In the last fifty years intellectual property has become a key asset in many businesses, the asset that allows the business to prosper and achieve a competitive edge in the marketplace. Indeed, intellectual property is the driving force of all the technology giants who dominate American and world business and efforts to protect those assets are a constant preoccupation of the companies and the law courts.
But it is not just the giants of industry who need to protect such assets. Every start up and many medium or small businesses that hope to succeed have their own stash of confidential intellectual property and trade secrets, ranging from invented technology, developed methodology, information as to customers, markets, or anticipated changes in the market.
The wise company will have employees and contractors execute appropriate contractual obligations to protect their intellectual property and utilize various methods to keep the information safe and immune from efforts to hack or steal. Aggressive litigation to seek damages and enjoin use of such stolen information is common, though enforcement is often difficult if the culprit is located abroad in various jurisdictions that are reluctant to enforce such protections.
This is not new. Great Britain, in the 19th Century, complained bitterly about companies in the United States stealing their trade secrets and methods and the refusal of the United States courts to protect the British victims. The same complaints the United States now makes about China or Russia were made by Britain against the United States.
Realizing the value of such assets, both the courts and the various government agencies have increased both their scrutiny and their efforts to enforce intellectual property rights and an excellent example of the dangers of violating the law when tech giants are involved is seen in the recent case of Anthony Levandowski who will be serving time in prison for such theft. Both civil and criminal charges were brought against Mr. Levandowski, as described in detail below. Important lessons may be learned from that case.
From Wikipedia: (emphasis added.)
Anthony Levandowski (born March 15, 1980) is a French-American self-driving car engineer. He is known for advancing the field of autonomous vehicles. In 2009, Levandowski co-founded Google's self-driving car program, now known as Waymo, and was a technical lead until 2016. In 2016, he co-founded and sold Otto, an autonomous trucking company, to Uber Technologies. In 2018, he co-founded the autonomous trucking company Pronto; the first self-driving technology company to complete a cross-country drive in an autonomous vehicle in October 2018. At the 2019 AV Summit hosted by The Information, Levandowski remarked that a fundamental breakthrough in artificial intelligence is needed to move autonomous vehicle technology forward.
On August 27, 2019, Levandowski was indicted on 33 federal charges of alleged theft of self-driving car trade secrets. On August 4, 2020, Levandowski pleaded guilty to one of 33 charges and was sentenced to 18 months in prison. The remaining 32 counts were dismissed.
According to a February 2017 civil lawsuit filed by Waymo officially known as Waymo v. Uber (Levandowski was not a defendant in the case), Levandowski allegedly "downloaded 9.7 GB of Waymo’s confidential files and trade secrets, including blueprints, design files, and testing documentation” before resigning to found Otto. Google co-founder Larry Page was reluctant to file the suit. However, he was pushed over the edge when one of Waymo's suppliers inadvertently copied a Waymo engineer on an email of a schematic of Uber's Lidar design. Uber's design appeared to be almost identical to that of Waymo. The civil suit between Uber and Waymo was settled in February 2018 with Uber agreeing to pay Waymo 0.34% of its equity, valued at approximately $245 million, and not to use the unit's technology.
Before filing its lawsuit against Uber in 2017, Google had separately taken Levandowski to private arbitration over a contract dispute. On March 4, 2020, Levandowski filed for bankruptcy protection after the court confirmed an arbitration panel's ruling that Levandowski and his colleague Lior Ron had breached their employment contracts with Google by poaching employees for their startup. The panel found that Levandowski owed Google $179 million—$120 million accounted for the salary he received while at the company, and the remainder for interest and legal fees accrued.
On March 30, 2020, Levandowski filed a motion with a California bankruptcy judge to force Uber to honor its contractual obligation to indemnify Levandowski. At issue is the validity of the indemnification agreement that Uber, Levandowski, and Ron entered into pre-acquisition. According to a court document, “The indemnification agreement was structured to ensure that Mr. Levandowski would not be left unprotected against Google, which had inexhaustible resources to attack Mr. Levandowski.” Uber initially honored the agreement and covered both Levandowski and Ron's legal costs. However, in April 2018, days before the final arbitration hearing that resulted in Levandowski owing Google $179 million, Uber informed him it would be seeking reimbursement for his defense costs, arguing he had breached their agreement by refusing to testify.
In March 2017, United States District Judge William Haskell Alsup referred the civil case to federal prosecutors, citing the Economic Espionage Act of 1996 after Levandowski exercised his Fifth Amendment right against self-incrimination. In May 2017, Judge Alsup ordered Levandowski to refrain from working on Lidar at Uber and required Uber to disclose its discussions on the technology. Levandowski was later fired by Uber for failing to cooperate in an internal investigation. Soon after the case went to trial, Uber, through its lawyers, publicly apologized for hiring Levandowski.
On August 27, 2019, Levandowski was charged by the Department of Justice for the alleged theft of trade secrets from Google's self-driving unit Waymo.
In the months before he left Google, the criminal charges alleged Levandowski downloaded thousands of files from Waymo's predecessor, Project Chauffeur. The data allegedly included “critical engineering information about the hardware used on Project Chauffeur self-driving vehicles,” and that Levandowski transferred files onto his laptop before leaving the company. Following the indictment, Pronto, a new self-driving trucking company that Levandowski co-founded, announced that its Chief Safety Officer, Robbie Miller, would take over as CEO.
On March 19, 2020, Levandowski agreed to plead guilty to one of the thirty-three charges initially brought against him by the Department of Justice. Levandowski's plea to the 33rd count was for downloading an internal project tracking document called, “Chauffeur TL Weekly – Q4 2015.” Originally charged with stealing documents containing trade secrets, technical specifications, and Lidar design, “Chauffeur Weekly” was a single spreadsheet consisting of team goals, project metrics, and weekly status updates accessible by Levandowski's team on an unsecured Google Drive. Levandowski admitted to accessing the document about one month after leaving Google in February 2016.
On August 4, 2020, Levandowski formally pleaded guilty to one count of trade secret theft, and Judge William Alsup sentenced him to 18 months in prison to be served after the coronavirus pandemic had subsided; he dismissed the remaining 32 counts. During the sentencing, Alsup said Levandowski is a “brilliant, groundbreaking engineer that our country needs. We need those people with vision. I’m going to give him that.” In addition to time served, Levandowski will pay $756,499.22 in restitution to Waymo and a fine of $95,000.
(End of Wikipedia article.)
More Relevant Facts:
Judge Alsup also stated that only sentencing Levandowski to defense counsel’s proposed home confinement would “[give] a green light to every future brilliant engineer to steal trade secrets. Prison time is the answer to that.”
The U.S. District Attorney’s office had recommended a 27-month sentence, arguing in court that Levandowski had committed the crime for ego or greed, and that he remained a wealthy man. Levandowski had sought a fine, 12 months home confinement and 200 hours of community service.
“It was wrong for him to take all of these files, and it erases the contributions of many, many other people that have also put their blood, sweat and tears into this project that makes a safer self-driving car,” prosecutor Katherine Wawrzyniak said in her closing statement. “When someone as brilliant as Mr. Levandowski and as focused on his mission to create self-driving cars to make the world safer and better, and that somehow excuses his actions, that’s wrong.”
Levandowski spoke on his own behalf: “The last three and a half years have forced me to come to terms with what I did. I want to take this time to apologize to my colleagues at Google for betraying their trust, and to my entire family for the price they have paid and will continue to pay for my actions.”
Levandowski said in the plea agreement that he downloaded the Chauffeur Weekly Update to his personal laptop on or about January 17, 2016, and accessed the document after his resignation from Google, which occurred about 10 days later.
The Basic Law and Strategy to Protect Intellectual Property:
TYPE OF INTELLECTUAL PROPERTY PROTECTION
There is different type of protection for different type of intellectual property.
COPYRIGHT is a means of protecting "originality of authorship," and pertains to writings, music, graphic arts, and generally any other form of tangible creation. Software is normally categorized in this area, though patents may be available for certain types of computer software.
PATENTS protect novel inventions or discoveries.
TRADEMARKS protect terms identifying the source of origin of goods and services.
TRADE SECRETS protect proprietary information which is confidential and of use to a business.
It can happen that a theft of intellectual property can act as a violation of several of the categories. For instance, a patent can also be a trade secret and an action to recover damages would lie in pleading both causes of action. Violation of a copyright of a particular manual created by a business also may involve theft of the trade secrets involved, etc.
Further, if the accused occupies an employee, officer or director position in the victim’s company a whole series of additional civil causes of action may apply, such as breach of fiduciary duty, breach of contract, fraud and deceit, embezzlement, and violation of the corporate opportunity doctrine.
Every business knows that many of the most important assets it owns are simply information and data that it has developed over the years which, even if not a creation that is original (for copyright) or connected with the business name (for Trade Mark), or an innovative device or method (for patent) is still proprietary and needful of protection. Such items as unique methodology; customer lists or information; information about the market or competitors; information about suppliers and vendors, etc., are of extreme competitive value.
Can they be protected? Yes, they are business assets subject to protection much as any other asset of the business...provided the business has acted in a manner to maintain their unique confidential value.
Most states provide that Intellectual Property not covered by the Federal Lanham or Copyright Act are still assets that may be protected and that improper use of them may be actionable under various tort theories (Interference with a Business Relationship; Breach of Fiduciary Duty; Trade Theft; Theft of Trade Secret; Conversion or even simple theft and embezzlement, etc.) Most of those legal actions allow punitive damages to be awarded and such litigation is becoming common place in the United States and abroad.
For non-patent intellectual property, the important thing for a business to understand is that unless reasonable steps are made to maintain the confidentiality of a concept, idea, method, etc., then it is no longer a "secret" and not protectable. It is up to the business to make it a secret by taking the appropriate proactive steps and sloppiness in the care and protection of trade secretes effectively gives free reign to others to steal them since they are in the public domain. (A typical example is that data or a customer list is left out on a desk or on a hard drive available to all, or is sent in a relatively public manner to a third party or is seen and taken by a third party, who then defends the action by claiming that it was not secret since anyone wandering by could see it.)
It is also vital to understand that the entity seeking to protect a trade secret must be extremely aggressive in maintaining its exclusive rights to the secret both in court and in the market. Once any third party breaches the exclusivity of the secret, it is no longer subject to protection. Thus, even businesses who are not particularly worried about theft in a particular market must act aggressively to punish the wrongdoer before another entity seizes that opportunity to claim that the secret is now in the public domain. (Again, a typical example is that your secret is stolen and used in Asia in which you do no business so you do not concern yourself greatly; but by letting the Asians use the concept, if it is picked up by your competitor in your own city, you may no longer have the ability to claim exclusive rights to the secret.)
The DIGITAL MILLENNIUM COPYRIGHT ACT (DMCA) of 1998 seeks to enlarge trade secret protection to the new technology. Key provisions relate to laws prohibiting defeat of technological protections of intellectual property and copying controls and the Act provides separate causes of action independent of those under the Lanham Act or the Copyright Act. The Act also covers other areas of concern, such as prohibiting sale of devices primarily designed for the purpose of circumventing the intellectual property protection of others (the video scanners which allow one to make unlimited movies, etc.)
As anyone who has sought to control theft of intellectual property in China knows, enforcement of judgments to stop such violation is difficult if not impossible in that jurisdiction-the same complaint the British made against the United, States, note.
But the Levandowski case makes clear that at least in the United States, such theft can result in both civil and criminal prosecution. Note it was the Judge in the civil case, after Mr. Levandowski took the Fifth Amendment, who referred the matter to the United States Attorney for criminal prosecution. And note that the civil judgment resulted in a massive verdict and bankruptcy and the criminal resolution was eighteen months in prison.
The key was aggressive and immediate prosecution of the matter by the victim, spending the time, energy and money to advance the claim. Of course, the sums at issue were significant and the parties involved enjoyed significant resources to spend advancing their claims. But the very prominence of the parties and the monies at risk has allowed the Court to send a clear message to every business and every person considering thievery of intellectual property that such actions will be treated seriously by United States courts.
Conclusion and Solutions:
Most businesses have neither the resources nor the clout of Google or Uber and the challenge the business faces is how to be effective in protecting the property with a far more limited budget. That said, it must be understood that protection of such an asset is often central to the continued viability of the company and ignoring the problem or electing to allow the theft to succeed will simply empower competitors and send a clear message to contractors and employees that the company will not protect its own assets. That message not only creates incentive to steal but results in good employees electing to leave a company that will not protect the product they are helping to create.
As with all else in business, advance planning is the key. Various safeguards of intellectual property can be created. These can include restricting access, developing software with “time bombs” and careful background checks of all with access to the product. One client we represented would never create software without code inside that both identified it as coming from him and also sent out notice to the world that the product was stolen if certain additional code was not entered. One developer of specialty lubricants would put non-required additives in his product that could easily be identified if other persons stole the product and sought to counterfeit it.
Contractual protection is equally vital, with clear and powerful contracts as part of the standard employment and third-party relationship and providing for arbitration of all disputes with the prevailing party receiving attorney’s fees. This can turn a ten-million-dollar litigation lasting three years into a six-month arbitration costing one hundred thousand dollars. One can afford to “buy the justice” and if you win, you are made whole.
Practical business advance planning includes careful selection of third parties that will have access. Some of our clients will not engage in business with any Chinese, Nigerian, Ukrainian or Russian entity since it is next to impossible to protect intellectual property in those regions. This is not jingoism: it is simply practical advance planning. Others plan for a three year or less lifetime for any new property since they assume that sooner or later it will be copied. As one client put it, “The minute it’s on the market, I am seeking to improve and change it so I will keep ahead of my competitors.”
What is clear is that there are effective tools to enforce your rights and if you prepare ahead of time you can protect your intellectual property as required. Just ask Mr. Levandowski.