In the final 2022 webinar, Seyfarth attorneys Kate Perrelli, Dan Hart, and Dallin Wilson discussed new and pending legislation and enforcement issues for non-competes.
As a conclusion to this webinar, we compiled a summary of takeaways:
Wednesday, December 21, 2022
1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific
In the final installment of our 2022 Trade Secrets Webinar Series, our team will focus on new legislation and the enforcement of non-competes. Any company that seeks to use non-compete
Continue Reading Upcoming Webinar! Overview of Non-Compete Legislation and Enforcement Issues from 2022
The Department of Justice recently announced a revision of its policy concerning charging violations of the Computer Fraud and Abuse Act (the “CFAA”). Following recent decision from the Supreme Court and appellate courts that seemingly narrow the scope of civil liability under the CFAA, the DOJ’s new policy may likewise limit criminal prosecutions under the law.
As regular readers of this blog are well aware, the CFAA provides that “[w]hoever … intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains … information from any protected computer … shall be punished” by fine or imprisonment.” The DOJ’s announced policy, however, now directs that “good-faith security research” should not be charged. “Good faith security research” means “accessing a computer solely for purposes of good-faith testing, investigation, and/or correction of a security flaw or vulnerability, where such activity is carried out in a manner designed to avoid any harm to individuals or the public, and where the information derived from the activity is used primarily to promote the security or safety of the class of devices, machines, or online services to which the accessed computer belongs, or those who use such devices, machines, or online services.”
Continue Reading DOJ Announces It Will Not Charge CFAA Violations for Good-Faith Security Research
In September 2019, the Ninth Circuit held that hiQ Labs, Inc.’s (“hiQ”) collection and use of information that LinkedIn users shared on their public profiles did not violate the Computer Fraud and Abuse Act (“CFAA”) because the data was publicly available and therefore did not fall within the scope of the CFAA. Following the Ninth Circuit’s order, the Supreme Court issued a decision in Van Buren v. United States, wherein the Supreme Court held, in a 6-3 ruling, that a former Georgia police officer did not “exceed authorized access” within the meaning of the CFAA by accessing a state law enforcement computer database containing license plate information to determine whether an individual was an undercover officer. The Supreme Court concluded that an individual “exceeds authorized access” when he accesses a computer with authorization but then obtains information located in particular areas of that computer—such as files, folders, or databases—that are off-limits to him.
Continue Reading Ninth Circuit Reaffirms that Data Scraping from Public Websites Does Not Violate the Computer Fraud and Abuse Act
A Massachusetts waffle manufacturer, The Burgundian, recently filed a lawsuit alleging that a potential co-venturer, Eastern Standard Provisions, submitted its Liege waffles for inclusion on Oprah Winfrey’s annual “Favorite Things” list without giving credit to Burgundian. Then, after Burgundian refused to sell its secret waffle recipe, Eastern Standard employed a “bait and switch” by selling Liege waffles from a different company while touting Oprah’s endorsement of the Liege waffles made by Burgundian and enjoying the spoils of landing a spot on the coveted list.
Continue Reading One of Our “Favorite Things” Are Lawsuits About Stolen Secret Recipes
In-house attorneys often wear multiple hats when performing work for private companies. Some of their work clearly falls under the provision of legal services, while others can be less clear quasi-business roles. And when those in-house lawyers who perform non-legal work are asked to sign a non-compete agreement in connection with their employment, questions can arise both as to the enforceability of those agreements and whether an attorney violates the rules of professional conduct by signing such an agreement as we have previously discussed.
Continue Reading Another Decision Addressing Non-Competes for In-House Counsel
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
Courts have long lamented that “computing damages in a trade secret case is not cut and dry,” Am. Sales Corp. v. Adventure Travel, Inc., 862 F. Supp. 1476, 1479 (E.D. Va. 1994), meaning that “every [trade secret] case requires a flexible and imaginative approach to the problem of damages,” Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 538 (5th Cir. 1974).
The federal Defend Trade Secrets Act (“DTSA”) and virtually every state’s version of the Uniform Trade Secrets Act (“UTSA”) (only New York has not adopted the UTSA) permits recovery of damages for (1) actual loss caused by the misappropriation; (2) unjust enrichment that is not addressed in computing damages for actual loss; or (3) a reasonable royalty for the misappropriator’s unauthorized disclosure or use of the trade secret. There has been little guidance from the courts, however, as to how to calculate these different, and sometimes competing damages calculations, many relying on the “flexible and imaginative approach” set forth in the Fifth Circuit’s 1974 pre-UTSA University Computing decision. Even more difficult is the case where a plaintiff’s damages are based on the defendant’s anticipated future use of the trade secret, given that those damages necessarily will involve speculation about the revenues the defendant will generate from its use of the trade secret.
Continue Reading Can a Party Recover Damages for the Anticipated Future Use of Trade Secrets?
In an a recently published opinion, the Ninth Circuit answered the question whether “LinkedIn, the professional networking website, [may] prevent a competitor, hiQ, from collecting and using information that LinkedIn users have shared on their public profiles, available for viewing by anyone with a web browser?” In affirming the trial court’s injunction enjoining LinkedIn from blocking hiQ’s access to its users’ public profiles, the Ninth Circuit held, among other things, that hiQ’s scraping did not amount to accessing LinkedIn’s users’ data “without authorization,” in violation of the Computer Fraud and Abuse Act (“CFAA”), because the data hiQ was accessing was publicly available and therefore did not fall within the scope of the CFAA.
Continue Reading 9th Circuit Takes Narrow View of the Computer Fraud and Abuse Act in LinkedIn Data Scraping Case
A group of 18 state attorneys general (the “AGs”) recently filed comments with the Federal Trade Commission (“FTC”) in advance of a series of hearings centered on changes to antitrust and consumer protection enforcement in the 21st century. The letter identifies four major areas where recent antitrust activity involving labor issues have occurred: (1) horizontal no-poach agreements between employers; (2) vertical no-poach agreements, particularly franchise agreements; (3) non-compete agreements between employers and employees; and (4) mergers impacting labor markets. Although it may reveal the enforcement priorities of its signatories, the letter’s arguments are mostly unsupported by any case law and in some respects are contrary to the Department of Justice’s positions on the matters.
Continue Reading State Attorneys General Urge FTC to Consider Labor Issues in Antitrust Enforcement