In the first program in the 2022 Trade Secrets Webinar Series, Seyfarth attorneys Michael Wexler, Robert Milligan, and James Yu reviewed 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 provided predictions for what to watch for in 2022.
As a follow up to this webinar, our team wanted to highlight:
- Recent trade secret decisions demonstrate the need for the plaintiff to clearly articulate the alleged trade secret misappropriated in its complaint by describing its trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade and to permit the defendant to ascertain at least the boundaries within which the secret lies. Additionally, a recent Third Circuit decision held that copying is not the only method that trade secret plaintiffs can demonstrate actionable “use” under the Defend Trade Secrets Act. The court held that the use of a trade secret encompasses all the ways one can take advantage of trade secret information to obtain an economic benefit, competitive advantage, or other commercial value, or to accomplish a similar exploitative purpose, such as assisting or accelerating research or development. The Third Circuit also held that plaintiff sufficiently alleged misappropriation based on circumstantial evidence. The court reasoned that indirect use can be inferred from the timing of a defendant employee’s hire, deception in the employee’s departure, the corporate defendant’s lack of experience in the industry, low financial investment, and quick success.
- At the federal level, we continue to see bipartisan attempts to address a national uniform approach to non-compete covenants. While the present bills are not likely to pass, it is apparent from Biden’s July 9, 2021, Executive Order that federal agencies, including the FTC, DOJ, and DOL, are being delegated and empowered with enforcement responsibilities aimed at curtailing the use of non-compete agreements that are perceived to limit workforce mobility. In particular, in December 2021, the DOJ and FTC hosted a virtual workshop that brought together policy experts and labor leaders to discuss efforts to promote competitive labor markets and worker mobility, including scrutinizing and limiting the use of restrictive covenants. Furthermore, the DOJ also obtained criminal indictments against employers in the health care and aerospace engineering industries who have allegedly violated antitrust laws by conspiring to refrain from soliciting or hiring each others’ workers. This has spilled over into civil class action lawsuits brought by employees alleging that the conspiracy impacted their wages and careers or that they have been otherwise harmed by these so-called no-poach agreements. Given the Biden Administration’s objective of fostering worker mobility, 2022 will likely see additional efforts at the federal level to curb the use of non-compete and no-hire agreements, particularly with respect to lower waged workers.
- Care should be taken to review state law as to new statutes affecting employee non-compete/non-solicit provisions and applicability with at least 20 states having new statutes and approximately 70 statutes pending.
- Particular attention should be paid to timing for notifying employees of covenant provisions and providing agreements for review.
- Employee compensation thresholds must be carefully examined to determine if covenants are prohibited under state law for lower earning employees.