Posts in Trade Secrets

As I was participating in a recent conference of trade secret nerds (yes, we often refer to ourselves that way), I found myself thinking about the Titanic. More specifically, about the legend of the missing binoculars. It seems that on that tragic night in 1912 the lookout was unable to find a pair of binoculars that he thought had been stowed in the crow’s nest. According to the story, they were in a locked box in the quarters of the former second officer, who had been transferred to another ship just before departure (lucky guy) and apparently took the key with him.

The Center for Intellectual Property Understanding (CIPU) has released a report that gauges the level of intellectual property (IP) engagement at the largest U.S. university entrepreneurship and innovation (E&I) programs. The nonprofit organization found that E&I programs at U.S. universities are increasingly incorporating IP into students’ business education. The report’s goal was in part to evaluate whether the observed increase in entrepreneurship in the United States is improving engagement with or is a result of intellectual property. CIPU wrote, “understanding the level of IP engagement among students enrolled at these schools provides insight into ways to increase support for the nation’s would be entrepreneurs.”

Intellectual property (IP) theft has severe consequences for U.S. business, and many companies—particularly small businesses—can feel overwhelmed at the seemingly insurmountable task of stopping IP theft that occurs overseas. Introduced by Senators Tammy Baldwin (D-WI) and John Cornyn (R-TX) earlier this summer, the American IP Defense and Enforcement Advancement Act, or the “American IDEA Act,” promises to protect U.S. businesses against international IP theft. It is not to be confused with the Inventor Diversity for Economic Advancement (IDEA) Act, which aims to improve demographic data-gathering efforts at the U.S. Patent and Trademark Office (USPTO).

Noncompete agreements have always been controversial to some extent. Employers like them because they avoid messy litigation over whether the employee has breached confidentiality; a noncompete eliminates the risk as a practical matter. But it is a blunt instrument, preventing fair as well as unfair competition…. In contrast, employee confidentiality agreements have almost universally been embraced by courts, even though they usually operate in perpetuity to restrain use or disclosure of information. This is mainly because even without a contract, the common law recognized a duty of confidentiality by all employees to respect the trust implied by having access to secrets.

Last Saturday, my friends and I practically bounced our way to the movie theatre, joining throngs of pink-clad youngsters to watch the year’s biggest global blockbuster: ‘Barbie.’ Well, Barbie has done it all, honestly. She has not only achieved unparalleled success as a toy, with over a billion units sold worldwide, but now as a movie, amassing an impressive $365 million global opening. She has defied traditional stereotypes by promoting career-focus and self-sufficiency, challenged the motherhood-aspiration notion for young women, and inspired Greta Gerwig’s modern take on the iconic character. However, we often overlook the doll’s profound contributions to the evolution of intellectual property (IP) jurisprudence, from its genesis to its movie adaptation.

You always remember your first jury trial. Mine happened almost 50 years ago, and I still vividly recall sitting with the partner to work on the “instructions” that the judge would be giving. He explained to me that the jury would be told what the statutes said (this was a contract case), and they would be responsible for deciding the facts that determined their verdict. As it turned out, we didn’t win, and that was the end of it. Although an appeal was possible, overturning a jury verdict is very hard to do. And that’s as it should be…. That’s why I was surprised to see the recent opinion in Syntel v. Trizetto.

The U.S. House of Representatives’ Committee on the Judiciary yesterday held a hearing featuring Federal Trade Commission (FTC) Chair Lina Khan, who has recently come under fire from the Republican-led House leadership. Judiciary Committee Chair Jim Jordan (R-OH) repeatedly grilled Khan about testimony from the independent assessor for Twitter, Ernst & Young, in the Commission’s recent investigation into the social media platform, which Jordan characterized as “targeted harrassment.”

On July 11, the Council for Innovation Promotion (C4IP), released a policy report advocating for a pro-innovation legislative and administrative agenda to counteract a series of shocks to the U.S. patent system over the past two decades. This pro-innovation agenda has the direct support of several C4IP members who formerly held high-ranking government positions and are now calling on the federal government to correct several areas of patent law that have improperly tilted the playing field in favor of corporate infringers and foreign counterfeiters.

The U.S. Supreme Court today delivered a ruling that flows from a trade secrets theft case, holding that “the Constitution permits the retrial of a defendant following a trial in an improper venue conducted before a jury drawn from the wrong district.” The underlying case involves a software engineer, Timothy Smith, who stole trade secrets from StrikeLines, a company that uses proprietary technology to identify private, artificial reefs that individuals construct to attract fish and then sells the coordinates. Smith, an avid fisherman, was angered by this approach as he felt StrikeLines was profiting off of the work of private citizens. He therefore figured out how to obtain StrikeLines’ data and announced on social media that he was willing to share it.

The use of Artificial Intelligence (AI) has taken center stage in popular culture thanks to the significant advances of tools like ChatGPT. Of course, the use of these new, high-powered AI tools presents real issues for businesses of all types and all sizes. Notably, Samsung employees shared confidential information with ChatGPT while using the chatbot at work. Subsequently, Samsung decided to restrict the use of generative AI tools on company-owned devices and on any device with access to internal networks. Concerned about the loss of confidential information, Apple has likewise restricted employees from using ChatGPT and other external AI tools. The actual or potential loss of confidential information is a matter of critical importance to technology companies, but it also must be of the utmost concern for all attorneys who have an ethical obligation to keep client information confidential.

Artificial Intelligence (AI) has become a crucial tool for organizations in various sectors, particularly in the generation of content and code by generative AI systems such as ChatGPT, GitHub Copilot, AlphaCode, Bard and DALL-E, among other tools. As the promise of incorporating these generative tools in the corporate setting is all but assured in the near term, there are a number of risks that need to be minimized as companies more forward. In particular, as AI applications grow increasingly sophisticated, they raise concerns with several forms of intellectual property (IP), such as patents, copyrights, and trade secrets. This article aims to discuss these issues and provide a sample company policy for using AI-generated content such as software code.

The story seems to unfold the same way every time, whether the actor is a high-level departing employee or a customer or business partner. When sharing confidential information in a long-term relationship results in the release of a similar product by the recipient, the reaction is a claim of theft, laced with accusations of treachery and betrayal. And the response is equally strong: “no, I did this on my own”; in legal terms, “I engaged in ‘independent development.’” Strictly speaking, this means that the development of the new product was accomplished “independently” of the information shared in the confidential relationship. As a practical matter, this can be difficult to prove. Once you have been exposed to the secret process or design, or other related information, how do you demonstrate that your work was entirely your own?

As I described in my previous article about the protocol for clean room product development, there are often situations where a company has come into contact with intellectual property that it cannot allow to spread to a product in development. In that article, I described the concepts of a clean room. In this article, I describe the practical implementation details. Once a clean room protocol has been set up, the following sections describe the recommended procedure to implement.

The Senate Judiciary Committee’s Subcommittee on Intellectual Property held a hearing today featuring a panel of patent-savvy witnesses to underscore the crucial role intellectual property plays in the U.S. economy and to define the biggest threats to IP rights, both foreign and domestic. The conclusion of most panelists as to what one step is most important in reestablishing the United States as an IP powerhouse was that we need to clean up our own IP system at home in order to even begin addressing threats from foreign competitors like China.

In January of this year, the Federal Trade Commission (FTC) proposed a new rule that would ban employers from using noncompete clauses for their employees. In an announcement, the FTC said that the use of noncompete clauses is “a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses.” The agency estimated the new rule could increase wages by $300 billion a year, as firms would be encouraged to do more to keep their workers. The proposed rule change was opened for public comment in January, and the deadline for submissions was extended from March 20 to April 19 in early March. As of April 18, the Regulations.gov website indicated that 24,259 comments had been received and 14,946 posted. With the comment period coming to a close this week, the U.S. Chamber of Commerce has weighed in, urging April Tabor, FTC Secretary to withdraw the proposed rule.