In a classic example of bad facts creating bad law, a federal judge in Kentucky recently denied a motion to dismiss claims brought against attorneys who allegedly counseled employees to breach a non-compete agreement and assisted in setting up a competing business. In Pinnacle Surety Services, Inc. v. Manion Stigger, LLP, the plaintiff sued its former attorneys and their respective law firms, alleging among other things that the attorneys tortiously interfered with a contractual relationship and aided and abetted Pinnacle’s former employees’ breaches of fiduciary duty, by encouraging them to violate their non-compete agreements and helping them set up a competing surety bond company. Continue Reading Can Attorneys Be Liable For Directing Clients to Breach Non-Competes? One Federal Court Says Maybe

We reported yesterday that the attorneys generals of ten states are investigating several fast food franchisors for their use of so-called “no poach” provisions in their franchise agreements.  Well, less than twenty-four hours later, the New York Times has reported that seven fast food franchisors (mostly different ones than those who received the information demands discussed yesterday) entered into agreements with the Washington State Attorney General’s Office to remove such clauses from their franchise agreements.  According to the New York Times:

Many types of franchise businesses impose the clauses, but they may be most prevalent in the restaurant industry. The fast-food sector, in particular, relies overwhelmingly on independently owned and operated franchise stores.

Washington State Attorney General Bob Ferguson is quoted in the article as stating that his “goal is to eliminate these provisions in all fast-food contracts” in Washington State.  We will keep you posted on further developments.

The Attorneys General of ten states are investigating fast food franchisors for their alleged use of “no poach” provisions in their franchise agreements, according to a press release by the New Jersey Attorney General’s Office, and as reported by NPR.  In a July 9, 2018 letter, the Attorneys General for New Jersey, Massachusetts, California, Washington, D.C., Illinois, Maryland, Minnesota, New York, Oregon, Pennsylvania, and Rhode Island requested information from eight fast food companies about their alleged use of such provisions.  The letter states that the Attorneys General “have learned that certain franchise agreements used in our States and the District of Columbia . . . may contain provisions that impact some employees’ ability to obtain higher paying or more attractive positions with a different franchisee.”  In other words, the agreements purportedly prohibit one franchisee of a particular brand from hiring employees of another franchisee of the same brand.   Continue Reading State Attorneys General Investigate Fast Food Franchisor “No Poach” Agreements

Marc McGovern, the mayor of Cambridge, Massachusetts (home to many of the Commonwealth’s established and emerging pharmaceutical, biotech, and other life sciences companies), published an op-ed in today’s Boston Globe regarding the noncompete reform movement in Massachusetts (about which we have previously reported).  Unsurprisingly, given that Cambridge has been referred to as the “People’s Republic of Cambridge,” Mayor McGovern comes out strongly in favor of severe restrictions on the use of employee noncompete agreements, stating, among other things, that “noncompetes are unfair to employees.”   Among other things, Mayor McGovern proposes that noncompete agreements be banned outright, or at least severely limited; and if the latter, that employers be required to pay 100% of the employee’s salary during the restricted period (known as “garden leave” pay).  In his words: Continue Reading Mayor of the “People’s Republic of Cambridge” Steps Into The Massachusetts Noncompete Reform Fray

The Texas Court of Appeals, Third District, issued an opinion in Tejas Vending, LP, et al. v. Tejas Promotions, LLC further delineating the applicability of Texas’s anti-SLAPP statute, the Texas Citizens Participation Act (“TCPA”). The Court emphasized that the TCPA was applicable to a conspiracy to misappropriate trade secrets claim, but found that it did not apply to requests for declaratory relief. This holding serves as a reminder that anti-SLAPP statutes can be a powerful shield in misappropriation of trade secret cases, particularly when such cases involve claims for an alleged conspiracy. Continue Reading The Texas Court of Appeals for the Third District Holds that the Texas Anti-SLAPP Statute Applies to a Conspiracy to Misappropriate Trade Secrets Claim

Seyfarth Shaw Partner and Co-Chair of the Trade Secrets, Computer Fraud & Non-Competes Practice Group Robert Milligan, along with iDiscovery Solutions’ Jim Vaughn, spoke with Corporate Counsel Business Journal about discovery and digital forensics in the age of the cloud. To learn more about the type of evidence from the cloud and mobile devices can be important during litigation, why cloud computing is so important in discovery and digital forensics, and more, check out “How the Cloud and Mobile Devices Have Changed Discovery” in the July/August issue of Corporate Counsel Business Journal here.

As a special feature of our blog—guest postings by experts, clients, and other professionals—please enjoy this blog entry from Jeremy Morton, Partner at Harbottle & Lewis LLP, London, UK.

For the first time ever, we have UK-wide legislation that concerns the protection of confidential information. Modifying its approach in light of a recent consultation exercise, the UK government introduced The Trade Secrets (Enforcement, etc.) Regulations 2018 on June 9, to implement the EU Trade Secrets Directive 2016/943. Continue Reading UK Adopts New Trade Secrets Legislation

Earlier this month, the Texarkana Court of Appeals took the extraordinary measure of affirming an award of plaintiff attorney’s fees against a defendant for willful and malicious misappropriation of trade secrets in an amount that was ultimately more than 50 times higher than the plaintiff’s actual awarded damages.

Samuel D. Orbison worked for an oil and gas company, Ma-Tex Rope Company, Inc., for five years and signed an employment agreement containing a non-competition agreement, a non-disclosure agreement, and a non-solicitation agreement. During his tenure with Ma-Tex, Orbison became the coordinator of Ma-Tex’s recertification department until he resigned and began working for its competitor, American Pipe Inspections, Inc. (API), in the same position he had filled with Ma-Tex. When Ma-Tex learned that Orbison had begun soliciting recertification work from Ma-Tex’s customers, it sued Orbison and API for, among other claims, breach of contract and misappropriation of trade secrets. Continue Reading In Trade Secret Misappropriation Case, Texas Court of Appeals Affirms Attorney’s Fees Award Approaching $220,000 where Actual Damages Were $4,000

This post originally appeared in the June edition of Cyber Law & Strategy.

Somewhere today at least one data security breach is likely to happen. It might not have been publicized and may not have involved millions of records, but there is no doubt it will happen. That is because cybercrime remains one of the most common crimes in the world, and non­criminal exposures are fairly common as well. Continue Reading Security Breach Responses — As Important and Difficult As Ever

In Seyfarth’s third installment in its 2018 Trade Secrets Webinar Series, Seyfarth attorneys Kate Perrelli, Dawn Mertineit, Justin Beyer, and Andrew Stark focused on trade secret audits, with an emphasis on the importance of a proactive, systematic approach to assessing and protecting trade secret portfolios.

As a conclusion to this well-received webinar, we compiled a summary of takeaways:

  • Recent government and news media attention on trade secret theft serves as a firm reminder of the risk of trade secrets being stolen and the importance of protecting them. Trade secret theft costs American companies hundreds of billions of dollars per year, and even the largest and most sophisticated companies are victims.
  • It is critically important to identify and understand your company’s trade secrets to ensure that you have adequate protections from theft in place.
  • Have a well-communicated plan for the audit to ensure buy-in from appropriate stakeholders and set expectations.
  • An equally important, but sometimes overlooked, component of the trade secret audit is reviewing and analyzing a company’s internal technology. Any plan to prevent misappropriation should include analyzing company technology, upgrading it when feasible, or customizing it to prevent someone from stealing information.