November 21, 2017

World Intellectual Property Day – Why It Matters

Last week, April 26, marked World Intellectual Property Day. The US Chamber’s Global Intellectual Property Center celebrated by releasing a new “IP 101” education tool-kit. The kit includes an educational white paper so even first-time readers can familiarize themselves with Intellectual Property issues, IP infographics and multiple third party voices of support for IP .

So often, Americans take for granted how IP touches nearly every aspect of our daily lives. I wanted to highlight World IP Day as an opportunity to articulate the importance of Intellectual Property to our overall economy.

It’s easy for consumers to think of IP in the abstract. Pirated software overseas or copyright infringement is only a problem for the biggest of mega corporations. Unfortunately, for small business owners in America – the largest engines of job creation – that’s not the case. If you or someone you know owns or operates a small business, take a minute and think about how their livelihoods are impacted by issues surrounding Intellectual Property.

In recognition ofGlobal IP Day, the Small Business & Entrepreneurship Council published the “Top 10 Reasons Intellectual Property Rights Matter to Small Business.”

10. Small Businesses Are Robust Innovators.

9. Small Business Tend To Be At the Cutting Edge of Innovation.

8. The Self-Employed Represent a Big Chunk of U.S. Copyright Businesses.

7. Key Copyright Industries Are Overwhelmingly About Small Businesses.

6. Strong Intellectual Property Rights Are Positive for Self-Employment Globally.

5. Patent Systems Are Particularly Important for Small Businesses.

4. IP Theft Is Economically and Individually Destructive.

3. The Evidence Overwhelmingly Shows That Innovation is a Key Driver of Economic Growth.

2. Economic History Confirms That Intellectual Property Protections Matter for Innovators and Development.

1. Ultimately, Intellectual Property Rights Incentivize Innovators to Innovate.

For example, on item #7, the analysis in part notes, “Based on Census Bureau data (2009 most recent), these core copyright industries are dominated by small firms: a) 83% of newspaper, periodical, book, and directory publishers had fewer than 20 employees; b) 70% of software publishers had less than 20 workers; c) 93% of firms in the motion picture and sound recording industries had less than 20employees; and d) 76% of firms in the radio and television broadcasting business had less than 20 workers.”

SBE Council chiefeconomist Raymond J. Keating noted, “Celebrating intellectual property means celebrating entrepreneurs and small businesses, who are the innovators in the economy. Make no mistake, intellectual property rights and protections matter most to the entrepreneurial sector, given the big role small firms play in innovation and IP industries, how IP rights spur self-employment, the importance of patent protections for smaller firms, and the overall importance of IP to economic growth.”

For more information on this post, please visit the Small Business & Entrepreneurship Council, and to find out more about the fight to protect Intellectual Property, please visit the US Chamber’s Global Intellectual Property Center.

Mr. Patent Meet Mr. Copyright

The American Institute of Physics and two publishers have sued four law firms for copyright infringement claiming that their scientific journal articles have been improperly used in patent applications and that the firms have earned profits from creating intellectual property rights for their clients while infringing the intellectual property rights of scientific journal publishers. The plaintiffs’ claim that they “publish, sell and distribute journals, and license the copyrighted content contained in them for precisely these types of uses . . . Nevertheless, defendants have not acquired any of the licenses necessary to make their copying and distribution of plaintiffs copyrighted articles lawful.”

The four complaints are almost identical in content. Using the complaint against Chicago based McDonnell Boehnen Hulbert & Berghoff LLP as an example of plaintiffs claims, plaintiffs allege that, as part of its patent prosecution practice, the firm “made and/or distributed to the USPTO . . . unauthorized copies of copyrighted articles from plaintiffs’ journals ” and that the firm made copies of other works for internal use that “were cited” in the patent applications, or were considered but not cited in the patent applications. (Click here for a copy of the complaint). The complaint also charges that “McDonnell has charged its clients for the copies it has made of plaintiffs’ copyrighted works, and thereby made a direct profit as a result of its infringement.” Finally, according to the complaint, plaintiffs remain willing to offer licenses to defendants, but defendants have not taken plaintiffs up on their offers. [Read more…]

Chinese Espionage: The Risks Within U.S. Companies

My in-depth review and analysis of the 115 prosecutions brought by the government for theft of trade secrets under the EEA has revealed a disproportionate share with a link to China. In over 20% of the total prosecutions, the government alleged that the defendant intended to benefit the Chinese government or a company in China. If you are interested in reading more about this topic and my suggestions as to what the government needs to do, you should click here and read my article that appeared in Forbes on April 24, 2012.

Appellate Courts Deliver Two Major Setbacks to the Government’s Protection of Intellectual Property

The federal government recently suffered two very significant setbacks in its efforts to protect intellectual property in the United States. In the first, the Second Circuit explained its prior decision to order the acquittal of former Goldman Sachs Group Inc. computer programmer Sergey Aleynikov, who had been found guilty under the Economic Espionage Act (“EEA”) and the National Stolen Property Act (“NSPA”) of stealing computer source code from Goldman U.S. v. Aleynikov, No. 11-1126 (2d Cir., April 11, 2012).
In the second, the Ninth Circuit found that David Nosal, who left a well-known executive search firm to start his own business, did not violate the Computer Fraud and Abuse Act (“CFAA”) even though the convinced some of his former colleagues to use their login credentials to download source lists names and contact information from a confidential database, and then to provide that information to him. U.S. v. Nosal, No. 10-10028 (9th Cir. April 10, 2012).
If you’re interested in learning more about these important cases read my article published in Law360 on April 24, 2012. Article Aleynikov And Nosal — 2 Major Government Setbacks – Law360

Second Circuit Issues Opinion in Aleynikov: Limits Scope of the EEA, Urges Congress to Take Action

On February 27, 2012, Law360 published my article about the Second Circuit’s “stunning reversal” of the conviction of former Gold Sachs Group Inc.’s programmer Sergey Aleynikov for stealing proprietary source code from the bank’s high-frequency trading program in violation of the Economic Espionage Act (“EEA”) and the National Stolen Property Act (“NSPA”). The Second Circuit acted to reverse the conviction only hours after hearing oral argument, and ordered the trial court to enter a judgment of acquittal. The Court said that that time that an opinion would follow in “due course.”

The Second Circuit issued its opinion today finding that the HFT program is an intangible property that does not constitute a “goods, ware or merchandise” as required by the NSPA. The Court concluded that “[w]e join other circuits in [holding] . . . that the theft and subsequent interstate transmission of purely intangible property is beyond the scope of the NSPA.”

With regard to the EEA, the Court found that the language in section 1832 requiring that the trade secrets be related to products “produced for” or “placed in” instate or foreign commerce must be read as a term of limitation since this language is present in section 1832, and which does not appear in the otherwise parallel section 1831, foreign espionage statute. The Court held that because the HFT system was not intended “to enter or pass in commerce, or to make something that does, Aleynikov’s theft of source code relating to that system was not an offense under the EEA.”

I wrote in my article that, depending on the scope of the Second Circuit’s decision, the EEA may not apply to trade secrets relating to products still in the development stage because such products have not actually been placed in interstate commerce. Although not at issue in Aleynikov, the Second Circuit distinguished the Aleynikov circumstances from a product under development. The Court indicated that products that are under development and have not yet been “placed in” interstate commerce, are still protected by the EEA, because they “can properly be described as being ‘produced for’ . . . commerce.” The Court, thus, carefully avoided the concern I raised. [Read more…]

Chinese Corporate Spying Case is Just the Tip of the Iceberg

Bloomberg Law released on March 19, 2012 my interview regarding the Economic Espionage Act.

Intellectual Property & Computer Crimes, Release 17

The 17th update to my book, Intellectual Property & Computer Crimes, was just released.  It features an analysis of a recent Ninth Circuit case brought under section 1030(e)(6) of the Computer Fraud & Abuse Act.  In United States v. Nosal, the Ninth Circuit considered whether an employer’s use restrictions should define when an employee “exceeds authorized access,” under the CFAA or whether a prior Ninth Circuit decision,  LVRC Holdings LLC v. Brekka, required dismissal on the ground that an employee does not exceed authorized access to a computer by accessing information unless the employee has no authority to access the information.  The Ninth Circuit also addressed defendant’s assertion that the government argument would lead to an “Orwellian situation” that will “make criminal out of millions of employees who might use their computers for personal use.”  The Ninth Circuit’s ultimate holding serves as a reminder to employers to draft policies outlining those activities which constitute authorized access to the company’s computers and those which are prohibited.

Other topics addressed in the Release include:

Application of the defense of copyright misuse in the civil arena.

Whether using a password or security code to access a copyrighted work, even without authorization, constitutes “circumvention” under Section 1201(a) of the DMCA.

Where the anti-circumvention provisions of the DMCA require a connection between the technological measure circumvented and a protected copyright interest, whether that nexus is limited only to proof of actual infringement.

Appellate court’s adoption of a broader definition of copyright management information under section 1202 of the DMCA.

Report to Congress from the office of the National Counterintelligence Executive highlighting the risks posed to U.S. companies and the U.S. economy from economic espionage in cyberspace committed by foreign governments and agents.

Different standards for finding a violation under the Economic Espionage Act Act and Uniform Trade Secrets Act.

Advantages for government and private litigants from parallel civil and criminal trade secret proceedings.

 

The Second Circuit Overturns Aleynikov Conviction Under the EEA

 In a stunning reversal, the Second Circuit on February 17, 2012, reversed the conviction of former Goldman Sachs’ programmer, Sergey Aleynikov, for stealing proprietary source code from the bank’s high-frequency trading program in violation of the Economic Espionage Act (“EEA”) and the Interstate Transportation of Stolen Property Act (“ITSP”).  When Aleynikov was convicted on December 10, 2010, the government claimed that it represented a major step in it’s efforts to increase the protection of intellectual property in the United States. Aleynikov has been in prison since February 24, 2011, when the district court revoked his bail and remanded him based on a finding that he posed a risk of flight.  However, only hours after hearing oral argument, the Second Circuit overturned the conviction and ordered the trial court to enter a judgment of acquittal.  The court simply said that an opinion would follow in “due course.”  On February 18, 2012, the court revoked its mandate that the trial court issue an acquittal allowing the U.S. Attorney’s Office to seek a hearing en banc.  I wrote an article on a number of the issues raised by this case that is scheduled to be published soon by Law360.  I will  post a copy of the article after it is published.  I was also quoted by Law360 in an article on this case entitled “Ex-Goldman Coder’s Acquittal Threatens Wall Street’s IP.”  If you are interested in reading a copy of this article, click here.

Chief Judge Rader on the Patent Pilot Program

In a speech on January 18, 2012, at Stanford Law School, Chief Judge Rader of the Federal Circuit Court of Appeals described how he thought the Patent Pilot Program would specifically affect patent litigation in the United States, and litigation in the U.S., in general. (In a previous post, Pilot Patent Litigation Program is Here – Is It In a Court Near You?, I described the basics of the Patent Pilot Program).

While Judge Rader addressed a number of aspects of the Patent Pilot Program, he focused on the potential to reduce patent litigation expenses.  According to Chief Judge Rader the Patent Pilot Program provides the way for the “patent system to lead to an economically defensible adjudication model” by allowing courts “to address more effective ways to reduce the cost of discovery.”  If this is successfully done in patent cases, Judge Rader believes that it will be “the tip of the spear” in improving all U.S. civil litigation.  Rader also cited the Federal Circuit’s Advisory Committee’s Model Ediscovery Order as “step one” in a plan to reduce discovery costs.

China/Russia Steal Trade Secrets from U.S. Visitors

In case you missed it, the New York Times published a front page article on February 11, 2012, entitled,”Traveling Light in a Time of Digital Thievery,” which describes how foreign governments, especially the Chinese and Russians, steal government information and trade secrets from digital devices carried by U.S government and corporate employees.  The article quotes, Joel F. Brenner, formerly the top counterintelligence official in the office of the director of national intelligence that “[i[f a company has significant intellectual property that the Chinese and Russians are interested in, and you go over there with mobile devices your devices will get penetrated.”  The article also provides a number of examples of organizations, including the U.S. Chamber of Commerce, whose computers were hacked and did not even know about it for several months after the valuable information had been stolen.  The bottom line is that companies with employees who do business in China and Russia must be particularly sensitive to this issue and should learn from the example of Google that prohibits its employees from bringing sensitive data to China and requires employees to bring only a loaner laptop to China or have their own laptop inspected upon their return to the United States.

What the article does not point out is that the state sponsored theft of trade secrets  from U.S. corporations is not limited to those thefts committed outside the United States.  As noted in my previous post, The Latest on the Economic Espionage Act, I am analyzing the approximate 125 prosecutions that the government has brought to date under the EEA and, while I have not finished, my research suggests that foreign entities are increasingly seeking to steal the trade secrets from U.S. corporations.  Many of the early prosecutions under the EEA, especially during the EEA’s first five years involved a single defendant, usually a U.S. citizen, who stole trade secrets with the intent to start a domestic company.  More recently, however, an entirely new type of defendant has emerged.  Out of the 15 most recent prosecutions under the EEA, approximately 12 have involved defendants who, at least according to the U.S. government were intending to start a foreign company or for theft to benefit a foreign company or entity.  For example, on September 28, 2011, Yuchun Yang was indicted for theft of trade secrets from his former employer,  CME Group.  Yang allegedly downloaded and removed computer source code and other proprietary information from CME while at the same pursuing business plans to improve an electronic trading exchange in China.  According to the indictment, Yang and two unnamed business partners, allegedly developed business plans to form a business referred to as the Tongmei (Gateway to America) Futures Exchange Software Technology Company (Gateway), with the purpose of increasing the trading volume at the Zhangjiagang, China, chemical electronic trading exchange (the Zhangjiagang Exchange).  Yang allegedly expected that Gateway would provide the Zhangjiagang Exchange with technology to allow for high trading volume, high trading speeds, and multiple trading functions.

These and other recent cases highlight the risk posed to U.S. companies by foreign theft of trade secrets and that the resulting loss of the information has never been higher.  If you want further information about how to better protect your trade secrets, please see my book, Intellectual Property & Computer Crimes or contact me directly at www.ptoren@wmclaw.com.  My analysis of the EEA will also be available shortly.