Voting Machine Makers Claim The Names Of The Entities That Own Them Are Trade Secrets

from the yeah-this-makes-you-all-look-way-less-shady dept

Recently, the North Carolina State Board of Elections asked suppliers of electronic voting machines a simple question: who owns you? (h/t Annemarie Bridy)

On June 14, 2019, the State Board of Elections requested that your companies disclose any owners or shareholders with a 5% or greater interest or share in each of the vendor’s company, any subsidiary company, of the vendor, and the vendor’s parent company.

This seems like very basic information -- information the Board should know and should be able to pass on to the general public. After all, these are the makers of devices used by the public while electing their representatives. They should know who's running these companies and who their majority stakeholders are. If something goes wrong (and something always does), they should know who's ultimately responsible for the latest debacle.

It's not like the state was asking the manufacturers to cough up code and machine schematics. All it wanted to know is the people behind the company nameplates. But the responses the board received indicate voting system manufacturers believe releasing any info about their companies' compositions will somehow compromise their market advantage.

Hart Intercivic said letting the public know that the company is owned by H.I.G. Hart, LLC and Gregg L. Burt is a fact that would devalue the company if it were made public.

Hart InterCivic, a corporation that derives independent actual value from this information not being generally known or readily ascertainable and makes reasonable efforts to maintain the secrecy of this information, requests that it be designated as a trade secret pursuant to G.S. § 132-1.2(1)d. and G.S. § 66-152(3).

Election Systems & Software (ES&S) said basically the same thing, claiming this information is "proprietary and confidential information:"

The following individuals and/or entities own 5% or more of the shares of Government Systems, Software & Services, Inc.:

McCarthy Group, LLC
Tom Burt
Tom O'Brien

Clear Ballot also claimed its list of owners was a trade secret:

Hello, per your request please see below for a list of our shareholders with a 5% or greater share of Clear Ballot Group, Inc. We have no other parent companies or subsidiaries:

1. Larry Moore
2. Tim Halvorsen
3. Steven Papa
4. Raging Capital Opportunity Fund V, LLC

Even this minimal amount of transparency had to be extracted at Board-point. While it's true private companies such as these are under no obligation to inform the public about the details of their ownership, they're all involved with providing goods and services to government agencies. Government agencies hooking up with private companies that treat ownership details as trade secrets isn't a good idea -- not when the government has certain transparency obligations.

Even with the release of these details, there's still plenty of secrecy to go around. Election security advocate Lynn Berstein says the ownership of voting machine companies is a deliberate, multi-layered mess designed to obscure who's running these shops -- and to possibly hide a bunch of stuff that looks like corruption, fraud, or general financial malfeasance.

One of ES&S's subsidiaries (and there are at least 39 of those) -- Meritage Homes Corp. -- shuffled some securities ownership the same day the North Carolina election board asked it to provide information about the company's ownership. Maybe it's a coincidence. Or maybe ES&S was offloading a politically-inconvenient owner. Whatever the case is, it certainly doesn't look good.

The government can't do everything itself. It will need vendors to supply goods and services. But these vendors need to operate under the same transparency the government is forced to, if they want to secure these lucrative contracts. Voters aren't given a choice in voting machine providers. They're stuck with whatever their government gives them. But when the government actually decides to perform a little vetting, the makes of the machines trusted to deliver accurate vote counts want to hide behind trade secret exceptions to prevent the public -- and their elected officials -- from knowing exactly who they're dealing with when they head into the voting booth.

Given the abhorrent track record of so many voting machine companies, it's no surprise they're extremely reluctant to share any details with the voting public. But that doesn't make them right. It just makes them a little bit more evil.

Filed Under: elections, north carolina, trade secrets, transparency, voting machines

Tired: Insane Patent Verdicts; Wired: Insane Trade Secret Verdicts

from the stop-expanding-intellectual-property-law dept

There are so many issues related to what's referred to (misleadingly, of course) as "intellectual property" that it's difficult to cover them all. For a while I'd been meaning to write about the attempt to "raise up" trade secret law to the federal level and what kinds of problems that might cause. Professor Eric Goldman, not surprisingly, was covering this all along, noting that the Defend Trade Secrets Act from 2016 was the "biggest IP development in years" (even if Congress, in a little twist, made sure it was not officially an "intellectual property" law -- which means that Section 230 immunity still applies).

Of course, it usually takes a few years for the real effects of new laws to be felt. In a fascinating, if troubling article, economist Ike Brannon, notes that we may be on the verge of a new raft of patent trolling-esque legal fights over loosely defined "trade secrets," that have the potential to be much, much worse than patent trolling. At least with patent trolls, there's an actual patent with actual definitions (even if they're a mess) that can be looked at to see if there's infringement. The world of trade secrets is a lot more murky.

Brannon points to a crazy recent case, involving a title insurance company Title Source (now Amrock) who sued a data analytics firm called HouseCanary over a claim that HouseCanary breached a contract the two companies had to deliver "an advanced, automated home valuation model." HouseCanary countersued, claiming that Title Source used its proprietary trade secrets to develop its own home valuation model. As Brannon points out, most people thought little of these counterclaims... but a funny thing happened when it got to court:

At the time, HouseCanary’s claim appeared to be merely a tactical move with little basis in reality, but to the surprise of many a jury found in its favor in the countersuit and awarded it nearly three-quarters of a billion dollars. A judge recently upheld the jury’s award.

Several people questioned the jury’s rationale, and shortly after the verdict several former HouseCanary employees came forward to attest that what their company delivered to Amrock was of marginal value and contained no proprietary intellectual property or trade secrets that could have been stolen.

For instance, data on home sales and prices are publicly available and software that aggregates and collects it has been widely available for two decades; Redfin and Zillow each employ such software. What’s more, the alleged Amrock product at issue was never commercially sold or marketed.

The case is now being appealed, but as Brannon notes, thanks to the DTSA, suddenly there's a wide open field of questionable trade secret claims that can be brought in federal court:

Unfortunately, it has become clear that the legislation did little to clear up these disputes. The scope of the damage awards in the the last few years and the recent spike in cases involving trade company secrets means that more companies should brace themselves for lawsuits.

It was not the intent of Congress to broaden the scope for such lawsuits when it enacted a more uniform approach to the trade secrets law. However, that does indeed appear to be occurring, and the HouseCanary verdict may very well serve as the (house)canary in the coal mine, serving to inform the market of the peril in the law.

This, of course, should not surprise anyone who's spent literally any amount of time studying how other areas of so-called intellectual property have developed over the years. We've seen copyright trolling, patent trolling, and trademark trolling. There are even some examples that might be considered publicity rights trolling. So, of course, there's going to be an increase in trade secret trolling, especially when you're discussing an area of law that includes much more vague and amorphous "property" (note: not actual property) than copyrights or patents. And, of course, this is exactly what Professor Goldman predicted years ago, and supporters of the law brushed off.

Filed Under: dtsa, patent trolling, trade secret trolling, trade secrets, trolling
Companies: amrock, housecanary, title source

Democratic National Committee's Lawsuit Against Russians, Wikileaks And Various Trump Associates Full Of Legally Nutty Arguments

from the slow-down-there-dnc dept

This morning I saw a lot of excitement and happiness from folks who greatly dislike President Trump over the fact that the Democratic National Committee had filed a giant lawsuit against Russia, the GRU, Guccifier 2, Wikileaks, Julian Assange, the Trump campaign, Donald Trump Jr., Jared Kushner, Paul Manafort, Roger Stone and a few other names you might recognize if you've followed the whole Trump / Russia soap opera over the past year and a half. My first reaction was that this was unlikely to be the kind of thing we'd cover on Techdirt, because it seemed like a typical political thing. But, then I looked at the actual complaint and it's basically a laundry list of the laws that we regularly talk about (especially about how they're abused in litigation). Seriously, look at the complaint. There's a CFAA claim, an SCA claim, a DMCA claim, a "Trade Secrets Act" claim... and everyone's favorite: a RICO claim.

Most of the time when we see these laws used, they're indications of pretty weak lawsuits, and going through this one, that definitely seems to be the case here. Indeed, some of the claims made by the DNC here are so outrageous that they would effectively make some fairly basic reporting illegal. One would have hoped that the DNC wouldn't seek to set a precedent that reporting on leaked documents is against the law -- especially given how reliant the DNC now is on leaks being reported on in their effort to bring down the existing president. I'm not going to go through the whole lawsuit, but let's touch on a few of the more nutty claims here.

The crux of the complaint is that these groups / individuals worked together in a conspiracy to leak DNC emails and documents. And, there's little doubt at this point that the Russians were behind the hack and leak of the documents, and that Wikileaks published them. Similarly there's little doubt that the Trump campaign was happy about these things, and that a few Trump-connected people had some contacts with some Russians. Does that add up to a conspiracy? My gut reaction is to always rely on Ken "Popehat" White's IT'S NOT RICO, DAMMIT line, but I'll leave that analysis to folks who are more familiar with RICO.

But let's look at parts we are familiar with, starting with the DMCA claim, since that's the one that caught my eye first. A DMCA claim? What the hell does copyright have to do with any of this? Well...

Plaintiff's computer networks and files contained information subject to protection under the copyright laws of the United States, including campaign strategy documents and opposition research that were illegally accessed without authorization by Russia and the GRU.

Access to copyrighted material contained on Plaintiff's computer networks and email was controlled by technological measures, including measures restricting remote access, firewalls, and measures restricting acess to users with valid credentials and passwords.

In violation of 17 U.S.C. § 1201(a), Russia, the GRU, and GRU Operative #1 circumvented these technological protection measures by stealing credentials from authorized users, condcting a "password dump" to unlawfully obtain passwords to the system controlling access to the DNC's domain, and installing malware on Plaintiff's computer systems.

Holy shit. This is the DNC trying to use DMCA 1201 as a mini-CFAA. They're not supposed to do that. 1201 is the anti-circumvention part of the DMCA and is supposed to be about stopping people from hacking around DRM to free copyright-covered material. Of course, 1201 has been used in all sorts of other ways -- like trying to stop the sale of printer cartridges and garage door openers -- but this seems like a real stretch. Russia hacking into the DNC had literally nothing to do with copyright or DRM. Squeezing a copyright claim in here is just silly and could set an awful precedent about using 1201 as an alternate CFAA (we'll get to the CFAA claims in a moment). If this holds, nearly any computer break-in to copy content would also lead to DMCA claims. That's just silly.

Onto the CFAA part. As we've noted over the years, the Computer Fraud and Abuse Act is quite frequently abused. Written in response to the movie War Games to target "hacking," the law has been used for basically any "this person did something we dislike on a computer" type issues. It's been dubbed "the law that sticks" because in absence of any other claims that one always sticks because of how broad it is.

At least this case does involve actual hacking. I mean, someone hacked into the DNC's network, so it actually feels (amazingly) that this may be one case where the CFAA claims are legit. Those claims are just targeting the Russians, who were the only ones who actually hacked the DNC. So, I'm actually fine with those claims. Other than the fact that they're useless. It's not like the Russian Federation or the GRU is going to show up in court to defend this. And they're certainly not going to agree to discovery. I doubt they'll acknowledge the lawsuit at all, frankly. So... reasonable claims, impossible target.

Then there's the Stored Communications Act (SCA), which is a part of ECPA, the Electronic Communications Privacy Act, which we've written about a ton and it does have lots of its own problems. These claims are also just against Russia, the GRU and Guccifer 2.0, and like the DMCA claims appear to be highly repetitive with the CFAA claims. Instead of just unauthorized access, it's now unauthorized access... to communications.

It's then when we get into the trade secrets part where things get... much more problematic. These claims are brought against not just the Russians, but also Wikileaks and Julian Assange. Even if you absolutely hate and / or distrust Assange, these claims are incredibly problematic against Wikileaks.

Defendants Russia, the GRU, GRU Operative #1, WikiLeaks, and Assange disclosed Plaintiff's trade secrets without consent, on multiple dates, discussed herein, knowing or having reason to know that trade secrets were acquired by improper means.

If that violates the law, then the law is unconstitutional. The press regularly publishes trade secrets that may have been acquired by improper means by others and handed to the press (as is the case with this content being handed to Wikileaks). Saying that merely disclosing the information is a violation of the law raises serious First Amendment issues for the press.

I mean, what's to stop President Trump from using the very same argument against the press for revealing, say, his tax returns? Or reports about business deals gone bad, or the details of secretive contracts? These could all be considered "trade secrets" and if the press can't publish them that would be a huge, huge problem.

In a later claim (under DC's specific trade secrets laws), the claims are extended to all defendants, which again raises serious First Amendment issues. Donald Trump Jr. may be a jerk, but it's not a violation of trade secrets if someone handed him secret DNC docs and he tweeted them or emailed them around.

There are also claims under Virginia's version of the CFAA. The claims against the Russians may make sense, but the complaint also makes claims against everyone else by claiming they "knowingly aided, abetted, encouraged, induced, instigated, contributed to and assisted Russia." Those seem like fairly extreme claims for many of the defendants, and again feel like the DNC very, very broadly interpreting a law to go way beyond what it should cover.

As noted above, there are some potentially legit claims in here around Russia hacking into the DNC's network (though, again, it's a useless defendant). But some of these other claims seem like incredible stretches, twisting laws like the DMCA for ridiculous purposes. And the trade secret claims against the non-Russians is highly suspect and almost certainly not a reasonable interpretation of the law under the First Amendment.

Filed Under: cfaa, conspiracy, dmca, dnc, donald trump junior, ecpa, gru, hack, hacking, jared kushner, julian assange, paul manafot, rico, roger stone, russia, sca, trade secrets
Companies: dnc, wikileaks

Waymo And Uber's Settlement Is A Good Thing: Focus On Innovating, Not Litigating

from the took-too-long-already dept

Back in December, right before the Waymo/Uber trial was supposed to begin (before it got delayed due to an unexpected bombshell about withholding evidence that... never actually came up at the trial), I had a discussion with another reporter about the case, in which we each expressed our surprise that a settlement hadn't been worked out before going to trial. It seemed as though part of the case was really about the two companies really disliking each other, rather than there being a really strong legal case.

A year ago, when the case was filed, I expressed disappointment at seeing Google filing this kind of lawsuit. My concern was mainly over the patent part of the case (which were dropped pretty early on), and the fact that Google, historically, had shied away from suing competitors over patents, tending to mostly use them defensively. But I had concerns about the "trade secrets" parts of the case as well. While there does seem to be fairly clear evidence that Anthony Levandowski -- the ex-Google employee at the heart of the discussion -- did some sketchy things in the process of leaving Google, starting Otto, and quickly selling Otto to Uber, the case still felt a lot like a backdoor attempt to hold back employee mobility.

As we've discussed for many years, a huge part of the reason for the success of Silicon Valley in dominating the innovation world has to do with the ease of employee mobility. Repeated studies have shown that the fact that employees can switch jobs easily, or start their own companies easily, is a key factor in driving innovation forward. It's the sharing and interplay of ideas that allows the entire industry to tackle big problems. Individual firms may compete around those big breakthroughs, but it's the combined knowledge, ideas, and perspective sharing that results in the big breakthroughs.

And even though that's widely known, tech companies have an unfortunate history of trying to stop employees from going to competitors. While non-competes have been ruled out in California, a few years back there was a big scandal over tech companies having illegal handshake agreements not to poach employees from one another. It was a good thing to see the companies fined for such practices.

However, the latest move is to use "trade secrets" claims as way to effectively get the same thing done. The mere threat of lawsuits can stop companies from hiring employees, and can limit an employee's ability to find a new job somewhere else. That should concern us all.

However, in this lawsuit, everything was turned a bit upside down. Part of it was that there did appear to be some outrageous behavior by Levandowski. Part of it was that, frankly, there are few companies out there disliked as much as Uber. It does seem that if it were almost any other company on the planet, many more people would have been rooting against Google as the big incumbent suing a smaller competitor. But, in this case, many many people seemed to be rooting for Google out of a general dislike of Uber itself.

My own fear was that this general idea of "Uber = bad" combined with "Levandowski doing sketchy things" could lead to a bad ruling which would then be used to limit employee mobility in much more sympathetic settings. Thankfully, that seems unlikely to happen. As Sarah Jeong (who's coverage of this case was absolutely worth following) noted, despite all the rhetoric, it wasn't at all clear that Waymo proved its case. Lots of people wanted Google/Waymo to win for emotional reasons, but the legal evidence wasn't clearly there.

And now the case is over. As the trial was set to continue Friday morning, it was announced that the two parties had reached a settlement, in which Uber basically hands over a small chunk of equity to Waymo (less than Waymo first tried to get, but still significant). As Jeong notes in another article, both sides had ample reasons to settle -- but the best reason of all to settle is so that they can focus on just competing in the market, rather than the courtroom and in not setting bad and dangerous precedent concerning employee mobility in an industry where that's vital.

Filed Under: anthony levendowski, autonomous vehicles, competition, employee mobility, innovation, patents, self driving cars, settlement, trade secrets, travis kalanik
Companies: google, otto, uber, waymo

Uber Waymo Trial Delayed After Justice Department Jumps In, Unprompted, To Tell Judge That Uber Was Withholding Evidence

from the holy-shit dept

So lots of people were gearing up for the Waymo/Uber trial starting next week over Uber's alleged efforts to get Waymo's (Google's self-driving car project) trade secrets. There are a whole bunch of issues around this case that are interesting -- from questions involving what really is a trade secret to where the line is between controlling former employees and allowing people to switch jobs within an industry. But... all of that has been completely tossed out the window as more and more evidence piles up that beyond those key legal issues, Uber sure did some shady, shady stuff. This morning, the latest bombshell (in a long line of bombshells) is that the judge has delayed the trial after the Justice Department got involved, totally unprompted. No, really.

You have to piece together some of the details, because some of the key documents are heavily redacted, but let's try to unpack what appears to have happened. Earlier this year, the judge in the case, William Alsup, referred the case to federal prosecutors to also investigate whether anything criminal had happened. Normally, in such cases, federal prosecutors will spend quite a while looking into the details and no one -- including the judge who made the referral -- will hear boo from the DOJ until charges are filed (if that ever happens). Except... that's not what happened. Apparently while investigating the possible criminal behavior by Uber, the DOJ noticed that Uber had failed to hand over a key piece of evidence during discovery. Specifically, it appears to be a letter from a former Uber security analyst named Richard Jacobs, concerning efforts by Uber to access competitor trade secrets -- and to conceal that information (there is some suggestion that this involved using disappearing messaging apps).

This would have been required to be handed over during discovery, but was not. And no one would have known about it, had the acting US Attorney for the Northern District of California not decided, unprompted, to let Judge Alsup know about it -- leading Judge Alsup, just last week, to order Uber to hand it over to Waymo. You can get some of this from the heavily redacted filing made by Waymo's lawyers, in which you can hear their exasperation over just finding this out.

Also, Judge Alsup order Jacobs to appear in court and answer questions, and reports from the courtroom suggest it's been... messy. Reporters Kate Conger and Joe Mullin have been providing some fairly astounding color commentary. A few snippets from their tweets:

As computer security guru Matt Blaze points out, there are plenty of good reasons for companies to want to use secure communications -- but doing so explicitly to avoid having your conversations show up during discovery certainly doesn't look good in court.

Either way, Judge Alsup appears to be less than happy about all of this:

“We're going to put trial off … because even if half of what’s in that letter is true it would be a huge injustice to Waymo to have to go to trial now,” the judge said...

Judge Alsup also noted that "the public is going to hear everything" about this evidence, so there's likely to be more coming down the road.

Once again, there are all sorts of interesting legal questions underlying this case -- but as happens all too often, it appears that some fairly blatant bad behavior is likely to obscure much of that. While it may make for more entertaining stories, it can muck up some of the legal questions. Or, as lawyers sometimes note, bad cases make bad law. This is shaping up to be a bad case with a pretty clear pattern of incredibly bad behavior by Uber (which, of course, appears to be consistent with the company's reputation). And, unfortunately, that seems likely to distract from some actually important issues that could have a much wider impact, concerning questions around trade secrets and employment.

But, no matter what, withholding evidence like this during discovery -- not to mention some of that evidence being an explanation of how the company tried to avoid discovery -- is a double layer cake of extremely sketchy behavior. It seems unlikely that this will end well for Uber.

Filed Under: autonomous vehicles, discovery, doj, evidence, richard jacobs, self-driving cars, trade secrets, william alsup
Companies: google, uber, waymo

TPP's Forgotten Danger: Stronger Trade Secrets Protection, With Criminal Penalties For Infringement

from the quid-without-a-quo dept

Since the release of the TPP text back in November, commentators have naturally tended to concentrate on the bigger, more obvious problems -- things like the corporate sovereignty chapter, the extension of Big Pharma's monopolies to scientific data, and copyright provisions -- that Techdirt has been exploring for years. But there's one area that has received relatively little attention, perhaps because for most people it's an obscure topic that seems rather unimportant. It concerns the issue of trade secrets, which Techdirt wrote about in the context of TPP in October 2014. There, we concentrated on the risk that it would chill investigative reporting and corporate whistleblowing, but a new column in The Globe and Mail by Dan Breznitz, professor of Innovation Studies at the Munk School of Global Affairs at the University of Toronto, looks at the economic impact of TPP's trade secrets measures. First, he notes that copyright and patents are based on a social bargain:

The side that wishes to be granted a patent needs to disclose new and useful information to society at large, and in return we (the people) give it an exclusive right for a limited time, preventing others from using it without permission. In other words, we grant it a temporary monopoly.

But trade secrets are quite different:

[W]e (the people) give rights to prevent others from using any information without any disclosure and without any time limitation or otherwise -- as long as it remains undisclosed (in other words, secret). In so doing, we give a quid that covers potentially wide-ranging types of information, without receiving any quo in return.

Since society gets almost nothing out of this other bargain, the remedy available for the disclosure of secret business information is limited:

Currently, the remedy is available only against those who breached the contract or trust, but not against others who obtained the information. Once the information has been disclosed publicly, the person who disclosed it might be held liable, but everyone else is free to use it.

As Breznitz points out, TPP changes all that, offering a much wider scope for protection, and much more serious penalties for breaches of trade secrets:

Article 18.78 [of the TPP text] adopts a potentially very broad concept of a trade secret, a very wide range of activities that might constitute a breach and a very broad potential class of persons who might be liable. Worse, it also calls for criminalization. The potential risk for would-be entrepreneurs to start a business in anything that even remotely relates to their past job are now enormous.

In other words, like much everything else in TPP, the proposed changes work to the advantage of big, established companies -- and against the interests of start-ups and entrepreneurs:

The resulting chill [caused by TPP's trade secrets rules] in entrepreneurship alone would cost the U.S. and Canadian economies significantly higher orders of magnitude in terms of lost growth, jobs and welfare than any positive benefits that the TPP might bring. Even more disturbing, Articles 18.74 and 18.75 profoundly expand the enforcement measures, including significant provisional ex parte proceedings [with only one side present], and narrow the discretion of the courts. Those provisions apply to all intellectual property rights, including trade secrets. These extra-potent tools would be used not only where they are appropriate, but also where they aren’t -- such as to stifle competition and innovation.

That's a bold claim, but, if true, suggests that TPP could be an extremely bad deal for the US. At the very least, it deserves some serious research to investigate the issue. However, given the absurdly-truncated time span available for studying the TPP text, that research is unlikely to be conducted, which means that the US could end up entering blindly into an agreement whose net economic and social effects will be decidedly negative.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: infringement, tpp, trade secrets

Some Now Suggesting Cardinals Hack May Have Violated The Economic Espionage Act

from the uh-oh dept

After the revelation that the St. Louis Cardinals are being investigated by the FBI for hacking into the Houston Astros' networks and grabbing a whole bunch of proprietary statistical and scouting data, much of the speculation centered around one or two rogue employees, who may have used old passwords to get into the Astros' systems. Those systems had been set up by the Astros' new GM, who was a former Cardinals employee and who presumably just reused his passwords. With that speculation in mind, the focus then turned to how the feds might look to use the CFAA to go after those employees for having committed a federal crime. All of that would be serious enough in and of itself, except some of the details coming out of the investigation and some of the expert opinions on which laws may be brought to bear are making all of this look much more serious than even most people's first take.

Much of the speculation that only an employee or two will face punishment under the CFAA has taken the form of something like this, from Alexander Southwell, a cybersecurity expert for law firm Gibson Dunn.

Southwell said the most likely charge would involve violation of the federal Computer Fraud and Abuse Act. The Cardinals would be unlikely to face criminal charges unless it could be proven that the team, and not an employee or group of employees, was behind the act, Southwell said.

“The entity can’t be held responsible for the acts of rogue employees,” he said.

But not everyone agrees with that. Much in the way that Sarbanes-Oxley was constructed to keep high-level executives from shirking their responsibility for the actions of the businesses they oversee, there are laws on the books that could be used to go after the Cardinals' leadership not only if they had direct knowledge of this alleged hack, but also if they should have known about it but didn't. Serious negligence would have to be proven on the part of the higher-ups still, but the bar is lower. Here's the take from Nathaniel Grow, an Assistant Professor of Legal Studies at the University of Georgia.

The alleged hacking may have also violated the Economic Espionage Act of 1996, which criminalizes the theft or misappropriation of trade secrets. The data allegedly accessed by the Cardinals would appear to satisfy the legal definition of a trade secret, which covers any information that provides a business with a competitive advantage over its competitors and is not generally known by the public (for example, the recipe for Coca-Cola). The Astros’ proprietary statistical analysis and internal scouting reports would almost certainly qualify as trade secrets under this definition. . . Under the EEA, anyone who steals, copies, or downloads someone else’s trade secret information without permission faces a monetary fine and possible jail sentence of up to 10 years in prison per offense.

Perhaps more significantly, however, the EEA would also potentially allow the government to charge the entire Cardinals organization with criminal activity. As Section (b) of the law provides, “Any organization that commits any offense described in subsection (a) shall be fined not more than $5,000,000.“ In order to charge the entire organization with criminal activity, however, prosecutors would likely have to show that high-level Cardinals executives were aware of the hacking, or at least should have known that it was going on. If that is the case, then the entire team could face criminal prosecution. But if the hacking were simply carried out by a few lower-level team officials, without the knowledge of any higher-ups, then any organization-wide criminal case would be unlikely.

Complicating all of this further is the combination of Major League Baseball's antitrust status, which in part hinges on the notion that MLB acts as an umbrella organization under which the franchises operate. One of the questions that's been raised is whether or not the EEA could be invoked in this situation due to that organizational architecture. After all, two different people might own McDonald's franchises, but it would hardly make sense if one sued the other for stealing "trade secrets" when they're both McDonald's. Are the two teams competitors or are they different entities within the same organization?

Either way, the more that comes out, the more it's becoming clear that the FBI has someone or some people in the Cardinals organization dead to rights. The question is going to end up being how many are punished and under what laws they are prosecuted.

Filed Under: astros, cardinals, cfaa, criminal, economic espionage, trade secrets
Companies: houston astros, major league baseball, st. louis cardinals

Guy Who Inspired The Term 'Patent Troll' May Be Leaving The Patent Trolling Business

from the but-watch-out-for-those-trade-secrets dept

Anyone remember Ray Niro? He's the lawyer who so perfected patent trolling that the term "patent trolling" was first used (by future patent troll Peter Detkin) back in the 1990s to describe... Ray Niro for his lawsuits. Niro was the original uber patent troll, demanding settlements and suing all sorts of people. Perhaps his most famous move was that he had control over a patent that he argued covered any use of a JPEG image -- and would use it to go after basically anyone who displeased him (if they had any JPEGs on their websites). This included the Green Bay Packers and a resort in Florida. When noted patent system critic Greg Aharonian described that patent as "crap," Niro sued him for infringing on it as well. Niro also put a bounty on the identify of an (at the time) anonymous blogger who called himself the "Patent Troll Tracker."

Either way, Niro apparently claims that he's getting out of the patent trolling business. He's blaming the Supreme Court's ruling in the Octane Fitness case that made it easier for the victims of patent trolls to seek fees. While many people point to last year's ruling in the Alice case, which has been used to kill a bunch of software patents, as shifting the balance against patent trolling, the Octane Fitness ruling may be having an even bigger impact, because it can directly hit patent trolls in their wallets. And that's what's happening with Niro:

Niro and his firm have been ordered to pay fees in a patent suit he brought against HTC on behalf of Intellect Wireless and an inventor. The parties are still litigating over the amount, but HTC is seeking $4.1 million.

The fee order was "a wake-up call," Niro told Crain's. "I can take it once, twice, but am I going to take it three or four times? No. Why should I?"

The Ars Technica article linked above notes that another prominent patent troll, Erich Spangenberg, has been pointing to the Octane Fitness ruling for why he's moving out of the business as well:

"You invested up front to buy the patent, did the research and found infringement," Spangenberg explained to Ars in an interview last year, shortly after he made the decision to move on from IPNav. "Over and above that, you go through an IPR and spend another million there, and then you get hit with a $2 million to $3 million fee award. I don't want to be working on cases where that's what I'm worried about."

But, fear not for Niro. He's moving on to other lucrative trolling areas. The Crain's article where he initially claimed to be moving out of the patent trolling business notes that he's moving more aggressively into trade secrets:

Changes in patent law in the past year have gutted the business model that made it possible for law firms to represent “little guy” clients whose patents were being infringed, says Raymond Niro, founder of Niro Haller & Niro, one of the country's highest-profile plaintiff-side intellectual property boutiques. The firm, which has shrunk to 18 lawyers from 30, is considering taking more cases involving alleged breach of contract, nondisclosure agreements and misappropriation of trade secrets.

I've been meaning to write more about this (and I promise I will get to it eventually)... but over the last few years, there's been a big move to ratchet up laws around "protected trade secrets" with a big push coming from the US. Because of this, there is some evidence that we're already starting to see some "trade secret trolling" going on -- and given Niro's nose for early trolling opportunities, it's little surprise that he's exploring that as a new area for business.

Filed Under: fee shifting, jpeg patent, patent troll, patent trolling, ray niro, trade secrets
Companies: octane fitness

Global Moves To Give Corporations Yet More Legal Weapons By Strengthening Laws Protecting Trade Secrets

from the too-much-is-never-enough dept

Techdirt often discusses the problems with intellectual monopolies such as copyrights, patents and trademarks. These grant powers to exclude others from using something -- creative works, inventions, words and phrases. Increasingly, they create dense thickets of obligatory permissions that make it hard or even impossible for others to build on pre-existing work. That may serve the purposes of the monopolist, but is frequently to the detriment of society. Despite the fact that the enforcement options available to holders of such intellectual monopolies have been repeatedly and disproportionately strengthened in recent years, it seems that too much is never enough: there is now a move to boost another kind of monopoly right, that of trade secrets.

These already exist of course, but by one of those strange coincidences, new initiatives to enhance greatly the reach and exclusionary power of trade secrets have appeared simultaneously on both sides of the Atlantic. In the US, there are a pair of bills -- the "Defend Trade Secrets Act of 2014″ (pdf) and the "Trade Secrets Protection Act of 2014″ (TSPA - pdf) -- both aiming "to provide Federal jurisdiction for the theft of trade secrets, and for other purposes." The Fair Competition Blog offers the following summary:

If enacted, the TSPA would create a private right of action (very similar to that provided by the Uniform Trade Secrets Act ("UTSA")); permit the civil ex parte seizure of relevant evidence and of the trade secrets, to prevent their further use or disclosure; permit such actions to be brought under a five-year statute of limitations; and requiring the Attorney General to issue an annual report on the international threat of trade secrets misappropriation. There is apparently a 57% chance of the TSPA being enacted.

The USPTO is also active in this area. Here is a notice of a public meeting on the subject, to be held in January at its offices in Virginia:

The protection of U.S. trade secrets from misappropriation is an Administration priority. As noted in the Administration Strategy on Mitigating the Theft of U.S. Trade Secrets (February 2013), "trade secret theft threatens American businesses, undermines national security, and places the security of the U.S. economy in jeopardy." In pursuit of the goals of the Administration Strategy through information sharing and discussion, the United States Patent and Trademark Office will hold a public symposium on issues relevant to the protection of trade secrets. Topics to be discussed include losses due to trade secret theft and challenges to protecting trade secrets, the intersection of patent and trade secret protection, trade secret issues in civil litigation, trade secret protection in foreign jurisdictions, and proposed responses to the threat of trade secret theft in the U.S.

Meanwhile, in the EU, there is a proposal for a major "Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure" (pdf). The new rights would be very broad, prompting a group of leading civil organizations to write an open letter expressing their concerns about them:

We strongly oppose the hasty push by the European Commission and Council for a new European Union (EU) directive on trade secrets, which contains overly-broad protection and inadequate safeguards. This unbalanced piece of legislation will result in legal uncertainty and endanger freedom of expression and information, corporate accountability, information sharing and, possibly, innovation, rather than create a competitive and sound business environment in the EU, as the Commission claims.

If the draft directive, which the Commission published in November 2013, is passed, consumers, workers, researchers, journalists and whistleblowers in the EU will be at risk. The definition of 'trade secrets' in the draft directive is unreasonably broad, enabling almost anything within a company to be deemed as such. Unsurprisingly, the draft directive text is strongly supported by multinational companies because it would enable them to sue anyone who "unlawfully acquires, uses or discloses" their so-called trade secrets. Instead, the right to freely use and disseminate information should be the rule, and trade secret protection the exception.

As well as these efforts to introduce new laws in the US and EU directly, international treaties too are being used as a vehicle for promoting the enhanced protection of trade secrets. Back in October, David Levine produced a helpful analysis of what we know about the trade secrets provisions in TPP:

The elevation of trade secrecy is baked into the most recent leaked May 2014 IP chapter from the Trans Pacific Partnership Agreement (TPP). TPP, which is concluding yet another negotiating round today, is bringing trade secrecy to the international stage through efforts to harmonize IP law across continents and cultures. The role of secrecy is varied from country to country, but that has not stopped the TPP negotiators from apparently proposing language that would require criminal sanctions for unauthorized access to trade secrets.

As far as TAFTA/TTIP is concerned, we know that the lobby group Business Europe has been pushing for the inclusion of "strong trade secrets protections, combined with a commitment to effective enforcement in the TTIP" (pdf), and doubtless many companies and lobbyists have done the same. Moreover, an EU document leaked in March 2014 confirms that trade secrets are a "clear priority for the US" -- one that is unlikely to meet much resistance from the European Commission, given the plans for an EU Directive on the subject. The participation of the USTR in both the TPP and TTIP negotiations ensures close synchronization between them, so we can probably expect the existing bad ideas from TPP appearing in TAFTA/TTIP too.

Assuming those provisions are still present in the final texts of TPP and TAFTA/TTIP -- and assuming that those agreements are ratified -- they will boost significantly the current campaign from corporations around the world to turn trade secrets into yet another powerful legal weapon, just as patents, copyrights and trademarks have already become.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: intellectual property, protectionism, trade secrets

TPP Leak Confirms Measures To Criminalize Corporate Whistleblowing

from the no-public-interest-or-free-speech-exemptions dept

As Mike has reported, the core of the newly-leaked TPP chapter is about granting Big Pharma's wish-list, with other worrying stuff for the copyright industry's benefit thrown in for good measure. But hidden away in the chapter's 70+ pages there's something very different -- and very dangerous. Here's how the Australian newspaper The Age explains it:

The draft text provides that TPP countries will introduce criminal penalties for unauthorised access to, misappropriation or disclosure of trade secrets, defined as information that has commercial value because it is secret, by any person using a computer system.

That's clearly an incredibly broad definition of trade secret, and will allow a vast range of materials to enjoy this kind of protection. And by requiring criminal penalties, TPP aims to make that protection very serious indeed:

TPP countries may criminalise all such disclosures or, if they wish, limit criminal penalties to cases that involve "commercial advantage or financial gain"; are directed by or benefit "a foreign economic entity"; or are "detrimental to a [TPP] party's economic interests, international relations, or national defence or national security."

Notice that those are simply options: the default position is to criminalize everything. Moreover, even those "limited" cases could be applied very widely. Particularly troubling is the following aspect of the proposed text:

There are no public interest or free speech exemptions. Criminalisation of disclosure would apply to journalists working for commercial media organisations or wherever the leak was considered harmful to the "economic interests" of any TPP country.

The chilling effect that this would have on investigative reporting is evident. It would also represent yet another powerful reason not to become a corporate whistleblower.

The presence of this section in the latest TPP text is not a complete surprise: a slightly shorter version was already in the previous leak of this chapter, as we reported earlier this year. Moreover, its appearance in TPP seems to be part of a larger push for stronger protection of trade secrets around the world. In 2013, the European Commission proposed new rules "to help protect against the theft of confidential business information." One of the questions in the accompanying FAQ was whether trade secret protection will be part of TAFTA/TTIP. Here's the reply:

Trade secrets will be discussed in the TTIP negotiations, and has a heightened level of relevance with the recent allegations of economic espionage carried out by the national Security Agency (NSA). One goal could be to make sure that the two legal regimes are inter-operative facilitating recognition and enforcement of judgments on either side of the Atlantic. The EU and the US also have a common interest in pursuing protection of trade secrets against misappropriation in third countries.

That's a clear signal that trade secrets will indeed be part of TAFTA/TTIP. Unfortunately, the latest TPP leak gives a pretty good idea of just how bad they are likely to be.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: criminalize, leaks, tpp, trade secrets, ustr, whistleblowing