In the bustling craft brew transparenteconomy brewers are faced with new issues every day. One that recently came to my attention arises when the craft brewery’s brewmaster or head brewer decides to either start his own craft brewery, or go to work for another brewery. While this may not initially seem like a big deal, it gets much more complicated when that brewmaster or brewer is responsible for the creation of your flagship brew. The question arises: who owns the intellectual property rights to that brew? Of course, the brewery is going to say that they have been selling, distributing, and promoting the brew, so it must be theirs. On the other hand, the brewer is going to say that he created it, so it must be his. The truth is that determining who owns the intellectual property rights to the brew formula can get quite complicated, encompassing numerous factors. But it does not have to be.

With a booming industry such as craft brew, it is imperative that the appropriate precautions be taken to protect the craft brewery’s most lucrative asset: the beer itself. In order to protect a brew formula from being taken from your company and utilized by a competitor when one of your brewers, the creator of the formula or not, leaves the company, the formula must be treated as a trade secret. The California Uniform Trade Secrets Act (“UTSA”) defines a trade secret as:

information, including a formula, pattern, compilation, program, device, method, or technique, or process, that:
(1) derives independent economic value, actual or potential, from not being generally known to the public, or to other persons who can obtain economic value from its disclosure or use; and
(2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Continue Reading Hey, that’s my beer! I think…

Victims of trade secret theft often can seek a variety of civil and criminal remedies against those who have absconded with proprietary information.  The Ninth Circuit however recently rejected criminal charges in a situation where the claims could be addressed as a civil matter under California’s trade secret laws.

In United States v. Nosal, David Nosal was sued by his former employer, the Korn/Ferry executive search and placement firm.  After leaving Korn/Ferry, Mr. Nosal contacted several former colleagues who were still working with the company and asked them for assistance with his efforts to set up a competing business.  Mr. Nosal’s former co-workers had access to a significant amount of proprietary information on the Korn/Ferry computer system, and assisted Mr. Nosal by using this access in order to provide names, contact information, and other confidential data from Korn/Ferry’s proprietary database to Mr. Nosal.  Although their access to the database was authorized, the employees provided information to Mr. Nosal in violation of a trade secret and nondisclosure agreement with their employer.
Continue Reading Ninth Circuit Limits Application of the Computer Fraud and Abuse Act

   Under California law, a plaintiff must bring a claim for trade secret misappropriation within three years of discovering the misappropriation or, by the exercise of reasonable diligence, should have discovered the alleged misappropriation.  Often times, discovery of alleged trade secret misappropriation is rather straightforward, i.e., a company discovers that its former employee has downloaded information from a computer and has started soliciting customers to do business with a competitor.  However, there are times when discovery is less straightforward, especially in product development where it can take years for a product to hit the market.  One potential source of information that may give rise to the discovery of trade secret misappropriation that employers must be aware of are patent filings.  The U.S. District Court in the Northern District of California recently used evidence of a patent filing to grant summary judgment in favor of a defendant accused of trade secret misappropriation in the case: Wang v. Palo Alto Networks, Inc. (Case No. 12-05579).

Mr. Wang was a design engineer specializing in the field of network security.  He spent approximately a decade trying to commercialize his firewall technology that included  “fast signature scan” technology.  In 2004, he filed a patent application on his technology.  His patent eventually issued in November 2008.

For years prior to the issuance of his patent, he tried to interest venture capitalists in his product.  In 2005, Mr. Wang met defendant Fengmin Gong at a seminar.  Mr. Gong was a chief scientist at McAfee, Inc. at the time.  Mr. Wang gave Mr. Gong a brief overview of the technology he was developing and later had Mr. Gong sign a nondisclosure agreement.   Over the next year, Mr. Wang discussed his alleged trade secrets with Mr. Gong and even gave him a copy of his patent application that contained trade secret information.  Mr. Gong was supposedly the only person to whom Mr. Wang disclosed his trade secret information.
Continue Reading Patent Filings and the Potential Discovery of Trade Secret Misappropriation

By: James Kachmar

A recent decision in the case Jobscience, Inc. v. CVPartners, Inc. (N.D. Cal. Jan. 9, 2014) shows the interplay between the various theories of intellectual property claims. There, the plaintiff asserted claims for both copyright infringement and trade secret misappropriation arising out of the alleged theft of its software code. The court was required to deal with the issue of whether plaintiff’s trade secret claim was preempted by its claim for copyright infringement.

Jobscience develops and licenses recruiting software applications, including its JS 2 Jobscience Recruiting Package. In 2010, Jobscience entered into a master agreement with defendant CVPartners that contained an End User License and Agreement, which provided the defendant with a license to use plaintiff’s job recruiting software application. The license was renewed in 2011.

Continue Reading Copyright Preemption and Its Interplay with Trade Secret Misappropriation

By James Kachmar

Under the California trade secret statute, the court may award attorneys’ fees where there has been a willful and malicious misappropriation of plaintiff’s trade secrets or when a trade secret misappropriation claim is brought in bad faith.  (See Civil Code §3426.4.)  In Weco Supply Company, Inc. v. Sherwin-Williams Company, 2013 U.S. Dist. LEXIS 1572 (January 3, 2013), a district court in the Eastern District of California, revisited the issue of what constitutes “bad faith” for purposes of awarding attorneys’ fees in trade secret cases.

Weco and Sherwin-Williams had entered into a “jobber” agreement by which Weco would distribute Sherwin-Williams paint products.  Weco alleged that Sherwin-Williams breached the jobber agreement by discontinuing certain of its product lines and then dealt directly with some of Weco’s end customers.  In addition to breach of contract claims, Weco asserted a claim for trade secret misappropriation against Sherwin-Williams.  Weco argued that its pricing arrangements with its end users were trade secret and were misappropriated by Sherwin-Williams to deal directly with these customers.  The court eventually granted Sherwin-Williams summary judgment against Weco as to its trade secret misappropriation claim and found that “the undisputed facts showed that Weco’s pricing to end users and cost of acquisition were not trade secrets” under California law.  Thus, the court found there was no misappropriation and dismissed Weco’s trade secret misappropriation claim.

Continue Reading “Animosity” Is Not Bad Faith For Attorneys’ Fees In Trade Secret Cases