From Legal Tech News and ALM comes a good lawyer practice tip report from Federal Judges Sallie Kim and Xavier Rodriguez. Major hint is for lawyers to go back and read the 2015 revisions to the Federal Rules which govern discovery, data collection and electronic productions of documents. Read the article here on ALM/Legal Tech: http://tinyurl.com/yclmj9hv
Posted onMay 1, 2016byHenry Sneath|Comments Off on Big IP NEWS: Defend Trade Secrets Act 2016 (DTSA) Passes Congress – President to sign
Posted by Henry M. Sneath, Esq. – Chair of the Intellectual Property Practice Group at Pittsburgh, Pa. law firm Picadio Sneath Miller & Norton, P.C. (PSMN® and PSMNLaw®). Mr. Sneath is also an Adjunct Professor of Law at the Duquesne University School of Law teaching Trade Secret Law, Trademark Law and the Law of Unfair Competition. He may be contacted firstname.lastname@example.org or 412-288-4013. Website www.psmn.com or www.psmn.law.
The US Congress has passed the landmark Defend Trade Secrets Act of 2016 (DTSA) and it is set for the President’s signature. It will soon be law. See Link to DTSA Legislation here: https://www.congress.gov/bill/114th-congress/senate-bill/1890/text Trade Secret law has long been the province of the States, more or less exclusively, and except for criminal protections against trade secret theft and economic espionage, there has been no Federal civil law providing a federal damages remedy for such theft. Amended will be Crimes and Criminal Procedures – Title 18, Chapter 90, Section 1836 and the key provision is as follows:
“(1) IN GENERAL.—An owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.”
Congress has now added a civil remedy provision to Federal protection of Trade Secrets wherein prior Federal law only provided criminal sanctions. This has been described as a major new development in Federal IP law and will provide federal jurisdiction for Trade Secret Misappropriation cases. The law will NOT preempt nor change State laws and therefore actions will be brought in both federal and state court jurisdictions. Most states (48) have adopted a form of the Uniform Trade Secrets Act (UTSA) and actions can still be brought under those state statutes, but those statutes vary to some degree. The DTSA is very similar to the UTSA based state court statutes, but there will be differences depending on the state jurisdiction from which cases are brought or removed. DTSA will apply to any acts of trade secret misappropriation that take place AFTER the act is signed into law (not retroactive). The Statute of Limitations will be 3 years according to the actual text linked above, but some commentators have stated that it is 5 years (we will need to check to get accurate information on the SOL and will follow up).
The DTSA contains an important and somewhat controversial “Civil Seizure” provision which renders it different from most state laws and which reads:
“(i) APPLICATION.—Based on an affidavit or verified complaint satisfying the requirements of this paragraph, the court may, upon ex parte application but only in extraordinary circumstances, issue an order providing for the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”
This provision is controversial because it can be ordered by a court ex-parte. By amendment, the words “but only in extraordinary circumstances” were added to attempt to mollify some critics of this provision. However, there are some strict limitations to the ex-parte injunctions and a couple of them are below:
“(ii) REQUIREMENTS FOR ISSUING ORDER.—The court may not grant an application under clause (i) unless the court finds that it clearly appears from specific facts that—
“(I) an order issued pursuant to Rule 65 of the Federal Rules of Civil Procedure or another form of equitable relief would be inadequate to achieve the purpose of this paragraph because the party to which the order would be issued would evade, avoid, or otherwise not comply with such an order;
“(II) an immediate and irreparable injury will occur if such seizure is not ordered.”
Such ex-parte injunctions must be very specific and the court must go to great lengths not to overreach or to punish through publicity an accused wrongdoer during the period of seizure. There are other typical requirements for injunctions like posting of security and careful management of the seized materials, and the accused wrongdoer has a right of action back against the claimant if the seizure turns out to be wrongful or excessive.
In an action for misappropriation, a court may order injunctive relief and may
“(i) (I) damages for actual loss caused by the misappropriation of the trade secret; and
“(II) damages for any unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computing damages for actual loss; or
“(ii) in lieu of damages measured by any other methods, the damagescaused by the misappropriation measured by imposition of liability for a reasonable royalty for the misappropriator’s unauthorized disclosure or use of the trade secret;
“(C) if the trade secret is willfully and maliciously misappropriated, award exemplary damages in an amount not more than 2 times the amount of the damages awarded under subparagraph (B); and
“(D) if a claim of the misappropriation is made in bad faith, which may be established by circumstantial evidence, a motion to terminate an injunction is made or opposed in bad faith, or the trade secret was willfully and maliciouslymisappropriated, award reasonable attorney’s fees to the prevailing party.”
It is unclear as to how this bill will be enforced against foreign Trade Secret theft, or if there will even be jurisdiction under this act for such claims. We will follow up on that issue in future posts. See the Senate and House reports below which contain a substantial amount of background legislative history and commentary. Contact us for additional information. We will continue to study this new law and report to our readers.
Posted onMarch 12, 2016byHenry Sneath|Comments Off on VENUE: Will Texas Lose its Dominance as a Patent Venue? Fed. Circuit Tackles Venue in the “Heartland” Case
FEDERAL CIRCUIT HEARS ORAL ARGUMENT IN “HEARTLAND” CASE ON MAJOR VENUE ISSUE
Posted by Henry M. Sneath, Esq. – Chair of the Intellectual Property Group at Picadio Sneath Miller & Norton, P.C. (PSMN® and PSMNLaw®) in Pittsburgh, Pa. He may be contacted at email@example.com or 412-288-4013. Website www.psmn.com or www.psmn.law
Yesterday the Federal Circuit heard oral argument on the mandamus petition filed by TC Heartland in an underlying case lodged in the District Court of Delaware ( The underlying case is Kraft Foods Group Brands LLC v. TC Heartland LLC, case number 1:14-cv-00028, in the U.S. District Court for the District of Delaware). The outcome could either keep the status quo where Texas is the venue of choice for an inordinately large number of patent infringement filings, or force courts to adopt a different standard for evaluating proper venue. Texas, Delaware and the Northern District of California receive the majority of patent case filings, but Texas gets over 40% of all filings alone. Heartland, as sued by Kraft Foods, is headquartered in Indiana and believes that the case should be lodged in their home jurisdiction and not where they have little or no business contact in Delaware – beyond sales of product. On a challenge to venue, the District Court used the currently applied standard finding “venue is appropriate for a defendant in a patent infringement case where personal jurisdiction exists.” Heartland argues that the Federal Courts Jurisdiction and Venue Clarification Act of 2011 effectively repealed the Federal Circuit’s 1990 ruling in VE Holding v. Johnson Gas Appliance that patent suits can be brought anywhere a defendant makes sales. In other words, that personal jurisdiction and venue are essentially the same. Heartland, in its mandamus petition ( https://www.eff.org/files/2015/10/28/in_re_tc_heartland.pdf ) has asked the Federal Circuit to reevaluate the VE Holding case along with certain Congressional venue legislation and the overall venue issue.
In an en banc decision in Robert Bosch, LLC v. Pylon Manufacturing Corp., No. 2011-1363, -1364, the Federal Circuit held that it has jurisdiction under 28 U.S.C. § 1292(c)(2) to hear an appeal of a jury’s determination of infringement even though the issues of damages and willful infringement have not been decided. Judge Prost was joined by Chief Judge Rader and Judges Newman, Lourie, and Dyk. Judges Moore and Reyna concurred with respect to an appeal where just the damages determination has not been made, but dissented with respect to appeals where the willful infringement determination has not been made. Judges O’Malley and Wallach dissented as to both.
The case had a rather unusual procedural path. In 2008, Robert Bosch sued Pylon Manufacturing for infringing its patents relating to wiper blades. Pylon moved the district court to bifurcate the issue of infringement from the issues of damages and willful infringement. The court granted the motion and stayed discovery with respect to both damages and willful infringement. The court entered partial summary judgment on some issues in favor of both parties, but found jury questions relating to some of the infringement and invalidity claims. The jury found that Pylon infringed the claims of the patents and that the patents were not invalid. The court denied Bosch’s motion for a permanent injunction. Bosch appealed, and the Federal Circuit, in an opinion written by Judge O’Malley and joined by Judge Reyna, reversed and remanded. The parties also appealed the infringement and invalidity decisions. After oral argument, the Federal Circuit, sua sponte, granted a rehearing en banc to determine whether the Court had jurisdiction to hear the appeal in the first place because the damages and willful infringement issues had not been decided.
Under 28 U.S.C. § 1292(c)(2), the Federal Circuit has jurisdiction to hear appeals “from a judgment in a civil action for patent infringement which would otherwise be appealable . . . and is final except for an accounting.” Thus, the question was whether the damages and willful infringement determinations fall within the rubric of an “accounting.”
In analyzing the history of the statute and the understanding of the term “accounting,” the Court determined that an accounting was “a proceeding that includes the determination of both profits and damages.” The Court further noted that historically such accountings were made by special masters, but that this limitation no longer applied, especially after the merger of law and equity occurred in the courts.
With respect to willful infringement, the Court found that historically the issue of enhancement of damages was determined as part of an accounting. Thus, the Court found that it had jurisdiction to hear appeals when the issues of both damages and willful infringement remain outstanding. The Court then returned the case to the panel to decide the appeal on its merits.
The dissent reached a different conclusion, finding that the historical precedent made clear that the term accounting in the statute did not apply to either the damage or willful infringement determinations. Judge O’Malley noted that “[i]n all other circuits and all other types of cases, the finality requirement plainly applies to outstanding damages determinations.” She cautioned that there was no justification for treating patent cases any differently.
On March 19, 2013, in Kirtsaeng v. Wiley & Sons, Inc., No. 11-697, the U.S. Supreme Court held that the “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad. Specifically, a buyer or other lawful owner of a copy (of a copyrighted work) lawfully manufactured abroad is protected under the “first sale” doctrine and such buyer may bring that copy into the United States (and sell it or give it away) without obtaining permission to do so from the copyright owner.
Section 106 of the Copyright Act grants the owner of copyright exclusive rights including the right to distribute copies of the copyrighted work to the public by sale or other transfer of ownership. One limitation on these exclusive rights falls under Section 109(a) of the Copyright Act (commonly referred to as the “first sale” doctrine), which provides that the owner of a particular copy lawfully made under this title is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy. Thus, once a copy has been lawfully sold or its ownership otherwise lawfully transferred, the buyer of that copy and subsequent owners are free to dispose of the copy as they wish. Section 602(a)(1) further provides that importation into the United States, without the authority of the owner of copyright under this title, of copies of a work that have been acquired outside the United States is an infringement of the exclusive rights to distribute copies under Section 106.
Wiley & Sons publishes academic books and assigns rights to publish, print and sell the English language textbooks abroad to its wholly owned foreign subsidiary. Supap Kirtsaeng, while studying in the United States, asked his friends and family to purchase copies of foreign edition English-language textbooks at Thai book shops, which sold the books at low prices, and to mail the books to him in the United States, wherein he used the books, sold them, reimbursed his family and friends and kept the profit.
In 2008, Wiley initiated a lawsuit against Kirtsaeng for copyright infringement on the grounds that Kirtsaeng’s unauthorized importation of its books and his later resale of those books amounted to an infringement of Wiley’s Section 106(3) exclusive right to distribute as well as the Section 602 related import prohibition. Kirtsaeng defended against the claim on the ground that the books he had acquired were “lawfully made” and that he had acquired them legitimately. His position was that the “first sale” doctrine under Section 109(a) permitted him to resell or otherwise dispose of the books without the copyright owner’s further permission. The District Court ruled that the “first sale” defense was not available to Kirtsaeng because the doctrine does not apply to “foreign-manufactured goods.” The Second Circuit agreed with the District Court.
The Court analyzed the language within these statutes, and in particular the phrase “lawfully made under this title.” Wiley argued that the phrase imposes a form of geographical limitation and that the “first sale” doctrine does not apply to copies of American copyrighted works manufactured abroad. Kirtsaeng argued that the phrase imposes a non-geographical limitation, and in particular, that the intention was for the phrase to mean “made in accordance with” or “in compliance with the Copyright Act.” In this case, Kirtsaeng asserted that the “first sale” doctrine would apply to copyrighted works as long as their manufacture met the requirements of American copyright law, e.g. copies manufactured abroad with the permission of the copyright owner. The Court considered the language of Section 109(a), its context and the common-law history of the “first sale” doctrine and concluded that Section 109(a) favors a non-geographical interpretation. The U.S. Supreme Court determined that, while Section 602(a)(1) makes clear that importing a copy without permission violates the owner’s exclusive distribution right, it also refers explicitly to Section 106(3), which is by its terms is subject to various limitations including the “first sale” limitation under Section 109(a).
A complete copy of the Court’s Opinion can be found on the United States Supreme Court’s website.
Previously, when out-of-state litigants attempt to serve subpoenas in Pennsylvania for discovery in out-of-state actions, they had to open a miscellaneous matter in Pennsylvania, which could be an involved and difficult process—NO MORE. Pennsylvania has adopted the Uniform Interstate Depositions and Discovery Act, which became effective on December 24, 2012. This will make out-of-state discovery in Pennsylvania easier and more efficient, by eliminating the potpourri of individualized county by county out-of-state discovery procedures across Pennsylvania.
On October 24, 2012, Governor Corbett signed Act 183 of 2012, which amends the Pennsylvania Judicial Code by adopting the Uniform Interstate Depositions and Discovery Act (the “UIDDA”). The UIDDA is a model uniform law that allows for out-of-state litigants to obtain third-party discovery in Pennsylvania. Because foreign subpoenas lose jurisdiction at the border of their issuing state, the subpoena must be “reissued” in Pennsylvania to be effective within the Commonwealth
The procedure under UIDDA is simple: foreign litigants present their foreign subpoena to the “in the jurisdiction in which the person who is the subject of the [subpoena] resides, is employed[,] or regularly transacts business in person.” After paying a fee (and complying with local rules) the prothonotary will issue the subpoena for service within its jurisdiction. The Pennsylvania subpoena must incorporate the terms of the foreign one and must contain contact information for all counsel of record and any pro se party. Requesting that a subpoena be issued in Pennsylvania under the UIDDA does not constitute a court appearance, so out-of-state attorneys need not worry about seeking admission pro hac vice.
The Pennsylvania Rules of Civil Procedure govern service and any motion practice related to the Pennsylvania subpoena or its enforcement (including protective orders). This procedure applies both to subpoenas for depositions and subpoenas for documents and things.
Here is the link to the Act as adopted in Pennsylvania.
While the UIDDA will ultimately make out-of-state discovery in Pennsylvania easier, it may take a while before the new process becomes streamlined and efficient. In fact, there have already been reports of difficulties in its implementation as attorneys and the various Prothonotaries across the state become familiar with this new process. However, we expect these issues to resolve themselves soon.
For this end-of-the year blog entry, I took a look back at some of the bigger developments in technology and the law in 2012. One of these developments was the ABA’s revisions to its Model Rules of Professional Conduct to address technology. These changes impact lawyers and clients. Highlights of these revisions (Recommendation 105A) include the following:
Rule 1.1 requires that every lawyer shall provide competent representation to a client. Comment 6 of this rule has been amended to clarify that to maintain the requisite knowledge and skill necessary to represent a client, a lawyer must keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology.
Comment 4 to Rule 1.4 Communication, has changed from requiring a lawyer to promptly return telephone calls to requiring a lawyer to promptly respond to or acknowledge client communications, which is more encompassing and which includes e-mail, text messages, or other electronic communications from clients to lawyers.
Rule 1.6 Confidentiality of Information was revised to include a new paragraph (c) which states that “[a] lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.” New comments addressing paragraph (c) explain that the unauthorized access to or the inadvertent or unauthorized disclosure of information does not constitute a violation of paragraph (c) if the lawyer made reasonable efforts to prevent the access or disclosure. Factors to be considered in deciding if a lawyer took reasonable efforts include, but are not limited to, “the sensitivity of the information, the likelihood of disclosure if additional safeguards are not employed, the cost of employing additional safeguards, the difficulty of implementing the safeguards, and the extent to which the safeguards adversely affect the lawyer’s ability to represent clients (e.g. by making a device or important piece of software excessively difficult to use).” The comment also adds that “[a] client may require the lawyer to implement special security measures not required by this Rule or may give informed consent to forgo security measures that would otherwise be required by this Rule.”
Rule 4.4 was revised to clarify that if a lawyer receives not only a document but also electronically stored information relating to the representation of the lawyer’s client and knows or reasonably should know that the electronically stored information was inadvertently sent, the lawyer has a duty to promptly notify the sender. Comment 2 to Rule 4.4 was revised to explain that “a document or electronically stored information is inadvertently sent when it is accidentally transmitted, such as when an email or letter is misaddressed or a document or electronically stored information is accidentally included with information that was intentionally transmitted.” Moreover, the comment explains that for purposes of this rule, “electronically stored information” includes “email and other forms of electronically stored information, including embedded data (commonly referred to as metadata. . . .)” The comment goes on to state that “[m]etadata in electronic documents creates an obligation under this Rule only if the receiving lawyer knows or reasonably should know that the metadata was inadvertently sent to the receiving lawyer.”
The application and interpretation of these rules will be the big issue. For instance, what does it mean for lawyers and clients that lawyers must keep abreast of the benefits and risks associated with relevant technology? This could mean, for example, lawyers, especially in cases involving the production of large amounts of data, need to understand the benefits and risks of “predictive coding.” It could also mean that lawyers need to know the benefits and risks of “cloud computing” and other relatively recent technological advancements affecting the practice of law. Another important issue is what a lawyer must do to protect client data from being stolen or lost. The model rules give factors to be considered, but these hardly provide all the answers.
While Pennsylvania has not yet adopted these revisions, lawyers in Pennsylvania should be aware of these requirements, should be guided by them and should be learning about technology. Technology has a significant impact on lawyers’ clients and their practice. Lawyers can no longer “hide” from technology.
Our Law Firm: Houston Harbaugh in Pittsburgh, Pa. Business Litigation. Pittsburgh Strong.®
Contact our Pittsburgh Intellectual Property, Data Security, Trade Secret, DTSA and Technology Attorneys at Houston Harbaugh, P.C. through IP Section Chair Henry M. Sneath at 412-288-4013 or firstname.lastname@example.org. Some posts herein were published by the law firm Picadio Sneath Miller & Norton, P.C. (PSMN®) which has merged with HoustonHarbaugh, P.C. and are used by permission. DTSALaw® is a federally registered trademark. See Firm Website at: www.hh-law.com