

Oddly, PC Magazine hits on the legal points better in 'Skank' blogger talks, sues Google for $15m

Legal time-out. That strikes me as nonsensical concept: the fiduciary relationship is the highest, most stringent duty one can have to another, typically the directors duty to shareholders, or a trustee’s duty to beneficiaries. To create such a relationship between a company and someone who creates a free blogging account makes a mockery of the relationship. And what is the duty to protect anonymity? That is definitely not listed in the treatises’ lists of fiduciary duties. What is listed is the duty not to profit from one’s position as the fiduciary. The idea that Google has undertaken a fiduciary relationship with users - and that the duty includes disobeying a court order - is laughable. Now back to our catfight…

Google has a fiduciary duty? Creative is good when kept when the bounds of reality. This idea has only a passing familiarity with reality, but this next argument has even less relationship with reality:

This seemingly trivial yet voyeuristic spat is in fact a major First Amendment case in the making, the lawyer thinks.
I’m ready to take this all the way to the Supreme Court. Our Founding Fathers wrote ‘The Federalist Papers’ under pseudonyms. Inherent in the First Amendment is the right to speak anonymously. Shouldn’t that right extend to the new public square of the Internet?

I think Maureen Dowd does a droll destruction of this argument in her Stung by the Perfect Sting:

Yet in this infinite realm of truth-telling, many want to hide. Who are these people prepared to tell you what they think, but not who they are? What is the mentality that lets them get in our face while wearing a mask? Shredding somebody’s character before the entire world and not being held accountable seems like the perfect sting.

Pseudonyms have a noble history. Revolutionaries in France, founding fathers and Soviet dissidents used them. The great poet Fernando Pessoa used heteronyms to write in different styles and even to review the work composed under his other names.

As Hugo Black wrote in 1960, “It is plain that anonymity has sometimes been assumed for the most constructive purposes.”

But on the Internet, it’s often less about being constructive and more about being cowardly.

I really do not see this as a landmark on the road of free speech.

For background on the case, here is JUDGE ORDERS 'SKANKS IN NYC' BLOGGER TO REVEAL IDENTITY TO LISKULA COHEN.

Cohen's lawyer, Steven Wagner, said he hopes the decision sends a message to bloggers, Twitterers, and whoever else would use the anonymity of the Internet for cowardly defamations.

"The rules for defamation on the Web -- for actual reality as well as virtual reality -- are the same," Wagner said. "The Internet is not a free-for-all."

But the lawyer for the anonymous blogger warned that the real free-for-all will happen in the court system if everyone who's ever suffered an ugly insult online decides to take their complaint before a judge.

"The floodgates would be opened if you tried to regulate these very broad, common insults and invective on the Internet," said Anne Salisbury.

"You can be really, really mean to people -- you just can't lie about a set of facts that are provable as lies, and that you knew or recklessly disregarded the truth of."

Trade Secrets: Barbie, Papermaster and Preventive Law

2009-08-07T08:05:00.000-04:00

Probably too long of a post but, businesspeople, you need to read this Enforcing Property Rights In Confidential And Proprietary I

In Bryant v. Mattel Inc. , a case pending in the United States District Court for the Central District of California, Mattel, maker of the Barbie doll, asserted that a former employee, Carter Bryant, began drawing designs for the Bratz doll - made by his new employer MGA Entertainment ("MGA") - while he was still employed by Mattel. Mattel instituted the action in 2004 claiming that Bryant violated his employment agreement, which, among other things, gave Mattel rights to all of his doll designs as an employee of Mattel. In August 2008, Mattel obtained a jury award of $100 million in damages for copyright infringement and contract-related claims. The court thereafter ruled that Mattel owned all the right, title and interest (including all copyrights) in and to the Bratz-related works, ideas and concepts that Bryant conceived, including the Bratz name, and Mattel obtained a permanent injunction against MGA's sale of the Bratz dolls. In January 2009, the court modified its prior order to allow MGA to continue to sell Bratz dolls through the end of 2009. At a hearing in February 2009, counsel to Mattel conveyed that Mattel was interested in settling the litigation and that there had been some activity on this front.

In International Business Machines Corp. v. Papermaster , 2008 WL 4974508 (S.D.N.Y. Nov. 21, 2008), the United States District Court for the Southern District of New York ordered Mark Papermaster, a former IBM senior executive, to immediately cease working as Apple's Senior Vice President, Devices Hardware Engineering, in the iPod/iPhone Division. Papermaster - who had worked for IBM for 26 years - had served as Vice President of IBM's Blade Development Unit in the preceding two years. Papermaster worked throughout his tenure at IBM on a technology used to develop microprocessors and servers, and he was viewed within IBM as its top expert in "Power" architecture. The Court found that Papermaster was "fully aware of many of IBM's most sensitive trade secrets," having "worked for years with some of the crown jewels of IBM's technology." Because of his expertise, IBM selected Papermaster to be a member of its Integration & Values Team, an elite group of approximately 300 executives that is comprised of its key leaders and develops IBM's corporate strategy.

***

These cases underscore just a few steps that employers may take to enhance their litigation positions prior to ever setting foot in the courthouse.

1. Ensure that your confidentiality and restrictive covenant agreements have language confirming that inventions, innovations, processes, discoveries, improvements, ideas, system designs, technical know how, computer programs and related documentation, literary works, artistic works, copyright works or any other works of authorship developed, created, made, conceived, invented, discovered, acquired, suggested or reduced to practice by the employee, either alone or jointly with others during the employee's employment by the employer, whether or not during working hours, and related in any manner to the work or other activities carried on by the employer shall be (i) the sole property of the employer and (ii) works-made-for-hire to the extent allowed by the Copyright Act. The developments provision should also provide that to the extent the developments are not works-made-for-hire, the employee assigns all right, title and interest in the developments to the employer.

2. Based on the nature of the employer's business and the services the employee will be performing for the employer, the employer should also consider requiring the employee at the beginning of his employment to set forth a complete list of developments that he has conceived, developed, created, made, invented, discovered, acquired, suggested or reduced to practice prior to the commencement of his or her employment that he or she considers to be his or her property or that of third parties and that he or she wishes to have excluded from the scope of the confidentiality agreement he or she is being asked to execute.

3. Consider whether it is appropriate to ask a new or existing employee to execute an agreement with non-competition restrictions. The immediate reaction of many entities is that "tying up" as many employees as possible enhances their business goals. As the IBM/Apple dispute evidences, however, less is often more. That Papermaster - exposed to IBM's most sensitive trade secrets - was one of only a few hundred of IBM's 400,000 employees required to execute a non-competition agreement weighed in favor of the court's enforcement of the prohibition against him working for competitors within one year of leaving IBM.

4. Make sure your confidentiality and restrictive covenant agreements have language by which the employee acknowledges and agrees that, by virtue of his or her position, services, and access to and use of confidential records and proprietary information, any violation of any of the undertakings contained in the agreement would cause the employer immediate, substantial and irreparable injury for which it has no adequate remedy at law. The Papermaster court relied on Papermaster's acknowledgment that IBM would suffer irreparable harm if he violated the agreement in finding that IBM had proven a likelihood of irreparable harm.

5. In cases regarding confidential information and restrictive covenants, e-mails between the departing employee and his or her new employer are often rich sources of favorable evidence. Employers must implement e-mail and communication policies which, among other things, confirm that (a) electronic communications are the property of the employer and not the private property of individuals, (b) employees' electronic communications are not considered private, (c) employees shall not transmit without prior express authorization any trade secrets or other confidential or proprietary information and (d) the employer reserves the right at any time, in its sole discretion, with or without notice, to review, monitor and disclose its employees' electronic communications. When a dispute arises with an employee or former employee regarding confidential information or restrictive covenants, the employer should promptly review the employee's e-mails to ascertain whether any incriminating evidence is included within those e-mails. In many industries, employers' most critical assets walk out the door at the end of each day.

Indiana Lawyers Cannot Use Trade-Names

2009-08-06T16:33:00.000-04:00

Another instance where the non-lawyers have us beat? I do not think so but still I thought it would be interesting to the general public.

Court reprimands attorneys for trade-name use

Three attorneys who practiced separately but advertised as an LLC were publicly reprimand by the Indiana Supreme Court for violating several Indiana Professional Conduct Rules by not letting clients know they didn't practice law as a firm.

The Supreme Court combined the disciplinary actions against J. Michael Loomis, Robert A. Grubbs, and Robert J. Wray into one order posted May 8 and agreed a public reprimand was the appropriate discipline for violating Rules 7.2(b), and 7.5(a) and (b). The sanction was consistent with discipline imposed in other cases involving misleading attorney communications.

***

The Supreme Court found the attorneys' use of "Attorneys of Aboite, LLC" and "Attorneys of Aboite" to be improper because a lawyer in private practice shall not practice under a trade name. The use of "LLC" implied that the attorneys were practicing law together as a LLC and not as individuals just sharing office facilities. Using an LLC in a name implies the LLC maintains adequate professional liability insurance or other forms of adequate financial responsibility for the protections of clients and that the State Board of Law Examiners investigated the LLC and certified it, according to the order.

Indiana Non-Compete Case

2009-08-05T11:05:00.000-04:00

Still trying to round out the material from my hiatus.

Judges differ in non-compete agreement case

In a legal dispute regarding a non-compete agreement, the Indiana Court of Appeals judges disagreed as to whether the agreement could be enforced if the former employee's clients voluntarily left and contacted him to continue to be their accountant.

At issue in Craig P. Coffman and Coffman Proactive CPA Services, LLC v. Olson & Co., P.C., No. 53A04-0804-CV-190, is whether Olson & Co. had a protectable interest that could be enforced by a non-compete provision in an employment agreement and whether the trial court erred by voiding the liquidated damages provision in the agreement and calculating the damages award.

Craig Coffman worked as CPA for Olson & Co. and signed a confidential non-disclosure and client proprietary agreement that said upon termination of his employment with the company he couldn't contact or work with Olson clients for 24 months. If he did so, he would liable to Olson for two times the client's most recent 12-months billings with Olson if he informed the company of the violation of the agreement; if Coffman failed to inform Olson, he would be liable for three times the amount.

Marvell Semiconductor Suit Dismissed

2009-08-04T13:53:00.000-04:00

A little late but from Law.com comes IP Suit Against Marvell Semiconductor Dismissed for Lack of Standing and the end of one case:

Jasmine Networks Inc.'s epic trade secret case against Marvell Semiconductor Inc., featuring a general counsel's accidental voice mail confession, was suddenly dismissed (.pdf) Wednesday.

Santa Clara Superior Court Judge Thomas Edwards ruled that Jasmine doesn't have standing to sue because the bankrupt company had sold off the trade secrets in question.

Marvell's lawyers at Latham & Watkins filed a motion to dismiss the case in the midst of pretrial motions last week, nearly eight years after the case was filed.

Steven Bauer, who led the Latham team, said he wasn't authorized to comment on the case and a Marvell spokesman was traveling and couldn't be reached for comment.

See my earlier posts here and here on this case. Not sure who should say ouch loudest - plaintiff for not noticing it had sold off its right or defendant for not noticing earlier.

How Contracts Help Fight Fraud

2009-08-02T08:05:00.000-04:00

From the Supply Excellence blog comes Fraud Risks (and how Contracts can help):

In other words, a head-in-the-sand approach or playing nice will not protect against fraud … it’ll just prevent you from knowing about it until it’s too late. And while communication early and often is key, the contract tweaks Neil highlighted also point to an important step technology can play in reducing risks of fraud.

Having pre-approved clause language and proper process and approvals in an automated contract management system may root out instances where fraud can take place in the first place. And, worse case, it provides improved after-the-fact visibility in the event that it is not caught proactively.

Notice it is just any contract but a well-written contract that helps fight fraud. Here is another point where a good relationship with the business' lawyer can help prevent problems - such as lost proftis.

Lindsay Lohan Stealing Trade Secrets?

2009-07-20T12:04:00.000-04:00

Not quite the kind of trouble one associates with Lindsay Lohan but this is the news.

New York Injury News - Lindsey Lohan sued!

Lawsuit claim Lohan stole sunless tanning lotion formula that retails at Sephora.

Tampa, FL–Lindsey Lohan and her business partner, Lorit Simon, are embroiled in a lawsuit, accusing the pair of stealing a St. Petersburg chemist’s formula for Lohan’s sunless tanning line, Sevin Nyne. The New York Daily News reported, the chemist, Jennifer Sunday, alleges Simon and Lohan breached their signed confidentiality agreement after the duo were made privy of Sunday’s exclusive tanning formula.

Lohan teamed up with the business woman, Simon, who owns a Las Vegas business, that applies airbrush tans to celebrities and high profile clients to help develop the sunless tanning concoction, Sevin Nyne. The lawsuit, which was filed in a Tampa, Florida, federal court, charges Lohan, Simon, and Simon’s company for breach of contract, theft of trade secrets, civil conspiracy, intentional indifference with contractual relations, and deceptive and unfair trade practices. Sunday and Simon were reportedly in negotiations when Simon was shown the sunless formula at Sunday’s company, White Wave International Labs, but they never confirmed an agreement.

Sevin Nyne, which is remarkably similar to Sundays formula, contains, goji berries, caramel, Chardonnay extracts, and a sugar free coconut base. Lohan’s “sunless secret” was launched this summer at Sephora and is reportedly being retailed for $35. According to the Sephora website http://www.sephora.com, a portion of the proceeds of Sevin Nyne are being used to benefit skin cancer awareness charities.

I found a bit more legal information on the Daily News' Gossip page's Lindsay Lohan sued for stealing formula for Sevin Nyne tanning spray:

According to the St. Petersburg Times, Sunday is suing Lohan, Simon, and Simon’s company for breach of contract, theft of trade secrets, civil conspiracy, intentional interference with contractual relations and deceptive and unfair trade practices.
In January, Sunday’s company, White Wave International Labs, signed a confidentiality agreement with Simon. Sunday claims that the two sides had been in negotiations, but had not reached an agreement on pricing.
"The next thing we know, Lorit Simon and Lindsay Lohan are partnering and Ms. Lohan is taking credit for developing this formula, which she indeed had no role in," Cohen told the St. Petersburg Times on Monday.

Okay, I do not know much about Ms. Lohan other what I have seen in the news and from watching one and one-half of her movies. From what I do know, I cannot see her as an inventor.

Which leads me to wonder what is her connection to the theft of trade secrets. As a partner to an offending party, she could be liable but that is the danger of partnerships.

The third party interference claim makes some sense in the abstract and you can read my article here on that subject.

It maybe that there is more to it than merely looking for a deep pocket, but I would have to see more information to overcome my skepticism.

What is a Litigation Attorney?

2009-07-09T08:46:00.000-04:00

I suspect I will get comments from other lawyers about the difference between a a litigation attorney and a trial lawyer. Relax. I did not write this post for us lawyers but for the non-lawyers. (For the record, I do think of myself as a trial lawyer and not a litigation attorney). And, Attorney at large, has written a good article for laypeople about what litigation attorney or a trial lawyer does:

What Does A Litigation Attorney Do, Anyway
Litigation Takes A Long Period Of Time.

Very rarely does the litigation process go quickly. It’s not that litigation attorneys don’t want to expedite the process as much as possible – it’s just that there are an unbelievable number of details and legal procedures that have to be followed in any type of litigation. Court systems and their rules also introduce their own level of bureaucracy that only extends the amount of time needed for litigation attorneys to cover all the bases necessary.

Again, litigation is a very complicated process. While it might sound simple to simply carry a lawsuit through the court process, every experienced litigation attorney knows that this is just not the case at all!

Worried About Financing a Case Needing Experts?

2009-07-07T09:49:00.000-04:00

Small Firm Business's Litigants Lacking Big Tech Bucks Can Still Play Ball has some interesting points that I have yet to really work out - at this point, I do not have this issue in any of my pending cases.

"In a survey, several federal district court judges also opined that Rule 403 permits the trial judge to bar the proponent's expert testimony when the opponent lacks the wherewithal to afford a rebuttal expert. Savikas & Silverman, 'Making the Poverty Objection: Parties Without Fancy Exhibits Could Claim Unfair Prejudice, But Not All Judges Would Agree,' NLJ, July 26, 1999, at C1.

Is it proper to invoke Rule 403 in that fashion? On the one hand, Rule 403 does not embody any egalitarian objective. Neither the text of the statute, the accompanying advisory committee note, nor any passages in the congressional deliberations over Rule 403 indicate that the drafters intended judges to resort to Rule 403 to compensate for an imbalance of financial resources between the litigants.

As quoted above, Rule 403 lists a number of probative dangers. Several other federal rules provisions contain lists. For example, Rule 404(b) lists some of the recognized noncharacter theories of logical relevance of uncharged misconduct. Likewise, Rule 407 enumerates several permissible purposes for introducing evidence of subsequent remedial measures."

Trade Secrets Litigation Round Up for The Week

2009-07-07T06:43:00.000-04:00

A Goldman trading scandal from Reuters might actually have broader interests, but I leave those broader issues to others:

While most in the United States were celebrating the Fourth of July holiday, a Russian immigrant living in New Jersey was being held on federal charges of stealing secret computer trading codes from a major New York-based financial institution.

Authorities did not identify the firm, but sources say the institution is none other than Goldman Sachs (GS.N).

The charges, if proven, are significant because the codes that the accused, Sergey Aleynikov, tried to steal are the secret sauce to Goldman's automated stock and commodities trading business.
***
The platform is one of the things that gives Goldman an advantage over the competition when it comes to the rapid-fire trading of stocks and commodities. Federal authorities say the platform quickly processes rapid developments in the markets and using secret mathematical formulas, allows the firm to make highly-profitable automated trades.

The criminal case has the potential to shed a light on the inner workings of an important profit center for Goldman and other Wall Street firms. The charges also raise serious questions about the safeguards that Wall Street firms deploy to protect these costly-to-build proprietary trading systems.

I think everyone who follows this blog knows the key to a trade secrets case is how well and in what ways the business keeps those secrets secret.

Bloomberg reports on Hartford Sues Arch Over Hiring of New York Employees (Update2) wherein former employees hired by a competitor become also defendants in a civil suit:

Hartford said in the lawsuit, filed today in New York state Supreme Court, that Arch “conducted an unlawful corporate ‘raid’” by hiring more than 60 managers, underwriters and employees from a unit that insures financial obligations and corporate boards. Hartford Financial Products, the New York- based subsidiary, employs about 250 people.

Hartford is guarding against employee and client defections after three consecutive quarterly losses depleted capital and a $3.4 billion U.S. bailout raised the prospect of government- imposed compensation curbs. Arch and a unit of Berkshire Hathaway Inc. settled a suit last year stemming from allegations that Arch stole trade secrets.

Hartford said in its complaint that Arch conspired with David McElroy, who left his job as president of the Hartford unit on June 5, to gain trade secrets and client information. McElroy, who is also named in the lawsuit, cooperated with Arch’s efforts to hire Hartford underwriters through “threats, bullying and repeated disparagement” of the insurer, according to the complaint.

Also from New York, Courthouse News Service reports on Ex-Partner Accused of AIP Trade Secret Theft:

A former managing partner of American Institutional Partners masterminded a scheme to steal the company's trade secrets from its owner, Pelican Equity claims in Federal Court.
Pelican Equity, which owns AIP's rights, says Robert Brazell partnered with Stephen Norris to form Talos Partners in order to steal AIP's confidential busines information for their own gain. At the time, Brazell was a managing partner of AIP, a stock loan business. The complaint paints a colorful picture of him, quoting his 2008 email to AIP founder Mark Robbins, in which he said he "humped the Prudential brochure" because he was so excited to be a partner in AIP.
Brazell used the company's computers to copy a Web site that AIP was developing, which he used for Talos, the lawsuit states. Pelican claims the copying was so sloppy that early forms of Talos' site still referred to AIP.
In the last 90 days, the defendants - acting through Talos - have closed more than $500 million in stock loans and have amassed a balance sheet of $350 million using AIP's confidential information, the suit states.

All right, I admit this raised my eyebrows. Hard to imagine the ineptitude of a managing partner who could not make sure that the highjacked HTML did not mention his old firm, but lucky for AIP that they did not. Thoughts of arrogant, boneheads from Wall Street do not need much stirring during the current state of our economy but those thoughts apply to both sides of this case. Again, what did AIP do to protect its trade secrets?

I do want to note a new trade secrets blog: Trading Secrets. Just found them via Google Alerts and only have had time to read FLIR Systems, Inc. v. Parrish: A Cautionary Tale for Trade Secrets Misappropriation Plaintiffs. I mentioned this case here. This post details what went wrong in the case and it is probably too long a critique for me to quote in full but I am compelled to point out these paragraphs:

• The absence of any evidence of misappropriation or threatened misappropriation of trade secrets. Notably, there was evidence at trial that one of the defendants, Parrish, had downloaded technological data onto a hard drive before leaving Indigo, and that he destroyed the hard drive a few months before the lawsuit was filed. Although evidence that an employee has downloaded confidential information shortly before leaving his employer is typically significant to support a misappropriation claim, here, the evidence was discounted because defendants first learned of the download after the complaint was filed, so it was not a consideration for bringing suit, and the download was not a threatened misappropriation because there was no evidence that the contents of the hard drive, “if such contents existed, were improperly accessed, used, or copied before the drive was destroyed.”

• Evidence that FLIR and Indigo had an anticompetitive motive in filing the lawsuit. On this point, the court found significant the testimony of FLIR’s CEO, who testified that “we can’t tolerate a direct competitive threat by [Parrish] and [Fitzgibbons],” inferring that the CEO had no evidence of wrongdoing but was bothered that defendants planned to compete with FLIR in the future. The Court also found significant the fact that another FLIR officer had voted to file the lawsuit but had no personal knowledge that defendants had committed a wrongful act.

• Failure by FLIR and Indigo to identify what trade secrets would be subject to the permanent injunction. The Court found as “strong evidence of bad faith” FLIR and Indigo’s proposed injunction, which barred defendants from developing certain products for a 12-month period even if they did not use FLIR and Indigo’s technology or trade secrets.

Trade Secrets Vault notes an interesting case with Dialysis centers locked in battle. What really perked me up was this from the original newspaper source:

DaVita has filed similar lawsuits against doctors and treatment centers in at least four other states, the newspaper reported.

DaVita issued a short statement saying ‘‘maintaining strong relationships with our business partners is a primary concern.’’

I did not know the dialysis business was so cut-throat. I think I might be even be a bit surprised.

And so ends this week of trade secrets litigation.

What to do if your company gets a deposition notice?

2009-07-02T16:22:00.000-04:00

Read Be Prepared to Deal With Deposition Notices and get ready to call your lawyer:

Your company has just been served with a 30(b)(6) deposition notice under the Federal Rules of Civil Procedure, and it is your job to respond to the notice and determine who will testify on behalf of the corporation. Is there anything you can do to ensure that your company puts its best foot forward at the deposition? The answer is yes: There are numerous strategies for selecting and preparing witnesses to participate in these depositions.

A 30(b)(6) deposition is a widely used litigation tool that requires a corporation to appear at a deposition and respond to questions regarding a specific list of topics contained in the notice. Since these depositions make it easier to depose the right corporate officers and managers on the right topics, as in-house counsel you need to be aware of how to avoid the many potential pitfalls of 30(b)(6).

Take a good look at the list of topics in the notice. Once you fully comprehend the crucial points involved, you need to identify the right witness or witnesses to speak on behalf of your company. Balance the number of witnesses against cost and time constraints.

The scope of a 30(b)(6) deposition is broad: A company can proffer as many witnesses as it needs to cover all areas of inquiry. A corporation may prefer to respond to a particular topic of inquiry covered in a plaintiff's notice by designating several corporate representatives. But doing so may unnecessarily subject the corporation to many hours of deposition testimony that an opposing party otherwise might not have the ability to take. And that isn't necessarily an outcome that you want to encourage.

Oh, if you think just because it says "federal" that this may not apply to you, then think again. Indiana's trial rules have a similar rule for our state courts:

(6) A party may in his notice name as the deponent an organization, including without limitation a governmental organization, or a partnership and designate with reasonable particularity the matters on which examination is requested. The organization so named shall designate one or more officers, directors, or managing agents, executive officers, or other persons duly authorized and consenting to testify on its behalf. The persons so designated shall testify as to matters known or available to the organization. This subdivision (B)(6) does not preclude taking a deposition by any other procedure authorized in these rules.

Non-Competes and Trade Secrets - IBM Loses a Case

2009-07-01T07:26:00.000-04:00

I am not so sure that I buy not signing on the correct line means that the non-compete agreement in Judge: Former IBM executive can work at Dell is enough. I am more worried about the implication that IBM had an employee sign a non-compete after the start of employment.

According to a court document, IBM in 2005 required executives to sign noncompete agreements to continue receiving equity benefits. Johnson didn't agree with certain conditions in the noncompete agreement, so he signed the document on the wrong line. Johnson said that IBM discovered that the signature wasn't properly executed and sent him a new noncompete agreement, which he never signed.

In a court filing, IBM alleged that Johnson had indeed signed a noncompetition agreement. However, the court said that IBM's case wasn't strong enough and that its actions raised significant doubts as to whether Johnson had entered into the noncompete agreement.

Frankly, this argument from the employee from Reuters' IBM loses injunction against Dell executive better explains what went wrong at IBM:

He maintains that the non-compete agreement is invalid because he intentionally signed his name in "the wrong spot" on the document in a bid to win time to work out his differences with his superiors.

"I believed that IBM did not consider the non-compete agreement agreed upon or entered because IBM returned to me the one I had signed in the wrong spot unexecuted and asked me to sign a new form," Johnson said in an affidavit.

I find the trade secrets issues even more interesting:

The judge also said that Johnson didn't have access to IBM trade secrets. "The Court ... believes that IBM has overstated its case. Mr. Johnson does not have the sort of information that is considered quintessential trade secret information--detailed technical know-how, formulae, designs, or procedures," Robinson wrote. In addition, Johnson could suffer great hardship if the court enforced the agreement, the judge wrote.

Which is pretty straightforward trade secrets law, but IBM argues the employee possesses a different kind of information:

IBM argued that Johnson could hurt the company because he has knowledge of the "most sensitive confidential strategic information," according to the filing.

I am trying to figure out what strategic information could be confidential. Client lists....but we are talking about IBM here. Those likely to be IBM clients are what I would call obvious and not a secret.

If I can find the time, I might jump on Pacer and see what else there is to find out.

Trade Secrets/Inevitable Disclosure Case: $1.6 Million in Attorney Fees

2009-06-30T07:02:00.000-04:00

The Pacific Coast Business Times sedately headlines an interesting trade secrets case with Court clears way for infrared venture.

What happened?

Bill Parrish and Tim Fitzgibbons have been in a legal wrangle with Oregon-based Flir Systems for three years. The two sold their former company, Indigo Systems, a Goleta-based maker of infrared vision systems components, to Flir in 2004 for $185 million.

In 2005, Parrish and Fitzgibbons decided to start a company that would compete with Flir. They offered Flir a stake in the new venture, but Flir turned them down. In 2006, Parrish and Fitzgibbons left Flir and started talks with Raytheon about technology for the new company.

Flir sued in Santa Barbara County Superior Court to stop them, alleging there was no way the pair could carry out their business plan without stealing trade secrets that belonged to Flir. Raytheon pulled out of the business talks after Flir filed suit.

So Flir loses out on a piece of action in exchange for a lawsuit. Parrish and Fitzgibbons loose out on the Raytheon deal. Flir has now to pay $1.6 million for losing on its theory of inevitable disclosure.

Why?

In Yegan’s (the trial judge) decision, he wrote that Flir erred in arguing from a doctrine called inevitable disclosure. The idea is that an employee knows a company’s trade secrets so intimately that he or she would inevitably put them to use if working for a competitor.

In some East Coast states, companies can use that doctrine as an argument to stop former employees from forming or working for a competitor. But Yegan pointed out in his ruling that California courts have rejected inevitable disclosure for nearly six decades in favor of letting employees compete against their former companies and even go after the same customers.

2009-06-27T16:19:00.000-04:00

Oops, seems someone else had a less than stellar week.

From The Indiana Lawyer comes Judge criticizes counsel seeking class certification

Don't expect one federal judge to re-examine a ruling by another jurist on the same court if you don't present any new facts or arguments on a similar case and issue.

That's the message to federal attorneys practicing in the Southern District of Indiana, as detailed in a decision Thursday from U.S. District Judge David F. Hamilton in Blanca Gomez and Joan Wagner-Barnett v. St. Vincent Health, No. 1:08-CV-0153. The judge denied a class-action certification motion involving two ex-hospital workers who allege their former employer didn't provide adequate notice of COBRA rights to more than 250 people qualified for that extended health insurance between May 2004 and January 2006.

Non-Compete Agreements - Closing the Barn Door After the Horse Leaves

2009-06-22T08:22:00.000-04:00

Which is how I describe this dialog from Internet Marketing & Affiliate Tips's Use Noncompete Agreements To Help Protect Your Business:

Q: One of my former employees has started a competing business and is calling my clients and trying to steal their business from me. Do I have any legal recourse against him?
– Brad J.

A: I hate to break this to you, Brad, but unless this former employee signed a noncompete agreement while on your payroll, there is probably very little you can do to stop him from wooing your customers. You should discuss the situation with your attorney, but unless this person is also breaking the law in some other way (using stolen trade secrets, for example) your attorney will probably concur with me.

For those of us old enough to remember the idea of nuclear deterrence, you may better understand the use of a non-compete agreement as a deterrent to former employees acting as described above. Which means you need one before the employee leaves.

I will be happy to discuss with any Indiana business their need for a non-compete agreement.

Trade Secrets - Another R

2009-05-20T07:10:00.000-04:00

Protect trade secrets to prevent ugly surprises | Richmond Times-Dispatch

For a business, consider putting the need to protect your trade secrets near the top of your worry list.

Just ask Bank of America about the importance of trade secrets. It recently suffered a painful lesson from its neglect.

A trade secret is information that has value because it has been kept confidential. For businesses, classic examples of potential trade secrets are customer lists and future business plans.

***

One argument Bank of America made in favor of confidentiality was that information regarding what Merrill and it pay their employees, including bonuses, is trade-secret property.

The court shredded Bank of America's contention. Key officials from Merrill and Bank of America testified they didn't know of any company policy prohibiting disclosure of compensation information.

Bank of America had circulated a message to employees asking them to keep their compensation confidential but never enforced the policy. It never had employees sign an agreement to keep the information confidential.

Unlike what the song says, you can get protection. The question is will you?

Trade Secrets Litigation News: Some Times It Is Not an Employee

2009-05-19T07:13:00.000-04:00

Instead, the one stealing trade secrets can be a partner. Such was the story in Morrison & Foerster Wins $36 Million in Trade Secrets Trial

A San Jose, Calif., jury hit Luna Innovations for $36 million in damages in a trade secret case Tuesday, handing Hansen Medical and its lawyers at Morrison & Foerster the victory.

MoFo's Arturo Gonzalez had squared off with Wilson Sonsini Goodrich & Rosati's Jamie DiBoise in the three-week trial, culminating in animated closing arguments Thursday.

The jury took 1 1/2 days to come to a verdict. They found that Luna broke an agreement it had to help Hansen develop a robotic catheter and misused trade secrets to land a lucrative contract with a Hansen competitor, Intuitive Surgical Inc., instead.

Trade Secret Litigation News: Sun Microsystems and Versata

2009-05-18T07:16:00.000-04:00

Sun Successfully Defends Itself Against $100M Patent Suit

A jury denies the claim for than $100 million in damages from Sun for alleged patent infringement, breach of contract, interference with an existing contract, trade secret misappropriation and unfair competition that had been filed by Versata, formerly called Trilogy Software. Versata claimed Sun stole its technology for a product configurator designed to model a software development project throughout the entire product cycle, from requirements to marketing and sales.

Trade Secrets - A Request from IP finance ...

2009-05-18T07:15:00.000-04:00

I did not try to find the study mentioned in IP finance ...'s Trade Secrets v. Patents

If I may, I have request for assistance from readers. Against the sometimes overly patent-centric view of the IP world, we try to balance patents with trade secrets/know-how in the context of business management education. In that context, I like to mention to students that, to the best of my recollection, the OECD carried out a study some time ago that concluded that more technology is either created or transferred or exploited (all of the above; none of the above; other) via trade secrets than by inventions protected by patents. However, I have never succeeded in successfully locating the OECD report that supports this assertion.

Non-compete News - Massachusetts Upholds Non-Competition Agreement

2009-05-15T08:02:00.000-04:00

News from Reuters - HP hits snag in plan to hire executive from EMC

BOSTON (Reuters) - Hewlett-Packard Co's (HPQ.N) plans to hire a top executive away from rival EMC Corp (EMC.N) hit a legal snag on Monday when a Massachusetts court issued an order temporarily barring him from starting his new job.

The court ruled former EMC storage division president David Donatelli could not proceed with plans to start a job on Tuesday as head of HP's storage, server and networking groups, until the two companies resolve a legal dispute over the terms of a non-compete clause he signed with EMC.

EMC filed a lawsuit in Massachusetts last week and sought the preliminary injunction to bar Donatelli from taking the job. The suit cited a non-compete clause in his employment agreement.

Donatelli filed suit in California, which generally does not recognize non-compete clauses, seeking to dissolve that agreement.

"The court concludes that the covenant which Donatelli signed is an enforceable contract, is not unreasonably broad (at least on its face) and serves legitimate business interests of EMC," Stephen Neel, Justice of Massachusetts Suffolk County Superior Court, said in the order issued on Monday.

"Donatelli's intention to work for HP in California, which has a statutory prohibition on covenants not to compete, does not warrant denial of EMC's request for injunctive relief."

SBA News

2009-05-14T16:44:00.000-04:00

Some thoughts from Business Opportunities Weblog that deserve consideration.

Our Future With Our New President

Many wonder exactly how qualified Mills is to run the SBA given she is a venture capitalist. Well let’s see…she was a partner/director of Solera Capital a venture capital firm, a Harvard business school graduate and president of private equity business firm MMP Group. It sound’s to me like she just may have the credentials that this country needs right now.

Marketing consultant Scott Testa argues that Mill’s while being a venture capitalist is naturally a risk taker and that just may be what the SBA needs…to take some new risk’s.

Though Mills’ experience is more ambitious entrepreneur than stereotypical mom-and-pop shop, that may be just what the SBA needs to inject new ideas and resources — and, in turn, boost the ailing economy.

What are some of your thoughts on how Karen Mills will do in heading up the SBA?

Excuse me but a venture capitalist would seem a perfect fit for an agency like the SBA.

Trade Secrets: Hilton Looking at Criminal Charges?

2009-05-13T23:11:00.000-04:00

More news on the Hilton case I wrote about in Ying and Yang of Protecting Trade Secrets. This comes from The Wall Street Journal Law Blog.

In Trade Secrets Flap, Might Criminal Charges Be Heading Hilton’s Way?

The latest big case involving allegations of corporate espionage involves Hilton Hotels and Starwood Hotels. We first heard about it last week, when Starwood, which runs the W line of hotels, among others, filed suit against Hilton and two former Starwood executives, alleging that the executives, who ultimately went to work for Hilton, smuggled more than 100,000 documents and electronic files out of Starwood — and that Hilton used the information to create a new luxury hotel brand, called Denizen.

he news out today: Hilton said it recently received a federal grand jury subpoena from the U.S. Attorney’s Office for the Southern District of New York asking for documents relating to the situation. Click here for the story, from the WSJ’s Tamara Audi.
Hilton said Tuesday it is temporarily suspending development of Denizen as a precautionary move. The brand has not opened yet, but Hilton was actively pursuing contracts and development deals and planned to open the first Denizen in 2010.

Hilton has also placed two high-ranking employees named in Starwood’s suit, Ross Klein and Amar Lalvani, on paid administrative leave “pending Hilton’s review of the situation,” according to a statement. The hotel company has also placed its luxury and lifestyle development team—many of them former Starwood employees—on paid administrative leave.

Update on the Thomas/RIAA Case

2009-05-11T21:33:00.000-04:00

RIAA Fails to Settle Thomas File-Sharing Case; Retrial Date Set | Digital Media Wire

"What they wanted to do, my client did not want to do," Toder told Wired; Thomas has previously stated she would not settle the case.

Thomas was initially found guilty of copyright infringement and ordered to pay a $220,000 fine for sharing 24 songs on Kazaa.

However, U.S. District Judge Michael Davis declared a mistrial after concluding that he erred when instructing the jury that Thomas should be found guilty if she merely made songs available for sharing, without proof that they had been downloaded by a third party.

The retrial is scheduled to begin on June 15.

For my earlier report on this case, go here

This Week's Trade Secrets Litigation Case - Marvell Semiconductor

2009-05-11T10:08:00.000-04:00

What can I say? Silence is golden? Loose lips sink law suits as well as ships?

Lawyers Say Embarrassing Voice Mail of Marvell GC May Have Been Edited | ABA Journal - Law News Now

Lawyers for Marvell Semiconductor say the tape should be tossed because it may have been edited, the Recorder reports. The company’s forensic expert says there are several instances where there is a complete loss of signal—a finding consistent with editing.

The lawyers caught on tape were Matthew Gloss, then the general counsel of Marvell Semiconductor, and one of its intellectual property lawyers, Eric Janofsky, the Recorder says. The lawyers and an engineer had phoned a lawyer for rival Jasmine Networks, and left a voice mail message when she didn't answer. Jasmine had been in negotiations to sell its technology and engineers to Marvell, and the details were protected by a nondisclosure pact, according to a 2001 account of the recording in Fortune.

Trial Featuring Infamous Marvell GC Voicemail Set for Next Week

We cringe every time we think about Jasmine Networks's trade secrets case against Marvell Semiconductor. At its heart is a recording of then-Marvell general counsel Matthew Gloss, patent attorney Eric Janofsky, and VP of engineering Kaushik Banjeree that has helped secure them a place in Silicon Valley infamy. Eight years ago the three rang up a Jasmine in-house lawyer, who didn't answer. When the call went to voicemail, Gloss left a message and hung up. Except he didn't. With the Jasmine phone system recording their conversation, Gloss, Janofsky, and Banjeree proceeded to keep talking....about stealing Jasmine's trade secrets! At one point, Janofsky said, "If we took that IP on the pretense of just evaluating it, and put in in our product..." Yikes!

***

Mind you, Elinson writes, Latham's arguments don't "cast much doubt on the part where they're talking about stealing the other guy's IP." On top of that, Jasmine's lawyer, William McGrane of McGrane Greenfield, told Ellinson that the appeals court has already denied Latham's challenge to the recording. "They are fighting an uphill battle," McGrane said.

I am not even sure that I care whether the recording was doctored or not. I am old enough to remember the Nixon tape transcripts and have seen other people forget that their telephone was not disconnected (especially embarrassing to a friend of mine who had not realized her cell phone could be dialed without her fingers touching the call button). Between those experiences, I have a healthy fear of telephones and recording devices. I am only surprised it is not more widely shared.

Trade Secrets Litigation News

2009-05-05T16:45:00.000-04:00

Lockheed Seeking Nearly $700 Million in Trial Against L-3 Communications

A big, big trade secrets trial is set to begin in Atlanta federal court this week, reports the Fulton County Daily Report. Lockheed Martin, the largest defense contractor in the world, is seeking $689 million in compensatory and punitive damages from America's sixth-largest defense contractor, L-3 Communications, and its subsidiary L-3 Communications Integrated Systems, for allegedly stealing trade secrets related to Lockheed's line of marine patrol, antisubmarine aircraft.

Lockheed sued four years ago after it lost to L-3 in the bidding for a $427 million contract with the government of South Korea to refurbish eight of these Lockheed antisubmarine planes. Lockheed alleged that L-3 illegally took proprietary information about its planes to get the work.

Senate Defeats Measure to Allow Bankruptcy Judges to Change Mortgage Terms - washingtonpost.com

2009-05-01T10:38:00.000-04:00

Senate Defeats Measure to Allow Bankruptcy Judges to Change Mortgage Terms - washingtonpost.com: "Supporters argued the measure would keep 1.7 million borrowers in their homes, but it ultimately foundered in the face of fierce financial industry and Republican opposition. The bankruptcy modification provision, which was offered an amendment to a broader housing bill, failed by a vote of 45 to 51.

'I'll be back. I'm not going to quit on this,' said Senate Majority Whip Richard J. Durbin (D-Ill.), who sponsored the measure. He noted that estimated foreclosures during the housing crisis has ballooned from 2 million to 8 million since his campaign for the change to the bankruptcy code began."

***

But the measure ran into trouble in the House among moderate Democrats before ultimately passing that chamber. Then it faced an even tougher battle in the Senate. Durbin negotiated with Bank of America, J.P. Morgan Chase and Wells Fargo for weeks, hoping their support would bridge the gap. Even after the proposal was weakened significantly, the financial services industry refused to sign on.

"Instead of encouraging homeowners who are at risk of foreclosure to file for bankruptcy, the federal government should continue to encourage lenders to work with owners to modify loans where it is economically viable for homeowners to remain in their homes," Republican Whip Sen. Jon Kyl (R-Ariz.) said. "While it is regrettable that not all homeowners are eligible for a loan modification, Congress should not incentivize bankruptcy by making it the only means to save one's home."

Patents, Trademarks and Hamburgers: Steak n Shake Settles With Burger King

2009-04-30T10:43:00.000-04:00

Steak n Shake, Burger King settle lawsuit:

"Steak n Shake Co. has changing the name of its miniature Steakburgers to settle a trademark-infringement lawsuit brought by Miami-based Burger King Corp.

The Indianapolis-based chain was slapped with a lawsuit last month after it unveiled slider-style hamburgers called Steakburger Shots, a moniker Burger King said was 'confusingly similar' to its trademarked BK Burger Shots, BK Breakfast Shots and BK Chicken Shots.

The mini-burgers at Steak n Shake now are known as Shooters.

Steak n Shake CEO Sardar Biglari said at the chain's annual meeting Friday that he simply called Burger King CEO John Chidsey and worked out the dispute over the phone.

In the lawsuit, Burger King had said it registered the names with the U.S. Patent and Trademark Office and began promoting them in February 2008, well before its competitor unveiled 'identical' products."

Trade Secret Example; Bourbon

2009-04-30T07:53:00.000-04:00

Bourbon Steps Out of Its Overalls comes from The Washington Post but it does give a quick example of a trade secret:

I visited Brown-Forman's cooperage on the outskirts of Louisville, right near Churchill Downs, where the 135th Kentucky Derby will be run this weekend. Inside the cooperage, 2,000 barrels a day are built by hand from new oak, lightly toasted, then charred on the inside. I was allowed to see every step of the barrel process except the toasting. "That's proprietary," Morris said.

***
Buffalo Trace's distiller, Harlen Wheatley, at 39, is one of the youngest, and his apprenticeship lasted a number of years. "I'm only the sixth guy since the Civil War," he says. "The master distiller I replaced worked for a guy that dated back to Prohibition."

Beyond the obvious issues of trade secrets and loyalty, Wheatley said, the continuity of the master distiller is important because bourbon takes so long to make.

Proprietary = trade secret. Do not take steps to kept the technique form the general public and lose the trade secret. Anyone want to to estimate the value to the business of the toasting technique?

Protecting Your Trade Secrets from Poaching Employees

2009-04-29T09:25:00.000-04:00

I ran across Protecting your employees: how to stop poaching a while back and, although the focus is English, I see good advice here for any employers:

The best place to start is with an appropriate risk assessment, focused on identifying two things:

* Identify which staff or teams are the most likely to be tempted to remove information or attempt to take customers when they leave. In many cases, the greatest risks come from senior staff and sales teams.
* Identify the data and information most likely to be targeted. By doing so you can ensure that there is appropriate security, as well as a reliable system for tracking when and how the data has been accessed - an invaluable tool when trying to build a picture of what people have been up to.

The value of doing this is greatly enhanced by ensuring that the right wording is in place in employee contracts, particularly those who pose the greatest risk.

It is a common misapprehension that restrictive covenant clauses do not work or are not worth having - probably because lawyers argue so much over whether these clauses are enforceable. However, most employers forget that this is exactly what lawyers are paid to do.

***

Key points

* Employee turnover is part of every day business life. In industries where human capital is key to establishing a competitive advantage, poaching is a critical issue.
* The growing use of technology is an increasing threat, as it continually makes it easier for valuable business information to be removed.
* Restrictive covenants can work, providing the restriction is valid. They work most effectively as part of a business response to the issues.
* Gardening leave can do little to restrict employees' activities from home.

Regardless of the chosen response, the important thing is to be well prepared and respond quickly and efficiently once the news of the departure breaks. The best way to prepare is to:

* identify the staff most likely to remove information or customers if they leave
* identify the data most likely to be targeted and secure it appropriately
* ensure the right wording is in employee contracts.

Remember, if you want more information about retaining me for a case, please give me a call at 765-641-7906.

Update on Realnetworks Trial - Trade Secrets

2009-04-28T19:15:00.000-04:00

How trade secrets get dealt with in trial.

First Day of DVD Trial Features Closed-Door Testimony - Digits - WSJ

Tech geeks hoping for juicy details from a closely watched trial involving RealNetworks are likely to find Friday’s proceedings a bit disappointing. U.S. District Judge Marilyn Patel closed much of the first day’s action to the public after an attorney for the DVD Copy Control Association said questioning would reveal too many trade secrets.

The witness with the top-secret information was Dr. John Kelly, of Kelly Technology Group, a consultancy in Santa Barbara, Calif. that specializes in computers and intellectual property. Some of his testimony early in the day was public, but when it got down to meaty questions about the specifications of DVD copy protection, courtroom bystanders got the heave-ho. That includes reporters from CNET, the Associated Press, the Daily Journal, Wired, and the local ABC affiliate.

Judge seals courtroom in MPAA DVD-copying case | Politics and Law - CNET News

"I find that this does meet the requirements for a trade secret," Patel said. "We're going to protect what needs to be protected. I'm ordering everyone not signed off on a confidentiality agreement to leave the courtroom."

"The MPAA is trying to seal proprietary specifications," said DVD-CCA attorney Reginald Steer. He added: "This is critical to our presentation."

Steer said the trade secrets related to licensing technology and CSS, or Content Scrambling System, which is an algorithm used to encrypt DVDs. DVD-CCA once filed a lawsuit against programmer Jon Johansen, who wrote a DVD-descrambling utility that circumvented CSS--a suit that had the unintended consequence of publicizing the code widely, including on ties, T-shirts, and at least one haiku poem.

Corynne McSherry, an attorney at the Electronic Frontier Foundation who has been following this case and was in the courtroom, said Patel chose an unfortunate procedure when barring the public from the room on Friday.

"She implied that we should have filed a motion preemptively," McSherry said. "If that's true, the public shouldn't have to go to court to make the courtroom stay open...Presumably the plaintiffs had known for months that they were planning to close this hearing. This is not the right way to do it."

Third parties interfering with contracts - a primer

2009-04-27T10:31:00.000-04:00

Recognizing a Litigious Reality serves as a good reminder of things businesses should not do and applies more widely than its original audience of accountants.

Intentional interference with contractual relations is a business tort that is especially prevalent in the field of intellectual property. A third party may be liable for this tort by inducing an employee to breach a contract (restrictive covenant) with an employer and encouraging the use of confidential information, such as customer lists. Since customer lists have been held to be trade secrets in some jurisdictions, the third party could also face liability for misappropriation of trade secrets.

The article proceeds to discuss how hiring employees with non-compete agreements can lead to a claim of tortious interference. While the employee gets sued for violating the non-compete, the new employer finds itself sued for tortious interference.

The writer proceeds to some good advice here:

Accounting firms should study the state laws carefully and narrowly tailor their noncompete clauses to an employee’s activities within their organization. Firms should take several factors into consideration:

* The specific language of the clause is very important, and thus a specialized attorney should draft the contract.
* Restrictions must be reasonable and no broader than necessary to protect legitimate interests of the firm. Be specific as to which clients are covered. In states like New York, make sure the noncompete specifies clients with whom the accountant is given direct, substantive work.
* Require recruitment efforts to be firm-driven and consider implementing a client development plan that includes paying employees’ membership dues in community organizations where business may be developed.
* Consult state law for reasonable limitations in time, geography, clients, and scope of activities, and stay within these limits.
* Practice bans are more onerous than reimbursement provisions. It is appropriate to limit the enforcement of these covenants to very narrowly defined time frames, classes of clients, or activities.
* Reasonable-reimbursement clauses based on formulas related to the anticipated loss have greater public policy support than practice bans. An unbiased objective formula commonly used for practice sales to third parties is advisable.
* The employer should exercise good faith in implementing and enforcing covenants.
* It is advisable with existing employees to tie a noncompetition agreement to a raise or promotion.
* Do not require all employees to sign noncompete clauses. Instead, select only those employees who will have the opportunity or ability to unfairly compete.
* Avoid requiring employees or partners to sign noncompetition agreements without allowing time to review them.

Taken together, these steps will show a court that an employer is attempting to protect only the firm’s legitimate interests, while keeping the burden on the employee and the clients to a minimum.

I am far more blunt about non-compete agreements: get a lawyer to draft the non-compete agreement, discuss fully what information and positions need protection with that lawyer, and be sure to have the employee sign them.

I am a bit leery of the advice to tie a non-compete agreement to a raise but only because it is much better to have had one signed at the outset of the employment relationship. Remember I am writing from the perspective of Indiana law,. Our courts will enforce non-compete agreements, but that enforcement is conservative.

As for employers hiring employees with non-compete agreements, always get a copy of the agreement and have it reviewed by counsel.

Remember, if you want more information about retaining me for a case, please give me a call at 765-641-7906.

One Idea About Alternative Fee Agreements

2009-04-27T08:52:00.000-04:00

From WhichDraft.com Alternative Fee Agreements Presentation at IACCM Americas Conference Touted by Supply Excellence

Justin noted that:

To capture some of that spend and have better legal representation, Jason recommends negotiating “incentives that motivate people to do better”. Meaning, structure your relationship with outside counsel so that there are either caps on fees for specific, clearly defined projects OR include “efficiency bonuses” that reward the firm for coming in under budget.

Couldn’t have said it better myself.

Even if you do not call me to represent you, ask your potential lawyer about whether they use alternative fees.

Ying and Yang of Protecting Trade Secrets

2009-04-24T08:59:00.000-04:00

Let us once again talk about departing employees and protecting your business' trade secrets. let me say about the first example that I am taking the allegations as being true just for the purposes of discussion.

If the allegations are true, then I think Starwood has a problem showing that it properly protected its trade secrets.

Bloomberg.com provides us with Hilton Sued by Starwood Over Claims of Trade-Secret Theft

Hilton recruited the employees, Ross Klein and Amar Lalvani, after it was acquired by Blackstone Group LP in 2007, according to the suit. Both men were involved in developing White Plains, New York-based Starwood’s “lifestyle and luxury” hotels, including the St. Regis, W and Luxury Collection brands, and downloaded confidential Starwood information to use later at Hilton, the suit claims.

“This case involves corporate espionage and the looting through computer fraud of a mountain of information,” the lawsuit claims. “Klein and Lalvani took and encouraged other Starwood employees to take with them to Hilton over 100,000 electronic and hard copy files, many containing highly confidential and proprietary Starwood information and trade secrets,” according to the complaint.

Strategic Plans

The materials included strategic development plans, negotiation tactics, explanations of how to convert hotels into luxury brands, and marketing and demographic studies.

Courthouse News Service may provide a clue how the information was taken and a reminder that it is not always the lowly, hourly employee needing watched:

Starwood claims that Hilton's president of global development and real estate, Steven Goldman, began recruiting Lalvani to join Hilton in March 2008. And it claims that "Before joining Goldman at Hilton, Lalvani, too, misused his position at Starwood and secretly downloaded large quantities of confidential documents, which he brought with him to and used at Hilton."

Thanks to HotelChatter for the article that originally tipped me off to this case.

At the other end, we have from George's Employment Blog a report on an employer going overboard on protecting its trade secrets. Expensive Trade Secret Protection Lesson for Employer — $17.5 Million Verdict in Lawsuit Over Employee’s Hard Drive

The former employee is Dallen Trealoff, who founded an RV-related company with his wife in 2003. In 2002, Trealoff’s former employer, Forest River, Inc., removed the hard drive from Trealoff’s personal computer, alleging that Trealoff was preparing to make off with company trade secrets in order to found his company.

Trealoff had used his spare time to develop a software program that kept track of Forest River’s sales and production information.

In removing the hard drive, the company was pursuing protection of that information, which it considered trade secrets.

However, the computer also contained Trealoff’s personal financial information.

George provides five points where he thinks the employer fouled up their case, and for our purposes I am pikcing on the following (I do suggest reading the other points, all are good ones for employers):

4 Trealoff’s employer may have failed to take sufficient security and confidentiality precautions to establish that the information qualified for trade secret status.

One of the requirements for information to qualify for trade secret protection is that reasonable efforts have been taken to maintain secrecy. Lack of a noncompete agreement, confidentiality agreement, or computer policy, and allowing the use of a personal computer for company business may have all been factors supporting the conclusion that the company failed to take such precautionary efforts.

Both employers did not take proper precautions. Which should serve as a reminder that an ounce of prevention beats a pound of cure. The second employer overreacted without a plan for dealing with trade secrets. Both were preventable.

Take a look at your business and ask yourself if your business can survive loss of its trade secrets.

Remember, if you want more information about retaining me for a case, please give me a call at 765-641-7906.

Updated 5/13/09: Trade Secrets: Hilton Looking at Criminal Charges?

Garden Leave: A Live American Example

2009-04-20T11:56:00.000-04:00

From Virginia Non-Compete Law Blog's GARDEN-LEAVE EMPLOYMENT CONTRACTS

Want an example? In Bannister v. Bemis Co., Inc., (2009 U.S. App. LEXIS 3648, 8th Cir. Feb. 25, 2009) a Garden-Leave clause was examined by a federal court in Arkansas. Bannister served as director of product development for Bemis. He signed a non-compete agreement which contained an 18-month post-employment restriction against working for a competing business. However, Bannister's contract provided he could receive his base-salary from Bemis if he was "unable to obtain employment consistent with his abilities and education solely because of the non-compete clause." This is called a "Garden-Leave" provision.

I call that a tidily succinct description of garden leave.

Virginia Non-Compete Law Blog goes on to make this suggestion:

My Take: If you bring highly sought after skills to you job and the employer wants you to sign a restrictive non-compete agreement, request a Garden-Leave provision in your employment agreement.

This sounds like a good strategy but for one thing: if the position does not pay a salary, there is no base salary to be paid during the garden leave period.

Now on Twitter

2009-04-19T23:44:00.000-04:00

I took the Twitter plunge this past Friday. If you want to add me, I am http://twitter.com/schasler

Non-Compete Agreements and Dentists (and Doctors)

2009-04-19T08:37:00.000-04:00

Are covenants not to compete becoming unenforceable?: A growing trend explored comes from The Journal of the American Dental Association:

"The court then examined the policies of the American Medical Association (AMA), which has taken the position that physicians’ noncompete agreements have a negative effect on health care and are not in the public interest. The AMA has held the view for many years that non-compete agreements restrict competition, disrupt continuity of care and potentially deprive the public of medical services.

The court also found it curious that, despite the AMA’s stated position, a majority of courts continue to apply a 'reasonableness' standard in evaluating noncompete agreements among physicians, similar to the evaluation of such covenants in commercial contexts. Nevertheless, several states, emphasizing public policy concerns, have applied closer scrutiny to non-compete agreements involving physicians (for an example, see Valley Med. Specialists v. Farber4). Also, three states in recent years have enacted statutes totally prohibiting non-compete clauses in physicians’ contracts. In other states, antitrust statutes have been interpreted as prohibiting non-compete clauses among physicians."

***

The court concluded its analysis by holding that public policyconsiderations such as the right to freedom of choice in physicians,the right to continue an ongoing relationship with a physicianand the benefits derived from having an increased number ofphysicians practicing in a given community all outweigh thebusiness interests of an employer. As a consequence, the covenantnot to compete was declared void. Although most courts continue to enforce physicians’ non-competeagreements, more and more courts today are holding these covenantsunenforceable for public policy reasons. In some instances,this has spread to other health care providers.⁶ At present,however, we are not aware of any cases involving dentists whoseagreements have been held void because they were judged to bein conflict with public policy.

For employer and employee the best thing to do with a non-competition agreement is to make sure that it is drafted in clear language and everyone understands what the terms.

Remember, if you want more information about retaining me for a case, please give me a call at 765-641-7906.

Non-Disclosure Agreements

2009-04-18T10:39:00.000-04:00

Covering Your ATS applies to more than software engineers.

By example, a broker and a software engineer develop a new computer system containing a novel matching process for their start-up ATS. They may sign a non-disclosure agreement forbidding either party to disclose without the other party's consent. If the software engineer tries to use the novel matching process in a side business, without the broker's consent, the broker may sue the software engineer for misappropriation of the trade secret.

To further protect the innovation, the software engineer and broker may require anyone they share the information with to sign non-disclosure agreements. If a financier is interested in investing in the technology, the software engineer and broker may require the financier to agree not to disclose or use the matching process trade secret. If the financier starts a new business using the novel matching process, in a way that violates the non-disclosure agreement, the software engineer and broker may sue the financier for misappropriation of the trade secret and breach of contract. However, if a third-party investment bank independently develops the same matching process, the software engineer and broker cannot stop the investment bank from marketing their process.

This is a good description of what a non-disclosure agreement does, and its defects have to do with the generality of the original article.

That non-disclosure agreement needs careful drafting so as to provide the protection expected by the parties. Yes, get a lawyer to do this. Is a lawyer necessary? Not really but having a person who can is not immersed in the deal gives you someone who view the deal critically and find any flaws in the agreement.

Hollywood and the Problems of Intellectual Property

2009-04-17T13:38:00.000-04:00

What applies to Hollywood applies to Indiana businesses. From Good Morning Silicon Valley comes Hollywood trying desperately to keep a lid on the box:

"Of course, media-center computer owners can still watch Hulu’s shows on the big screen — they just have to do it through a conventional Web browser instead of Boxee’s cleaner interface, and that leaves Techdirt’s Mike Masnick, among others, confounded: “It’s difficult to see how there’s even a claim by the content providers at all. They put the content on Hulu so that anyone watching the content via the Internet on a computer within the geographic restrictions should be fine. Boxee is just an application on a computer. It’s functionally identical to watching the content on your computer screen. The only real difference is that the ’screen’ is a television instead of a monitor. But the mechanism is identical. It’s difficult to see how the content providers can claim any right whatsoever to say that you can watch the content that they purposely put online only on a specific type of screen.”"

Remember, if you want more information about retaining me for a case, please give me a call at 765-641-7906.

Non-Compete Agreements - Rounding Up Medical Non-Competition Agreements

2009-04-16T20:37:00.000-04:00

Medical non-compete agreements continue to make news. For earlier articles, click on the link below next to Label.

From the North Carolina Appellate Blog comes COA Invalidates A Non-Compete And Non-Solicitation Agreement, While Limiting Trade-Secrets Damages:

"Plaintiff (MSN) is a medical staffing company (e.g., providing per diem nurses to hospitals and healthcare providers). The employee was hired to be manager of the MSN's Raleigh branch, with accounts including WakeMed. Five years later, he resigned to join a Raleigh competitor, and WakeMed went with him.

Although he had signed a noncompete with MSN, he contended it was unenforceable. The noncompete defined MSN (and thus the scope of his noncompetition duty) to include not only MSN but also 'any parent, division, subsidiary, affiliate, predecessor, successor, or assignee' of MSN. 'As drafted,' the COA therefore observed, 'the covenant not to compete would prevent Ridgway from working in any business within a 60-mile radius of Raleigh that competes with MSN's parent, or any of its divisions, subsidiaries, affiliates, predecessors, or assignees, even if Ridgway's employment duties for MSN had nothing to do with that business.' The COA indicated that this ran afoul of the rule that a company has no legitimate interest in preventing an employee from competing with affiliated companies. The COA also held that it ran afoul of the rule that a noncompete is unenforceable if it prohibits the employee from work that is distinct from the duties he actually performed as an employee."

***

Yesterday the NC Court of Appeals (COA) invalidated a noncompete and nonsolicitaiton agreement as facially overbroad. The case is Medical Staffing Network, Inc. v. Ridgway. The decision required the COA to vacate a seven-figure judgment that the former employer obtained against the former employee and his new employer. The Court also gave direction (and limiting principles) for damages in trade secrets cases

From this description, I think Indiana courts would have no problem invalidating the non-compete agreement. Employers should also be looking a the trade secrets side of the equation.

Understand this article from 1996_11 | LEGAL FORUM as applying to more than the medical field. A Too-Tough Noncompete Clause Could Defeat Its Own Purpose:

"The noncompete clause should prevent the physician from providing services in the prohibited geographical area. However, it is not wise to bar the physician from drawing patients from that area. If a patient is willing to travel to an office outside the proscribed area, that should be sufficient.

In addition, a group needs to be reasonable in the scope of services it chooses to specify in a noncompete clause. It is dangerous, for example, to prohibit a cardiologist from practicing primary care medicine within the restricted area. After all, the special leverage that the medical group offered to that cardiologist was primarily tied to the physician's specialty. A court may find it unfair to prevent that physician from staying in the area and practicing outside the field of cardiology, assuming that noncardiology procedures were not included in his or her original practice."

Finally, the penalties imposed for violation of the covenant should also be reasonable. Often, an injunction is the only way to prevent the medical group from being irreparably harmed by unfair competition. Sometimes, though, it is sufficient to give the de- parted physician an opportunity to buy out of the prohibition by paying what is known as liquidated damages. This is essentially a mutually agreed payment, derived by some sort of reasonable formula, to reflect an agreed approximation of the cost of the harm to the medical practice from the competition.

***
I recently have begun to see an interesting variation on physician noncompete provisions in employment agreements. Instead of the standard noncompete provisions, the contract lists specific physicians from whom a departing employee may not accept referrals. Often, this list is so extensive as to virtually prevent the physician from remaining in the area. All of the same cautions and advice I discuss above for standard noncompete provisions apply to such "end-run" prohibitions.

The successful non-compete case begins with the agreement itself. The truly successful case has a well drafted non-competition case that prevents litigation. The article Doctors' Rights Protected by Non-Compete Ruling has another case demonstrating this point:

"While medical clinics long have protected patient bases with physician non-compete agreements, a recent Arizona Supreme Court ruling favors doctors' rights by limiting how broadly such agreements may be written.

Non-compete agreements prohibit doctors who leave the practice from treating patients within a certain distance from the clinic for a specific amount of time.

But the state's high court determined one agreement was too broad because it prohibited a pulmonologist from practicing any form of medicine within five miles of a clinic and for three years after his departure. The court stated that because of the physician/patient relationship and a patient's right to see one's chosen doctor, non-compete agreements must be narrowly worded. For this reason, the court ruled the wording in an employment contract between Dr. Steven Farber and Valley Medical Specialists was unreasonable."

Between ethical issues and poor writing, these medical non-compete agreements present serious issues for lawyers, doctors, patients and the courts. I am inclining to the position that here is a place for garden leave clauses supplanting the traditional non-compete agreements.

Remember, if you want more information about retaining me for a case, please give me a call at 765-641-7906.

Update On ClearOne Trade Secret Case - Premanent Injunction Gratned

2009-04-16T10:39:00.000-04:00

The following is from ClearOne Granted Permanent Injunction Order in Federal Trade Secret Misappropriation Case . SunHerald.com provides an impressively detailed description of the judgment.

On April 9, 2009, the Court issued a Permanent Injunction. The Permanent Injunction provides, among other things, the following:

-- that the restrictions set forth apply immediately;

-- that the restrictions set forth apply not only to the Defendants, but also to each Defendants' agents, servants, officers, employees, entities, and those acting in concert with them, and/or those acting under their direction or control;

-- that all WideBand Defendants are permanently prohibited from using, disclosing, or transferring in any way the computer code at issue in the case, the development documentation for that code, and WideBand's "Infringing Products," defined as: (a) the AEC2w object code licensed to Biamp, (b) the computer code licensed to Harman Music Group, Inc. that was the subject of the October 30, 2008 Preliminary Injunction Order, (c) WideBand's FC101 product, (d) WideBand's WC301 product, (e) WideBand's WC301A product, and (f) WideBand's Simphonix product;

-- that the restrictions on WideBand Defendants include, without limitation, a restriction upon any further marketing, selling, manufacturing, development, modification, duplication, or transport or delivery of technology containing the computer code at issue in the case, or any product substantially derived from that computer code, including for the purpose of servicing any past or existing customer; and

-- that Biamp is permanently prohibited from using, disclosing, or transferring the object code licensed to it by WideBand for use in its "AEC2W" cards, including use of such code to service any past or existing customers.

On April 9, 2009, the Court issued a separate order, an Order Granting Permanent Injunction, placing additional requirements on WideBand Defendants, including:

-- that Defendants Lonny Bowers, Andrew Chiang, and Jun Yang provide a copy of the Permanent Injunction to (a) any prospective or new employer, (b) any existing or potential licensee of any audio DSP product generated by them, their company, or their employer, and (c) any potential purchaser of WideBand or its assets.

Further, the Order Granting Permanent Injunction noted, among other things, that preventing use of the trade names associated with the infringing technology is a necessary consequence of the WideBand Defendants' misconduct, and that WideBand Defendants should be compelled to turn over every electronic or hard copy of any algorithm, source code, object code, documentation, or other materials containing or derived from the computer code at issue in the case.

For a prior case on the subject, follow this link.

Pepsi Sues Coke (Again)

2009-04-16T10:35:00.000-04:00

From Reuters comes Pepsi sues Coke over energy drink claims

LOS ANGELES/NEW YORK (Reuters) - PepsiCo Inc (PEP.N), taking umbrage over a nationwide advertising campaign accusing its Gatorade energy drink of missing crucial electrolytes, sued Coca-Cola Co (KO.N) on Monday for false advertising and taking scientific liberties.

***

Coke's campaign "is a calculated, intentional strategy designed to falsely and viciously attack the readily identifiable market leader, Gatorade, in the hopes of unfairly gaining precious market share," Pepsi unit Stokely-Van Camp said in its complaint.

It accuses Coca-Cola of "false advertising, trademark dilution, deceptive acts and practices, injury to business reputation and unfair competition" under the U.S. trademark law known as the Lanham Act.

Feels like watching Ali and Frazier duke it out.

The Public Library of Law

2009-04-15T10:23:00.000-04:00

For lawyers (evne if it is not quite a solution to Lexis and Westlaw) and the general public, The Public Library of Law

Searching the Web is easy. Why should searching the law be any different? That's why Fastcase has created the Public Library of Law -- to make it easy to find the law online. PLoL is the largest free law library in the world, because we assemble law available for free scattered across many different sites -- all in one place. PLoL is the best starting place to find law on the Web.

What is available on PLoL?

* Cases from the U.S. Supreme Court and Courts of Appeals
* Cases from all 50 states back to 1997
* Federal statutory law and codes from all 50 states
* Regulations, court rules, constitutions, and more!

How Do Lawyers Set Fees?

2009-04-14T09:58:00.000-04:00

That Unsettling Feeling from IP Litigation Lawyer & Attorney may not answer that question but it hits some important points:

"There are a lot of questions we consider before taking a case and certainly before filing a complaint. Most important is, does the case have merit? Second, are potential damages sufficient to make it worthwhile? Very important is whether the defendant can actually pay if judgment is obtained? However, one question that NEVER gives us any pause whatsoever is, 'will the defendants put up a fight?' Of course they will. That is ALWAYS a possibility, and a company's reputation for defending cases vigorously simply does not enter into the calculation. Facing defense counsel and their defenses is just part of the game.

Having now been on the plaintiff's side for quite some time, I feel somewhat foolish recalling the principled speeches I once gave corporate clients regarding the need to stand up and send a strong message to the plaintiff's bar. In reality, my opponents did not care about reputations, 'messages' or the perceived nastiness of defense counsel."

***

I understand a big firm lawyer's need to hit his numbers and bring in the cash. And fighting cases is what we lawyers do, on both sides. But rational business decisions by clients should be based on more than silly claims about "messages" and "principle" and so forth. You'd think that people smart enough to get rich in the first place would know when their lawyers are blowing smoke.

Again, the overwhelming majority of cases settle, and they usually do so when when clients wake up to where their true interests actually lie.

Remember, if you want more information about retaining me for a case, please give me a call at 765-641-7906.

Read if you are not impressed with PACER

2009-04-10T23:45:00.000-04:00

The case against PACER: tearing down the courts' paywall - Ars Technica

In this feature, Ars takes stock of online access to federal court records in the United States. We'll discuss how the system got where it is today, look at where there's room for improvement, and talk to two experts on open government about the prospects for reform. The bottom line is that the courts deserve credit for the progress they made in the 1990s, but a lot more work is needed to bring PACER into the 21st century

Non-Compete Litigation News from Florida

2009-04-10T09:19:00.000-04:00

I think South Florida Business Journal's head line of Hank Asher sued by former company is pretty tame description of what follows:

"Reed Elsevier, the Massachusetts-based parent of LexisNexis and Seisint, on Thursday filed a complaint in Palm Beach County Circuit Court, alleging that Asher is violating his non-compete agreement by starting a new company, TLFO, in Boca Raton.

In 2004, Asher sold Seisint, his second major database company, to LexisNexis for several hundred million dollars. The deal included a non-compete agreement that is in effect until August.

But, Faith Gay, an attorney for Reed Elsevier, said Asher started violating his five-year non-compete agreement “approximately” two years early. While Asher has said publicly that TLFO is doing only charitable work to help in the hunt for child predators until his non-compete expires, the suit alleges that Asher is already angling for market share.

“He is out, trying to sell a commercial product,” Gay said. “We’re seeking damages for any harm that Asher has caused to our customer base. And, we are seeking a pro rata refund of the $775 million paid for Seisint based upon the length of time Asher has violated his noncompete.”

The suit also alleges that Asher has hired former Seisint employees and is using Seisint’s trade secrets in his new venture."

If Reed Elsevier has correctly described what is going on, then Mr. Asher tried a rather clever way to get around a non-compete agreement. Something to think about when drafting a non-competition agreement.

A reminder, I am taking on new clients for drafting non-compete agreements or litigating non-competition cases. Jsut give me a call at 765-641-7906.

Indiana Foreclosure News

2009-04-10T08:27:00.000-04:00

State AG files lawsuit in Delaware County | thestarpress.com | The Star Press

"We recognize there is a foreclosure crisis in the country," Zoeller said. "Indiana has tools in place that can help consumers avoid becoming victims of for-profit foreclosure consultants' bad intentions. Free mortgage counseling resources are available to Hoosiers that should be explored before paying a foreclosure consultant."

***

Zoeller and his staff recommend homeowners at risk of foreclosure or in need of mortgage counseling contact a certified Housing and Urban Development (HUD) counselor or call 1-877-GET-HOPE. These services are free.

For more information, go online to www.877gethope.org

Trade Secrets and Laid Off Employees

2009-04-09T08:58:00.000-04:00

As if businesses do not have enough to worry about with the economy, let me remind them of a perennial problem that may be getting worse with the economy. Don't let laid-off employees walk out the door with the company playbook - 03/23/09

"It's estimated that 70 percent of an average business' value is held within its information systems. It is vital to protect a company's trade secrets so that in the event an employee steals that information, employers are in the best possible position to succeed in litigation stemming from the theft," said Ron Brand, Fisher & Phillips LLP's Employee Defection and Trade Secrets Practice Group. "A proactive corporate program should be in place, as well as forensic steps to catch the employee."

So what steps can employers take to protect their trade secrets in these uncertain times? Taking physical security measures like locking cabinets and doors, implementing IT solutions such as password protection and keystroke software and taking legal steps like implementing confidentiality and non-compete agreements can help employers protect their trade secrets and confidential information.

Take the time to follow the link below for the trade secrets label. This will take you other articles on this blog about trade secrets.

I am taking on new trade secrets cases and clients. Remember, if you want more information about retaining me for a case, please give me a call at 765-641-7906.

2009-04-09T07:26:00.000-04:00

Court: Don t assume undue influence by child

The Indiana Court of Appeals used an opinion issued today to caution courts to not assume a child is exerting undue influence over a parent when analyzing cases involving adult children assisting an aging parent.

In Bruce Barkwill v. The Cornelia H. Barkwill Revocable Trust, No. 64A04-0808-CV-455, the appellate judges had to decide whether Cornelia Barkwill revised her trust under undue influence from her son Jeffrey Barkwill. Jeffrey lived near Cornelia, assisted her in getting a line of credit on her homes, and issued checks drawn on that line of credit to her when needed. He also advanced around $230,000 of his own money to her throughout the years. Bruce lived in Florida and only saw his mother twice between 1998 and when she died in 2007

Knowledge Discovery Compilation

2009-04-08T08:58:00.000-04:00

Another useful tool from LLRX.com - Knowledge Discovery Resources 2009: An Internet MiniGuide Annotated Link Compilation

This Internet MiniGuide Annotated Link Compilation is dedicated to the latest and most reliable resources for knowledge discovery available on the internet. With the addition of new and pertinent information added online continuously, it is very easy to experience information overload. The key is to be able to find the important knowledge discovery resources and sites both in the visible and invisible World Wide Web. The following selected knowledge discovery resources and sites offer a range of knowledge and information discovery sources to help you accomplish your research. Also, visit the Knowledge Discovery Subject Tracer Information Blog for updates. Other white papers and subject tracers by Marcus P. Zillman are available by clicking here.

Consumer Law News: Antitrust and Caskets

2009-04-07T08:27:00.000-04:00

Antitrust Case Against Funeral Industry Ailing, But Not Dead Yet - Law Blog - WSJ

So we suppose we weren’t entirely surprised when we read this morning of a case taking shape down in Houston, where a group called the Funeral Consumers Alliance have sued the leading casket maker and three major funeral home chains, alleging a nationwide price-fixing conspiracy. Click here for the story, from the American Lawyer’s Alison Frankel. (Frankel’s lead gave us a chuckle: “The assertions of a putative class led by a group called the Funeral Consumers Alliance are enough to make anyone opt for cremation.”)

The Alliance has alleged that as a result of the conspiracy, unsuspecting casket buyers are forced to pay perhaps twice as much as they would if there were true competition in the market.

That said, according to Frankel, the class action has, uh, “one foot in the grave” after a two-page ruling last week by Houston federal district court judge Kenneth Hoyt. Hoyt denied class certification, adopting without additional discussion the memorandum and recommendations filed last December by magistrate judge Calvin Botley. Botley had rejected the plaintiffs’ arguments, finding not only that individual issues predominated, but also that the plaintiffs hadn’t shown evidence of a conspiracy.

Litigation the Ballsy Approach: Psystar and Apple

2009-04-06T08:58:00.000-04:00

My subject line's pungency came from reading Ars Technica's Psystar makes small update to Mac clone, Apple fumes

Despite a pending lawsuit with Apple, Mac clone maker Psystar has released an update to its lineup, further showing its commitment to its line of computers running Mac OS X. The Open(3) joins the Rackmount OpenPro, OpenPro, and the Open7 in Psystar's lineup of machines. These are all aimed at budget-conscious users who don't want the hassle of building their own Hackintoshes, but still want to run Apple's operating system.

***

The introduction of the updated model certainly sends a message to Apple--one that would cause our mouths to be washed out with soap if we repeated. Apple, of course, filed a lawsuit against Psystar last summer for violations of the Mac OS X EULA. So far, the court case hasn't started, though the companies have recently agreed to keep their trade secrets, well, secret.

I can think of one, very important difference between a strategy that win and one that loses regardless of its looniness - it is called success. Successful litigation depends on the facts, the law, and the client's willingness to back the litigation. It looks like Psystar backs its legal team. Let us see if the facts and the law back them up in their willingness.

Remember, if you want more information about retaining me for a case, please give me a call at 765-641-7906.

Indiana Court Forms and Rules

2009-03-24T08:39:00.000-04:00

LLRX. com has a page devoted to Indiana courts - their dockets, rules and forms - here. This includes both federal and state courts.

2009-03-22T14:02:00.000-04:00

Knowledge Discovery Resources 2009: An Internet MiniGuide Annotated Link Compilation | LLRX.com

This Internet MiniGuide Annotated Link Compilation is dedicated to the latest and most reliable resources for knowledge discovery available on the internet. With the addition of new and pertinent information added online continuously, it is very easy to experience information overload. The key is to be able to find the important knowledge discovery resources and sites both in the visible and invisible World Wide Web. The following selected knowledge discovery resources and sites offer a range of knowledge and information discovery sources to help you accomplish your research. Also, visit the Knowledge Discovery Subject Tracer Information Blog for updates. Other white papers and subject tracers by Marcus P. Zillman are available by clicking here.

YouTube Changing Copyright?

2009-02-18T11:41:00.000-05:00

Eventually, YouTube might affect cxopyright law. I think everyone agrees the Internet has put incredible strain on copyright law. The ABA Journal - Law News Now published Copyright in the Age of YouTube which examines the issue at soem length:

"The ruling is part of a larger legal struggle over who should bear the burdens of stopping online copyright infringement. Movie companies, record companies and many other copyright owners fear that—because committing copyright infringement online is so fast and easy, and because the huge number of online infringements is skyrocketing—it is impracticable for copyright owners to stop online infringements by suing all the individual wrongdoers.

So content owners are seeking alternatives. They are trying to automate the process of removing allegedly infringing material. They are asking the courts to impose liability on YouTube and other online companies if these companies fail to vigorously police the material posted by their users. And the content owners are lobbying Congress for tougher laws against infringement."

Update on Bratz case

2009-02-17T11:36:00.000-05:00

An update on a case I wrote about here. From Corporate Counsel Center - News:

"RIVERSIDE, Calif. (AP) - The judge who barred MGA Entertainment Inc. from selling or making its popular Bratz dolls agreed Tuesday to extend a deadline he set for the company to take the products off store shelves.

MGA, which was initially told to stop selling Bratz by Feb. 11, had argued in court that retailers would not order the toys unless the court could guarantee they would remain in stores through most of 2009. U.S. District Judge Stephen Larson obliged, and allowed MGA to file a motion for a later deadline by next week.

'Given the clear importance of the Bratz line to MGA's financial health, it's not a big leap to see that (the February deadline) would have significant economic impact on the viability of MGA,' Larson said."

Overtime Wages-

2009-02-17T09:45:00.000-05:00

Pay attention to The Forgotten Overtime Exemption from workforce.com:

Much less well known is the overtime exemption set forth in Section 7(i) of the Fair Labor Standards Act. Limited to retail or service establishments, this exemption focuses not on the duties of the employee, but on how the employee is paid. Qualifying establishments are relieved from paying overtime to employees who are paid the majority of their compensation in commissions on goods or services and who earn at least one-and-a-half times the minimum wage. Given that all of these conditions must be present before an employer may utilize the exemption, employers should be wary of the nuances associated with each requirement.

Companies with employees who set their own schedules or work uncontrollable numbers of hours, or that need to align labor costs more closely with revenue, should consider whether this exemption for might work for them.

Employees currently paid on an hourly or other basis can be converted to exempt 7(i) commissioned employees by basing their compensation on the amount of revenue that they or their work unit generate. Once properly implemented, the company can be more flexible about scheduling and need not worry about employees who may inadvertently cross the 40-hour threshold. Employees who generate more revenue for the company will see their compensation increase commensurately and the company can be assured that this higher compensation is fully funded by higher revenue.

Trade Secrets Blog: The Microsoft Mole

2009-02-16T22:47:00.000-05:00

From Trade Secrets Blog, one of the stranger trade secrets stories, Trade Secrets and the Mole at Microsoft:

"From the Seattle Post-Intelligencer, an almost bizarre story concerning the CEO of a software company, Ancora Technologies, who went to work for Microsoft claiming that Ancora was no longer in business. Not only was that apparently not true, but his reason for joining Microsoft was to obtain evidence for a patent suit brought by Ancora against three Microsoft customers, Dell, Hewlett-Packard and Toshiba America Information Systems. Microsoft claims he downloaded secret information unrelated to his work for Microsoft."

Microsoft suit alleges ex-worker stole trade secrets : News : Software - ZDNet Asia:

According to the lawsuit, filed Jan. 22 in King County Superior Court, Miki Mullor stated on his application that he no longer worked at Ancora Technologies because it had gone out of business. However, Sammamish, Wash.-based Ancora was still in existence and he was the chief executive, the lawsuit alleges. (The Ancora site was inaccessible on Friday.)
***
"Mullor told ZDNet Asia's sister site CNET News last week that he had been advised by an attorney not to comment on the lawsuit, but then later e-mailed a statement. Mullor said he informed Microsoft about his patent in his resume and employment agreement and that Ancora had ceased business operation before he applied to Microsoft.

Mullor also said he applied for his patent in 1998, it was issued in 2002 and in 2003 he approached Microsoft and discussed the 'benefits Microsoft could realize by using it', but Microsoft wasn't interested. Then, while he was working at the company and unbeknownst to him, Microsoft developed technology that is the subject of the patent lawsuit, he said.

'Microsoft's complaint against me in Washington is a shameful and a desperate attempt to put pressure on me and my family from continuing to pursue our legal rights in the federal court in Los Angeles,' he wrote."

Another employee stealing trade secrets

2009-02-15T06:28:00.000-05:00

From The South Florida Sun-Sentinel comes a trade secrets theft case with a twist.

Keys marine worker accused of stealing trade secrets:
"ISLAMORADA - An employee of a marine services company on Plantation Key is accused of stealing trade secrets from her workplace and giving them to her boyfriend, a potential competitor of the business.

According to the Monroe County Sheriff's Office, Gwendolyn Russell, 45, was diverting price estimates and other quotes from Atlantic Davits & Boatlifts of the Keys so her boyfriend could submit lower quotes for the work in order to win potential customers.

The owner of Atlantic Davits, James Annesser, told investigators that Russell's boyfriend has a manufacturing company in Fort Myers and was planning to open a rival business in the Keys."

Trade Secrets: ClearOne Gets Broader Preliminary Injunction

2009-02-14T06:32:00.000-05:00

Here is the news:

ClearOne Granted Expanded Preliminary Injunction Order in Federal Trade Secret Misappropriation Case, Prohibiting Use, Sale or Marketing, of Wideband Solutions, Inc.s' Infringing Products: "

SALT LAKE CITY, Feb. 5 /PRNewswire-FirstCall/ -- ClearOne (Nasdaq: CLRO). An order was issued by the federal court yesterday, in favor of ClearOne Communications, Inc. expanding the scope of a previously issued preliminary injunction order, and prohibiting WideBand Solutions, Inc., its principals, and others acting in concert with WideBand, from (among other things) the use, sale or marketing of ClearOne's trade secrets and WideBand's infringing products found to use these trade secrets."

I have not had time to read the pleadings but this from Trade Secrets Blog's ClearOne Obtains Expanded Trade Secrets Injunction gives me a clue on why the expansion occurred:

"The Expanded Order noted that '[t]here is also recent evidence that the WideBand Defendants are still marketing one or more products that contain the trade secret,' and went on to preclude any 'further marketing, selling, manufacturing, development, modification, duplication, or transport or delivery of technology containing [ClearOne's trade secrets],' including 'without limitation, a restriction upon any further marketing, selling, delivery, and/or use of technology or products containing [ClearOne's trade secrets] to service any past or existing customers.'"

Remember this: judges do not like their orders ignored and federal judges really do not like their orders ignored.

Papermaster Wrapped Up

2009-02-13T11:47:00.000-05:00

Here is how it end:

Apple And IBM Resolve Employment Dispute; Papermaster Can Now Get To Work:

"Well, now he can finally go make future iPhones and iPods for Apple. The two companies have settled out of court. It kind of makes you wonder why companies even bother with non-compete clauses in employment contracts, especially when they are overly broad. More often than not, they are not worth the paper they are written on."

I expect there a confidentiality clause will limit any further information. Those keeping a closer eye on this industry might notice some change in money or technology. That would be my guess as I suspect IBM would not leave without some sort of compensation. (For an example, take a look at this post from The Trade Secrets Blog.)

And that is about all there is to know. Looking back, I noticed that I failed to post a memorandum of law filed in the case (thank you, Findlaw). It is in PDF format for those wanting to see it.

Trade Secrets: Business Loses

2009-02-12T11:31:00.000-05:00

From Los Angeles Business Journal Online

"International Rectifier Corp. lost its battle with ousted chief executive Alexander Lidow when a Los Angeles federal judge dismissed its lawsuit over alleged theft of trade secrets.

The El Segundo maker of power management chips filed the suit in September, alleging that Lidow engaged in an ongoing criminal enterprise — also known as a racketeer influenced and corrupt organization, or Rico — by stealing information and intellectual property related to the company’s $60 million secret research. The judge dismissed the suit on Monday.

International Rectifier claimed that Lidow devised a plan to steal IR’s trade secrets, and then recruited former researchers and sales executives to help him launch a competing company.

Federal judge Manuel Real threw out International Rectifier’s suit, ruling that the company failed to properly plead its claim that Lidow, and the other former IR employees, where involved in a criminal enterprise."

Not much there about what was going on, but Semiconductor Today had a bit more about the specific allegations:

"However, IR claims that Lidow stalled IR from making its GaN technology public in 2007. It claims that instead, in a breach of his duties to act in IR’s best interest, Lidow during that time began secretly recruiting six IR staff (from the R&D team plus senior sales representatives) for his plan to establish his new, El Segundo-based firm Efficient Power Conversion Corp (EPCC, of which he is CEO), with the aim of providing rival GaN-based products. IR also claims that Lidow’s actions have undermined its five years of R&D and caused the firm to lose its competitive advantage."

And this quote from Lidow's lawyer:

In response to the lawsuit’s allegations, in the Los Angeles Business Journal article, Lidow’s attorney Robert Sacks claims that his clients are not using IR’s GaN technology, and that EPCC is developing a different semiconductor product. “There is no substance to the claims,” Sacks said. “It’s an effort to retaliate further and to cause him harm.”

For what it is worth, Yahoo Finance has Form 8-K for INTERNATIONAL RECTIFIER CORP /DE/ which includes this:

5.02(b) Resignation of Director/Resignation of Officer
A. On April 17, 2008, the Company and Eric Lidow entered into an agreement ("Lidow Agreement") pursuant to which Mr. Lidow resigned as Chairman of the Board and as a Director of International Rectifier Corporation (the "Company") and retired from the Company, to be effective May 1, 2008. A copy of the Lidow Agreement is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Pursuant to the Lidow Agreement, the Company will provide Mr. Lidow with certain office, secretarial and transportation assistance, and will provide Mr. Lidow and his spouse with medical and life insurance benefits for the remainder of their lives equal to those presently provided to them by the Company. In addition, Mr. Lidow will be entitled to exercise his options to purchase shares of the Company's common stock until the later of eighteen months from the effective date of his resignation or sixty days following the date on which the Company becomes current in its periodic reports with the Securities and Exchange Commission ("SEC"). Additionally, under the Lidow Agreement, the Executive Employment Agreement between the Company and Mr. Lidow, dated May 15, 1991, as amended, is terminated effective May 1, 2008. The foregoing description is not complete and is qualified in its entirety by reference to the actual Lidow Agreement, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by this reference.

About all I can do from this distance is quote Arte Johnson: "Verrrry interesting." Considering the outcome, I think paying attention to what Lidow's attorney said ought to give rise to some speculation.

On the other hand, Trade Secrets Blog has this:

Graham Robertson, a spokesman for International Rectifier, said the company is evaluating its next move in its battle with Lidow.

“We are reviewing the options,” Robertson said.

We wonder if one of the options International Rectifier is considering is bringing claims under California's Trade Secrets Act or maybe even going federal with an Economic Espionage Act claim. We'll keep you posted.

New Record Whistelblower Settlement

2009-02-09T09:24:00.000-05:00

Record $24.7M Qui Tam Settlement in Medicare Case | ABA Journal - Law News Now

Two registered nurses who blew the whistle on an alleged Medicare fraud by a major hospice provider have sparked a record $24.7 million settlement with the U.S. government by their former employer, from which the RNs themselves will get $4.9 million.

The settlement by Birmingham, Ala.-based SouthernCare, which admits no wrongdoing, puts an end to two federal lawsuits that were unsealed yesterday, reports the Birmingham News. The qui tam litigation contends that the private company, which has offices in 15 states, enrolled ineligible patients in hospice care when they didn't qualify (patients must be expected to have only six months or less to live).

"It was a numbers game with SouthernCare," attorney Henry Frohsin, who represents one of the nurses, tells the newspaper. "They were trying to bolster their rolls because Medicare pays for hospice care and does not (always) pay for home care."

Decision on Ringtones and Copyrights

2009-02-01T11:07:00.000-05:00

U.S. Copyright Office -115 Review

The Register of Copyrights has issued her decision identifying and correcting erroneous resolutions on material questions of substantive law under title 17 that underlie or are contained in the Copyright Royalty Judges' final determination regarding adjustment of reasonable rates and terms of royalty payments for the making and distribution of phonorecords of musical works, Docket No. 2006‑3 CRB DPRA, Version PDF

Review of Copyright Royalty Judges Determination: Notice; correction

__ FR _______ January 26, 2009 Version: PDF

Register’s Request for participants' views regarding possible legal
errors contained in the Copyright Royalty Judge's final determination
(January 8, 2009), Version: PDF

Views of Participants: Copyright Owners; RIAA; DiMA

Trade Secrets - Protecting Your Business

2009-01-30T20:37:00.000-05:00

I am not a security expert or a computer experrt.I am only a lawyer with a big interest in trade secrets. The key to a successful trade secrets case lies in protecting your secrets. Read PC Magazine's The Best Apps: Business Security - The Best Apps for Business Security and then take it to your IT guy:

Whatever the focus of your small business—whether you deploy durable doohickeys, sell superior services, or weave wondrous widgets—nothing is more valuable than your data. If your intellectual property, customer lists, financial data, or other critical information experiences an unfortunate event, the company you spent years building could collapse overnight. How secure you keep such priceless assets and how quickly you can replace them if something happens will determine the survival of your operation. Whatever you use to provide security and backup needs to be the best, and in this roundup, you'll find the most recent reviews of exactly that. These products are the best at what they do. Most have earned Editors' Choice awards.

Australia Court Okays Service Through Facebook

2009-01-30T10:30:00.000-05:00

Reading the ABA Journal - Law News Now's In Seeming First, Aussie Court Says Default Judgment Can Be Served on Facebook, I am not at all sure how Indiana courts would deal with this issue.

"Updated: In an apparent first in Australia and, possibly, the world, a judge has OK'd a plan to serve a default judgment on a non-appearing defendant via a social networking website.

Although service previously has been allowed by e-mail and text message, a master of the Supreme Court of the Australian Capital Territory has gone a step further into the Internet world by allowing a default judgment to be served on Facebook, reports the Sydney Morning Herald.
The court okayed the Facebook approach, a Herald Sun article explains, after all other efforts failed, according to attorney Mark McCormack, who represented the creditor side in the mortgage foreclosure case.

From what I am seeing in this article, it would be my guess (guesses are all that lawyers really have until an appellate court weighs in on a topic except that we get to call them arguments) is that the following Indiana Trial Rules apply:

Rule 4.5. Summons: Service upon resident who cannot be found or served within the state

When the person to be served is a resident of this state who cannot be served personally or by agent in this state and either cannot be found, has concealed his whereabouts or has left the state, summons may be served in the manner provided by Rule 4.9 (summons in in rem actions).

***

Rule 4.9. Summons: In rem actions

(A) In general. In any action involving a res situated within this state, service may be made as provided in this rule. The court may render a judgment or decree to the extent of its jurisdiction over the res.

(B) Manner of service. Service under this rule may be made as follows:
(1) By service of summons upon a person or his agent pursuant to these rules; or

(2) By service of summons outside this state in a manner provided by Rule 4.1 (service upon individuals) or by publication outside this state in a manner provided by Rule 4.13 (service by publication) or outside this state in any other manner as provided by these rules; or

(3) By service by publication pursuant to Rule 4.13.

Much more prosaic than the Australian case but remember this is Indiana

and not Australia

Trade Secrets: Papermaster Case Comes to An End

2009-01-28T20:18:00.000-05:00

Just saw this tonight from PC Magazine:

A legal dispute between Apple and IBM over a former IBM employee hired to serve as Apple's new senior vice president of devices hardware engineering has been resolved, Apple announced Tuesday.
Mark Papermaster will start work on April 24, reporting to chief executive Steve Jobs, who is currently on a six-month health-related hiatus.

No details on the settlement, yet. i expect a confidentiality clause in the agreement will keep details from being known.

Protecting Your Business and Going to Court

2009-01-20T07:11:00.000-05:00

I wish I could get every client to memorize this paragraph from Striking Up's Protect Your Intellectual Property:

I don’t condone suing others consistently. Sue to win. If you don’t think you’ll win, better hold off that thought and put your effort and energy on other things instead of thinking about war in the courtroom with others. Stay smart and use the knowledge of Intellectual Property laws."

Unless the destruction of the business looms without litigation, litigation distracts from running the business. I have long advocated everyone who can read to read Sun Tzu's Art of War. The following comes from Mark McNeilly’s The Sun Tzu Strategy Site (having just found this site, I suggest anyone reading this to go there and read it.):

5) Use alliances and strategic control points in the industry to “shape” your opponents and make them conform to your will.

“Therefore, those skilled in war bring the enemy to the field of battle and are not brought there by him.”
--Sun Tzu

“Shaping you competition” means changing the rules of contest and making the competition conform to your desires and your actions. It means taking control of the situation away from your competitor and putting it in your own hands. One way of doing so is through the skillful use of alliances. By building a strong web of alliances, the moves of your competitors can be limited. Also, by controlling key strategic points in your industry, you will be able to call the tune to which your competitors dance.

I put my belief that preventive law down to having read Sun Tzu. Deal the problems ahead of litigation for litigation is a blunt instrument with risky outcomes. The Art of War considers the best general as the one who ends the war without a fight. Think about that. Then apply it to your business' legal needs.

I will soon be taking on new business clients. If you want to protect your business, give me a call.

Following up on "Tips for an EEOC Mediation"

2009-01-20T06:30:00.000-05:00

Workforce.com published its second installment about EEOC mediation tips, 10-Plus Tips for Succeeding in an EEOC Mediation: Part Two . I suggest you read it. I wrote up the first installment under Tips for an EEOC Mediation.

Trademarks: Phase 10 Goes to Court for Copyright Infringement

2009-01-19T09:27:00.000-05:00

Inventor’s lawsuit sets up high-stakes fight

In the world of card games, Phase 10 is a whale. About 3 million copies of the rummy variation are sold each year, second only to Uno. The game has been the top seller for Plainfield-based Fundex Games Ltd. for years.

But now the 50-employee company has been dealt a wild card: The man who created Phase 10 in 1982, Michigan resident Kenneth Johnson, is suing to yank the firm’s rights to make and market the game.

Johnson accuses Fundex of copyright infringement, trademark dilution, fraud, conversion and theft in the suit, which was filed in December in U.S. District Court in Indianapolis. Johnson claims the privately held company has withheld royalties, granted sub-licenses without his consent, failed to include Johnson’s copyright notice on card games, and registered the Phase 10 mark for itself in the United Kingdom and France.

***

The principals of Fundex struck a deal for the game in 1986, paying Johnson a flat $60,000 and assigning him royalties on all future sales. The parties amended the agreement in 1996 and 2003, but the gist remained the same: Fundex had the right to market and sell Phase 10 and the first right to market new products related to the game, in exchange for royalty payments.

The lawsuit says Johnson discovered in the summer of 2008 that Fundex wasn’t living up to its end of the deal. He spelled out his concerns in two letters to the company. And he notified Fundex of plans to review its records on Phase 10, as allowed in the contract, but when his auditors arrived a month later the company refused to provide the requested information.

So Johnson, who received a trademark for the game in 1994, told the company on Nov. 1 that he was canceling the deal. When Fundex continued to market and sell the game, he filed suit. The featured game on Fundex’s Web site at press time was a board game called “Phase 10 Twist.”

Notice that Johnson trademarked the game after he first entered into the contract. I found that the outstanding fact, an odd fact but which gives him the big stick in this case.

Book Notice- ‘Appetite for Self-Destruction,’ by Steve Knopper - The Modern Music Bus

2009-01-19T07:57:00.000-05:00

I think this is the first time I note a book review on this blog, but this caught my eye. Having posted a few times on the RIAA's lawsuits, I took When Labels Fought the Digital, and the Digital Won from the New York Times reviews ‘Appetite for Self-Destruction,’ by Steve Knopper as about those lawsuits. It is much more. It reminded me about the controversy over CD pricing (which was over two decades ago). It sounds a worthwhile red for anyone interested in how to create a poor business model.

Following up on "Indy Strippers Sue Over Wages"

2009-01-12T07:33:00.000-05:00

The Indiana Lawyer reports the dancers of my Indy Strippers Sue Over Wages have been certified as a class for a class action suit, Court certifies exotic dancer suit as class action:

"Anyone who danced in the past three years at one Indianapolis strip club embroiled in a lawsuit over minimum wage may be able to collect on unpaid wages, ruled a District Court judge Wednesday.

Southern District Judge William Lawrence granted a motion for notice to potential plaintiffs and certified the matter as a collective action in Wendi R. Morse and Felicia Kay Pennington, individually, and on behalf of others similarly situated v. M E R Corp. d/b/a Dancers Showclub, No. 1:08-cv-1389."

Trade Secrets: Pfizer Hit for $38 million

2009-01-12T06:56:00.000-05:00

Pfizer ordered to pay for stealing drug secrets

A Santa Clara County jury has ordered drugmaker Pfizer to pay $38 million to a leading medical research nonprofit for stealing trade secrets to develop a pain relief drug.

***

The Superior Court jury reached the verdict Monday in a 2004 lawsuit filed against Pfizer by the San Bruno nonprofit Ischemia Research and Education Foundation.

The lawsuit said Pfizer in 2002 wanted to use the foundation's database for clinical trials on Bextra, a drug to treat acute pain chiefly caused by arthritis. The drug was eventually taken off the market over concerns it posed a heart risk.

After the New York drugmaker and the foundation could not agree on terms for use of the database, the lawsuit alleged Pfizer arranged a side deal with Ping Hsu, a lead statistician at the foundation. Hsu provided the data without approval, according to the suit.

Pfizer said it plans to appeal.

Employment law - Practical Tip on Dealing With a Discrimination Charge

2009-01-09T09:46:00.000-05:00

Workforce.com provides A Few Practical Tips on Responding to a Discrimination Charge. Remember that federal jurisdiction under Title VII begins at 14 employees.

Don’t panic when you receive a discrimination charge. Most people practicing in this area, including the investigators, would agree that the large majority of the charges filed will be found to be "without reasonable cause", meaning that the investigating agency will determine there are insufficient facts to support the allegations.

***

There is a "Notice of Charge of Discrimination" that accompanies the charge and commonly includes a very short response deadline. You should feel free to promptly request an extension of time for your response when you receive the charge; a 30-day extension is commonly granted.

***

If you determine that the filing date is more than 300 days from the date of the incident, the charge should be time barred and you should send a letter to the investigator explaining those circumstances. If the agency insists that you are mistaken, you should insist that they explain their position in writing and should include in your response an explanation that the charge is time barred.

***

Ideally, an investigation should have been conducted at the time the employee complained about being discriminated against by following the employer’s complaint procedure. If that did not happen, upon receipt of the charge it will be necessary that you and your team conduct a prompt, thorough and objective investigation to determine what happened. Doing it right is very important to effectively respond to the charge or to determine whether a settlement should be explored.

Ideally, the person conducting the investigation should not be an attorney. Many courts have ruled that the attorney-client privilege is lost when the attorney puts on the investigator’s hat. Rather, to maintain the privilege, the person making the investigation should report everything to the attorney by correspondence that clearly indicates the information is confidential and attorney-client privileged.

***

A brief, concise response, on the other hand, will be more favorably received by investigator, will probably be considered more credible and will put you off on the right step. You should keep in mind that unless you can produce credible, persuasive evidence such as witness statements and the comparative information discussed above, the investigating agency will usually believe the complainant’s version of what happened.

Trade Secrets - A Doozy of a Case

2009-01-07T10:26:00.000-05:00

How else to describe what happens when a company depends on information from its competitors for defending against a Federal Trade Commission complaint?

UPDATE: Grocer Loses Bid To Keep Trade Secrets Away From Whole Foods
The FTC is seeking to undo Whole Foods' 2007 acquisition of rival Wild Oats Markets Inc., arguing that the merger would lessen competition in the market for natural and organic foods. The commission is holding an administrative trial in February on the legality of the merger.

To prepare its defense, Whole Foods subpoenaed 93 grocery stores around the country for sensitive business information, saying it needed its competitors' data and documents to prove that a competitive marketplace still exists even after the Wild Oats deal.

Whole Foods said that no one inside its company would see the sensitive data, only its outside lawyers. The FTC, meanwhile, has put in place a protective order that bars unauthorized disclosure of trade secrets.

But New Seasons Market, a nine-store chain in Portland, balked at the request and filed a legal challenge with an FTC administrative law judge, arguing that it should not have to turn over its most closely held business secrets to Whole Foods, which, it said, "has a history of taking a predatory approach toward its competition."

"If New Seasons were required to produce the information Whole Foods seeks, it would provide Whole Foods with a blueprint to New Seasons' success and the means for Whole Foods to engage in anti-competitive conduct against one of its primary competitors in the Portland market," the company said in a legal brief.

New Seasons said Whole Foods' document requests were burdensome and estimated that it could cost at least $250,000 to produce everything Whole Foods requested.

***
An FTC administrative law judge rejected New Seasons' request Tuesday, saying its information would be protected and that turning it over was not an undue burden.

"The implied allegations that Whole Foods may be using the document requests to gain a competitive advantage over New Seasons are without support," wrote Administrative Law Judge D. Michael Chappell.

Whole Foods spokeswoman Kate Lowery said the company had no choice but to seek New Seasons' information.

"We have to defend ourselves," Lowery said. "Not only did the FTC put us in this position, they need the same information."

New Seasons Chief Executive Brian Rohter said he disagreed with the ruling and would meet with the company's attorneys "to get guidance on options for our next steps."

***
The FTC is seeking to undo Whole Foods' 2007 acquisition of rival Wild Oats Markets Inc., arguing that the merger would lessen competition in the market for natural and organic foods. The commission is holding an administrative trial in February on the legality of the merger.

Consumer Safety Database a Problem for Trade Secrets?

2009-01-06T12:42:00.000-05:00

Toxic Tort Litigation Blog writes about several problems with the pending database from the Consumer Product Safety Commission. While the post,

CPSC's New Database: An Opportunity for Abuse?, covers a lot of territory, the following points about trade secrets interested me:

The Consumer Product Safety Improvement Act of 2008 ("CPSIA") provides that the Consumer Product Safety Commission ("CPSC") will establish and maintain an Internet database on the safety of consumer products. The CPSIA Section 212 requires that the database be: (1) available to the public; (2) searchable; and (3) accessible on the CPSC's website. Reports of harm caused by consumer products may be reported by consumers; local, state or federal govenment agencies; health care professionals; child service providers; and public safety entities. Ideally, the database will encourage the sharing of information and direct communications among consumers, consumer advocacy groups and state attorneys general, who have been given an important new role under the CPSIA. For the first time, consumers will have direct instant access on the Agency's website to potentially important product safety information.

***
Because the person making the report need not be identified to the manufacturer unless he or she explicitly consents, there may not be much the manufacturer can do, within the 10 day window provided before the report is posted, to determine whether the report is accurate. Certainly, this narrow window does not permit a manufacturer to obtain the product from a consumer, assuming the consumer can be identified, and inspect it. The manufacturer can request that proprietary or trade secret information not be posted on the database, but that request, if granted, will result only in the sensitive information being redacted, not in a delay in posting the report on the database. The statute permits a manufacturer to request that its own comments also be included in the database, but in the absence of a realistic time frame to perform an investigation of the underlying report, what would be an appropriate comment to make? Moreover, the manufacturer may be at a disadvantage if reporters call seeking comment after the consumer's report is posted by the Commission.

While it is not clear what impelled this legislation, I will presume that it may have to do with the rash of bad products from China. If so, I put it down as an another example of how crises make for bad legislation (TARP, anyone?).

Duane Morris has a page devoted to the law here and the Commission has a portal page here.

What notice does an employee have to give an employer for FMLA leave?

2008-12-26T20:23:00.000-05:00

If the need is foreseeable, then read 29 CFR 825.302 from the federal Department of Labor.

Is The War Between the RIAA and Music Fans Over?

2008-12-23T10:27:00.000-05:00

RIAA to Stop Suing Over Music Downloads; ISPs are New Copyright Cops | ABA Journal - Law News Now

Ending a controversial enforcement effort in which it appeared to be fighting something of a losing battle, the Recording Industry Association of America says it will stop suing consumers over illegal music downloads via the Internet.

"The decision represents an abrupt shift of strategy for the industry, which has opened legal proceedings against about 35,000 people since 2003," reports the Wall Street Journal. "Critics say the legal offensive ultimately did little to stem the tide of illegally downloaded music. And it created a public-relations disaster for the industry, whose lawsuits targeted, among others, several single mothers, a dead person and a 13-year-old girl."

Instead of using lawsuits as leverage to try to protect music copyrights, the RIAA now plans a more practical enforcement effort concerning illegal downloads. With the help of Internet service providers, those who repeatedly download music illegally and ignore ISP warnings are expected to have their Internet service first slowed down and then stopped entirely, the newspaper explains.

2008-12-23T10:05:00.000-05:00

Computers making guarding precious information a challenge - Jacksonville's Financial News & Daily Record

“It’s a big risk for companies, not just disgruntled employees but companies that are downsizing as well,” said Chanley Howell, a partner with Foley & Lardner who specializes in data security and privacy law.

With the modern technology available at most discount stores, theft of a company’s information stored on a computer network doesn’t have to involve wire fraud. Removable media — also called a “flash drive” or “thumb drive” — is widely available. The latest models can hold up to 12 gigabytes of data.

“And that’s the equivalent of a tractor-trailer full of paper,” said Robert Jones, an investigator at Mulholland Forensics.

Howell advises his clients to avoid that aspect of technology.

“We recommend that clients limit the use of flash drives. The more places data is stored, the more ways there are to lose data,” he said. “And it’s not just thumb drives. Any kind of remote storage, including laptops, is vulnerable. We recommend that all data stay on network servers or at least on encrypted laptops or other encrypted devices.”

Trade Secrets: A Survey of Recent Cases

2008-12-23T09:48:00.000-05:00

Actually a shout out to Traverse Legal for its posts such as Trade Secret Attorneys: Recent Trade Secret Issues across the World Wide Web. This blog is turning into a good clearinghouse of trade secret and non-compete news.

Tips for an EEOC Mediation

2008-12-23T06:14:00.000-05:00

I am sure no one wants to think of employment problems over the holidays - except lawyers, of course. So take a look at workforce.com's 10-Plus Tips for Succeeding in an EEOC Mediation: Part One after the New Year's parties:

"Simmering-pot employees have turned off, left the organization prematurely,
sabotaged their companies or gone out on extended stress leaves. Some of these
pots, if left unattended, will become the people who file charges with the Equal
Employment Opportunity Commission, alleging discrimination. The best goal for
your organization is to stay out of the EEOC process, and mediation can help you
do that. But if a charge has been filed and you’re before the EEOC, consider
these tips on how to prepare for success in a mediation. In part two of this
article, I’ll suggest some tips for the EEOC mediation itself, as well as some
ideas for steering clear of problems in the future."

Trade Secrets Tips

2008-12-22T16:52:00.000-05:00

Happy Business has Nine Trade Secrets You Should Keep To Your Self which are well worth reading and probably ought to be printed and put on your desk. The article also makes a very good point here:

"Business competitors are not meant to be relied upon. Of course, there are
instances of healthy competition and you may even be friends with your
competitors. Nonetheless, all competitors want to know the trade secrets of
their opponents. As a result, be careful, no matter how cordial your relations
are with your competitors; never ever reveal your business secrets to them.

Whistleblowing in Indiana - When an Employee Can Get Fired

2008-12-21T08:37:00.000-05:00

The Indiana Lawyer published Man not fired for being whistle-blower a while back but I have not had time to write up a post on the case. First, you will find the IL report and then my comments on the actual opinion follows.

In Donald A. Bregin v. Liquidebt Systems Inc. and SIRVA Inc.,
No. 08-1390, Donald Bregin filed a suit against Liquidebt (LSI) and
SIRVA, claiming LSI fired him in retaliation for his refusal to
participate in illegal accounting practices. LSI provided collection
services for SIRVA, where Bregin originally worked until LSI hired him as vice president of operations. LSI had a contract with SIRVA to meet certain collection goals or face a financial penalty.

The 7th Circuit Court of Appeals found undisputed facts that Bregin's suit must fail. Indiana is an employment-at-will state, and there are only rare occasions in which an employer can't terminate any employee for any reason, such as not firing someone who doesn't want to participate in criminal conduct, as in McClanahan v. Remington Freight Lines, Inc, 517 N.E.2d 390 (Ind. 1988).

Bregin claimed he couldn't lawfully stay silent about SIRVA's allegedly illegal accounting practices, but he never offered any specifics or identified what illegal act he was asked to commit or condone, wrote Judge Terence Evans.

Bregin also wanted the appellate court to find a new exception under Indiana's employment-at-will doctrine - that as a whistle-blower under the Sarbanes-Oxley Act, he's afforded certain protections against wrongful discharge under state law. But again, Bregin failed to specify any law that has been violated and is vague in describing the irregularities in SIRVA's accounting practices, wrote Judge Evans.

Here is the passage from the actual opinion dealing with Bregin's attempt to make a whistleblower exception to Indiana's at-will employment law:

We cannot agree. As we just discussed, Bregin does not pinpoint any law that has been violated. He says because SIRVA was in the process of issuing an initial public offering (IPO), the company did not want any irregularities to come to light. But, again, the irregularities he is talking about are vague. We cannot conclude that, contrary to what the Indiana courts have repeatedly said, they would now decide—especially based on the facts before us—that whistle-blowing is an exception to the employment-at-will doctrine. That they would not is clear from Campbell v. Eli Lilly & Co., 413 N.E.2d 1054 (Ind.App. 1980). In that case the court rejected a claim by an employee who was terminated after complaining to allowing an exception to the employment-at-will doctrine for whistle-blowers. But that view did not carry the day. At this time, whistle-blowing simply does not form the basis for an exception to Indiana’s employment-at-will doctrine.

Having read the opinion, I am not so sure that Bregin was a whistleblower but that is only a minor point for our discussion.

My second observation has to do more with the forum where Bregin put his case - federal court. If I wanted to change Indiana law I would start in an Indiana court. Indiana's federal courts have the right to interpret Indiana but I think federal courts tend to interpret state law narrowly. Starting in an Indiana state court presents the possibility of a less narrow interpretation of Indiana. Even more importantly, it presents the possibility of an appeal to the Indiana Supreme Court whose opinion would trump the Campbell decision.

Third, I present this as a more general view on Indiana law - I am curious just how well Campbell would stand up today. Indiana law has changed a bit in twenty-eight years. In 1980, the Indiana Supreme Court was mired in criminal cases and heard few civil appeals. Changes have happened in that time - including exceptions to the employment-at-will doctrine. It may be time to bring this sort of case before our Supreme Court. The case that does try to overturn Campbell must have better facts than Bregin.

Employment law: A Termination Checklist

2008-12-20T14:57:00.000-05:00

workforce.com published Termination Checklist developed by Yvonne Mug. The article describes Ms. Mug as the HR manager for Summit Industries. I like it because it fits in with my philosophy that an ounce of prevention beats a pound of litigation. Do check it out.

2008-12-20T09:04:00.000-05:00

Court remands to recalculate attorneys fees

The Indiana Court of Appeals affirmed the eviction of a renter and an award of damages in favor of her former landlord, but it reversed the amount of attorneys' fees she has to pay because the trial court's rationale in determining the amount was insufficient.

In Jackie Fortner v. Farm Valley-Applewood Apartments, No. 20A03-0806-CV-314, the appellate court affirmed the eviction of Jackie Fortner from the federally subsidized apartment complex after Farm Valley-Applewood Apartments determined Fortner had forged documents to show she was receiving less child support and income than she actually had.

***
http://www.in.gov/judiciary/opinions/pdf/12190801jgb.pdf

Although Fortner submitted a closing statement, she did not object to Farm Valley’s attorney fee request. On October 17, 2007, the trial court awarded judgment in Farm Valley’s favor as follows:
6. Damages are . . . proven in the sum of $2664.96.
7. The plaintiff is entitled to recover reasonable attorney fees under the terms of the lease. The plaintiff’s submission would support a recovery of attorney fees in excess of $4500. As a matter of due process, and the resulting policy of this Court, since the plaintiff has filed its claim for judgment of $4000.00, the Court will not award judgment in excess of the claim.
. . . The Court enters judgment for the plaintiff in the sum of $4,000.00 plus costs. Appellant’s App. p. 7-8 (emphasis added).
In reviewing the evidence presented at trial and considering the parties’ agreement allowing Farm Valley to submit a subsequent request and affidavit for attorney’s fees, we cannot agree with the trial court’s rationale in entering a total judgment in the amount of $4,000 and its implicit reduction of Farm Valley’s request for attorney’s fees—to which Fortner did not object—from $4,269 to $1,335.04.1 Indeed, the trial court had jurisdiction to enter a judgment amount not to exceed $6,000. Ind. Code § 33-28-3-4....Although the trial court specifically found that Farm Valley’s “submissions would support a recovery of attorney fees in excess of $4,500,” appellant’s App. p. 8, we note that the record before us is insufficient to determine the reasonableness of the requested fees. Although Fortner did not object to the proposed request for attorney’s fees, there is nothing before us establishing the number of hours that counsel for Farm Valley spent on the case or the hourly rate that was charged. Indeed, the hours worked and the rate charged are a common starting point for determining the reasonableness of a fee. See In re Estate of Inlow, 735 N.E.2d 240, 257 (Ind. Ct. App. 2000) (describing the lodestar method of calculating reasonable attorney fees).

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