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TMT Perspectives

Insight & Commentary on Business, Legal and Policy Developments Affecting the Telecom, Media, and Technology Sectors

A Better Way to Litigate Trade Secrets? – Congress Passes Defend Trade Secrets Act of 2016 and the Bill Awaits the President’s Signature

Posted in Intellectual Property

Yesterday, the United States House of Representatives passed S. 1890, the Defend Trade Secrets Act of 2016 (DTSA), with overwhelming bipartisan support in a 410-2 vote. This bill was previously passed by the Senate earlier this month by a vote of 87-0, and will now proceed to the White House where the president will surely sign it into law. The Obama administration has stated that it “strongly supports” passage of this bill, and it is expected that the president will sign the bill into law quickly. The DTSA enables trade secret owners to file civil lawsuits in federal court for trade secret misappropriation related to products or services in interstate or foreign commerce. The DTSA also provides remedies for trade secret misappropriation, such as damages, injunctions and civil seizure orders.

What is the Defense of Trade Secrets Act of 2016 (DTSA)?

The DTSA creates a cause of action for trade secret owners in federal court under the Economic Espionage Act of 1996, which will provide predictability and uniformity of trade secret laws across the United States[1]. Currently, trade secrets are protected in most states under a particular state’s adoption of the Uniform Trade Secrets Act (UTSA). Trade secrets are also protected under federal criminal laws, i.e., the Economic Espionage Act of 1996, as well as state criminal laws. The new law, however, will not preempt various state trade secret rights, but will coexist with state law and add an extra layer of protection for owners to protect their trade secrets. The DTSA will go into effect immediately when it is signed by the president, and it will apply to any act of misappropriation on or after its effective date.

The new law has garnered overwhelming bipartisan support because it was amended to address various concerns. In 2015, Congressional leaders introduced the Defend Trade Secrets Act of 2015, which featured amendments from an unsuccessful attempt the previous year to pass the bill. While the proposed 2015 legislation had many benefits, critics still had concerns. To address these concerns, several new amendments were introduced earlier this year, passing with majority support.

DTSA Key Features and Amendments

Because critics voiced concerns that such a harsh remedy could be abused against small companies and former employees, the amended DTSA states that such orders are only to be instituted in “extraordinary circumstances.” It also placed further limitations on the seizures, such as requiring the parties to show “with reasonable particularity” what property is to be seized, as well as proof that the target of the seizure order has “actual possession” of the trade secret or the property. The amendment also added a provision that stressed the importance of balancing the interests of all parties when issuing an ex parte seizure by instructing the Federal Judicial Center to develop “best practices” for executing seizures and storing seized information.

Further, victims of a seizure made in bad faith will be entitled to relief in the form of a damages award, punitive damages for bad faith and/or attorneys’ fees.

  • State laws coexist with federal cause of action. The DTSA clarifies the appropriate scope of injunctions relating to “threatened misappropriation” to ensure that federal court orders do not conflict with applicable state laws prohibiting restraints on employment. Although the original language for this section was taken from the UTSA, there was concern that federal judges could use this provision to override state laws rejecting the “inevitable disclosure doctrine,” and prohibit employees from leaving to work for a competitor. The amendment addresses this concern by requiring that an injunction that limits employment must be based on actual evidence of threatened misappropriation of a trade secret, and not simply based on information an employee knows.
  • Whistle blowers. This provision provides immunity from liability (whistle blower protection) for confidential disclosure of information to law enforcement, to the government or in a court filing (made under seal). It also requires that employment contracts provide to employees notice of this immunity. Failure to notify employees could limit an employer’s right to punitive damages or attorneys’ fees in an action against that employee.
  • Statute of limitations. The statute of limitations for the DTSA was amended from five years to three years.
  • Federal civil action for misappropriation. The DTSA creates federal court subject matter jurisdiction with appeals going to the regional federal circuit courts.

How Your Company Can Benefit

Companies can act now to protect their trade secrets by assessing confidentiality agreements and guarding confidential information to ensure trade secrets are adequately protected. When the DTSA is enacted into law, companies will have a new avenue to pursue protection in federal courts. Federal courts can provide broader discovery tools than state courts, such as nationwide subpoena power. Federal courts are also oftentimes better equipped than state courts to handle complex technical details and international disputes. Furthermore, the DTSA’s provision requiring notification of immunity to whistleblowers should be immediately implemented by employers in order to safeguard an employer’s right to certain damages in trade secret protection under the DTSA.

[1] See https://www.congress.gov/congressional-report/114th-congress/senate-report/220/1.

[2] For more information see http://www.law360.com/ip/articles/789239?nl_pk=f855e51b-562d-4d09-a6a6-d80d5ec985f4&utm_source=newsletter&utm_medium=email&utm_campaign=ip.

WPDI’s Peacebuilding Efforts in South Sudan

Posted in Uncategorized

Our firm represents WPDI in its peacebuilding activities around the world. Founded by artist and philanthropist Forest Whitaker, the Whitaker Peace and Development Initiative helps communities in conflict areas through peace-building initiatives.

An area on which WPDI has been focused is South Sudan. Perhaps known best for the violence arising from ethnic divisions, it is less well known that South Sudan is home to between 8 and 12 million people.

WPDI’s role in the region is to work with youth in an effort to mitigate the violence and promote peace activities. Often this includes capacity-building on a personal level and sustainable development on a community level. On February 1 WPDI announced a new project. It has recruited two youths from each of the 78 “payams” (sub-county areas of about 25,000 people each) of the Eastern Equatorial State to join WPDI’s “Youth Peacemaker Network.”

WPDI will “train and lead this new cadre of 156 youths in designing community-building projects throughout the state that will promote peace and sustainable development.” WPDI’s work is fascinating and quite broad-based. If you are interested in learning more about this new project and its intended goals, see WPDI’s article, “New Milestones for the Youth Peacemaker Network in South Sudan.”

Congratulations to WPDI on this new development in its Youth Peacemaker Network program. We encourage you to contribute to WPDI.

The Johnny Appleseed of the Internet Anticipated Net Neutrality Issues

Posted in Antitrust and Competition Policy, FCC, Net Neutrality

100033462We think of the Internet as a computer science or engineering project. And it certainly was. But did you know that according to Robert Taylor, the founder of Xerox PARC’s computer science laboratory, the fundamental vision for the modern Internet came from a psychologist?

Well, neither did I, until I came across what seems to be the original white paper arguing for the modern Internet as a mass communications medium. The paper was written in 1968 by Taylor and a Midwestern fellow named J. C. R. Licklider and was aptly entitled “The Computer as a Communications Device.” Continue Reading

What Is Management? Are You a Manager or a Contributor?

Posted in Uncategorized

dv2171020My experience tells me that many managers have never asked themselves, “What is management?”

I don’t know Ben Horowitz, cofounder and Partner of Andreesson Horowitz, or Andy Grove, retired CEO of Intel, and I’ve never read Grove’s 1995 book, High Output Management, though it was recommended to me just last month. But in a recent blog, Ben introduced HOM by noting how simply Andy defined management.

Ben says that Andy introduces management with this classic equation:

 A manager’s output = the output of his organization + the output of the neighboring organizations under his influence.

Ben continues:

On the surface it may seem simple, but [Andy] clarifies the essential difference between a manager and an individual contributor. A manager’s skills and knowledge are only valuable if she uses them to get more leverage from her people. So, Ms. Manager, you know more about our product’s viral loop than anyone in the company? That’s worth exactly nothing unless you can effectively transfer that knowledge to the rest of the organization. That’s what being a manager is about. It’s not about how smart you are or how well you know your business; it’s about how that translates to the team’s performance and output.

This lesson often seems overlooked, particularly in high performing service industries (such as accounting and law, and maybe software development).

Highly trained professionals are often committed to the notion that individual performance is the goal, rather than simply a condition necessary to achieving the goal. Understanding this is probably a first step toward successful management in such sectors.

Are you a contributor or a manager? And are you comfortable with the answer to that question?

Hot News: PwC Reports that Cable Customers Are Price and Value Sensitive

Posted in Technology

ThinkstockPhotos-467648706Not surprisingly, consumers believe that cable fees are excessive. Customers say that cable service is too expensive, complaining about both the service fees and the set-top box fees. Many customers are demanding “skinnier” content packages, aimed more at their particular interests. Others desire to cut the cord completely, while the next generation of consumers are unlikely ever to subscribe to cable content services, because they don’t see the need to have prepackaged content “streamed” to them 24 hours a day. They would rather find their own content and consume it via the technology of their choosing.

If anything, cable is continuing to reap substantial revenue due largely to habit.

    “I want to get rid of cable because we pay $100 and we don’t ever watch it.”
– Pay-TV subscriber, Male, age 35 to 49

Underneath it all is good news for consumers: Although it will be messy for cable companies to transition to the new world in which content is consumed in more nuanced ways, the end result is there will be increased competition for content, meaning that content will continue to diversify to meet the changing needs. In the long run that means both more content and content more narrowly tailored to diverse interests.

The other new development is that there will be, of necessity, new businesses or technologies to help consumers figure out how to consume content from diverse sources.

The most surprising thing to us in the report is that consumers don’t seem to be opposed to TV commercials, and that they appear to watch a lot of them even when watching a program that has been recorded. That befuddles us entirely.

If you are interested in reading more about this, please see the PwC report.

Net Neutrality—Analyzing Georgetown’s Position

Posted in Antitrust and Competition Policy, FCC, Lawsuits, Net Neutrality

100033462Georgetown University’s business school (specifically the Center for Business and Public Policy) submitted an Amicus Brief in the currently pending net neutrality lawsuit at the D.C. Circuit. It is highly critical of the FCC and dependent upon ideas that are deeply suspect. The Brief is based on the “Economic Policy Vignette.

Economic Flaws. The policy paper argues that in adopting the “radical” Net Neutrality rules, the FCC ignored economic considerations resulting in the following three economic flaws:

  1. The Order overstates the likely benefits of its stringent regulatory regime by relying on implausible theory and speculation about anticompetitive threats from broadband access providers;
  2. By failing to account appropriately for the overwhelming empirical evidence showing the benefits of “light-touch” regulation, the Order overstates the benefits from additional regulatory control and understates the costs of net neutrality regulation; and
  3. The Order recklessly dismisses evidence of the very real threat to investment, innovation and output that will result from net neutrality regulations.

Continue Reading

FTC Asserts Jurisdiction over Privacy in Unusual Case

Posted in FTC, Lawsuits, Privacy and Data Security

ThinkstockPhotos-517343725What is the FTC’s jurisdiction over privacy?

That is one of the most important—and overlooked— issues in Washington, DC today.

The reason it is so important is because privacy issues can arise for almost any business engaged in electronic commerce. And if the FTC has jurisdiction over privacy generally— on the theory that failure to protect privacy is “an unfair or deceptive” practice, then the FTC potentially has jurisdiction over all electronic commerce without any formal rules to constrain FTC enforcement actions.

In other words, in the absence of clearly ascertainable ex ante privacy regulations, a “we know a violation when we see it” standard would apply. This is an invitation to arbitrary government adjudication, never a good thing.

An Unusual Alliance. A case in point is a suit brought by the FTC against LabMD, a small cancer diagnostic business, now mostly defunct except for clean-up operations out of the owner’s condo. Although the litigation is ongoing, it appears that in 2008 the FTC was concerned about privacy and peer-to-peer (PTP) networks. At about that time a private company, Tiversa, took a LabMD file containing information on 9,300 patients. The file was on a LabMD’s employee’s computer. Unfortunately this single employee had a PTP application running on her computer which enabled Tiversa to access the computer, in violation of LabMD policies and inspection practices. Continue Reading

Celebrities Rule—But the FTC Has Endorsement Rules

Posted in FTC, Legal Developments
best buy

best buy

Perhaps because it is pervasive, there is a growing presumption that social media communications are unregulated. That is not accurate where endorsements are concerned.

So before you blog or tweet about a product under circumstances in which you are getting compensated, it is worth figuring out whether your communication complies with the Federal Trade Commission’s Endorsement Rules.

The rules say that if you are recommending or promoting a product, and if you are compensated, that compensation has to be clear to the reader. If not, you may have violated federal law against deceptive speech.

The concern about deceptive speech in the social media context is particularly high where the recommendation is from a “true celebrity”—a famous actor or business person. But the rules also apply to non-celebrity notables, such as bloggers, vloggers, and other twitterati. Continue Reading

Retransmission Consent Reform—The “Must Haves” for Cable and Satellite Companies

Posted in FCC, Legal Developments

ThinkstockPhotos-497350805Retransmission consent refers to the system by which pay TV providers (principally cable and satellite companies, which for convenience we will call “CableCos” and which FCCers call MVPDs) pay broadcast TV stations to carry the programming they broadcast. Years ago the payments were marginal or non-existent. Today the payments are growing, in part because increasingly the payments are shared by the TV stations and the networks with which they are affiliated (NBC, Fox, etc.). This increases the price consumers pay for cable and satellite TV. Price disputes between broadcasters and CableCos are subject to commercial negotiations based on “good faith negotiations,” however currently the broadcasters have the ability to withhold programming from the CableCos in the event of a dispute, meaning that such programming gets blacked out to cable and satellite consumers. This severely limits CableCos negotiation power.

The FCC will shortly release a proposal to revamp the retransmission rules, which were first developed in the early 1990s. As a result, the American Television Alliance, made up of CableCos and some programming interests—all of whom are opposed to the broadcasters’ unilateral ability to black out programming in the event of a dispute—have informed the FCC of ATVA’s “must haves” in reforming retransmission consent rules. They are:

  1. Broadcasters should not be able to block CableCos customers’ access to the broadcasters’ online programming when there is a negotiations impasse between the broadcaster and the CableCo.
  2. Broadcasters should not be allowed to require CableCos to purchase content they don’t want in order to get content they do want, which is referred to as “forced bundling.” Any bundling requirement that is not based upon the specific economics related to the content the CableCos want would be considered forced bundling.
  3. Broadcasters should not be allowed to withhold, or threaten to withhold, marquee events, such as certain sporting events.
  4. If Broadcasters withhold content during negotiations, CableCos should be able to get that same content from somewhere else (FCC rules currently prohibit this in a variety of ways).
  5. Broadcasters should not be able to cede rights to negotiate retransmission consent to third parties (such as the TV networks). In other words, individual television stations or station groups should have to negotiate with the CableCos.
  6. Broadcasters should not be permitted to demand that CableCos make use of any particular technologies (e.g. set-top boxes).
  7. Broadcasters should not be permitted to charge CableCos rates based upon the CableCos’ total number of subscribers, but only on the number of subscribers that purchase the particular content controlled by the broadcaster.

FCC Approves Lawn Robots

Posted in FCC, Technology

lawn robot 2With a gleeful nod to all 15-year-old boys out there, yesterday the FCC approved the first lawn robot. The manufacturer —iRobot—claims that this Roomba-for-the-Yard device “has the potential for reducing deaths and injuries, reducing emissions and noise pollution, and improving quality of life related to residential lawn mowing.” Frankly, given our own shaky experiences with lawn mowers, our first thought was the opposite—“run for your life, your lawn mower is untethered”—but we trust the FCC has given this more thought than we have. In any event, the complicating issue for the FCC was not the safety of our cats and dogs, but interference with radio astronomy activities. Go figure.