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

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.

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.

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.

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.)

“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.

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.

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.

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.

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.

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

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.

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.

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.

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.

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/