Articles Discussing Restrictive Covenants In The Workplace And Other Topics Relating To Unfair Competition.

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.

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.

The Securities and Exchange Commission (SEC) has recently contacted a number of companies seeking every confidentiality agreement, nondisclosure agreement, settlement agreement, and severance agreement the companies entered into with employees since the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) went into effect. According to a February 25, 2015 Wall Street Journal article, the SEC is also seeking documents related to corporate training on confidentiality, as well as “all documents that refer or relate to whistleblowing” and a list of terminated employees. The SEC wants to use these documents as evidence of retaliation against whistleblowers. In the SEC’s view, these agreements can represent a form of systemic retaliation if they are overly broad and serve to silence would-be whistleblowers.

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.

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.

On September 16, 2014, Judge Dean R. Pregerson of the United States District Court, Central District of California issued an Order Denying Plaintiff’s Motion for Summary Judgment and Granting in Part Defendant’s Motion for Summary Judgment (the Order) in the matter of Cellular Accessories for Less, Inc. v. Trintitas LLC.

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.

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).

On April 11th, a North Carolina federal court granted an insurance business’s motion for preliminary injunction against six of its former independent insurance agents and enjoined further violations of a restrictive covenant. In Superior Performers, Inc. v. Meaike, 2014 U.S. Dist. LEXIS 50302 (M.D.N.C. Apr. 11, 2014), the court took on a number of discreet legal issues related to the drafting of employee restrictive covenants in North Carolina and, in a refreshingly practical manner that prioritized substance over form, reached several employer-friendly conclusions.

Companies seeking to protect their trade secrets should take note of the U.S. Court of Appeals for the Fourth Circuit’s decision to vacate a $920 million dollar jury verdict and 20-year non-compete injunction awarded to the plaintiff DuPont Company in E.I. DuPont De Nemours & Co. v. Kolon Industries, Inc. No. 12-1260 (4th Cir. Apr. 3, 2014). The Fourth Circuit held that the District Court for the Eastern District of Virginia, “abused its discretion and acted arbitrarily” when it excluded evidence defendant Kolon Industries sought to introduce at trial to defend against allegations that it stole the plaintiff’s trade secrets pertaining to Kevlar, a strong para-aramid fiber used, for example, in body armor and ballistics.

Addressing the “inevitable disclosure doctrine” for the first time, the U.S. District Court for the District of Columbia’s recent decision in Info. Strategies, Inc. v. Dumosch1 left open the possibility of the doctrine’s use in establishing trade secret misappropriation claims. A shorthand method of proof, the inevitable disclosure doctrine creates an inference that a former employee will inevitably disclose trade secrets while working in similar employment with a competitor. Although the Info. Strategies court did not fully adopt the doctrine, the court suggested a degree of lenience at the pleading stage, specifically stating that “[the plaintiff employer] may not even have to allege the misappropriation of a specific trade secret” in its complaint.

Although the Computer Fraud and Abuse Act (CFAA) is mainly a criminal statute designed to prevent hacking, it also prohibits an employee from accessing an employer’s computers “without authorization” or in a manner that “exceeds authorized access.” Employers typically attempt to invoke the CFAA when an employee downloads or emails confidential information to use for the benefit of a competitor. In the “disloyal employee” scenario, the employer may file a CFAA claim—often with a claim for misappropriation of trade secrets—because the CFAA provides a basis for federal court jurisdiction, triggers the possibility of enhanced sanctions, and arguably provides a means of protecting confidential information that does not rise to the level of a “trade secret.”

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.