Traverse Internet Law Federal Court Report: July 2010 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


BRITANIC VENTURES 1 LP, ET AL. v. MICHAEL STUART, ET AL.
SOUTHERN DISTRICT OF TEXAS (HOUSTON)
4:10-CV-02604
FILED: 7/22/2010

Trade secrets can very well be the data and information that is gathered in the log files by a website. Access to analytics programs clearly would implicate trade secret issues and the value of the analytics is just becoming recognized and appreciated. As you establish strategic relationships and web partnerships, including hosting and development situations, be very aware of the value of the data and the potential implications if it is misused.

Britanic Ventures is the developer of high-end oceanfront living located in Mexico in the form of a condominium development. Defendants are alleged to have worked together to misappropriate Plaintiffs’ data, confidential and proprietary information, and trade secrets for their own commercial advantage because one of the Defendants was in charge of the Plaintiffs’ website and accessed the information without authorization.

Plaintiffs allege distributing false copyright management information in violation of the Digital Millennium Copyright Act, breach of contract, conversion, misappropriation of trade secrets, harmful access by a computer, tortious interference with existing contracts, tortious interference with prospective relations, breach of fiduciary duty, breach of duty of loyalty, breach of duty of confidentiality, fraud by non-disclosure, conspiracy, violation of the Computer Fraud and Abuse Act, violation of the Lanham Act, violation of the Texas Anti-Dilution Statute, common law unfair competition, violation of the Texas Theft Liability Act, violation of Texas Pen. Code § 33.02, infliction of bodily injury, and offensive physical contact. Relief requested includes declaratory judgments on behalf of the Plaintiff, a temporary restraining order, temporary injunctive relief, preliminary and permanent injunctive relief, actual and consequential damages, statutory damages in an amount of $250,000 for each violation, exemplary damages, attorneys’ fees and costs, and a request for accounting. Traverse Internet Law Cross-Reference Number 1440.

Traverse Internet Law Federal Court Report: June 2010 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer
The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


FREE FOR ALL, INC. and BURT CROWLEY BENEFIT SOLUTIONS, LLC v. MATTHEW FOWKES, ET AL.
DISTRICT OF NEW JERSEY (CAMDEN)
1:10-CV-02927
FILED: 6/10/2010

So many understandings and agreements in business arise in an oral setting in which a formal written memorandum of understanding is absent. This is understandable to some extent given the speed at which deals occur in the online world. However, businesses need to develop a feeling as to what liabilities and downside risks could attach when there are “misunderstandings” as to an oral deal, and seriously consider formalizing agreements in the appropriate circumstances.

The Plaintiffs are in the business of marketing a national pharmacy discount program. The Defendants and Plaintiffs entered into a business understanding and the Plaintiffs now claim that the Defendants began competing against them directly and misappropriated trade secret information.

The Plaintiffs allege trademark infringement, breach of contract, breach of the covenant of good faith and fair dealing, breach of agreement to form a joint venture, oppression of minority member’s interest, common law unfair competition, and breach of fiduciary duty. The lawsuit requests injunctive relief, declaratory relief, and the imposition of a constructive trust. Damages include compensatory damages, treble damages, attorneys’ fees, and any other such relief the Court deems equitable. Traverse Internet Law Cross-Reference Number 1433.

Traverse Internet Law Federal Court Report: May 2010 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer
The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


3BA INTERNATIONAL LLC v. KEVIN LUBAHN, ET AL.
WESTERN DISTRICT OF WASHINGTON (SEATTLE)
2:10-CV-00829
FILED: 5/18/2010

Websites are property, very similar to an automobile or other personal property. If you are involved with a dispute over the ownership of a website don’t just assume that possession is nine-tenths of the law. Seizing a website in which the ownership is in dispute may help from a business perspective to leverage you into a better position, but it really has little impact on legal rights and ownership of the website.
3BA International is a professional basketball league that was formed in 2007. The individual Defendants were involved with the basketball league in one way or another and are alleged to have conspired to steal and misappropriate confidential and proprietary trade secret information. Defendant LuBahn is alleged to have transferred the basketball league’s website to a new manager, changed all the passwords, and took over the administration of the site.

Plaintiff alleges breach of common law confidentiality obligations, misappropriation of trade secrets, breach of fiduciary duty/common law duty of loyalty, tortious interference with business relationships, libel and slander, violation of the Lanham Act, conversion, misrepresentation and fraud, violation of the Computer Fraud and Abuse Act, violation of the Stored Communications Act, and violation of the Influenced and Corrupt Organizations Act. Prayer for relief includes requests for injunctive relief along with actual damages, consequential damages, an award of attorneys’ fees and costs, and such other and further relief the court deems just and proper. Traverse Internet Law Cross-Reference Number 1429.

Traverse Internet Law Federal Court Report: April 2010 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


DIRECT LINE CORPORATION v. MICHAEL L. CARRINGTON AND JOHN DOE(S)
MIDDLE DISTRICT OF TENNESSEE (NASHVILLE)
3:10-CV-00423
FILED: 4/28/2010

The Plaintiff in this case alleges that its executive was responsible for backing up critical confidential and proprietary information and was the sole party responsible for maintaining such intellectual property. Although the dispute came to a head after the Defendants’ alleged termination for cause, the problem actually arose far earlier when an employee was apparently given the sole and exclusive responsibility, seemingly without oversight and controls, to act as the sole responsible party for maintaining what is alleged to be very significant intellectual property of the corporation. Every business should have a program in place to ensure that all information, and particularly valuable intellectual property, is backed-up and the integrity of the back-up process and data must be confirmed by a separate employee. Think of your intellectual property as your bank account - allowing the same party to write checks and reconcile bank accounts is a dangerous practice.
Direct Line Corporation, the Plaintiff, is a corporation that provides high density storage filing systems and maintains extensive websites for its dealers. The Defendant was allegedly hired as a marketing representative and project manager and became Executive Vice President with principle responsibilities for marketing and intellectual technology. Carrington was allegedly terminated for cause in January, 2010. Plaintiff alleges that Carrington is refusing to return electronic files containing extensive trade secrets of the Plaintiff absent the payment of additional compensation.

Causes of action listed in the complaint include trademark infringement, unfair competition, theft and misappropriation of trade secrets, breach of fiduciary duty, breach of duty of loyalty, breach of duty of trust, breach of duty against self-dealing, tortious interference with a business relationship, conversion, and unjust enrichment. Plaintiff requests that the Court issue extensive injunctive relief along with an accounting and disgorgement of profits, the return of all passwords, electronic files and other confidential information belonging to the Plaintiff, forensic examination of relevant hardware, pre-judgment and post-judgment interest, and exemplary and exceptional damages that the Court deems appropriate. Traverse Internet Law Cross-Reference Number 1417.


ANY TEST FRANCHISING, INC. v. LAB TEST DEPOT, LLC
SOUTHERN DISTRICT OF FLORIDA (MIAMI)
1:10-CV-21337
FILED: 4/26/2010

This case obviously involves both trade secret misappropriation issues and copyright infringement. It’s unfortunately common for web developers to “borrow” content from websites, and most often this just results in the service of a Digital Millennium Copyright Act takedown notice or a cease and desist demand letter that results in the content being removed from the web. However, when there is more than simple copying, and there are competitive aspects to the infringement, it is much more likely that a businesses’ first notice might come by service of a federal lawsuit. It’s a good time to check the contract with your web developers and make sure that when you order customized creative works you aren’t getting cut and paste copies of websites already existing on the web.

Any Test Franchising, Inc. owns and sells the franchise rights to an array of laboratory tests distributed through retail locations. Lab Test Depot, LLC, the Defendant in this case, has allegedly copied much of the content from the Plaintiff’s website. The principals of the Defendant allegedly attended a “discovery day” put on by the Plaintiff and signed an extensive non-disclosure agreement but the Defendant did not enter into a franchise agreement with the Plaintiff.

Defendant is accused of misappropriation of trade secrets and confidential and proprietary business information, federal trademark infringement, federal unfair competition, federal trademark dilution, federal copyright infringement, trademark infringement under Florida common law, and unfair competition under Florida common law. The Prayer for Relief includes requests for temporary, interlocutory, and permanent injunctive relief, general and compensatory damages, actual damages, incidental, special, consequential, and exemplary damages, damages for the unjust enrichment caused by Defendant’s misappropriation and infringement, attorneys’ fees and costs, and such other relief the Court deems just and proper. Traverse Internet Law Cross-Reference Number 1418.

Traverse Internet Law Federal Court Report: February 2010 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


CAPTIVE CONCEPTS, LLC v. ARTHUR J. WILLIAMS, ET AL.
CENTRAL DISTRICT OF CALIFORNIA (LOS ANGELES)
2:10-CV-01230
FILED: 2/18/2010

The misappropriation of trade secrets because “Plaintiff’s website is confidential and proprietary information owned by Plaintiff” likely won’t be successful. The reason for bringing a trade secret claim is because many states enhance damages, enable the recovery of attorneys’ fees, and/or have a far lower threshold for obtaining injunctive relief. HTML that is readily available through the “view source” function of a browser can certainly be protected by copyright, but not protected as a trade secret. Always consider the remedies available, what you can recover and how quickly you might be able to attack a problem, in deciding upon how you are going to proceed. Decisions made early in a dispute can often define the course of the litigation, the expense involved in pursuing the case, and of course the outcome.

The Plaintiff and Defendants apparently had some type of relationship in which they collaborated in offering printed materials and artwork online. Defendants are alleged to have copied the Plaintiff’s website and launched it surreptitiously in order to compete against the Plaintiff.

Claims for relief include copyright infringement, misappropriation of trade secrets, unfair competition, and tortious interference with prospective business advantage. Plaintiff requests injunctive relief, an accounting of profits, compensatory damages, consequential damages, exemplary damages, cost of suit, attorney’s fees and other legal costs. Traverse Internet Law Cross-Reference Number 1407.

Traverse Internet Law Federal Court Report: January 2010 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.

J.C. BROMAC CORPORATION v. CALIFORNIA SUNRIDERS, ET AL.
CENTRAL DISTRICT OF CALIFORNIA (LOS ANGELES)
2:10-CV-00630
FILED: 1/28/2010

Big businesses enter into confidentiality and non-disclosure agreements all the time and comfort can be taken in the fact that these businesses have deep pockets, a brand to protect, and hopefully an understanding of business ethics. More often than not, doing business on the web means that you are not dealing with big businesses, the risk of loss of trade secrets is far greater, the “deep” pockets far shallower, the brands that could be tarnished by his conduct almost non-existent, and a code of ethics a mere figment of the imagination. Don’t take big business policies and practices relating to the protection of intellectual property and trade secrets and try to implement those in the Internet arena when small businesses are involved. When you are doing deals with other companies, recognize that there is often a minimal amount of leverage available to assure compliance with promises made.

The Plaintiff is engaged in the business of renting Harley Davidson motorcycles and providing guided and self-guided tours to tourists worldwide. The Defendants are former employees/managers for the Plaintiff. They are alleged to have left the employment of the Plaintiff and launched a competing business despite the existence of a confidentiality and non-disclosure agreement.

The lawsuit alleges misappropriation of trade secrets and aiding and abetting the misappropriation of trade secrets, unfair competition, breach of contract, breach of duty and loyalty, breach of the covenant of good faith and fair dealing, intentional interference with and conspiracy to interfere with prospective economic advantage, negligent interference with prospective economic advantage, violation of Computer Fraud and Abuse Act, violation of the California Penal code 502, and unjust enrichment/imposition of constructive trust. Plaintiff requests declaratory relief against all Defendants and an accounting of profits, as well as general, special, and punitive damages and attorneys’ fees and costs. Traverse Internet Law Cross-Reference Number 1393.

TES FRANCHISING, LLC, ET AL. v. ERIC J. DOMBACH, ET AL.
EASTERN DISTRICT OF PENNSYLVANIA (ALLENTOWN)
5:10-CV-00017
FILED: 1/04/2010

Non-disclosure agreements are vastly overrated in their importance, at least in the Internet industry. If you are going to disclose trade secrets to a third party and rely upon a non-disclosure agreement to protect those secrets first consider what they party who is signing the agreement has to lose if there is a breach. Once trade secrets are disclosed into the public arena the fact that you might have a valid legal claim against someone who signed a non-disclosure agreement isn’t much consolation. If you are going to hand over your trade secrets, make sure you are dealing with a party who is highly motivated to comply with the contract, no matter how your prospective business relationship pans out.

This is a class action lawsuit and the Plaintiffs are various franchisees providing business coaching to entities wishing to purchase franchises. The Defendants are alleged to have breached a non-disclosure agreement and misappropriated trade secrets by launching a competing website.

The lawsuit alleges breach of non-disclosure agreement, breach of confidentiality agreement, and breach of duty of loyalty. The claim for relief includes a request for an award of actual and compensatory damages in an amount well in excess of $150,000, an accounting of revenues and profits, damages sufficient to deprive Defendants business of any benefit of enrichment from their wrongful conduct, damages in the amount paid to Dombach during his engagement with Plaintiffs which is in excess of $251,000, preliminary and permanent injunctive relief, punitive damages, reasonable attorneys’ fees and costs. Traverse Internet Law Cross-Reference Number 1394.

Traverse Internet Law Federal Court Report: December 2009 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.

OPTICSPLANET, INC. v. OPTICSCALE, INC., ET AL.
NORTHERN DISTRICT OF ILLINOIS (CHICAGO)
1:09-CV-07934
FILED: 12/22/2009

If you are ever interviewing a former or existing employee of a competitor make sure that there is no contract in place prohibiting the employee from working for your company and have that employee sign an agreement and acknowledgement that he is not bringing any trade secret information, customer lists, or any other type of proprietary information with him.

OpticsPlanet is one of the largest online retailers of sports optics, microscopes, telescopes, and the like. The Defendant is alleged to have hired away a number of employees who had “trade secret” information. The employees have, or are now, working for the Defendant and, according to the Plaintiff, misappropriating and stealing trade secrets, customers, inventory, and the like.

The Plaintiff’s lawsuit includes claims for federal trademark infringement, false designation of origin, trademark dilution, copyright infringement, violation of the Illinois Deceptive Trade Practices Act, violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, common law trademark infringement, cybersquatting, violations of the Illinois Trade Secrets Act, intentional interference with business relationships, negligent interference with business relationships, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, trespass to chattels, breach of contract, conspiracy, and accounting. The Plaintiff requests permanent injunctive relief and that Defendants destroy and refrain from using any of Plaintiff’s copyrighted works, trademarks, and similar derivatives and transfer any infringing domain names to the Plaintiff. Plaintiff further requests indemnification from any third party claims, statutory damages, a disgorgement of profits, exemplary damages, actual damages of nothing less than $250,000, treble damages, punitive damages, costs and attorneys’ fees, pre and post-judgment interest, and any further relief the Court deems equitable. Traverse Internet Law Cross-Reference Number 1395.


JOYMAX CO., LTD. v. GRZEGORZ GRYCUK, ET AL.
CENTRAL DISTRICT OF CALIFORNIA (SANTA ANA)
8:09-CV-01432
FILED: 12/08/2009

The misappropriation of trade secrets, in one form or another, is often the motivation for unauthorized access, hacking, or theft in the business environment. This is nothing new. Stealing business plans and trade secrets of US companies has been a standard business practice for summer clerks and interns from other countries. This case is a reminder that protecting your trade secrets as a business is a critical function and contracts with employees and contractors can go a long way in establishing legal protections against misappropriation.

Joymax is a company existing under the laws of South Korea primarily involved with the development of computer games. The Defendant, and others associated with him, appear to be residents of the country of Poland. Plaintiff alleges that the Defendants stole their source code and launched a duplicate online game website. Joymax also alleges that it has invested over $10 million in the development, marketing, and distribution of its online game and that the source code is a trade secret.

Plaintiff has sued for copyright infringement, false advertising, trademark infringement, and theft of trade secrets. The Plaintiff has requested preliminary and permanent injunctive relief, damages according to proof, an order for the reassignment of Defendant’s domain name to Plaintiff, costs of suit, and attorneys’ fees. TraverseInternet Law Cross-Reference Number 1394.