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Total Articles: 226

6.8M Award for Theft of Company Trade Secrets

A dental technology company has obtained a $6.8 million judgment against a former employee accused of stealing the company’s designs. The federal district court in Central California entered the judgment after finding the defendant, Jian Lu, liable for stealing trade secrets. Sirona Dental Systems Inc., et al. v. Jian Lu, No. 2:15-cv-08777 (C.D. Cal. Oct. 19, 2017). This case highlights the importance of non-disclosure agreements, paying close attention to developments in your industry, as well as vigorously protecting your rights in court.

eLABORate: Social Media Complications in the Enforcement of Non-Solicitation Agreements

Determining whether a former employee has breached a non-solicitation agreement has become a more complicated issue in the social media age. Courts are wrestling with the question of when a former employee’s social media interaction crosses the line into contractually prohibited solicitation.

Are You Doing Enough to Protect Your Company's Secrets?

A decade ago, I litigated a trade secret/unfair competition dispute between two large plastics manufacturers. The Plaintiff was based in southwest Florida, the Defendant in southern Alabama. The factual dispute is interesting, though not necessarily particularly pertinent to the subject I want to address in this post.

Departing Employees: Ensuring Protection of Trade Secrets and Intellectual Property

“Knowledge is power” goes the old adage. Well, that is certainly true in the world of business where secret processes, confidential designs, and even a good customer list can give a business a vital commercial edge over its rivals. Protecting the sanctity of that information on the departure of a key employee is vital.

LinkedIn Over Her Head: When Broadcasting a Change in Employment Counts as Solicitation

Non-Compete and Trade Secrets Blog LinkedIn Over Her Head: When Broadcasting a Change in Employment Counts as Solicitation Sept. 8, 2017 by John Singer A recent blog post discussed an Illinois state court decision evaluating an employer’s claim against a former employee for breach of a non-solicitation agreement, when the employee had added former co-workers on LinkedIn after going to work for a competitor. There, the court determined that the employee had not violated the non-solicitation agreement, finding that merely adding a former co-worker as a LinkedIn connection was a type of “passive” social media activity that did not rise to level of solicitation. The court differentiated between passive, untargeted social media activity and more “active” interactions, such as sending direct messages to former co-workers or targeting former customers with a sales pitch, and suggested that such activity could run afoul of a non-solicitation agreement.

eLABORate: Federal Court Gives Clues as to When "The Nuclear Option" Will Be Ordered under the Defend Trade Secrets Act

In 2016, President Obama signed into law the Defend Trade Secrets Act of 2016 (“DTSA”), allowing businesses nationwide to file suit in federal court to protect their trade secrets from unscrupulous former employees and dishonest business competitors. The law was applauded by the business community, because prior to the enactment of the DTSA, companies were limited to seeking relief in state courts, where the law can vary from state-to-state, yielding inconsistent results.

Who Poked Whom First: Does a Friend Request or Social Media Invite Count as Solicitation?

When Gregory Gelineau quit his job at an Illinois-based insurance company to work for a competitor, he sent LinkedIn invitations to a group of his former co-workers. In response, Gelineau’s former company sued him. The company, Bankers Life, alleged that Gelineau violated the non-solicitation provision in his employment agreement by recruiting or attempting to recruit several of his former co-workers.

The Not-So-Secret Recipe: How Restaurants Can Protect Their Trade Secrets

Restaurant fortunes are often attributable to just one or two signature dishes, and recipe ownership dilemmas can arise in restaurants of all sizes. Recent examples include a joint venture gone awry, resulting in a war over the ownership of a salted caramel brownie recipe; the “Taco Bible” that a former employee allegedly stole and used at another taco restaurant nearby; and a well-known Australian chef demanding that his former employer cease serving the signature dish he created when he worked there.

Is My Noncompete With an Independent Contractor Enforceable?

The Eight Circuit recently addressed this question in Ag Spectrum Co. v. Elder, Case No. 16-3113 (8th Cir. August 2, 2017). In that case, Ag Spectrum contracted with Vaughn Elder to work as an independent contractor. Elder also agreed to a three-year noncompete whereby he would not compete with Ag Spectrum by “marketing to, selling to, or consulting with its customers about similar products for three years after terminating the Agreement.” Elder argued that the Agreement was unenforceable under Iowa law.

Noncompete Agreements Present Challenges for Multistate Employers

Every organization wants to protect its assets, and employees are undoubtedly vital to any employer as one of its greatest resources. Thus, an employer will often use a noncompete agreement, which is a type of restrictive covenant designed to limit an employee’s ability to work in similar employment for a competitor.

Review of Previously Opened Email May Violate SCA

In the midst of a heated litigation commenced by an employer against its former employee for alleged violations of a non-compete agreement, an employee returned the cell phone she used during her employment. Prior to returning the phone, she deleted all emails that were stored on the phone.

Non-Compete News – Third Circuit Says Tortious Interference with a Non-Compete Requires Actual Knowledge of the Agreement at Issue

Executive Summary: An employer hiring an individual known to be subject to a non-compete contract can expect to be accused of tortiously interfering with that contract. On the other hand, the hiring employer should be innocent of wrongdoing if it has no idea the new hire is bound by a restrictive covenant. In Acclaim Sys. v. Infosys, Ltd., 2017 U.S. App. LEXIS 2325 (3d Cir. 2017), the Third Circuit recently affirmed this common-sense approach by holding an employer lacking actual knowledge of a restrictive covenant cannot be liable for tortious interference with that covenant.

Choice-of-Law and Choice-of-Forum May Depend on the Choice of Where to File and When: Multi-State Employers Continue to Face Challenges When Enforcing Restrictive Covenants Across State Lines

Employers who operate in a multi-state environment should take note of a recent case out of the Sixth Circuit (which governs employers that operate in Kentucky, Michigan, Ohio, and Tennessee.) Stone Surgical, LLC v. Stryker Corporation involved a departing sales representative from Stryker, a medical-device manufacturing company headquartered in Michigan.

Lyft Drivers Allege Uber Spied on them for Competitive Edge

former Lyft driver filed a class action lawsuit in the Northern District of California against Uber, alleging Uber violated the Electronic Communications Privacy Act (“ECPA”), the California Invasion of Privacy Act (“CIPA”), and other common law invasions of privacy and unfair competition.

Defend Trade Secrets Act Claims Demonstrate Evolving Legal Options for Employers

The Defend Trade Secrets Act (DTSA) marked its first anniversary in May, and a number of claims have helped to outline both the law's scope and federal courts' willingness to apply the law's provisions. Employers may use the DTSA to protect against unauthorized disclosure of trade secrets and other confidential and proprietary business information.

Noncompete Agreements: Five Common Pitfalls Every Employer Must Know

Employers like noncompete agreements because they can restrict employees from working for a competitor not only during employment, but for a certain period of time after they leave the company. It’s an employer’s way to safeguard its position in its industry—by preventing certain employees from using the knowledge and skills obtained while working for the former employer for a competitor.

Non-Compete News: Using Defend Trade Secrets Act, California Court Stops Deletion of Misappropriated Confidential Information

Executive Summary: Having just celebrated its one-year anniversary, the Defend Trade Secrets Act (DTSA) triggered an uptick in federal litigation concerning the fight to protect corporate trade secrets. Though no court has issued the elusive ex parte civil seizure remedy which the Act allows, one recent decision came close. In OOO Brunswick Rail Mgt. v. Sultanov, 2017 WL 67119 (N.D. Cal. Jan. 6, 2017), the U.S. District Court for the Northern District of California used the DTSA to bar an individual defendant from accessing or modifying a laptop and cell phone received from his former employer, and to compel non-parties Google and Rackspace to preserve both individual defendants’ web-based email accounts.

Don’t “Hire” A Lawsuit: A New Employee’s Misappropriation of Trade Secrets May Quickly Become Your Own

Companies commonly assume that they will only be sued for trade secret misappropriation if they or someone from their company steal the “secret sauce” of their competitor. Not true. A far more common way that companies get dragged into these lawsuits is through poor hiring decisions and practices. These cases are sometimes referred to as third-party misappropriation claims. [1] A recent example is Molon Motor and Coil Corp. v. Nidec Motor Corp, Case No. 16 C 03545 (N.D. Ill. May 11, 2017).

State and Federal Trade Secrets Claims Upheld By Northern District of Illinois

A May 11, 2017 decision by Judge Chang, in the Northern District of Illinois, found misappropriation alleged under the Defend Trade Secrets Act (DTSA) and the Illinois Trade Secrets Act (ITSA), in a case where the employee downloaded files while still employed.

Despite recent scrutiny, carefully-considered non-competes logical choice in many situations

Last weekend, the New York Times published an article titled “How Noncompete Clauses Keep Workers Locked In.” The article focused on low and middle level workers who were sued or had a hard time finding new jobs because they had signed non-compete agreements with their former employers. One point made by the article is that when used with personnel who do not have significant executive, research and development (R&D), or sales responsibilities, non-competes provide little benefit for employers, can cause difficulties for employees (including limiting their mobility and ability to make higher wages), and hurt the economy.

A Key Difference Between the DTSA and UTSA: “Continued Misappropriation” Continues to be a Viable Claim

The Defend Trade Secrets Act (“DTSA”), unapologetically, was modeled after the Uniform Trade Secrets Act (“UTSA”) in many respects. For background, the DTSA is the federal statute, enacted in 2016, that creates a federal private right of action for misappropriation of trade secrets. The UTSA is a model statute that has been adopted, in various forms with many variations, in 48 states and the District of Columbia.

Securing An Ex Parte Seizure Remedy Under DTSA

Last year, a new federal statute was passed that should have a profound effect on employers and their businesses — the Defend Trade Secret Act. The act codified, for the first time, a federal statute providing a civil remedy for misappropriation of trade secrets. Prior to the DTSA, employers that sought to protect their trade secrets had to do so under state law often in state court. This state law, in many respects, was inconsistent between states, creating real difficulties for employers that operated in a multistate environment.

A Primer on “Cross-Referencing” the DTSA Whistleblower Immunity Provision Following 4 Simple Steps

In the spring of 2016, the Defend Trade Secrets Act (“DTSA” or “Act”) was signed into law providing trade secret owners for the first time a federal civil cause of action for trade secret misappropriation. Although the DTSA does not provide a new framework and largely overlaps with the Uniform Trade Secrets Act in that respect, it does have some unique provisions. One key distinction imbedded in the statute is that the Act requires employers to provide notice to employees of whistleblower immunities in all agreements dealing with trade secrets and/or confidential information in order to be able to recover punitive damages and attorneys’ fees. Employers can do so by (1) providing notice in the agreement itself, or (2) “cross-referenc[ing]” a “policy document” that sets forth the employer’s reporting policy for a suspected violation of law.

First Ever Federal Trade Secrets Conference Will Heed Call to Action!!

On October 25, 2016, the Obama White House issued a Call to Action (CTA) urging states to enact non-compete reform. The CTA posits that non-compete agreements are overused, and that employers can protect their interests through a “host of other legal frameworks-including trade secrets protections.”

California Court Declines to Issue DTSA Seizure Order

On January 6, 2016, the U.S. District Court for the Northern District of California issued one of its first decisions interpreting the ex parte seizure provisions found in the recently enacted Defend Trade Secrets Act of 2016 (DTSA).

Federal Court in California Rules on DTSA’s “Extraordinary” Ex Parte Seizure Remedy

When the Defend Trade Secret Act (“DTSA”) was enacted last year, there was much debate on the remedy provision permitting the ex parte seizure of property. Such an order would not only direct the seizure of information without notice to the defendant, it would involve the assistance of law enforcement who would seize physical property and deliver it to the court. No analogous procedure was available at the state level or under the Uniform Trade Secret Act. Thus, the remedy was seen as a potentially powerful new tool for employers who sought to protect their trade secrets against misappropriation.

Forum Shoppers Beware (But Not in Alabama)!

Since non-compete law can vary drastically by state, many employers who operate in a multistate environment can benefit from utilizing forum-selection and choice-of-law clauses. These clauses are intended to ensure employers greater uniformity and predictability in managing their workforce. Employers can know in advance the forum and law that will apply if and when it needs to enforce a restrictive covenant against a rogue employee. Unfortunately, as many of the states have started to weigh in on the enforceability of these clauses, they have adopted different rules and at times made enforcement unpredictable and inconsistent.

Did the White House’s “Call to Action” Get“Trumped”?

The White House, under the Obama Administration, recently issued a “Call to Action” to state legislators across the country for non-compete reform. The Call to Action was a culmination of a months-long investigation by the Obama Administration. It reflected a growing movement amongst the states, including Illinois, Massachusetts, and Michigan, and others, for non-compete reform.

Twas the Night Before Christmas -- Non-Compete Style

Twas the night before Christmas, when all through the company; A disgruntled employee kept saying “please jump with me.” She was trying to line up a grand, mass departure; Of which she was certain no one could outsmart her.

DOJ, FTC Announce Plans to Criminally Prosecute Employers That Enter into Wage-Fixing or No-Poaching Agreements

In the fiercely competitive market for talent, human resources personnel and recruiters inevitably feel the competing pressures of offering compensation packages that are attractive to potential employees and keeping costs under control. To find the appropriate balance, they may feel tempted to share information with their counterparts at competing organizations and/or reach agreements with them not to recruit one another’s employees.

New SEC 'Risk Alert' on Confidentiality Agreements

The Securities and Exchange Commission has announced that it considers illegal any employer-imposed limitation on employees' ability to disclose confidential trade secret information to the SEC, if the employee wants to make disclosure in pursuit of whistleblower claims. Indeed, the SEC wants employers to affirmatively advise employees of their right to do so.

New DOJ, FTC Antitrust Compliance Guidance for Human Resources Attacks No-Poaching Agreements

Criticizing non-solicitation of employees — or “no-poaching” — agreements as an alleged factor in holding back wage growth, the U.S. Department of Justice and the Federal Trade Commission have issued antitrust guidance on human resources issues. This is consistent with and continues the White House’s recent attacks on post-employment restrictive covenant agreements. (See our article, White House Continues Attack on Non-Compete Agreements.)

White House Urges Noncompete Ban for Certain Jobs

The Obama administration has announced several steps to reduce what it sees as the misuse of noncompete agreements, including urging states to ban noncompetes altogether for certain jobs. One in five US workers is bound by a noncompete agreement, including 14% making less than $40,000 per year.

White House Continues Attack on Non-Compete Agreements

“State Call to Action on Non-Compete Agreements” is the White House’s latest in a series of Executive Branch missives decrying the purported misuse of non-competition agreements by employers across the country.

White House Issues State Call To Action To Ban Certain Non-Compete Agreements

Executive Summary: On October 25, 2016, the Obama Administration issued a “State Call to Action on Non-Compete Agreements.” This call to action is part of President Obama’s Executive Order directing states to increase competition for workers and consumers. This “Call to Action” can be reviewed here.

A Call-to-Action: Obama Administration Encourages States to Ban Noncompetes for Low-Wage Workers and Certain Other Employees

On October 25, 2016, the Obama administration released a fact sheet announcing the steps that the White House is taking to “enhance competition to benefit consumers, workers, and entrepreneurs.” The administration’s actions come in response to President Obama’s April 15 executive order: Steps to Increase Competition and Better Inform Consumers and Workers to Support Continued Growth of the American Economy. The new announcement referenced the administration’s “call to action” and accompanying “set of best practices for state policymakers to enact reforms to reduce the prevalence of non-compete agreements.”

A New Arrow to Attack those Who Steal Trade Secrets

Last month, Congress passed the Defend Trade Secrets Act of 2016 (“DTSA” or the “Act”). This momentous new law establishes a federal cause of action for companies who have trade secrets misappropriated.

Accessing Database Violates Computer Fraud and Abuse Act and Economic Espionage Act – Ninth Circuit Affirms Criminal Conviction of Former Employee

The Ninth Circuit recently filed its latest installment in the saga involving David Nosal and his former employer, Korn/Ferry International, an executive search firm. Korn/Ferry maintains a proprietary database of executive candidates for its paying customers. Nosal, a former Korn/Ferry executive, set up a competing business. Allegedly desiring the information in Korn/Ferry’s database for his competing business, Korn/Ferry alleged that Nosal tried two methods to access it: (1) using his own user name and password to download information before his departure; and (2) after his departure, using the user name and password of a willing accomplice who was still employed by Korn/Ferry.

Can Non-Compete Agreements Be Classified As Personal Services Contracts?

In Symphony Diagnostic Services No 1 Inc. d/b/a MobilexUSA v. Greenbaum, the Eighth Circuit Court of Appeals tjust addressed an issue that frequently arises in the non-compete context: what happens when a company buys the assets of another and then tries to enforce non-compete agreements?

Non-Compete Agreements may be Transferred and Enforced by the Successor Employer Following an Asset Purchase Sale

The Eighth Circuit Court of Appeals recently held that non-compete agreements may be transferred to a successor employer through an asset sale and enforced by that successor employer against the employees who previously signed the non-compete agreements. (Symphony Diagnostic Services No 1 Inc. d/b/a Mobilex USA v. Greenbaum).

Eighth Circuit Finds Non-Competition Agreements Assignable to Successor Employer in Asset Purchase Without Employees' Consent

Executive Summary: The United States Court of Appeals for the Eighth Circuit recently held that a successor employer, who was assigned non-competition agreements as part of an asset purchase, could seek to enforce the non-competition agreements under Missouri law against two former employees of the predecessor who went to work for a competitor. Reversing the district court's order granting summary judgment to the former employees on the basis that the non-competition agreements were "personal service contracts" and could not be assigned without the employees' consent, the Court of Appeals in Symphony Diagnostic Services No. 1 Inc. v. Greenbaum found that that the non-competition agreements were not personal service contracts and, therefore, could be assigned without the employees' consent.

Uber vs. Cab Companies: Trade Secret Edition

A state court in Florida recently ruled that the same categories of information maintained and possessed by government officials relating to two different companies can be both a public record and a trade secret, depending on how the information is used and protected by the companies at issue. The decision underscores the importance of ensuring that trade secrets meet the applicable statutory definition, as well as vigorously opposing any attempts by anyone to force trade secret disclosure.

New Federal Trade Secret Statute Requires Important Updates To Contracts And Policies

With the recent passage of the Defense of Trade Secrets Act (DTSA), businesses are welcoming the many benefits the statute brings, including federal jurisdiction, robust equitable relief, and the ability to recover compensatory damages, punitive damages, and attorneys’ fees. However, in the midst of celebrating this new federal cause of action, many employers are overlooking a requirement embedded deep within the statute that requires revisions to existing confidentiality agreements and restrictive covenants.

Terminating an Injunction Regarding Confidential Information

Although the Georgia appellate courts have not issued many decisions on the new restrictive covenant statute that went into effect on May 11, 2011, they do continue to issue decisions in the area of protecting confidential information. One such decision is Mays v. Southern Resources Consultants, which came out of the Georgia Supreme Court in early June.

Five Questions You Should Ask About the Defend Trade Secrets Act

Until recently, the Economic Espionage Act of 1996 (EEA) allowed for federal trade secret actions by the U.S. Department of Justice.

The Advantages of Using Forum Selection Clauses

As a management-side labor and employment law firm with a national practice, we often deal with companies who have operations in multiple states throughout the country.

California Federal Court Grants TRO Under New Federal Trade Secrets Law

In the first decision under the federal Defend Trade Secrets Act of 2016 (DTSA), which was signed into law on May 11, 2016, a California federal court has granted a temporary restraining order (TRO) against a sales consultant who changed employers and allegedly stole confidential data in violation of federal and state trade secret laws and employment agreements. In Henry Schein, Inc. v. Cook, No. 16-cv-03166-JST, 2016 U.S. Dist. LEXIS 76038 (N.D. Cal. June 10, 2016), the district court entered a TRO enjoining the defendant from using or disclosing the plaintiff’s confidential information and trade secrets and from soliciting customers that were assigned to her during her employment.

Hiring an Employee Subject to a Restrictive Covenant: Risky or Smart Business?

What company wouldn’t want their competitor’s employees? They already have the specialized industry knowledge and skills that can help your company be successful. However, hiring a direct competitor’s employees raises many concerns, especially if that employee is subject to an employment contract that contains restrictive covenants, i.e., noncompete, nonsolicitation and/or nondisclosure clauses.

The New Defend Trade Secrets Act: Implications For Employers

With the enactment of the federal Defend Trade Secrets Act of 2016 (DTSA), owners of trade secrets now have the ability to bring a cause of action for misappropriation of trade secrets in federal court. Previously, employers had to rely primarily upon state laws in pursuing such claims against former employees. Employers can still protect trade secrets through applicable state law but now have the added protection of federal law,[1] which has certain advantages. To take full advantage of the DTSA, however, employers must include certain notice provisions in all agreements with employees, contractors and consultants governing the use of trade secrets or other confidential information. These requirements are discussed belo

Update Your Confidentiality Agreements and Policies *Now*

Tidea netheft of trade secrets by rogue employees is frighteningly common. When employees leave or lose their jobs, about half “steal corporate data and don’t believe it’s wrong” and forty percent “plan to use the data in their new jobs,” according to a 2012 global survey published by Symantec, a security firm. The survey was based on responses from thousands of employees in the United States, United Kingdom, France, Brazil, China, and Korea.

Listen – do you want to know a (trade) secret . . . ?

Signed into law on May 11, 2016 by President Obama, the Defend Trade Secrets Act (DTSA) has been called the “most significant expansion” of federal intellectual property law in 70 years, and has set off a firestorm of articles on the topic. The DTSA ostensibly was created to establish a uniform national law regarding the protection of trade secrets, and to homogenize the complexities created by the wide variety of existing state trade secret laws.

President Obama Signs the Defend Trade Secrets Act into Law: What You Need to Know Now

On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act (DTSA). Unlike other forms of intellectual property, trade secrets issues have been addressed mainly through state law. The DTSA provides a new federal court civil remedy for acts of trade secret misappropriation, among other key provisions:

New Federal Law Governs Trade Secrets

President Obama has signed the Defend Trade Secrets Law of 2016 into law, effective May 11, 2016. As discussed in detail in our April 28, 2016 Legal Alert, the law provides a new, uniform federal civil remedy to trade secret owners whose intellectual property has been stolen—without preempting state law or disrupting fair competition. The law creates a strong weapon in the corporate arsenal to strike back and stem the tide of cyberthieves, unscrupulous employees, and others who misappropriate confidential information and trade secrets.

What Does The Defend Trade Secrets Act Mean For Employers?

On May 11, 2016, President Obama signed the Defend Trade Secrets Act which had been overwhelmingly passed by the U.S. House of Representatives on April 27, 2016, after having previously been passed by the Senate. The Act creates a federal civil cause of action for trade secret theft.

Update: Defend Trade Secrets Act Signed Into Law

Yesterday, President Barack Obama signed the Defend Trade Secrets Act of 2016 ("DTSA") into law creating a federal private cause of action for trade secret misappropriation that can be pursued in federal courts as more fully described in our April 28, 2016 post, available here.

Defend Trade Secrets Act Becomes Law, Opening Federal Courts to Aggrieved Companies

For the first time, companies have a federal private right of action for misappropriation of trade secrets. The Defend Trade Secrets Act (“DTSA”), signed by President Barack Obama on May 11, 2016, applies to any misappropriation of trade secrets that occurs on or after the signing date.

Employers, Beware: New Federal Trade Secrets Law Contains A Hidden Trap

With the recent passage of the Defense of Trade Secrets Act (DTSA), businesses are welcoming the many benefits the statute brings, including federal jurisdiction, robust equitable relief, and the ability to recover compensatory damages, punitive damages, and attorneys’ fees. However, in the midst of celebrating this new federal cause of action, many employers are overlooking a requirement embedded deep within the statute.

The Seizure Provisions of the Defend Trade Secrets Act

This week, President Obama signed into law the Defend Trade Secrets Act. Among its many interesting provisions is a detailed procedure for a party to request, ex parte, the seizure of property in order to "prevent the propagation or dissemination" of the trade secret at issue. Such an order would only be available in "extraordinary circumstances." This could be a very powerful tool in a fight against misappropriation of trade secrets as it could impair the defendant's ability to conduct business.

President Obama Signs Defend Trade Secrets Act of 2016

The federal Defend Trade Secrets Act of 2016 was signed into law on May 11, 2016 by President Obama. A review of the law and its impact on employers can be found here: http://www.noncompetereport.com/2016/04/defend-trade-secrets-act-set-to-become-law/

The Defend Trade Secrets Act Is Now Law

On May 11, 2016, President Barack Obama signed into law the long-awaited Defend Trade Secrets Act of 2016 (DTSA), which is effective immediately. Three key features of the DTSA include: (1) the creation of a federal private right of action for trade secret misappropriation; (2) a provision permitting ex parte civil seizure of property necessary to prevent the propagation or dissemination of trade secrets; and (3) a requirement that employers provide notice to employees of their immunities under the DTSA for making confidential disclosures to the government, in court filings, or in connection with whistleblower retaliation claims by employees against their employers.

Famous Examples of Trade Secrets

Trade secret practitioners often find ourselves having to explain what a trade secret is. The most common example (and one which I frequently use) is the Coca-Cola formula, as it can be easily used to illustrate each of the prongs of the trade secret test. That example can then dovetail into a description of the Joya Williams case from a decade ago, which is a good example of an effective internal investigation on the part of an employer protecting its trade secrets.

The White House is Interested in Non-Compete Reform

President Obama is expected to sign the Defend Trade Secrets Act, which passed with overwhelming, bipartisan support in the House and Senate in recent weeks (and about which we will have a lot more to say in the coming days). Now, his Administration is moving from one major arena in which companies protect their confidential information to the other: enforcement of non-compete restrictions. And in this instance, the Administration would seek to reduce the options available to American businesses, rather than expand them.

Trade Secrets Finally Get Federal Law Protection

On April 27, 2016, Congress passed the Defend Trade Secrets Act of 2016 (S.1890)1 (DTSA) and sent it to President Obama, who has indicated he will sign it into law.2 The DTSA, which will take effect on the day it is signed, will provide a new federal court civil remedy for acts of trade secret misappropriation occurring on or after the enactment date. The passage of the DTSA means trade secret owners finally have a truly uniform federal law under which to pursue trade secret misappropriation claims.

FAQs on the Defend Trade Secrets Act

The Defend Trade Secrets Act of 2016 (DTSA) is a new federal law that, once signed by President Obama, will amend the Economic Espionage Act of 1996 and provide a private civil cause of action for misappropriation of trade secrets.

New Anti-Trade Secret Theft Law Awaits President's Signature

With theft of business trade secrets estimated to cost American businesses more than $300 billion a year, according to a 2013 report by the Commission on the Theft of American Intellectual Property, yesterday the US House of Representatives voted unanimously (410-2) to pass a bill - the Defend Trade Secrets Act (DTSA) of 2016 - that would standardize and strengthen businesses' current legal remedies and protections against trade secret theft. The DTSA was overwhelmingly passed by the Senate earlier this month. President Barack Obama is in favor of the measure and is expected to sign it into law.

Near-Unanimous Congress Federalizes Trade Secret Protection

Business owners should be aware that the federal government, for the first time in over half a century, made an important stride to protecting trade secrets in the federal courts. In an era of bi-partisan bickering, the Defend Trade Secrets Act of 2016 (“DTSA”) has cleared congress on almost unanimous votes and is expected to be signed into law by President Obama. On April 4, 2016, the Senate voted unanimously and, yesterday, the House of Representatives voted 410-2 to pass the DTSA.

New Federal Law May Be Employers' Strongest Weapon Against Trade Secret Theft

Executive Summary: Until now, employers with trade secrets stolen by former employees had to rely upon uneven, hit-or-miss state laws to protect their intellectual property and confidential information. Enter the Defend Trade Secrets Law of 2016, designed to provide a new, uniform federal civil remedy to trade secret owners whose intellectual property has been stolen—without preempting state law or disrupting fair competition. Now that the Act is finally on its way to President Obama's desk for signing, the Act's signature developments are worth highlighting.

Defend Trade Secrets Act Set to Become Law

For the first time, there will be a federal private right of action for misappropriation of trade secrets. The Defend Trade Secrets Act (“DTSA”), passed by both houses of Congress, is headed to President Barack Obama for his signature and his office has stated it “strongly supports” the legislation. The DTSA will become effective upon the President’s signature and will apply to any misappropriation of trade secrets that occurs on or after the date it is signed by the President.

House Passes Federal Trade Secrets Bill

We recently reported that the U.S. Senate passed the Defend Trade Secret Act (“DTSA”), which would create a federal private cause of action for trade secret theft.

Defend Trade Secrets Act Set to Become Law

For the first time, there will be a federal private right of action for misappropriation of trade secrets. The Defend Trade Secrets Act (“DTSA”), passed by both houses of Congress, is headed to President Barack Obama for his signature and his office has stated it “strongly supports” the legislation.

Defend Trade Secrets Act of 2016 Heading to White House: What You Should Know Now

Congress has finally passed the anticipated Defend Trade Secrets Act of 2016 (DTSA). The bill, which is now on its way to the White House and is expected to be signed by President Obama, will be effective immediately once it is signed into law.

Defend Trade Secrets Act Advances: Getting Closer to Law?

Defying claims that bi-partisanship in Congress is dead, the United States Senate has passed the Defend Trade Secrets Act by a vote of 87-0. The measure, approved by the upper chamber on April 4, goes to the House of Representatives, which is considering a very similar bill with sponsorship from both sides of the aisle. The President has expressed support for such a law. (Our article, Defend Trade Secrets Act — Congress Tries Again, discusses the introduction of the DTSA in the Senate.)

Managing Restrictive Covenants in a Multistate Environment

Does your company have employees located in multiple jurisdictions across the United States? Are you concerned that your restrictive covenants are not enforceable in all of these jurisdictions? If so, you're not alone. Multistate employers need to consider the dangers of “one-size-fits-all” covenants. The Association of Corporate Counsel's Docket just published a detailed article addressing this very question. Click here to learn how to navigate the analysis required to ensure your covenants will hold up in a multistate environment.

Jawbone v. Fitbit: a Discovery Fight over the Extent of Trade Secret Misappropriation

Jawbone and Fitbit are competitors in the business of selling fitness trackers. As competitors will sometimes do, Fitbit hired a number of employees from Jawbone in 2015. And as competitors sometimes do, Jawbone brought a legal claim against Fitbit and its five former employees. Because Jawbone and Fitbit are California companies, the allegation was not that Fitbit and the departing employees conspired to violate non-compete restrictions. Rather, the central claim is that Fitbit intended to acquire Jawbone's trade secrets and it hired the employees as part of an effort to do so.

Statutory Requirements for Invention Assignment Provisions

You may have spent time drafting (or having your lawyers draft) enforceable restrictive covenants to protect your company's confidential and proprietary information, goodwill, and customer relationships, but have you ensured that a former employee cannot take intellectual property developed while working at the company? Not if you have omitted certain language required in a number of states.

Criminal Sanctions in a Trade Secret Dispute

Just a few days after the Major League Baseball season opens next month, former St. Louis Cardinals scouting director Chris Correa will attend a sentencing hearing where he faces to up to five years in prison, a $250,000 fine, and payment of restitution to the Houston Astros. Correa pleaded guilty earlier this year to criminal charges brought against him under the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030. Trade secret lawyers, baseball fans, and "Moneyball" enthusiasts are familiar with the allegations. Correa used the password of a former Cardinals employee now working for the Astros to access the Astros' scouting database and obtain confidential player evaluation data.

Unintended Consequences of Arbitration Provisions

A recent unpublished decision of the United States District Court, Eastern District of Pennsylvania, highlights the importance for employers to review carefully their agreements containing restrictive covenants to ensure they do not unintentionally limit the available avenues for relief.

Use Of Personal Cloud-Based Document Accounts Requires New Strategies By Employers

Whether Google Docs, Dropbox, or some other file sharing system, employees, especially millennials and other digital natives, are increasingly likely to set up personal cloud-based document sharing and storage accounts for work purposes, usually with well-meaning intentions, such as convenience and flexibility. Sometimes this is done with explicit company approval, sometimes it is done with tacit awareness by middle management, and often the employer is unaware of this activity.

Establishing Personal Jurisdiction Over Remote Employees

According to a recent Gallup poll, thirty-seven percent (37%) of U.S. workers report that they telecommute or otherwise work remotely. Indeed, due to advances in technology, many employees never report to an office of their employer, but instead use technology to conduct business on behalf of their employer from a remote location. Remote employment, however, raises challenges that the law is just now beginning to resolve. One such challenge is whether it is fair for an employer to haul remote employees into a distant district court in order to enforce restrictive covenants and/or common law obligations to the employer. This presents a new twist for the age-old problem of jurisdiction and venue in restrictive covenant disputes.

Protecting Trade Secrets From Theft By Ex-Employees

In late 2015, Atlantic Marine Construction Company, a Virginia Beach construction company, filed a lawsuit against a former Vice President of Construction and his new employer, alleging various causes of action arising out of the VP’s trade-secret theft. At first glance, this lawsuit reflects a familiar scenario: a departing employee steals proprietary data on his way out and later provides it to a competitor. This case includes an interesting twist, however. Atlantic Marine alleges that the VP stole the trade secrets at issue after he was terminated, using a software tool to access his former employer’s network.

Defend Trade Secrets Act — Congress Tries Again

The Defend Trade Secrets Act (“DTSA”), S. 1890, which would provide federal jurisdiction for the theft of trade secrets, has moved out of the U.S. Senate Judiciary Committee with bi-partisan support. With this procedural hurdle cleared, the DTSA is now in the hands of Senate Majority Leader Mitch McConnell. Should he bring the bill to the floor for a vote, it likely would pass.

Confidential Information that isn't a Trade Secret?

One question that often arises in the trade secret practice is what information, if any, can be protectable as confidential information even if it does not qualify under state law as a trade secret. In other words, what is the value of having a non-disclosure of confidential information provision in an agreement? What does that type of provision do that statutory or common law trade secret protections don't already provide?

Sixth Circuit Highlights Importance of Non-Disclosure Agreements

The Sixth Circuit recently held that an employer’s “playbook” was protected from disclosure and use, even if the business information was not a “trade secret.” (Orthofix, Inc. v. Hunter, No. 15-3216 (Nov. 17, 2015)) Fortunately for Orthofix, its employment agreements included non-disclosure provisions.

Four Non-Compete and Confidentiality Agreement Issues to Watch in 2016

Jackson Lewis has prepared an end-of-the-year review of four non-compete and confidentiality issues to watch in 2016 on its website.

Four Non-Compete and Confidentiality Agreement Issues to Watch in 2016

As 2015 draws to a close, reflection on the year’s changes and developments in the law governing non-compete and non-disclosure agreements suggests additional issues to be on the lookout for in the coming year. We review four of them below.

Second Circuit Adopts Narrow Construction of Federal Computer Fraud Statute, Joins Circuit Split

Clifford R. Atlas and Ravindra K. Shaw of Jackson Lewis’s New York office have written on the firm’s website about a recent decision from the Second Circuit Court of Appeals applying the narrow definition of “exceeds authorized access” under the Computer Fraud and Abuse Act. The case is United States v. Valle, 2015 U.S. App. LEXIS 21028 (2d Cir. Dec. 3, 2015).

Arkansas Football and Non-Competes?

Three years ago, we addressed the question of why college football programs do not use non-compete restrictions to prevent coaches from moving to direct rivals. At the time, we mentioned the fact that Arkansas was a program that had utilized a non-compete restriction with its then-current coach, Bobby Petrino:

Five New State Noncompete Laws Affecting Your Employment Contracts

State legislatures have had a very active 2015, passing several laws that affect the enforceability of noncompete agreements. Employers need to be aware of these laws; otherwise their noncompete agreements may not be valid and could expose them to unwanted competition. Here are five new state laws employers need to know about to ensure that their contracts are up to date and in compliance.

Federal Court Approves $415 Million Settlement of Employee Antitrust Claims Against California Technology Employers

Executive Summary: On September 2, 2015, a federal trial court in California approved a $415 million settlement of an antitrust class action filed against a number of Silicon Valley technology employers, including Apple Inc. and Google, among others. The settlement resolves a class action lawsuit filed by software engineers in May 2011, which claimed that the companies had conspired to repress the engineers' wages and job opportunities by sharing salary and benefit information, agreeing to pay caps among themselves, and agreeing not to hire employees away from competitors. In re: High-Tech Employee Antitrust Litigation, Case No. 5:11-cv-02509 (N.D. Cal. 2015).

Second Circuit Holds that Parties May Not Stipulate to Dismiss With Prejudice FLSA Actions Without Court Approval

In an opinion issued on July 23, 2015 in Sweet Street Desserts, Inc. v. Better Bakery, LLC, the United States District Court for the Eastern District of Pennsylvania underscored the need to think carefully before filing a lawsuit for misuse of trade secrets.

The Defend Trade Secrets Act of 2015: Proposed Legislation Would Open the Federal Courthouse Door for Trade Secret Misappropriation Claims

In an era where bipartisanship is rarely on display, a group of Senators and members of the House of Representatives from both parties recently joined together to propose the Defend Trade Secrets Act of 2015 (S. 1890, H.R. 3326). The bicameral bill, which was introduced and referred to both the Senate and House Judiciary Committees on July 29, 2015, proposes the creation of a federal civil cause of action for the misappropriation of trade secrets by amending the Economic Espionage Act of 1996, which criminalizes the theft of trade secrets.

Trade Secret Legislation Reintroduced in Congress (3rd Time)

Maybe the third time is the charm. After trying twice before (see here and here), Congress is making another run at creating a federal claim for trade secret misappropriation. A bipartisan group of legislators from both congressional chambers, introduced a lengthier federal trade secrets act that would create a federal cause of action and create original federal question jurisdiction for trade secret actions in federal court. For those of you who want to read the details, you can review a copy of the bill here, and you can read Senator Hatch’s press release here.

Top Three Reasons to Double Check Confidentiality and Non-Disclosure Provisions

In an effort to protect legitimate business interests and safeguard valuable company information from competitors, employers often rely on confidentiality agreements and employee handbook policies.

Reminder From the 7th Circuit: Don’t Put the Cart Before the Horse (Establish your Legitimate Interest in Need of Protection Before you Complain About the Breach of a Non-Compete)

In the rush to the courthouse after an executive leaves, takes people with her, and opens a competing business, the spurned employer often relies on the promise that executive made—the noncompete agreement—and the undisputed breach of that promise and believes the court will provide a remedy. “Not so fast,” is the takeaway from the 7th Circuit Court of Appeals decision in Instant Technology LLC v. DeFazio, et al., in which it applied Illinois law.

Time To Review Your Non-Competes

Companies with employees across multiple states face an administrative challenge. How do they ensure that their non-compete programs remain up to date with the various states law requirements for enforcement?

Jawbone Cries Foul – Fitbit’s Success Due To Stolen Trade Secrets

On May 27, 2015, Jawbone, a maker of wearable fitness and activity tracker devices, filed suit in California state court alleging at least five former employees accumulated confidential information related to market research, products and designs, and supply chain prior to joining rival competitor, Fitbit, for Fitbit’s benefit. On the eve of Fitbit’s June 18th IPO, Jawbone filed a second suit alleging patent infringement with the U.S. District Court for the Northern District of California, and, on July 9, 2015, Jawbone requested what effectively amounted to an injunction on the import of Fitbit devices with the U.S. International Trade Commission by incorporating its earlier claims for trade secret misappropriation and patent infringement.

A Trade Secret Reminder — Take “Reasonable Steps”

The Center for Responsible Enterprise and Trade (CREATe.org) just released a new White Paper, “Reasonable Steps” To Protect Trade Secrets: Leading Practices in an Evolving Legal Landscape. It’s a must read for companies grappling with how best to protect and manage their trade secrets.

Hulk Hogan, Sex Tapes, And The FBI: Lesson Learned

When the celebrity gossip blog Gawker decided to post highlights from a sex tape starring Hulk Hogan, it never thought that decision would lead to suing the FBI. But that’s what happened—and just recently, Gawker prevailed. A federal judge in Florida ordered that the FBI and the Executive Office of United States Attorneys (EOUSA) must respond to Gawker’s FOIA request—even though the agencies argued that the requested evidence related to an ongoing investigation.

Resource Update - Restrictive Covenant FAQs: How to Protect Your Business, Data, Intellectual Property, and People from Unfair Competition

Executive Summary: Employers face practical concerns and legal issues when drafting and enforcing noncompete agreements and other restrictive covenants. Though these issues vary widely from state to state, FordHarrison has developed Restrictive Covenant FAQs: How to Protect Your Business, Data, Intellectual Property, and People from Unfair Competition, a practical guide answering frequently asked questions concerning drafting and enforcement of restrictive covenants common to employers nationwide.

Attract New Talent While Sidestepping Legal Landmines

Hiring away a competitor’s valued employee can be quite a coup, but also can bring a host of headaches for unwary employers. This is especially true if the new hire signed any sort of restrictive covenant agreement with his or her former employer.

Update: Comfortable With Your Non-Compete?

We previously analyzed a Pennsylvania appellate court decision, which held that a non-compete agreement was unenforceable for lack of consideration. The case, Socko v. Mid-Atlantic Systems of CPA, Inc., is now before the Pennsylvania Supreme Court.

"Professional" Distinction: A New Approach To Bans On Non-Competes?

A recent Florida appellate court decision may alter 200px-Florida-StateSeal.svglong-standing prohibitions against non-compete agreements for certain professionals. In AmSurg New Port Richey FL Inc. v. Vangara, the court upheld a non-compete, finding that it prohibited a physician from operating a rival business—but not from practicing medicine. This was the pivotal distinction for saving the non-compete, and other state courts could adopt this same logic.

IP and Tech Law Alert: Protecting Your Trade Secrets (and Customer Relationships!) from Former Employees: A Cautionary Tale in Base One Technologies, Inc. v. Ali

One of the most valuable forms of intellectual property can be a company’s trade secrets. For many companies, particularly service-oriented businesses, trade secrets include confidential customer information, such as customer pricing, customer purchasing history, and identification of key decision makers within a customer’s organization. One challenge companies face is the vulnerability of its customer relationships whenever an employee, such as a salesperson, leaves to work for a competitor or to start up a rival business. Many laws are designed to protect employers in such situations. Depending on the circumstances, former employees may be susceptible to claims for breach of fiduciary duty, unfair competition, tortious interference with business relations, unjust enrichment, and misappropriation of trade secrets. Standing alone, however, these laws often fall short as a practical remedy for protecting employers from misappropriation of their trade secrets.

A Franchise Chain's Non-compete Agreement Comes Under Congressional Scrutiny

Tremors were felt throughout the franchise community when a recent article in the Huffington Post reported that the Jimmy Johns sandwich franchise is under Congressional scrutiny for its franchisees’ practice of requiring lower level employees to sign non-competition agreements. The agreements prohibit the employees from working for another restaurant that receives more than 10% of its business from the sale of sandwiches for two years after they leave Jimmy Johns. Although it is unclear whether the franchisor requires or endorses this practice, it seems to be pervasive within the franchise system. Two United States Representatives, describing the agreements as “anti-competitive and intimidating to workers,” have asked the Federal Trade Commission to investigate the practice.

Court Enforces Five-Year Noncompete Agreement in Connection With Sale of Business

Employers drafting and seeking to enforce noncompete agreements struggle with structuring the temporal and geographic scope of the proposed noncompete covenant. The Texas Supreme Court has wrestled over the last few years to define the boundaries of when noncompete covenants can be enforced against employees. A recent decision by the federal court sitting in San Antonio reminds employers that the law provides more latitude in structuring and enforcing noncompete agreements in the context of the sale of a business.

Forum Selection Clause Causes Roadblock In Trade Secret Case

The recent decision in Wellogix, Inc. v. SAP America, Inc., No. 14-0741 (S.D. Tex. Nov. 10, 2014), demonstrates that federal courts can rely on contractual forum selection clauses to dismiss or transfer trade secret theft cases. It’s a reminder to weigh how these clauses could impact litigation strategies and to consider the specific language negotiated during contract talks.

eLABORate: Sandwich "Secrets" and Noncompete Agreements

The sandwich chain Jimmy John’s is getting some unwanted attention from the federal government amid reports that it requires its low-level employees to sign noncompete agreements as a condition of employment. The story was first reported by the Huffington Post, and it resulted in Congressional Democrats sending a letter to the Federal Trade Commission ("FTC") and the U.S. Department of Labor ("DOL"), describing the restrictive covenants as “clearly anti-competitive and intimidating to workers.” The House Democrats are asking for the FTC and the DOL to investigate the sandwich chain.

Bipartisan House Bill Provides Private Right of Action for Misappropriation of Trade Secrets

On July 29, 2014, a bipartisan group of congressional representatives introduced legislation that would codify a federal private right of action for trade secret misappropriation. The proposed bill, the Trade Secrets Protection Act of 2014, H.R. 5233 (“the Bill”), would permit companies and individuals to sue under the Economic Espionage Act.

Restrictive Covenants And The Cross-Border Employer

In most U.S. states, employers are free to bind employees with restrictive covenants – which commonly take the form of post-employment restrictions on soliciting clients or employees – as a condition of employment. But the wide acceptance of such restrictions in the U.S. does not necessarily translate to other countries. And although restrictive covenants may be permitted in some form elsewhere, they are generally much more limited in scope outside the U.S.

U.S. House Judiciary Committee Approves Legislation Creating Civil Cause of Action Under Federal Trade Secrets Protection Act

Federal trade secret legislation may be closer than you think. On September 17, 2014, the Judiciary Committee of the U.S. House of Representatives approved H.R. 5233, the Trade Secrets Protection Act of 2014, with one amendment. The bill, which will now move to the full House of Representatives for a vote, would create a federal private right of action for trade secret theft. A federal civil cause of action for misappropriation of trade secrets would be a powerful tool for employers to use to combat the theft of protected information that is increasingly flowing across state and international borders as domestic and foreign companies become more competitive. The current version of H.R. 5233 provides for the award of attorneys’ fees under certain circumstances.

Protecting Trade Secrets Furnished To The Government

Picture this situation: your company is submitting a bid on a public contract, whether a technology acquisition, software development project, construction project, insurance quote, or financial services contract, to name but a few. Or picture responding to state and federal regulatory authorities that require disclosing company information concerning approval and licensing of your gaming establishment or approval of your oil and gas exploration project. Then also picture a legal framework that requires governmental agencies, whether state or federal, to disclose public records to all who ask—even competitors.

Can You Go Too Far in Protecting Trade Secrets?

The U.S. Fifth Circuit Court of Appeals in New Orleans recently held that an employer’s policy for protecting its confidential and proprietary information was unlawful under the National Labor Relations Act (NLRA).

Restrictive Covenants and the Cross-Border Employer

In most U.S. states employers are free to bind employees with restrictive covenants – which commonly take the form of post-employment restrictions on soliciting clients or employees – as a condition of employment. The wide acceptance of such restrictions in the U.S. does not necessarily translate to other countries, however, and although restrictive covenants may be permitted in some form, are generally much more limited in scope outside the U.S.

Federal Trade Secret Legislation Proposal Gains New Life

The prospects for federal trade secret legislation has heated up again as there appears to be bipartisan support for a new bill. After failing in previous years, Senator Coons (D) recently joined forces with Senator Hatch (R) to introduce a federal trade secrets act that would create a federal cause of action and create original federal question jurisdiction for trade secret actions in federal court. For those of you who want to read the details, you can review a copy of the bill here, and you can read Senator Coons’ press release here.

Silicon Valley’s No-poaching Case: The Growing Debate over Employee Mobility

When Apple, Google, Intel and Adobe Systems last week agreed to settle a lawsuit accusing them of conspiring to prevent the hiring of each other’s employees, they avoided having to testify in court and risk a public glimpse into their strategies. Yet, the case has provoked a heated debate on the damage that no-poaching agreements cause.

National Implications From Settlement of High-Profile Employee Raiding Case

Four major Silicon Valley-based tech companies—Apple, Google, Intel, and Adobe Systems—announced a settlement on Thursday, April 24, in a closely-watched lawsuit accusing them of conspiring to hold down salaries in the tech industry, just weeks before the case was scheduled to go to trial in San Jose. Although the terms of the settlement are not yet public, one news agency report indicates that the four companies agreed to pay a total of $324 million to settle the lawsuit brought by tech workers in a class action lawsuit pending in the U.S. District Court for the Northern District of California.

Employer Failed to Establish Tortious Interference by Current Employees Who Were Secretly Operating a Competing Business

An employer failed to show that its former employees tortiously interfered with its current and prospective customers, even though they had been secretly operating a competing business while working for the employer. In deciding Aid Maintenance Co., Inc. v. Realty Maintenance Service, Inc. (C.A. No. PC-2009-0194), the Rhode Island Superior Court noted that the employer did not have an agreement with the employees prohibiting their competitive efforts, the employee’s conduct was typical of competitors in the industry, and the employer could not quantify the value of lost business. Said the trial court, “[t]here are many descriptive, albeit non-legal, terms that may be appropriate in describing defendants’ actions: dishonest, disloyal and unappreciative are a few. These terms, however, do not carry any particular legal significance in this Court’s dispassionate analysis.”

Opinion: Bad Facts Make Bad Law, Especially in Non-Compete Cases

A non-compete agreement that prohibited a former sales rep from working for a competitor in any capacity, “even as a custodian,” is overly broad and unenforceable. At least that’s what a North Carolina Court of Appeals recently concluded in a case captioned CopyPro, Inc. v. Musgrove.

There Must be Proof in That Trade Secret Pudding

Okay, maybe the word "proof" is a bit too strong. But a recent decision from the United States District Court for the Middle District of Florida makes clear that trade secret claims must be based upon more than mere suspicion. In American Registry v. Hanaw et al., the plaintiff fell victim to a motion to dismiss complaining that the case was based upon nothing more than mere speculation.

Court Upholds Forum Selection Clause Over Plaintiff's Claims of Inconvenience and Expense

A senior manager alleging claims against his former employer arising out of the early termination of an incentive plan will have to take his case abroad. In Wolf v. TBG Limited, C.A. No. 13-3315 (Jan. 28, 2014), the United States District Court for the Eastern District of Pennsylvania recently upheld the forum selection clause in the employee’s long- term incentive plan and held that the employee had to litigate his claims in England.

Sometimes Noteworthy Non-Compete Decisions Have No Non-Competes

As a non-compete litigator, I often scan the case reports looking for noteworthy non-compete decisions. In doing so, I look for the usual buzzwords of interest -- non-compete, trade secret, preliminary injunction, etc. But every once in a while, I come across a case that has nothing to do with non-competes that is worth tucking away in the research file. Wolfe v. TBG Limited is just such a case.

Send a non-compete demand letter – buy yourself a lawsuit?

When employers seek injunctive relief to enforce a restrictive covenant, nearly every judge begins the injunctive hearing with the same question: What efforts did you make to resolve this matter? Judges encourage settlement; they encourage compromise. Even if such compromise is not possible, they want to know an earnest effort was made.

Twas the Night Before Christmas -- Non-Compete Style

Twas the night before Christmas, when all through the company; A disgruntled employee kept saying “please jump with me.” She was trying to line up a grand, mass departure; Of which she was certain no one could outsmart her.

Implementing a Trade Secrets Protection Program

In the business world, protection of trade secrets can make the difference between success and failure, or profit and loss. This post seeks to show you how to protect your company’s trade secrets so that in the event one of your employees steals a trade secret, you will be in the best possible position to succeed in litigation stemming from this theft.

Excuse Me Judge, Could I Be Heard On That?

A few months ago, I filed a motion for a TRO on behalf of a client. I thought I had a pretty rock-solid case. My client had discovered that in the weeks and months leading up to the resignation of a former employee, the employee had created a detailed spreadsheet containing proprietary customer data.

When Coaches Can't Compete -- Non-Competes in Sports

In the lucrative world of big time college football, universities continually try to gain an edge over the competition by, among other things, luring top notch coaches with generous multi-million dollar contracts. One such instance of this occurred in late 2012, when the University of Arkansas hired Bret Bielma away from the University of Wisconsin to coach its football team.

Don't Chase Your Tail in Pursuit of the "Perfect Non-Compete"

I recently read an article in which some talented lawyers did a nice job summarizing a few recent conflicting cases in Massachusetts. In Interpros, Inc. v. Athy, a Massachusetts court held that a new restrictive covenant must be signed every time an employee has a significant change in responsibilities. The court reasoned this is necessary because "each time an employee's relationship with the employer changes materially such that they have entered into a new relationship, a new non-competition agreement must be signed."

State Legislatures Take Aim at Restrictive Covenants but Rarely Hit the Target

As unemployment numbers remain high, state legislatures are taking aim against employers’ use of restrictive covenants, including non-competition, non-solicitation, and non-disclosure provisions. The goal is to reduce unemployment by allowing employees a broader range of employment opportunities. However, these laws pose a serious risk to employers trying to protect confidential information, trade secrets, and business relationships. Here is the latest from two East Coast states.

What Are Your Ex-Employees Taking with Them?

Decades ago, it was reasonable to imagine that one could work for the same company from the start of one’s career to the end. Think about the world portrayed in Mad Men. Don Draper has mostly worked with the same fictional co-workers – Roger Sterling, Pete Campbell, Joan Harris, Bert Cooper, etc. – for the better part of a decade. This is not just a function of Matthew Weiner keeping the same actors around; it’s a relatively accurate portrayal of work in the 1960s.

A Social Media Status Update: A Gray Area of Solicitation- Part 2

Employers frequently use restrictive covenant agreements to prevent their employees from competing for a certain period after employment. One common provision in such an agreement is a non-compete provision, which prevents an employee from performing certain competitive acts in a given territory for a stretch of time after employment. However, employees often push back against such provisions and judges can be reticent to enforce them because of the view that they prevent an individual from making a living.

Customer Lists By Another Name Social Media and Trade Secrets - Part 1

Employers are well aware of the various implications that the social media explosion has on the workplace. The various issues created by Facebook, LinkedIn, and other similar platforms lead to constant requests for input by management-side employment lawyers. Likewise, employers – especially those in industries with a heavy emphasis on relationships and/or research and development – are also focused on protection of their trade secrets and other confidential information. However, the intersection between social media and trade secret protection represents a new frontier, one with relatively little case law, but with substantial implications.

Non-Compete and Trade Secret Review for February 2013

February 2013 was an active month in the world of non-competes and trade secrets, and if we read the tea leaves, it looks like things are only going to get busier. Before I recap some of February's highlights and direct you to some of the best resources out there on the web, let's briefly discuss one reason I think non-compete issues are likely to be pushed to the forefront over the coming months and year -- Warren Buffet. Warren Buffet? That's right, Warren Buffet, and people like him.

Recent Cases Address Employer Efforts to Protect Confidential Information

In recent months, both the Fourth Circuit Court of Appeals, which has jurisdiction over federal cases in North and South Carolina, and the S.C. Supreme Court have addressed the issue of protecting trade secrets and confidential information.

What's New in the World of Non-Competes and Trade Secrets?

As January draws to a close, we figured it seemed like a good time to take stock of where things stand in the world of non-competes and trade secrtets. So we've paused to look around the blogosphere to see what's been happening and what's on the horizon.

New Federal Law Increases Trade Secret Protection

On December 28, 2012, President Obama signed into law the Theft of Trade Secrets Clarification Act, which amends and expands the Economic Espionage Act (EEA).

What Can the NHL Lockout Teach Us About Mediating Non-Compete and Trade Secret Disputes?

After 113 days, the NHL lockout ended with the NHL and its players association reporting that they have reached a tentative deal. Although they say that a lot of i's need to be dotted and t's need to be crossed, it looks as if North America's hockey fans will get to watch hockey again this winter.

Medical Device Industry Remains a Hotbed for NonCompete Litigation

A recent opinion stemming from a lawsuit between two competitors in the medical device industry reminds us of the old adage “be careful what you wish for.” In Howmedica Osteonics Corp. v. Zimmer, Inc., the plaintiff seemed to get what it desired – a broad injunction against its competitor. Unfortunately, that injunction came with some likely unforeseen and unpleasant consequences when the Third Circuit Court of Appeals found that the injunction was overly broad, thus placing Howmedica’s $6 million bond at risk.

Non-Competes Pay a Rare Visit to the U.S. Supreme Court

This week, the U.S. Supreme Court issued a ruling in a non-compete case -- a type of dispute that rarely finds its way to the high court. See Nitro-Lift Technologies v. Lee, 568 U.S. --- (2012). The issue that brought this case to the Court was arbitration, a topic the high court has ruled on a number of times in recent years. The Supreme Court reaffirmed what most employers have believed for quite some time: if you include an arbitration clause in your employment agreement, you can count on being able to enforce the agreement to arbitrate.

ERISA Severance Plans and Non-Compete Agreements Must Work Together

In an ever-more competitive business climate, employers are increasingly interested in protecting revenue streams through enforceable non-compete restrictions on employees. A recent federal district court decision highlights, however, that employers should take care before trying to impose new non-compete restrictions upon departing employees who are entitled to benefits under any formal severance plan.

Noncompete News: Noncompete News: Former Employee Can't Sue Employer Under Computer Fraud and Abuse Act Over The Ownership Of Employee's Social Media Account

Executive Summary: A District Court in Pennsylvania entered judgment in favor of the employer on a former employee's Computer Fraud and Abuse Act ("CFAA") claim in a dispute over the ownership of the employee's LinkedIn account created during the scope of her employment. The Court ruled that the employee's allegations of the loss of potential business opportunities, goodwill, and/or interference with customers are not cognizable losses under the CFAA, even though it was undisputed that the employee lost control of the LinkedIn account after she was terminated. The Court also dismissed the employee's trademark claim because she failed to demonstrate that the employer created confusion, or the likelihood of confusion, when it replaced the employee's name and photo on the LinkedIn profile with her successor's name and photo on the same account.

Recent Cases Address Employer Efforts to Protect Confidential Information

In recent months, both the Fourth Circuit Court of Appeals, which has jurisdiction over federal cases in North and South Carolina, and the South Carolina Supreme Court have addressed the issue of protecting trade secrets and confidential information.

4th Circuit Issues Employee Friendly CFAA Opinion

As readers of this blog know, we have been following the diverse and seemingly irreconciliable decisions from federal courts regarding the scope of the federal Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030.

Doesn’t Marissa Mayer have a Non-Compete???

Yahoo! recently named longtime Google executive, Marissa Mayer, as its new CEO. How can Google let this happen? Does she have a non-compete? Should Google be concerned? Read on for the answers to these questions and more.

Ten Non-Compete Issues to Consider When Buying a Business

Every day businesses across the country merge and consolidate their operations. If your business acquires or merges with another business, consider these issues when drafting the agreements to make sure that you will get the benefit of your bargain.

Can I Protect My Trade Secrets Via Social Media Policy?

Everybody in the modern workforce is involved in social media in one way or another. Think about it. Even if your company does not utilize social media (which is becoming less and less likely), it is almost certain that your company’s employees do.

Eight Reasons Small Businesses Should Use Non-Compete Agreements

Small business owners understandably may be reluctant to use non-compete agreements for many reasons. The desire to divert precious resources to paying an attorney to prepare a contract is hardly appealing. Similarly, businesses may feel that such agreements are unnecessary because they have few employees. But as Ben Franklin once wisely advised, an ounce of prevention is worth a pound of cure.

Trade Secrets and Non-Competes – A Compendium of State Law

Nexsen Pruet attorney, Gary Beaver, is Regional Editor to DRI's Commercial Litigation Committee publication, "Trade Secrets and Non-Competes – A Compendium of State Law."

CFAA Does Not Apply to Employee Data Theft According to Ninth Circuit

"Computers have become an indispensable part of our daily lives. We use them for work; we use them for play. Sometimes we use them for play at work. Many employers have adopted policies prohibiting the use of work computers for nonbusiness purposes. Does an employee who violates such a policy commit a federal crime? How about someone who violates the terms of service of a social networking website? This depends on how broadly we read the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030."

What Does Obamacare Have to do with Non-Compete Agreements?

What does Obamacare have to do with non-compete agreements? Well, technically speaking, nothing. But the Supreme Court recently focused on what it should do with the remainder of the healthcare law if it decided to strike the individual mandate. Justice Scalia asked, "Once you cut the guts out of it, who knows which parts were desired and which ones weren't?"

Protocol for Broker Recruiting: 5 Things to Consider

The Protocol for Broker Recruiting makes it easier and less expensive to hire representatives from competitor firms. However, firms need to beware of certain pitfalls which could eliminate the protection of the Protocol and subject the hiring firm and its new representative to costly and time-consuming litigation, injunctions and damages. Below are five things to consider when representatives transition under the protection of the Protocol:

Second Circuit Reverses Economic Espionage Conviction, Then Steps Back

This blog has previously covered the arrest, prosecution and trial of Sergey Aleynikov, the former employee and computer programmer of the Goldman Sachs Group accused and convicted of misappropriating computer source code from Goldman. After being convicted by a federal jury, Aleynikov was sentenced to eight years in prison.

5 Keys to Mediating Non-Compete and Trade Secret Disputes

Mediating a non-compete and trade secrets dispute is different than mediating general commercial disputes. This is particularly true early on in litigation. Non-compete cases are front loaded by nature and get expensive very quickly. The associated expenses are often beyond a party's control. Here are five things to keep in mind as you consider whether and when to mediate a non-compete and trade secrets case:

Non-Compete Developments

In this time of technological advances, rapidly moving information and economic difficulties, employers increasingly are turning to non-competition agreements to protect their businesses. At the same time, individuals are growing more concerned about career mobility and employability. Although New York courts historically were loathe to enforce non-competes because of the strong public policy in favor of free competition and against restricting an individual’s ability to earn a living, those courts are now focused on balancing those competing interests — resulting in increasingly fact-specific (and divergent) results.

Ex Parte TRO's: Courts Don't Like Them

Every now and then, non-compete and trade secret plaintiffs conclude that the need for relief is so urgent that a temporary restraining order is not enough. Instead, they decide that relief must be granted by the court before notice and an opportunity to be heard is provided to the defendant.

Another Case to Watch in the Ongoing Debate Over the Computer Fraud & Abuse Act

The past year has produced noteworthy decisions from the Sixth, Ninth and Eleventh Circuit Courts of Appeals – and recent Congressional hearings – regarding the applicability of the Computer Fraud & Abuse Act (“CFAA”) to employers’ claims that disloyal employees accessed their employers’ computers in order to take trade secrets, source code, and other valuable electronically stored information. The CFAA provides a federal, private right of action against any person who “knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value… .” 18 U.S.C. § 1030(a)(4).

Dispute Serves Up Lessons for Restaurateurs in Employee Defection and Trade Secrets

A case pending in New York federal court, BLT Restaurant Group LLC v. Laurent Tourondel, Michael Cinque and LT Burger, Inc., provides a reminder of important lessons for professionals in the food services and restaurant industry regarding employee defection and trade secrets issues.

Enjoining Nick Saban: Non-Compete Agreements and College Football Coaches

In the realm of examining whether non-compete provisions should be used in particular professions, this article by Clay Travis asks an interesting question: why don’t college football coaches have non-competes? It is a timely question in January as every sports media outlet is full of headlines about coaches unexpectedly moving between schools, a recent example being the abrupt move of Todd Graham from Pitt to Arizona State. It’s difficult to answer Travis’s question, but here are a few potential explanations:

RESOLVE TO SAFEGUARD COMPANY INFORMATION IN 2012

For many businesses, employees are the biggest investment and the primary safeguard of their confidential, proprietary and competitive information. For some employees, however, a slowly rebounding economy presents increased opportunities to join a competitor looking to capitalize on the specialized knowledge of an experienced industry insider.

Twas the Night Before Christmas -- Non-Compete Style

Twas the night before Christmas, when all through the company; A disgruntled employee kept saying “please jump with me.”

Lawsuit Serves Up Lessons For Restaurateurs

A decision issued this summer by a federal district court in New York provides important lessons for professionals in the food services and restaurant industry regarding employee defection and trade secrets issues.

Lie about your age...Steal a trade secret..It's all criminal.

Could it possibly be equally as unlawful to lie about your age as it is to download trade secrets from your employer's computer? Some say that both may constitute a violation of the federal Computer Fraud and Abuse Act, 18 U.S.C. § 1030 (“CFAA”), and therefore the statute must be amended.

China Non-Compete and Trade Secrets Law: A Primer for U.S. In-House Counsel

This is the second in our series on international non-compete and trade secrets law for U.S. corporate counsel. Today, we examine the law in the world’s second largest economy, The Peoples Republic of China (PRC). The heated competition for qualified talent in the PRC makes non-compete protections a crucial topic. In a recent survey, members of the US-China Business Council reported that their #1 challenge doing business in China was “talent recruitment and retention”:

Managing Restrictive Covenants for a Multi-National Workforce: A Primer for U.S. In-House Counsel

Back in July 2011, we wrote in our Noncompete News blog about the challenges posed for in-house attorneys who are tasked with drafting and enforcing restrictive covenants when a company does business in many different states throughout the country.

Misclassification of Independent Contractors: A Non-Compete Issue?

Much has been written about misclassification of employees as independent contractors. Discussion often focuses on the economic consequences of misclassification, such as the IRS concluding that it has been deprived of revenue. For instance, the Small Business Administration says that proper classification matters because it “affects how you withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment taxes.” In a recent decision, a panel of judges from the United States Court of Appeals for the Third Circuit found one more reason it matters: companies may not be able to enforce restrictive covenants against individuals misclassified as independent contractors.

Non-Compete Caution: Protecting the Attorney-Client Privilege

When non-compete and trade secrets lawyers are advising an employee who is preparing to transition from one employer to another, ensuring that the client’s intentions remain confidential is paramount. Often, the overriding concern is making sure that the individual’s present employer does not discover the employee’s intentions before he or she is ready to “jump.” For this reason, many of us have admonished individual clients over the years to be sure they do not communicate with counsel from their present employer’s telephones or computers. A recent Formal Opinion issued by the ABA Standing Committee on Ethics and Professional Responsibility offers yet another reason for non-compete lawyers to be sure they offer this advice to clients.

Even Hooters Has Trade Secrets

Hooters recently sued a competitor, La Cima Restaurants, alleging widespread misappropriation of trade secrets. That’s right. Trade secrets.

An Intoxicating Trade Secret: Sam Adams Versus Anchor Steam

Describing itself as doing business in the “Better Beer” part of the beer market, Boston Beer Corporation – the maker of Sam Adams beers – filed a lawsuit yesterday against competitors Anchor Brewing Company and Anchor Brewers & Distillers – the maker of Anchor Steam beers – as well as Judd Hausner. (For this post, I will refer to the companies by their trade names as “Sam Adams” and “Anchor Steam.”) Sam Adams states that Hausner is a former employee who resigned effective September 22, 2011 to join Anchor Steam.

Tortious Interference? Tell me who.

Name a few claims you’d expect to see in a non-compete case. Breach of contract. Misappropriation of trade secrets. Tortious interference with contract and relationships. These are a few claims commonly pleaded in employee defection cases.

Sealing Judicial Records in Trade Secret Litigation

It is not uncommon for parties in trade secret and non-compete litigation to ask the court for permission to file documents under seal. In a recent post, this blog discussed one court’s reaction, which was based primarily upon the public’s interest in having access to judicial records. The court’s reaction was not surprising given that courts historically have recognized that the public has a “general right to inspect and copy public records and documents, including judicial records and documents.” Nixon v. Warner Communs., Inc., 435 U.S. 589, 597 & n.7 (1978).

You "Tolled" Me My Non-Compete Only Lasts a Year!!

Imagine that an employee resigns. He begins breaching his 12-month non-compete, and you promptly seek judicial relief. After allowing the parties to conduct expedited discovery and conducting a lengthy preliminary injunction hearing, the judge assigned to your case takes seven months to issue his decision. The judge finds the non-compete to be enforceable and rules that a preliminary injunction should be granted. Will the preliminary injunction run for 12 months from the date of the judge’s decision? Or will it be limited to the 5 months remaining in the term of the non-compete? According to the United States Court of Appeals for the First Circuit (applying Massachusetts law), the answer may depend on the language set forth in your contract.

Exactly Which Trade Secrets Am I Enjoined From Using?

If there is one thing that non-compete and trade secret plaintiffs and defendants can agree upon, it is that injunctions need to be clear. If an injunction is going to preclude someone from doing something, it is best if they know exactly what they can and cannot do.

Non-Competes: A Matter of Dollars and Sense?

Can employees avoid preliminary injunctions because they are not as wealthy as their employers? A recent federal court decision says “No.”

Non-Competes: Do They Favor or Hinder Fair Competition? -- You Decide

Take our poll to the right, and let us know your opinion.

Non-Competes in a Multi-State Environment

Many companies have employees located in states across the country.

Want to litigate in private? Opt for arbitration.

Non-compete and trade secret litigation inherently involves disclosure of confidential information. Plaintiffs argue that defendants took or used the plaintiff’s confidential information, and they often want the defendants to turn over their files for review. Defendants often complain that the plaintiffs are engaged in a fishing expedition or that they are entitled to review the plaintiff’s files in order to pressure test the trade secret claims.

Protecting Trade Secrets: Confidential Information and Customer Relationships Audits

For any company seeking to protect its trade secrets, it is important to take reasonable measures designed to maintain the secrecy of the information at issue. Following is a list of question companies ought to consider:

Hospitality Industry: Seven Signs Your Employees May Be Poachable

A recent survey by Manpower suggests that employers across the country are planning to increase their hiring during the second quarter of 2011. Will they be hiring your best people away from you? Putting it another way . . . are your employees poachable? Consider the following:

Court Holds That Bartered Services May Qualify as "Loss" Under the Computer Fraud & Abuse Act.

An increasing number of courts have weighed in recently on whether the Computer Fraud & Abuse Act (“CFAA”) applies in the context of a faithless employee. Despite this onslaught of decisions, there are still relatively few cases that delve into the details of what qualifies as a “loss” under the statute. The definition matters because without a “loss” of $5,000 or more, employers (or anyone else) cannot bring a civil claim under the CFAA.

Court Holds That Using Facebook at Work Does Not Violate the Computer Fraud & Abuse Act

The debate rages on concerning the scope and extent of the federal Computer Fraud & Abuse Act. In simple terms, the CFAA makes it unlawful to access a protected computer without authorization (or in excess of one's authorization) and to damage the computer or obtain information that one is not entitled to obtain. Originally a criminal statute, the CFAA also provides for a civil claim if certain conditions are met. Courts have long debated whether the statute applies in the context of an alleged faithless employee who accesses an employer's information contained on a computer for an improper competitive purpose. Regardless of the varied judicial opinions addressing this point, the United States District Court for the Middle District of Florida recently rejected as "dubious" a somewhat novel argument that an employee violated the CFAA by accessing Facebook and her personal email at work. (A copy of the Court's opinion is available in pdf format below.)

Ninth Circuit Reverses Course on Computer Fraud & Abuse Act

More often than not when a management law firm informs its clients of recent case developments, the news is not good. This is an exception.

9th Circuit Rules For Employers In Protecting Trade Secrets

More often than not when a management law firm informs its clients of recent case developments, the news is not good. This is an exception.

7 Signs Your Employees Are Poachable

A recent survey by Manpower suggests that employers across the country are planning to increase their hiring during the second quarter of 2011. Are your employees poachable? Consider the following:

Settling Non-Compete Cases: Postponing Battle for Another Day?

Settlement of lawsuits is almost universally considered a good thing. Among the many benefits is the notion that the conflict ends immediately and the parties can go on with their lives with the comfort of certainty. Right? Well, maybe.

Non-Competes in Fixed Term Agreements: Special Care Required

Special caution is required concerning restrictive covenants that are ancillary to employment agreements for a fixed term (as opposed to an employment agreement for an at-will employee). Whether such covenants may be enforced could depend upon: (1) written renewal of the employment agreement upon expiration; and/or (2) the inclusion of language expressly stating that restrictive covenants contained in the agreement survive termination of the agreement. Consider the following hypothetical:

Decision Insights: Publicly Available Ingredients Do Not Invalidate Source Code’s Trade Secret Status

The recent decision in Decision Insights, Inc. v. Sentia Group, Inc., No. 09-2300 (4th Cir., Jan. 28, 2011), features two reversals of district court decisions involving a bedrock trade secrets principle: just because a secret recipe uses publicly available ingredients, it does not necessarily mean that the recipe is not a secret.

Social Media and Trade Secrets: Essential Lessons to Protect Your Company

The use of online social media such as LinkedIn is becoming increasingly prevalent, and as a consequence, employees are often very casual about what they say and do online. They frequently share information first, and think about the consequences later. Any business that does not have a solid contract, a sound social networking policy, or does not train its employees on the do's and don'ts of social networking may have a critical security gap in the protection of its trade secrets and its confidential information. Click here to join us for this free one hour webinar led by Mike Greco and Chris Stief from the Employee Defection and Trade Secrets Practice Group at Fisher & Phillips LLP as they explore steps employers can take to address this growing threat.

Not Everyone Steals A Trade Secret for Money: Some Do It For Fun.

Profit isn’t always the motive underlying trade secret theft. Sometimes people simply want revenge or to wreak havoc.

What Every CEO Should Ask the General Counsel About the Company's Trade Secrets

What are we doing to protect our company’s trade secrets? And don't tell me we have non-compete and confidentiality agreements in place. Don't tell me we have provisions in our policies and handbooks. Don't tell me about how we have electronic controls to stop employees from downloading files. I expect as much. Rather, tell me what HR and Legal are doing to make sure that protecting our trade secrets is part of the fabric and culture of our firm. What are we doing to ensure that our employees protect our trade secrets not because they have to, but because they want to. What are we doing to make sure our employees believe in our company and our mission? What metrics do we use to gauge our success outside the courtroom (and preferably to keep us out of the courtroom)?

Breach Notification Statutes: "Um...We Lost Your Social Security Number"

Employees take and misuse company information for a variety of reasons. Some do it because they want to document what they believe to be unlawful conduct. Others do it because they intend to use it in competition with their soon to be former employers. Regardless of their motivation, when employees misuse customer information, employers must recognize that such misconduct presents more than simply a competitive or employment concern. It also may trigger significant obligations under state breach notification laws.

Sixth Circuit Affirms Employee’s Conviction Under the Computer Fraud & Abuse Act

Not long ago, the Eleventh Circuit Court of Appeals upheld the conviction of an employee under the CFAA in United States v. Roberto Rodriguez. In that case, the Eleventh Circuit took on the question of whether an employee "exceeds authorized access" under the CFAA by accessing information on a computer in a manner contrary to an employer's written policies. The answer according to the Eleventh Circuit: Yes.

When is it okay for an employee to steal trade secrets?

When is it okay for an employee to steal trade secrets? According to the New Jersey Supreme Court, the answer is when an employee is trying to preserve evidence of discrimination.

Protective Orders: Alternatives to "Attorney Eyes' Only".

Federal Rule of Civil Procedure 26 provides for broad discovery: “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense.” “Relevant information need not be admissible at trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” These provisions apply with equal force in non-compete and trade secret litigation, but perhaps with greater consequence. After all, the purpose of such litigation is to protect confidential information, not to share it with competitors.

Computer Fraud & Abuse Act: Eleventh Circuit Finds Employer’s Policy Defines Limits of Employee's Authorized Access

Time and time again, this blog has outlined the ongoing debate in the courts over whether the federal Computer Fraud & Abuse Act (“CFAA”) applies in the context of departing employees. Namely, federal courts differ over whether the CFAA applies when an employee is accused of misappropriating his or her employer’s confidential information or trade secrets by means of the employer’s computer, to which the employee had authorized access as a result of his or her employment. A recent opinion by the United States Court of Appeals for the Eleventh Circuit may be seen by some as adding to debate.

Top Five Non-Compete and Trade Secret Issues to Watch for in 2011

Top Five Non-Compete and Trade Secret Issues to Watch for in 2011

Twas the Night Before Christmas -- Non-Compete Style.

Twas the night before Christmas, when all through the company; A disgruntled employee kept saying “please jump with me.” She was trying to line up a grand, mass departure; Of which she was certain no one could outsmart her.

Departing Employees and the Stored Communications Act: Employers Beware.

Departing employees sometimes access workplace computer systems to obtain information for purposes of using it in competition with their employer. Sometimes they use the internet at work to send emails concerning their post-employment plans. And while employers have many tools and tactics at their disposal to investigate their computers and related systems, these investigations are fraught with pitfalls for the incautious employer.

Top Ten Non-Compete and Trade Secret Concerns for Inhouse Lawyers and the Companies They Represent.

Protecting a company's non-compete and trade secret interests can be a daunting task. There are so many things to consider. Here's a list of ten things to keep in mind and some resources to help you take action.

WikiLeaks Breach: Lessons Learned Regarding Trade Secret Theft

If the recent WikiLeaks release of more than a quarter-million sensitive files is not a wake-up call to companies about the need to proactively protect confidential information, nothing is. The lesson is clear. When it comes to protecting trade secrets, preventative measures are as important, if not more important, than remedial measures.

One Indispensible Lesson Every Company Should Learn From the Goldman Sachs Computer Theft Trial.

Opening arguments began yesterday in the trial of Sergey Aleynikov, a former Goldman Sachs computer programmer accused of stealing the computer code underlying Goldman’s high-frequency trading programs. When Aleynikov was taken into custody by the FBI, he reportedly said he did not intend to take any proprietary code. Rather, he intended to take only open source code.

Jury Orders SAP to Pay Oracle $1.3 Billion For Theft of Software and Documents

If you had dismissed Oracle's lawsuit against rival SAP as just one more squabble between giant IT competitors, you likely weren't alone. But yesterday afternoon, all that changed when a nothern California jury ordered SAP to pay Oracle a whopping $1.3 billion for theft of software and related documents. According to Oracle's Complaint, the case arose out of "a conspiracy by German software conglomerate SAP AG to engage in and cover up corporate theft of Oracle intellectual property on the grandest scale." (A copy of Oracle's Fourth Amended Complaint available in pdf format at the bottom of this post)

Pssst...Can Your Lawyer Keep a (Trade) Secret?

The American Bar Association’s Commission on Ethics 20/20 (the “Commission”) is examining whether technological advances are placing clients’ confidential information at risk, and if so, what should be done about it. The Commission recently released an Issues Paper that identifies various risks presented by the increasing use of technology by the legal profession and solicits feedback on how to address these risks.

Computer Fraud & Abuse Act: Court Rejects Argument That Employer’s Corporate Policies Can Make Employee Access “Unauthorized” Under the CFAA

No sooner than we posted last week’s blog regarding the dismissal of the United States’ Computer Fraud and Abuse Act (“CFAA”) claims against Sergey Aleynikov in the Goldman Sachs’ high-frequency trading code criminal prosecution, a California federal district court issued a similar noteworthy opinion dismissing CFAA claims against an employee who used his employer’s computer systems to misappropriate his employer’s trade secrets and confidential information. Accenture, LLP v. Sidhu, No. C10-2977-TEH (N.D. Cal., Nov. 9, 2010). A pdf copy of the Court's opinion is available below.

Former Société Générale Trader Convicted of Stealing Proprietary Source Code; Stage Set for Goldman Sachs Source Code Prosecution

Much attention has been paid to the criminal prosecution of Samarath Agrawal, former trader at Société Générale, for allegedly misappropriating the source code that fueled the high-frequency trading algorithms used by Société Générale. On Friday, November 19, 2010, a jury in Manhattan convicted Agrawal of stealing the French bank's proprietary code. The United States alleged that Agrawal secretly printed out copies of the computer code last year, and planned to use it to run similar high-frequency trading programs at one of Société Générale’s competitors. After two weeks of testimony and evidence concerning these allegations, the federal jury, comprised of four women and seven men, found Agrawal guilty of theft of trade secrets and transportation of stolen property. The sentencing phase of the trial is set for February 2011, and Agrawal could face between four to six years in prison.

Litigation Budgets in Non-Compete Cases November 14, 2010 13:22

Litigation budgets can be difficult to prepare under the best of circumstances. Budgeting for non-compete litigation, with its unpredictable nature and often front-loaded cost structure, is even more difficult. Although many factors are outside the control of parties and their counsel when it comes to litigation costs, the litigation strategy you choose can have a particularly significant impact on your budget in a non-compete case. Moreover, given the fast pace of non-compete litigation, there is an increased need to continually reassess your budget early on as developments unfold.

U.S. Loses Argument that the Computer Fraud & Abuse Act Applies to Employees Who Access Work Computers

The recent developments in the criminal prosecution of Sergei Aleynikov for his alleged misappropriation Goldman Sach’s high-frequency trading platform provide more interesting insights in the ongoing debate within the federal judiciary concerning the scope of the federal Computer Fraud and Abuse Act (“CFAA”). Specifically, federal courts continue to debate whether the CFAA applies to the misappropriation of an employer’s electronic trade secrets by departing employees. In United States v. Aleynikov, the United States District Court for the Southern District of New York said the statute does not apply in this context. In reaching this conclusion and dismissing the CFAA-based count against Aleynikov, the federal court cited the civil interpretations of the CFAA offered by some recent courts that reached this same conclusion and rejected the holdings taking the opposite interpretation.

Smart Decisions by Multi-National Companies Can Keep Trade Secret Cases in U.S. Courts

Multi-national corporations operating in the United States often question whether their trade secrets will receive adequate protection in foreign markets. With this concern in mind, multi-national companies commonly prefer to litigate in U.S. courts where legitimate trade secret rights are consistently respected. When parties and witnesses are located abroad, keeping litigation in U.S. courts, however, presents certain challenges. Smart litigation decisions can make the difference. A recent case, MicroAire Surgical Instruments, LLC v. Arthrex, Inc., illustrates this point.

Financial Times Columnist Gets It Wrong: Trade Secrets Are Worth Protecting

Just in time for Halloween, The Financial Times columnist Lucy Kellaway ran a column entitled, "The Thief, His Victim and the Company Laptop," in which Ms. Kellaway shared her thoughts about the folly of trying to protect trade secrets residing on a company's computers. Ms. Kellaway's article focused on a recent failed attempt to steal a Bank of America Merrill Lynch employee's company-issued laptop.

No Notice? No Compete.

Give me ninety days notice, or sit on the sidelines for ninety days. That's what a financial services firm just said to a former employee who resigned to join UBS Financial Services with support from the United States District Court for the Northern District of New York.

LinkedIn Torpedoes Employer's Trade Secrets Claim.

In a sobering reminder that online social media is changing the way many companies do business in unforeseen ways, a federal court recently shot down an employer's trade secret claim based largely upon the availability of information via the internet. In Sasqua Group, Inc. v. Courtney, a magistrate judge for the United States District Court for the Eastern District of New York held that although an employer's customer list may have been a trade secret years ago, "the exponential proliferation of information made available through full-blown use of the Internet [presents] a different story." The district court subsequently adopted and approved the magistrate's lengthy and detailed opinion.

ACLU Successfully Argues Confidentiality Agreements Must Yield to Litigation Discovery.

The United States District Court for the District of Minnesota recently upheld a magistrate judge’s decision to issue a protective order precluding a school from enforcing confidentiality obligations against employees who disclose information in connection with “formal and informal discovery” in a lawsuit commenced by the ACLU.

Conspiracy Theory: Employees Conspire to Breach Non-Competes or Steal Trade Secrets.

In actions against former employees, it is sometimes difficult for the former employer to determine precisely who did what. Sometimes, one employee has a non-solicitation agreement, but the other does not. Sometimes, one employee takes a trade secret, but the other employee uses it. Asserting a cause of action for civil conspiracy can help overcome the efforts of former employees who seek to avoid liability by hiding the ball.

Garden Leave as Consideration for a Non-Compete?

How much consideration is enough? I am asked this question frequently by employers and employees attempting to determine whether their non-compete is supported by adequate consideration. Regular readers of this blog know by now that covenants signed by at-will employees after the inception of employment must be supported by new and independent consideration. But how much consideration is enough? My take: there are as many answers to that question as there are judges on the bench.

Maintaining Trade Secret Status For Customer Lists: Five Steps Every Company Can Take to Protect Customer Information

Many employers consider their customer list to be a trade secret. As this blog has previously noted, 46 states plus the District of Columbia have enacted a version of the Uniform Trade Secrets Act. In some states, the statute goes so far as to expressly provide that a customer list may qualify for trade secret protection. For example, in Colorado, a trade secret may include “names, addresses or telephone numbers, or other information relating to any business or profession which is secret and of value.” See Colo. Rev. Stat. Ann. § 7-74-102(4). Other states are more generic and do not expressly mention customer lists. Rather, generally speaking, a trade secret is a (1) compilation of information, (2) that derives independent economic value to the owner, (3) because it is not generally known or easily ascertained by others through proper means. It is important to note, however, that trade secret status is not automatic in any state. Stated differently, although a customer list may qualify for trade secret protection, the trade secret owner will bear the burden of showing that the information is in fact a secret and valuable.

LinkedIn: A Violation of Your Employee’s Non-Compete?

A sales manager has signed a contract with his employer agreeing that client lists are confidential and agreeing not to solicit clients for a period of six months after the end of his employment.

Top Ten Things to Consider When Drafting A Non-Compete Agreement

Previously, we have written about the Top Ten Things to do When an Employee Resigns to Join a Competitor and the Top Ten Mistakes Made by Departing Employees. Given the favorable feedback, we continue with the following Top Ten Things to Consider When Drafting a Non-Compete Agreement.

RIA’s Are Increasingly Reaping the Benefits of the Protocol for Broker Recruiting

The Protocol for Broker Recruiting, which was implemented six years ago by three of the largest wire houses, is being embraced by RIA’s and small and medium sized broker-dealers – a result that was unintended and unimagined at the time. In 2004, Merrill Lynch, Citigroup and UBS Financial Services formed the Protocol for Broker Recruiting (the “Protocol”). The Protocol is an agreement among a group of securities industry competitors to refrain from enforcing non-competes against brokers who move between signatory firms. Although the Protocol states that it was implemented to further clients’ interests in following their broker from firm to firm, it is clear that the initial signatories were at least equally motivated to protect against potential claims by aggressive regulators who were concerned about the movement of private customer information among firms. Although other broker-dealers could, and were invited to join the Protocol, no one really expected that they would. Yet, six years after its inception, membership in the Protocol includes almost 550 firms, including the majority of the largest wire houses. Most surprising though is the trend of smaller broker-dealers joining the Protocol to obtain the secondary benefit that the Protocol provides - protection and predictability when hiring financial advisors.

Eight Reasons Small Businesses Should Use Non-Compete Agreements

Small business owners understandably may be reluctant to use non-compete agreements for many reasons. The desire to divert precious resources to paying an attorney to prepare a contract is hardly appealing. Similarly, businesses may feel that such agreements are unnecessary because they have few employees. But as Ben Franklin once wisely advised, an ounce of prevention is worth a pound of cure.

Non-competes, Trade Secrets, and Patents! Oh My!

In today's competitive business environment, it is imperative that companies take steps to protect their intellectual property, including trade secrets, customer relationships, proprietary computer software, and business methods. Taking appropriate steps will enable companies to protect and leverage their own intellectual property and to manage the risk from claims that they are improperly using the intellectual property of others. To this end, this post summarizes some of the primary types of intellectual property protections available: contracts, trade secrets, copyrights; trademarks; and patents.

HP's Lawsuit Against Mark Hurd -- An Uphill Battle?

Much has been written about Hewlett-Packard’s recently filed case against its former CEO Mark Hurd following his acceptance of a job as president of Oracle. At first blush, observers seem quick to assume that HP is dead in the water because California has unequivocally rejected the inevitable disclosure doctrine. See Whyte v. Schlage Lock Company, 101 Cal.App.4th 1443 (2002). And if you read HP’s complaint, it sounds an awfully lot like an inevitable disclosure case: “[Hurd] cannot perform his job at Oracle without disclosing or utilizing HP’s trade secrets and confidential information.” Complaint ¶ 46. (For a copy of the Complaint click on the pdf at the bottom of this post.)

Major Lindsey Drops Suit After Federal Court Nixes Computer Fraud & Abuse Act Claim and Hints at RICO Dismissal

A few days ago, this blog reported on two recent noncompete cases in which former employers have asserted RICO claims against departing employees. (Click here to see that post.) Previously, we have also commented on Computer Fraud & Abuse Act claims in similar contexts. It is the rare case, however, that involves claims under both statutes by employers against a departing employee. A few days ago, U.S. District Judge Colleen McMahon dismissed a CFAA claim in just such a case, and she hinted that a dismissal of the RICO claim could soon follow. Shortly thereafter, the plaintiff voluntarily dismissed the action reserving its right to pursue its claims in arbitration or state court.

Underutilized Provisions of the Uniform Trade Secrets Act

In 1979, the Uniform Trade Secrets Act (“UTSA”) was completed by the National Conference of Commissioners on Uniform State Laws, and it was amended by the Commissioners in 1985. The purpose of the UTSA was to provide states with a comprehensive model piece of trade secret legislation. To date, forty-six states plus the District of Columbia have enacted trade secret legislation, the vast majority of which substantially resembles the uniform act. (Massachusetts, New Jersey, New York and Texas have not enacted the UTSA, but legislation has been proposed recently in all of these states except Texas. Click here for more information on this pending legislation.) Despite the “uniformity” of the UTSA, an often overlooked provision sits at Section 8 of the statute, entitled “Uniformity of Application and Construction.” This section states:

RICO Claims in Noncompete Cases -- A Growing Trend?

So the former employee who walked out the door with your company’s “secret recipe” is not in the mob. Does that mean the Racketeer Influenced and Corrupt Organizations Act (“RICO”) does not apply? A growing number of companies contend that it does. Recently, attorney search firm Major, Lindsey & Africa filed suit against a former employee alleging RICO violations based on accusations that the former employee took confidential information. (To read more about that case, click here.) And yesterday, Pennsylvania-based Venturi Technologies, Inc. filed a RICO claim against two former employees and the companies they created. Venturi contends the former employees formed and operated competing companies prior to resigning and surreptitiously diverted business to these entities. (For a copy of the Venturi complaint, click on the pdf file at the bottom of this post.) Does RICO apply?

Caution Required: Severability Clauses in Non-Compete Agreements.

The manner in which courts treat overly broad non-compete agreements varies from state to state. Generally speaking, there are three approaches. In some states (e.g., Georgia), if a covenant is overbroad by an inch, it might as well be overbroad by a mile because overly broad covenants will be invalidated. In other states (e.g., Arizona), overly broad covenants will be blue-penciled – meaning that courts will strike through offending language but will stop short of rewriting the agreement. In still other states (e.g. Ohio), courts are free to reform restrictive covenants so that its restrictions are reasonable under the circumstances.

Implementing a Trade Secrets Protection Program.

In the business world, protection of trade secrets can make the difference between success and failure, or profit and loss. This post seeks to show you how to protect your company’s trade secrets so that in the event one of your employees steals a trade secret, you will be in the best possible position to succeed in litigation stemming from this theft.

Slumping Economy Drives Employee-Defection Lawsuits.

Competition to obtain more customers, sell more products, and make more profits is a motivating factor that drives every company. With new revenue hard to find in the present economy, retaining what business you do have, or that you have lined up in the pipeline, is at a premium. In a situation like this, the ramifications from employee defections can be crippling – i.e., years of hard work and "fair competition" can be quickly undone by a former employee who takes the benefits of those efforts to a competitor. Now is the time to make sure that you have maximized all means of protecting your client relationships and confidential information.

Drafting A Non-Competition Agreement? Ten Things You Should Consider.

After training and grooming a green employee into a highly productive and valuable member of the team, employers are frequently frustrated to learn that the employee is now their chief competitor. It's no surprise that, more and more frequently, employers are asking or requiring employees to sign non-competition agreements – employment contracts that restrict the rights of employees to set up shop across the street, or take your training with them when joining your rival.
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