Friday, October 10, 2014, 1:08 PM

Order Pierces Allegations Unsupported By Receivable Evidence In Granting Summary Judgment To All Parties In IP Dispute

This blog post is authored by Kirk Watkins and posted by the Womble Carlyle Team.

In 2011 EarthCam, Inc. (“EarthCam”) brought suit against Richard Hermann (“Hermann”), OxBlue Corporation, Chandler McCormarck, John Paulson, and Brian Mattern (collectively “OxBlue”) asserting corporate espionage to misappropriate trade secrets.  OxBlue filed counterclaims for copyright infringement, trademark infringement, false advertising, false designation of origin, unfair competition, and violation of the Georgia Uniform Deceptive Trade Practices Act.

EarthCam is a New Jersey privately held company in the high-end web-based cameral system business.  OxBlue is an Atlanta based company in the same business focusing primarily on the construction industry.  Hermann is an independent contractor for OxBlue who was formerly employed by EarthCam as a product technician and camera installer.
Judge Duffey addressed summary judgment motions filed by all the parties and granted all of them.  How did that happen?  Read on.


The Court noted that the evidence must be viewed in the light most favorable to the party opposing the motion, "but only to the extent supported by the record."[1] 
 
OxBlue Motion for Summary Judgment on EarthCam’s Claims
 
OxBlue filed for summary judgment relating in part to a 2006 script written by an OxBlue principal to locate the URL’s of EarthCam customers’ webpages without decrypting a password or breaking into any secure servers.  EarthCam described the use of this script as a Brute Force Attack.  The summary judgment motion further addressed 2008 and 2011 incidents where EarthCam clients provided OxBlue with usernames and passwords for customer webpages with EarthCam.  In one instance OxBlue logged into the EarthCam system and provided advice on correcting a problem to an EarthCam client.  Although this is prohibited by the End User License Agreement, there was no evidence that OxBlue was aware of that license agreement.  Finally, OxBlue’s summary judgment motion also addressed emails between Hermann and OxBlue that allegedly contained trade secret information.
 
In considering OxBlue’s motion the Court quoted a Ninth Circuit decision that applied Georgia law:  “[A] plaintiff who seeks relief for misappropriation of trade secrets must identify the trade secrets and carry the burden of showing that they exist.”[2]  The claimant is further required to show that actual or potential economic value exists because of secrecy and that the secrecy has been reasonably maintained.  Misappropriation is only established by evidence that information was disclosed enabling the secret to be learned and that a substantial portion of the trade secret was then used to create an improvement or modification substantially derived from the trade secret.  
 
The Court reviewed three EarthCam exhibits relied upon for its assertions of trade secret misappropriation and found all three lacking.  An email of July 14, 2008, failed to discuss or even allude to any EarthCam technology.  A second email between Hermann and OxBlue also failed to mention the technology allegedly stolen and further evidenced independent knowledge of the “exclusive” supplier by the recipient of the communication.  Finally, the Court rejected as unpersuasive that the OxBlue product had an identical glitch to the EarthCam product that was allegedly copied – pointing out that the explanation that the glitch came from a component furnished by a mutual supplier was unrefuted.  The “brute force” attack was not proven to have obtained the information alleged and that information was not shown to have economic value apart from what could be readily obtained by proper means, and it was not shown to have been subject to reasonable efforts to maintain its secrecy.
 
The Court discounted EarthCam’s claims relating to its files found on an OxBlue computer (the “OxBlue 3019” file) after pointing out that only a conclusory affidavit and sworn interrogatory answers were offered by EarthCam to establish the information was not publicly available and gave EarthCam a competitive advantage.  Even assuming the interrogatories were admissible, the Court found “EarthCam has not shown that the information [in OxBlue 3019] is a protectable ‘trade secret.’”[3]  
 
The Court found that EarthCam “fundamentally failed to meet its statutory burden under the Georgia Trade Secrets Act.”  EarthCam failed to prove “use” of the alleged trade secrets by OxBlue and the Court refused to allow an amendment by brief that “misappropriation may occur through ‘acquisition of a trade secret of another by a person who knows or had reason to know that the trade secret was acquired by improper means.’”[4]
 
EarthCam’s assertion of a private right of action under the CFAA, 18 U.S.C. § 1030, was found without merit as there was no access without authorization – the passwords of EarthCam customers with authorization were voluntarily furnished to OxBlue.[5]  The Court noted there was no evidence of subterfuge or orchestration of a fraud by OxBlue.
Ruling on summary judgment against EarthCam’s assertion of tortious inference with contract, the Court found EarthCam failed to present evidence of acquisition by OxBlue of confidential or trade secret information from Hermann.  And with no improper conduct, there could be no claim.  Although New Jersey law applied to the contract between Hermann and EarthCam, Georgia law applied to the claim against OxBlue as a third-party.[6]  Because the contract was unenforceable in Georgia, OxBlue could not be held liable for tortious interference with that contract.
 
Hermann Motion for Summary Judgment on EarthCam’s Claims
 
Hermann filed for summary judgment relying on a release which EarthCam provided along with a check to escape claims based on a non-compete and confidentiality agreement.  The Court found the release provided by EarthCam precluded a claim of fraudulent inducement against Hermann, as there was no reliance.  The summary judgment also related to 4 gigabytes of information contained in the OxBlue 3019 file that was discovered during litigation by EarthCam.  EarthCam alleged this information originated with EarthCam and was uploaded by to an FTP site by Hermann after requesting such a site by email of June 19, 2009.  However, EarthCam relied upon its own interrogatory answers for proof that the files were trade secrets taken from its files.  In addition, EarthCam failed to “explain why any of the information . . . contained on OxBlue 3019 was not publicly available.”  The Court disregarded the interrogatories and a conclusory affidavit on this topic.  The Court ruled that EarthCam’s speculation of what was uploaded to the FTP site did not create a genuine issue of fact, but a mere fact issue that must have evidentiary support to survive summary judgment.  Although discovery was over, there was no indication in the Order that EarthCam had offered evidence of the source of the information in OxBlue 3019.
 
The Court found that information in Hermann’s mind, but not in any tangible format, was not trade secret information under applicable law: “Hermann’s general knowledge of EarthCam’s customers, products, services and strategies is not a trade secret under Georgia law.”
 
EarthCam Motion for Summary Judgment on OxBlue’s Counterclaims
 
EarthCam moved for summary judgment on several issues, including OxBlue’s claim of copyright infringement for the OxBlue Specification.  This system was modeled on the Construction Specification Institute’s MasterFormat, 2004 Edition.  In granting EarthCam’s motion, the Court noted that OxBlue confined its recovery to statutory damages and had not registered its copyright until over five years after publication and had not registered at the time of infringement (or within three months of the publication).[7]
 
The motion also addressed keyword purchases for advertising purposes.  EarthCam purchased “oxblue” as a search engine keyword to display its product when that word was searched.  However, the Court noted that EarthCam did not use the term “OxBlue” on its website or embedded as metadata, that it discontinued purchasing the term as a keyword upon request, and that OxBlue purchased “earthcam” as a keyword in 2003.  Without finding that the 11th Circuit would adopt the “initial interest confusion” as a cause of action, the Court assumed it was a viable claim only to find that OxBlue failed to provide evidence on the four factors necessary to prove such a claim:  “(1) the strength of the mark, (2) the evidence of actual confusion, (3) the type of goods and degree of care likely to be exercised by the purchaser, and (4) the labeling and appearance of the advertisements and the surrounding context of the screen displaying the results page.”[8] 
 
EarthCam’s summary judgment motion also covered false advertising claims based on (a) statements made over the phone by EarthCam representatives to OxBlue agents pretending to be looking for a camera solution and on (b) a chart depicting a comparison of EarthCam’s webcams with OxBlue’s cameras, which was sent to one customer.  The Court summed up its ruling at page 64: “OxBlue has not presented any evidence that EarthCam’s alleged misrepresentations about OxBlue’s products had a material impact on a customer’s purchasing decisions.”  The Court noted that “[i]Isolated [s]tatements made by sales representatives are not sufficiently disseminated to the relevant purchasing public to constitute false advertising under the Lanham Act.”  OxBlue sought to rely on a response to a leading question that the statements could have been made hundreds of times.   This only proved that the number of times was unknown.
 
A motion to reopen discovery by EarthCam was also denied as untimely and futile.
 
EarthCam, Inc. v. OxBlue Corporation, Chandler McCormack, John Paulson, Bryan Mattern, and Richard Hermann, Docket No. 292, decided September 22, 2014, in 1:11-cv-02278-WSD (J. Duffey).
-----------------------
[1] Garczynski v. Bradshaw, 573 F.3d 1158, 1165 (11th Cir. 2009) (quoting Scott v. Harris, 550 U.S. 372, 381 n.8 (2007).
[2] Order at 22 (quoting Rent Info. Tech, Inc. v. Home Depot U.S.A., Inc., 268 F. App’x 555, 557 (9th Cir. 2008)).
[3] Order at 32.
[4] Order at 34-35 (citing Gilmour v. Gates, McDonald & Co., 382 F.3d 1312, 1314-15 (11th Cir. 2004)).
[5] Order at 36-38 (citing Diamond Power Int’l, Inc. v. Davidson, 540 F. Supp. 2d 1322, 1341 (N.D. Ga. 2007); Secureinfo Corp. v. Telos Corp., 387 F. Supp. 2d 593, 608 (E.D. Va. 2005)).
[6] Order at 44-46 (citing Grupo Televisa, S.A. v. Telemundo Commc’ns Grp., Inc., 485 F.3d 1233, 1246-47 (11th Cir. 2007)).
[7] Order at 59 (citing M.G.B. Homes, Inc. v. Ameron Homes, Inc., 903 F2d. 1486, 1493 (11th Cir. 1990)).
[8] Order at 61-63 (citing Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1154 (9th Cir. 2011)).

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