I. The Trial Court’s Orders
The parties were competitors in the market for cell phone chipsets. Broadcom asserted three of its chipset patents against Qualcomm, contending that Qualcomm directly infringed the asserted patent claims and that it had also induced infringement by its customers. A jury trial produced a verdict of willful infringement in favor of Broadcom, and an award of attorneys’ fees for willfulness. But the jury had been instructed, consistent with pre-Seagate case law, that it could find willfulness if Qualcomm had breached its “affirmative duty of care.” Seagate then supervened, and the trial court invited reconsideration of its own trial rulings, remarking that it “would be an understatement to say that the Federal Circuit rewrote decades of case law interpreting the requirements for demonstrating willful infringement in a patent case.” Broadcom Corp. v. Qualcomm Inc., 2007 U.S. Dist. LEXIS 86627 at *5 (C.D. Cal. 2007), aff’d in part and vacated in part, 543 F.3d 683 (Fed. Cir. 2008). Concluding that its prior instruction “was error,” the trial court held that Qualcomm was entitled to a new trial on the jury’s finding of willfulness. Id., at *7.

The trial court then addressed Seagate’s implications for its instructions to the jury on inducing infringement. The court had instructed the jury that in determining whether Qualcomm had the necessary intent to induce infringement it could consider whether Qualcomm had obtained advice of counsel, though it did not inform the jury that such an opinion was necessary. The jury instruction stated:

In considering whether Qualcomm acted in good faith, you should consider all of the circumstances, including whether or not Qualcomm obtained and followed the advice of a competent lawyer with regard to infringement. The absence of a lawyer’s opinion, by itself, is insufficient to support a finding of willfulness, and you may not assume that merely because a party did not obtain an opinion of counsel, the opinion would have been
unfavorable. However, you may consider whether Qualcomm sought a legal opinion as one factor in assessing whether under the totality of the circumstances, any infringement by Qualcomm was willful. Id., at *9.

Qualcomm maintained that this instruction could not survive Seagate, which had jettisoned any duty to obtain an opinion of counsel while still suggesting that they were of utility. The trial court rejected this argument, reasoning that the absence of a legal opinion was nevertheless one factor, among many, that the jury could consider in determining whether Qualcomm had knowingly induced the infringement of others. Id., at *9-12.

This left for consideration whether a retrial on all issues would be required, in view of the necessity of retrying the issue of willfulness under the new Seagate standards. Where trial “of an issue such as willfulness is necessarily bound up with the basic liability determination,” noted the court, “a new trial on all issues should be granted.” Id., at 17. Hence Broadcom was required to elect either to retry the case on all issues or to abandon its efforts to obtain enhanced damages for willfulness. Id., at 17-19. Broadcom elected to drop its willfulness claims, and Qualcomm then appealed.

II. The Opinion-Of-Counsel Ruing
The Federal Circuit disagreed with the trial court’s construction of one of Broadcom’s patents, and ordered JMOL for Qualcomm on grounds of anticipation, affirming infringement as to Broadcom’s other asserted patents. Broadcom, at 543 F.3d at 691-697. This cleared the way for consideration of the disputed opinion-of-counsel willfulness instruction. Qualcomm urged the court not to allow the inducement verdicts to stand on the theory that opinion-of-counsel evidence, after Seagate, is no longer relevant to determining whether an accused party had the specific intent to encourage anothers infringement – a required element of an inducement claim. The court rejected this argument. Id., at 697-700.

As the court noted, to make out a case for inducement, the claimant must show that the defendant intended to cause the acts that constitute direct infringement and must have known or should have known that its actions would actually induce infringement. Id., at 698-99. This is a higher standard than that of willful infringement generally, for under Seagate the claimant need only establish (a) objective recklessness, namely a “high likelihood that . . . [the infringer’s] actions constituted infringement of a valid patent,” and (b) subjective bad faith, namely, that the objectively-defined risk of infringement “was either known or so obvious that it should have been known to the accused infringer.” Seagate, 497 F.3d at 1371. One should be able to meet this higher standard of culpability, reasoned the court, by evidence tending to show whether or not the defendant obtained and followed the advice of a competent lawyer. Broadcom, 543 F.3d at 698-99.

Opinion-of-counsel evidence, concluded the court, is one circumstance, in the totality of the circumstances, logically relevant to the “knew or should have known” element of inducing infringement. Id.,at 699. Indeed, the court had specifically acknowledged the exculpatory value of such evidence in an en banc pre-Seagate case, DSU Medical Corp. v. JMC Co., 471 F.3d 1293, 1307 (Fed. Cir. 2006), which the Broadcom court found to be still viable in light of Seagate. Id., at 699. The court reasoned that it would be “manifestly unfair to allow opinion-of-counsel evidence to serve an exculpatory function, as was the case in DSU itself . . . and yet not permit patentees to identify failures to procure such advice as circumstantial evidence of intent to infringe.” Broadcom, 543 F.3d at 699. Hence the trial judge did not err in instructing the jury to consider whether Qualcomm “sought the advice of counsel as to non-infringement,” as one factor among all relevant circumstances, on the inducement claim. Id., at 700.

The court went on to consider whether there was “substantial evidence” supporting the jury’s verdict of induced infringement. In concluding that such evidence had been presented, the court took note of a number of factors militating in favor of willfulness: a “failure to investigate” the Broadcom patents, a “failure to explore design around approaches,” a failure to “take remedial steps” even after the lawsuit was filed, and “a failure to seek legal advice.” Id., at 700 -701.

III. The Implications For Willful Infringement Generally

Much of the reasoning of the Federal Circuit in upholding both the judgment of willfulness and the instruction on opinion-of-counsel could easily be adapted to the willful infringement context, even in the post-Seagate era. Each of the willfulness factors identified above, for example, could be used to support a finding of “subjective bad faith” under Seagate, even though such evidence was deemed irrelevant to Seagate’s initial standard of proof: the existence of an objectively-defined risk of infringing a valid patent. Put otherwise, the failure to seek the advice of a competent lawyer once an accused infringer is aware of an objectively high likelihood that its actions constitute infringement, ought to qualify as one of the circumstances relevant to subjective bad faith.

If subjective bad faith is, under Seagate, proof that the risk of liability is “either known or so obvious that it should have been known to the accused infringer,” Seagate, 497 F.3d at 1371, then the conduct of the defendant in either seeking, or not seeking, the advice of counsel ought to be as relevant in the ordinary willfulness context as it is in the context of willful inducement, at least in logic. Indeed the same rationale used by the appeals panel in Broadcom Corp. would seem to apply: failing to seek counsel is probative of the “knew or should have known” element of subjective bad faith, just as relying on competent advice should be exculpatory. Moreover, the “standards of commerce” alluded to in the Seagate majority and concurring opinions, would seem to include seeking advice of counsel in the face of a high potential for liability. Seagate, 497 F.3d at 1371, n.5 and 1385 (Newman, J., concurring). This Seagate factor could arguably strengthen the relevance of such opinion-of-counsel evidence in view of the opinion in Broadcom.

A recent district court case suggests, on the other hand, that an instruction like the one approved in Broadcom would be improper in infringement cases that do not turn upon a claim of induced infringement. World Wide Stationary Manufacturing Co., Ltd. v.U.S. Ring Binder, L.P., 2009 U.S. Dist. LEXIS 113169 at * 6 (E.D. Mo. Dec. 4, 2009) (holding that because inducement claim had been withdrawn, “defendant was under no obligation to obtain an opinion of counsel, and plaintiff is precluded from mentioning evidence related to defendant’s lack of opinion of counsel.”) The rationale of this approach seems to be that Seagate simply forbids such evidence outside of the inducement context. This is almost certainly a sound analysis, but only because of the policy-based decision in Seagate, rather than logic. Because the Federal Circuit frequently changes direction, a litigator might nevertheless advocate for a Broadcom instruction for the subjective bad faith prong of the analysis, preserving the record should the wins of change alter the Court’s course again, and the logical connection between the failure to obtain an opinion of counsel as to a known risk of infringement and subjective bad faith be acknowledged.

January 2010

Robert H. Thornburg • rthornburg@addmg.com

Allen, Dyer, Doppelt, Milbrath & Gilchrist, P.A.

PROTECTION OF TRADE SECRETS IN THE PLASTICS INDUSTRY

A.   What Constitutes a Common Law Trade Secret?

“A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” Restatement (Second) of Torts, §757.

1. Types of Common Law Trade Secrets: “It may be a formula for a chemical compound, a process for manufacturing, treating or preserving materials, a pattern for a machine or other device or a list of customers.” Restatement (Second) of Torts, §757

2. The 1979 Uniform Trade Secrets Act: Sought to create a uniform trade secret act to replace common law.

B.   What defines a “Trade Secret?”

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, and not being readily ascertainable by proper means by, 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.

C.   The Key Elements of An Enforceable Trade Secret

In litigation involving trade secrets, the threshold question is this: does the secret meet the necessary criteria for legal protection. It is not enough to say that you have a trade secret; the information in question must meet established legal criteria for protection. A trade secret is information that derives economic value from not being generally known to and not being readily ascertainable by other persons. As such, a trade secret has certain essential attributes without which there is no cause of action for its misappropriation. These attributes have been defined this way:

1. First, the claimed secret must consist of qualifying information; that is, one must be able, at least in general terms, to articulate what it is in such a way that it may be distinguished from general knowledge and skill. In other words, can you take this secret and compare it against the public domain and search against the secret to determine if it is in fact known? This has been defined as the test of concreteness.

2. Second, the subject matter of the secret must be secret in the sense that it is not well known or easy to compile. It need not be secret from all others; but it must be not generally known.

3. Third, the owner must have made reasonable efforts to preserve the secrecy of the information. The information need not be protected by perfect means, but the means must be reasonable.

4. Fourth, the secret must have value as reflected in some competitive advantage that the plaintiff can establish. See Restatement of the Law (3rd) of Unfair Competition ¶39 and comments and reporter notes.

D.   Meeting the Test of Concreteness

The secret must be able to be described concretely enough so that it can be distinguished from what is already in the public domain, for “that which is in the public domain cannot be removed therefrom by action of the States.” Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 481 (1974). This is because once an item is in the public domain, it is fair game for exploitation by anybody and ceases to be eligible for protection as an alleged “secret”, in which case, “only a patent can eliminate the inherent risk of competition and then but for a limited time.” Bonito Boats, Inc. v. Thunder Craft Boats, 515 So. 2d 220, 222 (Fla. 1987), affirmed with opinion, 489 U.S. 141, 109 S. Ct. 971 (1989).

E.   Proving Secrecy

The trade secret must indeed be secret in the sense that it is not known generally. Thus, an item a manufacturer once sold or showed publicly may lose its protection as a trade secret. See, e.g., Bonito Boats, Inc. v. Thunder Craft Boats, 489 U.S. 141, 109 S. Ct. 971 (1989). Trade secrets “are of value only before the products embodying them are commercially available.” Intergraph Corp. v. Intel Corp., 195 F.3d 1346, 1363 (Fed. Cir. 1999). Thus information disclosed in publications or just in the general knowledge of a trade or profession is also no longer eligible for protection. See, e.g., Restatement of Unfair Competition ¶39, Comment F; Milgrim on Trade Secrets §1.07[1]. Similarly, matters of common knowledge, professional judgment, skill, or expertise cannot be protected as alleged trade secrets. See Restatement of Unfair Competition §42, Comment D, AMP, Inc. v. Fleischhacker, 823 F.2d 1199, 1205 (7th Cir. 1987). For this reason, an employer cannot take away an employee’s or a competitor’s right to exploit that employee’s own knowledge, judgment or expertise by labeling the use of such expertise as the misappropriation of a trade secret. See, e.g., Templeton v. Creative Loafing Tampa, Inc., 552 So. 2d 288, 290 (Fla. 2d DCA 1989) (former employee may use contacts, expertise, and skills to compete with a former employer.)

F.   Mere Ideas to be Protectible Need be Novel

If the alleged trade secret is merely an idea and nothing more than that, the law usually requires proof that the idea is in fact novel in order to accord it protection. Take for example a naked idea as opposed to a concrete chemical formula, process or technique. The law has long resisted protection of a mere idea as such. See, e.g., Milgrim on Trade Secrets at §9.05[1] [a] at page 9-334 (“Although there is authority recognizing a right of property in an abstract idea, it would appear that the majority view rejects such a conclusion.”) The courts that do recognize idea-based claims require that novelty be proven in order to ensure that the idea is not already resident in the public domain and that the idea has value because it is in fact not generally known. See, e.g., Restatement of Unfair Competition at §39, Comment H. Novelty in this sense is not “merely an innovative representation or adaptation of existing knowledge.” Garrido v. Burger King Corp., 558 So. 2d 79, 84 (Fla. 3rd DCA 1990). It is something not known before, and clearly not already in the public domain. See, e.g., Hudson Hotels Corp. v. Choice Hotels Int’l, 995 F.2d 1173, 1179 (2d Cir. 1993) (“non-novel ideas are not protectible as property[;] they cannot be stolen”).

G.   Proving that the Owner Exerted Reasonable Efforts to Preserve Secrecy

As a general rule, a plaintiff need prove only a level of secrecy sufficient to ensure that it has a competitive advantage. It is enough to show that it will be hard to get this information or expensive to do so because the trade secret owner has exerted sufficient control over its knowledge to keep it relatively secret. Restatement of Unfair Competition §39, Comment F. Certainly, an employer may share its secrets with employees and others in a confidential relationship, although the confidentiality of that relationship must be protected to some degree.

H.   Multiple Users

It is possible that many people may own the same type of trade secret and yet independently protect it. See, e.g., E.I. Dupont de Nemours & Co. v. United States, 288 F.2d 904, 911 (Ct. Cl. 1961) (“[a] plurality of individual discoverers may have protectible, wholly separate, rights in the same trade secret”). In other words, suppose a number of plastics companies gradually developed the same secret, and each company exerts control over the disclosure of that secret. It is possible that each such company owns a right that is protectible at least up to a point where every industry player knows about the subject matter of the secret such that it may be said to have entered general knowledge. See Milgrim on Trade Secrets §1.07[2] (“as a plurality of independent use begins … the secret erodes. At some point there will be a sufficient number of independent users to correspond to trade use. At such time the matter is no longer secret.”)

I.   Fact-Specific Details of Protection

Every trade secret case must turn on its own facts as to whether the efforts to maintain the secrecy of the secret are indeed reasonable. “What may be reasonable measures in one context may not necessarily be so in another.” In re Innovative Constr. Systems, Inc., 793 F.2d 875, 884 (7th Cir. 1986). The test is whether the plaintiff has exerted reasonably prudent measures under the circumstances, which may involve weighing the risk of loss against the cost and effectiveness of preventive measures. Restatement (3rd) of Unfair Competition §43, Comment C.

J.   Protecting Secrecy by Confidentiality Agreement

Every employer in the plastics industry should have a confidentiality agreement, at the minimum, with all employees who are or may be exposed to any trade secret the employer wishes to protect. Employees inherently have a confidential relationship with an employer in this setting, but the execution of such an agreement ensures that there is no question about the confidentiality of the relationship and that the employer is endeavoring to protect its confidential information. “When other evidence establishes secrecy and the existence of a confidential relationship, courts are properly reluctant to deny protection on the basis of alleged inadequacies in the plaintiff’s security precautions.” Restatement (3rd) of Unfair Competition, §39, Comment G, Reporter’s Note.

However “merely obtaining secrecy agreements from employees may not be enough to protect a secret.” See, e.g., Electro-Craft Corp. v. Controlled Motion, Inc., 332 N.W.2d 890, 901-902 (Minn. 1983) (“[w]e acknowledge that ECC took minimal precautions in screening its Handbook and publications for confidential information and by requiring some of its employees to sign a confidentiality agreement, but these were not enough”). A wise employer would, in addition to using confidentiality agreements, provide specific notice to employees, in writing, of important trade secrets and of the employer’s intended vigilance in protecting them. But see Vermont Microsystems v. Autodesk, Inc., 88 F.3d 142, 150 (2d Cir. 1996) (“employer had no need to provide an itemized list of secrets when the employee leaves”).

K.   Inadvertent Disclosure

An inadvertent or accidental disclosure does not ordinarily defeat the secrecy of a trade secret. This is particularly the case where reasonable efforts to reclaim the secret inadvertently disclosed have occurred. E.g., Gates Rubber Co. v. Bando Chem. Indus., 9 F.3d 823, 849 (10th Cir. 1993) (information published outside the court records was then sealed promptly upon disclosure and deemed protectible).

L.   Intended Disclosure to Third Parties

Where a trade secret owner does disclose to third parties, for example, persons with whom it is in contract, or customers, or consultants, the trade secret owner must make clear that the information being disclosed is disclosed under a duty of confidence. Ordinarily this means that the trade secret owner must, prior to the disclosure, disclose that the information is indeed confidential so that the recipient of the information has an opportunity to object to the imposition of the confidence. What is required, therefore, is fair notice to the party to whom the information is disclosed that confidential and proprietary information is about to be imparted, coupled with a reasonable opportunity to object to the imposition of the confidence on the part of the recipient. See, e.g., Restatement (3rd) of Unfair Competition §41, Comment B and Reporter’s Notes; Milgrim on Trade Secrets §3.03. Confidentiality must be created at the time of the disclosure to the third party, not afterwards. Smith v. Snap-On Tools Corp., 833 F.2d 578 (5th Cir. 1987) (attempt to establish a special relationship with a disclosee party after the disclosure comes too late).

M.   Ready Ascertainability

Obviously something well known cannot be secret. The same holds true for self-evident variations or modifications of known processes, procedures, or methods, since these “lack the secrecy necessary for protection as a trade secret.” Restatement (3rd) of Unfair Competition §39, Comment F. Equally clear is that a formula or process that cannot be revealed by simply examining the end product can in fact be a secret. The real difficulty in trade secret litigation is drawing a line between the unprotectible and the clearly protectible. The only standard in this area is the standard that if it is really easy to ascertain the secret, then it is not a matter of secrecy at all. See, Wilson Certified Foods, Inc. v. Fairbury Food Products, Inc., 370 F. Supp. 1081, 1086 (D. Neb. 1974) (where a process could be duplicated in eight to ten hours, there was no secret to it). Certainly as the information becomes more difficult to reverse engineer, the easier it is to show that the information is indeed secret and has value because of its secrecy. This same point is important also in protecting a trade secret by injunction: the more difficult it is to capture the secret through reverse engineering or other means, the greater the likelihood the court will grant a long injunction. See, Restatement (3rd) of Unfair Competition §39, Comment F, reporter’s note. Thus the “relative secrecy of information claimed as a trade secret is measured by the difficulty in acquiring the information by proper means.” Restatement, Comment F, reporter’s note.

A trade secret owner can prove that the information in question is not readily ascertainable by proper means by using circumstantial evidence, such as: precautions taken to protect it, the inability of other competitors to obtain the information, the existence of licensees or prospective purchasers for the information, and the fact that others have had to obtain it by improper means. See, Restatement (3rd) of Unfair Competition ¶39, Comment F (“when a defendant has engaged in egregious conduct in order to acquire the information, the inference that the information is sufficiently inaccessible to qualify for protection as a trade secret is particularly strong”).

N.   Proving That the Secret Has Value Because it is Secret

A true trade secret is one that affords its owner a competitive advantage because of its secrecy. Thus the Uniform Trade Secrets Act requires that a plaintiff prove that the alleged secret “derives independent economic value, actual or potential, from not being generally known”). Uniform Trade Secrets Act §1(4)(i). The information in question thus must afford some real advantage to the owner over what is generally known in the industry; slight variations will not suffice. See, e.g., Cudahy Co. v. American Laboratories, Inc., 313 F. Supp. 1339, 1345 (D. Neb. 1970) (slight variation over those of other manufacturers gave no competition advantage). On the other hand, a “slight competitive edge” will suffice so long as it is truly competitively valuable. Telerate Systems, Inc. v. Caro, 689 F. Supp. 221, 232 (S.D.N.Y. 1988). In addition, a defendant’s decision to use improper means of acquisition could itself support a finding of value – why else steal it? Restatement (3d) of Unfair Competition §483, Comment D.

O.   Pursuing Injunctive Relief

In the event of trade secret litigation, a key goal of the employer or plaintiff would be to obtain temporary and thereafter permanent injunctive relief preventing the use of the secret information. A court may be asked to grant an injunction that lasts for long enough to prevent the defendant from benefitting in any way from the use of the technology. The plaintiff would ordinarily be required to show irreparable injury, probably that the plaintiff will succeed on the merits of the claim, that the public interest is not dis-served by the injunction, and that the balance of equity and harm between the parties weighs in favor of the plaintiff. E.g., Ferrero v. Associated Materials, Inc., 923 F.2d 1441, 1448 (11th Cir. 1991). Where a defendant has acquired notice of the trade secret only after it has been put to use in a process or product, a defendant may be able to continue use of the product thereafter, by payment of a reasonable royalty. Restatement (3d) of Unfair Competition §44; Uniform Trade Secrets Act §2(b). As a general rule, a court will not enjoin a defendant for any longer than it would take to deny the defendant the ill-gotten gains from the misappropriation. This is sometimes referred to as granting a head start injunction. See, e.g., Restatement (3rd) of Unfair Competition §44(3).

P.  Damages Along with an Injunction

Where the trade secret owner seeks damages as well as a permanent injunction, the damage claim is often limited by the amount of ill-gotten gain or profit the defendant has made in the interim. This is referred to as obtaining unjust enrichment damages. Uniform Trade Secrets Act §3; Restatement (3rd) of Unfair Competition §45(a). Punitive damages and attorneys’ fees are often also remedies allowed by a particular version of the Uniform Trade Secrets Act in the state of the misappropriation.

Q.   Examples of Trade Secrets Common in the Plastics Industry:

1. Chemical formula for a resin (incapable of easy reverse engineering);

2. Process for creating a resin (incapable of reverse engineering);

3. Method of cross-bonding a polymer strand;

4. Your product pricing list (mfg price vs. wholesale vs. retail);

5. Who you get your raw materials from, and related pricing;

6. List of where your distributors are located; and

7. Customer list.

R.   Uniform Trade Secrets Act (U.T.S.A.) has now been Adopted in about 45 states: The U.T.S.A. governs trade secret law, defines what a trade secret is, and provides remedies for misappropriation.

1. U.T.S.A. can be used to Redress Improper Control and Domination over Confidential Proprietary Information Stored on Computers: Cases have applied the F.U.T.S.A. to redress the improper exercised dominion and control over a portable computer containing confidential and proprietary information. Control Ctr. L.L.C. v. Lauer, 288 B.R. 269 (M.D. Fla. 2002).

2. Taking of Software from Computer Programmers Actionable: The taking of proprietary computer software from a developer has been found actionable under the Uniform Trade Secrets Act. Beck v. Dumas, 709 So. 2d 601 (Fla. 4th DCA 1998).

3. U.T.S.A. Allows for Injunctive Relief: Either an “actual or threatened misappropriation” may be enjoined.

4. U.T.S.A. Provides Damages to Recover Actual Loss and Unjust Enrichment Caused by Misappropriation: The owner of a trade secret is entitled to recover two forms of damages (i) actual loss caused by the misappropriation; or (ii) the unjust enrichment caused by the misappropriation.

5. Calculation of Damages “May” Be Measured by a Reasonable Royalty: Damages for the misappropriation of a trade secret may be based upon a reasonable royalty.

6. Damages Double Upon Finding of Willfulness: Under the Uniform Trade Secrets Act, if a court finds that a misappropriation was willful and malicious, it may award “exemplary damages” not to exceed twice an award of actual loss or unjust enrichment.

7. Statute of Limitations is Three Years: The Uniform Act requires all claims to be brought within three years after discovery of the misappropriation or when the misappropriation should have been discovered.

8. U.T.S.A. Displaces Common Law: The Uniform Trade Secrets Act displaces conflicting tort, restitutory, and other state civil remedies.

S.   Proactive Measures to Secure and Protect Trade Secrets in the Workplace:

• (a) limit access to your computer databases;

  (b) maintain revolving passwords on databases;

  (c) provide USB ports and CD burners only to those that require data transfer;

  (d) require employees only to use company computers;

  (e) use encryption software, scrubbers, and appropriate firewalls;

  (f) educate your employees on importance of confidentiality;

  (g) limit physical access to the plant and formulas and other secrets, using badging and other security means;

  (h) use employee handbooks and other well known procedures within the company to encourage prompt reporting of suspected misappropriation;

  (i) take care to mark as confidential all documents that relate to protected information–including computer accessible documents;

  (j) conduct an annual audit with your general counsel and key management personnel, taking care to remind all employees of the diligence of the company in protecting secrets and pursuing violators.

1. Performing Yearly Audits to Identify Trade Secrets: Unlike the patent grant that has a presumption of validity based upon review by the US Government whether the idea is novel and non-obvious, there is no review to ascertain whether something constitutes a trade secret.

Accordingly, companies should perform yearly internal audits to identify and categorize the potential trade secrets they should protect and enforce.

2. Trade Secret Maintenance Program to Ensure Protection of Information

T.  Drafting Proper Employee/Confidentiality Agreements in the Plastics Industry:

• (a) Appropriate geographic scope of these agreements;

  (b) Appropriate terms of years;

  (c) Non-Compete provisions during employment tenure; and

  (d) Non-Compete provisions for after employment has been completed.

1. Defining what is “Confidential.”

2. Provisions relating to employee “Duty of Loyalty.”

3. Provisions relating to employee “Fiduciary Duty.”

4. Non-Compete Agreements:

III. RELATED FORMS OF PROTECTION FOR THEFT OF DATA

A.  Computer Crimes and Abuse Act: Most states have some version of the Federal Computer Crimes and Abuse Act to provide both criminal and civil penalties for improper access to computer based information.

• (a) the first protects against acquisition of or access to intellectual property, namely information which would be defined as a trade secret; and

  (b) the second protects the ultimate computer owner (i.e., the consumer).

1. Governs Alteration and Destruction of Computer Files: A state computer crimes and abuse act governs improper alteration or destruction of computerized information or files, and the stealing of financial instruments, data, and other assets.

2. Creates Causes of Action to Protect Consumers, Intellectual Property, and Hardware: The state act protects two specific and different classes of improper access to computer data:

3. Allows for a Civil Remedy: While the predominant focus and application of the Act is to create criminal guidelines for computer misconduct, the Act does provide a civil remedy to financially compensate for computer abuse.

4. Compensatory Damages May be Awarded to Redress the Civil Wrong:

5. Provides Attorneys’ Fees to Prevailing Party: “the court may award reasonable attorneys’ fees to the prevailing party.”

B. Unfair and Deceptive Trade Practices Act:

• (a) Civil Damages Capped At $10,000 Per Unfair Act: Under the uniform act, civil damages are capped at $10,000 per instance of conduct that is unfair or deceptive against a corporation, partnership, or business entity.

  (b) Civil Damages against Consumer Not Capped: A consumer is entitled to seek actual damages, attorney fees, and costs against a retailer of manufactured goods (i.e., computer systems). (allows cause of action to occur at retail level, instead of manufacturer level).

1. Introduction: Most states have some version of §5 of the Federal Trade Commission Act, which prohibits unfair methods of competition and unfair or deceptive trade practices.

2. Importance to Plastics Industry: When misconduct between two competitors in the plastics industry does not rise to the level of trade secret misappropriation (i.e., resin composition is capable of reverse engineering), but the overall conduct is improper, a state cause of action under this theory may be the best method to seek redress.

3. Commercial Disparagement or Trade Libel: Some state causes of action will allow redress when one competitor disparages the quality of another’s products or services.

4. Directed to Regulate “Consumer Transactions”: Most state versions of the Uniform Deceptive and Unfair Trade Practices Act focus on protecting consumers against deceptive trade practices.

5. Civil Penalty Protects only Against Willful Conduct: Any entity who is willfully using or has willfully used a method, act, or practiced to complete an unfair or deceptive trade practice, is liable under the civil portion of the uniform act.

6. Attorneys’ Fees Are Awarded to Prevailing Party: Attorneys’ fees and costs are awarded to the prevailing party. Thus, this act is a double-edged sword, and requires upfront investigation of claims.

Note: While the act is typically used in general business litigation, with emphasis in consumer and franchise law, the act has been used in the context of theft of computer data.

C.  Common Law Theory of Trespass to Chattels:

1. Introduction: This common law tort is routinely used in the Second, Fourth, Ninth, and Eleventh Circuits to redress improper access or attacked computer networks and software.

2. Restatement (Second) of Torts §217(b) (1965): Under the Restatement, an actionable trespass occurs through the intentional use or intermeddling with a chattel in the possession of another . . . where the chattel is impaired as to its condition, quality, or value. City of Amsterdam v. Daniel Goldreyer, Ltd., 882 F. Supp. 1273, 1281 (E.D.N.Y. 1995).

3. Multiple Courts Have Found that Data, Computer Systems, Networks, Software, and Hardware Constitute Chattels. Register.com, Inc. v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004).

4. Diminishing Value of Database Information, Network, or Computer Service Sufficient: A trespasser is one who diminishes the value of personal property, even in the absence of physical damage to a computer, network, or underlying data. Sherwood 48 Assocs. v. Sony Corp. of Am., 76 Fed. Appx. 389 (2d Cir. 2003).

5. A claim of Trespass to Chattels Often Complements a Claim under Computer Fraud and Abuse Act: Physicians Interactive v. Lathian Sys., 2003 U.S. Dist. LEXIS 22868 (E.D. Va. Dec. 5, 2003).

6. As Information on a Database is Not Copyrightable, Trespass Often Provides Only Remedy: As information stored in a database is often not an original expression, the common law tort of trespass often is the most direct means of seeking redress. Nihon Keizai Shimbun, Inc. v. Comline Bus. Data, Inc., 166 F.3d 65, 70 (2d. Cir. 1999).

7. Actionable to Redress Use of Software Programs to Limit Capacity of Networks: The use of “search robots,” or other software programs performing multiple automated queries to limit the capacity of a computer system or network constitutes a trespass to chattel. Register.com v. Verio, Inc., 356 F.3d 393 (2nd Cir. 2004).

8. Act of Access or Limiting Computer System Need Not Cause Physical Harm to System: In order to recover under a trespass to chattels theory, the owner of the computer system or database, or entity with an interest in equipment, bandwidth, or server capacity, need not show physical harm to equipment. Specht v. Netscape Communs. Corp., 306 F.3d 17 (2d Cir. 2002).

9. Conspiracy to Improperly Access or Use a Computer Network or Computer-Related Service Actionable: Case law has suggested that mere conspiracy or assistance of another to improperly access a computer service or network may be actionable under a trespass to chattels theory. Microsoft Corp. v. Neoburst.Net, LLC, 2004 U.S. Dist. LEXIS 18733 (N.D. Cal. Aug. 30, 2004).

10. Arguing Insufficient Usage Restrictions is Improper: A defendant cannot argue that a claim of trespass to chattels is barred, based upon a computer network owner’s failure to create sufficient usage restrictions. Physicians Interactive v. Lathian Sys., 2003 U.S. Dist. LEXIS 22868 (E.D. Va. Dec. 5, 2003).

To read the entire brief, please download TradeSecrets-Plastics

By Stephen D. Milbrath

In an increasingly digital age in which the Internet is an ever more vital mode of distribution and the products which we buy and sell are themselves morphing into complex combinations of information – in which, for example, written content, images, art, video and music may all be bundled together into a single digital “product” instantaneously available for purchase – handling copyright infringement cases will almost certainly become a stock feature of a litigation practice. The purpose of this article is to suggest a few initial steps to evaluating the typical claim of copyright infringement from the moment the claim has been assigned to defense counsel to the beginning phases of discovery. What is said here is not intended to provide a complete checklist for developing a defense case, but it will hopefully provide some useful guidelines for thinking through the initial issues for the defense, learned from many years in the trenches in the prosecution and defense of such claims.

In copyright disputes it is frequently the case that the plaintiff will assert various claims for “infringement” along with its counts for copyright infringement: claims like unfair competition, deceptive advertising, or “knocking off,” all or some of these theories arising under the Lanham Act. E.g., 15 U.S.C. §1125(a). Such claims are often asserted, however, primarily to assure “advertising injury” and thus insurance coverage. Hyman, supra, n. 1. As you study the complaint and the facts of the case, you will often find that the core issues of the dispute, unfair competition issues notwithstanding, reduce to whether the plaintiff owned something original enough to claim copyright protection for it and, if so, whether that original content was unfairly copied by the defendant. Hence the first step in case evaluation should center upon the matter of originality and what rights the plaintiff has to protect. This will require a very careful study of the copyright registration and related documents. (Sample registrations are available at the Copyright Office website, www.copyright.gov.)

1. Study the Registration Certificate

It is well known, of course, that copyright protects only “original” works of authorship “fixed in any tangible medium of expression.” 17 U.S.C. §102(a). The term “original” is shorthand, however, for two distinct concepts. The first is that of creativity: the work must possess at least some “minimal degree of creativity.” Feist Pub’lns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 345 (1991). This is not a challenging standard; indeed most works “make the grade quite easily, as they possess some creative spark ‘no matter how crude, humble or obvious.’” Id. The work need not be novel or even clever; it may even be similar or indistinguishable from other works so long as it displays the necessary “creative spark.” Id. But it must display some creativity contributed by the author. Id. See also, Eldred v. Ashcroft, 537 U.S. 186, 211 (2003) (contribution must not be utterly lacking in creativity or so trivial as to be nonexistent). The second aspect of “originality,” Feist at 345-346, is that of independent creation: the work must be original to the author. Id. Originality in this sense means that the portion of the work in which copyright is claimed has not been copied from someone else. Id; Utopia Provider Systems, Inc. v. Pro-Med Clinical Systems, Inc., 596 F.3d 1313, 1319-20 (11th Cir. 2010).

Most works, however, are in at least some sense “derivative” in that they are based upon or incorporate content from some other, preexisting work. See 17 U.S.C. §§101, 103(a); Nimmer on Copyright §3.03[A]. Such derivative works are capable of only limited protection. See Feist, at 499 U.S. 348; Montgomery v. Noga, 168 F.3d 1282, 1290 n. 12 (11th Cir. 1999); L. Batlin & Son, Inc. v. Snyder, 536 F.2d 486 (2d Cir. 1976) (en banc), cert denied, 429 U.S. 857 (1976). For the derivative work, copyright protection extends no further than the content contributed by the derivative author; it does not protect the underlying content obtained from the public domain or contributed by some other author who may have authorized the making of the derivative work. See generally, Alfred Bell & Co. v. Catalida Fine Arts, Inc., 191 F.2d 99 (2d Cir. 1951) (an influential case concerning derivative works). These and related principles make the examination of the registration certificate and related documents a matter of paramount importance for defense counsel.

Remember that the copyright office does not make a detailed examination of the registered work. The examiner studies for the most part only the registration document and the “deposit” or official exemplars of the work in which copyright is claimed. And who prepares the registration certificate? In all too many cases, it is the client, or, if the registration is prepared by the claimant’s lawyer, you will frequently find that the lawyer had but limited experience in intellectual property matters. As a result, copyright registrations are often error-filled and are thus worthy of very exacting study.

In examining the certificate of registration, pay particular attention to block six of the registration form (see standard registration forms at Copyright Office website), in which the applicant must disclose (i) whether the work existed in some prior version, which is almost always the case in computer software cases, and (ii) whether the work is derivative and, if it is, (iii) the content contributed by the derivative author. Each detail is important. Be suspicious if block six of the form is blank. Was there a prior version of the work, as is often the case with software or digital images? If so, why was it not disclosed? Could the work be derivative? If so, why was this information not brought to the attention of the examiner? The author’s failure to disclose that the work was derivative may not have been intentional; but such an omission could be material all the same. Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1146, 1167 (C.D. Cal. 2002); Block State Testing Servs. L.P. v. Kontractor’s Prep Corp., 4 F. Supp. 2d 1365, 1366 (M.D. Fla. 1997). The failure to disclose the preexisting content could strip the work of its presumption of originality, or even invalidate the registration altogether, if deception was involved. Id.; Masquerade Novelty v. Unique Indus., 912 F.2d 663, 667 (3d Cir. 1990); Nimmer on Copyright §720[B]. This is true even though the Copyright Act has been amended recently to limit the range of defense attacks on copyright registrations.

Section 411 (b) (1) of the Copyright Act now provides that a certificate of registration “satisfies the requirements of this section and section 412 ” even if there are inaccuracies in the registration form unless the inaccuracies were included in the registration form “with knowledge that it was inaccurate” and the inaccuracies “would have caused the Register of Copyrights to refuse registration.”

A case illustrating the continued vitality of attacks on registration certificates even in the face of this new amendment is St. Lukes Cataract and Laser Institute, P.A. v. Sanderson, 573 F.3d 1186 (11th Cir. 2009), which sustained a jury verdict that the errors in two successive copyright registrations were sufficiently substantial to meet the statutory test for invalidity. The court interpreted the statute to require proof of “scienter,” consistent with the pre-amendment standard. “Scienter” in this context is, in essence, the intentional or purposeful concealment of material information from the Copyright Office. Id., at 573 F.3d 1201.

Next consider how the work was created. Does the registration certificate show, for example, that the work is one “for hire?” See 17 U.S.C. §201(b) (defining work for hire). If so, an urgent topic for discovery will be whether the real “author” was an employee or, failing that, one who signed a written agreement transferring his or her rights. The “author” in this sense is the one whose creativity is embodied in the work: the “originator” or “maker.” Feist, at 345; Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53, 58 (1884). You should look for more detail, for example, if the one who did the programming or contributed the artwork or other creativity to the work was an independent contractor working without an agreement; the employer in such event may have nothing to protect. See Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989); M.G.B. Homes v. Ameron Homes, 903 F.2d 1486, 1490 (11th Cir. 1990). Be suspicious if the persons involved in creating the work are not among the Rule 26 disclosures of the claimant. Obviously if your own client collaborated in the creation of the work, to any significant degree, consideration should also be given to whether the work is a joint work in which the defendant has rights as well. 17 U.S.C.§201(a) (stating that the authors of a joint work are co-owners of copyright in the work); 17 U.S.C. §101 (defining joint work as a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole). This defense is more often asserted than proven, and is disfavored by the courts, and should be invoked only where it is substantially supported by independently verifiable evidence. See Childress v. Taylor, 945 F.2d 500, 505 (2d Cir. 1991) (defining an exacting standard); Thomson v. Larson, 147 F.3d 195 (2d Cir. 1998) (emphasizing the necessity for independent proof of intent to form a co-authorship relationship). If the degree of collaboration in the actual writing of the work was minimal, it is a defense best left unasserted. Yet there are cases which have upheld a defense of joint authorship in a copyright infringement case. A recent example is Janky v. Lake County Convention & Vistors Bureau, 576 F.3d 356 (7th Cir. 2009), in which a song-writer’s contribution to a song, though minimal in percentage of contribution, was found sufficient to uphold a claim of joint authorship as a defense – and one which prevailed on summary judgment.

Study also the matter of assignment. If the work was created by a subcontractor or independent contractor, is there an agreement in writing authorizing the assignment of the author’s work? If not, the plaintiff must cure the error or forfeit the registration. See 17 U.S.C. §201(d) (requiring a written instrument of conveyance absent a work for hire or other acknowledged exception); Nimmer on Copyright §12.02 (discussing standing to sue for infringement).

Two always-important factors in evaluating a copyright defense are the date on which the work was published and the date on which the registration issued. Many copyright registrations are filed with the Copyright Office by angry plaintiffs just before the filing of the complaint, and then only to assure federal jurisdiction for suit; such eleventh-hour registrations are always problematical. Did the infringement commence before the registration? If so, the claimant is statutorily barred from recovering either statutory damages or attorney’s fees on the claim. 17 U.S.C. §412 (defining the conditions for the award of statutory damages or attorneys’ fees). As a practical matter such a belated registration may constrain the claimant’s litigation objective almost entirely to securing an injunction against continued infringement, and should prompt an early mediation or settlement conference. See generally, Nimmer on Copyright §14.02. If the infringement commenced after registration, consider the date on which the work was created and published. If you are dealing with a work that has been around for a few years, you may find that the work was registered more than five years after the work was first “published”. If this is the case, the claimant cannot avail itself of the statutory presumption of validity; and the evidentiary weight to be accorded the certificate will be a matter solely within the discretion of the court. 17 U.S.C. §410(c). The loss of this presumption may, as a practical matter, doom the claimant to affirmatively proving the originality of the work in question, which can be a daunting matter in court. Publication is a thorny issue, but for products like artwork or music or software that are usually published soon after they were created, the matter may be reduced to pinpointing the date on which the product was first in distribution for resale. See 17 U.S.C. §101 (defining publication); Brown v. Tabb, 714 F.2d 1088 (11th Cir. 1983); American Vitagraph, Inc. v. Levy, 659 F.2d 1023 (9th Cir. 1981).

Even if the work was registered in time to provide it with the cloak of originality, careful study of the registration may reveal significant issues over the originality of the content that is truly at issue in the case. For example, if most works are only derivative, it will often prove to be difficult for the claimant to prove that the original content it contributed to the total work can be found in the defendant’s allegedly infringing work. It is not enough to show similarity between the claimant’s work as a whole and the accused work as a whole; the similarity must subsist in the content that is original to the claimant’s registration. Feist, at 345-47; Burroughs v. Metro-Goldwyn-Mayer, Inc., 683 F.2d 610, 632 (2d Cir. 1982); Nimmer on Copyright §3.04[A]. Consider a house plan registration, for example. If the claimant is being honest at all, it must concede that any 3-2 or 4-3 house plan design is in some sense derived from preexisting plans or from code or from functional constraints or from some combination of these elements. The originality of the copyrighted plan will turn, therefore, on the particular elements of the design that the claimant contributed to the preexisting plan or paradigm which possess the necessary modicum of creativity. To win, the copyright claimant must, in the simplest case, show that these creative elements were copied and are present in the accused design of the defendant. Feist, 499 U.S. at 361. The claimant will also often be forced to overcome a defense of independent creation: the defense that the accused plans were not copied but were independently created by or licensed from another. See, e.g., Calhoun v. Lillenas Publ’g, 298 F.3d 1228, 1232 (11th Cir. 2002) (proof of access and substantial similarity raises only a presumption of copying which may be rebutted by evidence of independent creation). In either case the registration is often the key to the defense. Does the registration paper-over preexisting content that the author incorporated? Is the content contributed by others properly accounted for? Is there a basis for inferring that the copyright claimant has itself engaged in improper copying? If the claimant has in fact copied the work of others in its work, the registration is invalid. Murray Hill Publications, Inc. v. ABC Communs., Inc., 67 F. Supp. 2d 754, 759 (E.D. Mich. 1999), aff’d (except as to attorneys’ fees) at 264 F.3d 622 (6th Cir. 2001); Nimmer on Copyright §3.06. This defense of copying-by-the-author can be proven, at least in most jurisdictions, by indirect proof of access and substantial similarity, exactly as the copyright plaintiff may do in mounting an indirect proof case. See, e.g., Boisson v. Banian, Ltd., 273 F.3d 262, 269-70 (2d Cir. 2001); Nimmer on Copyright §12.11[A]. Are the dates of creation and publication unreliable? If so, a prior independent creation defense may be available based upon the true dates of the two works.

More fundamentally, if the work is derivative, the available corpus of original content can often be shown to be “thin,” Feist, at 349, as in most online databases and compilations, in which the bulk of the work is a compilation of facts that cannot be protected by copyright. Id. Increasingly courts are limiting the level of protection available for derivative works as well as compilations to instances of literal or wholesale infringement – cases in which the defendant has copied every feature of the work in total. See, e.g., MiTek Holdings v. Arce Eng’g Co., 89 F.3d 1548, 1558-59 (11th Cir. 1996); Apple Computer v. Microsoft Corp., 35 F.3d 1435, 1446 (9th Cir. 1994). As a policy matter this makes a great deal of sense in a legal system in which the standard for originality is relatively low and the danger of trivializing copyright protection is thus a genuine concern. If, in short, copyright is to be so widely available that anybody with any insubstantial contribution can secure a registration of a work, no matter how mundane, it is appropriate to accord such works only a level of protection commensurate with their level of originality. If the work is largely someone else’s or incorporates much public domain content, it has but limited originality; the claimant should be entitled only to a limited scope of exclusivity: the law should prohibit only the complete and literal copying of the content original to the author. This approach to originality deters the literal copier from “free riding” on the copyright owner’s creativity while still leaving ample room for others to make their own marginal contributions to a crowded field of design without fear of unwarranted infringement claims. See generally, Nimmer on Copyright §3.01. The starting point for the analysis is to focus on the specific content in which copyright is claimed. If the work is a compilation or a derivative work which incorporates much public domain or third-party licensed content, it should be treated legally as a “thin” work with correspondingly limited protection. MiTek, 89 F.3d at 1558-1559; Apple Computer, 35 F.3d at 1446.

Even in the more complex source-code copyright cases, only a “thin” level of protection may be available to the claimant. This is certainly the case if the author incorporated much of the code in which protection is claimed from other sources, such as preexisting source code, or used a rapid application development tool with canned solutions to create the whole program. But it may also prove true even for the more complex programs written from scratch by talented programmers. This is because the court must, except in instances of wholesale, literal line-for-line copying apply some form of abstraction, filtration and comparison process to separate ideas, methods, scenes a faire, interfaces and compatibility requirements and other unprotectable content from whatever genuine expression may be embodied in the source code. Computer Assocs. Int’l v. Altai, Inc., 982 F.2d 693 (2d Cir. 1992) (setting forth abstraction/filtration/comparison test); General Universal Sys. v. Lee., 379 F.3d 131, 143 (5th Cir. 2004) (requiring Altai analysis to establish unlawful copying of nonliteral aspects of programs); Bateman v. Mnemonics, Inc., 79 F.3d 1532 (11th Cir. 1996) (requiring some species of filtration even for literal infringement of source code).

2. Study the Deposit

A copyright claimant must supply, with the registration, a bona fide copy of the original work in which copyright is claimed. This requirement, set forth in Section 408 of the Copyright Act, is satisfied only if the registrant has deposited a copy of the actual original work, as opposed to a later alleged reconstruction of it. For musical works or software source code, this is a requirement which is often bungled, particularly where the application has been submitted by inexperienced counsel. Hence careful study of the deposit is in order. Do not assume that the claimant’s counsel has a “bona fide” copy of the deposit. Instead, go directly to the Copyright Office and request an expedited copy of the deposit, to which you are legally entitled because of the litigation. 37 C.F.R. §205.22(a). You may find, particularly if you are dealing with source code, that the deposit submitted is inadequate, or is the wrong version of the work, or is a mere reconstruction of it that may or may not be genuine. If so, the claimant has failed to satisfy an essential statutory formality, and the copyright should be declared invalid. Coles v. Wonder, 283 F.3d 798, 801 (6th Cir. 2002); Shady Records, Inc. v. Source Enters., 73 U.S.P.Q. 2d 1954 (S.D.N.Y. 2004). If the deposit is not literally the original work, it must be “virtually identical to the original and must have been produced by directly referring to the original.” Kodadek v. MTV Networks, 152 F.3d 1209, 1211 (9th Cir. 1998)

3. The Available Relief

Careful consideration of the factors noted above will lead to an early assessment of the claimant’s potential relief. If the copyright registration occurred after the infringement, the claimant will be limited to recovering (I) actual damages, which is typically limited to lost profits and may be expressed as the loss of a reasonable per-unit royalty for the use of the program, reduced to present net value and (ii) the infringer’s profits, to the extent not already included in the damages model. 17 U.S.C. §504(b). This can, in the proper case, obviously be a large number and should provide an incentive on the part of the defendant to cease any genuine acts of infringement immediately. If the registration was not a belated one, the claimant may also be entitled to seek statutory damages, an election of the form of relief being required only after the jury returns its verdict. 17 U.S.C. §504(c) These damages may prove to be the greater risk to the defense, for the jury can award up to $150,000 per work infringed (Id.) should willfulness be determined – another factor militating in favor of an early termination of any infringement. The timely registrant is also entitled to seek attorneys’ fees if it is found to be the prevailing party. 17 U.S.C. §505. Whether to award such fees is discretionary on the part of the court, Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), and may hinge on your ability to prove good faith on the part of the defendant, particularly in the selection of defenses that seem appropriate and directed to clarifying legitimately contested issues of copyright law. This should be a key factor in your early evaluation of the case. If there are no significant issues to raise in the defense, and no new policy grounds to pursue (such as a viable argument for fair use), cut your losses and seek an early settlement conference; if there are significant issues document them early (which will usually require early resort to an expert) and consider making an offer of judgment that the claimant cannot easily reject. In at least some jurisdictions such an offer may defeat an attorneys’ fee award entirely. Jordan v. Time, Inc., 111 F.3d 102 (11th Cir. 1997); contra: Harbor Motor Co. v. Arnell Chevrolet-Geo, Inc., 265 F.3d 638, 646-647 (7th Cir. 2001); Crossman v. Marcoccio, 806 F.2d 329 (1st Cir. 1986). In other jurisdictions, the making of such an offer can at least be considered by the court in weighing whether to award the claimant its fees.

Conclusion

As the above suggests, an early proactive approach to evaluating the defense of the claim is particularly necessary in copyright litigation, even where preliminary injunctive relief has not been sought. Indeed, your ability to limit the defendant’s exposure to attorneys’ fees may depend upon such an active and prompt approach. Hopefully these comments will provide some useful approaches to mounting a successful defense.