UnIntellectual Property (UnIP): Trade Secret for Source Code and Other Deliverables
The United States District Court of the Southern District of New York has granted a defendant’s motion to dismiss a lawsuit involving claims of copyright infringement and trade secret misappropriation. The lawsuit arose after Plaintiff was hired to create a website for an entity that shared employees and facilities with Defendant. When Defendant failed to pay, Plaintiff sued. At issue in the motion to dismiss was whether Plaintiff has properly pled causes of action for copyright infringement and trade secret misappropriation.
The Court first disposed of the copyright claim, despite Plaintiff having filed for a copyright registration. It is worth noting that Plaintiff’s copyright registration was limited to text, not the claimed code and other Deliverables. The Plaintiff’s copyright infringement claim, however, relied upon an entire list of Deliverables containing both copyrightable subject matter and non-copyrightable subject matter. This, the Court held, was not sufficient to provide notice as to which Deliverables are eligible for copyright protection and, of those, which are registered. Thus, it dismissed the copyright infringement claim.
With respect to the trade secrets, the Court recognized that there was insufficient particularity in the pleadings. More importantly, the Court recognized Plaintiff’s copyright registration and held that it would necessarily require public disclosure of the alleged secrets. Thus, no trade secret could exist. Moreover, the Court also stressed that Plaintiff “does not explain how source code AI wrote for, and delivered to, Adorama would constitute “information which is used in [AI’s] business,” a necessary element of trade secret status, nor does it explain how that information would provide AI with “an opportunity to obtain an advantage over competitors who do not know or use it.”” Put another way, the Court found that since the source code was created for Defendant, and not used by Plaintiff, it was not Plaintiff’s trade secret, especially given the failure to identify the same in the contract between the parties.
The Court did allow for amendment, which would necessarily require greater specificity with respect to the trade secret claim. My belief is that the Plaintiff would have to show that whatever it claims was not publicly disclosed to the U.S. Copyright Office, identify what alleged trade secret was owned by Plaintiff as part of its preexisting toolkit that would not be publicly available through Defendants or any previous customers website (especially the source code) and establish proof of its own use for a competitive advantage. While doing so may get it beyond a motion to dismiss stage, I have a strong belief a motion for summary judgment would be forthcoming on what appears to be a difficult claim to establish, especially given this ruling to date.
UnIntellectual Property (UnIP): Trade Secret for Drug Ingredients and Dosage/Marketing Strategies
Massachusetts is relatively unique in that it has yet to adopt the Uniform Trade Secrets Act. Instead, a blend of statutory law (Massachusetts Trade Secret Protection Act) and common law define a trade secret and what happens in the event of misappropriation. This case arises out of a dispute between pharmaceutical companies that promote and offer for sale competing bowel preparation drugs that are administered prior to colonoscopies. When the General Counsel of Defendant came into possession of certain training materials “sent in from the field” by an unknown source, Plaintiff took this present action claiming that Defendant had misappropriated an undisclosed number of pages of its raining materials and the trade secrets contained therein.
The Court granted Defendant’s motion to dismiss for failure to state a claim, which was based upon Plaintiff’s entire set of training materials. In doing so, the Court held that the lawsuit cannot proceed because Plaintiff has not identified with adequate specificity any trade secrets in materials that have not been submitted with the pleadings. Moreover, the items claimed do not amount to a trade secret under Massachusetts law. In particular, the six pages of material included publicly available information about the drug, such as its ingredients and recommended dosage, all of which is within the public domain. In addition, while noting that marketing strategies may be protectable as a trade secret, in this case, the differences in price, efficacy and safety was not established to be proprietary to Plaintiff. Finally, the Court held that “it is implausible that platitudes such as “Cash in on relationships!” are the product of significant effort or investment or are valuable to Braintree’s competitors.” Thus, no trade secrets existed under law.
I envision a similar result if UTSA was enacted in Massachusetts. Fortunately for Plaintiff, its other causes of action remain.
The United States District Court for the Southern District of Ohio denied Defendant’s Motion for Partial Summary Judgement, which was based upon the argument that Plaintiff’s claimed service mark, VNA, was generic. The Court’s threshold question was whether the term “VNA” is generic. The Defendant argued it was generic for Visiting Nurse Association and offered evidence of such use. This followed denial of Plaintiff’s attempt at a preliminary injunction. However, the Court quickly determined that a “term may be considered generic in certain regions of the country and not in others.” Thus, given Plaintiff’s Ohio trademark registration and disputed issues of fact surrounding use in the Ohio region, the Court denied summary judgement on the issue of genericness. In doing so, the Court noted: “While the Defendant makes a compelling case for summary judgment because the evidence supports a finding that the term “VNA” is generic, Plaintiff has yet to complete discovery. Moreover, Defendants failed to cite any case where a court made a factual finding as to genericness before the close of discovery or at least until after an evidentiary hearing.”
Ultimately, the Court seems to be sending a signal that Plaintiff better come up with evidence to support that its VNA mark is not generic, at least in the Ohio region. Regardless, this is a good reminder to trademark attorneys litigating cases involving claims of genericness involving common law trademark rights that such trademark rights may differ by region.
There was no finding of UnIntellectual Property in this case out of the Tenth Circuit, but it did highlight two items that I believe are worthy of note to any copyright attorney, especially those litigating copyright infringement cases involving software. The case involved a payroll processing company suing another company and its owner for copyright infringement of computer software code. The Defendant appealed after the District Court appointed a special master and adopted the special master report that found copyright infringement had occurred, thus leading to the Court ordering all copies of the infringing software destroyed. The issues on appeal, that form the basis of my two practice tips relate to (1) the use of a special master and (2) analysis of software code for infringement.
The appointment of a special master to assist the Court is worth consideration in copyright infringement and/or trade secret cases involving computer source code. This is typically something a plaintiff will request so as to help establish its cause of action.
As it relates to analysis of software code to determine if copyright infringement has occurred, this Court makes clear that any special master (and I would proffer any expert) should not only apply the abstraction-filtration-comparison test but also document such application. The abstraction-filtration-comparison test is summarized as follows:
UnIntellectual Property (UnIP): Trade Secret for Information Posted on the Internet and Generally Known
The United States District Court for the District of Maryland analyzed several alleged trade secrets as part of a lawsuit involving six former employees and their activities before and after resigning. Plaintiff, whose business is locating, selecting, screening, mobilizing, and placing candidates in temporary and permanent employment positions throughout the United States at all levels of skill and expertisehad sued defendants, for, among other things, trade secret misappropriation in violation of the Maryland Uniform Trade Secrets Act (MUTSA).
Plaintiffs allege Defendants misappropriated the following documents:
(1) a TEKsystems CATS 2 Price Sheet and a Federal Supply Service Price List – Although the Court notes that pricing information is protectable as a trade secret, the Court made quick work of this particular price sheet, agreeing with Defendants that it was a not a trade secret because it was published on the Internet.
(2) a Software Market Definitions Memorandum – Again, the Court recognized that marketing plans are protectable as a trade secret. However, the Court found that Plaintiff’s failure to offer evidence that the list is not generally known or would be valuable to competitors, let alone rebut Defendant’s evidence, favored a finding that the Memo did not qualify as a trade secret.
(3) an Allegis Group Internal Employee Handbook and a TEKsystems Staffing Services Agreement – The Court held: “Plaintiffs offer no evidence that the information in the agreement and the handbook is not generally known or would be valuable to competitors. Thus, there is no evidence from which a reasonable jury could conclude these documents are trade secrets.”
Thus, the Court granted Defendant’s motion for summary judgment with respect to the MUTSA claim.
Again, I wonder whether the trade secret misappropriation claim, which is typically included when there is a breach of a covenant in an employment agreement, was included as mere habit. Will a motion for fees be forthcoming?
UnIntellectual Property (UnIP): Trademark for REDSKINS
The USPTO’s TTAB today issued its opinion cancelling the REDSKINS trademark as owned by Pro Football, Inc. and used in connection with the Washington Redskins NFL team. The USPTO issued a statement that, in sum, says:
1. “Redskins” was disparaging of Native Americans, when used in relation to professional football services, at the times the
2. The federal registrations for the “Redskins” trademarks involved in this proceeding must be canceled.
3. If not appealed or not affirmed, the previous registrant loses the benefits associated with a federal trademark registration, including the legal presumptions of ownership and of nationwide scope of rights in these trademarks, as well as the ability to use the federal registration ® symbol, and to record the registrations with the U.S. Customs and Border Patrol Service to block importation of infringing or counterfeit foreign goods.
4. The decision does not require that the REDSKINS trademark be changed or no longer used by Washington D.C.’s NFL team, since the TTAB’s jurisdiction does extend to trademark use but rather only trademark registration with the USPTO.
You can read the precedential opinion.
Given the facts, this decision does not surprise me. The timing of it, however, confirms to me the power of lobbying and social change efforts, as evidenced by the Native American commercial ran during, among other times, the NBA Finals. As an alumni of Miami University, who used be called the Miami Redskins and has since changed to Miami Redhawks, I understand both sides views on the matter. Ultimately, it will be interesting to see whether Washington D.C.’s football team actually stops use and rebrands.
Today, the CEO of Tesla, Elon Musk, has decided that patents may not be the best thing for his company, the automobile industry, or the environment. Instead, he is advocating for open source. He posted the following on the Tesla Blog:
“Yesterday, there was a wall of Tesla patents in the lobby of our Palo Alto headquarters. That is no longer the case. They have been removed, in the spirit of the open source movement, for the advancement of electric vehicle technology….We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.”
IP attorneys, including Tesla’s, must be collectively sweating. I am not, and not simply because I prefer trademark over patent (no way Tesla would ever say their brand name is open source). Sure IP is immensely valuable to many companies and one of the most important line items when it comes time for valuation and financing. That said, securing patents and choosing not to enforce them or bypassing patent protection in the interest of open source deserves consideration, especially by companies looking to change the world. I don’t drive a Tesla, but I want to now, more than ever, and not only because it is a great looking car. This confirms it is a socially conscious and admirable company, even to an IP attorney like me.
UnIntellectual Property (UnIP): Trademark for ASSHOLE
The Trademark Trial and Appeal Board (TTAB) affirmed, in a precedential opinion, an Examining Attorney’s refusal of a trademark application for ASSHOLE REPELLENT in connection with an “amusement device, namely, a can with a spray top used as a gag gift and sold as a unit.” The mark was held immoral and scandalous under Section 2(a) of the Trademark Act. When determining if a mark is scandalous, according to the TTAB, the “analysis must be made (1) from the standpoint of a substantial composite of the general public, and (2) in terms of contemporary attitudes.” The word “shit” has previously been repeatedly held as scandalous. Now, it appears, the word “asshole” is subject to the same fate. Applicant’s evidence included reference to broadcast television using the A-Word and countless website references for other products was not enough. The TTAB relied upon dictionary definitions and distinguished the word from “ass” in and of itself, which was included in several trademark registrations.
I’ve always said that we are a victim of our time and place. 20 years ago this application would have had no chance. Today, it is obviously still difficult to overcome a scandalous refusal. However, with the explosion of social media and hardening of the populations tolerance for “vulgarity,” most likely due to overexposure, would this same decision stand in 5 years? I think contemporary attitudes are changing, and as a result, I envision the TTAB will too, eventually. For now, this Applicant will have to rely upon common law trademark rights if he wishes to enforce his mark. I’m guessing that this Applicant could put some of his spray to good use regardless.
UnIntellectual Property (UnIP): Trade Dress for Stylus Holder
The United States District Court for the District of Massachusetts granted summary judgment to Defendants with respect to Plaintiff’s claim of trade dress infringement of a stylus holder. The Court recognized that Plaintiff and Defendants had done business together, including one Defendant (Pitney Bowes) having purchased stylus holders directly from Plaintiff and the other Defendant having helped source a “similar” alternative stylus holders for a cheaper price to Pitney Bowes. However, the Court found that although issues of material fact remained with regard to whether the wingless shape, oval-shaped backplate, and curved spine were functional, Plaintiff had failed to establish the requisite secondary meaning so as to establish distinctiveness for its trade dress.
In doing so, the Court analyzed both direct and indirect evidence offered by Plaintiff in support of its claim of distinctiveness, based upon secondary meaning. The First Circuit only recognizes consumer surveys as direct evidence, and Plaintiff’s consumer survey was deemed deficient. In particular, the Court noted that the 8 question multiple choice survey was more geared toward likelihood of confusion rather than secondary meaning. Even the two questions that could be arguably directed toward secondary meaning were held deficient because the survey only questioned existing customers who are already familiar with Plaintiff’s product and was thus an improper sampling of individuals. Since consumers had a 30% chance at guessing the source of the product, it was not sufficient to establish that consumers associated the stylus with a single source, namely the Plaintiff.
As it relates to indirect evidence, the Court acknowledged that the following could suffice: 1) the length and manner of the use of the trade dress; 2) the nature and extent of advertising and promotion; 3) the efforts to promote a conscious connection between the public, the trade dress, and the source; 4) the products’ established place in the market (possibly through continuous use in the market); and 5) proof of intentional copying. Despite Plaintiff’s arguing, and offering some evidence in support of such arguments, that its existance for over seven years with large expenditures resulting in web traffic and “Top 10” placement on Google, the Court held that “[p]roof of secondary meaning requires at least some evidence that the consumer associates the trade dress with the source.” Plaintiff simply did not provide such evidence. Therefore, Defendants were granted summary judgment.
Had the survey been different, would this case have survived summary judgment? Would a piece of evidence showing intentional copying or indirect evidence (perhaps consumer testimony) that it associates the trade dress with Plaintiff have created an issue of material fact? Trademark/trade dress attorneys can advise their clients of these issues, but unfortunately, as is more often than not the case in the subjective area of trademark law, one piece of evidence may make or break a case. Surveys are typically ripe for dispute and can become (or not) that important piece of evidence, as shown by this case.
Genesis Strategies, Inc. v. Pitney Bowes, Inc., CIV.A. 11-12270-TSH, 2014 WL 2048447 (D. Mass. May 16, 2014).
The United States District Court for the W.D. of Pennsylvania has confirmed that, at least under Pennsylvania law, there is no standalone cause of action for attorney’s fees, expenses, and costs to be recovered in a separate lawsuit filed by the prevailing party in a previous trade secret misappropriation lawsuit. Section 5305 of the Pennsylvania Uniform Trade Secrets Act (PUTSA), namely Section 5305, empowers a court may award reasonable attorney’s fees, expenses and costs to “the prevailing party” (1) if a claim of misappropriation is made in bad faith; (2) a motion to terminate an injunction is made or resisted in bad faith; or (3) willful and malicious misappropriation exists. 12 Pa. Cons.Stat. § 5305. However, the Court confirmed that the proper procedure for such an award is following either summary judgment or trial on the merits. In doing so, the Court granted Defendants Motion to Dismiss the PUTSA count.
It is worth noting that this federal court lawsuit between rival carpet-cleaning companies followed a state court action and also relates to abuse of process, Lanham Act claims, unfair competition, and fraud (with the fraud claim also being dismissed). Regardless, trade secret litigators regularly deal with claims for attorneys fees following a UTSA claim. While it is within the Court’s discretion whether to award such fees, this case helps trade secret attorneys understand when and how to pursue such fees.