by Lee Gesmer | Feb 11, 2009 | Copyright
In June 2007 I wrote a post discussing two cases in which clients of our firm had, before they became clients, failed to get written assignments of copyright ownership from independent contractors who wrote software for them. Without a written assignment the contractors were able to claim ownership of the works, and make life very unpleasant for their customers, who may have assumed that since they paid for this work the code belonged to them.
A case decided last Fall shows what happens when this problem is taken to an extreme. In this case the programmer-contractor claimed ownership, and the value he assigned was in the millions of dollars. The customer was forced to go through a federal court lawsuit that involved discovery (expensive), summary judgment (quite expensive), and finally appeal to the Ninth Circuit Court of Appeals (very expensive), only to finally have a court declare that it owned an “unlimited, non-exclusive, implied license to use, modify and retain” the source code written by the contractor.
While this case had a happy ending for the customer, the entire expense, as well as the risk of a loss, could have been avoided if the customer had a piece of paper with only one sentence, signed by the contractor: “I hereby assign to [customer] all right, title and interest to all intellectual property developed by [contractor] during the course of any engagement by [customer], including but not limited to all property protected by copyright, patent or trade secrets.”
The case is Asset Management Systems, Inc. v. Gagnon
by Lee Gesmer | Feb 11, 2009 | Trade Secrets
Clients often ask what measures they need to take to protect their trade secrets, should it be necessary to enforce them in court and prove that they were treated as secrets.
Here’s how Kentucky Fried Chicken does it, according to an AP story published today:
The recipe lays out a mix of 11 herbs and spices that coat the chain’s Original Recipe chicken, including exact amounts for each ingredient. It is written in pencil and signed by Harland Sanders.
The iconic recipe is now protected by an array of high-tech security gadgets, including motion detectors and cameras that allow guards to monitor the vault around the clock.
Thick concrete blocks encapsulate the vault, situated near office cubicles, that is connected to a backup generator to keep the security system operating in times of power outages.
The recipe is such a tightly held secret that not even Eaton knows its full contents. Only two company executives at any time have access to the recipe. KFC won’t release their names or titles, and it uses multiple suppliers who produce and blend the ingredients but know only a part of the entire contents.
“We’ve very comfortable with the security,” [KFC President Roger Eaton ]said. “I don’t think anyone can break into it.”
Hmmmm …. perhaps a real-life George Clooney will be interested. Of course, we don’t really know what’s in that vault, do we?
by Lee Gesmer | Feb 5, 2009 | Miscellaneous
If you’re fascinated with India, as I am, there’s an interesting series of articles described as an “innovation tour,” of India by Vinit Nijhawan, Executive-in-Residence in the Boston University School of Management. In a series of “dispatches” Nijhawan “takes readers on a journey, from New Delhi’s teeming cell phone (and cell phone unlocking) marketplace to Chandigarh, home to a great engineering college and a nascent life sciences industry forming . . . around agricultural products”, to quote from Xconomy.
An introduction and links to the installments (five so far), can be accessed here.
by Lee Gesmer | Feb 2, 2009 | Noncompete Agreements
You’ve got to wonder what Steelcraft was thinking when it decided to file a lawsuit against its former employee, James Hensel.
It’s hard enough to enforce a written noncompete agreement, much less an oral agreement, but that’s what Steelcraft tried to do in this case. The absence of a written agreement didn’t deter Steelcraft, which sought a preliminary injunction against Hensel. Steelcraft was able to allege nothing more than an “oral” noncompete agreement. One of several requirements for enforceability of a noncompete agreement is that it be reasonable in duration and geographic scope, and even though Steelcraft alleged an oral agreement, it said nothing about that element, rendering the agreement unenforceable in the eyes of Worcester County Superior Court Judge Richard T. Tucker.
Steelcraft also alleged that Hensel had taken Steelcraft trade secrets (the decision doesn’t discuss precisely what these were), but once again its argument was rejected on the grounds that it had failed to establish that it had properly protected the alleged secrets. For good measure, the judge noted that Steelcraft had failed to enter into a confidentiality agreement with the former employee.
There’s a bit more to this case (favorable to Hensel, harmful to Steelcraft), but the point is made: if you fail even to get a written noncompete agreement from your employee, don’t expect that you’ll be able to stop him from competing based on an oral agreement. “He said – She said” just doesn’t work here.
To read the full decision in Steelcraft v. Mobi Medical click here.
by Lee Gesmer | Jan 28, 2009 | Antitrust, Copyright
[Update: the FTC did file a reply brief. Link here]
All the briefs are in on the FTC petition for cert in its antitrust case against Rambus, (unless the FTC decides to file a reply brief, which is unlikely to change things much). I’ve added the Rambus opposition to the Rambus Group page on scribd.com, here. Now its time for the antitrust community to hold its breath and see whether the Court takes the case. Some knowledgeable commentators have opined that FTC/Rambus case has the best chance of any antitrust case obtaining review this year, but that plus a dime will get you …. well, nothing I guess. If the petition is allowed, it will be very exciting times for antitrust and standards setting law and policy wonks.
In federal court in Boston the Gatehouse Media v. New York Times case (described in these two (1, 2) earlier posts) has settled, as I suspected it would. The
settlement agreement (or a preliminary agreement which is binding in the event a “definitive agreement” is not reached), is on scribd.com, here. It appears that this agreement was not intended to be made public (at least not yet), but apparently someone leaked it, so it’s public now.
As I read this, Gatehouse prevailed, hands down over the NYT/Boston.com. Gatehouse will erect “technical solutions” to prevent Boston.com from copying the Gatehouse original content, and Boston.com will respect those “solutions.” If a “solution” proves ineffective, Gatehouse will notify Boston.com, and Boston.com will back off right away. Why the parties went about it in this manner (which implicates DMCA-like anti-circumvention) I’m not sure, but I appears to accomplish the same result as if the NYT/Boston.com simply said “we won’t copy your ledes.”
From what I can seek, Boston.com/yourtown has already dropped its ledes and links to the Gatehouse sites, at least based on a quick sampling.
[postscript: here is a link to the report of Gatehouse’s copyright expert, Douglas Lichtman, Professor of Law, UCLA. The report is an analysis of the case under copyright fair use principles, and a rebuttal of the NYT/Boston.com’s unclean hands argument]
