Substantive Trends in Computer Technologygy g Litigation m 25caslin2.pdf · zPolar Molecular Corp v...

Brent Caslin of Kirkland & Ellis LLPBrian D. Ledhal of Irell & Manella LLPLawrence D. Graham of Black Lowe & Graham

Speaker #: 23-1Speaker #: 24-1Speaker #: 25-1

Law Seminars International | Seattle Technology Law Conference | 12/14/07 in Seattle, WA

Substantive Trends in Computer Technology Litigationgy g

Larry Graham, Black Lowe & GrahamBrian Ledahl, Irell & ManellaBrent Caslin, Kirkland & Ellis

16th Annual Seattle Technology Law Conference, December 14, 2007

Discussion Topics

Trade Secret TrendsTrending Computer Fraud & Abuse Act– new cases on the damages floor– growing split on statute’s breadthgrowing split on statute s breadth

September 20, 2007: Three Important Decisions on Patent Protection




Trade Secret Trends

• Criminality• Preemption• Employment IssuesEmployment Issues

Criminal Liability IssuesPssstt…Wanna buy the formula for Coke?Ingredients:

– 1 oz caffeine citrate – 3 oz citric acid– 1 fl oz extract vanilla– 1 qt lime juice – 2½ oz flavoring – 30 lb (14 kg) sugar– 4 fl oz fluid extract of coca (decocainized flavor essence of the coca leaf) – 2½ gal water– Caramel sufficient

Flavoring: – 80 Oil orange

40 Oil i– 40 Oil cinnamon– 120 Oil lemon– 20 Oil coriander– 40 Oil nutmeg– 40 Oil neroli– 1 qt alcohol

Directions: – "Mix caffeine acid and lime juice in 1 quart boiling water add vanilla and flavoring when cool. Let stand for 24 hours." – Source: Mark Pendergrast. For God, Country, and Coca-Cola: The Definitive History of the Great American Soft Drink and the

Company That Makes It. New York: Basic Books, 2000. ISBN 0-465-05468-4




Coca-Cola Trade Secret Theft

Using alias “Dirk ” Coke employee offeredUsing alias Dirk, Coke employee offered to provide new project sample and packaging for $75,000Three Coca-Cola employees sentenced– Five to eight year prison termsg y p– Fraud and theft of trade secrets– $40,000 restitution ordered

DuPont Trade Secret Theft

DuPont scientist Gary Min sentenced 18DuPont scientist Gary Min sentenced 18 months and fined $30,000 Min left DuPont to take job with Victrex– Before leaving, downloaded thousands of

documents– Uploaded documents to new company

computer, but no evidence of use, sale, or other dissemination

– Additional confidential documents on home computer, shredded, and in fireplace




Criminal Trade Secret Theft18 U.S.C. 1832(a) Theft of trade secrets(a) Whoever with intent to convert a trade secret that is related to or included in a product that is(a) Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly--

(1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information;

(2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information;

(3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization;

( ) i ff d ib d i h ( ) h h ( )(4) attempts to commit any offense described in paragraphs (1) through (3); or(5) conspires with one or more other persons to commit any offense described in paragraphs (1)

through (3), and one or more of such persons do any act to effect the object of the conspiracy,

shall, except as provided in subsection (b), be fined under this title or imprisoned not more than 10 years, or both.

(b) Any organization that commits any offense described in subsection (a) shall be fined not more than $ 5,000,000.

Economic Espionage

18 U S C 183118 U.S.C. 1831– a) In General - Whoever, intending or knowing

that the offense will benefit any foreigngovernment, foreign instrumentality, or foreign agent, knowingly . . . .




PreemptionUTSA Section 7 Effect on Other Law

( ) Thi A t di l fli ti t t tit ti– (a) This Act displaces conflicting tort, restitutionary, and other law of this State providing civil remedies for misappropriation of a trade secret.

– (b) This Act does not affect: (1) contractual remedies, whether or not based upon misappropriation of a trade secret; (2) other civil remedies that are not based upon

i i ti f t d t (3) i i lmisappropriation of a trade secret; or (3) criminalremedies, whether or not based upon misappropriation of a trade secret

Increased Attention to Preemption

At least ten reported U S District cases inAt least ten reported U.S. District cases in 2007Trend seems to favor finding of preemptionBut “remedies that are not based upon misappropriation of a trade secret” remains pp ptroublesome




Confidential Information Preemption?

Cl i dClaim fits within UTSA

Claim does not meet UTSA, but is it preempted?

Trade Secret“Confidential Information”

(but not Trade Secret)

Allegedly misappropriated information

Recent Preemption Cases

Polar Molecular Corp v Amway 2007 U S Dist LEXISPolar Molecular Corp. v. Amway, 2007 U.S.Dist.LEXIS 84252 (W.D. MI, Nov. 14, 2007) (common law T.S., conversion, civil conspiracy preempted)Chatterbox, LLC v. Pulsar Ecoproducts, LLC, 2007 U.S.Dist.LEXIS 34022 (D. Idaho 2007) (calling “confidential information” displacement the majority view; preemption for unjust enrichment and unfair competitionpreemption for unjust enrichment and unfair competition but not for fraud)United States Gypsum Co. v. LaFarge North America Inc., 508 F.Supp.2d 601 (N.D. Ill. 2007) (no preemption where misappropriated information is not a trade secret)




Recent Preemption Cases, Cont’d

Veritas Operating Corp v Microsoft Corp 2006Veritas Operating Corp. v. Microsoft Corp., 2006 U.S.Dist.LEXIS 79451 (W.D.Wa. 2006)– RCW 19.108.900 (displacement language)– Preempted if “based solely on” unauthorized use of

confidential information or trade secret– Conversion preempted (used information to file patent

li ti )application)– Unjust enrichment preempted unless based in

restitution (quasi-contract)

Employment IssuesTrend: weakened covenants not to competeMust protect specific interest?– County Materials Corp. v. Allan Block Corp, 502 F.3d

730 (7th Cir. 2007) (e.g., goodwill, trade secrets, confidential information)

Only restrict solicitation?Thrasher v Grip Tite Mfg 2007 U S Dist LEXIS– Thrasher v. Grip-Tite Mfg., 2007 U.S.Dist.LEXIS 86326) (D. Neb. 2007) (only for non-solicitation of clients for whom employee actually did business)

CA: void except for business sale or dissolution (CBPC 16600)




Best Practices

Focus on trade secrets in employmentFocus on trade secrets in employment context– Employment agreement (NDA obligations;

restrict use of information)– Access control– Document marking– Entry and exit interviews

Computer Fraud & Abuse Act




Civil Liability under the CFAAtraffics passwords with intent to defraud ( 1030(a)(6))threatens computer damage with intent to extort(§1030(a)(7))accesses a computer without authorization or exceeds authorized access with intent to defraud (§1030(a)(4))accesses a computer without authorization or exceeds authorized access to obtain information (§1030(a)(2))authorized access to obtain information (§1030(a)(2))transmits a program or code causing damage to a computerwithout authorization (§1030(a)(5)(A)(i))accesses a computer without authorization and causes damage (e.g., compensatory damages) (§1030(a)(5)(A)(ii)-(iii))

Recent Cases Broadly Interpreting Access “Without Authorization”

Shurgard Storage Centers v. Safeguard Self Storage, 119 F. g g g g ,Supp. 2d 1121 (W.D. Wash. 2000).International Airport Centers v. Citrin, 440 F.3d 418 (7th Cir. 2006).ViChip Corp. v. Lee, 438 F. Supp. 2d 1087 (N.D. Cal. 2006).Forge Industrial Staffing, Inc. v. De La Fuente, 2006 WL 2982139 (N.D. Ill. 2006).Hewlett-Packard Company v. Byd:Sign, Inc., 2007 WL 275476 (E.D. Tex. 2007).United States v. Phillips, 477 F.3d 215 (5th Cir. 2007).




Recent Cases Restricting “Access Without Authorization”

Lockheed Martin Corp. v. Speed, 2006 WL 2683058 p p ,(M.D. Fla. 2006).Brett Senior & Associates v. Fitzgerald, 2007 WL 2043377 (E.D. Penn. 2007). Diamond Power Int’l, Inc. v. Davidson, 2007 WL 2904119 (N.D. Ga. 2007). B&B Microscopes v. Armogida, 2007 WL 2814595 (W.D. Penn. 2007).– but finds he caused damage without authorization to a

protected computer– CFAA Section (a)(5)(A)(i)

$5,000 Damages Floor

United States v Middleton 231 F 3d 1207 (9th CirUnited States v. Middleton, 231 F.3d 1207 (9th Cir. 2000).– internal employee time may be used in the calculation

United States v. Millot, 433 F.3d 1057 (8th Cir. 2006).– internal employee time may be used in the calculation

Forge Industrial Staffing, Inc. v. De La Fuente, 2006 WL 2982139 (N.D. Ill. 2006).– cost of forensics expert who evaluated laptop, which was

more than $5,000, satisfied $5,000 requirement




Best Practices in Light of Recent Trends in Case Law

Damages FloorDamages Floor– keep careful track of employees’ time– computer forensics experts are expensive but helpful

“without authorization” split in authority– consider jurisdiction (Seventh Circuit; Fifth Circuit;

Western District of Washington)g )– avoid the issue by alleging damage to a computer

computer forensics expert

– state authorization clearly in employment agreementsHP carved out authorization for computer work for personal gain or for the competition, and it worked for them

September 20, 2007:Three Important Decisions on

Patent ProtectionPatent Protection

Brian Ledahl

Irell & Manella LLP1800 Avenue of the Stars Suite 9001800 Avenue of the Stars, Suite 900

Los Angeles, California 90067




September 201519 – Magellan sails from Spain to find a western passage to the Spice Islandswestern passage to the Spice Islands

1878 – Social activist Upton Sinclair is born

1973 Billie Jean King defeats Bobby1973 – Billie Jean King defeats Bobby Riggs in tennis’ “Battle of the Sexes”

1998 – Cal Ripken Jr. sits out his first game after playing in 2,632 consecutive games

September 20, 2007




#1 - In re ComiskeyIn re Comiskey, 499 F.3d 1365

(Fed. Cir. 2007)( )Purely Mental Processes Are Not Patentable Subject Matter Under Section 101Claimed A Method For Mandatory Arbitration ResolutionArbitration ResolutionAdding A General Purpose Computer To The Mental Process Might Make It Patentable

Section 101Defines what inventions may be patented

“Whoever invents or discovers any new and useful process, machine,

manufacture, or composition of matter, or any new and useful improvement

thereof, may obtain a patent therefor, subject to the conditions and

requirements of this title.”




#2 - In re NuijtenIn re Nuijten, 500 F.3d 1346

(Fed. Cir. 2007)( )Signals Are Not Patentable Subject Matter Under Section 101Claimed A Signal Encoded With A Watermark In A Particular WayTransitory Electrical Signals Do NotTransitory Electrical Signals Do Not Fit Any Of The Statutory CategoriesClaims To Signals On A Storage Medium Were Allowed

The Importance of Section 101“The first door which must be opened on the difficult path to patentability is § 101.”

State St. Bank & Trust Co. v.Signature Fin. Group, Inc.,

149 F 3d 1368 1372 n 2149 F.3d 1368, 1372, n.2(Fed. Cir. 1998)




#3 - BMC ResourcesBMC Resources, Inc. v. Paymentech, L.P.

498 F.3d 1373 (Fed. Cir. 2007)498 F.3d 1373 (Fed. Cir. 2007)Defendant Must Perform All Steps In A Method Claim To Directly InfringeAbsent a Showing of Control or Direction of Other Parties Performing Steps in The Method – No InfringementEven For Secondary Liability – Some Party Must Perform The Entire Method

Basic PointsClaiming A Mental Process To Include Using A Computer May Not SurviveUsing A Computer May Not SurviveClaiming Signals – Instead Of Methods And Apparatus For Generating Or Receiving Them Will Not SurviveClaiming A Process That Will Ordinarily Require Separate Actors To Complete WillRequire Separate Actors To Complete Will Have Little Enforcement Value




Prosecution PossibilitiesMethods Should Include Steps That A ti l R i U f T h lActively Require Use of TechnologyClaims For Signals Should Focus On The Methods Or Hardware For Generating Or Receiving The SignalBut - Claims For Generating ANDBut - Claims For Generating ANDReceiving Signals May Have Little Value If The Two Are Not Controlled By The Same Actor

The End

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Substantive Trends in Computer Technologygy g Litigation m 25caslin2.pdf · zPolar Molecular Corp v...

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