Several members of Seyfarth’s Trade Secrets, Computer Fraud & Non-Competes Practice Group attended the AIPLA’s annual Trade Secret Law Summit on November 12-13, 2015. Rick Lutkus spoke on a panel that was moderated by Erik Weibust entitled “The Ethics of Data Security and Trade Secret Protection for Lawyers,” which we will post about separately.
Another session, entitled “Perspectives From The Bench: How State and Federal Judges View the Growth and Scope of Trade Secret and Restrictive Covenant Disputes,” featured an impressive panel of the Honorable Mitchell H. Kaplan and the Honorable Janet L. Sanders, both of whom sit in the Business Litigation Session of the Suffolk Superior Court, and the Honorable F. Dennis Saylor, IV, a district court judge for the U.S. District Court for the District of Massachusetts. These judges provided some very valuable insights with respect to seeking injunctive relief in a trade secret and/or restrictive covenant case.
Here are some key takeaways from the panel:
- Equitable factors matter. All three judges agreed that notwithstanding the terms of an employment agreement, they are far more sympathetic to young or low-level employees who might be prevented from earning a living due to the enforcement of a non-compete agreement, as opposed to a CEO or other high level executive, particularly where he or she was paid a handsome severance package. Indeed, the panel agreed that the language of the agreement is “just the beginning” of the analysis, and that they will certainly consider other equitable factors such as this.
- Ex parte motions are disfavored. The panel consistently agreed that they only grant ex parte orders sparingly, and instead will typically issue a short order of notice to allow defendants some time to respond to plaintiffs’ allegations. Judge Sanders further noted that she is typically not swayed by plaintiffs’ counsel’s outraged protestations that they have not had an opportunity to review defendant’s opposition papers when the plaintiff has demanded an expedited hearing. In other words, the plaintiff made its bed and now has to sleep in it.
- Forensic discovery should not be a battleground. Judge Saylor noted that it is relatively easy for forensic experts to make mirror images of parties’ electronic devices, and accordingly he is generally receptive to requests to conduct forensic discovery to determine whether and to what extent confidential information or trade secrets has been misappropriated and/or misused. He further noted that parties should not object to a neutral third party forensic expert, which should allay concerns that competitors will be rooting around in the company’s “crown jewels.” Finally, he warned that to the extent employees put company documents on personal devices, they cannot then complain about the prospect of a forensic expert accessing those personal devices .On this same topic, Judge Sanders explained that parties should do their best to work cooperatively on forensic discovery, given that judges are frequently not as savvy regarding the technological details of forensic discovery. That said, she did suggest that the party seeking forensic discovery should not seek broad forensic searches on a competitor’s entire network (which she deemed a “red flag” that the moving party is being unreasonable); instead, absent extreme circumstances, forensic discovery should be limited to the departing employees’ relevant devices.
- The parties’ pre-litigation conduct matters. Judge Kaplan explained that the parties’ behavior leading up to litigation can be incredibly persuasive. Obviously, “bad actors” will suffer grave consequences, and conversely, an employee who takes steps to ensure that his or her departure goes smoothly with sensitive materials promptly returned to the employer will have a much easier time convincing the court that an injunction is unnecessary. Judge Sanders concurred, noting that she is more sympathetic to employees who are terminated without cause, although she admitted that her thinking may shift if the employer attempted to “do right” by the terminated employee by providing severance. Judge Saylor agreed that an employee who ignores inquiries by her former employer regarding whether she retained trade secrets will have a much more difficult time arguing to the court that she didn’t know that she had done anything wrong. Judge Kaplan concurred, contrasting that scenario by noting that a party who responds to a cease and desist letter representing that it will abide by contractual, common law, or statutory obligations to the extent reasonable will go a long way in convincing the court that an injunction is unnecessary.Both Judge Saylor and Judge Kaplan agreed that while pre-litigation correspondence between the parties can at times be useful, angry emails between attorneys that are clearly written for purposes of motions for injunctive relief are rarely compelling to the court.
- Make life easy for your judge. In addition to cooperating with the opposing counsel on such matters as timing and scope of discovery, the panel stressed how useful it is for the parties (whether jointly or separately) to bring a reasonable, clear proposed order that the judge can simply sign, without significant (or any) edits. This is particularly useful in cases where the judge may not have the same depth of understanding as the parties on highly technical terms.
- Be wary of over-redacting. The panel discussed motions to impound or seal materials that parties deem confidential. The panel’s consensus was that many litigants over-designate materials as confidential, and stressed that attorneys should discuss with clients how to limit redacted or sealed pleadings, notwithstanding that it is frequently a difficult conversation. The judges emphasized that litigation happens in the public forum, and parties should take pains to limit their redactions to what is truly necessary to protect confidential information and trade secrets.
- Finally – Be reasonable! While this should be obvious, it bears noting that all judges stressed the need to be reasonable in requests for injunctive relief (as well as in oppositions). Judge Saylor specifically noted that while judges oftentimes want to find a middle ground, judges tend to migrate towards the party that is being more reasonable. Pressing for the most draconian measures — or conversely, refusing to agree to “no-brainers” such as refraining from using obviously misappropriated information — is unreasonable and could backfire.
Of course, given the fact-intensive nature of non-compete and trade secret cases, and the broad latitude that judges are given to issue equitable relief, the facts of the case, the relief being requested, the economy, and even the proclivities of the judge can make or break a case. Nevertheless the advice above should be considered in each case.