Wednesday, April 28, 2010

Book Review: The Secrets to Winning Trade Secret Cases

This is a great book for lawyers seeking to learn about trade secrets litigation written in accessible language, and also for experienced practitioners who might learn some new tactics.  While it covers all of the basics, such as the elements of a claim, what is a trade secret, and the like, it is chock full of helpful tips that any IP litgator can appreciate.  For example, the first chapter contains "Ten Keys to Winning" trade secret cases.  This  goes through some basic information, but also contains a nice explanation for the reason why a company might want to forget about making a trade secret claim at all and instead pursue other remedies.  The book also contains examples of "killer crosses" that help show how to execute the  advice given.  One sample cross examination appears in the first chapter, going through a line of questioning designed to show how companies try to protect too much information by stamping documents confidential that end up being distributed outside the "need to know" group.  The cross shows how the overreaching approach could confuse employees as to what is a trade secret and what is not.  After all, if the company is stamping as confidential documents that it clearly did not keep confidential, how is the employee supposed to know what is really a secret?

The book is helpful for both those suing for misappropriation of trade secrets, and those defending the claims.  For most of the points made in the book, a helpful case in point example is inserted, with a brief description of the case and the holding.  These are not only great citations but also handy real world examples of the results of the tactics in use.  The book also stays on the cutting edge of trade secrets law with a splendid chapter on inevitable disclosure.  Another great chapter is the section on the determination whether misappropriation is criminal in nature, and a very frank explanation of the dilemma between pursuing criminal charges versus civil remedies.  An advanced section details the use of clean rooms to reverse engineer the alleged secrets, and  others explain the intersection of trade secrets with (1) patent law and (2) noncompetes. 

Of course, trade secrets law is a state by state subject for the most part, although the Uniform Trade Secrrets Act has been adopted widely.  Thus, the book by necessity does not delve deeply into the conflicts between states, and sticks to practical advice that applies to all cases.  It is not a hornbook or a treatise.  True to its title, it is a litigation guide.  There is a fantastic appendix with a sample complaint, protective order, and TRO order.  A great section on packaging a criminal case for prosecutors is also included.

However, the book could spend more time on the preemption issues with the UTSA that often arise with multi-count complaints.  Also, the book contains sample jury instructions, but only for six states that seem to be randomly selected, such as Arkansas and Ohio. One wonders how Arkansas made the cut but not Georgia. 

I know of no other book in the market that gives such practical and comprehensive advice about how to effectively litigate trade secrets cases.  In my opinion it is a must-read for any lawyer serious about becoming successful in the trade secrets litigation practice.  Now, how to be a winner in trade secret cases is no longer a secret.  

GET LUCKY Brand Has Good Fortune at Trial against Liz Claiborne dba Lucky Brand

A jury in the U.S. District Court for the Southern District of New York returned a $580,000 verdict in favor of Miami-based Marcel Fashion Group Inc. and the GET LUCKY line of apparel following a federal trademark infringement trial against New York-based Liz Claiborne Inc. The case was tried before Judge Laura Taylor Swain.  GET LUCKY was in fact the counterclaimant, having been sued by Lucky Brand first. 

In the verdict, which followed five days of trial, jurors found that Liz Claiborne and Lucky Brand sold garments that infringed the "GET LUCKY" trademark owned by Marcel Fashion, owner of GET LUCKY. The jury also found that the companies' infringement amounted to unfair competition under federal law. The jury awarded $300,000 in actual damages and punitive damages of $280,000.

Lucky Brand originally sued Marcel Fashion and its licensee Ally Apparel for trademark infringement in 2005, but evidence showed that Marcel Fashion had registered and used the trademark "GET LUCKY" years before Lucky Brand was even formed. Last year, the Court sanctioned Lucky Brand, represented by Greenberg Traurig, for its repeated discovery violations and awarded partial summary judgment on some of Marcel's trademark counterclaims and breach of a 2003 settlement agreement with Marcel Fashion. McCool Smith represented the GET LUCKY brand owners.  The case is Lucky Brand Dungarees Inc., et al. v. Ally Apparel Resources LLC, USDC SDNY.  Case No. 1:2005cv067.

Tuesday, April 27, 2010

Dr. Renee Kaswan Settles Dispute with UGA Research Foundation, Prepares to Shift Focus to IP Advocate

The Wall Street Journal Market Watch is reporting that Dr. Kaswan, inventor of the drug Restasis,
settled litigation with the UGA Research Foundation ("UGARF") regarding a contract that UGARF entered with pharmaceutical company Allergan to market an ophthalmic formula including cyclosporine.  The contract was negotiated without the involvement of Dr. Kaswan, after a deal had already been struck with Allergan to market the drug.  For some reason, UGARF agreed to reduce the amount received for the drug, costing Dr. Kaswan, and the state of Georgia taxpayers, millions of dollars.  Ultimately, UGA ended up suing Dr. Kaswan as part of the long dispute. 

Dr. Kaswan has launched a non-profit, IPAdvocate, to help university researchers more freely translate inventions into publicly useful products.  “I fought for 20 years to patent, license, and gain FDA approval for my invention – a treatment for chronic dry eye, which can cause blindness,” said Dr. Kaswan. “But once approval came, the lawyers attacked and turned what had been a cooperative relationship between university and inventor into a contentious legal battle that lasted seven years. That is not the way to inspire innovation.”

According to published reports,  in late 2002, UGARF agreed in writing to assign Dr. Kaswan the patents for her dry-eye treatments. Contracts were being drafted when the FDA surprised everyone by approving Allergan’s Restasis for use on humans on Dec. 24, 2002. University officials immediately reneged on their promise and initiated a pitched legal battle against Kaswan and her company, KB Visions.
Litigators intercepted and stopped all direct communications between UGARF and Dr. Kaswan. They initiated a series of bad faith claims against Dr. Kaswan and KB Visions, falsely alleging that she was acting against their instructions and outside of the terms of the licensing agreement. They announced intent to retract her patent license agreement, and suspended royalty payments to Dr. Kaswan from January 2003 through July 2005, and September 2008 until the recent settlement.

UGA President Michael Adams secretly and falsely instructed the university’s Board of Regents and IP Faculty Oversight Committee that Dr. Kaswan had elected litigation and forfeited her rights under UGA's non-legal dispute resolution procedures. This move by President Adams forced Dr. Kaswan to defend her IP equity rights in court, where Adams had the ability to exhaust her finances. “This litigation was a smokescreen to conceal the secret dealings with Allergan, which resulted in the loss of $220 million to the university and to the taxpayers of Georgia,” said Dr. Kaswan.

Dr. Kaswan eventually filed a countersuit against UGARF and Allergan, claiming, among other things, that Allergan tortiously interfered with her employment contract and fiduciary relationship with UGA, and that UGARF and Allergan fraudulently conspired to convey her property for an unreasonably low price. After seven years of litigation, Dr. Kaswan settled and received her inventors' share of royalties minus the legal fees UGARF deducted for suing her.

About IP Advocate

IP Advocate ( is a non-profit organization that educates and empowers faculty researchers on patent rights and the process of commercialization – helping inventors protect their rights during the complex process of moving their inventions from the lab to the public marketplace. IP Advocate is a robust resource of information and best practices related to the commercialization of intellectual property. IP Advocate was founded by Dr. Renee Kaswan, inventor of Restasis® and a former research professor at the University of Georgia; and is led by executive director Rhaz Zeisler, an internationally recognized interactive media brand strategist, and former Walt Disney producer and IBM creative executive. IP Advocate is a 501(c)(3) organization, based in Atlanta.

Monday, April 26, 2010

Happy World Intellectual Property Day

Today is World Intellectual Property Day.  If you are like me, your firm has not yet grasped the significance of this sacred day and you are at work, hopefully contributing to the rule of law for intellectual property somewhere in the world.  The US Chamber of Commerce has released a study claiming that 60% of US exports come from intellectual property "intensive" industries.  The debate over fair use versus strict regulation continues, but the competition in the marketplace of ideas and expression will continue forever. 

Friday, April 23, 2010

Court Has Dark View of Lanham Act Claims Brought by Design Company

Judge Forrester of the Northern District of Georgia recently granted summary judgment against claims brought by a lighting design company against a former employee.  PHA Lighting Design, Inc. v. Kosheluk, 2010 WL 1328754 (N.D. Ga.), Decided March 30, 2010.  Lighting design is a specialized aspect of architecture that involves the creation of lighting plans for commercial buildings.  Defendant Kosheluk worked for PHA from 2000-2007, and then left to form his own company, Archiluce International.  After leaving PHA Kosheluk created a Power Point marketing presentation that was sent to potential customers.  The introduction stated that "The selected project images herein were all designed and/or completed under his direction while at PHA Lighting Design."  The hundred page presentation went on to displays photos of lighting in many different buildings.  Kosheluk admittted copying from PHA's server some of the photos in the presentation, PHA's master contact list, lighting cut sheets, expense reports, a shop drawing stamp template, lighting fixture specifications, and proposals.  PHA brought claims for Lanham Act violations, Georgia Uniform Deceptive Trade Practices Act, unjust enrichment, and statutory interference with property. 

PHA's Lanham Act claims were two-pronged:  (1) a claim for false designation of origin, also known by the unwieldy term "reverse passing off", and (2) false advertising.  Reverse passing off  happens when the party misrepresents the victim's goods or services as his own.  The elements of the claim are (1) the item at issue originated with the plaitniff, (2) the defendant falsely designated the origin of the work, (3) the false designation was likely to cause consumer confusion, and (4) the plaintiff was harmed.    PHA alleged several falsehoods.  PHA claimed that the statement that the selected project images were "all designed and/or completed under his direction while at PHA Ligthing Design" was false.  PHA argued that none of the projects were "under his direction" because the design is a collaborative process, and that Kosheluk did minimal work on a few of the projects.   Also, PHA complained that the fact that Archiluce's logo was on every photo but that not all of them made specific reference to PHA created a false impression of origin.  Finally, PHA argued that a few of the items were false because not all of the designers that contributed to some of the projects were listed, only some of them. 

The court rejected PHA's argument, holding that PHA had adduced no evidence that, even though the representations in the presentation may have been somewhat inaccurate, PHA had not come forward with any actual evidence that there was a likelihood of confusion.  Plaintiff had merely asserted that the defendant had passed off PHA's services as his own.  Secondly, the court threw out the claims because it stated that PHA had not come forward with any evidence that it was harmed by the presentation at issue.  PHA argued that the fact that ten recipients of the presentation had hired Archiluce was enough to infer harm, but the court disagreed, noting that there was no reference to the presentation by these customers in the record. 

Citng the same alleged inaccuracies in the presentation, PHA also claimed false advertising.  False advertising occurs under the Lanham Act when the following elements are satisfied:  (1) the advertisements of the defendant were false or misleading; (2) the advertisements deceived, or had the capacity to decieve, consumers; (3) the deception had a material effect on purchasing decisions; (4) the misrepresented product or service affects interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false advertising.  Under the first element, the plaintiff must show that a statement is literally false, or if literally true, conveyed a false impression, is misleading in context, or likely to deceived consumers.  If literally false, deception is assumed.  PHA claimed that all of the inaccuracies pointed out were literally false and thus deception was automatic.  The court disagreed, finding that at most, the claims made in the presentation were ambiguous as to Kosheluk's role in the projects at issue.  Because some evidence was presented that Kosheluk was not involved at all in some of the projects, the court found some evidence of one literal falsehood.  However, the court stated that, even if deception is presumed, the plaintiff has to present evidence of materiality to maintain a claim.  The court found that PHA had not provided any evidence that the possible falsity of some of the claims made in the presentation would affect the consumer decision.  Therefore, the court granted Kosheluk summary judgment on all of PHA's claims. 

Tuesday, April 20, 2010

Use of Copyright Law to Fight the Import of Gray Market Goods Goes to US Supreme Court

Gray market products are genuine goods sold by U.S. retailers outside official distribution channels to exploit worldwide price differences.  What happens is that brand label items are manufactured abroad, sold abroad cheaply by the manufacturer, and then imported into the United States and sold at prices below those suggested by the retailer or offered by the retailer at its own stores.  This is how Costco can sell Movado watches for so much less than you can buy them at a Movado store or through some other retailer who got the watch through Movado's US distributors. 

Courts ruled long ago that copyright law could not be used to protect goods manufactured in the US, sold abroad and reimported to the US outside normal distribution channels.  This is because of the "first-sale doctrine" which says that copyright holders can only profit from the original sale of a product.  Now the question is whether the first-sale doctrine applies to goods manufactured outside the US.  The Ninth Circuit has held that it does not. The Supreme Court has granted certiorari on the issue.  The bottom line is that this case pits manufacturers of brand label goods against consumer advocates and discount retailers.  In other words, it may be time to go to Costco and load up.

2nd Circuit Affirms Noninfringement Holding on Motion to Dismiss in Copyright Claim

The Second Circuit joined the 5th, 8th, 9th and 10th circuits in finding that it is possible to obtain a Rule 12(b)(6) dismissal of a copyright action where the works in question are attached to the plaintiff's complaint.  Peter F. Gaito Architecture, LLC v. Simone Development Corp.,2010 WL 1337225 (2d. Cir. April 5, 2010).  This case had to do with architectural plans for a project in New Rochelle, New York (pictured above).  The plaintiff architecture firm made a deal to do a joint proposal with the defendant development company.  After the architect submitted plans, a dispute arose between the architect and the developer, so the developer fired the architect and hired a new one.  The fired architect contended that the new plans were substantially similar to its plans and filed a copyright action.  The district court dismissed the case and the court of appeals affirmed.

The complaint had identified 35 alleged similarities between the plaintiffs designs and the redesign.  The court held that substantial similarity claims can be dismissed as a matter of law either (1) because the similarity between the works concerns only non-copyrightable elements, or (2) no reasonable jury could find that the two works were substantially similar.  In this case the court found that "it is patent that the overall visual impressions of the two designs are entirely different."  In rejecting the alleged similarities proposed by the plaintiff the court found that they were no more than ideas and concepts, not the protectable expression of ideas. 

It appears that the Eleventh Circuit has not spoken on the issue.  Therefore, it may be worth the effort to try a motion to dismiss where the plaintiff attaches the two works in question. 

Tuesday, April 13, 2010

Court Finds Allergy Clinic's Trademark Claims Nothing to Sneeze At

The Northern District of Georgia sent a trademark case between two Atlanta allergy clinics to trial in Atlanta Allergy and Asthma Clinic, P. A. v. Allergy & Asthma of Atlanta, LLC, USDC NDGA Case No. 1:08-cv-3033-WSD, decided January 19, 2010.  The plaintiff clinic claims the exclusive right to use the mark "Atlanta Allergy & Asthma Clinic," and complains that the defendant's name infringes on the mark.  According to the plaintiff it has, among other things (1) the largest allergy and asthma practice in the southeast with 19 office locations in the Atlanta area, (2) spent great amounts of money to advertise and promote its name and services with the public, especially referring doctors, and (3) distinguished and branded itself through its creation and reporting of its daily "Pollen Count."  The plaintiff claimed that it has used the mark continuously since 1972 at best and 1996 in the worst case.  In late 2007, the Defendant began using the name "Allergy & Asthma of Atlanta" to identify and advertise their services.  The plaintiff asserts that the use of the name is causing actual confusion as whether the Defendant is related to the Plaintiff.  Plaintiff has sued claiming trademark infringement, among other things. 

Both sides filed motions for summary jugment.  On the trademark claim, the court ruled that jury issues precluded summary judgment.  The Lanham Act protects trademarks, whose infringement can be established by a showing that its mark was used in commerce by the defendant without consent and that the use was likely to deceive, cause confusion or result in mistake.  There are three elements to winning a trademark claim (1) first use of the trademark in the same market, (2) validity of the trademark and (3) likelihood of confusion.  The court found jury issues on the last two of the three elements.

Regarding the validity of the trademark, the plaintiff's mark is a geographically descriptive mark, which is a subset of descriptive marks.  In order to show validity, the plaintiff must show that its mark has acquired secondary meaning before the infringement began.  Secondary meaning is the connection in the consumer's mind between the mark and the provider of the product or service. Determining whether there is secondary meaning requires analysis of four things:  (1) length and manner of use, (2) nature and extent of advertising and promotion, (3) efforts made by claimant to promote a conscious connection with the public's mind between the name and plaintiff's product, and (4) the extent to which the public actually identifiies the name with plaintiff's product. 

On the first element the court noted the undisputed use of the mark since 1996.  The Defendant attacked the mark by pointing out the common third party usage of its individual terms such as "Atlanta," "allergy" and "asthma."   The defendant pointed out that another clinic opened named Atlanta ENT Allergy and Asthma Associates, using all of the words in plaintiff's name, and the plaintiff countered that the name had been changed after a cease and desist letter from the plaintiff.  Ultimately the court rejected the defendant's attempt to deconstruct the words in the name, stating that the validity of the mark is analyzed by looking at the mark as a whole, not its parts.  However, the court then found that it could not conclude on summary judgment that the length and manner of plaintiff's use of the mark established secondary meaning. 

On the second element the court noted that it would consider in its analysis the plaintiff's claim that it had spent approximately $1.4 million on advertising and promoting its mark.  The court noted, however, that it is not the amount of money spent that matters but rather the results achieved from the expenditure in looking at secondary meaning.  On the third element, the court noted evidence of many promotional activites, such as media events, the pollen count service, the use of a consultant to build patient referrals.  Plaintiff stated that from 2007 to 2009 its consultant met with about 310 medical providers and only 14 were unfamiliar with the plaintiff.  The defendant argued that the plaintiff's marketing to doctors was not targeting the public or consumers and thus there was no evidence the activity promotes a conscious connection with consumers between the mark and the services.  The court found that the plaintiff had established that it "has made a concerted effort to promote its mark" but also held that standing alone this did not establish secondary meaning. 

On the fourth element, public identity between the mark and the product, the plaintiff offered a survey that it contended showed that 73% of survey respondents made an association between the name and the services of the plaintiff.  On the basis of this the expert (a marketing professor at Georgia State, Dr. Kenneth L. Bernhardt) concluded that the mark has acquired a substantial level of awareness and recognition in the marketplace.  The survey was aimed at physicians, who presumably are the source of much of the plaintiff's business through referrals.  The defendant, under a Daubert motion to exclude the expert's findings, attacked this aspect of the survey, arguing that by focusing on doctors the survey did not look at actual or potential customers.  Thus, argued the defendant, the universe of survey respondents was improper because it excluded all actual or potential allergy patients.  The court rejected the argument that focusing on doctors made the survey fatally flawed, stating that the defendant's argument goes to the weight the survey deserves, not its admissibility. 

The defendant also attacked the survey claiming that it failed to tet whether respondents identified a single source of services because it tested whether plaintiff' was the most commonly associated  party to the mark.  The court rejected this, finding that the survey was probative of secondary meaning because it gathered evidence of awareness and familiarity with the plaintiff's name.  Defendant also claimed that the survey failed to follow accepted scientific principles and methods for survey evidence, and once again the court said the argument goes to the weight of the survey, not its admissibility. 

The court ultimately found that the plaintiff had presented "some evidence of confusion" between its mark and the defendant's name.  Thus, the court denied the defendant's motion for summary judgment. However, the court also stated that plaintiff had not established as a matter of law that its mark had secondary meaning, and thus it could not obtain summary judgment that it has a valid and protectible trademark.  Because summary judgment was not reached on the validity issue, the court declined to make a ruling on likelihood of confusion.  Therefore, in the end the court found two issues for trial, (1) whether plaintiff's mark has secondary meaning and is thus valid and protectable, and (2) whether the defendant's name infringes on the plaintiff's mark because it is likely to cause confusion.

Thursday, April 8, 2010

Motorcycle Photos May be Protected by Copyright

The Eleventh Circuit affirmed in part and reversed in part a Florida district Court's decision regarding a
copyright infringement action related to the use of photographs of customized motorcycles.  Latimer v. Roaring Toyz, Inc., 11th Cir. U.S. Court of Appeals, Case No. 08-16665, decided April 2, 2010. 
The court affirmed the district court’s denial of summary judgment based on defendants’ argument that plaintiff’s photographs of motorcycles featuring original artwork were unauthorized derivative works, but reversed the district court’s grant of summary judgment based on fair use, holding that the district court erred in raising the fair use defense sua sponte where fair use was not raised as a defense in the answer, and reversed the grant of summary judgment based on implied license, finding that genuine issues of material fact regarding whether defendants exceeded the scope of the implied license preclude summary judgment. 

The plaintiff is a photographer who filed suit against several parties for copyright violation:  (1) a motorcycle customizing shop (Roaring Toyz), (2) a motorcycle manufacturer (Kawasaki) and (3) a magazine publisher (Hachette) for using photographs the plaintiff had taken of several customized ZX-14 motorcycles. The defendants claimed (1) that the plaintiff’s photographs were derivative works based on the original artwork painted on the motorcycles, (2) that the plaintiff did not have a license from the creator of the artwork to make a derivative work, and (3) that therefore the plaintiff’s photographs were not entitled to copyright protection and (4) even if plaintiff’s photographs were entitled to copyright protection, the plaintiff granted defendants an implied license to use the photographs.

The defendants did not plead fair use, but the district court raised the issue sua sponte and granted defendant magazine publisher summary judgment based on its publication of the photographs being a fair use. The district court also held that the photographs were not derivative works because they did not “recast, transform, or adopt” the artwork and that they were entitled to copyright protection. However, the district court concluded that the plaintiff had granted the defendants an implied license to use the photographs, and granted summary judgment to defendants on this issue. On appeal, the plaintiff argued that the defendants exceeded the scope of the implied license and that the defendants waived their right to assert the affirmative defense of fair use by failing to plead it.

Ruling on the issue of whether the photographs were protected by copyright, the Eleventh Circuit held that it need not resolve the question of whether the photographs were derivative works based on the artwork painted on the customized motorcycles because the artist had granted an implied license that encompassed the photographs. Based on this conclusion, the court affirmed the district court’s denial of summary judgment based on the argument the photographs did not enjoy copyright protection.

However, the Eleventh Circuit reversed the district court’s summary judgment ruling on the issue of the implied license granted by plaintiff. According to the court, an implied license is created when one party (1) creates a work at another person’s request; (2) delivers the work to that person; and (3) intends that the person copy and distribute the work. Furthermore, implied licenses may be limited and a defendant who exceeds the scope of an implied license commits copyright infringement. The court held that an implied license will be limited to a specific use only if that limitation is expressly conveyed when the work is delivered.

The appeals court agreed with the district court that the plaintiff granted Kawasaki an implied license to use his photographs, but found that the defendants’ use might have exceeded the scope of that license. The court held that the plaintiff’s conduct satisfied all three prongs of the implied license test: the plaintiff granted Kawasaki an implied license to use his photographs; the plaintiff created the photographs at Kawasaki’s request and delivered the photographs to Kawasaki, and intended that Kawasaki use the photographs on a placard and in a screen presentation to promote its new sport bike. However, the parties disputed whether the plaintiff specifically limited how the defendants could use the photographs and the appeals court remanded this issue for the district court to determine, stating that there were genuine issues of material fact regarding whether the defendants exceeded the scope of the implied license.

The appeals court also reversed summary judgment for the magazine publisher on the basis of fair use. The plaintiff argued that the defendants never raised the fair use defense until after the district court raised it sua sponte and thus the defendants waived their right to raise the affirmative defense of fair use. The defendants argued that fair use is not an affirmative defense but is instead considered not infringement. The court rejected this argument and held that the district court erred by raising the fair use defense sua sponte where the defense was not asserted in Hachette’s answer or raised in its motion for summary judgment. The court reversed the district court’s grant of summary judgment to the defendant magazine publisher and remanded the issue. “We are not ruling as a matter of law that Hachette has waived the fair use defense because this issue has not been properly presented in the district court. As previously noted, failure to plead an affirmative defense generally results in a waiver of that defense. However, there are exceptions to this rule and the district court is free on remand to entertain a motion to amend by Hachette to assert the affirmative defense of fair use.”

Wednesday, April 7, 2010

Judge Pannell Shoots Down Lockheed's Trade Secrets Verdict for Discovery Abuse

Judge Pannell of the USDC NDGA overturned a $37.3 million trade secrets verdict for Lockheed Martin Corp. and ordered a new trial, after ruling that the company failed to turn over to a defendant competitor documents critical to the defense of the trade secrets claims.   The documents were discovered by the defendant,  L-3 Communications Integrated Systems, when they were produced after the verdict in a companion antitrust case pending in Dallas, Texas. The original article by The Daily Report is  here. In his March 31 order Pannell said it was "probable" that the outcome of the trial would have been different if the jury had been given access to the information that Lockheed withheld. 

Perhaps as painful for Lockheed, in his order Pannell also tossed out Lockheed's motion for a whopping $16 million in legal fees claimd to have been amassed by Lockheed's counsel, Kilpatrick Stockton, during the Atlanta litigation. Five years ago, Lockheed sued L-3 in U.S. District Court in Atlanta over what it claimed was a misappropriation of trade secrets associated with the design and construction of Lockheed's anti-submarine bomber, which is used by navies around the world. 

"Evidence that Lockheed allowed another company to utilize its proprietary data is important because failure to maintain the secrecy of such data results in the termination of trade secret status," Pannell wrote. "The main thrust of L-3's defense in this case was that the data it utilized was no longer a trade secret because it had not been properly protected by Lockheed."  L-3 claims that Lockheed waived the trade secret status of the information at issue by allowing another company, CASA, to use the information without proper protections in place to keep it secret under the law.  The documents not produced clearly had to do with Lockheed's dealings with CASA and the treatment of the key information at issue in the L-3 case.

According to Pannell's order, L-3 also contended that internal company e-mails Lockheed withheld would have shown that a letter of assurance from CASA that Lockheed relied on at the trial "was actually meaningless and was created by Lockheed to cover the fact that it had allowed its trade secrets to be used without compensation. Lockheed used this letter at trial to buttress its claims that it had taken all necessary steps to protect its trade secrets."

Pannell noted in his order that "the fact that Lockheed, not CASA, drafted the letter is an important fact that L-3 could have presented to the jury in arguing that the steps Lockheed took to protect its trade secrets had been all form and no substance." What the e-mails at issue showed, according to the judge's order, was that "at some point, Lockheed employees knew or believed that CASA was planning to illegally utilize Lockheed's data and that Lockheed intended to allow this to happen."
Lockheed contended it did not produce the e-mails in question because "they were not clearly responsive" to L-3's discovery requests. Pannell clearly found this excuse to be bogus. However, he declined to dismiss the case entirely, saying L-3 had not made the case that a lesser sanction -- in this case a new trial -- would fail to repair the harm caused by Lockheed's abuse of the discovery process.

"While the court is puzzled by the fact that Lockheed provided certain emails related to the P-3 data rights with respect to the Brazil program and even emails within the same email 'tree' while withholding the emails at issue here, the court is hesitant to find that the documents at issue were intentionally withheld for the purpose of obtaining an advantage in this litigation, particularly in light of the voluminous amount of documents that were exchanged in this matter," the judge wrote in his order.

But, he added, "The point is that L-3 should have had the opportunity to make these arguments to the jury. ... Therefore, the court concludes that it is more than possible, and is even probable, that the outcome of the jury trial would have been different in this case if Lockheed had properly turned over the documents."

The Atlanta case is Lockheed Martin Corp. v. L-3 Communications Integrated Systems, No. 1:05-cv-0902. The Dallas case is L-3 Communications Integrated Systems v. Lockheed Martin Corp., No. 3:07-cv-0341.