Defamation Attorney: Internet Law

Defamation Attorney and Trade Secret Casenotes

Litigation is extremely expensive. Knowing what tactics or practices can get you sued is imperative. The focus of Federal Court Reports is to keep you abreast of the issues that are getting businesses in trouble. Understanding what strategies, tactics and practices are getting online businesses sued will help you make better informed decisions. Of course, all references to facts or summaries of facts are based upon the allegations in the lawsuit only and we make no representation as to whether the facts alleged will ultimately be proven truthful. These case comments are not intended to be legal advice, and you should consult your Internet law expert attorney for guidance and advice.

Traverse Internet Law Federal Court Report on trade secrets is now located at Traverse Internet Law on Trade Secret Violations.

COSTAR REALTY INFORMATION, INC. AND COSTAR GROUP, INC. v. KLEIN AND HEUCHAN, INC. AND SCOTT BELL DISTRICT OF MARYLAND (GREENBELT) 8:08-cv-01575

FILED: 06/17/08

The Defendants have been sued for using this website outside the bounds of the user agreement. The Federal hacking statute, known as the “Computer Fraud and Abuse Act”, is the same law that is being relied upon in the criminal prosecution in the “MySpace.com” case in California. This is yet another example of violations of a website user agreement resulting in claims for violation of the Computer Fraud and Abuse Act. This issue is implicated often and everyone doing business on the web needs to be aware of both this federal law and a number of state laws that prohibit activity beyond the scope of a legally enforceable user agreement.

Costar Realty Information, Inc. and Costar Group, Inc. have sued the Defendants for accessing its website and extensive database beyond the scope of the contract with the Plaintiff. The individual Defendant, Scott Bell, is alleged to have worked for a customer of Costar and used its real estate information databases and related software. Mr. Bell then allegedly left the employment of the Plaintiff’s customer but continued to access the website and database using his old login name and password.

The lawsuit alleges copyright infringement against the individual Defendant and his new employer, breach of contract for violation of the license agreement and terms of use located on the site, and unauthorized access of a computer. Cybertriallawyer.com Internet Law Cross-Reference Number 1189.

THE GATES CORPORATION v. GANG SHENG f/k/a GANG CHEN, ET AL. EASTERN DISTRICT OF MICHIGAN (DETROIT) 2:08-CV-11566-AJT-DAS

FILED: 04/11/08

Is this why employees with computer access to trade secret information are more often escorted from the building the moment their employment ends? The ability to move vast quantities of information in a matter of minutes has changed the dynamic of a “two week notice” in employment relationships, and if these allegations are true this is a classic example of why things have changed.

Plaintiff The Gates Corporation, a Michigan-based company, does business as the Gates Rubber Company and is an international leader in the design, manufacture and sale of a full line of belt and hose products for the industrial and automotive markets. According to Plaintiff, Defendant Sheng was hired to be Plaintiff’s resident expert in the area of noise, friction and tribology which is the study of friction, wear and lubrication. Plaintiff contends that as a condition of his employment, Mr. Sheng signed an employee confidentiality agreement that required him to keep Plaintiff’s trade secrets and copyrightable material secret. Plaintiff further contends that when Mr. Sheng terminated his employment with Plaintiff he signed a termination statement wherein he agreed not to disclose any of Plaintiff’s trade secrets. Plaintiff alleges that Mr. Sheng subsequently authored a textbook called “Friction-Induced Vibrations and Sound: Principals and Applications” and that he plans to publish another book titled “Road Vehicle Dynamics” which is available by password on the World Wide Web. Plaintiff contends that Defendants’ book and planned books and publications include information that he agreed not to disclose subject to his employee confidentiality agreement and termination agreement.

Plaintiff filed suit against Defendants, Sheng and his publishers, in federal court in Michigan alleging trade secret misappropriation in violation of Michigan’s Uniform Trade Secrets Act. Plaintiff’s suit also alleges trademark infringement trademark dilution and unfair competition in violation of federal law claiming that Defendants’ materials are likely to cause confusion as to source with respect to Plaintiff’s federally registered “Gates” trademarks. Furthermore, Plaintiff’s suit alleges claims of copyright infringement in violation of federal law. Plaintiff contends that the subject matter contained in Defendants’ text books contains copyrightable material Sheng made as “work for hire” while he was employed by Plaintiff and that any dissemination thereof constitutes contributory copyright infringement. Plaintiff’s suit also alleges common law breach of contract. Finally, Plaintiff’s suit claims that Defendants violated the federal Computer Fraud and Abuse Act alleging that Sheng transmitted confidential, proprietary, trade secret information that he prepared and edited during his employment with Plaintiff and was specifically told by his supervisor that he was not authorized to disclose from Plaintiff’s secure computer network to his Co-Defendant publisher through Plaintiff’s email system. Plaintiff’s suit seeks injunctive relief, actual damages, recovery of Defendants’ profits, statutory damages, attorneys’ fees, and costs. Cybertriallawyer.com Internet Law Cross-Reference Number 1164.

DISABOOM, INC. v. COWBOY INTERNATIONAL, INC. DISTRICT OF COLORADO (DENVER) 1:08-CV-00574-REB-MJW

FILED: 03/20/08

Get ownership issues resolved in your contract with web developers. It is all too common to see this type of alleged non-performance grow into a bigger issue.

Plaintiff Disabloom, Inc., a Colorado corporation, is a publicly-owned business that operates the website www.disabloom.com. Plaintiff’s website provides a community-forum for people affected by disabilities. The website has health-related information resources and contacts as well as discussion forums. According to Plaintiff, Defendant Cowboy International, Inc. is a New York-based company that provides online advertising and media consultation services. Plaintiff contends that it entered into various confidentiality and service agreement with Defendant in 2007. Plaintiff maintains that Defendant repeatedly missed agreed-upon deadlines and delivered substandard work product. Plaintiff alleges that based on Defendant’s repeated and material breaches of the service and confidentiality agreements, it terminated the service agreement with Plaintiff. Plaintiff contends that Defendant then failed to return work product containing Plaintiff’s intellectual and other property, failed to return Plaintiff’s stock photos and failed to provide monthly cost and expense reports pursuant to the contracts.

Plaintiff filed suit against Defendant in federal court in Colorado alleging common law breach of contract, breach of the covenants of good faith and fair dealing, and breach of the duty to turn over media containing Plaintiff’s intellectual property. Plaintiff contends that the service agreement provided that all original reports and documentation provided to Defendant by Plaintiff, including any trademark and copyright rights were the exclusive right of Plaintiff. Plaintiff’s suit seeks an injunction requiring Defendant to return its confidential information and work product and media containing its intellectual property. Plaintiff’s suit further seeks actual and compensatory damages, interest, costs and attorneys fees. Cybertriallawyer.com Internet Law Cross- Reference Number 1132.

QUIXTAR INC. v. MONA VIE, INC., ET AL. DISTRICT OF UTAH (CENTRAL) 1:08-CV-00209-DB

FILED: 03/18/08

Again, false advertising online is just beginning to get a lot of attention. But note that some of the defendants are former high level distributors of the plaintiff and there were non-compete contracts in place and there are trade secret violations alleged. California doesn’t recognize non-compete agreements for the most part. Just about every other state does if it is narrow in geography, job description and time. But they are disfavored by the courts.

Plaintiff Quixtar Inc., a Virginia corporation with its principal place of business in Michigan, sells a variety of products including nutritional products through its network of independent business owners. Plaintiff’s business model combines the efficiency of the World Wide Web with personal contact generating sales of approximately $1 billion each year, making it one of the largest online retailers. Plaintiff began its operations in 1999 and is a successor in interest to certain assets of Amway Corporation. Plaintiff contends that Defendants are companies located in Utah and their known and yet to be discovered individual distributers. According to Plaintiff, Defendants sell nutritional and juice products known as “MonaVie” which are sold through a multilevel marketing distribution system similar to Plaintiff’s. Plaintiff contends that Defendants are making unsubstantiated and outrageous health benefit claims about MonaVie including claiming that it cures cancer and other diseases. Plaintiff contends that these claims are contained in videos posted on YouTube and on various other websites and web forums.

Plaintiff filed suit against Defendants in federal court in Utah alleging that Defendants are engaged in unfair competition in violation of federal law by making false and misleading representations of fact in connection with the sale and advertising of MonaVie products. Plaintiff further alleges that Defendants’ actions have violated the Utah Truth and Advertising Act and allege that Defendants’ actions constitute deceptive trade practices. Moreover, Plaintiff asserts claims of tortious interference with business relationship in violation of Utah law and common law. Plaintiff contends that some of the individual named Defendants who are high level distributors for Plaintiff were formerly in Plaintiff’s network and signed agreements not to compete and to keep certain of Plaintiff’s distribution strategies and processes confidential. Plaintiff contends that Defendants induced the breach and/or breached their agreements with Plaintiff. Finally, Plaintiff alleges that Defendants have engaged in civil conspiracy in violation of Utah law and common law. Plaintiff’s suit seeks an injunction preventing Defendants from making false and misleading claims regarding the nature, quality and characteristics of its products and unfairly competing with Plaintiff. Plaintiff’s suit also seeks compensatory, punitive and treble damages, attorneys fees and costs. Cybertriallawyer.com Internet Law Cross-Reference Number 1116.

AMERICAN RADIATION SERVICES, INC. v. KEITH PATRICK LEMOINE MIDDLE DISTRICT OF LOUISIANA (BATON ROUGE) 3:08-CV-00141-JVP-SCR

FILED: 03/10/08

Another trade secret matter; with hacking thrown in for good measure. Leaving with pricing information and customer lists are often the two things that will get you in trouble when you go to work for a competitor, even without a non-compete agreement or an employee confidentiality agreement.

Plaintiff American Radiation Services, Inc., a Louisiana corporation, provides environmental and laboratory consulting and professional services relating to radioactive content. Defendant was employed by Plaintiff as a project manager and signed an “Employee Confidentiality Agreement” whereby he agreed to maintain the confidentiality of Plaintiff’s materials and property and a “Statement of Client Confidentiality” whereby he agreed to keep client documents and information confidential for a period of two years after his employment with Plaintiff. Plaintiff claims that, before resigning, Defendant without authorization accessed Plaintiff’s computer system and copied and removed Plaintiff’s shipping spreadsheet, copyrighted training materials, and various electronic files containing Plaintiff’s confidential price and equipment rental information. Plaintiff alleges that Defendant later used Plaintiff’s materials for his own purposes and in connection with his new position as project manager for Plaintiff’s competitor.

Plaintiff filed suit against Defendants in federal court in Louisiana alleging copyright infringement in violation of federal law, unauthorized access in violation of the federal Computer Fraud and Abuse Act, unfair trade practices in violation of state law, and breach of contract in violation of the Louisiana Trade Secrets Act. Plaintiff’s suit seeks injunctive relief ordering Defendant to return Plaintiff’s materials and information and damages including statutory damages, punitive damages, attorneys fees and costs. Cybertriallawyer.com Internet Law Cross-Reference Number 1100.

LSO, LTD v. HUGHES, et al. SOUTHERN DISTRICT OF CALIFORNIA (SAN DIEGO) 3:08-CV-00329

FILED: 02/21/2008

Know who you are dealing with. No matter what the contract says, and no matter how nice the vendor appears to be, don’t entrust your valuable online business to someone who looks and sounds like they are “with it”. Do your homework on every vendor you use. Note the trade secret allegations here relating to customer lists and personally identifiable information. The plaintiff’s problems have likely just begun, particularly in light of the new data theft reporting laws. And, of course, if this personal information is splashed across the web, things are going to go from bad to ugly very quickly. I am a bit surprised the plaintiff does not appear to be asking for a temporary restraining order and a court order seizing the defendants’ computers and servers.

Plaintiff, a California corporation, specializes in the marketing and sales of conventions, travel, publications, social interfacing, education, and communication for and between couples with interests in alternative lifestyles. Plaintiff has numerous federal trademark registrations in “Lifestyles” and other marks, as well as common law trademarks in “Clublifestyles” and “Desire-Resorts.” Plaintiff entered into an agreement with Defendants, under which Defendants would develop and host Plaintiff’s website, www.clublifestyles.com. Under this agreement, Plaintiff retained ownership of all of its confidential customer information. However, without Plaintiff’s permission or knowledge, Defendants registered the domain names www.clublifestyle.com and www.desire-resort.com. Defendants then shut down Plaintiff’s websites, uploaded nearly identical copies of the websites linked under Defendants’ infringing domain names, and used the confidential customer information that they had acquired from Plaintiff to redirect traffic to themselves and to their affiliates. Defendants are also using Plaintiff’s confidential customer information to interfere with Plaintiff’s contracts.

Plaintiff has filed suit against Defendants in federal court in California. Plaintiff alleges several federal causes of action, including infringement of its federally registered and common law trademarks, trademark dilution, and cyberpiracy. Plaintiff’s California causes of action include misappropriation of trade secrets, breach of contract, and interference with prospective economic advantage. Plaintiff seeks a permanent injunction prohibiting Defendants from infringing on any of Plaintiff’s marks, from claiming any affiliation with Plaintiff, from engaging in unfair and deceptive trade practices, and from injuring Plaintiff’s business reputation. Plaintiff also requests the return of its computers and code from Defendants, and asks that Defendants be ordered to surrender for destruction all of their materials that infringe on Plaintiff’s trademark. Additionally, Plaintiff seeks actual damages, equitable damages, punitive damages, royalties for misappropriation of trade secrets, attorneys’ fees, and costs. Cybertriallawyer.com Internet Law Cross-Reference Number 1053.

ROCKY BRANDS, INC., ET AL. v. GLEN A. BRATCHER, ET AL.SOUTHERN DISTRICT OF OHIO, EASTERN DIVISION 2:08-CV-107

Former employees love to compete against their former employers, and manufacturers not tied down to exclusivity agreements will often look to monetize your product line through third parties. In the online world of today, third parties ready to launch a new retail store are everywhere.

Plaintiffs manufacture and sell rugged outdoor, work and Western boots. According to Plaintiffs’ suit, Defendant Glen A. Bratcher is a former employee who later formed a competing company called Westwood Footwear and Accessories, LLC. Defendant owns and operates a website at www.roadwolfboots.com. According to Plaintiffs, Defendant Nantong Hong Yi Wang Shoes Co., Ltd. is a Chinese company that has handled much of Plaintiffs’ Western boot manufacturing since 2000 and, as such, was provided with certain trade secrets in order to properly undertake the manufacture of the high quality boots that customers had come to expect from Plaintiffs. Plaintiffs claim that Nantong Hong Yi Wang Shoes Co., Ltd. was required to maintain the confidentiality of Plaintiffs’ trade secrets as a condition of doing business with Plaintiffs but violated this requirement by doing business with Bratcher. Plaintiffs claim that Defendants are inappropriately using Plaintiffs’ technology, sizing, designs and leathers to manufacture and sell knock-offs.

Plaintiffs have filed suit in federal court in Ohio alleging that Defendants have “stolen” and misappropriated their trade secrets. Further, Plaintiffs claim that Defendants are infringing on their trademarks and trade dress with respect to three lines of Plaintiffs’ Western style boots, in violation of various federal and state trademark, contract and business laws. Plaintiffs, who state that Nantong Hong Yi Wang Shoes Co., Ltd. invested millions of dollars in Westwood Footwear and Accessories, LLC, further allege that Defendants’ conduct constitutes a pattern, scheme and conspiracy to defraud Plaintiffs in violation of the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) and state unfair competition laws. Plaintiffs’ suit seeks to prevent Defendants from manufacturing, marketing and selling the “knock-off” boots, compensatory damages, punitive damages, treble damages, pre- and post- judgment interest, and attorneys’ fees. Cybertriallawyer.com Internet Law Cross-Reference Number 1021.

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