Trade Secrets

Massachusetts Bay Transportation Authority v. Anderson

Date: 

08/08/2008

Threat Type: 

Lawsuit

Party Receiving Legal Threat: 

Zack Anderson; RJ Ryan; Alessanro Chiesa; the Massachusetts Institute of Technology

Type of Party: 

Large Organization

Type of Party: 

Individual
School

Court Type: 

Federal

Court Name: 

United States District Court for the District of Massachusetts

Case Number: 

08-cv-11364

Legal Counsel: 

Cindy Cohn, Jennifer Granick, Marcia Hoffman, and Emily Berger, Electronic Frontier Foundation (for MIT undergraduate defendants); Lawrence K. Kolodney and Adam J. Kessel, Fish & Richardson P.C. (for MIT undergraduate defendats); John Reinstein (for

Publication Medium: 

Forum
Print
Website
Other

Relevant Documents: 

Status: 

Concluded

Disposition: 

Injunction Denied
Withdrawn

Description: 

According to the complaint, Zack Anderson, RJ Ryan, and Alessandro Chiesa were undergraduate students at the Massachusetts Institute of Technology (MIT). The students claimed to have discovered a vulnerability in the "CharlieCard" and "CharlieTicket" automated fare collection systems used by the Massachusetts Bay Transportation Authority (MBTA) for Boston area public transit. The students planned to share their research at the DEFCON computer security conference on August 10, 2008. Their description of the presentation, as quoted in the complaint, was as follows:

Want free subway rides for life? In this talk we go over weaknesses in common subway fare collection systems. We focus on the Boston T subway, and show how we reverse engineered the data on magstripe card [sic], we present several attacks to completely break the CharlieCard, a MIFARE Classic smartcard used in many subway systems around the world, and we discuss physical security problems. We will discuss practical brute force attacks using FPGAs and how to use software-radio to read RFID cards. We go over social engineering attacks we executed on employees, and we present a novel new method of hacking WiFi: WARCARTING. We will release several open source tools we wrote to perform these attacks. With live demos, we will demonstrate how we broke these systems.

When the MBTA learned of their planned presentation, they arranged a meeting with the MIT students and MIT Professor Ronald Rivest, who specializes in network security. According to the court records, the students met with the MBTA on August 5, but refused to provide the MBTA with materials they planned to present, and instead agreed to provide a three-page summary of the vulnerabilities they found. The students also modified their event description to remove the reference to "free subway rides for life," and made other small alterations to the event description.

On August 8, 2008 the MBTA filed a complaint and motion for a temporary restraining order against the students and MIT. The complaint alleged that the students committed a violation of the Computer Fraud and Abuse Act (CFAA) by transmitting information that caused damage to computers. The complaint also alleged that the students committed the common law torts of conversion and trespass to chattels by intercepting MBTA rider fares, that MIT negligently supervised the students by failing to instruct the students to "responsibly disclose information concerning perceived security flaws," and that all four defendants committed a violation of Massachusetts's unfair and deceptive trade practices statute, M.G.L. Ch. 93A § 11.

The complaint sought an order preventing the students from "offering to provide software tools or demonstrations to allow others to duplicate the attacks referenced," from "providing information or materials that would assist another in any material way to circumvent the security of the" CharlieCard system, from "publicly stating or indicating that the security or integrity" of the system "has been compromised," from "further circulating" the conference panel announcement, from suggesting that "MIT endorses or approves of the activities" described, and from "declining to provide the MBTA and its vendors with information sufficient to replicate, test, and repair the purported security flaws."

On Saturday, August 9, 2008, U.S. District Court Judge Douglas Woodlock (acting as duty judge covering court matters over the weekend) issued a temporary restraining order forbidding the students from "providing program, information, software code, or command that would assist another in a material way to circumvent or otherwise attack the security of" the MBTA fare system. Per the Federal Rules of Civil Procedure in effect at that time, the injunction was scheduled to last for ten days. At oral argument, Judge Woodlock stated that the planned DEFCON presentation would constitute"transmission" of a program, and that the possible harm to MBTA fare collection constituted "damage," for CFAA purposes. The court also indicated that if someone were to use this information to evade fare collection the students would be aiders and abettors of that crime.

The court noted a possible First Amendment issue with the order, but stated "there's a balance that has to be drawn at various points," and that "we can't expect people in their early 20s to have sufficient judgment or experience to avoid causing those clashes of interest between something as broad and as important as the First Amendment and the need to avoid actual criminal conduct of which words are the constituent elements." The students argued that they had met with the MBTA and provided a report addressing their discovered vulnerabilities and what they planned to present at DEFCON, but the court found that insufficient to remove the risk of irreparable harm.

On August 11, the MBTA filed a motion to modify the terms of the restraining order, to clarify that the injunction only applies to "non-public" information related to the fare collection system. On August 12, the students responded, opposing the modification of the order and moving to have the court reconsider the restraining order altogether. The students argued that the order was an unconstitutional prior restraint on speech, as it prohibited the students' speech without a showing of an intent to induce any unlawful activity, or any other state interest of the highest order. The students further argued that the MBTA failed to show a likelihood of success on the merits of their CFAA claim, as the legislative history and statutory interpretation of the relevant section of the CFAA suggested that it applied only when a person actually transmits code to a protected computer, and not one's mere description of vulnerabilities. The students also noted that the MBTA's disclosure of the students' presentation slides in a public filing in the current action undermined their claim that an injunction was necessary.

On August 14, 2008, the MBTA responded to the students' motion. The MBTA argued that while some of the material related to their fare system was now public in light of the disclosure of the DEFCON slides, there remained non-public information that the students might share, including the source code of the program they used to read and alter the fare cards. The MBTA further argued that the CFAA's language extends to transmitting damaging "information," and not just software, and that the students' planned speech would advocate violation of the law, and would thus be unprotected by the First Amendment under Brandenburg v. Ohio. Finally, the MBTA argued that the presentation was not "research," but was instead commercial speech, and that the students failed to follow industry standards for responsible disclosure of a data breach. 

In a reply filed on August 18, the students argued that the factual record contradicted the claim that the students planned to share anything beyond what was already in the public docket of this court case. The students further argued that the MBTA failed the basic standard for injunctive relief as there was no immediate risk of harm. They also argued that adherence to industry standards for responsible disclosure was not required by law and, if compelled, would lead to censorship of important public information. (To support this, the students also provided a letter from eleven computer science professors and computer scientists discussing responsible disclosure.) The reply also argued that the students were discussing matters of policy and not engaging in commercial speech, as evidenced by the use of the student's research in numerous news articles addressing the data security of the CharlieCard system.

On August 14, Judge George O'Toole, the assigned judge for the case, held a hearing to determine whether the temporary restraining order should remain in effect for the full ten days that it was issued.  Judge O'Toole allowed the restraining order to remain in place, and granted the MBTA's motion for limited discovery against the students in preparation of the MBTA's motion to convert the restraining order into a preliminary injunction. The court allowed the MBTA to obtain: written correspondence, as well as "permissions, waivers, and other agreements" between the students and the DEFCON organizers; a copy of a MIT class paper that the students wrote, which served the basis of the presentation; copies of all software tools the students intended to distribute as part of the DEFCON presentation; and copies of any other materials the students planned to distribute.

On August 17, 2008, the students filed a motion for reconsideration of the court's discovery order as it applied to the the class paper and planned presentation software and materials. The students argued that such material is exempt from disclosure under the First Circuit's decision in Cusumano v. Microsoft, which protects certain academic sources and work product from disclosure. The students argued that the MBTA, a governmental agency, was seeking impermissible pre-publication review of academic work product.

On August 18, the MBTA filed a motion for a preliminary injunction. In its supporting memorandum, in addition to the arguments made previously, the MBTA argued that there remained information that the students had yet to disclose to the MBTA and the court about their planned presentation, including the software they planned to share. The MBTA also included a declaration from Systems Project Manager Scott Henderson, who stated that some of the cards used in the presentation had been used on the MBTA system illegally, based on the MBTA's own audit. The MBTA sought an injunction against the dissemination of this information for five months, in order to give them time to implement security upgrades to the system.

At a hearing on August 19, 2008 the court denied the preliminary injunction and dissolved the temporary restraining order. The court found that the MBTA had failed to show a likelihood of success on the merits of their CFAA claim, indicating that discussion of security topics is not likely to be not be "transmission" of code, commands, or information under the CFAA, as the statute's terms suggest that such transmission would need to be technical instead of informational in order for the statute to apply. The court also raised doubts as to whether the required $5000 of loss under the CFAA had be sufficiently demonstrated, finding the possible loss of future MBTA revenue as "a matter of possibility but [not] sufficiently established to support the injunction requested." The court noted that it was "mak[ing] that point in the first instance without reference to the First Amendment, what it may or may not guarantee under these circumstances," but also noted the valid public interest in such disclosures and discussions.

On October 7, 2008, the MBTA and student defendants filed a stipulation of dismissal, dismissing the claims against the students with prejudice and without costs. On December 22, 2008 the Electronic Frontier Foundation released a statement indicating that the MBTA and MIT students are now working together to improve the data security of the MBTA system. The claims against MIT were dismissed on February 3, 2009.

Content Type: 

Subject Area: 

CMLP Notes: 

Created by AFS

Jurisdiction: 

Art of Living Foundation v. Does 1-10

Date: 

11/05/2010

Threat Type: 

Lawsuit

Party Receiving Legal Threat: 

John or Jane Doe ("Skywalker"), John or Jane Doe ("Klim")

Type of Party: 

Large Organization

Type of Party: 

Individual

Court Type: 

Federal

Court Name: 

United States District Court, N.D. California, San Jose Division

Case Number: 

10–CV–05022–LHK

Legal Counsel: 

Joshua Koltun

Publication Medium: 

Blog

Relevant Documents: 

Status: 

Pending

Disposition: 

Dismissed (partial)
Settled (partial)

Description: 

Substantive Proceedings

The Art of Living Foundation is an international nonprofit organization that, according to its website, is "engaged in stress-management and service initiatives." Two former followers, Skywalker and Klim, published anonymous blogs (entitled "Leaving the Art of Living" and "Beyond the Art of Living") criticizing the Art of Living's practices and their leader, Sri Sri Ravi Shankar. In addition to their critiques, they also provide excerpts from the Art of Living's teaching manuals and other materials (normally provided to members in courses for a fee).

On August 14, 2010, Skywalker and Klim received a demand from Art of Living (from its headquarters in India) to take down this material. The branch of Art of Living in the United States (based in California) also filed a complaint on November 5, 2010, in the U.S. District Court for the Northern District of California. Art of Living alleged copyright infringement under federal law for the blogs' publication of portions of the "Breath Water Sound Manual." In addition, Art of Living alleged misappropriation of trade secrets, defamation, and trade libel under California law, based on the aforementioned publication and the Does' critical statements about the organization.

On January 31, 2011, the Does filed a motion to dismiss the defamation and trade libel claims for failure to state a claim. They also filed a special motion to strike the defamation, trade libel, and trade secrets claims under California's anti-SLAPP statute. Art of Living filed both an opposition to the motion to dismiss and an opposition to the motion to strike on March 17, 2011, to which the Does replied (reply re: motion to dismiss; reply re: motion to strike) on April 6, 2011. After a hearing in May, on June 15, 2011, U.S. District Judge Koh dismissed the defamation and trade libel claims and denied (without prejudice) the motion to strike. Judge Koh found that the statements at issue were opinions rather than assertions of fact, resolving the defamation claim, and that Art of Living did not sufficiently allege harm or damages for the trade libel claim. Judge Koh also held that discovery on the trade secrets claim could not proceed until Art of Living identified the trade secrets with reasonable particularity.

On July 14, 2011, Art of Living proceeded to amend their complaint in accordance with the June 15th order, removing the dismissed claims from their complaint. Art of Living also provided further detail and content identification in regards to the remaining copyright infringement and trade secrets claims. The Does answered the amended complaint on July 28, 2011.

The Does then filed a second special motion to strike on September 12, 2011 (with the redacted version entering the docket on January 9, 2012), this time directed at the remaining trade secret claim. This motion was opposed by Art of Living on September 29, 2011. Additionally, on September 27, 2011, the Does filed a motion for summary judgment on the copyright infringement claims. Art of Living filed an opposition to this motion on October 11, 2011, which the Does replied to on October 24, 2011. 

In an order on May 1, 2012, Judge Koh granted summary judgment on the copyright infringement claim. Judge Koh found that Klim was entitled to summary judgment based on noninfringement, and that Art of Living did not provide enough support for its claim of authorship of the manual to pursue a copyright infringement claim against Skywalker because the copyright registration certificate was obtained after the litigation began). The district court also granted Klim's motion to strike the trade secrets misappropriation claim while denying the motion to strike in regards to Skywalker. While Skywalker conceded that there was at least some overlap between his blog postings and the materials Art of Living designated as trade secrets, Art of Living presented no evidence that Klim misappropriated any of these materials.

Anonymity in Art of Living v. Does

Throughout the proceedings described above, there was an ongoing issue with respect to the defendants' ability to proceed anonymously.

On November 9, 2010, Art of Living filed a motion for leave to take expedited discovery. Pursuant to an ex parte order by Magistrate Judge Beeler, on December 20, 2010, Art of Living subpoenaed Google and Wordpress to reveal the identities of bloggers Skywalker and Klim. Not long after being notified of this by Google, the Does filed a motion to quash the subpoena. In response, Art of Living filed an opposition on March 22, 2011, and the Does replied on April 28, 2011. On August 10, 2011, Magistrate Judge Lloyd denied the motion to quash in regards to Skywalker's claim while granting it for Klim, finding that the copyright claim was a sufficient basis for permitting identification of Skywalker.

In response, on August 24, 2011, Skywalker filed a motion for relief from the order of the Magistrate Judge regarding the motion to quash. On August 31, 2011, Public Citizen, joined by the Electronic Frontier Foundation and the ACLU, submitted an amicus brief. This brief urged the court to apply the balancing test adopted in Dendrite Int'l v. Does, despite the copyright claim being considered in the case. Art of Living's opposition to the motion for relief was filed on September 16, 2011, and Skywalker replied on September 30, 2011.

On November 9, 2011, Judge Koh granted the motion, finding that Skywalker's First Amendment right to anonymous speech outweighed Art of Living's need for discovery at this time. Judge Koh applied the Highfields Capital two-part test (which relied heavily on Dendrite) for determining whether to allow discovery seeking the identity of an anonymous defendant: "(1) The plaintiff must produce competent evidence supporting a finding of each fact that is essential to a given cause of action; and (2) if the plaintiff makes a sufficient evidentiary showing, the court must compare the magnitude of the harms that would be caused to the competing interests by a ruling in favor of the plaintiff and by a ruling in favor of the defendant."

In a case management conference and corresponding minute order on May 9, 2012, Judge Koh again denied all of Art of Living's motions to disclose Skywalker's identity. By also refusing to extend discovery a setting the trial date and length, these rulings potentially allowed Skywalker to defend at trial anonymously.

Related Case and Settlement

On June 8, 2012, Judge Koh granted Art of Living's motion to relate Art of Living Foundation v. Eng-An Chou (Docket no. 5:12-CV-02748-LHK) to this case. Chou involves Art of Living's claim that Eng-An Chou breached her contracts with Art of Living by disclosing some of the organization's confidential texts to Skywalker for posting on his blog.

The next week, the cases were referred to Judge Joseph C. Spero for a Magistrate Judge Settlement Conference. The conference was held on June 12, 2012 and a settlement was reportedly reached. As part of the settlement agreement, Skywalker and Klim published a joint statement informing readers of the settlement and would proceed to freeze their blogs on June 19, 2012. The joint statement noted that there are no restrictions on the Does to create new blogs, and that no identity had or would be disclosed in relation to this litigation and settlement. Art of Living also agreed to drop the lawsuit with prejudice (also dropping the separate suit against Chou) and to pay Skywalker and Klim's attorney's fees.

Content Type: 

Subject Area: 

Jurisdiction: 

How Much is a Twitter Account Worth? (And Is It Enough to Keep You in Federal Court?)

While doing some research on recent media law suits here at the CMLP, I came across a particularly interesting case involving a dispute over the ownership of a Twitter account: PhoneDog, LLC v. Kravitz.

Subject Area: 

Jurisdiction: 

PhoneDog, LLC v. Kravitz

Threat Type: 

Lawsuit

Date: 

07/15/2011

Party Receiving Legal Threat: 

Noah Kravitz

Type of Party: 

Organization

Type of Party: 

Individual

Court Type: 

Federal

Court Name: 

U.S. District Court, Northern District of California

Case Number: 

C11-03474

Legal Counsel: 

Kletter Law Firm, Dewey & LeBoeuf LLP

Publication Medium: 

Micro-blog

Relevant Documents: 

Status: 

Pending

Description: 

PhoneDog, LLC, an "interactive mobile news and reviews resource," filed suit against former employee Noah Kravitz on July 15, 2011, for ownership of a Twitter account Kravitz used while he was employed by PhoneDog. As a product reviewer for PhoneDog, Kravitz was allegedly given use of a Twitter account with the handle @PhoneDog_Noah to promote PhoneDog's services. PhoneDog claimed that after his employment ended, Kravitz changed the Twitter handle to @noahkravitz and continued use of the account, even though PhoneDog requested Kravitz relinquish use.

The complaint asserts four claims for relief. First, PhoneDog alleged that Kravitz willfully and intentionally obtained and misppropriated confidential information from PhoneDog, primarily the passwords to its Twitter accounts. According to PhoneDog, this information "would be of substantial value to PhoneDog's competitors" if it leaked. PhoneDog claimed that Kravitz used this confidential information to his own advantage, constituting trade secret misappropriation.

The second and third claims for relief allege that Kravitz intentionally and negligently interfered with PhoneDog's prosepctive economic advantage by using the confidential information to disrupt PhoneDog's business with current and prospective users. 

Finally, PhoneDog claimed that Kravitz unlawfully converted the Twitter account to his own use by changing the handle, even after PhoneDog requested that he relinquish the account.

PhoneDog requested that the court issue a temporary restraining order, preliminary injunction, and permanent injunction preventing Kravitz from using its confidential information. Additionally, PhoneDog asserted it suffered $340,000 in compensatory damages as a result of the alleged conversion. To arrive at this figure, PhoneDog assumed that, according to industry standards, Twitter followers are valued at $2.50 per month each. Since Kravitz's account has approximately 17,000 users, PhoneDog has suffered damages of $42,500 per month since October 2010.

On October 4, 2011, Kravitz moved to dismiss the complaint for lack of subject matter jurisdiction under FRCP 12(b)(1), and failure to state a claim under FRCP 12(b)(6). On the jurisdictional issue, Kravitz asserted that the amount in controvery, if any, could not exceed $8,000, which is under the statutory limit, a federal court could not hear the case. Kravitz used sites such as tweetvalue.com and whatsmytwitteraccountworth.com to value the account.

Kravitz also claimed that PhoneDog could not satisfy the misappropriation of trade secrets claim, because any information obtained by Kravitz (including the identity of the account's followers and its password) are not trade secrets under California law. Regarding claims of intentional and negligent interference with prospective economic advantage, Kravitz alleged that PhoneDog could not establish the existence of a current economic relationship between PhoneDog and the Twitter account followers, an essential element of each claim. Finally, Kravitz contended that PhoneDog's complaint did not establish ownership or the right to possess the Twitter account, which would require the court to dismiss the conversion claim.

After both PhoneDog and Kravitz filed subsequent pleadings related to the motion to dismiss (PhoneDog Response; Kravitz Reply), the court issued an order granting in part and denying in part the motion. The court denied the motion with respect to lack of jurisdiction, stating that the determination of whether the court has subject matter jurisdiction is so tied up with PhoneDog's claims that it could not be resolved in this early stage. Turning to the substantive claims, the court granted Kravitz's motion with respect to the claims of intentional and negligent interference with prospective economic advantage, finding that PhoneDog failed to assert essential elements of the claim, including the existence of economic relationships and a duty of care. The court denied, however, the motion with respect to the misappropriation of trade secrets and conversion claims. The court also granted PhoneDog leave to amend its complaint.

The amended complaint, filed on November 29, 2011, alleges that PhoneDog has economic relationships with its users, including CNBC and Fox News. The amended complaint also claimed that Kravitz owed a duty of care to PhoneDog as a former agent of the company.

Content Type: 

Subject Area: 

Threat Source: 

Blog Post

CMLP Notes: 

Author: LC (2/8/12)

Jurisdiction: 

Antioch University v. The Antioch Papers

Threat Type: 

Correspondence

Date: 

02/29/2008

Party Receiving Legal Threat: 

Brian Springer, Tim Noble, TheAntiochPapers.org, theantiochpapers@gmail.com

Type of Party: 

School

Type of Party: 

Organization

Legal Counsel: 

Robert J. Fitrakis

Publication Medium: 

Website

Relevant Documents: 

Status: 

Concluded

Description: 

The Antioch Papers, an investigative journalism and media arts website, maintains and "open archive for primary source materials that document the institutional life of Antioch College and by extension Antioch University."  Source materials have been gathered through publicly accessible archives and through submissions by institutional whistle blowers.

On February 29, 2008, Antioch University sent a letter to The Antioch Papers demanding the removal of documents that the University alleged included attorney/client privileged communications and proprietary business and financial planning documents.

The Antioch Papers responded in a letter dated March 12, 2008, asserting a First Amendment right to publish the materials at issue.

No further actions on this dispute have been reported; the operations of Antioch College were suspended in July 2008, apparently rendering this demand moot.

 

Content Type: 

Subject Area: 

Jurisdiction: 

Lost and Found: California Law and the Next Generation iPhone

Unless you've been hiding under a rock for the past few days, you've heard that a newfangled iPhone mysteriously turned up in a fancy beer bar in Redwood City, California, and photos of it ended up on

Subject Area: 

Jurisdiction: 

Target Corp. v. Doe

Date: 

09/05/2006

Threat Type: 

Lawsuit

Party Receiving Legal Threat: 

John Doe, Charles Emmerson William Harris

Type of Party: 

Large Organization

Type of Party: 

Individual

Court Type: 

Federal

Court Name: 

United States District Court Northern District of Georgia Atlanta Division

Case Number: 

1:06-cv-02116-CC

Publication Medium: 

Forum
Website

Relevant Documents: 

Status: 

Concluded

Disposition: 

Dismissed (total)

Description: 

Target Corporation, a chain retailer, filed a lawsuit against an initially unknown Internet user with the handle “Target Sucks” for copyright infringement and misappropriation of trade secrets for allegedly posting information on various retail-employee forums and blogs. Target identified the user as Charles Emmerson William Harris based on the information it received after subpoening Internet providers. Harris allegedly posted Target’s "Asset Protection Directives," an in-house theft prevention manual, on several websites critical of Target.

Target asserted in its two-count complaint that the user “acquired a copy of Target’s AP Directives from a recently terminated Target employee, Scott Hundt.” Target alleges that Hundt emailed a copy of the AP Directives to the user, as well as posting that information on the website www.targetunion.org. After learning of the post, Target threatened legal action against Hundt, who admitted wrongdoing and cooperated with Target's subsequent efforts to block the further dissemination of the AP Directives. Target and Hundt emailed cease-and-desist orders to the user and received no reply. Target alleges that instead of complying with its demands, the user posted the AP directives to “various retail-employee forums on the Internet.” Target sent cease-and-desist letters to those forums, and the AP Directives were removed. Target asserted that the user’s “dissemination of the Target AP Directives is deliberate, willful, malicious, oppressive, and without regard to Target’s proprietary rights.” Compl. ¶ 33. Further, the complaint asserted that user had disclosed “such information without the express or implied consent of Target, for the benefit of himself.” Compl. ¶ 42.

In an effort to discover the identity of the then-anonymous user, Target subpoenaed AOL, Yahoo!, Hotmail, Qwest, Comcast, and UPS.  Compl. Ex. B. The court granted these subpoenas. Based on the information it obtained through investigation, Target identified the user as Charles Harris. Target claimed that it confirmed this identification based on the documents relating to IP address and P.O. Box information it received in response to its subpoenas to website, email, mail, and internet providers. Req. for Service.

On 04/10/2007, a civil summons was issued for  Charles Emerson William Harris. However, attempts to locate Harris for service failed. On 12/21/2007, the court granted a motion for service by publication to the Fulton County Daily Report. This notice was posted on 01/15/2008.  On 07/16/2008 the case was dismissed for want of prosecution pursuant to Local Rule 41.3(A)(3) because the case had been pending for more than 6 months without a substantial proceeding of record.  

Content Type: 

Subject Area: 

Priority: 

1-High

CMLP Notes: 

Source: TechDirt

AVM 6/02

 

Jurisdiction: 

FORBA v. Hagan

Threat Type: 

Lawsuit

Date: 

11/14/2008

Party Receiving Legal Threat: 

Debbie Hagan

Type of Party: 

Organization

Type of Party: 

Individual

Court Type: 

Federal

Court Name: 

United States District Court for the Western District of Kentucky (Ownsboro)

Case Number: 

4:08-cv-00137-JHM

Legal Counsel: 

Pro se

Publication Medium: 

Blog

Relevant Documents: 

Status: 

Concluded

Disposition: 

Injunction Issued
Withdrawn

Description: 

FORBA Holdings, a dental practice management company, sued blogger Debbie Hagan after she posted internal FORBA documents on her blog, Dentist the Menace, which covers alleged misconduct in the dental profession.

According to the complaint, Google search crawlers indexed a password-protected FTP site hosting FORBA internal documents, and Hagan was able to obtain copies of these documents through a Google search for the term "forbainfo.com." The documents in question included marketing materials, recruitment strategy information, spreadsheets and facility information lists, as well as internal PowerPoint presentations. Hagan allegedly provided links to certain of the FORBA documents and posted copies of others for viewing and download.  FORBA contended that, by posting these materials, Hagan misappropriated trade secrets embodied in the confidential documents and infringed its copyrights in the PowerPoint presentations.  

FORBA also alleged that Hagan defamed the company on her blog by falsely claiming that FORBA engaged in "barbaric back alley dentistry and abusing children children in the process."

After filing suit, FORBA moved for a preliminary injunction barring Hagan from publishing its confidential and copyright-protected materials.  In November 2008, Hagan consented to the entry of a permanent injunction prohibiting her from publishing or posting "any internal and/or copyrighted documents or other information of FORBA obtained, directly or indirectly, through access to the FORBA FTP Site . . . and/or . . . any other internal and/or confidential FORBA documents or information. . . ."

FORBA subsequently dismissed its defamation claim voluntarily, and later moved to voluntarily dismiss the entire case without prejudice, leaving the consent injunction in n full force and effect. The court granted the motion in April 2009, dismissing the case and leaving the consent injunction in place. 

Subject Area: 

Content Type: 

Priority: 

2-Normal

Jurisdiction: 

CMLP Notes: 

Via Marc Randazza

Threat Source: 

User Feedback

Monex Deposit Co. v. Gilliam

Date: 

03/04/2009

Threat Type: 

Lawsuit

Party Receiving Legal Threat: 

Richard Gilliam; Jason Gilliam; Steven Bowman

Type of Party: 

Organization

Type of Party: 

Individual

Court Type: 

Federal

Court Name: 

United States District Court for the Central District of California; Superior Court of California, County of Orange

Case Number: 

8:09-cv-00287-JVS-RNB (federal); 30-2009, 00249439 (state)

Legal Counsel: 

Jason Gilliam - Pro Se

Publication Medium: 

Forum
Website

Relevant Documents: 

Status: 

Pending

Disposition: 

Injunction Issued
Material Removed

Description: 

On March 4, 2009, Monex Deposit Company and Monex Credit Company (collectively "Monex"), two companies in the precious metals business, filed a lawsuit suit against Jason Gilliam, Richard Gilliam, and Steven Bowman for publishing allegedly defamatory statements on the website MonexFRAUD.com and attempting to extort money from Monex.  Monex initially sued in California state court, but the Gilliams removed the case to federal court.

In its complaint, Monex claims that the Gilliams and Bowman threatened to "continue to libel Monex on their website, . . . share information with government regulators, and . . . interfere with Monex's relationships with investors and banks" unless the company paid them $15 million dollars.  According the complaint, the defendants called Monex's president a "ruthless sociopath" and the firm's sales pitch "flat-out lies," in addition to other comments.  Monex alleges that the defendants made these false statements on MonexFRAUD.com and in comments posted on other websites, including YouTube and Digg.

In addition to defamation and extortion, Monex's complaint alleges cyberpiracy, unfair competition, racketeering, interference with contract, attempted conversion, trade libel, interference with prospective economic advantage, and trade secret misappropriation. The Gilliams, father and son, allegedly lost approximately $32,000 with Monex.  On March 16, Jason Gilliam filed counter claims against Monex, including racketeering and breach of fiduciary duties.

On March 24, 2009, a federal court in California granted Monex's request for a temporary restraining order against the Gilliams and Bowman, expiring on April 7, 2009. The temporary restraining order prohibits them from taking any steps to extort money from Monex by (1) threatening to publish information about Monex on any forum or share information about Monex with third parties, or (2) threatening to defame Monex or its employees.  The order also barred them from retaining, disclosing, or using any Monex trade secret or proprietary information. 

The court also ordered the Gilliams and Bowman to show cause why a preliminary injunction should not issue, continuing the terms of the temporary restraining order until judgment or dismissal.  If granted, the preliminary injunction would also bar the defendants from "publishing or republishing any negative statements about Monex on any website" and require them to "remove, from any website over which they have sufficient control, all negative material about Monex that they have published or republished there, and to stop using the word MonexFRAUD."  It would also bar them from operating the MonexFRAUD website or any "other websites critical of Monex."  

Update:

04/09/09 -The court issued a preliminary injunction, prohibiting the defendants from (1) making any efforts to extort money from Monex by threatening to publish or share information about Monex or defame Monex or its employees; (2) operating www.MonexFRAUD.com or any other website using the Monex name in combination with any modifier that implies illegal, unlawful or unethical conduct; (3) publishing or republishing on any website, including www.MonexFRAUD.com, any statement that "Monex does not have title to or the ability to deliver precious metals sold under contract to any Monex customer; that Monex was expelled from the National Futures Association for fraud; that Monex operates a boiler room; that Monex violates any federal or state statutes regulating the business operations of Monex; that Monex has been charged by the Internal Revenue Service with tax evasion; and that Monex fails to accurately disclose to customers account and trading terms (collectively "Prohibited Statements"); (4) disclosing, using, or retaining any trade secret documentation or other proprietary information belonging to Monex.  The injunction also requires the defendants to remove all previously published Prohibited Statements within 24 hours.  It does not prohibit the defendants from (a) making statements regarding their own business dealings with Monex, including losses they have sustained; or (b) communicating with any governmental entity concerning matters within the scope of that entity's legislative, administrative, or regulatory responsibilities.

05/07/2009- Monex filed an amended complaint in district court. 

Content Type: 

Subject Area: 

Priority: 

1-High

CMLP Notes: 

Source: OCRegister.com

UPDATED 7/24/09- AVM added information on amended complaint and uploaded am. compl.

 

Jurisdiction: 

GW Equity v. Xcentric Ventures

Threat Type: 

Lawsuit

Date: 

06/01/2007

Party Receiving Legal Threat: 

Xcentric Ventures, LLC; Edward Magedson

Type of Party: 

Organization

Type of Party: 

Individual
Organization

Court Type: 

Federal

Court Name: 

United States District Court for the Northern District of Texas

Case Number: 

3:07-CV-976

Legal Counsel: 

Jeffrey Scot Seeburger - Kane Russell Coleman & Logan; Maria Crimi Speth - Jaburg & Wilk PC

Publication Medium: 

Forum

Relevant Documents: 

Status: 

Pending

Disposition: 

Dismissed (total)

Description: 

GW Equity, LLC, a mergers and acquisition firm that acts as a consultant to middle-market business owners who seek to sell or merge their businesses, sued Xcentric Ventures, LLC and Edward Magedson in Texas federal court for defamation and other torts over reports published on the Ripoff Report website, which provides a forum in which consumers may accuse companies and individuals of various "rip-off" and "bad business" practices.

In its complaint, GW Equity alleged that Ripoff Report published false and defamatory reports submitted by users without verifying their accuracy. In an effort to circumvent the immunity for website operators provided by section 230 of the Communications Decency Act (CDA 230), GW Equity further alleged that Xcentric and Magedson created, developed, and published defamatory titles, headings, and metatags for these reports concerning GW Equity. It also claimed that Ripoff Report generated defamatory content by providing users with drop-down boxes containing defamatory tags, such as "corrupt companies," which were applied by users to reports about GW Equity.

After completing discovery, Xcentric and Magedson moved for summary judgment. In October 2008, a federal magistrate judge issued his report on the motion, recommending that the district court grant Xcentric and Magedson's motion for summary judgment. The magistrate judge found that Xcentric and Magedson were entitled to the protection of CDA 230 because GW Equity had failed to raise a genuine issue of fact concerning their development or creation of defamatory content. The court indicated that providing drop-down boxes with "a broad choice of categories from which a user must make a selection in order to submit a report [was] not sufficient" to deprive the defendants of immunity, especially because they "did not solely provide users with a selection of categories that were negative and/or defamatory in nature." Slip op. at 7, 10.

The magistrate judge also found that there was no competent evidence that any Ripoff Report employee ever wrote or significantly edited report titles and headings, or changed the category tag on a user report. See id. at 9-10. The magistrate relied in part on a report produced by Xcentric showing IP addresses and locations connected with the reports and rebuttals about GW Equity. This report showed the IP addresses of Ripoff Report servers and machines used by Ripoff Report staff, and noneof those IP addresses matched up with the IPs of a report or a rebuttal about GW Equity. See id. at 9.

Finally, the magistrate rejected GW Equity's argument that Ripoff Report's "Corporate Advocacy Business Remediation & Satisfaction Program" took the website outside of CDA 230. According to GW Equity, under this program Ripoff Report will, for a fee, investigate "rip-off" reports targeting member companies and post prominent rebuttals to those reports. The court indicated that "it is not a bar to immunity for an Internet provider to refuse to remove defamatory material created by a third party, or to otherwise use it to their advantage, even though the Internet provider’s conduct may be considered reprehensible and offensive." Id. at 12.

GW Equity has filed objections to the magistrate's report and recommendation, and the district court had not ruled on those objections as of November 14, 2008.

Update:

01/09/2009 - The district court affirmed the magistrate's report and recommendation and granted Xcentric and Magedson's motion for summary judgment.

 

Subject Area: 

Content Type: 

Priority: 

1-High

Jurisdiction: 

CMLP Notes: 

Updated 2/26/09 - VAF (just added documents)

Threat Source: 

Blog Post

ViroLogic v. Does

Threat Type: 

Lawsuit

Date: 

04/23/2002

Party Receiving Legal Threat: 

John Does 1 - 10

Type of Party: 

Organization

Type of Party: 

Individual

Court Type: 

State

Court Name: 

California Superior Court, San Francisco County; California Court of Appeals for the First Appellate District

Case Number: 

407068 (trial); A102811 and A101571 (appeals)

Legal Counsel: 

Joshua Kathriel Koltun (Steinbart & Falconer)

Publication Medium: 

Forum

Relevant Documents: 

Status: 

Concluded

Disposition: 

Settled (total)
Subpoena Enforced

Description: 

ViroLogic, a biotechnology company, sued ten anonymous users of the Yahoo! Finance forum dedicated to it, after they allegedly posted internal ViroLogic information and made statements critical of the company and its officers. The original complaint included claims for defamation, trade libel, misappropriation of trade secrets, unfair competition, and intentional interference with prospective economic advantage. ViroLogic subsequently amended its complaint, limiting its claims to misappropriation of trade secrets and unfair competition. 

ViroLogic subpoenaed Yahoo! to uncover the identity of the Doe defendants. Yahoo! notified the Does of the subpoena, and one of them (Doe 1) filed a motion to quash.  Doe 1 also filed a motion to strike the complaint under California's anti-SLAPP statute, arguing that the lawsuit was an attempt to stifle his right to free speech. 

Meanwhile, ViroLogic moved for permission to take limited discovery regarding Doe 1.  The court granted the company permission to take his deposition, with the proviso that ViroLogic's attorneys could not reveal Doe 1's identity to ViroLogic employees. In the deposition, ViroLogic's lawyers discovered that Doe 1 had previously been a consultant for the company, and that he was closely related to a current company employee. The lawyers asked the court for permission to reveal this information, including Doe 1's identity, to ViroLogic, so that it could make a case in opposition to Doe 1's anti-SLAPP motion to strike.

In a subsequent hearing, the court granted Doe 1's motion to strike under the anti-SLAPP statute and denied ViroLogic's motion to permit its lawyers to disclose Doe 1's identity to it. The court ruled that the Doe 1's posts were an exercise of his protected right to free speech, and that ViroLogic had failed to show a sufficient likelihood of success should the case proceed.  The court dismissed the case and awarded attorneys' fees to Doe 1. It denied Doe 1's motion to quash the Yahoo! subpoena because dismissing the case mooted the issue.

ViroLogic appealed the decision and argued that the lower court had violated its due process rights by granting the anti-SLAPP motion to strike without permitting it to fully prepare a defense to that motion through access to Doe 1's identity. The California appeals court held that ruling on the anti-SLAPP motion to strike without giving ViroLogic access to Doe 1's identity deprived the company of a meaningful opportunity to oppose the motion. It recognized that Doe 1 has a right to anonymous speech, but reasoned that this right had to be balanced against ViroLogic's due process rights. See ViroLogic, Inc. v. Doe, 2004 WL 1941335, at *1, 5-7 (Cal. Ct. App. Sept. 1, 2004).

The appeals court set out a standard for lower courts to consider when deciding whether a plaintiff has shown "good cause" to discover a defendant's identity after an anti-SLAPP motion has been filed. Under this standard, the plaintiff seeking discovery must show: (1) the plaintiff's claims describe actionable conduct by the defendant; and (2) discovery of the defendant's identity is necessary for the plaintiff to present evidence in opposition to the special motion to strike. The court also indicated that, given the early stage when anti-SLAPP motions are usually litigated, it is not appropriate to impose upon the plaintiff a burden of supporting its claims with evidence.  See ViroLogic, Inc., 2004 WL 1941335, at *6. Applying this standard to the facts of the case, the appeals court determined that ViroLogic had shown "good cause" to uncover Doe 1's identity. It therefore reversed the lower court's grant of the anti-SLAPP motion to strike and its award of attorneys' fees to Doe 1, and directed the trial court to enter an order permitting disclosure of Doe 1's identity to ViroLogic.

UPDATE:

On 3/15/2005, the trial court permitted the disclosure of the identity of Doe. A series of case management conferences followed this disclosure. These conferences appear to have produced a settlement.

On 11/28/2005, ViroLogic filed a notice of settlement and dismissed the complaint with prejudice.

Subject Area: 

Content Type: 

Priority: 

1-High

Jurisdiction: 

CMLP Notes: 

6/15/09 AVM- documents are on court's website (search virologic)

changed from pending to concluded with settlement

Threat Source: 

CyberSLAPP.org

Immunomedics v. Doe

Date: 

10/12/2000

Threat Type: 

Lawsuit

Party Receiving Legal Threat: 

Jane Doe, aka "moonshine_fr"; John Does 1 - 10; John Foe aka "bioledger"; John Foes 2 - 10

Type of Party: 

Organization

Type of Party: 

Individual

Court Type: 

State

Court Name: 

Superior Court of New Jersey, Morris County; Superior Court of New Jersey, Appellate Divison

Case Number: 

L-003085-00 (trial); A-2762-00T1 (appeals)

Legal Counsel: 

Steven B. Stein (Stein & Stein)

Publication Medium: 

Forum

Relevant Documents: 

Status: 

Concluded

Disposition: 

Subpoena Enforced

Description: 

Pharmaceutical company Immunomedics sued "moonshine_fr," a company employee who allegedly posted confidential internal documents on a Yahoo! Finance message board, and several John Does in New Jersey state court on claims of breach of contract, breach of duty of loyalty, and negligently revealing confidential and proprietary information.

Soon after filing its complaint, Immunomedics amended it to include claims of defamation and tortious interference with economic gain against a second anonymous poster, "bioledger." In the amended complaint, it also accused moonshine_fr of continuing to reveal company information online, including product shortages in Europe and the imminent firing of the company's "european [sic] manager."  While Immunomedics admitted that moonshine_fr's online allegations were true, it claimed that her posting of them was a violation of the company's confidentiality agreement and employment provisions.

Immunomedics subpoenaed Yahoo! to determine moonshine_fr's true identity.  Yahoo! notified moonshine_fr of the subpoena, and she moved to quash it. The trial court denied her motion, and she appealed.

The appellate court affirmed the lower court's ruling.  Using the test established in Dendrite International, Inc. v. John Doe No. 3, 775 A.2d 756 (N.J. Super. Ct. App. Div. 2001), the court determined that Immunomedics had produced sufficient evidence to support its claim that moonshine_fr was an employee and was thus subject to the company's confidentiality agreement. Without extensive analysis, the court also concluded that Immunomedics's need to identify moonshine_fr in order to enforce its confidentiality agreement outweighed her right to speak anonymously.

It is not clear what happened after the appellate court's decision.

Content Type: 

Subject Area: 

Priority: 

1-High

CMLP Notes: 

Case citation: 775 A.2d 773.

Jurisdiction: 

Deep Blue Marine v. Krajewski

Date: 

05/20/2008

Threat Type: 

Lawsuit

Party Receiving Legal Threat: 

Edward Krajewski; John Does 1 - 10

Type of Party: 

Individual
Organization

Type of Party: 

Individual

Court Type: 

Federal

Court Name: 

United States District Court for the District of Utah

Case Number: 

2:08-cv-00405-TC

Legal Counsel: 

Pro se

Publication Medium: 

Forum

Relevant Documents: 

Status: 

Concluded

Disposition: 

Dismissed (total)
Injunction Issued

Description: 

Deep Blue Marine, its CEO Wilf Blum, and Alexander Lindale LLC sued former Deep Blue operations manager Edward Krajewski after Krajewski criticized the plaintiffs and allegedly disclosed Deep Blue proprietary information on several online investor forums. The plaintiffs sought an injunction in Utah federal court against Krajewski to prevent him from posting any further criticism or materials. They also brought claims for defamation, false light, intentional interference with economic advantage, breach of contract (including publication of trade secrets), and breach of convenant of good faith.

In May 2008, Deep Blue moved for a temporary restraining order and preliminary injunction against Krajewski. The court decided the motion ex parte after satisfying itself that Krajewski had received notice of the hearing. It granted the motion, issuing an order prohibiting Krajewski from

  1. publishing statements concerning trade secrets, confidential, and/or proprietary information of Deep Blue . . . , including but not limited to methods, processes, discussions, plans, techniques, equipment, locations, discoveries, recovered materials, research projects, sources of supplies, financial data and marketing, contract amounts and/or salaries, corporate income, disbursements, expenditures, and/or merchandising systems or plans of Deep Blue; and

  2. publishing false and/or defamatory statements regarding Deep Blue Marine, Wilf Blum, and/or Alexander Lindale, and/or their agents, employees or affiliates.

In July 2008, Krajewski, acting pro se, filed a motion for an extension of time to file a brief. He also submitted an affidavit explaining that he lacked sufficient financial resources to litigate the case in Utah and requesting that the court transfer the case to Pennsylvania, his home state. On July 22, the court denied the motion for an extension of time to file a brief, noting that Krajewski did not identify what motion he would be addressing and that no motions were currently pending. The court added that Krajewski could inititiate a motion and file a brief in accordance with the Federal Rules of Civil Procedure and the local rules.

Update:

1/15/2009 - Action dismissed without prejudice subject to parties' settlement agreement  

Content Type: 

Priority: 

1-High

Jurisdiction: 

Subject Area: 

Highlights from the Legal Guide: An Overview of Trade Secrets

This is the tenth in a series of posts calling attention to topics we cover in the Citizen Media Legal Guide. In this post, we highlight the section on trade secrets, which describes the limitations imposed on publishers who rely on or publish certain confidential business information and offers practical advice to citizen media creators on how to avoid liability for publishing trade secrets.

Subject Area: 

Crazy Legal Battle Between Newspapers Settles, But Leaves Worrisome Fair Use Decision Intact

Many readers are probably familiar with the meltdown of the Santa Barbara News-Press, a local daily newspaper in Santa Barbara, California. Starting in 2006, reporters and editors of the newspaper clashed with now-infamous Wendy McCaw, controlling shareholder of Ampersand Publishing LLC, which owns the paper. Tensions swirled around McCaw's perceived intervention in editorial and reporting judgments, traditionally left to the paper's professional staff.

Jurisdiction: 

Subject Area: 

Content Type: 

Ampersand Publishing v. Santa Barbara Independent

Date: 

10/26/2006

Threat Type: 

Lawsuit

Party Receiving Legal Threat: 

The Santa Barbara Indpendent, Inc.

Type of Party: 

Organization

Type of Party: 

Organization

Court Type: 

Federal

Court Name: 

United States District Court for the Central District of California, Western Division

Case Number: 

2:06-cv-06837

Legal Counsel: 

Louis P. Petrich, Robert S. Gutierrez, Thomas J. Peistrup - Leopold, Petrich & Smith, P.C.

Publication Medium: 

Blog

Relevant Documents: 

Status: 

Concluded

Disposition: 

Dismissed (partial)
Settled (total)

Description: 

In October 2006, Ampersand Publishing LLC, the company that owns the Santa Barbara News-Press, filed a lawsuit against Santa Barabara Independent, Inc., publisher of the Santa Barbara Independent, another local newspaper. The case arose out of Independent editor Nick Welsh's posting of a draft News-Press article in connection with a post on his "Angry Poodle" blog on the Independent's website. The facts are a bit complicated.

Welsh's post appeared on July 14, 2006, during the turmoil following the resignation of several of the News-Press's top editors and a leading columnist because of conflicts between the newspaper staff and Wendy McCaw, the local billionaire who controls Ampersand and essentially owns the News-Press. On July 6, 2006, News-Press reporter Scott Hadley wrote an article about the resignations, but the News-Press chose not to publish it, and instead published a "note to readers" written by McCaw, which discussed the resignations and the departing staff members' supposed motivations for leaving. Apparently in response to this decision, Scott Hadley also resigned from the News-Press. (Since then, over fifty more employees have either quit or been fired. The whole crazy drama is chronicled in the documentary film, Citizen McCaw.)

Welsh's July 14 post reported on Hadley's resignation and criticized the News-Press for publishing McCaw's "note to readers" instead of Hadley's article. Crucially, Welsh included a hyperlink in the blog post to a copy of Hadley's draft article, which an unknown person had sent to the Independent's office the day before. (The link in Welsh's post led to a scanned PDF of the article hosted on the Independent's site). Welsh and the Independent contend that Welsh posted the draft in order to expose and comment upon what he saw as the censorship of an unflattering article. In court documents, they also argue that Welsh's use of the draft "contrasted its fact-based account of the News-Press resignations with the defensive editorializing published by the News-Press." The link and the draft article remained online from July 14 to July 19, at which point the Independent removed them after Ampersand threatened legal action.

Ampersand sued the Independent in federal court in California, claiming that Welsh's posting of the draft article constituted copyright infringement. Ampersand also alleged that Welsh had misappropriated its trade secrets by acquiring and publishing the draft article and by acquiring another draft News-Press article relating to the paper's arbitration proceeding against a former editor. (Welsh and the Independent deny ever obtaining a copy of this latter arbitration article.) Ampersand argued that although the draft articles contained publicly available facts, they also embodied confidential processes and information because they reflected the reporters' labors and ideas of how to investigate and report on an issue. Ampersand also brought claims for unfair competition under California law, intentional interference with propsective economic advantage and contract, and negligent interference with prospective economic advantage and contract.

In September 2007, both parties moved for summary judgment. Among other things, the Independent argued that Welsh's publication of Hadley's draft article for purposes of commentary and criticism was a fair use, that the draft article was not a trade secret, and that it never acquired or published a copy of the arbitration article. Ampersand argued that it was entitled to judgment as a matter of law on its copyright infringement claim. In November 2007, the court granted Ampersand summary judgment on its copyright infringement claim, holding that Welsh's posting of Hadley's draft article was not fair use. The court dismissed Ampersand's trade secret claim based on the Hadley article, finding that the draft was not a trade secret. It reserved decision on the trade secret claim relating to the arbitration article, pending resolution of Ampersand's motion to compel Welsh to answer questions about his source of information about the article. (Welsh had refused to answer these questions, relying on the federal reporter's privilege.) The court also dismissed the unfair competition and tortious interference claims, finding that they were preempted by federal copyright law and the California Uniform Trade Secrets Act.

After this ruling, the only issues remaining were the amount of damages to be awarded to Ampersand on the copyright infringement claim and whether Ampersand had a valid trade secret claim based on Welsh's alleged acquisition of the arbitration article. Related to this latter issue, the parties fought bitterly over Ampersand's motion to compel Welsh to reveal the source of his information about the arbitration article, presenting a bizarre and unprecedented legal battle between two newspapers over application of the reporter's privilege. Before the court resolved the motion to compel or ruled on the final trade secret claim, the parties settled the case. As part of the settlement, the Independent agreed not to challenge the court's ruling that it had violated federal copyright law. The financial terms of the settlement are not public.

Content Type: 

Subject Area: 

Jurisdiction: 

Pages

Subscribe to RSS - Trade Secrets