Seyfarth Synopsis: Knowledge that a competitor or former employee is misappropriating trade secrets is difficult to come by. At the same time, however, once a company has notice that misappropriation may be occurring, the statute of limitations begins to run on any trade secrets misappropriation claim. A recent decision from the California Court of Appeals reinforces these rules and provides a good reminder of the need to take proactive steps to protect any possible claims.

When a competitor or former employee misappropriates a company’s trade secrets, the company often does not know for an extended period of time. This is especially true when the perpetrator takes action to conceal its misappropriation. For these reasons, the statute of limitations only starts to run once the company knows or should have known of the misappropriation. But this rule is not a universal remedy; companies should be aware that once they have sufficient knowledge that misappropriation may be occurring, they must take action or risk the running of the statute of limitations. A recent decision from the California Court of Appeals reinforces these principles. Continue Reading A Little Knowledge Is a Dangerous Thing: Beware the Statute of Limitations in Trade Secrets Misappropriation Cases

On August 23, 2019, the United States Court of Appeals, Fifth Circuit ruled that the Texas Citizen’s Participation Act, Texas Civil Practices and Remedies Code Chapter 27 (“TCPA”), did not apply in federal court. Klocke v. Watson, 936 F.3d 240, 244 (5th Cir. 2019). Nine days later, on September 1, 2019, key statutory changes went into effect for cases filed after the amendments’ enactment.[1] See H.B. 2730, Sept. 1, 2019. These amendments changed the requirements of the TCPA in several ways, some of which the Klocke panel had directly addressed when determining the TCPA’s applicability in federal court.

The question therefore arises whether the TCPA remains inapplicable in federal court for cases filed after September 1, 2019.[2] A Fifth Circuit panel addressing this issue today, and applying the rulings in Klocke, would likely rule that the TPCA remains inapplicable. Specifically, despite the various changes, the TCPA still “imposes evidentiary weighing requirements not found in the Federal Rules, and operates largely without pre-decisional discovery[.]” Klocke, 936 F.3d at 246. Accordingly, the TCPA “conflicts with those rules,” “answers the same question” as those rules, and therefore “cannot apply in federal court.” Id. at 244, 245, 246. Continue Reading Klocke’s Ongoing Viability: Whether the TCPA’s Statutory Changes Have Resurrected Its Applicability in Federal Court

Seyfarth’s Trade Secrets, Computer Fraud & Non-Competes practice group is pleased to provide the 2019-2020 edition of our 50 State Desktop Reference, which surveys the most-asked questions related to restrictive covenants and trade secrets in all 50 states, including the recent updates in non-compete law in Washington, California, Maine, Illinois, Rhode Island, Maryland, and New Hampshire.

For the company executive, in-house counsel, or HR professional, we hope this guide will provide a starting point to answer your questions about restrictive covenants and protecting your company’s most valuable and confidential assets.

Request a hard copy or PDF of the 50 State Desktop Reference.

Following in the footsteps of its neighbors Maine, Massachusetts, and New Hampshire, Rhode Island recently enacted legislation that restricts the use of non-competition agreements with certain types of employees. The Rhode Island Noncompetition Agreement Act, which becomes effective on January 15, 2020, prohibits non-competes without regard to geographic location and duration for the following types of employees:

  • Non-exempt employees under the FLSA;
  • Undergraduate or graduate students participating in an internship or short-term employment;
  • Employees aged 18 or younger; and
  • Low-wage workers (defined as earning 250% or less of the federal poverty level ($31,225 per year under current data).

Continue Reading Rhode Island Joins the Fray, Passing Legislation that Restricts the Use of Non-Compete Agreements for Certain Low-Wage Workers

This is the third blog by our Trade Secrets , Computer Fraud & Non-Competes team dealing with Washington state’s House Bill 1450, which dramatically alters non-compete agreements within the state. This blog discusses retroactive application of the statute and potential challenges the statute may face as it rolls out in January 2020.

What’s The Law?

As our team previously detailed, Washington state’s new House Bill 1450, which goes into effect January 1, 2020, will eliminate non-compete agreements for employees earning less than $100,000 a year and independent contractors earning less than $250,000 a year. The law requires advance notice of non-competes “no later than the time of acceptance of the offer of employment” and “independent consideration” for non-competes entered into after employment.

In addition, among other changes, the new law: Continue Reading Retroactivity Provision in Washington State’s New Law Limiting Non-Competes May Face Court Challenges

Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.) have introduced legislation entitled the Workforce Mobility Act (“WMA”). The WMA, like its prior incarnation from last year, seeks to ban non-compete agreements outside of the sale of a business or dissolution of a partnership. The WMA also follows a similar, unsuccessful, attempt by the federal government to limit non-compete agreements on a national scale earlier this year. Continue Reading Another Year, Another Attempt in the U.S. Senate to Ban Non-Competes Nationwide

It is axiomatic that in order for information to be considered a trade secret, it must have been kept secret. But what if the trade secret is disclosed without the owner’s consent? Such was the issue in Intellisoft, Ltd. v. Wistron Corp. et al., No. H044281, slip op. (Cal. Ct. App. Oct. 16, 2019), a recent unpublished decision from the California Court of Appeal for the Sixth Appellate District.  Continue Reading California Appellate Court Rules Publication of Trade Secrets, Even Without Owner Consent, Eviscerates Protection

The Council of the District of Columbia is considering a new bill that would ban the use of non-compete restrictions for workers below certain income thresholds—and impose stiff penalties upon employers who include such restrictions in their agreements. Introduced on October 8, 2019, the Ban on Non-Compete Agreements Amendment Act of 2019 (“the Bill”) places D.C. in line to join a growing number of states where non-compete restrictions upon low-income—and, in some cases, relatively high-income—employees are unenforceable.

The Bill would ban the use of non-compete agreements for employees who work in D.C. and who earn up to three times the D.C. minimum wage: $87,654 annually under current law. The Bill would ban such restrictions not just in written agreements, but also in an employer’s “workplace policy” whether in writing (i.e., through an employee handbook) or as a matter of the employer’s practice. Not only would such restrictions be void as a matter of law, but any employer who had such restrictions in place, regardless of whether or not the employer enforced them, would be separately liable to each affected employee in an amount “not less than $500 and not greater than $1,000.” Employers who attempt to enforce non-compete restrictions that fall below the Bill’s income threshold would be liable to affected employees in an amount “not less than $1,500.” Finally, employers who retaliate against employees for either (1) alleged violations of non-compete restrictions that would be unenforceable under the Bill or (2) inquiring about or informing an employer that the employer’s non-compete restrictions may be unenforceable under the Bill, would be liable to each such employee in an amount “not less than $1,000 and not more than $2,000.” Beyond liability to affected employees, the Bill would also empower the Mayor of the District of Columbia to impose fines for violations of the Bill in an amount up to $500, except for retaliatory conduct for which the fine would be at least $1,000. Continue Reading D.C. Poised to Ban Non-Competes Below Income Threshold

Cross-posted from Workplace Law & Strategy blog.

When an ex-employee goes to a competitor or starts poaching clients or staff, employers often look to a restraint of trade clause to protect key business assets such as client relationships or company confidential information.

Often a quick decision needs to be made: apply to the Court to stop the ex-employee, or wait and sue for breach of contract damages at some later time. Wrapped up in this decision is the important issue of prospects of success—an employer will want to know there is a good chance of a successful outcome. Continue Reading Will We Win? The Odds of Success in Restraint of Trade Cases

Seyfarth Trade Secrets Attorneys are participating in The Sedona Conference Working Group 12 Annual Meeting in Charlotte, North Carolina, November 4–5, 2019.

On November 4, Seyfarth Partner and Trade Secrets, Computer Fraud & Non-Competes Practice Group Co-Chair Robert Milligan is speaking on “The Employee Life Cycle Relating to Trade Secrets” panel, and Seyfarth Partner Erik Weibust is speaking on the “Monetary Remedies in Trade Secret Disputes” panel. Milligan and Weibust are the co-leads of their respective draft teams.

Additional topics at the conference include:

  • Identification of Trade Secrets
  • Governance and Management of Trade Secrets
  • Equitable Remedies in Trade Secrets Disputes
  • Protecting Trade Secrets in Litigation about Them
  • Trade Secret Issues across International Borders
  • Judicial Roundtable

Find more information or register on The Sedona Conference website at  https://thesedonaconference.org/node/8588