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I have recently developed a medical software application. One of my previous employers X (from 4 years ago) sells a similar application. (You can see where this is going.)

X is now alleging that I might have stolen the code and created my own version but that is truly not the case: Every line of code has been written from scratch, and is entirely different from that of X.

X is also alleging trade secret violation (without even looking at the software) but everything this software does is based on public domain knowledge. Managing patients, Exams, Bills, etc. are all public knowledge. Specific tests that go in each exam have been made based on material read from books that I can prove.

My software simply provides a different way of managing practice that has not borrowed anything from X's software.

I did sign a confidentiality agreement with X. But my system employs a non-secret process, and every feature in my system is based on knowledge generally available to all.

The agreement also has a non-compete that states I cannot work for a competitor while I am employed with X.

The agreement was signed in year 2001 in Oregon. I am now in Canada and my company is registered in Canada, trying to sell software in United States.

Anyone has experience going through a similar scenario who can help me prepare a good reply?

This is essentially what the letter from X says:

X has recently learned that you are marketing a software product competitive with X’s software product which incorporates concepts, ideas, layouts, and designs from X’s software product. Similarities between your product and X’s product suggest that you have misappropriated confidential information from X, including software source code, as well as failed to return all confidential information to X upon your termination. To the extent you have created products using X's confidential information, those products are owed solely by X. Moreover, you are hereby notified that under your Confidentiality Agreement, you are prohibited from using or disclosing confidential information obtained and retained from X. Failure to comply with this obligation will result in immediate legal action against you and any persons acting in concert with you to seek injunctive relief, compensatory and treble damages, and attorney fees. X hereby reserves all rights, claims, and causes of action.

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    If your lawyer has asked for a particular document, your lawyer should be able to help you find an expert that can work with you to prepare the document. That's not something that random people on the internet are going to be able to meaningfully assist you with. Particularly without knowing exactly which trade secrets you are alleged to have infringed. – Justin Cave Oct 1 '15 at 18:37
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    just because you wrote the code from scratch doesn't mean you didn't incorporate their trade secrets... This isn't about copyright, it's about your contract clause to not use knowledge gained during employment in work for competitors (or whatever it reads). So you learned about how their business works, and now made another application to do the same things, which puts you in competition with them in violation of your original contract. You need a lawyer for that, and a good one. – jwenting Oct 1 '15 at 18:41
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    @jwenting agreed, this software puts me in direct competition with my employer but its been 4+ years. non-compete does not apply for the entire life. – user559788 Oct 1 '15 at 18:43
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    @whatsisname ...or that it's enforceable. Non-competes generally are not, in the USA at least, particularly when it comes to software development. – Mason Wheeler Oct 1 '15 at 18:53
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    FWIW: why do you have to prove anything? If your opponent is going to sue you, isn't the burden of proof on his side? Why do you want to name details where no trade secret violation has happened - that gives him a list of things where he can question what you were telling. Instead, ask him to name the specifics. – Doc Brown Oct 1 '15 at 19:14
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Prove my work is not a trade secret violation

Please don't.

It's not your job to prove your innocence. The burden is on them to be specific, explain fully, and prove specific claims about your actions. In other words, don't justify, don't explain, and don't defend yourself to them.

It's actually best you do not say anything to them, and just forward the letter to your legal counsel (Since you're selling software to be used in the medical field, I assume you already have some kind of legal counsel).

For instance, even saying something as innocuous as "Managing patients, Exams, Bills etc are all public knowledge." could be used against you. Because it establishes the fact that you've been working on those features with them and that you've been working on those features with your new company (which doesn't necessarily follow, for all they know, you could have purchased a library module from someone else with those exact features).

In other words, even if you were to reply with such an innocuous-sounding statement, you could be saving them months of cross-border discovery and litigation about some of their claims (even if you believed you were being entirely reasonable by defending yourself). But at the same time, don't take what I'm saying to mean that you should lie to them about which features you recently worked on.

When I say that you shouldn't be talking to them. I mean that you should not be talking to them. You shouldn't be engaging with them and you shouldn't be giving them any shred of information whatsoever (implied or otherwise). It's not your job to make their job any easier. Do not reply to them. Don't even acknowledge the receipt of the letter (unless you already did by signing for it, which can't be helped).

Use a legal intermediary. Give the letter to your own legal counsel (whether you signed for the letter, or not) and leave any reply to him or her (assuming he/she thinks this warning letter even warrants a response). And if this former employer gives you a phone call, kindly refer them to your legal counsel without saying another word.

  • My lawyer suggested exactly the same thing that we should not even try to defend. Just tell the other party that their claims are not valid. \So marking this as the answer but that being said I found other answers on this thread to be very useful as well. Wish there was a way to mark multiple answers and maybe rank them. – user559788 Oct 18 '15 at 6:21
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The code is one thing, but what about concepts, ideas, layouts, and designs?

Setting aside the question of the appropriate court for this action (Federal Court in Oregon or a court in Canada) you need to really think about your product and any components of the product which find their most minuscule source at Company X. Not that you will be liable for these tiny things, but they are the threshold level for where your analysis needs to start.

The problem here is not just trade secrets but any intellectual property including design and layout which could raise trade dress issues. Of course, that stuff is not secret. Ideas on the other hand - they will need to prove that you used ideas which a) are independently valuable because of their secrecy and b) actively protected.

Oregon Uniform Trade Secret Act Trade secret means information, including a drawing, cost data, customer list, formula, pattern, compilation, program, device, method, technique or process that:
(a) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

and

Canada's Uniform Trade Secrets Act (1989) "trade secret" means any information that

(a) is, or may be, used in a trade or business,
(b) is not generally known in that trade or business
(c) has economic value because it is not generally known, and
(d) is the subject of efforts that are reasonable under the circumstances to prevent it from becoming generally know.

(2) For the purposes of the definition trade secret "information" includes information set out, contained or embodied in, but not limited to, a formula, pattern, plan, compilation, computer program, method, technique, process, product, device or mechanism.

In Oregon, a person might reply to such a letter with the question: So that I may properly respond to your letter, please tell me which concepts, ideas, layouts, and designs are trade secrets and how I have misappropriated them.

  • That question is definitely something I can ask, especially when the Company X has not even seen my product completely. I have been very careful from the begining and used only that information which was available publicly. All ideas are mine. Layouts are completely different and so are the designs. All concepts are public domain knowledge – user559788 Oct 1 '15 at 22:16
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    Good answer, and good proposed response. But does a warning/"reservation of rights" letter like that generally merit a direct response? I don't see an actual accusation in it (though I don't claim to know what the best course of action is based on that observation). I did once respond to such a letter in a similar fashion, and received the reply, "You should consult a lawyer for legal advice." Maybe these letters are just an ongoing joke in the Bar Associations. – feetwet Oct 1 '15 at 22:54
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    @feetwet 100% what you say here. There is a saying - don't sleep on your rights. That could be all that is happening here. A letter like this to a genuine bad actor cuts off certain defenses that a guilty person might exploit and gives the plaintiff credibility when they say to the judge, "your honor we've been trying to help defendant stay out of trouble and he has ignored all of our advice." So, sometimes ignoring stuff is fine but you don't want to move forward with your product only to find that they have a legitimate complaint! Especially if it is something that you can adjust now. – jqning Oct 2 '15 at 2:56
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    Note that the quoted letter from X does not mention the phrase "trade secret" (although it does say "confidential information"), and it doesn't state that all the things the questioner is alleged to have done wrong constitute use of trade secrets (that's just the most-discussed among the list: the letter is piling on by talk of things like "layouts" which most certainly are not secrets if they're visible in the UI, but might be elsewise protected from copying). So the suggested reply is probably straw-manning X's claims by reducing to trade secrets claims only. Is that the intention? – Steve Jessop Oct 3 '15 at 11:05
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The employer is now alleging that I might have stolen the code and created my own version but that is truly not the case. Every line of code has been written from scratch.

This should be easy to demonstrate if it comes to that. There are automated tools which can measure similarity of source code pretty reliably (up to renaming and reordering). You could get an expert witness to endorse the results of such a comparison if it's not possible to do it convincingly yourself.

The employer is also alleging trade secret violation (without even looking at the software) but everything this software does is based on public domain knowledge. Managing patients, Exams, Bills etc are all public knowledge. Specific tests that go in each exam have been made based on material read from books that I can prove.

Your employer will bear the burden of proof to show you are using their trade secrets. That means they will need to demonstrate you are doing something that they figured out how to do and that it's not something that's generally known in the industry. Consider what, if anything, makes your software unique - how is it different from your former employer's offering and from the offering of other companies? If it doesn't do anything not done by others besides your former employer, you have nothing to worry about. If it does things your employer's software doesn't, you're probably still OK, unless the employer can show that you knew they were planning on this new feature and just got to it first. If your software does some things that were unique to your former employer's software, then you need to concentrate on those things and figuring out whether you might have unwittingly used their trade secrets in your program. If the stuff is trivial or obvious, you may not be in trouble; but you might be if nobody else is doing it (since if it were useful and obvious, it stands to reason others would be doing it too).

Anyone has experience going through a similar scenario who can help me prepare a good reply?

There are a few strategies here. Have their lawyers contacted you in writing? If not, you might simply ignore these complaints if you feel you are genuinely in the right. IF you have been contacted by their lawyers, you could either ignore it unless they sue, or you could discuss it with a lawyer and have a formal response written based on the merits of the former employer's claim. If you have already been sued, absolutely go get a lawyer and start figuring out whether you are in the clear (that's what it sounds like based on your perhaps biased description) or in the wrong (even if unintentionally).

By the way - what is your former employer asking you to do? Pay them money? Take your site down? I wouldn't do any of it without having a lawyer tell me to but if they just want an acknowledgment or something it might be easier to get it in writing and do what they want. But I wouldn't take the site down or pay them anything without the lawyer.

Note that you might be in violation of a non-compete clause separately from claims of copyright or trade secret violations. Even if it's your own code and your own ideas, even demonstrably so, you might be prevented legally from benefiting from them for some period of time and in some market. If you have a non-compete with them and you're in a jurisdiction which recognizes it as valid, you are almost certainly in violation and I'd go see that lawyer yesterday.

I am not a lawyer. I am not a lawyer.

  • Hi Patrick, very useful response. Glad you mentioned about automated tools. Maybe I should have the lawyer include that in response that we are willing to have our product compared. Everything my software does is obvious. There are 100s of other competing products that work exactly the same way. So nothing new and nothing that only former employer knew and I somehow copied it in my software. – user559788 Oct 1 '15 at 21:11
  • Patrick, do you know of any such software comparison tool. All I can find are automated testing tools or code diff tools that are meant to find differences in the same code file over time. Thx – user559788 Oct 1 '15 at 21:22
  • @user559788 Perhaps this? theory.stanford.edu/~aiken/moss – Patrick87 Oct 1 '15 at 22:10
  • @user559788: You shouldn't do anything that makes their life easier. You shouldn't volunteer anything. They will try to make this costly for you. You should try to make it costly for them. No need to be nice; they are not nice to you. – gnasher729 Oct 1 '15 at 23:52
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    @StephanBranczyk Excellent point - I don't mean to suggest anybody proactively go out and do this to prove innocence. I'm simply pointing out that there are technical means of determining the similarity of code which could be used to convincingly argue that code is not plagiarized/copied. Of course a tool will find similarities, but there are similarities between any copyrighted works; it has to be the degree of similarity that is taken into account. Of course, both parties would have to agree to submit their source code to examination which they may not want to do. – Patrick87 Oct 2 '15 at 13:25
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They can reverse engineer your code to prove their secret has been stolen. As Stephan Branczyk points out, your help is not needed in this process. Your lawyers only response should be:

No trade secrets were stolen, all demands are refused. (or whatever the technical term is, i am neither a lawyer nor a native speaker)

I wouldn't even ask or discuss what trade secrets exactly, they have to come forward with a valid claim. Don't give them anything except the one line, maybe after concrete claims add:

Your letter from Nth October does not contain a valid claim about stolen property, ...

They could be trying to get hands on your code because it does something cool they want or because they want o falsify evidence that you stole from them. If ever, only give the code to a court appointed expert.

And really, don't talk to them, not in letters, mails, chats, not on the phone, not in person, never. Whatever they do, always just point them to your lawyer and make clear they are paying his fees because of their unsubstantial claims.

Btw, I wrote a medical patient database a while back, I think you both stole my trade secrets! I was for example using a database, with tables, and it had an UI .. it just doesn't sound like the kind of software where you can have trade secrets like some cool algorithms or lots of research to get it running.

Also be aware the might find your post here, so don't disclose too much, what could be stolen or not.

Prepare for many rounds of "you have stolen" .. "have not" .. document everything, you will need it, don't give them new information, never get emotional and escalate. Really, this could run for years like this, make sure you get to the i-don't-care-about-their-claims state pretty fast or they will win by annoying you out of business.

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    "They can reverse engineer your code to prove their secret has been stolen." They can try, but just to be clear. Even if they reverse engineer your code correctly and fully, finding something duplicated doesn't necessarily prove "theft". Many snippets of code and code libraries can be copied from technical books, or technical web sites. It's not unusual to find everyone using the same snippet of code. – Stephan Branczyk Oct 2 '15 at 2:40
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Your non-compete timeframe doesn't start when you signed the non-compete, it starts when you actually separate from them. For instance, you signed in 2001, worked until 2011, and now it's 2015. If, for example, your non-compete period was 5 years, you are still within it.

However, more and more courts are striking down onerous, career-killing non-compete clauses as being overreaching and not tenable. Especially for those who are not equity-owners.

I agree with the earlier answers that suggest you limit your discussions with Company X. The letter they sent was a fishing expedition, you have no responsibility to respond, and depending on how you do respond, it could open you up to a further discovery/subpoena process. For example, if you even said that it was you that wrote the new code, they can establish plausibility that a trade secret may have leaked, even if perhaps inadvertently, and use that as a valid reason to demand discovery.

If you reply at all, say something to the effect: "Dear Company X, we are in receipt of your letter dated mm-dd-yyyy. You've made some incendiary and concerning claims, which are however too generalized for us to determine their merit or lack thereof. Thank you, Company Y."

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In legal terms, they have no valid claims. What's more important is to know what they want to achieve.

  1. Do they fear your competing product and want to ban it from the market?
  2. Are they looking for some compensation payment i.e. free money?
  3. Does someone there dislike you and just wants to hurt you?
  4. Does someone feel injustice has been done and wants to see justice?
  5. Do they just want to put on a show so other employees don't get encouraged to actually steal trade secrets?

If it is number 1, their lawyer will already have told them that they can try to scare you into voluntarily retracting the product and if that doesn't work they are out of options. A letter from a lawyer should end this.

If it is 2, the mere mention of a lawyer will make the problem going away, because their costs will be higher than their profit.

If it is number 3, you need to be careful about contacting them. If you call them over the phone (unrecorded) they can later claim you admitted stealing trade secrets during that call, or you threatened them, which can make court costs more expensive.

If it's number 4 you have an actual problem. If you still have friends at the company you might be able to make them talk sense to the person responsible.

If it's number 5 they just want there to be a short and very cheap fight, which will probably mean just a few letters from a lawyer from each side.

The best option is, if you still have some old friends at the company who you can trust, ask them what's going on. Knowing what exactly is going on may allow you to resolve this quickly and free your mind from any worries.

Also respond to their letter in writing, rejecting their claim while giving as little information as possible. If they want to look at the code tell them "no". Giving them information willingly lowers their cost which is not something you want to do.

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