IP Law Alert : Intellectual Property Lawyers & Attorneys : Gibbons Law Firm : Copyrights, Patent Infringement, Unfair Competition

Coming off a year that included the Smith-Leahy “America Invents Act,” 2012 portends to have some significant developments in IP law.

Decisions for IP practitioners and industry to watch for include:

• the Supreme Court’s decision in Caraco Pharm. Labs. Ltd. v. Novo Nordisk A/S, regarding “use codes” and section viii carve-outs under the Hatch-Waxman Act;
• the Supreme Court’s decision in Mayo v. Prometheus, regarding patentable subject matter, post-Bilski; and
• the Federal Circuit’s upcoming en banc decisions in McKesson and Akamai, regarding joint infringement liability.

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New Jersey, along with New York, Massachusetts and Texas, are the only states that have not adopted some form of the Uniform Trade Secrets Act. Not for much longer.

Last week, the New Jersey Trade Secrets Act, A-921/S-2456 passed unanimously in the New Jersey Assembly, and is on its way to the Governor’s desk. Governor Christie will have 45 days to sign the measure into law. Once enacted, the law will be effective immediately, but will not apply retroactively.

To date, New Jersey has applied the common law to trade secrets. The pending law reflects much of this common law tradition. Basically, the Act defines a trade secret as information, regardless of form, that derives independent economic value from not being generally known to others who can gain economic value from its disclosure; and, is the subject of reasonable efforts to maintain its secrecy.

The Act protects a trade secret holder from misappropriation, which is defined as a trade secret acquired by improper means or improperly disclosed. Among the remedies available for misappropriation are: damages, both actual and for unjust enrichment; as well as a reasonable royalty for unauthorized use or disclosure; punitive damages; injunctive relief for actual or threatened misappropriation; and the possibility of attorney’s fees. Attorney’s fees are also available as a remedy for misappropriation claims made in bad faith, and with respect to a motion to terminate an existing injunction that is made or resisted in bad faith. The Act shortens the six-year statute of limitations previously available for bringing an action (under N.J.S.A. §2A:14-1) to a three-year term beginning with the time of actual discovery of a misappropriation or the time at which discovery would have occurred with reasonable diligence.

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Cybercrime has increased tremendously in the digital economy. “According to the American Society for Industrial Security, American businesses [are] losing $250 billion a year from intellectual property theft since the mid-1990’s.”¹ There is a clear and growing threat of Chinese industrial espionage targeted at American companies. In a recent case, a Michigan couple was accused of stealing $40 million worth of trade secrets from General Motors and selling them to a Chinese car maker. Aside from hackers, the threat also exists within organizations from insiders. A recent study commissioned by Cisco found that “[i]n the hands of uninformed, careless, or disgruntled employees, every device that accesses the network or stores data is a potential risk to intellectual property or sensitive customer data.”

According to the Ponemon Institute, a privacy and information management research firm, incidents of data breach costs U.S. companies $204 per compromised customer record. This can quickly escalate to the millions of dollars, not including penalties and other fees that may be imposed by federal and state regulatory authorities. The high cost of a security breach can have a profound effect on an organization’s profit and loss, market presence and competitive advantage. It can also result in damage to brand and reputation. In light of the above, American companies need to exercise increased vigilance to protect their trade secrets and other valuable intellectual property (IP) that are strategic to organizational success and competitive advantage.

President Obama, recognizing the increasing toll of cybercrime on U.S. commerce, on May 29, 2009 issued a very strong statement titled “On Securing Our Nation’s Cyber Infrastructure.” He warned: “every day we see waves of cyber thieves trolling for sensitive information—the disgruntled employee on the inside, the lone hacker a thousand miles away, organized crime, the industrial spy and, increasingly, foreign intelligence services… . It’s been estimated that last year alone cyber criminals stole intellectual property from businesses worldwide worth up to one trillion dollars. In short, America’s economic prosperity in the 21st century will depend on cybersecurity.”

Stay tuned for an upcoming post on the Fifth Annual Gibbons E-Discovery Conference, where privacy and legal practitioners tackled the subject of cybersecurity . . . .

¹ Hazlewood, Sara. “Tech Firms Watching Trade Secret Trials,” Business Journal Serving San Jose & Silicon Valley, May 14, 1999, 17:2, p. 7.

Luis J. Diaz is a Director in the Gibbons Intellectual Property Department. John J. Cahill, an Associate in the Gibbons Intellectual Property Department, co-authored this post.

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With the U.S. economy still reeling from the aftershock of what is now known as the “Great Recession,” companies large and small are evaluating cloud computing as a means of reducing IT costs. The National Institute of Standards and Technologies (“NIST”) and the Cloud Security Alliance have defined cloud computing as a model for on-demand network access to a shared pool of computing resources over the internet, namely software applications, data servers, networks and other services. Just as businesses and consumers now pay for gas, electricity and other utilities, cloud enthusiasts predict that the cloud will be sold on demand as a pure IT service.

The Silver Lining

Industry groups like ISACA recognize the silver lining in the cloud. For example, there are potential cost savings in the economies of scale that are achievable in a shared computing environment. The cloud also allows companies to scale without any major software or hardware investment. Thus, cloud users are able to deploy new services more rapidly than they could in a traditional IT model. Cloud computing also can accommodate changing business requirements in a flexible and scalable format. By relocating IT services to the cloud, moreover, companies are freed to focus on their core businesses, improve processes, innovate and increase productivity. In short, the promise of cloud computing is compelling – convert IT private networks to an on-demand, pay-as-you-go IT utility service that produces substantial savings for users.

Storm Clouds Gathering

While the benefits of the cloud are clear, the recent security breaches reported by Google highlight just some of the attendant risks. Google notified users that it inadvertently shared private Document and Spreadsheet materials with contacts that were never granted access to them. In response to cloud computing risks, The Electronic Privacy Information Center, an industry watchdog, has filed an FTC complaint to investigate the privacy and security measures of Gmail, Google Docs and Google’s other “cloud computing” services. Even John Chambers, Cisco Systems’ Chairman and CEO, has conceded that the computing industry’s move to an on-demand IT service on the Internet was “a security nightmare.” And, Microsoft now has joined the bandwagon and called on U.S. legislators to enact a “Cloud Computing Advancement Act.”

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