Plaintiff is over a barrel without a protectable trade secret

Posted on June 10, 2015 by rtushnet
Giles Const., LLC v. Tooele Inventory Solution, Inc., 2015
WL 3505309, No. 2:12–cv–37 (D. Utah June 3, 2015)
 
Giles alleged that the defendants, including individuals, improperly
disclosed and used its trade secrets related to barrel processing and pricing,
resulting in violations of the CFAA, the Lanham Act, and the Utah Uniform Trade
Secret Act (UTSA), as well as tortious interference with contractual relations,
unjust enrichment, and conversion. The court found that all the claims failed
as a matter of law.
 
ATI is a large company that sells titanium, using barrels to
ship its product.  The individual
defendants had some relationship with ATI, and for a few months in 2011, Giles supplied,
refurbished, and shipped barrels for ATI. Tooele now provides barrel processing
services to ATI, after submitting a lower bid. 
When Giles was hired, ATI provided it with a sample barrel and
specifications for barrel dimensions; Giles found a barrel supplier through a
15-minute web search.  Giles had an
account with this supplier, but no contract, nor did ATI have an exclusive
contract with Giles for barrel processing; rather, Giles agreed to fulfill any
purchase orders ATI sent.
 
ATI began searching for a less expensive barrel processing
service, with direct purchase of barrels and a separate vendor for processing. It
found Giles’ supplier; when it sought bids for barrel processing alone, only
Giles and the newly formed Tooele submitted bids.  Giles alleged that ATI revealed trade secrets
to Tooele, making it possible for it to underbid Giles.
 
Giles first alleged that certain defendants violated the
CFAA by obtaining Giles Construction’s proprietary information on ATI computers
and then divulging that information to competitors in violation of ATI’s
corporate guidelines.  But misuse of
information acquired with authorization does not constitute “access[ing] a
protected computer without authorization, or exceed[ing] authorized access.” In
reaching this conclusion, the court discerned a trend in the courts towards
adopting a narrower view of the CFAA, which was consistent with the statutory
text (including its definition of actionable damages) and the rule of lenity.
Thus, defendants were entitled to summary judgment.

So too with the Lanham Act claim, since the Lanham Act doesn’t cover misuse of
confidential information.  There was no
allegation of any misleading representation to any consumers.
 
The trade secret claim failed. The identity of Giles’ barrel
supplier was not a trade secret, because it could be easily ascertained with
basic research.  As for Giles’ pricing
information, Giles failed to produce evidence that its pricing or pricing
method was unique or especially innovative. 
Finally, Giles’ barrel processing process was not a trade secret.  There was ample evidence that ATI instructed
Giles on much of the process, and palletizing and wrapping barrels for delivery
is a well-known process in the shipping industry.
 
After the trade secret claims failed, the Utah Uniform Trade
Secrets Act preempted “conflicting tort, restitutionary, and other law of this
state providing civil remedies for misappropriation of a trade secret.” This
preemption reached any state law claim that is based on allegations of misuse
of confidential information, “regardless of whether the claim contains
additional, separate allegations.” That is, claims that are to some degree
based on misuse of information are preempted even if they’re not solely based
on that misuse: “if the claim fails without the allegations regarding misuse of
information, the UTSA preempts it. This is so even if the purported
confidential information does not constitute a trade secret, which forecloses
the ability to alternatively plead causes of action if they are based on the
misuse of information.”  That was true
here.
 

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Plaintiff is over a barrel without a protectable trade secret

Posted on June 10, 2015 by rtushnet
Giles Const., LLC v. Tooele Inventory Solution, Inc., 2015 WL 3505309, No. 2:12–cv–37 (D. Utah June 3, 2015)
 
Giles alleged that the defendants, including individuals, improperly disclosed and used its trade secrets related to barrel processing and pricing, resulting in violations of the CFAA, the Lanham Act, and the Utah Uniform Trade Secret Act (UTSA), as well as tortious interference with contractual relations, unjust enrichment, and conversion. The court found that all the claims failed as a matter of law.
 
ATI is a large company that sells titanium, using barrels to ship its product.  The individual defendants had some relationship with ATI, and for a few months in 2011, Giles supplied, refurbished, and shipped barrels for ATI. Tooele now provides barrel processing services to ATI, after submitting a lower bid.  When Giles was hired, ATI provided it with a sample barrel and specifications for barrel dimensions; Giles found a barrel supplier through a 15-minute web search.  Giles had an account with this supplier, but no contract, nor did ATI have an exclusive contract with Giles for barrel processing; rather, Giles agreed to fulfill any purchase orders ATI sent.
 
ATI began searching for a less expensive barrel processing service, with direct purchase of barrels and a separate vendor for processing. It found Giles’ supplier; when it sought bids for barrel processing alone, only Giles and the newly formed Tooele submitted bids.  Giles alleged that ATI revealed trade secrets to Tooele, making it possible for it to underbid Giles.
 
Giles first alleged that certain defendants violated the CFAA by obtaining Giles Construction’s proprietary information on ATI computers and then divulging that information to competitors in violation of ATI’s corporate guidelines.  But misuse of information acquired with authorization does not constitute “access[ing] a protected computer without authorization, or exceed[ing] authorized access.” In reaching this conclusion, the court discerned a trend in the courts towards adopting a narrower view of the CFAA, which was consistent with the statutory text (including its definition of actionable damages) and the rule of lenity. Thus, defendants were entitled to summary judgment.
So too with the Lanham Act claim, since the Lanham Act doesn’t cover misuse of confidential information.  There was no allegation of any misleading representation to any consumers.
 
The trade secret claim failed. The identity of Giles’ barrel supplier was not a trade secret, because it could be easily ascertained with basic research.  As for Giles’ pricing information, Giles failed to produce evidence that its pricing or pricing method was unique or especially innovative.  Finally, Giles’ barrel processing process was not a trade secret.  There was ample evidence that ATI instructed Giles on much of the process, and palletizing and wrapping barrels for delivery is a well-known process in the shipping industry.
 
After the trade secret claims failed, the Utah Uniform Trade Secrets Act preempted “conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.” This preemption reached any state law claim that is based on allegations of misuse of confidential information, “regardless of whether the claim contains additional, separate allegations.” That is, claims that are to some degree based on misuse of information are preempted even if they’re not solely based on that misuse: “if the claim fails without the allegations regarding misuse of information, the UTSA preempts it. This is so even if the purported confidential information does not constitute a trade secret, which forecloses the ability to alternatively plead causes of action if they are based on the misuse of information.”  That was true here.
 
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Ron Coleman reviews Keller & Cunard copyright treatise

Posted on June 10, 2015 by rtushnet

In his inimitable style.  Obligatory disclosure: I worked at Debevoise with Bruce Keller and Jeff Cunard lo these many moons ago, which I guess makes me a demon-affiliate.  To the best of my recollection, I did not work on any previous versions of the treatise.

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Ron Coleman reviews Keller & Cunard copyright treatise

Posted on June 10, 2015 by rtushnet

In his inimitable style.  Obligatory disclosure: I worked at Debevoise with Bruce Keller and Jeff Cunard lo these many moons ago, which I guess makes me a demon-affiliate.  To the best of my recollection, I did not work on any previous versions of the treatise.

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DMCA Class 21 (vehicle software) FYI

Posted on June 5, 2015 by rtushnet

From the Copyright Office:
Class 21 Witnesses,

Additional written materials were submitted at the hearing for Proposed Class 21: Vehicle software – diagnosis, repair, or modification. The Copyright Office provided the opportunity to respond to these materials until the close of business on June 2, 2015. The Office did not receive any such responses to the additional written materials. However, this appears to be the result of a technical issue. If you sent in responses to the additional written materials submitted for Class 21 available at http://ift.tt/1FzpJ3v, please resend those responses to:

Steve Ruwe
Assistant General Counsel
Office of the General Counsel
U.S. Copyright Office
sruwe@loc.gov

Please get the word out–the Office does not have records of who attempted to submit a response.

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DMCA Class 21 (vehicle software) FYI

Posted on June 5, 2015 by rtushnet

From the Copyright Office: Class 21 Witnesses, Additional written materials were submitted at the hearing for Proposed Class 21: Vehicle software – diagnosis, repair, or modification. The Copyright Office provided the opportunity to respond to these materials until the close of business on June 2, 2015. The Office did not receive any such responses to the additional written materials. However, this appears to be the result of a technical issue. If you sent in responses to the additional written materials submitted for Class 21 available at http://copyright.gov/1201/2015/class21/, please resend those responses to: Steve Ruwe Assistant General Counsel Office of the General Counsel U.S. Copyright Office sruwe@loc.gov Please get the word out–the Office does not have records of who attempted to submit a response.

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failure to show damage from accusation of falsity dooms counterclaims

Posted on June 4, 2015 by rtushnet
Cascade Yarns, Inc. v. Knitting Fever, Inc., 2015 WL 3407882,
No. C10–861 (W.D. Wash. May 27, 2015)

This five-year odyssey ends with a whimper. 
Cascade and KFI sell luxury yarns; Cascade initially sued KFI for
mislabeling the fiber content of certain yarns. Ultimately, the case went to a
jury solely on KFI’s counterclaims for unfair competition under the Lanham Act
and Washington common law, defamation, and tortious interference with business
expectancies. Each claim arose out of Cascade’s posting a statement under the headline
“Milk Protein Fiber Hype”:
 
There has been a lot of hype
recently about a fiber advertised as “Milk Protein Fiber.” Given the
substantial price that “milk” yarns command, it made sense to investigate what
this “milk” fiber actually is. We were surprised to learn that three “milk”
yarns sourced from Knitting Fever were nothing more than common acrylic blends.
Acrylic is an inexpensive fiber, which is often added to make yarns soft and
affordable. Beyond the lack of milk, two of these yarns did not contain either
the cashmere or alpaca, listed on their labels.
We presented this information to
KFI, first to their attorneys informally, then later to the Court. KFI raised
questions regarding the testing methodology of our expert, but chose not to
have these yarns actually tested. So far, KFI asserts that the yarns, listed
below, contain milk, alpaca and cashmere, purely because the salesmen who sold
it to KFI says [sic] that they do. We attached the documents from Cascade’s
fiber expert, as well as the response from KFI’s plastics expert.
1) Ella Rae Milky Soft: advertised
as a 50/50 cotton milk protein blend is actually cotton and acrylic.
2) Laines du Nord (KFI) Baby Milk:
advertised as 63% wool, 30% milk fiber, and 7% cashmere is actually 68% wool
and 32% acrylic.
A. Retails for $6.60 for a 25 gram
skein or $26.40 per 100 grams.
B. Cascade Pacific 60% acrylic 40%
wool (merino) retails for $6.50 per 100 grams.
3) Ella Rae Latte: advertised as
30% alpaca, 30% milk, and 40% microfiber actually contains neither milk nor
alpaca and is 69% acrylic and 31% wool.
A. Retails between $9.00 to $10.00
for 50 gram skein or $18–$20 per 100 grams.
B. Again Cascade Pacific retails
for $6.50 and has a third more wool.
 
Cascade removed the posting sometime in 2012.
 
The court granted judgment as a matter of law to Cascade
because of KFI’s failure to show damages. Assuming (!) that the statement was
commercial comparative advertising, a presumption of injury is only available
for deliberately deceptive
comparative advertising.  No witnesses
testified to Cascade’s mental state.  A
Cascade witness testified that he relied on the reports of a fiber analyst,
Kenneth Langley, which he consequently believed to contain only true
statements.
 
Nor was there direct evidence of injury.  KFI did not link a drop in its business to
Cascade’s actions here; Cascade has been posting lots of pleadings from this
case wholly unrelated to the milk fiber yarn issue. “The jury would have no way
to find that KFI’s damages were attributable to the milk fiber posting and not
to the public airing of unrelated grievances throughout the course of this
litigation, or to any number of economic or other causes.” Nor did KFI show any
Cascade profits were attributable to this posting. “[U]nder these circumstances,
any award would constitute an impermissible penalty rather than compensation,”
so the court wasn’t going to send it to the jury.  This ended the state common law unfair
competition claim too.
 
On defamation, KFI was a private figure, but the milk fiber
yarn post involved a matter of “public concern,” “in light of the public’s
interest in the accuracy of product labeling as well as in consumer warnings of
fraudulent or deceptive business practices.” Under state law, KFI would need to
show negligence to recover actual damages, and actual malice to recover
presumed damages.  It couldn’t show
actual damages, as noted above, and it also couldn’t show actual malice either
through knowledge of falsity or reckless disregard for truth. Though KFI had
evidence of falsity, neither falsity nor proof of failure to investigate before
publishing are sufficient to show malice.
 
Similar difficulties attended the tortious interference
claim; KFI failed to show the existence of specific expectancies, Cascade’s
knowledge thereof, and resulting damages.  KFI didn’t to identify any of its customers
who were deterred by the milk fiber yarn posting.
 
KFI pointed to an email that I can imagine another court
finding sufficient, given the difficulty of finding actual evidence of deception—in
this email, a customer thanked Cascade “for helping her to avoid $200 of
contemplated purchases of milk fiber yarns.” The court found that this one
email contained hearsay and was insufficient. “It was admitted to contradict
Mr. Dunbabin’s testimony about the extent to which the milk fiber yarn posting
was viewed but not for the truth of the matter asserted therein.”  (Couldn’t it also go to the customer’s state
of mind, which would show deception?)
 
Cascade’s claims for injunctive relief based on KFI’s past
mislabeling also failed.  In order for cessation
of unlawful conduct to moot a claim for injunctive relief, the defendant bears
the burden to show that its reform is irrefutable and total.  The court found “ample assurances” that KFI
had stopped selling the mislabeled yarns at issue in 2012 and wouldn’t sell
them in the future.  Cascade’s remaining
claims were dismissed.

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failure to show damage from accusation of falsity dooms counterclaims

Posted on June 4, 2015 by rtushnet
Cascade Yarns, Inc. v. Knitting Fever, Inc., 2015 WL 3407882, No. C10–861 (W.D. Wash. May 27, 2015)
This five-year odyssey ends with a whimper.  Cascade and KFI sell luxury yarns; Cascade initially sued KFI for mislabeling the fiber content of certain yarns. Ultimately, the case went to a jury solely on KFI’s counterclaims for unfair competition under the Lanham Act and Washington common law, defamation, and tortious interference with business expectancies. Each claim arose out of Cascade’s posting a statement under the headline “Milk Protein Fiber Hype”:
 
There has been a lot of hype recently about a fiber advertised as “Milk Protein Fiber.” Given the substantial price that “milk” yarns command, it made sense to investigate what this “milk” fiber actually is. We were surprised to learn that three “milk” yarns sourced from Knitting Fever were nothing more than common acrylic blends. Acrylic is an inexpensive fiber, which is often added to make yarns soft and affordable. Beyond the lack of milk, two of these yarns did not contain either the cashmere or alpaca, listed on their labels.
We presented this information to KFI, first to their attorneys informally, then later to the Court. KFI raised questions regarding the testing methodology of our expert, but chose not to have these yarns actually tested. So far, KFI asserts that the yarns, listed below, contain milk, alpaca and cashmere, purely because the salesmen who sold it to KFI says [sic] that they do. We attached the documents from Cascade’s fiber expert, as well as the response from KFI’s plastics expert.
1) Ella Rae Milky Soft: advertised as a 50/50 cotton milk protein blend is actually cotton and acrylic.
2) Laines du Nord (KFI) Baby Milk: advertised as 63% wool, 30% milk fiber, and 7% cashmere is actually 68% wool and 32% acrylic.
A. Retails for $6.60 for a 25 gram skein or $26.40 per 100 grams.
B. Cascade Pacific 60% acrylic 40% wool (merino) retails for $6.50 per 100 grams.
3) Ella Rae Latte: advertised as 30% alpaca, 30% milk, and 40% microfiber actually contains neither milk nor alpaca and is 69% acrylic and 31% wool.
A. Retails between $9.00 to $10.00 for 50 gram skein or $18–$20 per 100 grams.
B. Again Cascade Pacific retails for $6.50 and has a third more wool.
 
Cascade removed the posting sometime in 2012.
 
The court granted judgment as a matter of law to Cascade because of KFI’s failure to show damages. Assuming (!) that the statement was commercial comparative advertising, a presumption of injury is only available for deliberately deceptive comparative advertising.  No witnesses testified to Cascade’s mental state.  A Cascade witness testified that he relied on the reports of a fiber analyst, Kenneth Langley, which he consequently believed to contain only true statements.
 
Nor was there direct evidence of injury.  KFI did not link a drop in its business to Cascade’s actions here; Cascade has been posting lots of pleadings from this case wholly unrelated to the milk fiber yarn issue. “The jury would have no way to find that KFI’s damages were attributable to the milk fiber posting and not to the public airing of unrelated grievances throughout the course of this litigation, or to any number of economic or other causes.” Nor did KFI show any Cascade profits were attributable to this posting. “[U]nder these circumstances, any award would constitute an impermissible penalty rather than compensation,” so the court wasn’t going to send it to the jury.  This ended the state common law unfair competition claim too.
 
On defamation, KFI was a private figure, but the milk fiber yarn post involved a matter of “public concern,” “in light of the public’s interest in the accuracy of product labeling as well as in consumer warnings of fraudulent or deceptive business practices.” Under state law, KFI would need to show negligence to recover actual damages, and actual malice to recover presumed damages.  It couldn’t show actual damages, as noted above, and it also couldn’t show actual malice either through knowledge of falsity or reckless disregard for truth. Though KFI had evidence of falsity, neither falsity nor proof of failure to investigate before publishing are sufficient to show malice.
 
Similar difficulties attended the tortious interference claim; KFI failed to show the existence of specific expectancies, Cascade’s knowledge thereof, and resulting damages.  KFI didn’t to identify any of its customers who were deterred by the milk fiber yarn posting.
 
KFI pointed to an email that I can imagine another court finding sufficient, given the difficulty of finding actual evidence of deception—in this email, a customer thanked Cascade “for helping her to avoid $200 of contemplated purchases of milk fiber yarns.” The court found that this one email contained hearsay and was insufficient. “It was admitted to contradict Mr. Dunbabin’s testimony about the extent to which the milk fiber yarn posting was viewed but not for the truth of the matter asserted therein.”  (Couldn’t it also go to the customer’s state of mind, which would show deception?)
 
Cascade’s claims for injunctive relief based on KFI’s past mislabeling also failed.  In order for cessation of unlawful conduct to moot a claim for injunctive relief, the defendant bears the burden to show that its reform is irrefutable and total.  The court found “ample assurances” that KFI had stopped selling the mislabeled yarns at issue in 2012 and wouldn’t sell them in the future.  Cascade’s remaining claims were dismissed.
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“designed to meet standard” doesn’t mean “meets standard,” court says

Posted on June 4, 2015 by rtushnet
Caltex Plastics, Inc. v. Shannon Packaging Co., 2015 WL
3407889, No. 2:13–cv–06611 (C.D. Cal. May 27, 2015)

Caltex makes polyethylene bags and laminated products for military and
electronics. Shannon competes with Caltex. 
The Department of Defense has a Qualified Products List (QPL), which
lists products that the DOD has approved to be used in Defense Department
contracts that require a “qualified” product.  Caltex has a product on the QPL for a
particular specification (Type III, static shielding), and this is presently
the only qualified product for that specification.  There was no evidence that Shannon ever said
that its products were on the QPL or that they were DOD-qualified. Its data
sheets previously said that its competing product was “[d]esigned to meet the
performance of [the Type III standard].” Shannon stopped saying this, and, when
it accepts an order, now advises the customer that its bags are not on the QPL.
Shannon’s previous representation was based upon the results of testing Shannon
conducted of its material, or which a third party conducted on behalf of
Shannon of its material; Caltex did not test them for this litigation.

The court, not interested in implicature, found that Shannon’s claim of
“designed to meet the performance” of the QPL standard wasn’t literally false
just because Shannon’s product wasn’t on the QPL.  Even assuming that Shannon’s statement was an
establishment claim, Caltex didn’t prove that the bags weren’t “designed” to meet the standard, or that Shannon didn’t
test them through the DOD-approved test method. 
Lack of substantiation is itself not actionable under the Lanham
Act.   Nor was there evidence of consumer
deception, so that was it.

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"designed to meet standard" doesn’t mean "meets standard," court says

Posted on June 4, 2015 by rtushnet
Caltex Plastics, Inc. v. Shannon Packaging Co., 2015 WL 3407889, No. 2:13–cv–06611 (C.D. Cal. May 27, 2015)
Caltex makes polyethylene bags and laminated products for military and electronics. Shannon competes with Caltex.  The Department of Defense has a Qualified Products List (QPL), which lists products that the DOD has approved to be used in Defense Department contracts that require a “qualified” product.  Caltex has a product on the QPL for a particular specification (Type III, static shielding), and this is presently the only qualified product for that specification.  There was no evidence that Shannon ever said that its products were on the QPL or that they were DOD-qualified. Its data sheets previously said that its competing product was “[d]esigned to meet the performance of [the Type III standard].” Shannon stopped saying this, and, when it accepts an order, now advises the customer that its bags are not on the QPL. Shannon’s previous representation was based upon the results of testing Shannon conducted of its material, or which a third party conducted on behalf of Shannon of its material; Caltex did not test them for this litigation.
The court, not interested in implicature, found that Shannon’s claim of “designed to meet the performance” of the QPL standard wasn’t literally false just because Shannon’s product wasn’t on the QPL.  Even assuming that Shannon’s statement was an establishment claim, Caltex didn’t prove that the bags weren’t “designed” to meet the standard, or that Shannon didn’t test them through the DOD-approved test method.  Lack of substantiation is itself not actionable under the Lanham Act.   Nor was there evidence of consumer deception, so that was it.
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