The significance of this particular case lies in its scope, however: apparently, the Chinese government mandated that Green Dam Youth Escort be included with all computers sold in the country, thereby forcing several prominent computer manufacturers, including Acer, Lenovo and Sony to include this software with its computers. According to the lawsuit, these manufacturers continued to market and sell their computers with the software even after they were made aware that the software was indeed pirated.

The lawsuit seeks more than $2 billion in damages, representing the amount of money Cybersitter would have earned had all of these users paid for their software.

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When P confronts D about all that has transpired, D looks P right in the eye, and says “Go right ahead and sue me if you like; I’m judgment-proof. Even if you win, your award will be worthless, because I’ve set up more shell corporations than you can count, and you’ll never get through them to me.” So, here’s the big question: Is D right, or is there something that can be done to effectively fight D?

As suggested by the title of this article, the answer is yes, under certain circumstances, you can pursue D individually by “piercing the corporate veil.” This is no simple task, however, for in order to prevail on such a claim, the plaintiff will be required to prove not only that D individually exercised total control over the company to the extent that he was effectively the alter ego of the company, but that he did not maintain corporate formalities. A practical example of this would be where he commingled funds, treating the company’s money as his own personal funds and vice versa, or the failure to maintain separate corporate accounts or file corporate tax returns.

Importantly, in a cautionary opinion that was handed down by New York’s Appellate Division, Second Department on Juy 28, blanket allegations that the individual defendant and his company are one and the same will not suffice; the party seeking to pierce the corporate veil must also allege specific facts demonstrating that the defendant had misused the special protections afforded by the corporate form (i.e., showing how these companies were really a sham), and thereby he should be deemed to have forfeited those privileges.

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In a story that was published earlier today, a former Goldman Sachs vice president was arrested by the FBI based upon this employee’s alleged trade secret theft, more particularly, claims that he stole Goldman’s proprietary automated trading codes and uploaded them to a remotely located computer server.

According to the FBI, this employee downloaded and then transferred this proprietary information from his work computer after accepting a job offer at a different company, and then tried to conceal his actions by deleting the history of his actions from his desktop computer.

He is currently out on bail.

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First, and as a threshold matter, the article does not even attempt to prove – scientifically or otherwise – a link between the economy and a breach of fiduciary duty.

Ironically, the prime example cited by this article - a crackdown on wealthy companies who engaged in unfair competition by paying out hundreds of millions of dollars in fines for illicitly attempting to secure lucrative oil contracts through bribes – does not support its theory that theft and dishonesty are being perpetrated by the desperate.

In short, as noted in my earlier blog post “Study Claims That Employee Theft Rises as Economy Worsens,”  it seems that people are looking for a convenient scapegoat for unethical behavior when they should be looking in the mirror.

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The answer is relatively straightforward: since we believed that our position was especially strong under New York law, particularly given the language in the parties’ contract which gave sole and exclusive ownership of all intellectual property to the LLC, we simply showed the other side a draft of the papers we intended to file with the Court, and gave them a day to mull it over. In response, the other side’s attorney contacted me, and began open and frank discussions about how we could resolve our clients’ differences.

Consider two alternative scenarios:

Scenario #1: we could have merely threatened suit, but as you probably know, most threats of lawsuits are not taken very seriously, and therefore, I’ve found, usually is just a waste of time.

Scenario #2: : we could have immediately filed suit and sought injunctive relief from the Court, and thereby not only incurred thousands of dollars in Court filing and attorneys’ fees for both sides, but this would have almost certainly poisoned the atmosphere between the parties, and made the resolution of this particular issue far more costly and difficult than necessary.

The moral of the story is obvious: if you have a strong and well-reasoned position, it is definitely worthwhile to spend the time and money to prepare legal papers that reflect this, and to let the other side know it. Everyone knows that’s the heavy lifting, and that it takes virtually no effort to walk (or electronically file) those papers over to the court. Taking this important first step may just save you loads of time, aggravation and money.

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I don’t think there is any one factor or cause for this phenomenon, and I doubt that it’s because some sort of mystical or mythical pendulum has swung in a different direction, and people have suddenly decided to stick to their principles. Rather, I suspect that the economic downturn we are in has made people more protective of their hard-earned money, and less likely to pay out a settlement because unlike days and years past, there is a likelihood that these people will not recoup (or at least not easily recoup) that settlement from their ongoing business.

But when a client takes an intractable stance, it can put the attorney in a difficult position, and for one simple reason: virtually no case is a “slam dunk.” Every case has difficulties, and the small business lawyer’s job is to balance the zealous advocacy of his client’s position with the need to view the case objectively. Otherwise, the lawyer is doing his client a great disservice; he is reduced to being a mercenary, and is no longer a valued counselor.

The cold, hard truth is this: in a court of law the most important issue is what you can reasonably prove – it is not whether you subjectively believe you are right or wrong.  Once you accept that fact, the next steps flow logically: the smart business owner will not want a mere “hired gun”; rather, he will want someone who will be straightforward and tell him what the problems are with his case based upon an objective evaluation of the evidence. In this manner, the small business owner can make an intelligent assessment whether the case should be tried, or to assess what a fair and just settlement should be.

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In its initial suit papers, Price Chopper claims that competitor Giant Market would have someone consistently and surreptitiously obtain copies of Price Choppers’ fliers that would announce their special sale items, and then undercut those specific sales items in their own advertisements, thereby depriving Price Choppers’ sales of any measurable impact, and giving Giant Market an unfair competitive advantage.

If true, the details set forth in Price Choppers’ complaint are indeed tantalizing, and if this case were ever to go to trial, would certainly have a great deal of jury appeal. For example, Price Chopper apparently has videotape of someone sneaking into the warehouse where their pre-publication fliers were stored, and then handing them to a Giant Market employee. And it appears that they have videotape of this occurring on several occasions.

One important tidbit to glean from this story is this: trade secret protection is not limited to proprietary technology and formulae; if your product marketing and pricing took time, effort, research and expense to develop, and is not readily available to the general public, it can be applied to that as well.

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Perhaps there’s a lesson for small businesses here: if you’ve been wronged by a much bigger company, don’t be afraid to stand up and protect your own turf. The other company’s deeper pockets do not – by any means – guarantee their victory.

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Not suprisingly, MGA announced its intention to appeal this verdict “immediately.” However, as any veteran litigation attorney will tell you, appellate courts tend to give great deference to jury determinations, and prefer not to disturb jury verdicts unless they are not supported by the evidence, because otherwise, the courts would effectively usurp the jury’s role and function . Thus, putting it mildly, MGA faces an uphill battle in its efforts to either reverse, or substantially reduce, the jury’s 9-figure verdict. In short: infringers beware.

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In addition to claiming that Sun stole their proprietary trade secrets and technology and breached their contract, the software company apparently also claimed that Sun engaged in unfair competition, and actively interfered with the software company’s existing contracts.

The significance of this news story to the small business owner should be obvious: before you embark on a joint project, particularly with a much larger partner, it is critically important that each side’s proprietary technologies and rights, as well as each side’s role in the project is, to the extent possible,  clearly delineated. In this fashion, it should be  relatively clear-cut when the contract has been breached.

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