Letter from AmeriKat: Trade secrets long arms, NDAs go bust and sharing of passwords
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| The AmeriKat observing the extent to which humans are creatures of routine. |
Trade secrets lawyers are probably glad that some ex-employees are not deviating from their seeming routine in misappropriating trade secret - otherwise with what would they occupy their time? And a lot has been going on in the trade secrets world recently. A little recap is below:
- Long-arm of Delaware courts, not so long: Last Thursday, the Delaware Court of Chancery held that it lacked jurisdiction over foreign companies based in Turkey, Luxembourg and the Netherlands accused by Dow Chemicals of stealing trade secrets concerning the manufacture of paint polymers relating to paint pigments. According to Dow, the defendants "hatched and carried out a scheme in which they hired former Dow employees with knowledge of the relevant technology and used the trade secrets embodied in that technology to manufacture and sell polymers in competition with Dow" and break into the US market. The complaint, filed last March, alleged that the defendants hired away two of it experts - Dilip Nene and Leonardo Strozzi. The Delaware Court held that the trade secrets claims against a Delaware subsidiary and its parents could continue. In Dow Chemical Company v Organik Kimya, Vice Chancellor Glasscock held that although Dow Chemicals had argued for long-arm jurisdiction over all the foreign defendants, it only extended to Organik Kimya Turkey (the Turkish parent of the US subsidiary). This was because it was plausible that it was this Turkish defendant that created the US subsidiary in furtherance of trade secrets misappropriation. On this basis the Court extended jurisdiction to the Turkish parent, but not to the other Foreign Defendants who, on the basis of the evidence, did not appear to have been involved in the incorporation of the US subsidiary. This followed after almost a year of discovery on these jurisdictional issues. Organik disputes the claims. The case has also been litigated in the ITC (including some fireworks concerning evidence and an appeal to CAFC) and was recently subject to a filing in Pennsylvania against Nene.
- NDAs spark Opternative v Warby Parker dispute: Last week, Warby Parker - an eyewear retailer - was hit with a trade secrets lawsuit brought by Opternative (a Chicago-based healthcare technology start-up) in the Southern District of New York alleging that Warby Parker violated a non-disclosure agreement and misappropriated trade secrets. According to the complaint, Opternative developed a "first-of-its-kind system whereby ophthalmologists generate an accurate corrective lens prescription using Opternative’s innovative refraction technology: an online eye-exam a patient can self-administer from any location without the use of specialized equipment. In the process, Opternative created the market for online refractions." The complaint alleges that pursuant to NDAs between the parties, Warby Parker benefited from numerous demonstrations of Opternative's technology with the aim of investigating a business relationship. Opternative claimed that Warby Parker then used that information to compete. Warby Parker, in an interview with TechCrunch, stated that:
"The preposterous claims made by Opternative do not accurately reflect reality, and we’re prepared to take all necessary steps to defeat them. This is an unfortunate example of a company choosing to address competition with litigation instead of innovation. . . . We gave Opternative the opportunity to demonstrate that its product could live up to the high standards of quality and service that customers have come to expect from Warby Parker. Ultimately, they failed to meet those standards, and we determined that the product and user experience were unfit for our customers. Opternative is now trying to correct those failures through meritless litigation."
- Sharing passwords and trade secrets theft not up for review at US Supreme Court: A couple of weeks ago, the US Supreme Court rejected an appeal by David Nosal, a former regional manager of Korn/Ferry International, who was convicted of fraud for encouraging former co-workers to download confidential information from the company's computers in order to set up his own firm. The 2013 conviction of six felony charges which included conspiracy, theft of trade secrets and computer fraud resulted in a fine of $60,000 and a year in prison. Up for issue was the charge of computer fraud on the basis that Nosal and his co-conspirators (two former employees), "acted without authorization" when they "used the log-in credentials of a current employee to gain access to computer data owned by the former employer". The hook came by way of Judge Reinhardt's dissent that sharing of passwords was "unscrupulous" but going further could result in unintended consequences saying that persuading a co-worker to share a password was a type of “innocuous conduct engaged in by ordinary citizens — for example, a husband who shared his bank account password with his wife to help her pay a bill.” The Electronic Frontier Foundation argued that "without authorization" access to computers under the Computer Fraud and Abuse Act should only apply to hacking and not to sharing of passwords. Unfortunately, no clarity on this issue will be given at this time.
- Implementation of the EU Trade Secrets Directive: The draft of the Danish legislation that will implement the EU Trade Secrets Directive has been published. The AmeriKat's friends at Plesner will be reporting on the legislation in the coming days. The AmeriKat understands there has been no news from Germany and the UKIPO has already held an initial stakeholder meeting to illicit feedback (the AmeriKat understands the general stakeholder consensus being "you don't need to do anything"). But what is going on elsewhere? Any IPKat readers who can share updates on their Member States' legislative efforts concerning with the EUTSD please e-mail the AmeriKat at annsleym@gmail.com.
