Trade Secret / Noncompete Blog

The stakes in trade secrets litigation are frequently very high.  The dispute between Semiconductor Manufacturing International (“SMIC”) and rival Taiwan Semiconductor Manufacturing (“TSMC”) is but one very recent example.  In a that case, brought in the Superior Court of Alameda County, California, TSMC claimed more than $1 billion in damages based on allegations that SMIC stole its trade secrets.  The parties settled the case, with SMIC paying TSMC a reported $200-plus million, including $40 million that SMIC owed TSMC from a previous trade secret and patent infringement case.  SMIC is also giving up a nearly 7.5% in SMIC over to TSMC.  Additionally, the litigation brought about the abrupt resignation of SMIC’s chief executive, which analysts speculate was forced and related to the dispute.  Read more about that here.

The risks arising from allegations of trade secrets theft can involve more than simple claims of money damages.  In Spring Design, Inc. v. Barnesandnoble.com LLC, pending in the United States District Court for the Northern District of California, Plaintiff Spring Design is seeking an injunction prohibiting Barnes & Noble from, among other things, the sale of its Nook electronic book reader.  If Spring Design succeeds, Barnes & Noble may be forced to delay the release of the Nook until sometime after the typically lucrative holiday season.  Click here to read more about this case and to review a copy of the complaint.

The threats in trade secret cases run the gamut from sublime to the bizarre.  A case in point is the recent decision by a Wisconsin judge to award two individual plaintiffs $1.26 billion dollars against PepsiCo and two of its Wisconsin distributors.  The plaintiffs allege that PepsiCo – which sells the ubiquitous Aquafina brand bottled water – stole their trade secrets and idea to sell bottled water.  When PepsiCo did not respond to the suit and failed to appear in court, the Jefferson County, Wisconsin Circuit Court sided with the plaintiffs and entered a default judgment.  That order was overturned a month later when PepsiCo appeared and argued that it had not responded to suit because of a “human error” caused by one of its secretaries.  PepsiCo also cited the fact that it had been served in its incorporation state of North Carolina instead of its headquarters in New York.  

Finally, last week, Plaintiff Franz Wakefield sued Apple Inc., Steve Jobs, and Sarah Jessica Parker (yes, THAT Sarah Jessica Parker of Square Pegs and Sex and the City fame) in the United States District Court for the Central District of California for, among other things, misappropriation of trade secrets.  Wakefield alleges that, in 1983, he and Parker had a friendship which resulted in Wakefield and Parker agreeing to a trade secret deal where Parker would commercialize various iterations of the iPod and the iPhone, and Wakefield would receive 2% of gross revenues of any license of the technology to an appropriate technology company.  The then 18-year-old Parker allegedly betrayed Wakefield by going to Steve Jobs, who sat on the technology for two decades.  Similar to Spring Design, Wakefield seeks to halt the sale of iPods and iPhones.  Wakefield also seeks to enforce his agreement for 2% of gross revenues on sales of the devices.

Read more from Marty Bishop at www.cfslitigation.com.