Source: http://tsi.brooklaw.edu/category/legal-basis-trade-secret-claims/other-state-statute
Timestamp: 2019-04-22 11:00:47+00:00

Document:
On January 24, 2017, the New York State Supreme Court Appellate Division, First Department, reinstated defendant Sergey Aleynikov's ("Aleynikov") guilty conviction for stealing trading software from Goldman Sachs ("Goldman"). The decision came after a series of litigation that sought to determine whether Aleynikov violated federal or state law by making an electronic copy of the software on an external hard drive just before he left Goldman to work at a competing company.
Aleynikov was formerly an employee of Goldman Sachs, where he worked as a computer programmer. During his time with Goldman, Aleynikov wrote and maintained software for high frequency trading computer programs, which are central to Goldman's business. Goldman took several measures to safeguard the software, some of which included increasing security, limiting employee access, and requiring all employees to sign a confidentiality and nondisclosure agreement. In 2009, Aleynikov left Goldman to work for Teza Technologies, one of Goldman's competitors. Before he left, he transferred a digital copy of Goldman's trading software to a hard drive outside the company's server. As a result, he faced criminal charges in federal and state court.
In February 2010, Aleynikov was charged with violating the National Stolen Property Act and the Economic Espionage Act. In December 2010, the United States District Court for the Southern District of New York convicted him. However, on appeal the US Court of Appeals for the Second Circuit reversed his conviction in April 2012.
Shortly after, in September 2012, Aleynikov was charged by the state of New York in New York County with two counts of unlawful use of secret scientific material and one count of unlawful duplication of computer related material. After trial in July 2015, the jury acquitted Aleynikov on the unlawful duplication of computer related material charge, and the court dismissed the charges for unlawful use of secret scientific material. The People appealed, and on January 24, 2017, the New York Supreme Court Appellate Division reversed, and reinstated his conviction with respect to the unlawful use of secret scientific material charge.
The Appellate Division reasoned that the evidence was sufficient to establish that Aleynikov misappropriated scientific information. According to the court's decision, Aleynikov did not challenge the People's contention that he electronically copied the Goldman software, nor did he deny that the software constitutes secret scientific material. Furthermore, the court rejected Aleynikov's arguments that he did not possess requisite intent to commit the offense and that he did not make a tangible copy of the software.
Pfizer, Inc. v. Texas Health and Human Services Commission et al.
On November 17, 2016 pharmaceutical giant Pfizer, Inc. (“Pfizer”) sued Texas’s Health and Human Services Commission (“HHSC”) in federal court. Pfizer alleges that the HHSC misappropriated confidential information regarding its prices and rebate information for Texas Medicaid when it revealed the information to state lawmakers.
Pfizer claims the HHSC sent confidential detailed information regarding its drug prices and rebate protocol to two state senators. In its complaint, Pfizer argues this was a violation of 42 U.S.C. §1396r-8(b)(3)(D), which, in part, states that information disclosed by manufacturers or wholesalers is confidential, and cannot be disclosed a state agency. Furthermore, Pfizer alleges the HHSC violated a Texas law, which also prohibits the unauthorized disclosure of information obtained by the HHSC regarding drug rebate negotiations or other related trade secrets. Pfizer also claims that the HHSC has refused to specifically disclose which company information it released to the senators. Pfizer expresses concern in its complaint that the pricing information released would give competitors an unfair advantage in bidding situations.
Pfizer seeks a declaratory judgment in its favor and injunctive relief to prevent further release of its confidential information.
The case is Pfizer, Inc. v. Texas Health and Human Services Commission et al.
America's Test Kitchen v. Christopher Kimball et al.
America’s Test Kitchen Inc. (“Plaintiff”) owns multimedia publications and productions, including television programs such as America’s Test Kitchen, cooking magazines and books, and several websites. Plaintiff sued Christopher Kimball (“Defendant”), a celebrity chef and the former host of its TV shows. Plaintiff alleges that Defendant misappropriated its trade secrets and breached his fiduciary duty to the company. Plaintiff filed the lawsuit on October 31, 2016.
Defendant left Plaintiff’s program in November 2015, and recently developed his own program called Christopher Kimball’s Milk Street. Plaintiff alleges that Defendant created his company using its image to attract new customers, and marketed his program as an enhanced version of America’s Test Kitchen. Plaintiff also contends that Defendant stole from its collection of recipes, TV show ideas, media contacts, and subscriber information. It seems Plaintiff and Defendant did not have a formal non-compete agreement in place.
Plaintiff is seeking damages against Defendant and a disgorgement of all profits that he has derived through the use of the trade secrets he allegedly misappropriated from America’s Test Kitchen. Plaintiff’s complaint also names Melissa Baldino (Defendant’s wife), Christine Gordon, and Deborah Broide as defendants, and claims that they aided and abetted Defendant’s breach of his fiduciary duties.
The case is America’s Test Kitchen, Inc., v. Christopher Kimball et al., 1684-cv-03325.
Adams Arms, LLC v. Unified Weapon Sys., Inc.
A federal district court in Florida has ruled that in cases of continuous misappropriation where a plaintiff can establish that at least one occurrence took place after the effective date of the Defend Trade Secrets Act (May 11, 2016), that plaintiff is entitled to at least partially recover under the DTSA. Neither party raised the question of whether this butts against the notion that you cannot apply a statute retroactively.
In this case, Plaintiff Adams Arms, which specializes in military-grade rifles, alleges that Defendant Unified Weapon Systems, Inc. ("UWS") both improperly acquired and disclosed its trade secrets. Adams Arms says that its rifles’ unparalleled reliability is the result of certain mechanical processes, mixes of parts, and the vendors used to supply them. Plaintiff disclosed this information to Defendants because they had been working together to win a bid with the Peruvian military. They also granted a tour of their facility, and handed over pricing information. Prior to this exchange, in 2014, parties executed a "Mutual Confidentiality and Nondisclosure Agreement," which was to be binding upon the companies and their representatives and officers.
However, relations between the parties soured when Defendant began locking Plaintiff out of meetings with the Peruvian client, and—Plaintiff alleges—attempted to sell to the client UWS rifles that were actually retooled Adams Arms rifles, following Plaintiff’s mechanics and designs.
Plaintiff Adams Arms seeks to recover under the DTSA, while Defendants believe the trade secrets misappropriation claim (Count 5 of the complaint) should be dismissed because the UTSA governs all incidents prior to May 11, 2016. The Court rejected Defendants’ motion to dismiss. Judge Hernandez Covington said that UWS signed a contract with the Peruvian military after May 11th, using the Adams Arms designs, specifications, and processes, which enables Plaintiff’s disclosure claim to advance in court. However, all trade secrets were acquired pre-DTSA, so Plaintiff’s misappropriated acquisition claims cannot be remedied under that statute.
Maxum Petroleum, Inc. v. Hiatt et al.
Maxum Petroleum (“Plaintiff”) filed a lawsuit in federal court for misappropriation of trade secrets under the Defend Trade Secrets Act (DTSA) and Connecticut’s Uniform Trade Secrets Act. The complaint alleges that defendant Stephen Hiatt (“Hiatt”), a former employee, wrongfully accepted a position with a competing company that would inevitably cause him to disclose insider knowledge about Plaintiff.
Plaintiff is an oil company. Stephen Hiatt worked as the Vice President of Sales for Plaintiff’s energy department for 25 years. According to Plaintiff’s complaint, Hiatt agreed not to take a position with a competitor that would require him to share information about Plaintiff’s pricing and customers. Hiatt stopped working for Plaintiff on August 31 and took a position with Chemoil, a competing company, last week. Plaintiff learned about Hiatt’s new position through email.
Plaintiff contends that by accepting the position at Chemoil, Hiatt misappropriated trade secrets under the DTSA, the Connecticut Uniform Trade Secrets Act, and brought claims for breach of contract and a violation of the Connecticut’s Uniform Trade Practices Act. Plaintiff filed the suit in the United States District Court for the District of Connecticut.
GlobeRanger Corp. v. Software AG Inc.
Software company GlobeRanger Corporation (“GlobeRanger”) obtained a $15 million judgment from the United States District Court for the Northern District of Texas in a trade secrets misappropriation action against Software AG USA, Inc. (“Software AG”), a competing company. Software AG appealed, arguing that federal copyright law preempted GlobeRanger’s trade secret claim. The Fifth Circuit affirmed, finding no preemption.
GlobeRanger’s trade secret claim stems from its radio frequency identification (RFID) technology, which is most commonly used for electronic readers in tollbooths (e.g. E-Zpass). GlobeRanger uses RFID technology to manage its inventory. GlobeRanger claimed that Software AG misappropriated its RFID technology after taking over GlobeRanger’s subcontract with the NAVY to implement the technology. After a jury trial, GlobeRanger was awarded $15 million in compensatory damages.
On appeal, Software AG argued that federal copyright law preempted GlobeRanger’s trade secret claim. The United States Court of Appeals for the Fifth Circuit affirmed the judgment below, finding copyright law did not preempt GlobeRanger’s claim. The court reasoned that trade secrets claims seek to protect different rights than those protected under federal copyright law. The court explained that the claims are not based on Software AG copying the RFID technology, but that they did not have access to authorize it. Since a trade secret claim includes this element of unauthorized access, the court held it is different from copyright, and therefore not preempted.
Conxall Corp. v. ICONN Systems, LLC, et al.
In Conxall Corp v. ICONN Systems, LLC, at al. the Illinois Appellate Court determined what constitutes “bad faith” under §5 of the Illinois Trade Secret Act for purposes of awarding attorneys’ fees. In a divided decision, the court proposed two standards for defining “bad faith” under the statute.
Section 5 of the Illinois Trade Secret Act states that if “a claim of trade secret misappropriation is made in bad faith . . . the court may award reasonable attorneys’ fees to the prevailing party.” The majority held that Illinois courts should determine the meaning of “bad faith” by examining if the pleadings were frivolous or in some way abuse the judicial process. The concurring judge followed California’s approach, which held that a claim is made in “bad faith” under California’s Trade Secret Act if it consists of “(1) objective speciousness and (2) subjective bad faith." The majority noted that the California approach has been adopted in a number of federal courts.
Despite taking different approaches to defining “bad faith,” the judges all agreed to remand the issue to the lower court for consideration.

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