Basic elements of trade secret violation claims

AllParadox

July 23, 2006

This is a question from rao, and he has given me permission to re-post his question with my answer.

>>> So SCO is looking through the discovery they've been given. They come upon an email from a Dynix programmer giving some advice to a Linux programmer. Are they allowed to just assume that the information in the email was something that they have proprietary control over or are they required to do some research and show by what means they claim proprietary ownership? Can I go to court claiming that the French stole the Mona Lisa from me or do I have to make some effort to establish that I actually own it.

IANAL but it seems obvious to me that they should at least have to make some effort to show why they have some control over this information. This almost certainly would be done by finding the source code that implements the M&C and tracing its lineage. I could imagine other means that don't involve source code like internal design documents or patent applications. But whatever was used it should be revealed in order for IBM to refute it.

I would pay a significant amount of money to be able to go back in time to this hearing and have Judge Wells ask the SCO lawyer what steps they took to determine that the information in the email was something they had proprietary control over. I don't think there is any answer to this that would not be devastating to SCO. Either they did nothing or they did something but did not reveal that something to IBM. This is "willful" by anybodies definition. <<<

This is pretty much the essence of the whole process. The answer is complicated. I am not sure what the limits are for a post on IV, so I will be brief on details, sometimes to the point of inaccuracy.

I will work back from final judgment. A final judgment is a final adjudication of claims. If the claim is not before the court, then the judgment is void.

The only pending claims from “The SCO Group” are the Second Amended Claims. I assume that Rao’s question relates to the claim regarding contract violation, which they assert was breached by disclosing methods and concepts.

As I have posted on this board before, I believe that the contract did not give USL, AT&T, or any successor-in-interest control over trade secrets that they did not own. I will address this question with regard to trade secrets owned by USL, AT&T, or successors.

To win a final judgment at trial, the claimant carries the burden of proof. One discussion, from the point of view of Common Law in California, is the 1968 case of Diodes, Inc. v Franzen, 67 Cal.Rptr. (Cal. later enacted their version of the Uniform Trade Secrets Act (1984), so the decision is superceded, but the requirement is part of the Act.) Speaking generally, and not from the point of view of legal elements of a claim, the claimant must prove:

1) That there is a trade secret. To be a trade secret, it must be more than a mention of the technology. For a trade secret in software, the plaintiff must specifically identify the secret within the software. Identifying the secret as the encrypted activation code for a software product would be sufficient. It must be more than merely incremental variations on state-of-the-art to experts in the field.
2) The secret must have some market value. The value need not be identified to the penny, but there must be some competitive advantage to it. Customer contact lists are very typical. It must possess independent market value from not being generally known to the public.
3) The plaintiff identified the information as a secret, and took reasonable efforts to maintain the confidentiality of the information.
4) The defendant had access to the secret.
5) The defendant disclosed the secret to others, to plaintiff’s commercial disadvantage.

The technical specific elements of a disclosure claim that apply here are described in Utah State Court opinions and State Statutes. I do not know those off the top of my head, but they will be similar to what I have described.

There must be direct evidence of each element, and the plaintiff has the burden of proof. The claim will be dismissed if direct evidence of each element is not introduced at trial.

To be introduced at trial in SCO v. IBM, the direct evidence was required to be disclosed before the evidence disclosure cut-off date.

I agree that a UnixSysV-AIX-Linux chain of similar code would likely be part of an effective claim submission.

I also agree that a naked assertion that a particular statement by someone in an email, without identifying the secret, or the details of the secret that have market value because they are not generally know to the public, is not enough. This kind of evidence is usually described as “collateral”. Some collateral evidence will be allowed to bolster a claim, but a party may object to collateral evidence being introduced at trial until the direct evidence is introduced.

As has been noted by posts on this board, a confirmation of use of a disclosed and publicly know M&C by noting that something similar was used in Dynix would not, in my mind, be a disclosure of a trade secret. FWIW, my first contact with semaphores was while studying IBM O/S 360 in graduate school, in 1976. IBM had to have done that development work in the late 1950’s and early 1960’s, before UNIX was a gleam in Richey’s eye.

It was not the purpose of the Hon. Wells to dig into “The SCO Group’s” foundations for their claims. That is the task of IBM in preparing their motions for summary judgment, and for Judge Kimball, when evaluating disclosed evidence to decide whether to grant or deny those motions.

Judge Wells would have risked reversible error by doing that investigation. It was not her job.
__________________________________________________________________
AllParadox – Retired Attorney, no legal opinions, just my opinion.

< EOM >

4:57:07 PM


Re: Basic elements of trade secret violation claims

El Corton

July 23, 2006

Conceptually, there are (at least) four levels on which IBM can attack SCO's contract claims:

(1) AT&T could not in principle have drafted a contract that meant what SCO says the AT&T agreements mean, no matter how worded. This is what you seem to be getting at with your comments about "valid business purposes." It's a line of argument that's popular on this board, but I don't see where IBM has used it in its pleadings for PSJ.

(2) The contracts that AT&T actually drafted don't mean what SCO says they mean. This seems to me a much stronger line of argument than the above, and IBM has certainly used it.

(3) SCO hasn't properly alleged facts sufficient to prove a breach of contract according to its own theory. This is essentially what IBM's motion to limit is about.

(4) SCO doesn't have enough evidence for its specific allegations to create a disputed fact. This is a very high standard for a PSJ movant to meet.

Your citation of the Diodes case addresses level 3. But Diodes was an action for misappropriation of trade secrets. The burden of proof in such a case is stronger than in an action for breach, since there's no need for privity between the parties.

At PSJ time, I don't expect IBM to argue that SCO must meet the standards for alleging misappropriation of trade secrets. It will put most of its effort into contract interpretation, and some into refuting SCO on the facts.
< EOM >

6:34:56 PM


Re: Basic elements of trade secret violation claims

ruidh

July 23, 2006

>> (1) AT&T could not in principle have drafted a contract that meant what SCO says the AT&T agreements mean, no matter how worded. This is what you seem to be getting at with your comments about "valid business purposes." It's a line of argument that's popular on this board, but I don't see where IBM has used it in its pleadings for PSJ.

(2) The contracts that AT&T actually drafted don't mean what SCO says they mean. This seems to me a much stronger line of argument than the above, and IBM has certainly used it. <<

IBM's Memo in support of their motion for PSJ on SCOX's contract claims (docket number 225 http://www.groklaw.net/article.php?story=20040817180409152 ) does hit heavily on (2), but (1) is an undercurrent without being explicit.

"First, the AT&T agreements upon which SCO’s claims are based do not preclude IBM from using and disclosing source code that is written by IBM and does not include UNIX System V code (referred to herein as “homegrown” code):

1. The plain and unambiguous language of the agreements imposed no restrictions on the use or disclosure of source code that does not contain UNIX System V code.

2. The individuals who executed the licenses and were involved in their negotiation, on behalf of both AT&T and IBM, have offered unequivocal testimony that the agreements were not intended and should not be understood to preclude IBM’s use and disclosure of homegrown code and contemporaneous documents reflect this interpretation of the licenses.

3. Interpreting the licenses to prohibit the disclosure of homegrown code would be patently unreasonable."

For some reason, IBM's memo in support of this motion (filed sealed as 230 and later redacted as 454) is neither on tuxrocks or groklaw.

< EOM >

9:59:19 PM


Re: Basic elements of trade secret violation claims

El Corton

July 23, 2006

< For some reason, IBM's memo in support of this motion (filed sealed as 230 and later redacted as 454) is neither on tuxrocks or groklaw. >

http://www.groklaw.net/article.php?story=20040816202817984

---

Argument

I. IBM's UNIX SYSTEM V LICENSES DO NOT, AS A MATTER OF LAW, RESTRICT IBM FROM DISCLOSING ITS OWN HOMEGROWN CODE

A. The IBM And Sequent Software Agreements, By Their Plain And Unambiguous Terms,
Do Not Pertain To The Code Allegedly Contributed By IBM To Linux

B. In Any Event, All Of The Relevant Testimonial And Documentary Evidence Supports
The Conclusion That The Software Agreements Do Not Pertain To IBM's Original Code

C. SCO's Interpretation Of The Software Agreements Is Unreasonable

II. NOVELL AND SCO HAVE IN ANY EVENT WAIVED ANY PURPORTED BREACH AS A MATTER OF LAW

A. Novell Has Explicitly Waived The Alleged Breaches By IBM

B. Through Its Own Conduct, SCO Has Waived Its Purported Rights To Claim
Breach of Contract

---

In section I.C, IBM shows that SCO's interpretation of the agreements is absurd. But IBM doesn't say that no enforceable contract could fit SCO's interpretation.

As a legal layman, I don't know what the limits of contract drafting are. Maybe SCO's fantasy of what the AT&T agreements mean goes beyond those limits, maybe not. In USL v BSDi, Otis Wilson testified to an interpretation of a different AT&T license that was even more extreme than what SCO is claiming. Yet I don't remember the defense arguing that no contract could possibly do that.
< EOM >

10:54:47 PM


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