Archive for the ‘trade secrets’ Category

Black Friday Blog Leaks Ads, Stores Make Legal Threats

Friday, November 26th, 2010

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A blog dedicated to reporting news of Black Friday sales,, has been publishing leaked copies of sale circulars long before Thanksgiving. Numerous stores have sent cease-and-desist letters (or, at least, please-stop letters). A great website that archives C&D letters, Chilling Effects, has published examples:

The Michael’s letter is fine – it doesn’t make any legal arguments. It simply asks to take the letter down and requests that rat out their snitch. Hmm, okay. I guess it never hurts to ask.

The Belk letter has a more legalish tone, but it also declines to make any legal arguments.

Now, the JCPenney letter does make a legal argument. But it’s a spurious one. The letter refers to what has done as “an infringement of our intellectual property[.]”


The problem with that is that there’s no such cause of action. The letter writer should pick an actual law. Is it copyright infringement? Trademark infringement? Is it a misappropriation of a trade secret? If someone is accusing you of an infringement of intellectual property, take a breath and relax a little. That’s a sure sign that what you have done is either (1) perfectly lawful, or (2) is, as luck would have it, legally actionable, but only in someway that the letter writer doesn’t actually understand.

Now, the JCPenney letter does mention that the ad is “copyrighted.” But is publishing a copyrighted ad on actionable as copyright infringement? In my opinion, it’s not clear that it is. Notice that the letter doesn’t actually make a claim of copyright infringement.

The JCPenney letter does, however, contain a practical argument: The ad is not the final version and therefore could provide readers with inaccurate information. That seems persuasive. Sometimes an argument that appeals to the reader’s sense of propriety and judgment is better than a legal threat.

Now here’s a letter from 2007, from Macy’s, that advances some actual theories of legal liability:

This letter says that what has released is “protected by copyright, trade secret, and other federal and state laws.”

Right away you should see that “other federal and state laws” is catch-all bluster to cover up ignorance, bluff, or legal-research laziness. So let’s skip to copyright.

Copyright does cover a sale circular. That’s true. But Macy’s only has a good copyright claim to the extent that what is doing is not fair use. And since’s usage could not have any conceivable effect on the market for Macy’s circulars (in fact, Macy’s isn’t selling its circulars at all), there’s at least a non-laughable argument for fair use. In fact, if you built it out, there would be a solid fair-use argument here. If another store were copying Macy’s ads but just changing the numbers and words, there would be a less persuasive fair-use argument. But that’s not what happened.

What about trade secret? Well, in my view – and I’ve studied this kind of thing – advance information about a sale may constitute confidential information, but not a trade secret.

A trade secret is a specific kind of business confidence, and it’s not the kind involved here. The distinction between a trade secret and a regular business confidence is the subject of a presentation I gave at a symposium earlier this year at Hamline Law School and an upcoming article of mine [now published] in the Hamline Law Review. Unfortunately, courts frequently misconstrue trade-secret law, so there’s always a chance that a judge would (erroneously) hold liable for trade-secret misappropriation. But if a judge interprets the law correctly, and finds that Macy’s sale information is not a trade secret, then can’t get in trouble for publishing it (though a Macy’s employee could be in trouble for leaking it).

Jason Chen Getting His Stuff Back

Wednesday, July 21st, 2010

EFF’s Deep Links blog reports that the county prosecutors have now withdrawn the warrant they obtained to search Gizmodo blogger Jason Chen’s home during Apple’s desperate attempt to claw back its lost iPhone prototype: San Mateo D.A. Withdraws Controversial Gizmodo iPhone Warrant.

That means Chen will get all his stuff back. In April, members of the Silicon Valley’s R.E.A.C.T. law-enforcement task-force seized four of Chen’s computers and two servers from his home. (My posts: here, here, here, here, here, and here. All the posts together here.)

It’s ironic looking back at it all. Apple was so keen to protect the secrets of its G4 iPhone before the big product launch date. And now the ultrahyped gadget has turned out to be a total dog. Maybe Apple should have lost more prototypes in bars. That way, perhaps they would have gotten wind of the phone’s call-dropping problems when there was still time to change the design.

And this sad news just out today: The Associated Press reports via the NY Daily News: iPhone factory worker commits suicide over lost G4 prototype.

Another iPhone Prototype Surfaces on Taoviet Blog from Vietnam

Tuesday, May 18th, 2010

Another blogger and another wayward iPhone prototype, on Taoviet blog out of Vietnam. (PC Magazine, Vanity Fair)

Unsealed Affidavit in iPhone/Blogger Raid

Monday, May 17th, 2010 has the unsealed search warrant and search inventory from the raid on blogger Jason Chen’s home in the search for a wayward Apple iPhone prototype.

The search warrant claims the iPhone is a trade secret of Apple. As I have discussed previously (here and here), the iPhone is, in fact, not a trade secret.

No Trade Secret Liability for iPhone, Part 2 – Wrongful Appropriation

Monday, May 10th, 2010

I explained previously one reason why, in my opinion, there were no protectable trade secrets embodied in the Apple iPhone prototype which led to a police raid on a blogger’s home. That reason was, in short, that Apple did not use reasonable efforts to secure any alleged trade secrets.

Here let me explain a second and independent reason there should be no cause of action under trade secret law in this case: There was no wrongful appropriation.

In California, the Uniform Trade Secrets Act requires, for liability, that the alleged wrong-doer have engaged in “misappropriation” of the alleged trade secret. It is not illegal, without more, to take someone’s trade secret. The taking must be of a kind that counts as “misappropriation.” Under California Civil Code 3420.1::

   (b) "Misappropriation" means:
   (1) Acquisition of a trade secret of another by a person who knows
or has reason to know that the trade secret was acquired by improper
means; or
   (2) Disclosure or use of a trade secret of another without express
or implied consent by a person who:
   (A) Used improper means to acquire knowledge of the trade secret;
   (B) At the time of disclosure or use, knew or had reason to know
that his or her knowledge of the trade secret was:
   (i) Derived from or through a person who had utilized improper
means to acquire it;
   (ii) Acquired under circumstances giving rise to a duty to
maintain its secrecy or limit its use; or
   (iii) Derived from or through a person who owed a duty to the
person seeking relief to maintain its secrecy or limit its use; or

Here, based on the facts as we understand them, there was no misappropriation, since the phone was lost, not stolen, and after it was lost, the retention of it was neither illegal nor wrongful.

My previous posts explain both of these aspects, that retaining the iPhone was, under the circumstances, in compliance with the law and not wrongful.

Since it was okay for the person who found the phone to keep it, it was similarly okay for him to sell it, and for someone to buy it.

Trade secret law is a serious matter. Trade secret law allows injunctions, huge damage awards, and felony convictions. After being utterly careless with their phone and then totally nonresponsive to phone calls, Apple is attempting to bring down the very heavy hand of the law to claw back what it regretted letting go of. A system of law that allows Apple to do this creates a travesty of justice.

The iPhone Was Not Stolen, Not Wrongfully Retained

Tuesday, May 4th, 2010

In a previous post, I argued that it is unfair to blame the person who found Apple’s iPhone prototype for not returning the phone. The issue is an important one, because the adventures of the wayward phone led to a police raid on tech blogger Jason Chen’s home. The short version is this: the finder of the phone tried in earnest to return it, but Apple wouldn’t return his calls. Thus, the iPhone ended up in Chen’s hands.

That’s the fairness issue. Now on to the law.

The statute at issue is California Civil Code § 2080, et seq., which provides:

Any person or any public or private entity that finds and takes possession of any money, goods, things in action, or other personal property … shall, within a reasonable time, inform the owner, if known, and make restitution …

If the owner is unknown or has not claimed the property, the person saving or finding the property shall, if the property is of the value of one hundred dollars ($100) or more, within a reasonable time turn the property over to the police …

So in California, if you find something valuable, you have to give it back to the owner, and if you can’t identify the owner, you have to give the thing to the police. So far so good. But this does not mean that the finder of the iPhone violated the law. The provisions of the California statute don’t apply under these facts because the finder did identify the owner, and did contact the owner. The owner then declined to respond. Apple’s refusal to take back the iPhone takes this out of the circumstances contemplated by the statute.

Reading the statue, it seems pretty clear that there is not intended to be a continuing legal obligation on the finder when the owner has rebuffed attempts to give the property back. In such a case, silence may be reasonably interpreted as abandonment of the property. This is not a matter of the property having been “not claimed” in the words of the statute. This is a matter of the property having been relinquished.

Much of the commentary coming out about the iPhone affair has been critical of Gizmodo and the finder with regard to the lost property aspect. These commentators have focused too much on the fact that this phone was some top-secret hyper-valuable prototype. That may be true, but it’s a fact known only now, a fact made evident because of what Apple eventually did to get the phone back.

But for the legal analysis, we need to look at the facts from the perspective of a reasonable person who does not know the end of the story. Back before the finder sold the phone to Gizmodo, the finder had no reason to believe the phone was anything other than a curious piece of junk. Apple clearly treated it like junk: (1) when they let it wander off at a bar, and (2) when they didn’t respond to efforts made to try to return it to them. It appeared, at best, to be some kind of rejected experiment without any continuing worth.

Now, you might say, surely the finder was on notice of how valuable it was when someone paid $5,000 for it. But if you say that, I say you don’t know Silicon Valley geeks.

The fact is, techies with money often spend it on tech junk. Tech weens will pay large amounts of money for vintage Betamax machines from the 1970s that don’t even work. Try buying a new inbox six-switch Atari 2600 on eBay for a reasonable price. Unless you think north of $2,000 is reasonable for one of the world’s most antiquated gaming systems, you’re out of luck. It is entirely reasonable to think that a prototype phone, worthless to Apple, would be highly prized as a curiosity by passionate geeks.

Don’t Give Apple a Pass on Not Answering the Phones

Monday, May 3rd, 2010

In the Gizmodo/iPhone affair, which involved a police raid on the home of a blogger who wrote a review of a prototype Apple iPhone found in a bar (some background and links to more background here), many bloggers and writers have opined that the iPhone was clearly stolen property and that Gizmodo’s receipt of it was illegal. I don’t think that is clear at all.

If someone loses something and you find it, should you give it back? Absolutely. What gets lost in the iPhone story, however, is that the finder, whose name we don’t seem to know, did try to return it. In addition to asking around the bar, the finder went much further. Here is what Gizmodo said about efforts to return the phone once the finder realized it must belong to Apple:

He reached for a phone and called a lot of Apple numbers and tried to find someone who was at least willing to transfer his call to the right person, but no luck. No one took him seriously and all he got for his troubles was a ticket number.

He thought that eventually the ticket would move up high enough and that he would receive a call back, but his phone never rang.

What more was the finder supposed to do? It is absurd to blame the finder for not returning the phone to Apple. The finder tried. It is not the finder’s fault that Apple is so bloated with bureaucracy that they won’t return important phone calls. Don’t give Apple a pass here.

Big corporations make a well-thought-out judgment about how easy or difficult they will make it for regular citizens to get in touch with them. Many huge enterprises seek to benefit their bottom line by dodging phone calls from the public. They staff the phone lines sparsely, and they require members of the public to go through onerous automated response systems. Those who do answer the phones are people with little training and virtually no discretion or power. Then the same companies avoid revealing inside phone numbers for executives.

The fact is, being ready and willing to talk to disgruntled customers and irate citizens is expensive. Thus, ignoring attempts of the public to communicate with a big company is profitable and convenient.

As a consumer, I find it inconvenient and unprofitable to read the fine print that comes with credit card bills and to go through the lengthy terms of use (that are constantly changing) for software installs and updates – including Apple’s. I doubt Apple or the banks would give me a pass in this regard. Can you imagine them saying, “I understand you’re busy. We can’t expect you to be bound by those terms.”? No, of course not. By the same token, no one should give Apple a pass on answering phone calls from the public.

No Trade Secret in the iPhone, Part 1 – Reasonable Efforts

Saturday, May 1st, 2010

There has been a fair amount written about the search-and-seizure and receiving-stolen-goods aspects of the iPhone police raid (background here), but much less about the trade secrets aspect. At the root of Apple’s complaint is (undoubtedly) a claim that the iPhone contained trade secrets.

The Explainer column at Slate, written this time by Brian Palmer, says that Jason Chen and Gizmodo could be in trouble for violation of the California trade-secret law. I’ve got to say, I find this conclusion extremely dubious. To the extent it turned out to be true that Chen or Gizmodo were held liable under a trade-secret theory, then, in my opinion, the outcome would have more to do with stellar lawyering and a court’s admiration for Apple rather than fealty to the law.

In California, the law governing trade secrets is California’s version of the Uniform Trade Secrets Act. For a piece of information to qualify as a trade secret, that piece of information must be:

the subject of efforts that are reasonable under the circumstances to maintain its secrecy

Allowing an employee to carry a slim phone-sized device in a pocket out to a bar does not qualify as reasonable measures. Palmer’s Slate piece acknowledges the problem for Apple along these lines. But Palmer ventures that taking the phone to a bar is not dispositive. He writes:

[T]he fact that Apple disguised the experimental device to make it look like an ordinary iPhone 3GS would likely be enough to convince a judge that the company intended to keep their new toy hush-hush.

If a judge were convinced in this way, I think it would be a travesty. First of all, “intent” to keep something secret is an entirely separate question from reasonable measures. The key question is not what you intended to do, but what you did do, and whether that was reasonable.

So, was what Apple did “reasonable under the circumstances” to protect alleged trade secrets in a phone? The answer is clear: Of course not.

The reality is that phones get lost. Everybody knows this. Phones especially get lost at bars. Mobile phones, at the whiff of beer breath and chicken wings, will leap out of the pockets of your Dockers faster than you can say, “What do you have on tap?” A finding that what Apple did here counts as reasonable measures, would, in my mind, be absurd.

There are other reasons that the iPhone did not embody trade secrets. I’ll cover those in future posts.

One other note: I don’t mean to beat up on Brian Palmer. He does a great job with the Explainer. (He consulted me last month on a piece about The Hurt Locker.) And with regard to the iPhone, I think he did a fine job of teeing up the issues. He also consulted two bona fide experts for the piece – Eric Claeys at George Mason and Elizabeth A. Rowe at Florida-Levin. And the fact is, courts often take a very expansive view of trade secrets. But if Palmer’s piece ends up being on target about the existence of trade secrets here, then, in my mind, that will be more on account of subpar jurisprudence than a correct interpretation of the law.

Police Raid of Blogger’s Home Creates Shield Law Question

Wednesday, April 28th, 2010

Silicon Valley’s multi-jurisdictional task force R.E.A.C.T. (“Rapid Enforcement Allied Computer Team”) sounds like something I would make up for a law-school exam hypothetical. But it is not, and on Friday night, Gizmodo blog editor Jason Chen came home to find R.E.A.C.T. seizing computers and servers pursuant to a search warrant issued in regard to a prototype Apple 4G iPhone, which Apple lost and Gizmodo “found,” and then dissected and reviewed. (Gizmodo’s wrap-up.)

COO of Gizmodo owner Gawker Media, Gaby Darbyshire, says the search was illegal under California Penal Code § 1524(g), a journalist shield law. (Gizmodo’s post, with search warrant document images.)

Lyrissa Lidsky on PrawfsBlawg discusses the question of whether bloggers are properly entitled receive protection under the federal Privacy Protection Act of 1980, 42 U.S.C §2000aa et. seq., intended to squelch newsroom search and seizure.

More: Alexandra Jaffe on; Nick Bilton on NYT’s Bits blog.