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Trading Secrets

A Law Blog on Trade Secrets, Non-Competes, and Computer Fraud

High Times in Trade Secrets

Posted in Trade Secrets

(N.B.: Neither the author, this article, nor this blog intends to make, nor makes, any comments for or against the legalization of marijuana in any jurisdiction.)

What happens when you mix animal affection with a political issue? A Constitutional Convention? Tax dollars for pet shelters? Would you believe…trade secret litigation?

People love their pets. There are doggie day spas, specialty cat foods, and pet therapists.

Legalization of marijuana is a highly controversial political issue. Twenty-three states have already passed some form of marijuana decriminalization law. Colorado and Washington have essentially made cannabis as legal as alcohol for people over twenty-one. At least fourteen additional states are considering laws that reduce or eliminate criminal penalties related to marijuana. Although still illegal under federal law, the main argument for state legalization is, typically, additional tax revenue.  Additional taxes usually means…additional profits for entrepreneurs, and people suing each other to see who gets those additional profits.

Thus, a lawsuit seeking an injunction and damages for “willful and malicious misappropriation of trade secrets” has been filed in Washington State (King County).  The underlying subject matter of the case: cannabis-based health products for pets.

The plaintiffs, veterinarians Sarah Brandon and Greg Copas, claim they performed fifteen years of research and development on their trade secret cannabis-based formulas.  These formulas were allegedly used to treat defendant Dan Goldfarb’s pet in 2013.  Washington legalized marijuana in December of 2012. Perhaps there was experimental use of the products going on prior to the laws being enacted?  You do the math.

Goldfarb was apparently so pleased with his pet’s recovery that he and the plaintiffs met regarding a possible business venture involving the development of pet health products using – what else – marijuana. The three formed Canna-Pet to manufacture and sell cannabis- and hemp-based pills, powder, and “canna-biscuit” products.

To keep people from stealing their pets’ stash or getting their pets in trouble with the law, because, let’s face it, Fido has enough anxiety already, the defendant’s website assures potential customers that “your pet will not get ‘high’ or in trouble with the law” from their products. Since this stuff won’t get Polly stoned, apparently your parrot cannot be arrested.  And if your pet isn’t receiving any of the typical benefits of this particular drug, what effect does the medication have, exactly?

As with many other agreements of this sort, the drug deal went bad. Goldfarb kept the Canna-Pet brand, while the plaintiffs formed Canna Companion to sell competing products using their proprietary formulas.

Goldfarb licensed the Canna-Pet technology to Cannabis Therapy Corp. in August 2014. The licensing agreement allegedly allows Cannabis Therapy to produce and sell cannabis-based pet products based on the plaintiffs’ trade secrets.

It seems inevitable that the human affection for animals and the politics of pot would combine to produce pet products containing marijuana. It also seems logical that each different type of plant can be best cultivated using different, perhaps secret, techniques.  Secret formulas and processes cover other goods and materials, why not the proprietary reefer concoction in Spot’s evening treat?

What are these mysterious secrets that provide amazing health benefits to our animal friends? Would it be proper to ask a judge to recuse themselves if they had never inhaled? Who would be considered a qualified (or unqualified) juror in this action? Will pets have to testify to the restorative powers of these products? Will there be a smoke-filled jury room determining the culpability of the defendants? Or is this just a case of smoke and mirrors? Would it be fitting if the verdict was read at 4:20?

Trade secrets, even those involving controversial goods and services, are part of almost every business.  It can be as little as a dog biscuit or as big as a jetliner. Regardless of the underlying subject matter, trade secrets often provide a competitive edge for any company.

In this particular trade secret case, the stakes may be extremely “high.”

 

Security Breach Liability – Its Complicated

Posted in Breach of Fiduciary Duty, Cybersecurity, Data Theft, Trade Secrets

The security breach news cycle continues. There remains a deluge of news stories about point-of-sale terminals being compromised, the ease of magnetic stripes being cloned, and the need for Chip and PIN technology being deployed on credit cards. The legal ramifications of all these events is just starting to become apparent – and it’s complicated. Individual liability is beginning to develop.

Security Life-Cycle

Before addressing legal issues, the question (mostly as a result of the Wyndham case) as to what constitutes “reasonable security” should be addressed. Fortunately, the law doesn’t require perfect information security. To do that would be to encase your computers and data in a block of amber and toss them to the bottom of the Marianas Trench – which makes them useless. So, for the rest of us who actually want to do business, the question is what do you do to have “reasonable security”?

The FTC has spent a pretty good amount of time going through what they consider “reasonable security”. Unfortunately, it isn’t a laundry list of “…do this and everything will be all right.’ One of the major take-aways of the Wyndham case is that the variable nature of the security threats which are out there demands that the FTC have the ability to evaluate reasonable security on a case-by-case basis. Practically this means you need to have a three-pronged strategy: 1) Risk Assessment (and you have to do this regularly – not just once, and think you are done); 2) implementation of controls to mitigate the threats identified in the first step (not just the ones that the media, or your vendor says you need to use); and 3) incident response protocols.

In general, the usual cause of a breach is a failure to do the first step. If you don’t know what your actual risk is (or how it has changed – remember, this isn’t a static environment), it won’t matter what you do in the control phase as you won’t cover all the actual risks that are there.

Legal Implications

With a breach, the default approach of res ipsa loquitor is rearing its ugly head. In other words, the plaintiff’s bar would have the mere existence of the breach be a violation of a duty. Interestingly enough, much like other res ipsa cases, determining who is the culpable party is just as difficult. Who was responsible for the breach? Who has standing to sue? Which part of an organization had the obligation to protect against breaches?

If a large company has a breach, someone is going to sue them. Either the people who had their data compromised, or the shareholders who have stock that has gone down in price. As I have commented in other posts, officers and directors have a duty of care they must adhere to. However, the usual cause of action which can affect the individual manager has been limited to the data subject, or the shareholder as the plaintiff. While this remains true, there is an additional party who is starting to prosecute individuals – the FTC.

In February of this year, the 4th Circuit upheld a $163 million judgment against an individual executive at a company accused of defrauding consumers via a “scareware” scheme. While not directly the same as a security breach, the defendant’s argument in this case centered around a challenge to the legal standard the lower court applied in finding individual liability under the FTC Act. Specifically, that a person could be held individually liable if the FTC proves that the individual participated directly in the deceptive practices or had authority to control them, and had knowledge of the deceptive conduct.

This standard comes from securities fraud jurisprudence and requires proof of an individual’s authority to control the alleged deceptive practices, coupled with a “failure to act within such control authority while aware of apparent fraud.” This proposed standard would permit the commission to pursue individuals only when they had actual awareness of specific deceptive practices and failed to act to stop the deception, i.e., a specific intent/subjective knowledge requirement”.

However, the 4th Circuit said this standard would effectively leave the FTC with the “futile gesture” of obtaining “an order directed to the lifeless entity of a corporation while exempting from its operation the living individuals who were responsible for the illegal practices” in the first place.

While the 4th Circuit’s holding is related to a very obvious fraud scheme, the usual cause of action the FTC asserts against a company for a security breach is under the “deceptiveness” prong of Section 5, liability for a security breach is starting to creep outward to those who are actually responsible for the security posture of a company.

When “The End” Is Not “The End”: Asserting Trade Secret Claims After The Execution of a Mutual Release

Posted in Non-Compete Enforceability, Practice & Procedure, Restrictive Covenants, Trade Secrets

In many cases, the execution of a mutual release is often the last step in resolving a trade secret or non-compete case.  Typically included in the release is an affirmation that all confidential information has been returned and the once former adversaries promise not to sue one another.  Once the release is executed, the fight is usually over.  Usually, but not always.

The recent opinion of EarthCam, Inc. v. OxBlue Corp., 1:11-CV-2278-WSD, 2014 WL 793522 (N.D. Ga. Feb. 26, 2014), addresses an uncommon situation where a former employer filed suit against one of its former employees for allegedly violating the terms of his non-compete agreement; notwithstanding the fact that the former employer and employee had previously executed a general mutual release wherein both sides agreed to release one another from any and all claims concerning the former employee’s non-compete agreement.

In response to the company’s complaint, the former employee filed a motion for Rule 11 sanctions on the grounds that the claims were allegedly barred by the executed general release.  The former employer contended that it had a good faith basis for believing that the release was obtained through fraud and that, accordingly, it was void.  Specifically, the company alleged that the former employee fraudulently affirmed that he had returned all of the company’s tools and materials, when in fact, he was now using these items to compete against the company.

The court noted that, in Georgia, to void a contract based upon fraud in the inducement, the party seeking the relief must prove five elements: (1) a false representation or concealment of a material fact; (2) that the defendant knew the representations or concealment were false; (3) an intent to induce the allegedly defrauded party to act or refrain from acting; (4) justifiable reliance by the plaintiff; and (5) damages as a result of the false representations or concealment.

With this standard in mind, Judge William S. Duffey, Jr. held that “what matters here is not whether the fraud actually occurred, but whether [the company] has a colorable argument that the fraud might have occurred.  If that is the case, then [the company] does not violate Rule 11 by asserting that the Release is void, allowing it to assert claims against [the former employee].”  (Emphasis in original.)  The court then examined the company’s allegations of fraudulent inducement and stated that the “allegations are sufficient, albeit barely, to form a basis for the conclusion that some fraudulent inducement occurred.  [The Company’s] assertion that the Release is voidable is thus at least arguably credible, and there is an insufficient basis for imposing Rule 11 sanctions.”

Takeaways

A general release does not automatically bar all future litigation between signatories if one of the parties subsequently discovers evidence enabling them to argue that the release should be voided based upon fraud in the inducement.  While the standard for establishing fraud in the inducement is certainly high, asserting a colorable argument to survive a motion for sanctions is much lower.  If you seek to assert such a claim, it is critical to plead all predicate elements or you run the risk of having your claim summarily dismissed, as well as being sanctioned

Upcoming Webinar: Protecting Trade Secrets and Recent Trade Secret Legislation Developments Presented By Seyfarth Shaw LLP, CREATe.org and PwC

Posted in Cybersecurity, Data Theft, International, Trade Secrets

From organized crime and “hacktivists” to competitors and rouge employees, the threats to companies’ trade secrets are more pronounced today than ever before.   A recent report by the Center for Responsible Enterprise And Trade (Create.org) and PricewaterhouseCoopers LLP (PwC) —  Economic Impact of Trade Secret Theft: A framework for companies to safeguard trade secrets and mitigate potential threats — details the significant threats that companies face and identifies the source and substantial economic impact of trade secrets theft.  Indeed, as noted in the report, trade secrets theft is estimated to result in an economic impact of between 1 to 3% of the Gross Domestic Product of the United States and other advanced industrial economies.  Such percentages translate to hundreds of billions of dollars per year lost through trade secrets theft.

On October 7, 2014 at 1:00 p.m. EDT, Seyfarth Shaw attorneys Robert Milligan and Dan Hart will team with Pamela Passman, CEO of Create.org, and George Prokop, Managing Director at PwC, in a webinar focused on trade secrets theft and practical measures that companies can take to reduce that threat.  Topics will include:

Current legislative initiatives, cases and trends, including proposed legislation pending in the U.S. Congress and the European Commission’s proposed Directive on Trade Secrets Protection in the EU;

  1. Current legislative initiatives, cases and trends, including proposed legislation pending in the U.S. Congress and the European Commission’s proposed Directive on Trade Secrets Protection in the EU;
  2. Analysis of the major sources of trade secrets theft;
  3. Steps companies can take to conduct a threat analysis of the types of actors that have been responsible until now for misappropriating trade secrets and the actors that are likely to do so in the future;
  4. Review of a five-step framework that helps companies assess trade secrets; and
  5. Future scenarios that companies should consider, including threats in the coming 10-15 years.

Please register by clicking here.

 

Competitor Avoids Injunction Because Competition Was Not Significantly Aided And Abetted By A Signatory To Non-Compete

Posted in Non-Compete Enforceability

In a recent Texas federal court ruling, a competitor closely aligned with, and seemingly assisted by, a signatory of a non-compete covenant narrowly avoided a preliminary injunction because the assistance was not shown to have been substantial.

Summary of the case.  In connection with the purchase and sale of a partnership’s assets, a partner of the seller signed a covenant which provided that, for five years, he would not participate in a business competitive with the seller anywhere in or adjacent to the county where the seller’s business was located.  Shortly thereafter, a company owned by the signatory’s wife commenced competition in that territory.  Alleging that the signatory was aiding and abetting the competitor, the assets purchaser sued the signatory, the signatory’s wife, and others.  The purchaser’s motion for entry of a preliminary injunction was granted solely against the signatory.  It was denied as to the remaining defendants because the purchaser was held to have failed to meet its burden of demonstrating that the signatory significantly aided and abetted competition.  Henson Patriot Ltd. Co., LLC v. Medina, Civ. Ac. No. SA-14-CV-534-NB (W.D. Tex., Sept. 11, 2014) (Rodriguez, J.).

The defendants.  Andrew Medina was a partner of, and the signatory for, the seller.  For 15 months after the transaction, he was employed by the purchaser Henson Patriot Ltd. in production and then in sales.  His wife Clara and her future business partner were lower level employees there.  They were not signatories.  The three of them — Andrew, Clara and her future partner — resigned from Henson more-or-less simultaneously, and almost immediately Clara (with her partner) set up a company within the territory of the non-compete.  Both Henson and Clara’s company were specialty commercial printers.  When Clara’s company took several good Henson customers who Andrew had serviced, Henson sued Clara’s company and the three individuals for violating the non-compete.  The defendants maintained that Andrew played no role in Clara’s company.  However, messages found on his phone at Henson after he left, various emails, and other evidence strongly suggested that he had been involved with “the launch and conduct” of that company.

The covenant.  In addition to the provisions relating to its duration and territory, the covenant stated that Andrew “shall not either directly or indirectly . . . engage, [consult] with, advise or otherwise participate in any business that is in competition” with the seller.

The court’s ruling on plaintiff’s motion for a preliminary injunction.  The defendants contended that the length of the term, the breadth of the area encompassed by the non-compete, and the activities prohibition were unreasonable, but the court disagreed.  Previous Texas decisions in asset sales cases upheld similar provisions.  Concluding that “The facts are approaching enough to show Andrew Medina significantly aided, abetted, and consulted with the other defendants,” Judge Rodriguez entered the injunction against Andrew, the signatory. More problematic was Henson’s effort to enforce the non-compete against the non-signatory defendants.

The judge stated that Texas law would “allow an extension of Andrew Medina’s non-compete to entities or persons he significantly aided, abetted, consulted, or advised to compete with Plaintiff.”  Clara, her company, and her partner insisted that Andrew’s involvement was inconsequential.  Judge Rodriguez responded that he was “not convinced Andrew Medina did not aid, consult, or advise [Clara’s company and its principals, but] the Court exercises caution at this time due to the extraordinary nature of a preliminary injunction.”  The Court added that Henson “has not shown enough for the Court to conclude Andrew Medina significantly aided, consulted, or advised the other defendants.”  Emphasis the court’s.  Therefore, as to those defendants, the court held that “Plaintiff, at this time, has failed to establish a substantial likelihood of success on the merits.”

Takeaways.  Henson teaches that, in order to obtain a preliminary injunction against an alleged violator of a non-compete covenant, an employer may have to prove that the violation but, in addition, that the violation was not trivial, at least in this Texas court.  The hard evidence presented by the plaintiff, rebutted only by the defendants’ denials, seems to have indicated that Andrew did what the non-compete prohibited.  But almost every time Judge Rodriguez referred to the covenant’s prohibition against “aiding, abetting, consulting, and advising,” he added the modifier “significantly” (once in italics) although that word is not found there.  Thus, he construed the covenant as implicitly precluding only extensive violations.  Perhaps he was influenced by the legal principle set forth in a few cases — none of which were cited — that aiding and abetting the commission of a tort is actionable only if the assistance is “substantial.”

Today’s Connected Employee: A License to Steal

Posted in Data Theft, Espionage, Trade Secrets

As a special feature of our blog –special guest postings by experts, clients, and other professionals –please enjoy this blog post by digital forensics expert Trent Livingston, a Director of iDiscovery Solutions.

By Trent Livingston

Do you recall the early days of the spy movie genre? Many of these movies depicted cloaked secret agents slinking around dark offices snapping pictures of evil plots to take over the world with their tiny spy cameras. Now a tiny spy camera is a bit passé given that every smartphone worth its salt makes this a standard feature. What is scary though is that camera is part of a digital storage device that can hold gigabytes of data, which coincidently, is connected to what we now commonly refer to as “the Cloud”.

Companies may not be plotting to take over the world, but one can be sure there is data within corporate walls that ownership wants kept under wraps. Does that mean everyone out there with a smartphone is stealing company secrets? The statistics are a bit unnerving. And a connected smart device is literally a mechanism that puts the ability to mastermind digital theft at one’s fingertips.

The Evolution of IP Theft

A five year old study conducted in 2009 by Ponemon Institute documented that when employees were dismissed, or voluntarily left their employer, more than 59% reported that they kept company data. Of the individuals surveyed, 61% reported to have taken it in the form of paper documents or hard files, 53% used CD or DVD media, 42% used media such as hard drive or USB memory stick, and 38% sent documents as attachments to a personal email account.

Fast forward to 2014 and bring your own device (“BYOD”) policies have introduced an entirely new way to pilfer corporate information. It may be as simple as a contact list, or as complex as source code for a new software release. The issue is, when it comes to Cloud connectivity, a corporation may never know a theft of this type has happened until it is too late. Given that the total losses attributed to IP theft of all types are in the hundreds of billions of dollars annually, it is not something to ignore.

With the advent of Web 2.0, new ways to share files have emerged in the last half decade that were not as prevalent in 2009 when the Ponemon survey was conducted. Google and many others introduced their enterprise web applications in 2009, and cloud computing began to hit its stride. Portable media like the CD and DVD have essentially become obsolete with increased bandwidth allowing large files gigabytes in size to be transferred in the time it takes to create one CD that can only warehouse a fraction of the same data.

While emailing information to personal email accounts is a likely suspect in intellectual property theft, data can leave an organization through a myriad of communication channels, including Social Media. Currently 74% of all adults use some form of social networking website or application. Essentially this means that 3 out of every 4 employees within any organization are using some form of Social Media to communicate. Of these individuals, 69% of them that are Facebook users say they visit the site at least once or more daily.

Social Media provides a means to obfuscate data theft, essentially allowing a perpetrator to abscond with information outside of the company’s firewall. Social networking applications such as LinkedIn, Facebook, and Twitter all have means of private communication. Access to these accounts is easy with any type of mobile device capable of running a social application.

File sharing applications are also mobile. With a quick click, and attachment saved from a corporate email account can be uploaded from anywhere to the likes of Box.net or Dropbox. These applications serve both the corporate and personal markets, which means distinguishing access to a personal or corporate account using corporate IT based IP address blocking solutions can become quickly limited.

Takeaways

Given that mobile devices serve a dual purpose for both the employee and employer under a BYOD policy, social and file sharing applications are integrated into the everyday corporate environment without second thought to their destructive capability. It is important to set up controls and company guidelines that specifically address employee usage of both social and file sharing web services. While direct monitoring of these types of personal accounts is not permitted, a departing employee’s ability to access sensitive company information should be quickly locked down. Without the proper controls in place, corporations are open to rampant IP theft should an employee have the desire to commit such an act.

Trent Livingston is a digital forensics expert who has given testimony in numerous cases involving topics such as evidence preservation, documentation of events, and computer forensic methodologies. Mr. Livingston has extensive experience working on litigation and consulting matters involving computer forensics, e-discovery and other high technology issues. He serves his clients through the litigation or consulting lifecycle by assisting them with important issues like data scoping, preserving, gathering, processing, hosting, review and production, as well as deeper diving issues uncovered through the use of computer forensics. Mr. Livingston can be contacted at tlivingston@idiscoverysolutions.com. Please note that each case may be unique and this single blog post is not intended to fully cover everything related to trade secret investigations or constitute advice, legal or otherwise. It is always best to consult a qualified person to assist with any investigation.

Non-Compete and Forum Selection Clauses in Franchise Agreement Binding on Franchisee Who Signed It and on His Wife Who Didn’t

Posted in Non-Compete Enforceability, Practice & Procedure

A Florida franchisee executed a franchise agreement (FA) containing a non-compete provision and a Pennsylvania forum selection clause.  Following termination of the FA, the former franchisee’s wife opened a similar business in another part of Florida.  The franchisor filed suit in Pennsylvania against the former franchisee and his wife, and they moved to dismiss or, alternatively, to transfer the case to Florida.  The motion was denied.  AAMCO Transmissions, Inc. v. Romano, Civ. Ac. No. 13-5747 (E.D. Pa., 8/21/14).

Summary of the Case

An AAMCO Transmissions FA prohibited competition by the franchisee within 10 miles of any AAMCO franchise for two years from the date of termination.  The FA required that any litigation regarding the FA take place in Pennsylvania where AAMCO is headquartered.  Prior to expiration of the FA, the franchisee and AAMCO entered into a termination agreement.  It gave the franchisee a complete release except with respect to a few identified surviving provisions such as the non-compete, but the forum selection clause was not mentioned.  Shortly after termination, the franchisee’s wife opened a competitive shop 100 miles from the former shop but approximately two miles from another AAMCO franchisee.  AAMCO sued the franchisee and his wife in Pennsylvania.  Without success, they asserted that the forum selection clause did not survive the termination, that the covenant’s geographic restriction was unreasonable, and that venue was inconvenient. 

Applicability of the Non-Compete and Forum Selection Clauses to a Non-Signatory

Robert, the franchisee, owned and operated an automotive maintenance and repair shop in Hollywood, Florida.  After the FA was terminated, his wife Linda opened a similar shop in Stuart, Florida, less than 10 miles from another AAMCO franchise.  In support of their motion to dismiss, Robert and Linda contended that he did not own or operate her shop, and she did not sign the non-compete.  The court cited several cases holding that a non-signatory to a covenant who is “closely related” to a signatory is entitled to the agreement’s benefits but also bound by its obligations.  Moreover, (a) AAMCO alleged that Linda was Robert’s agent in his franchised business in Hollywood, and (b) documents attached to the complaint indicated that they jointly own and operate the Stuart facility.  At the motion to dismiss stage, the trial judge said, it must be assumed that Linda also is subject to the covenant.

Survival of the Forum Selection Clause

The termination agreement contained a broad release with only a few specified exceptions.  One was the non-compete.  However, since the forum selection clause was not listed as an exception, the defendants argued that it did not survive the termination.  The trial judge disagreed.  She cited a half-dozen cases from around the country holding that if a non-compete continues after a contract termination, a forum selection clause does as well.  Further, the dispute obviously related to the FA which stated expressly that any legal “proceedings which arise out of or are connected in any way with this Agreement” must take place in a Pennsylvania court.  Finally, the judge observed that there was no evidence of a clear intent to make the clause inapplicable.

Geographic Restriction

Under Pennsylvania law, according to the judge, “Unreasonableness of the geographic scope of a non-compete is an affirmative defense on which the [defendants] bear the burden of proof.”  Further, “because reasonableness is a fact-intensive inquiry, it should not be determined on the pleadings unless the unreasonableness is clear from the face of the complaint.”  Decisions within the Eastern District of Pennsylvania are split concerning the reasonableness of AAMCO’s 10-mile restriction.  So, the court denied, without prejudice to renewal later, the motion to dismiss based on that restriction.

Inconvenient Forum

The defendants pointed out that they were appearing pro se because they could not afford a lawyer, and that litigating in Pennsylvania would be prohibitively expensive.  They emphasized that the relevant events occurred, and the witnesses and records are located, in south Florida.  That argument failed to carry the day because of the forum selection clause, the FA’s choice of Pennsylvania law, and the location of AAMCO’s headquarters.  The judge said the financial burden on the defendants litigating in Pennsylvania is no greater than the burden on AAMCO if it must litigate in Florida.

Takeaways

Not surprisingly, persons who are “closely related” to the signer of a non-compete can be held equally bound by it.  Further, the judge’s conclusion that venue was proper in Pennsylvania, because AAMCO is headquartered there and the FA selected Pennsylvania as the forum state, was predictable. 

More significant is the court’s refusal to transfer the case to Florida. This case teaches that a court may choose to deny defendants’ well-supported motion to transfer to a “more convenient forum” where the plaintiff chooses to sue in the state referenced in a contractual forum selection clause and has a significant relationship with that state.

Upcoming Webinar: How and Why California is Different When it Comes to Trade Secrets and Non-Competes

Posted in Trade Secrets

On Tuesday, October 28, 2014 at 12:00 p.m. Central, Seyfarth attorneys, Robert Milligan, James McNairy and Joshua Salinas, will present the eighth installment in our 2014 Trade Secrets Webinar Series. They will focus on recent legal developments in California trade secret and non-compete law and how it is similar to and diverse from other jurisdictions, including: a discussion of the California Uniform Trade Secrets Act, trade secret identification requirements, remedies, and the interplay between trade secret law and Business and Professions Code Section 16600, which codifies California’s general prohibition of employee non-compete agreements. The panel will discuss how these latest developments impact litigation and deals involving California companies.

Summary of Topics:

  • Defining and understanding trade secrets in California, including recent legal developments regarding the protection of ideas and confidential information
  • New cases discussing reasonable secrecy measures to protect trade secrets
  • The practical impact of preemption on protecting trade secrets, litigating misappropriation of trade secrets cases and available remedies
  • The potential consequences of bringing or maintaining a trade secret claim in bad faith
  • California’s public policy against employee non-compete provisions and the types of agreements that may be enforceable under California law
  • How forum selection, choice of law and arbitration clauses may affect non-compete and non-disclosure agreements
  • Effectively utilizing restrictive covenants in business deals in California

Our panel consists of attorneys with extensive experience advising clients on trade secret and non-compete issues, including litigating trade secret cases, drafting protection agreements, conducting trade secret audits and drafting/challenging non-compete provisions.

There is no cost to attend this program, however, registration is required.

If you have any questions, please contact events@seyfarth.com

*CLE: CLE Credit for this webinar has been awarded in the following states: CA, IL and NY. CLE Credit is pending for the following states: GA, NJ, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

 

Webinar Recap! Ins and Outs of Prosecuting and Defending Trade Secret Injunction Cases

Posted in Data Theft, Practice & Procedure, Trade Secrets

We are pleased to let you know that the webinar “Ins and Outs of Prosecuting and Defending Trade Secret Injunction Cases” is now available as a podcast and webinar recording.

In Seyfarth’s seventh installment of its 2014 Trade Secrets Webinar series, Seyfarth attorneys, Justin K. Beyer, Dawn Mertineit, and James Yu discussed practical steps employers can take to protect trade secrets during an employee’s employment and after, best practices employers should take upon discovering or suspecting that an employee has misappropriated its data, best practices employers should take in onboarding a competitor’s former employee to minimize the likelihood of being sued, and strategic considerations when faced with defending a trade secret misappropriation case.

As a conclusion to this well-received webinar, we compiled a list of key takeaway points, which are listed below.

  • Employers can best protect their trade secrets by instituting robust training, policies and procedures aimed at educating its work force as to what constitutes confidential information and that this information belongs to the employer, not the employee.  By utilizing confidentiality, invention assignment, and reasonable restrictive covenants, as well as implementing onboarding and off-boarding protocols, educating employees on non-disclosure obligations, educating employees on that data which the employer considers confidential, clearly marking the most sensitive data, and restricting access to confidential information, both systemically and through hardware and software blocks, employers can both educate and prevent misappropriation.
  • If an employee voluntarily resigns his or her employment with the company, the employer should already have in place a specific protocol to ensure that the employee does not misappropriate company trade secrets.  Such steps include questioning the employee on where s/he intends to go, evaluating whether to shut off access to emails and company systems prior to the expiration of the notice period, requesting a return of company property, including if the company utilizes a BYOD policy, and reminding the employee of his or her continuing obligations to the company. Likewise, companies should have robust onboarding policies in place to help avoid suit, such as attorney review of restrictive covenants, offer letters that specifically disclaim any desire to receive confidential information from competitors, and monitoring of the employee after hire to ensure that they are not breaching any confidentiality or non-solicitation obligations to the former employer.
  • If a company finds itself embroiled in litigation based on either theft of its trade secrets or allegations that it either stole or received stolen trade secrets, it is important to take swift action, including interviewing the players, preserving the evidence, and utilizing forensic resources to ascertain the actual theft or infection (if you are on the defense side).  Companies defending against trade secret litigation also need to analyze and consider whether an agreed injunction is in its best interests, while it investigates the allegations.  These types of cases tend to be fast and furious and the internal business must be made aware of the impact this could have on its customer base and internal resources.

Please join us for our next webinar on October 28, How and Why California is Different When it Comes to Trade Secrets and Non-Competes

House Judiciary Committee Considers Federal Trade Secret Legislation

Posted in Trade Secrets

With increased activity regarding proposed federal trade secret legislation expected this month and for the remainder of the fall Congressional session, Seyfarth Shaw’s dedicated Trade Secrets group has created a resource page on its Trading Secrets blog which summarizes the proposed legislation, outlines the arguments in favor of and against the legislation, and provides additional legislation resources for our readers’ convenience.

The resource page will be continuously updated as we monitor and keep you apprised of the most recent developments, debate, and news regarding the proposed legislation.

The mark up of the House Trade Secrets Protection Act of 2014 scheduled before the House Judiciary Committee is scheduled for Wednesday, September 17, 2014, at 1:00 p.m. EST.  We will cover the it all with live-tweeting on Twitter at @tradesecretslaw and @joshsalinas.