Businesses whose livelihood depends on proprietary technology must be vigilant in protecting that technology. Those who use others’ proprietary systems should strive to respect attendant use restrictions.

Earlier this month, Office Future Systems Inc. (OFS) filed a lawsuit against the Los Angeles Department of Water and Power (LADWP), alleging that LADWP misappropriated OFS’ proprietary online bidding system. Apparently, OFS and LADWP had a contractual relationship for several years during which LADWP paid OFS for the use of it’s system. In the lawsuit, OFS contends that LADWP terminated their relationship and then utilized the services of OFS’ former technology officer through another contractor to, essentially, duplicate OFS’s system.

Whether or not the allegations against LADWP will be proven remains to be seen. The immediate lesson is that steps to protect proprietary technology may include express license/access restrictions, non-disclosure agreements, non-compete agreements and even litigation. To help avoid litigation, users should exercise due diligence to determine whether contractors and vendors have unfettered permission to provide technology and services.

An article with more information about the OFS lawsuit is available here (free trial registration may be required). Contact us at Ossian Law P.C. regarding any information technology law question.