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Comment by grizzles | Hacker News Reader

lol @ preposterous. That's the law yo.

Copyright - Source code that has been copied. Patent - Monopoly on an idea. Trade Secret Law - N/A. They are former employees. Non Compete Agreement - Agreements in restraint of competititon are void in California.

Shred's story sounds credible to me. The fact that Smule offered to make this lawsuit go away in exchange for equity sounds a lot like extortion to me. Why would they settle for a % of a company when they already own 100% of the secret sauce that was stolen? If their claim is as baseless as this article [1] suggests, RICO or anti-SLAPP laws should definitely apply.

[1] https://blog.ycombinator.com/on-the-shred-video-lawsuit

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>Trade Secret Law - N/A. They are former employees. Non Compete Agreement - Agreements in restraint of competititon are void in California.

I would respectfully disagree with these assertions. Trade Secret is not void just because someone is a former employee. You don't get to walk out the door with the secret recipes. And there are many exceptions to california's ban on non-compete agreements. Non-compete agreements are also very different than non-disclosure agreements.

You don't get to walk out the door with the secret recipes.

Indeed, but in general in the US you have to go to real efforts to create and keep secret such recipes. And I find it utterly amazing that California law, last time I checked, doesn't consider customer lists to be protectable trade secrets for salesmen (!!!).

I'm completely onboard with california on that one. Customer lists are not secret. Each and every customer knows they are a customer. Certainly the tax man knows who is an isn't a customer, along with any number of credit cards companies and banks that might process orders. So the alleged secret isn't really kept in-house.

This is SUPER wrong. Customer lists were one of the original trade secrets under common law, and they still are trade secrets--as long as they're kept secret.

More modern applications:

"Business Information Trade secrets in this category may include: ... Customer lists" http://www.fenwick.com/FenwickDocuments/Trade_Secrets_Protec...

"California court affirms that customer lists can qualify as trade secrets" http://www.lexology.com/library/detail.aspx?g=ea22e316-7210-...

The case you cited in your last link could have been decided after I read whatever it was I read. It could be that it's pretty hard to make and keep such lists as trade secrets, or maybe what I read referred to just a list of customers with all that other information, but I remember it being pretty definitive, and, generally agreeing with your initial points, startling.

The law of customer lists being trade secrets is literally centuries old.

Perhaps you're remembering a recent case about whether LinkedIn contacts could qualify as trade secrets, which tested where to draw the line:

http://blogs.orrick.com/trade-secrets-watch/2014/10/27/new-s...

No. The tradition is old. The law has been revisited and updates many hundreds of time.

Um. That "old" "tradition" is binding law until it's overruled. It hasn't been.

Again, here are the current California trade secrets statutes:

http://leginfo.legislature.ca.gov/faces/codes_displayText.xh...

Lol, accepting your 'tradition' argument (I don't) any such traditions would be overturned by the very statute you cite.

"3426.8.This title shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this title among states enacting it."

That's the law. It overturns everything prior. All commonlaw interpretations (the closest legal thing to tradition) before it are void in the face of this new law.

Fyi. California's law is actual a cut-and-past of the Uniform Trade Secrets Act as adopted by basically every other state in the union. See https://en.wikipedia.org/wiki/Uniform_Trade_Secrets_Act.

I admit, my attention was divided earlier between Hacker News and my day job as a California IP litigator.

Here you go:

Yes, the UTSA statute is "the law". But it's not the ONLY law. Where there are gaps, courts look to case law, just like in any other area of law. And the UTSA was drafted with the old common law in mind, continuing much of it, but codifying it. That's why courts DO look at the older common law to inform their interpretations of the UTSA.

This is from page 1 of the Prefatory Note in the 1985 final draft of the UTSA:

"The Uniform Act codifies the basic principles of common law trade secret protection, preserving its essential distinctions from patent law."

With that, I'm done with this thread. We are way off-topic since the lawsuit in the original post doesn't even have a trade secret claim. I'm also done dispensing free legal advice for the night.

Note the words "can qualify" and "may include". It's not a matter of secret keeping. It is a fact-specific analysis turning on the nature of the product and the specific information on the list. Whether or not one could theoretically gather the information from public sources, sources outside the list, is also a factor. A simple list of buyers for a simple product may not qualify regardless of attempted protections. Not all lists are protected. Imho, given the various rules, I would say the default in California is still non-protection absent exceptional circumstances.

I totally dismiss the linked Fenwick PFD. According to my pdf reader that document was last updated on "Tue 05 Apr 2005 04:49:08 PM PDT". It's totally out of date and therefore untrustworthy as to specifics of current CA law. I'm a little shocked that it is still on their server.

California trade secrets law has not changed drastically since 2005. If you have actual information to the contrary, by all means, point to it.

You're correct that there's more to it than just keeping something secret:

- It has to also be valuable because of the secrecy, so the number I'm thinking in my head doesn't count. But customer lists typically do have value because of secrecy.

- Trade secrecy can be destroyed if the secret gets out.

There's no reason to argue in the abstract. Here's how California law actually defines "trade secret" -- Civil Code 3426.1(d):

(d) “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and

(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

http://leginfo.legislature.ca.gov/faces/codes_displayText.xh...

I said the document was untrustworthy, not necessarily incorrect. It is too old to be relied upon. It's not a question of whether the material is accurate. Any lawyer advising a client would be negligent if he or she looked to such dated summaries of the law. They aren't worth reading given the many current summaries are available elsewhere. Now if the firm wants to reissue the document, then perhaps.

Well, good thing you're not my client. :)

Just want to point out that Smule has not cited trade secret theft as a claim against us.

And on non-compete, Mark and I were just employees, not officers of any sort. Neither of us was a manager with direct reports.

There are two ways to 'win' a civil suit. Counter their allegations, or assert your own counterclaims. It may be possible to assert that they have taken your trade secrets.

Talk to lawyers. In offices. Not online. Sign a client agreement. Pay them money. Beyond that, you cannot get any reliable advice from anyone here.

There's also the "run out the clock" method, i.e. drain the other company of money, energy, time, etc.

Which appears to be exactly the worst case the plaintiff is imaging per the words he was rather unwise to utter in an all hands meeting (http://www.businessinsider.com/smule-ceo-shred-video-lawsuit...):

[...]

And here's the sad truth. You compare a 100-person company with 10, 30, 40 million dollars in the bank to a two-person startup. If it goes to litigation, if we're wrong, we'll win.

Right? We'll win. We'll put a giant law firm on it and we'll do all of the discovery and we'll do all the depositions and we'll win. And if we're right, we'll still win....

(Note: discovery can be very expensive, and depositions tend to take a lot of time in preparation and the actual deposition.)

Which suggests the defendant isn't entirely insane to try to win this in the court of public opinion, a worst case apparently not imagined heretofore.

There was no "misappropriation" here. Employment does not qualify as "improper means". [1]

Just imagine for a moment the slippery slope this would create if companies were able to criminalize knowledge on the basis of prior employment. Literally any work process you performed could be considered protected IP. You could work one job and never be employable again.

[1] https://en.wikipedia.org/wiki/Uniform_Trade_Secrets_Act

Yes. That is reality. Talk to anyone in aerospace. Techniques developed for employer A cannot be taken to employer B. I'm not saying it doesn't happen, just that there are laws on the books to prevent it.

Imagine the slippery slope if former employees of Coke were allowed to take the recipe over to Pepsi. We wouldn't have any long-lived product lines. (That actually happened. Pepsi called the FBI)

For below: 18 U.S. Code § 1832 - Theft of trade secrets (the really really short version)

"Whoever ... knowingly ... steals, or without authorization appropriates ... or by fraud, artifice, or deception obtains such information ... shall ... be fined under this title or imprisoned not more than 10 years, or both."

What laws?

sandworm101: That's a really interesting comment. It sounds very anti free market to me, but I guess I'm not surprised. I guess the only recourse for a founder led company in that situation would be to leave the US. Not necessarily a great result.

OT: Regarding the Coke/Pepsi thing, personally I think food manufacturers (I use the term loosely) should be forced to disclose what's in their products. Though I would strongly agree that this comment has nothing to do with the rest of our previous discussion.

Leaving the US would do little beyond increasing the cost of litigation and making said founder look more like a fugitive. Tradesecret law and IP law generally is pretty universal. And you can still get sued where the alleged theft/taking/wrong took place. A default decision (ie you don't show up) by a US court will be enforced in Canada, Europe or most anywhere else.

As for free markets, while IP law does create monopolies, the theory is that many protected innovations would never be brought to market without some promise they won't be replicated.

For below: Independent creation is not theft and so the laws do not apply. Copyright and patent bar independent creation, but not tradesecret. No doubt countless production secrets have been independently developed by competitors. When one trys to patent something, these come out of the woodwork as "prior art". But independence is a very hard burden to prove. Any communication from one firm to another, especially the movie a knowledgeable employee from one firm to the other, destroys any notion of independence.

sandworm101: do you think those laws apply when someone reinvents something that was in their head, or only when documents were retained/copied/passed as in the Chung/Boeing case?

It sounds like you agree with me then. Techniques developed for employer A CAN be taken to employer B. [as long as they are independently created ]

If there is some nuance here that I'm missing, I'd like to know what it is. A finer understanding of this point is probably really important for anyone who works in science.

No they cannot be 'taken' from A to B. They must arise independently within in B. The fact B's technique looks very much like A's must be complete coincidence.

> A default decision (ie you don't show up) by a US court will be enforced in Canada, Europe or most anywhere else.

Russia and China will be more than happy to take your IP :)

For 'eternal' products like Coke I guess it's impossible, but for other still moving markets I thought a simple N-years NDA clause was enough to let ex-employee not screw you until you have enough head start.

In the case of your Coke vs. Pepsi scenario, would the recipe for Coke not be protected both as a trade secret, and under copyright?

On the other hand, I can't believe it'd be against the law for some employees from Coke to quit and start a company that manufactures soda (assuming they didn't actually use Coke's recipe).

But that's exactly how it works. I have worked at a company that did a "clean room" reimplementation of a competitor's product. You cannot have anyone who was formerly an employee of the other company anywhere near a project like that. It's not that you will be prosecuted as a criminal, it's so that your company has some defense against being sued.

https://en.wikipedia.org/wiki/Clean_room_design

Trade secrets are indeed protected under California law yo.

http://www.nolo.com/legal-encyclopedia/california-trade-secr...

- "California is unique in that its laws expressly establish that the employer owns trade secrets created by an employee (Cal. Labor Code Sec. 2860)."

- "Federal rules also apply in California. The Economic Espionage Act of 1996 makes the theft of trade secrets a federal crime."

Patents do not offer a monopoly on an idea. They offer protection of an invention a process a machine, but not an idea.

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