Do Bloggers have special rights to disclose Trade Secrets? - The Trade Secret Owner s Perspective

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1 Trade Secret Protection vs. Free Speech Do Bloggers have special rights to disclose Trade Secrets? - The Trade Secret Owner s Perspective Marc Martin, Partner K&LNG Any opinions, interpretations or viewpoints expressed herein belong solely to the author for purposes of this presentation. This presentation does not constitute legal advice or legal services.

2 Statutory Protections Afforded Blogging Section 230(c)(1) of the Communications Decency Act No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider. Interactive computer service means any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet. 2

3 Statutory Protections Afforded Blogging Section 230(c)(1) grants a broad immunity for service providers against claims of defamation It essentially shields service providers from liability for defamatory information that originates with a third party user of their service. Section 230(c)(1) precludes courts from entertaining claims that would place a service provider in the role of a publisher Suits seeking to hold an interactive computer service provider liable for its exercise of a publisher s traditional editorial functions are barred. 3

4 Limitations to the Statutory Protections Afforded Bloggers Section 230(e)(2) In contrast to its defamation protection, Section 230 does not provide interactive computer service providers protection from intellectual property claims In Section 230(e)(2), Congress specifically exempted intellectual property law from the broad protections of Section 230 Nothing in this section [230] shall be construed to limit or expand any law pertaining to intellectual property As such, Section 230 is not a defense against claims of trade secret theft 4

5 First Amendment Law vs. Trade Secrets - The Clash of Technology and Free Speech Blogging highlights the intersection of the largest threats to trade secret law on the Internet anonymity and ubiquity Trade secret owners have no recourse if they cannot determine the identity of the misappropriating parties However, in many contexts First Amendment law seeks to protect just that expression and anonymity California courts continue to tackle this issue in Apple v. Does and Apple v. deplume 5

6 Apple Computer, Inc. v. Does (Cal. Super. Ct. 2005) In 2004, Apple Computer, Inc. sued three bloggers for misappropriation of trade secrets after confidential information about a secret product was posted on the Internet. The bloggers claimed protection under of the reporter s privilege of the First Amendment and state law. The court bypassed the determination as to whether bloggers are to be considered journalists and held that the journalistic privilege is not absolute. Journalists cannot refuse to disclose information when it relates to a crime. Trade secret laws apply to everyone regardless of their status, title or profession. Documentation related to the dissemination of the trade secrets was ordered to be turned over to Apple and the identity of the bloggers sources revealed. 6

7 Apple Computer, Inc. vs. Nick deplume, et. al. (Cal. Super. Ct. 2005) In this pending action, Apple claims that deplume, through his website Thinksecret.com, induced unknown defendants to breach their confidentiality agreements with Apple and misappropriate and disclose trade secret information regarding Apple s unreleased products. Apple argues that the First Amendment provides no protection for the unlawful violation of trade secrets. 7

8 No Right to Unlawfully Disseminate Trade Secrets According to court in Apple v. Doe, the issue is not whether bloggers are to be afforded the same protections as traditional journalists. Instead the real issue revolves around the fact that neither bloggers nor traditional journalists have the right to unlawfully disseminate trade secrets. Regardless of whether communicated online or offline, the First Amendment treats the unlawful misappropriation of trade secrets in the same manner. 8

9 Case Study: The Insider Newsworthiness vs. Trade Secret Protection In 1993, Dr. Jeffrey Wigand (played by Russell Crowe) was fired from his job as VP of Research at Brown & Williamson, then the third-largest tobacco company in the U.S. In violation of a life-long confidentiality agreement, Wigand confided to CBS 60 Minutes and the FDA that his former employer was making cigarettes stronger and more addictive. His whistle-blowing deposition led to the tobacco industry s $246 billion litigation settlement. 9

10 Uniform Trade Secrets Act - Bloggers Beware! The Uniform Trade Secrets Act prevents third parties from exposing information knowingly obtained from sources bound by confidentiality agreements. It imposes liability for the publication of information that should be reasonably known to be a trade secret. Trade secret misappropriation is the acquisition and/or disclosure of a trade secret by a person who knows or should know that the trade secret was acquired by improper means. 10

11 Trade secret misappropriation requires a breach of confidentiality DVD Copy Control Assoc. v. Bunner (Cal. 2001) The DVD Copy Control Assoc. sued Bunner, a web publisher, for misappropriation of its trade secrets after Bunner posted DeCSS, a code that reverses restrictions on encrypted DVDs and allows users to play the formerly encrypted DVDs on any machine, on his website. Soon thereafter, the code was posted on websites worldwide. The Supreme Court of California found that the First Amendment protected Bunner s publication as an exercise of free speech. The court suggested that the misappropriation of a trade secret required theft, misrepresentation or the breach of a duty to maintain secrecy. Reverse engineering alone misappropriation. Ford Motor Company v. Lane (E.D. Mich. 1999) Ford filed for injunctive relief after Lane posted an article on his site that discussed confidential information about Ford The court denied Ford s request for injunctive relief finding that no trade secret misappropriation had taken place as there was no confidentiality agreement or fiduciary duty between the parties. 11

12 Legal Issues Raised By Corporate Blogging Trade Secret Misappropriation is just the beginning

13 The Pros and Cons of Blogging for Employers Pros: Employee bloggers help humanize the organization Interested employees as great marketing tools Positive branding/increased publicity Recruiting tool Cons: Possible disclosure of trade secrets Lack of control over negative information posted and manner in which company is represented Cost of monitoring postings Possibility for personal attacks on company officers Increased possibility of liability 13

14 Legal Issues Raised by Corporate Blogging Disclosure and theft of trade secrets Employees unintentional disclosure of company trade secrets on a company blog by can destroy the secret status of the information and leaving it ineligible for trade secret protection Disclosure of a third party s trade secrets could expose the company to liability for trade secret misappropriation Dissemination of harmful speech or obscene material Infringement of intellectual property Disclosure of inside information Improper use of network capacity Defamation Claims Employment Issues Securities Law Violations (Insider Trading/FD violations) 14

15 Corporate Blogging Policies According to surveys conducted by the Society for Human Resource Management in 2005: 85% of companies do not have a written policy that provides employees with guidelines on what is acceptable to write about in a personal blog 8% of companies do have such a written policy In early 2005, 3% of 278 human resource professionals had disciplined workers for information posted in blogs According to a survey by the Employment Law Alliance: 5% of American employees maintain a personal blog while 15% of employers have a policy that directly addresses blogging 59% of employees believe that employers should be allowed to discipline or terminate workers who post confidential information about the employer 55% of employees believe that employers should be allowed to discipline or terminate employees who post damaging, embarrassing, or negative information about the employer 15

16 Corporate Blogging Policies (con t) Companies should consider issuing written blogging policies that: Reiterate employees obligation to protect confidential information Disclose the terms of use Limit the company s liability for the information posted; and Establish an employee s responsibility for the information posted The blogging guidelines should define which violations constitute grounds for termination Note that a lack of blogging policies (and consistent enforcement thereof) puts both the company, its trade secrets, and its blogging employees at risk 16

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