Global Innovation Sets Blistering Pace in 2013 With 200,000 Patents Filed

| May 6, 2014

Rumors of the death of innovation have apparently been greatly exaggerated.

The World Intellectual Property Organisation (WIPO), recently reported that their annual international patent applications surpassed the 200,000 mark for the first time ever. Of the 205,300 applications, 56% were from the United States, while 29% were from China, which saw a significant jump in applications from 2012 (18,617) to 2013 (21,516).

Japan (43,918, 21.4%), Germany (17,927, 7.7%) and South Korea (12,386, 6%) round out the top five nations in patent applications in 2013.

 

Courts Seem Reluctant to Enforce Non-Compete Agreements Without ‘Troubling Facts’

| May 6, 2014

The scenario is all too common.

A top-level executive at a company is enticed by a competitor to take a similar role with it. An agreement is struck and the executive announces his intent to switch companies. Immediately his former company files a suit against him and the competitor charging any or all of breach of contract, breach of fiduciary duty and misappropriation of trade secrets.

Such complaints are generally filed before there is any proof that the departing executive has done anything wrong. Often, the company losing the executive alleges that it will be impossible for the executive to do his or her job at the new company without violating trade secrets. This is the so-called “inevitable disclosure” principle.

Recent court rulings indicate a trend on the part of U.S. courts to deny injunctive or other pre-emptive relief in the absence of some facts that strongly indicate an intent to steal proprietary data or knowledge. Such facts might include wiping computers of data, actual removal of data from the company’s control, or documents between the departing executive and his or her new employer

As is always the case, if you are going to rely on trade secrets as your primary or sole IP protection strategy, be sure that you’ve anticipated such situations and covered them with appropriate non-compete and non-disclosure agreements. In addition, clearly spelled out and widely disseminated policies, constant vigilence in identifying and protecting such information and uniform application of procedures will all help you deal with potential issues when a senior executive announces his or her intention to leave the company.

Nebraska Court Puts Client List Protection Under a Cloud

| April 10, 2014

A court in Nebraska has ruled that a client list that contains only data that could be obtained from other public sources may not be protected as a trade secret. The ruling, if adopted more broadly in other jurisdictions, could undo a long tradition of treating such lists as legitimate trade secret information.

In First Express Services Group Inc. v. Arlene A. Easter, et al, the Nebraska Supreme Court found  that the client list an insurance agent took with her when she resigned from the agency could not be considered a trade secret because the information on the list was available from other sources.

Defendant/Appellant Easter had originally claimed that she took the list with her when she resigned only so she would have a means of tracking future commissions due. But some time later, she joined a competing firm in which her son was engaged and began soliciting her old clients to move their policies to the new agency.

Easter claimed that the information on the client list, including customer names, contact information and insurance information was not a trade secret because that information was available from other sources.

The Court agreed, stating that “because the customers’ identities and contact information were ascertainable from public sources, and because the other information on the list was also ascertainable by proper means, the customer list was not a trade secret.”

 

Considering a Business Relationship? About to Divulge Trade Secrets? Be Very Careful Drafting Your NDA

| April 4, 2014

Traditionally, when two companies enter into negotiations intended to produce a partnership or a joint venture relationship, both parties will require non-disclosure agreements to protect any trade secrets it may divulge during the course of the deal-making discussions.

But thanks to a ruling in an Illinois case late last year, the efficacy of the use of such agreements must be reassessed. It may be necessary to take other steps before and in conjunction with the NDA to ensure protection of confidential information.

The case is nClosures Inc. v. Block and Company Inc. (Case No. 1:2012cv09358 in the Illinois Northern District Court). nClosures had invented a product and Block and Co. was interested in a partnership surrounding that product and its manufacture and sale.

At the beginning of negotiations, the parties signed a mutual NDA, “relative to a potential business relationship…”, subsequent to which substantial disclosures were made by nClosures. Block and Co. began to manufacture its own version of the invention, asserting that a partnership had been entered into.

After the negotiations broke down without a business relationship emerging, nClosure sued to prohibit any use of its intellectual property but lost to a motion for summary judgment. The Court dismissed the case because it found, among other things:

  • Before the negotiations in question had even begun, Plaintiff had failed to take adequate steps to identify and protect its trade secrets, which it sought to prevent being used by the Defendant.
  • The Plaintiff/creator’s claim of a breach of fiduciary duty on the part of the Defendant failed because the essential nature of a partnership, the sharing of profits and losses, was not in place between the parties.
  • A claim of breach of contract failed because it would only apply to information that was confidential and the Court had already ruled there was no protectable property because of Plaintiff’s failure to protect its IP prior to the negotiations.

Perhaps the central lesson to be taken from nClosures v. Block and Co. is that a confidentiality and non-disclosure agreement that only references a “potential business relationship” may only apply to that specific course of negotiation and not to subsequent or seemingly related activities. This suggests that drafting such an agreement should involve the advice of competent counsel with experience in IP protection.

 

Just Because a Photo is Tweeted Doesn’t Mean It’s Not Under Copyright Protection

| March 28, 2014

Web publishers who publish photographs that they find on the Web must identify and obtain permission from the photographer or copyright holder or face stiff financial penalties.

In the New York case, Agence France Presse v. Morel, 2011 WL 147718 (S.D.N.Y. Jan. 14, 2011), photographer Daniel Morel had taken some photos of the Haitian earthquake and posted some of his shots on his Twitter feed. Another Twitter user copied Morel’s photos, put his own copyright notice on them, and republished them. Those republished photos were picked up by AFP and were subsequently sold to the public by Getty Images.

Morel sued AFP and won a $1.2 million judgment.

While the specifics of the case were highly unusual, the basic principle that a copyright isn’t waived by the simple act of the photographer posting images on the open Web is an important lesson. Everyone who publishes a Web site must be aware of the copyright status of any photos they use on their site.

In AFP v. Morel, the French news agency, the fact that AFP didn’t ensure that it had permission from the original photographer to use his images was the key factor in deciding the case.

One way to avoid problems like those that cost AFP a bundle is to use an application or plug-in for your favorite publishing platform that will help you easily locate copyright-free images. One such tool for WordPress is the $63 ImageSource but there are many others. A search for “copyright-free images” will turn up a number of alternatives.