Employee fired, charged with bringing former employer’s confidential information with him
July 2, 2008
An executive asks and is given for confidential sales information, marked as “confidential” and with a request not to distribute it. Not long afterwards, he quits and takes a similar position with a competitor of his former employer. Shortly after that, on his own initiative, he gives the confidential information to his new employer. That gets him fired by his new company, and then charged with criminal theft of trade secrets by the U.S. Attorney’s office.
In a nutshell, that’s what allegedly happened with Atul Malhotra, who has been indicted for giving IBM confidential information to HP. See the write-up in Wired magazine and the charging document filed in court.
California law requires Web sites to "conspicuously" display a privacy-policy link
May 30, 2008
Saul Hansell at the NY Times concludes that Google is in violation of the California Online Privacy Protection Act of 2003 because it doesn’t "conspicuously" display a link to its privacy policy.
Excerpt: "… a 2004 analysis by law firm Cooley Godward Kronish doesn’t list any other option for conspicuous notice other than placing the privacy policy itself or a link to it on a site’s home page. And the California Office of Information Security and Data Protection offers this recommendation to Web sites:
Use a conspicuous link on your home page containing the word “privacy.” Make the link conspicuous by using larger type than the surrounding text, contrasting color, or symbols that call attention to it.
Autodesk court case: Can shrinkwrapped software now be legally reverse-engineered?
May 23, 2008
If you’re a software vendor, you need to know about this recent Autodesk case, holding that typical software "license" transactions are in fact sales of copies, which the purchaser is free to re-sell under the First Sale Doctrine in copyright law.
If the court’s reasoning is upheld on appeal, software vendors might find themselves legally unable to stop their customers from reverse-engineering the software.
They might also have a more difficult time asserting trade-secret rights in the executable code.
Court smacks Autodesk, affirms right to sell used software
A better way of nipping business legal disputes in the bud
April 16, 2008
As I mentioned a few minutes ago, the CEO of Blue Jeans Cable, a former litigator, responded pretty forcefully to a cease and desist letter from Monster Cable, alleging various forms of infringement. One of the things I liked about the Blue Jeans response was its detailed requests for additional information — “If you expect to persuade me, you had better start making full, open and honest disclosures; I will find out the facts sooner or later in any event ….” (Emphasis added; hat tip Jeff Nolan at Venture Chronicles.)
The horrors of lawsuit discovery
The Blue Jeans Cable approach recognizes one of the grim realities of U.S. litigation, which is the American legal system’s premise that “the law is entitled to every man’s evidence.” Proceeding from that premise, the discovery rules allow adversaries’ lawyers to demand copies of each others’ relevant documents and to interview potential witnesses in depositions; one of the few limitations is that the requested information must be either relevant in itself or “reasonably calculated to lead to the discovery of admissible evidence.”
Disputes about discovery are one of the major reasons litigation is so expensive in this country:
- Party A’s lawyers demand that Party B produce copies of Documents X, Y, and Z;
- Party B’s lawyers object and refuse to comply;
- Party A’s lawyers file a motion to compel discovery; they spend lots of time writing a brief in support of the motion;
- Party B’s lawyers file an opposition to the motion, with its own brief;
- Party A’s lawyers file a reply brief;
- the judge orders an oral hearing — incidentally, there’s nothing judges hate worse than discovery disputes;
- the parties’ lawyers prepare for and attend the hearing;
- the lawyers’ meters are running the whole way.
Discovery disputes can also get in the way of coming to a sensible business resolution to the dispute: The parties and their lawyers get ticked off at each other, and over the money they’re spending on legal fees; as a result, they can sometimes have their judgment clouded about the true legal merits of their positions.
Cut the crap
In commercial litigation, it often makes sense for both sides to just cut the crap and exchange documents under a nondisclosure agreement, even before a lawsuit is filed. This lets the lawyers and management evaluate the case in a less stressful environment, and improves the chances of coming to an agreeable settlement (not just a nuisance settlement) before the parties’ backs have stiffened. When I was a software-company general counsel, I used this basic approach in quite a few disputes. It didn’t matter whether we were the potential defendant or the potential plaintiff: If preliminary due diligence suggested that the other side and its lawyers could be trusted to honor a nondisclosure agreement, I’d tell them something more or less like this:
- If our company is in the wrong, we want to know it early.
- We hope the same is true for you.
- If litigation were to come to pass, we’d each get the information we wanted during the discovery process anyway.
- So let’s put a nondisclosure agreement in place, and we’ll give your lawyer whatever s/he wants to look at that we can conveniently collect, as long as you agree to do the same for us.
- And then let’s talk, before we’ve both spent a ton of money on legal fees.
That approach generally worked out pretty well.
Monster Cables picked the wrong guy to threaten
April 16, 2008
Monster Cables, which makes extremely high-priced stereo cables, has apparently sent a cease-and-desist letter to Blue Jeans Cable, alleging various kinds of infringement. Bad move - the president of Blue Jeans Cable, Kurt Denke, is a former litigator who responded pretty forcefully:
… Once I have received the above materials and explanations from you, I will undertake to analyze this information and let you know whether we are willing to accede to any of the demands made in your letter. If my analysis shows that there is any reasonable likelihood that we have infringed in any way any of Monster Cable’s intellectual property rights, we will of course take any and all action necessary to resolve the situation. If I do not hear from you within the next fourteen days, or if I do hear from you but do not receive all of the information requested above, I will assume that you have abandoned these claims and closed your file.
As for your requests for information, or for action, directed to me: I would remind you that it is you, not I, who are making claims; and it is you, not I, who must substantiate those claims. You have not done so.
I have seen Monster Cable take untenable IP positions in various different scenarios in the past, and am generally familiar with what seems to be Monster Cable’s modus operandi in these matters. I therefore think that it is important that, before closing, I make you aware of a few points.
After graduating from the University of Pennsylvania Law School in 1985, I spent nineteen years in litigation practice, with a focus upon federal litigation involving large damages and complex issues. My first seven years were spent primarily on the defense side, where I developed an intense frustration with insurance carriers who would settle meritless claims for nuisance value when the better long-term view would have been to fight against vexatious litigation as a matter of principle. In plaintiffs’ practice, likewise, I was always a strong advocate of standing upon principle and taking cases all the way to judgment, even when substantial offers of settlement were on the table. I am “uncompromising” in the most literal sense of the word. If Monster Cable proceeds with litigation against me I will pursue the same merits-driven approach; I do not compromise with bullies and I would rather spend fifty thousand dollars on defense than give you a dollar of unmerited settlement funds. As for signing a licensing agreement for intellectual property which I have not infringed: that will not happen, under any circumstances, whether it makes economic sense or not.
I say this because my observation has been that Monster Cable typically operates in a hit-and-run fashion. Your client threatens litigation, expecting the victim to panic and plead for mercy; and what follows is a quickie negotiation session that ends with payment and a licensing agreement. Your client then uses this collection of licensing agreements to convince others under similar threat to accede to its demands. Let me be clear about this: there are only two ways for you to get anything out of me. You will either need to (1) convince me that I have infringed, or (2) obtain a final judgment to that effect from a court of competent jurisdiction. It may be that my inability to see the pragmatic value of settling frivolous claims is a deep character flaw, and I am sure a few of the insurance carriers for whom I have done work have seen it that way; but it is how I have done business for the last quarter-century and you are not going to change my mind. If you sue me, the case will go to judgment, and I will hold the court’s attention upon the merits of your claims–or, to speak more precisely, the absence of merit from your claims–from start to finish. Not only am I unintimidated by litigation; I sometimes rather miss it.
(Emphasis added; hat tip: Jeff Nolan at Venture Chronicles.)
I can relate to Denke’s final comment quoted above …. I wonder what the attendant publicity is doing for his sales.
Co-creators shouldn’t wait too long to claim their share
April 4, 2008
A day late and a dollar short — well, more like 13,000 days, and possibly millions of dollars.
In 2005, the guy who played the organ in Procul Harem’s 1967 hit A Whiter Shade of Pale filed suit against the lead singer. Matthew Fisher claimed he was entitled to an estimated $2 million in back royalties as a co-author of the song (his contribution being the famous organ solo).
Fisher won in the (UK) trial court, but the appeals court just reversed, saying that he was "guilty of excessive and inexcusable delay in his claim to assert joint title to a joint interest in the work …. He silently stood by and acquiesced in the defendant’s commercial exploitation of the work for 38 years.”
So despite being confirmed to be a co-author of the song, Fisher will get neither back royalties nor future royalties (unless he successfully appeals to the House of Lords).
If Fisher had been able to convince the court that he didn’t know he’d been left off the credits, conceivably he might have had a shot at getting future royalties, and perhaps back royalties for the statute-of-limitations period (probably three years in the U.S., although I haven’t looked it up).
But the way a NY Times blog describes the song’s credits, if he had made such a claim, he likely would have been laughed out of court: "music by Gary Brooker, lyrics by Keith Reid, it says on the band’s own recording and on the 600-odd cover versions that other artists have made over the years."
Invention ownership - watch out for automatic assignment language in the employment agreement
March 18, 2008
A subsidiary of Major League Baseball was able to throw up, at least temporarily, a complete roadblock to a computer scientist’s patent infringement lawsuit.
It turned out that the computer scientist, a Dr. Barstow, had previously signed an employment agreement with his former employer (which apparently wasn’t otherwise involved in the infringement suit).
That agreement had automatically assigned, to Dr. Barstow’s then-employer, all of his rights in any inventions he made that were “related” to the employer’s business.
When Dr. Barstow’s new company sued the Major League Baseball subsidiary, the subsidiary’s lawyers of course learned about the employment agreement. So the subsidiary went and made a deal with the former employer to acquire its rights in the patent, along with a retroactive license. With that in hand, the subsidiary successfully moved to have the infringement suit thrown out.
What mattered here was the language of the invention-assignment clause in Dr. Barstow’s old employment agreement. That language said that Dr. Barstow was, then and there, assigning his future work-related inventions to the employer: he “agrees to and does hereby grant and assign” to the employer all rights in future inventions falling within the scope of the agreement (emphasis added).
That meant that any transfer of Dr. Barstow’s ownership rights to work-related inventions had happened automatically, as a matter of law, as soon as he (and his brother) had made the inventions. There had been no need for the former employer to get Dr. Barstow to sign any additional paperwork to confirm the assignment.
(The case isn’t over yet: An appellate court ruled that a question still existed whether the inventions in question were sufficiently work-related to come within the scope of the automatic assignment.)
Lessons:
- If you’re an employee working on a sideline project that you don’t think should belong to your employer, you need to read your employment agreement carefully, and consider consulting an attorney.
- If you’re an employer, have your IP lawyer review the invention-assignment language in your employment agreement forms.
Reference: DDB Technologies LLC v. MLB Advanced Media LP, No. 2007-1211, at 9 (Fed. Cir. Feb. 13, 2008) (affirming decision that former employee could not assert equitable defenses to his assignment obligation).
ABA Project: Model Case Management Orders
for Patent Cases
June 16, 2004
Several years ago, I chaired a special committee of the American Bar Association’s Section of Intellectual Property Law. We set out to develop some model orders for implementing “best practices” in managing patent litigation cases.
(Of course, many of the model orders could be used in non-patent litigation as well.)
Public Allegation of Copyright Infringement
Leads to $300K Defamation Verdict
April 23, 2004
If you think a competitor is doing something illegal, like infringing your copyright, it’s usually best not to complain to customers about it. If it turns out you’re wrong about the alleged illegality, you could be liable for defamation. A Web site operator named Boats.com recently learned a $300,000 lesson on that subject in a Florida federal district court.
Compuware: Hit By Its Own Torpedoes
February 11, 2004
In my Navy days I was a carrier sailor, not a submariner. But I still heard the story about the valor of the submarine USS TANG, sunk in the middle of a furious battle in 1944 by one of its own faulty torpedos with the loss of all but nine of its crew. TANG’s skipper, Richard O’Kane, was one of the most successful U.S. sub skippers of WW II; he was awarded the Medal of Honor after he and his surviving crew were released from Japanese captivity at the end of the war.
(In re-reading this essay before posting it, I wonder whether I’ll be guilty of poor taste in using TANG’s epic saga as a motif for a far less-heroic tale. But many of you will have never heard of either TANG or O’Kane, and you should, so here goes.)
Compuware, a mainframe computer software vendor, seems to have been hit by several of its own torpedoes. In 2002, it launched a copyright- and trade-secret lawsuit against IBM, its former alliance partner. Not long afterwards, CompuWare’s own assertions were re-directed at them, as part of a class-action securities lawsuit. Last week, Compuware’s motion to dismiss the class-action lawsuit was denied in part, leaving the unfortunate Compuware to the tender mercies of the securities plaintiffs’ bar. See In re Compuware Securities Litigation, _ F. Supp.2d _, 2004 WL 231464 (E.D. Mich. Feb. 3, 2004) (link via Securities Litigation Watch.)