Sunday, June 12, 2011

The Law Follows Common Sense 99% of the Time (and So Should Intellectual Property Law)


"The Law follows common sense 99% of the time." This was and still is the mantra of The Hon. R Lanier Anderson, III, former Chief Judge of the Eleventh Circuit U.S. Court of Appeals. I had the incredible good fortune of clerking for Judge Anderson and he repeated this phrase often in his thick, Georgia red clay accent, prefaced by "My Granddaddy told me...." The Judge's father and grandfather practiced for life in Georgia, and with this mantra as his guide Judge Anderson has long been revered by judges and court personnel on the right, left, and center as an intellectual force on the court, and the very embodiment of Georgia's motto, Wisdom, Justice and Moderation.

We were taught as clerks by the judge to use common sense in appraising the legal arguments of lawyers, and this gauge was an incredible way of framing the questions presented, and looking at the Law through that lens serves as a barrier against frothy arguments and the intellectual pretzels in which lawyers get tied. Sometimes I refer to this radar, this sense that the Law is based on the ordinary sense of right and wrong, as the Common-Sense-ometer. One of the manifestations of this in the common law is the reasonable person. The reasonable person is a legal fiction of the common law representing an objective standard against which any individual's conduct can be measured. Generally the reasonable person applies to tort laws and its duties, but the reasonable person is invoked throughout the law. Inherently, the reasonable person has a usual share of the common sense of a reasonable person.

Another lawyer in a patent case expressed this recently about a case we were working on.  Defending a rather frivolous patent infringement suit, the lawyer observed that because our device was obviously not infringing, we were not "the side that has to be cute."  This was another way of saying that common sense was on our side.  Our job was not to let the other side use smoke and mirrors or confusing technical verbiage to obscure the fact that the "smell" test in the case went our way for anyone having ordinary skill in the art involved in that case.  In patent litigation, the reasonable person is a little more technically gifted, because the common sense barometer is based on a "person having ordinary skill in the art."  This is the reasonable technician, not the genius. In most cases a reasonable person can tell which side of the case "smells" bad, or which side has to be "cute" to fit a square peg into a round hole.  These cases make up 99% of litigation, and they should all follow common sense.  The other 1% often involves political or religious issues where there really is not much common sense to be found in the past cases, the language of the law, and the passions of the parties. 

Trademark bullying is a topic I have covered quite a bit recently, and once again common sense should prevail in looking at trademark infringement claims and whether there is a likelihood of confusion.  Most jurisdictions have a test for likelihood of confusion that delves into myriad factors related to the uniqueness of the mark, marketing, customer overlap, similarity of the product, and such.  None of this stuff should obscure the fact that the test is based on common sense, whether a reasonable customer is likely to be confused between the two marks or brands.  Not possibly confused, but probably confused.  Any judge or juror can look at a case in a few seconds and tell whether a person with any common sense ought to be confused by the marks. Generally that first impression is what the law should be, and the judgment should be, infringing or not.  The problem that has manifested itself with trademark bullying is the endless discovery and failure to award summary judgments in easy cases.  Most cases are obvious whether confusion is probable or not.  Courts should make decisions based on common sense and get rid of frivolous trademark bullying cases early.  They should also get rid of obvious infringement cases early and stop the infringing activity. 

Saturday, June 11, 2011

Judge Hammers "Not Believable" Trade Secret Defendant With Injunction in Northern District

Judge William Duffey of the Northern District of Georgia issued a scathing opinion against a defendant in a trade secret case after an evidentiary hearing, calling the defendant's testimony "not believable" and "troubling."  Amedisys Holding, LLC,  v. Interim Healthcare of Atlanta, Inc., Et al,  Case No.  1:11-cv-1437-WSD, Decided June 3, 2011, 2011 US DIST LEXIS 59260 (N.D. Ga). 

This case involves three former employees of the Plaintiff, Amedisys, who left to work for Interim Healthcare in April, 2011.  These were two salespeople and an assistant.   The business involved is home healthcare services.  The Plaintiff filed suit against the former employees and Interim, alleging that they had taken trade secret materials with them to Interim.

The trade secret materials involved what was called a "Referral Log."  The Referral Logs are a resource to track patient referrals. They contain detailed information regarding current and prospective patients. Amedisys employees use the Referral Logs to target their sales efforts to particular clinicians and facilities most likely to refer patients to Amedisys.  This allows their employees to concentrate their marketing efforts on the clinicians most likely to generate business for Amedisys.  The Referral Log in question contained the information of over 1200 patients.  It also showed who referred the patients to Amedisys, among other things.

There was a hearing on a TRO motion in early May at which the defense submitted declarations from the three former employees saying that they did not need the material, did not want it and would give it back.  Based on this, Judge Duffey denied the motion for a TRO but set some expedited discovery and a preliminary injunction hearing.  He also ordered the former employees to submit to forensic examinations of their computers.  By the time of the second hearing, several misrepresentations from one of the former employees had been unearthed.  This employee was hired to go to Interim as a manager of business development, and had emailed herself the Referral Log to her home address.  She turned out to have made several false statements in her declaration.  At the injunction hearing she testified, and the court found her "spin" about what she had done, when she had done it, and why to be unbelievable.  Thus, the court found that it was likely that this defendant had copied the logs and was using the information in her new job.  

The defense argued that the Referral Logs were not trade secrets but simply a list or directory of names of patients and healthcare providers that were publicly available. Amedisys argued that the Referral Logs reveal which doctors refer which patients to Amedisys and allow its sales representatives to identify which patients require long-term care and are susceptible to "poaching" by a competing home healthcare provider. The court agreed with the plaintiff.  Besides finding that reasonable measures had been taken to keep them secret (they were marked confidential on each page, among other things) the Court noted that the logs "are more than a list of names of healthcare providers and facilities. They are not simply a directory of healthcare providers. They contain valuable, proprietary information uniquely known to Amedisys, and which is not publicly available. This information, which Amedisys collects, evaluates, analyzes, and arranges, enables Amedisys employees to make informed, fact-based decisions on where to focus their business solicitation efforts. It is this information that transforms an ordinary list of doctors and healthcare providers to a trade secret."  

Going on the Court said "while the names of the doctors and healthcare centers could be developed in the logs by other means, including through a cumbersome and time-intensive deconstruction of medical directories, visitation to hospitals, internet searches, and the like, these "public" sources do not indicate which doctors or healthcare centers refer patients to in-home care, for what ailments the patients suffer from, who provided the referrals, and do not allow one to identify which patients are susceptible to poaching by a competing home healthcare provider."  In summary, although the names were not a secret, the analysis that the plaintiff had done on the names in compiling the "referral log" into a special list made it nonpublic and economically valuable.  From there the Court to determined that this person had stolen the logs for the benefit of herself and the new company.  

What is unclear about the opinion is just what these logs were about.  For example, if the logs dealt with hospitals all over Atlanta that would much more likely to be a trade secret than if the logs were about two or three hospitals.  A salesperson would have to be pretty dim to be unable to figure out whom to call on at a particular hospital for home healthcare referrals.  It would seem that this would be the doctors who deal with people who are going to be bedridden for some time or forever.  Not hard to figure out.  On the other hand, if this log dealt with facilities all over the metro Atlanta and culled specific marketing targets it would be easier to see it as a trade secret.  For example, if it had compiled data and a list of "top ten sales targets" it would more easily be seen as a trade secret. 

Because the Court distrusted the witness, it seems, it ordered a far-reaching injunction, prohibiting the new employer  from allowing this particular new employee "to contact on behalf of Interim, either directly or indirectly, any healthcare facilities, providers, patients, or prospective patients referenced in the Referral Logs she emailed to her personal email account on April 12, 2011, or any other Referral Logs or Referral Log information to which she now has access ("the Reference Log Persons"). Indirect contact shall include, but is not limited to, assisting others at Interim to identify, plan for, or make contact with any Reference Log Person."  This preliminary injunction, unless altered, will last for the rest of the case.  The defense argued that this injunction was essentially a noncompete against the witness and thus overreaching, but the Court noted that it did not prohibit her from working for Interim in other capacities or calling on places not listed in the logs.  Given the fact that the Logs likely included her best customers, this is probably cold comfort for her and Interim.  Chances are that most of the value of the defendant salesperson has been gutted by the injunction.  That is what you get for being unable to back up what you say in Court and trying to spin your way out of it.  You get punished.   

The court found no evidence that Interim had asked the former employee to take these trade secrets or to lie about it.  Unfortunately, they are stuck with the damage done by their new sales manager.  If these logs really are trade secrets, chances are that committing these illegal acts are a violation of Interim's deal with her.  It would not be surprising if Interim fired her and moved on without her.  In my experience, when what I call "Newco," the new employer, finds out about the theft of trade secrets and their potential liability, they are all too willing to fire the employee who caused all of the trouble. 

As a side note, the two other former employees were found to be truthful and not enjoined from doing work for the new company at all in their full capacities.  This was a salesperson who, the Court found, had accidentally failed to return her Workbook, but was able to recite from memory her contacts and referral sources.  Also, an assistant was found not to have any trade secret material.  They are free to work for Interim.  These two folks seem to have been part of the "package" that included the senior manager who is know hobbled by the injunction.