Valspar was tipped off to the theft after Lee allegedly resigned abruptly from his job two weeks after returning from a business trip in China. The company discovered suspicious activity on Lee’s laptop, such as recently deleted records as well as a hidden file that contained a number of unauthorized programs, according to the Minneapolis Business Journal.

According to the complaint against him, Lee accepted a job at Nippon Paint Co., one of Valspar’s competitors.

The suits allege that McKesson and First DataBank, a subsidiary of Hearst Corporation that specializes in medical databases, conspired to boost the profits pharmacies make on medicine sales. The plaintiffs argue that rather than profiting directly from the scheme, distributors manipulated pricing to gain favor with retailers such as Rite Aid Corp. and Wal-Mart and to increase its market share, according to Bloomberg.

Since the Racketeer Influenced and Corrupt Organizations Act triples the damages awarded in racketeering cases, and because the plaintiffs claim the alleged backroom deal cost consumers $5 billion, the total damages that McKesson Corp faces is $15 billion. Even as the largest drug wholesaler in the U.S., that’s a number McKesson can’t ignore. According to experts, it’s almost a guarantee that the company will settle the case.

DISH did win the case, but didn’t get the 10 figure outcome that company lawyers hoped for. Instead, after one day’s deliberation by the jury, NDS was ordered to pay $46.69 for reverse engineering one of DISH’s smart cards and $1,000 in punitive damages.

Both sides are calling this a victory. DISH says they won the case, which they did, but their legal fees clearly outweigh what they earned. And, let’s be honest, this is going to do zero damage to NDS’ credibility. NDS claims a victory because they don’t have to pay one billion dollars to DISH. As NDS attorney Richard Stone said after the jury’s verdict came in, “We’ve been completely vindicated on this whole lawsuit.”

Authorities discovered Jin was carrying about $30,000 in cash as well as over 1,000 confidential electronic and paper proprietary documents, all belonging to her former employer, known only in federal documents as “Company A.” According to the indictment against her, Jin was storing the information on a laptop, various hard drives, a thumb drive and a number of data CDs when her luggage was searched.

“We have to be vigilant in preserving the integrity of trade secrets to provide an honest playing field among business competitors, whether foreign or domestic. Trade secrets often are a business’s most valuable assets, and protecting them from theft and betrayal is a high priority for law enforcement,” Patrick J. Fitzgerald, the U.S. Attorney for the Northern District of Illinois, said in a statement released on Wednesday.

While an official release from the Department of Justice claims that Company A spent “hundreds of millions of dollars on research and development for the proprietary information” that Jin had in her possession, reports by the Chicago Tribune and Information Week both put that price tag at $600 million. If convicted, Jin faces a maximum penalty of 10 years in prison and a $250,000 fine for each charge.

A whopper of a sentence came in on Monday for the Chinese-born engineer who last May was convicted of conspiring to hand over U.S. military secrets to China. Chi Mak, 67, was given 24 1/2 years for smuggling top secret data, acting as an unregistered foreign agent in the U.S., attempting to violate export control laws and lying to the FBI, according to a story by Fox News. Mak’s defense asked for 10 years in prison while prosecutors asked for 30, though he could have been sentenced with as many as 35 years based on his convictions.

U.S. District Judge Cormac J. Carney presided over the ruling. Mak reportedly asked the judge for leniency before the sentence came in. Carney had this to say:

“He’s a very humble man, a very warm man and he wants to be helpful, but it’s those traits and that persona that allowed him to pass information to the People’s Republic of China.”

He added:

“I do believe a high-end sentence is appropriate here.”

According to the Fox News story, Mak worked for Anaheim-based naval defense contractor Power Paragon. He was arrested late in 2005. Both his wife, Rebecca Laiwah Chiu, and brother, Tai Mak, pleaded guilty last year as well. Chiu is currently serving three years in prison while Tai Mak faces a 10 year maximum.

Mak’s attorney said they will file an appeal.

“Alpha has suffered and continues to suffer irreparable damage as a result of defendant’s misappropriation of Alpha’s confidential, proprietary and trade secret information.”

Vance hasn’t shown up to any of his eight scheduled court appearances, maybe because he was so busy acquiring jobs at rival companies. In 2005, according to the Herald Tribune, he worked for Florida-based Alpha Mining Systems, Alpha’s China-based competitor Guizhou Tire Co. and United Arab Emirates-based Al Dobowi Group. His job description? Hand over secret Alpha documents to its rival firms, including design blueprints, and advise rivals’ clients that they now can get Alpha designed tires directly from Guizhou.

There’s no word on whether Vance can afford to pay the $19.7 million fine or not (as the Herald Tribune puts it, he may not have the “wherewithal”). It’s also unclear how Vance got the idea to work for Alpha’s overseas rivals in the first place – whether he was disgruntled and reached out to them, or the other way around. Whatever the case, he’s been barred “from working in mining worldwide or contacting his current employers or any current or former customers of Alpha.”

There is one minor fault in the story worth noting: The Herald Tribune states, “Del-Nat Tire Corp. and American Tire Corp. were buying a combined average of $1.9 million per month from Alpha until April 2005, when they stopped buying anything.” American Tire Corporation fervently denies having ever heard of Alpha, yet alone conducting business with the company. So, for all of you conducting business with ATC, don’t worry they’re in the clear.

The company reported on July 3rd that the administrator illegally downloaded the information and sold it to a third party data broker, who in turn sold the data to various marketing companies.

Fidelity National confirmed that the unnamed employee had been fired.

Commentary: Over 3.5 million credit card accounts were taken along with over 1.4 million credit card numbers. This is a prime example of how one employee can cause significant damage to a large corporation, their reputation, and their clients.

A jury determined that Robert Yarbrough broke his contract with the company after he violated non-competition obligations and leaked company secrets. He was charged with $1.1 million in damages.

Westport Big & Tall, a competitor of Casual Male, was charged $400,000 for interference with contractual relations.

The most recent setback was a very embarrassing federal judge ruling last week that Qualcomm had knowingly failed to turn over thousands of relevant documents in a patent trial against Broadcom. Judge Rudi Brewster said that Qualcomm knowingly concealed the documents and ordered that the company pay all of Broadcom’s legal expenses as result. Lupin had written an apology letter to the judge back in April after Qualcomm’s outside counsel discovered documents the company hadn’t previously produced that revealed facts “inconsistent with certain arguments that we made on Qualcomm’s behalf.”

Commentary: Perhaps most interesting is how the stock price reacted… it went up by nearly 3%. With 1.67 billion Qualcomm shares outstanding, that translates into a $1.72 billion gain for investors. Maybe they should fire more people as it seems to be working! Not sure how sustainable that business model would be though.

Schetty, concerned that Rohm and Haas would steal Technic’s bid with Intel, convinced unnamed Technic and Amkor employees to sabotage Rohm and Haas’ test at an Amkor facility in the Philippines. Schetty is looking at a possible maximum sentence of 10 years in prison, 3 years probation and a $250,000 fine. He agreed to pay $15,536 in restitution to Rohm and Haas.

Read the full article.

Commentary: Talk about going to extremes to stop the competition. Schetty actually convinced Technic employees that it was ‘good business’ to destroy a rival’s product. Another example of how one employee can ruin an entire company (even their own).

Sensitive data stolen from Ferrari included engineering documents, test data, and other undisclosed documents. This material was allegedly used to develop Toyota autos in 2002 and 2003.

Commentary: Toyota has been quite lucky that this story has gained ZERO traction in the U.S. media (its largest market). A story linking them to stealing corporate secrets from Western competitors, while crushing these same competitors in the market, would have major consumer backlash potential. Why has it been ignored by the U.S. media? It’s simply we’re all NASCAR fans over here – not Formula One. However, Toyota is entering NASCAR as well…with a Toyota Camry?

Cache La Poudre sued Land O’Lakes in 2004, alleging that the company began rebranding its lines of show feed under the brand name “Profile,” the same name which Cache La Poudre claimed it had developed for its show feeds in 1991.  The jury, who asserted that Land O’Lakes had acted “willingly and with bad faith,” ruled that the company had engaged in deceptive trade practices and unfair competition.

In-N-Out is claiming that Chadder’s is copying its business operations too closely – like In-N-Out, Chadder’s has a “secret menu” and also uses similar red, white and yellow signage.

The OC Register covered the case in a recent article:

According to the suit, Chadder’s offers several off-menu items trademarked by In-N-Out, including “Animal Style” burgers and fries and Protein burgers. During an undercover visit to the restaurant in early June, Wensinger said he immediately noticed “deceptively similar” features: the menu board, the color scheme, and the employee white uniforms. While there, he ordered an Animal Style, Double, Double with Animal fries. The burger was served partially wrapped, and in a cardboard box, according to the suit.

“No questions were asked and those specialty items were prepared and delivered in the same manner as if they had been ordered at In-N-Out,” the suit stated.

Five years ago, In-N-Out filed a similar lawsuit against a Texas restaurant called Lightning Burgers, which eventually shut down.

A judge did rule that Chadder’s could stay open so far as it didn’t allow for customers to order off-menu items using terms such as “the animal,” “the protein,” and the “4×4.” Since In-N-Out filed its lawsuit, Chadder’s has changed the color of its employees’ uniforms and its signage.

In-N-Out Burger was founded in 1948 and has acquired a cult-like following among customers.

Commentary: Is imitation the sincerest form of flattery? I guess not according to In-N-Out. We are taking the liberty of suggesting a new uniform style for Chadder’s employees (see picture above) at the risk that In-N-Out might sue over its resemblance to a burger – which In-N-Out seems to feel that they may own the rights to.

On a more serious note, it should be pointed out that, in other retail segments that have grown rapidly, chains have oftentimes simply acquired their imitators who got to new markets first, rather than invested the time, energy, and money to drive them out of business. Considering how slow In-N-Out has been to expand their franchise across the country (glacial…), we are bemused at their efforts to defend intellectual property rights of how to serve a hamburger in a territory where they do not operate.

We respect intellectual property rights just as much as the next person – but we think that In-N-Out is overreacting a bit in attacking small potatoes companies (yep, pun intended) this way and insisting that they cease operations.

But perhaps we are just grumpy that we didn’t know about the “secret menu” ourselves. What is “the animal,” anyway.

According to the analysts, the warning they received from the Office Depot Investor Relations Department re-emphasized earlier alerts about the current business environment and soft spending by businesses. They also mentioned that the calls did not provide specific outlooks for sales and profits.

While lawyers say that the disclosure may go against the SEC’s Regulation FD, which is aimed at preventing selective disclosure of material information to analysts, Office Depot insiders insist that nothing material was disclosed. Even so, the hint was enough for most of the company’s analysts to cut their earnings estimates and for options traders to take positions that would pay off if Office Depot’s stock fell.

Commentary: This is nearly unbelievable that a company would do this in today’s environment. It has garnered surprisingly little press. The SEC appears to be sleeping through it too. And Office Depot is claiming that their calls with the analysts were routine? Then how do you explain that the stock dropped over 8% from $34.46 at close of business on June 21st (the day before they first started ‘tipping’ analysts) down to $31.81 on June 28th on stock trading volume that was nearly 4 TIMES AS HIGH AS NORMAL? This wiped more than $700 million off the market capitalization of the company.

Then the company finally announced in a June 29th filing with the SEC that it expected soft earnings. The stock dropped another couple percentage points after the announcement (when the rest of the world got the news), but that was only a fraction of the overall loss that had already occurred in the prior week.

“Yes, we did it… but we didn’t see it.” Um…what????

SAP admitted this week that a subsidiary had completed “inappropriate downloads” of documents belonging to arch competitor Oracle. However, the company said that it had not had access to that material because firewalls had protected the downloads from SAP’s view.

“Even a single inappropriate download is unacceptable from my perspective. We regret very much that this occurred,” SAP Chief Executive Henning Kagermann said, striking a more conciliatory note than recent SAP declarations that it would aggressively defend itself in the case.

Commentary: SAP didn’t have much of a choice as they were caught RED-HANDED (we covered this in an earlier post back in March). That being said, we are more inclined to agree with JP Morgan software analyst Stefan Kuppen who says “Looking at the details they’ve given, it looks like things went wrong at the subsidiary but it doesn’t look like a concerted effort at industrial espionage.”

The bottom line is that Oracle is blowing this case way out of proportion – doing so because they know that they can win the PR war on it.

To an outsider, it is an excellent learning example for employees: a very small division of SAP is causing all kinds of headaches for a global multi-billion corporation. Some good ethics and IP (and judgment) training could have prevented this costly embarrassment.

While the result would be nothing short of a riot in the work-obsessed United States, it has become a reality in France as French intelligence officials have identified the handheld devices as a security threat. The ban on the use of Blackberries inside the presidential palace and government ministries rose from concerns of espionage and leaking of sensitive data. The main area of concern, asserts French newspaper Le Monde, is the United States National Security Agency (the logic being that Blackberry data is routed through servers here).

Commentary: This is the type of story just tailor-made for the media and it’s easy to poke fun at the French for overreacting. But, realistically, the French have an entirely legitimate concern.

Apparently, this product does not contain fluoride. Instead, it contains Diethylene Glycol (DEG). DEG is often described by its more layman’s term: antifreeze.

Doug Arbesfeld, an FDA official, said that testing had found the chemical in a product bearing Colgate label, but that the FDA was unsure whether it really was Colgate or a counterfeit.

The FDA pointed out an important method of distinguishing the bogus toothpaste:

For alert consumers it should be easy to identify the problem tubes as the counterfeit packages examined so far have several misspellings including: “isclinically” “SOUTH AFRLCA” “South African Dental Assoxiation.”

The Company said in a statement that it does not use Diethylene Glycol as an ingredient in Colgate toothpaste anywhere in the world nor does it import toothpaste from South Africa into the United States.

Commentary: DEG is a deadly substance that has been found in many other products over the years, often with fatal results. There are a number of questions surrounding this recall, including some asking why Colgate was slow in making an announcement once they learned of the problem.

Perhaps Colgate is due for a check-up. Say AHHHH.

In its lawsuit, Pioneer Press accuses former publisher Par Ridder of divulging critical company strategies and documents to rival paper Star Tribune shortly after leaving Pioneer to take a position as Star Tribune’s editor. In addition, Pioneer charges that the Tribune failed to report or return the stolen data.

AP Chairman Dean Singleton serves as chief executive of MediaNews Group Inc., which runs Pioneer Publishing, and said that up until the time that Ridder’s old laptop was examined, he was unaware of “the magnitude of the heist.” After finding that nearly all Pioneer materials on the computer had been copied to an external hard drive, Pioneer took action.

Commentary: If the facts as laid out in the suit are true, Ridder is busted cold with his hand driven deep into the cookie jar. Civil cases like these oftentimes turned into criminal ones as the heavy-lifting gumshoeing has already been done by the victimized corporation.

Our prediction? If Singleton/Pioneer Press stick to their guns, Ridder is out of a job within weeks and hoping that federal and/or state prosecutors do not get involved.

The perpetrator of the trade secret theft, Joya Williams, had faced up to 10 years in prison on the single conspiracy charge in a failed scheme to sell Coke’s trade secrets to rival Pepsi for at least $1.5 million.

U.S. District Judge J. Owen Forrester departed from federal sentencing guidelines (which would have recommended 5 years) and said to the court that he was meting out a longer sentence because, “This is the kind of offense that cannot be tolerated in our society”… and that “I can’t think of another case in 25 years that there’s been so much obstruction of justice.”

Commentary: While this was a very straight-forward case and a very obvious conviction, we have to admit that we were surprised that the judge imposed as stiff a sentence as he did. In part, our surprise is simply because most other judges in the country fail to impose extended prison terms for what some people feel is a ‘victimless’ crime unless it involves national security issues.

Hmmmm…. memo to potential trade secret criminals: if you are thinking about pursuing a dastardly life of corporate espionage and crime, it’s better to live in Connecticut than Georgia. Better yet, just don’t do it – as companies (and judges) are getting tougher on it for the most part.

As PC World reported, the popular technology blog, Engadget, posted a story claiming the expected June launch of the iPhone would be delayed until October – and the Leopard October debut would be postponed until January. Engadget’s credited its source as coming from an internal Apple e-mail.

The e-mail tip turned out to be false. But before anyone figured this out Apple’s stock tumbled 3 percent losing US$4 billion in value by the end of the trading day. Apple reacted quickly and issued a statement saying that the iPhone and Leopard are both still on track – the iPhone will ship at the end of June, and Leopard will ship in October. Engadget quickly posted a correction.

Commentary: What PC World did not report, and which makes the case even stranger, is that the email that Engadget got sent, was reportedly indeed an internal Apple email that went out to thousands of Apple employees. What supposedly really confuses Apple is how someone might have spoofed their internal system in order to send out such a mass email.

It could have been a mistake. Perhaps not though. It could have been a concerted effort by a stockholder (or “put” holder more likely) to disseminate false information to move the stock. Penny stock promoters do it all the time. Many hedge fund managers do as well. This case will only bring further intrigue and interest to the practice as volatility and leverage together can produce great gains with the right bet. And a blog, regardless of its popularity, cannot independently verify the facts of a submission. That was traditionally the role of big media – and with the slimmer staffing of a blog, and the pressure to produce “scoops” in the age of Internet before someone else beats you to it, don’t except ‘fact checkers’ to be showing up at blogs anytime soon.

To recap for anyone who has been living under a rock and missed the story, earlier this year TJX Companies, owners of the retail chains Marshalls, TJ Maxx and Bob’s Stores, had 45.4 million credit numbers of customers stolen.

The original breach probably took place around July 2005 and subsequent investigations by IBM and General Dynamics found that there are several additional intrusions later in 2005, 2006 and even in mid-January of 2007 (incredibly this last one occurred after the company had discovered on December 18, 2006 that its records had been breached).

Commentary: The damage figures are based upon the well-recognized ‘rules of thumb’ which apply to the cost of a credit card record stolen, which is between $100 and $182 per record, depending on who you speak with. Either way, the TJX breach is the biggest even discovered to date, even eclipsing the 40 million records compromised in the mid-2005 breach at CardSystems Solutions. Incredibly, however, the company has found that shoppers are forgiving and there has not been a dramatic fall-off in sales.

Investigators with the office of the attorney general found the documents in a dumpster behind a CVS store in Liberty, Texas, near Houston, Abbott’s office said.

Medical prescription forms with name, address, date of birth, issuing physician and the types of medication prescribed were found, along with hundreds of active debit and credit card numbers with expiration dates…

According to the attorney general, CVS violated a 2005 law that requires businesses to protect customer records with sensitive information, including credit and debit card numbers.

Commentary: This is an interesting case. It may be hard for Oracle to claim that much of the documents that were ‘swept’ off the Oracle’s servers were truly valuable trade secrets as such documents are broadly available to thousands of companies in all likelihood around the world (any Oracle customer). And unless SAP were able to use these ‘secrets’ to develop new competitive software, or lure existing Oracle clients away – both very unlikely events due to the very recent nature of the breach – proving material damages for a high award will be exceedingly difficult. That being said “pretextual” and “illicit” access are hot buzzwords – and the federal Computer Fraud and Abuse Statute is clear in that what SAP did was illegal. Thereby, the more likely outcomes here are that (1) Oracle ties up SAP in a nasty legal battle; (2) Oracle is able to claim morale high-ground in competitive selling against SAP; (3) existing Oracle clients may think twice before leaving to SAP if they think their consultants may not get sufficient access to documentation needed to help make transitions if they get caught up in this battle; and the wildcard of (4) could prosecutors decide to piggyback criminal charges on the civil complaint (we bet yes).

Commentary: We doubt that these retailers and distributors knew that they were buying fake products, but we here at Ethisphere Magazine are happy that we now have a brand new excuse for our lousy golf play (fake Titleists must slice). Titleist is rightfully throwing its legal weight around and steps like this are a necessary precedent to protect both brand and technology. Titleist is even suing in the source country for the counterfeits (China and one golf ball counterfeiter has even been put in prison as a result).

Commentary: The arrest was based upon a sealed indictment
from a federal grand jury formed in March 2005. Not being able to extradite Lui easily, agents apparently focused on trying to lure him back to the States in the intervening period of time. It’s important to keep internal investigations (and grand juries for that matter) extremely confidential or Lui may never have been apprehended. As this case unfortunately demonstrates, it can be difficult to drive home the point to employees that trade secrets must not be stolen. There are several particularly disturbing facets of this case, including: (1) it involves a retiree as well as someone who worked for the company for 37 years! Not much loyalty there; and (2) the secrets were not being stolen for any particular corporation (espionage) so much as to be marketed to the highest bidder (PowerPoint presentation and all?).