Practicing Law Institute’s “Noncompetes and Restrictive Covenants 2020″ has been posted on-demand and is currently available for viewing until January 2021. Among many other panelists and speakers, Seyfarth partner Erik Weibust spoke on a panel entitled “Advanced Issues in Noncompete Matters.” CLE credit is available.
On January 23, 2020, the Texas Fifth District Court of Appeals in Dallas retracted its previous ruling in the trade secrets dispute Goldberg, et al. v. EMR (USA Holdings) Inc., et al. and issued a new opinion upon rehearing. In doing so, the Court reversed course on its previous ruling that communications with customers and suppliers involved a matter of public concern and were an exercise of free speech.
The Court’s new ruling, which was decided under the pre-September 1, 2019, version of the Texas Citizens Participation Act (“TCPA”), makes clear that communications between a company and customers or suppliers that deal only with the sale of a commodity are not protected by the TCPA.
For the first time in 15 years, the Supreme Judicial Court (“SJC”), Massachusetts’ highest court, issued a decision analyzing the enforceability of non-solicitation covenants, the distinction between such covenants in the context of the sale of a business versus employment, and equitable tolling of restrictive covenants. As set forth below, this decision serves as an important reminder to businesses who impose restrictive covenants governed by Massachusetts law.
While the factual background of the case is long and twisty, only a few key details are necessary to rehash here. The defendant Matthew McGovern (“McGovern”) entered into a restrictive covenants agreement with his former co-shareholders of the Prime Motor Group (“Prime”), in exchange for plaintiffs’ agreement to buy out McGovern’s minority share in Prime with no discount. The agreement, which was made a year after McGovern had been terminated as an employee and as part of a resolution of the parties’ dispute concerning McGovern’s alleged violation of an earlier restrictive covenants agreement, prohibited McGovern from hiring, soliciting, or encouraging Prime employees to leave Prime for 18 months. The agreement contained no tolling provision, but provided that plaintiffs would be entitled to injunctive relief if McGovern breached, without needing to prove irreparable harm. Continue Reading Massachusetts’ High Court Pumps the Brakes on Equitable Tolling of Restrictive Covenant
Within the last five months, the two executive arms responsible for enforcing antitrust laws—the US Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”)—held public workshops to examine the effect of non-compete clauses in employment contracts on the labor market. The DOJ held its workshop on September 23, 2019, while the FTC recently held its own at the top of the year, on January 9, 2020. The purpose of the FTC workshop was “to examine whether there is a sufficient legal basis and empirical economic support to promulgate a Commission Rule that would restrict the use of non-compete clauses in employer-employee employment contracts.”
Why the FTC now wants to regulate in the employment space is not readily apparent apart from attempting to capitalize on a low-hanging fruit populist issue concerning the overreporting of some companies allegedly using non-competes with low-wage workers. Continue Reading A Solution in Search of a Problem? FTC Hosts Workshop to Consider Authority to Abolish Non-Competes
As a special feature of our blog—guest postings by experts, clients, and other professionals—please enjoy this blog entry from Donal O’Connell, Managing Director of Chawton Innovation Services Ltd.
One of the key pieces of legislation related to trade secrets in Russia is the Federal Law of July 29, 2004 on Commercial Secrecy. This was passed by the State Duma on July 9, 2004, and endorsed by the Federation Council on July 15, 2004.
This piece of legislation consists of the following articles or sections …
- Goals and scope of this federal law
- Laws of the Russian Federation on commercial secrecy
- Basic notions used in this federal law (including the definition of a trade secret as well as some details on the handling of trade secrets in agreements)
- Right to classify information as information constituting a commercial secret and methods of obtaining that information
- Data that may not constitute a commercial secret (i.e. what information may not be considered as a trade secret)
- Supply of information constituting a commercial secret (i.e. under what circumstances may a trade secret owner have to divulge the information)
- Protection of the confidentiality of information
- Protection of the confidentiality of information within the framework of employee or labour relations
- Protection of the confidentiality of information as it is passed over to for example state authorities
- Responsibility for violation of this Federal law (i.e. the various penalties for misappropriation)
- Responsibility for non-provision of information constituting a commercial secret to the state power bodies, other state authorities, bodies of local self-government
Definition of a Trade Secret
On Tuesday, January 28 at 12:00 p.m. Central, in the first installment of the 2020 Trade Secrets Webinar Series, Seyfarth attorneys will review noteworthy legislation, cases and other legal developments from across the nation over the last year in the area of trade secrets and data theft, non-competes and other restrictive covenants, and computer fraud. Plus, they will provide predictions for what to watch for in 2020 and provide an overview of the material law changes in Seyfarth’s 2019-2020 Non-Compete Desktop Reference.
Seyfarth attorneys Michael Wexler, Robert Milligan, and Joshua Salinas will address the following topics:
- Significant new federal and state court decisions and legislation on non-compete and other restrictive covenants that may impact their enforcement
- Discussion of legislative and regulatory efforts to narrow use of non-competes and how companies should respond and the likelihood and impact of potential federal legislation
- The Defend Trade Secrets Act and tips for navigating the law and an overview of what we know now that it’s been in effect for more than 3 years
- Recent trade secret misappropriation decisions
- Noteworthy data breaches and criminal prosecutions for trade secret misappropriation, data theft, and computer fraud matters and discussion of lessons learned
- Best practices for updating agreements and policies to adequately protect company assets and trade secrets, including addressing the challenge for multi-state employers of an increasing divergence of state laws
If you have any questions, please contact Colleen Vest at email@example.com and reference this event.
*CLE Credit for this webinar has been awarded in the following states: CA, IL, NJ and NY. CLE Credit is pending for GA, 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.
On January 31, 2020, Boston partner Erik Weibust will be speaking at the Practicing Law Institute’s program “Noncompetes and Restrictive Covenants 2020: What Every Lawyer, Human Resources Professional, and Key Strategic Decisionmaker Should Know” in San Francisco. Erik will be speaking a part of a roundtable discussion entitled “Advanced Issues in Noncompete Matters,” which will cover common difficult problems and cutting-edge topics, including:
- Whether and how to best use early dispute resolution options.
- How to negotiate consent injunctions, including as they relate to restrictions on the scope of activities, duration of the noncompete, clients covered and/or excluded, and preliminary versus permanent injunctions.
- When mediation of covenant disputes should takes place, considerations for the selection of a mediator, and how mediation intersects with discovery.
- The intricacies of expedited discovery, including obtaining leave of court, the scope of discovery to be expedited, and electronic discovery and forensics.
- “Raiding” and team moves, including considerations involved in litigating multi-employee covenant matters collectively or separately and balancing between injunctive relief and damages.
- The impact of legislative activities and changing public opinion, including the challenge for multi-state employers of an increasing divergence of state laws, the uncertainties created by Massachusetts-style “noncompete with pay” laws, the impact of low-wage worker bans (with diverging definitions of “low”), and the likelihood and impact of potential federal legislation.
- Litigating cross-state issues, including legislative nullification of choice of law and venue clauses, “preemptive strike” declaratory judgment actions by employees, and enforcement strategies such as which forum to select for filing.
More information, including registration for the in-person program and live webcast, can be found here.
Effective on September 1, 2019, the 86th Texas Legislature’s amendments to the Texas Citizen’s Participation Act, Texas Civil Practices and Remedies Code Chapter 27 (“TCPA”) essentially removed the vast majority trade secret claims from the TCPA’s grasp. These amendments intentionally sought to eliminate the application of the TCPA, an anti-SLAPP statute to certain run-of-the-mill trade secret cases with fact patters arising from independent contractor relationships and departing employees. Nevertheless, the TCPA may apply in light of past precedent to other, less common fact patterns. This article explores other trade secret claims that may still be “slapped” under the TCPA. Continue Reading Survival by the Thinnest Margins: Potential Trade Secret Claims Post-Texas TCPA Amendments
Last summer, after a decade of fits and starts, and just minutes before the end of the 2018 legislative session, the Massachusetts legislature finally passed comprehensive non-compete reform, which went into effect on October 1, 2018. It had become almost a sport watching what the legislature would do at the end of each year with that current year’s version of non-compete reform, which ranged from all out bans to merely codifying the common law. (For a recap of the many twists and turns over the years, here is just a smattering of blog posts on the topic)
If you assumed that we would get 2019 off, you would be mistaken. As we pointed out in the pages of Massachusetts Lawyers Weekly and Law360, the 2018 law caused as much confusion as it did clarity, and we predicted that amendments and clarifications would be necessary. And it didn’t take long for the first such clarification to be proposed. Continue Reading That Was Quick—Massachusetts Legislature Seeks to Clarify 2018 Non-Compete Law, and to Exempt Physician Assistants
As we previously covered, a group of 18 state attorneys general in July filed comments with the Federal Trade Commission (“FTC”), asking the FTC to incorporate labor concerns when reviewing corporate mergers and to use its enforcement powers under the Sherman Act to stop the use of non-compete, non-solicit, and no-poach agreements in many situations. Many of those same attorneys general recently sent another letter to the FTC, this time urging it to use its rulemaking authority “to bring an end to the abusive use of non-compete clauses in employment contracts.”
In the most recent letter, the attorneys general endorsed the arguments presented in a March 20, 2019, petition submitted to the FTC by various labor unions, public interest groups, and legal advocates, requesting that the FTC initiate rulemaking to classify abusive worker non-compete clauses as an unfair method of competition and per se illegal under the FTC Act for low wage workers or where the clause is not explicitly negotiated. As they did in their previous letter, the attorneys general contend that non-competes “deprive workers of the right to pursue their ambitions and can lock them into hostile or unsafe working environments.” The attorneys general also argue that the arguments in support of non-compete clauses are unpersuasive and that employers can use other “less draconian” ways to recoup their investment in job training, methods of business, and other intangibles. The attorneys general further argued that non-competes burden businesses seeking to hire new employees, which in turn inhibits innovation and drives up consumer costs by suppressing competition. Continue Reading State Attorneys General Keep Pressure on FTC to Regulate Non-Competes