Continuing our annual tradition, we have compiled our top developments and headlines for  2018-2019 in trade secret, non-compete, and computer fraud law.

1. Government Agencies Increasing Scrutiny of Restrictive Covenants

In mid-2018, the Attorneys General of ten states investigated several franchisors for their alleged use of “no poach” provisions in their franchise agreements. 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 several franchisors about their alleged use of such provisions. Less than twenty-four hours later, some franchisors (mostly different ones than those who received the information demands) entered into agreements with the Washington State Attorney General’s Office to remove such clauses from their franchise agreements. The recent focus by state law enforcement on franchisors is a new twist, given that restrictive covenant agreements in the franchise industry are typically given more leeway than in the employment context. Continue Reading Top 10 Developments and Headlines in Trade Secret, Non-Compete, and Computer Fraud Law in 2018/2019

Please join us for a one-hour CLE webinar on Tuesday, January 29, 2019, at 1:00 p.m. Eastern / 12:00 p.m. Central / 10:00 a.m. Pacific.

On Tuesday, January 29 at 12:00 p.m. Central Time, in Seyfarth’s first installment of its 2019 Trade Secrets Webinar Series, Seyfarth attorneys will review noteworthy cases and 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 will provide predictions for what to watch for in 2019.
Seyfarth attorneys Michael Wexler, Robert Milligan, and Joshua Salinas will address the following topics:
  • Significant new federal and state court decisions and legislation on non-compete and other restrictive covenants that may impact their enforcement
  • The Defend Trade Secrets Act and tips for navigating the law and an overview of what we know now that it’s been in effect for more than 2 years
  • Discussion of recent trade secret misappropriation decisions
  • Noteworthy data breaches and criminal prosecutions for trade secret misappropriation, data theft, and computer fraud matters and discussion of lessons learned
  • Best practices for updating agreements and policies to adequately protect company assets and trade secrets

A recent decision from the Eastern District of Pennsylvania reinforces the importance of the timing of purported misconduct in alleged violations of the Computer Fraud and Abuse Act (CFAA) and Defend Trade Secrets Act (DTSA). In Teva Pharmaceutical USA, Inc. v. Sandhu, et al., 2018 WL 617991 (Jan. 30, 2018), Judge Savage found that a defendant former executive could not be liable under the CFAA for conduct that occurred while she had authorized access to computers from which she misappropriated trade secrets. Id. at *1. However, the court also found that CFAA claims could be brought against the recipients of those trade secrets under an “indirect access” theory, and that DTSA claims could be brought on the basis of activity that began before the enactment of the DTSA but continued to occur after its passage. Continue Reading Federal Court Dismisses CFAA Claims Against Former Executive, Allows CFAA and DTSA Claims Against Competitor in Pharmaceuticals Trade Secret Dispute

Continuing our annual tradition, we present the top developments/headlines for 2017/2018 in trade secret, computer fraud, and non-compete law.

1. Notable Defend Trade Secrets Act Developments

Just two years after its enactment, the Defend Trade Secrets Act (“DTSA”) continues to be one of the most significant and closely followed developments in trade secret law. The statute provides for a federal civil cause of action for trade secret theft, protections for whistleblowers, and new remedies (e.g., ex parte seizure of property), that were not previously available under state trade secret laws. Continue Reading Top Developments/Headlines in Trade Secret, Computer Fraud, and Non-Compete Law in 2017/2018

In Seyfarth’s first webinar in its 2018 Trade Secrets Webinar Series, Seyfarth attorneys Michael Wexler, Robert Milligan, and Joshua Salinas presented 2017 National Year In Review: What You Need to Know About the Recent Cases/Developments in Trade Secrets, Non-Compete, and Computer Fraud Law. The panel reviewed noteworthy cases and other legal developments from across the nation over the last year in the areas of trade secrets and data theft, non-competes and other restrictive covenants, and computer fraud. Plus, they provided their predictions for what to watch for in 2018.

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

  • While the Defend Trade Secrets Act provides for an ex parte seizure order, courts have been very unwilling to provide such relief except in extraordinary circumstances.
  • In light of recent state laws and appellate court decisions at both the federal and state level in 2017, choice of venue and choice of law provisions must be carefully considered and strategically implemented.
  • The ABA’s May 4, 2017, Ethics Opinion encourages lawyers to have an open exchange of communication with their clients about the securities measures their firms are taking to safeguard the clients’ confidential information.

On January 25th at 12:00 p.m. Central Time, in Seyfarth’s first installment of its 2018 Trade Secrets Webinar series, Seyfarth attorneys will review noteworthy cases and other legal developments from across the nation over the last year in the areas of trade secrets and data theft, non-competes and other restrictive covenants, and computer fraud. Plus, they will provide their predictions for what to watch for in 2018.

Seyfarth attorneys Robert Milligan, Michael Wexler, and Joshua Salinas will address the following topics:

  • Significant new federal and state court decisions and legislation on non-compete and other restrictive covenants that may impact their enforcement;
  • The Defend Trade Secrets Act and tips for navigating the law and updating trade secret protection agreements to comply with the statute;
  • Discussion of recent trade secret misappropriation decisions;
  • Noteworthy data breaches and criminal prosecutions and criminal sentences for trade secret misappropriation, data theft, and computer fraud matters and discussion of lessons learned;
  • Best practices for updating agreements and policies to adequately protect company assets and trade secrets.

On Tuesday, October 10, 2017, the United States Supreme Court denied certiorari in Nosal v. United States, 16-1344. Nosal asked the Court to determine whether a person violates the Computer Fraud and Abuse Act’s prohibition of accessing a computer “without authorization” when using someone else’s credentials (with that other user’s permission) after the owner of the computer expressly revoked the first person’s own access rights. In denying certiorari, the Court effectively killed the petitioner’s legal challenge to his conviction in a long-running case that we have extensively covered here, here, here, here, here, here, and here (among other places). The denial of certiorari leaves further development of the scope of the CFAA in the hands of the lower courts. Continue Reading Supreme Court Refuses to Hear Password-Sharing Case, Leaving Scope of Criminal Liability Under Computer Fraud and Abuse Act Unclear

We are pleased to announce the webinar “2016
National Year In Review:webinar What You Need to Know About the Recent Cases/Developments in Trade Secrets, Non-Compete, and Computer Fraud Law” is now available as a webinar recording.

In Seyfarth’s first installment of its 2017 Trade Secrets Webinar series, Seyfarth attorneys reviewed noteworthy cases and other legal developments from across the nation over the last year in the areas of trade secrets and data theft, non-competes and other restrictive covenants, and computer fraud. Plus, they provided their predictions for what to watch for in 2017.

As a conclusion to this well-received webinar, we compiled a summary of three takeaways that were discussed during the webinar:

  • The DTSA can be a powerful tool to protect intellectual capital. However, in order to take full advantage of the DTSA, businesses should carefully check their agreements with employees, handbooks and equity awards to make sure they contain language mandated by the Defend Trade Secrets Act.
  • 2016 was a record year for data and information security breaches. Organizations should alert and train employees on following company policies, spotting potential social engineering attacks, and having a clear method to escalate potential security risks. Employee awareness, coupled with technological changes towards better security will reduce risk and exposure to liability.
  • Several states enacted laws to limit the scope and duration of non-competes in 2016. There were also some significant decisions limiting their scope and enforceability in 2016 as well. Companies should have their non-disclosure and non-compete agreements reviewed to ensure that they comply with the latest state and federal laws, including the new Defend Trade Secrets Act.

2016 TS YIR Cover

The 2016 Year in Review is a compilation of our significant blog posts from throughout last year and is categorized by specific topics such as: Trade Secrets, Computer Fraud and Abuse Act, Non-Compete & Restrictive Covenants, Legislation, International, and Social Media and Privacy. As demonstrated by our specific blog entries, including our Top Developments/Headlines, Trade Secrets Webinar Series – Year in Review and our dedicated page concerning federal trade secret legislation, our blog authors stay on top of the latest developments in this area of law and provide timely and entertaining posts on significant new cases, legal developments, and legislation.

The 2016 Review also includes links to the recordings of all webinars in the 2016 Trade Secrets Webinar Series. More information on our upcoming 2017 webinars is available in the program listing contained in this Review. Our highly successful blog and webinar series further demonstrate that Seyfarth Shaw’s national Trade Secret, Computer Fraud & Non-Competes Practice Group is one of the country’s preeminent groups dedicated to trade secrets, restrictive covenants, computer fraud, and unfair competition matters and is recognized as a Legal 500 leading firm.

Clients and friends of the firm can request a digital, CD, or printed copy of the 2016 Review below.

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shutterstock_144630422Although stealing bases, and even signs, in baseball may be part of the game, stealing another team’s trade secrets can land you in federal prison, as one executive recently learned the hard way.

As we previously reported, the FBI has been investigating the St. Louis Cardinals for hacking into the Houston Astros’ internal computer network and stealing proprietary information, including internal discussions about trades, proprietary statistics, and scouting reports. The investigation has now concluded, the Cardinals’ former director of baseball development, Chris Correa, pleaded guilty to five counts of unauthorized access of a protected computer in January, and he has now been sentenced to 46 months in federal prison. He also must pay $279,038 in restitution. According to NPR, “U.S. District Judge Lynn Hughes, as she sentenced Correa, noted that the crime has resulted in stricter security at other baseball teams, according to a press release from the Justice Department. When Correa apologized and called his actions ‘reckless,’ [Judge] Hughes replied, ‘No, you intentionally and knowingly did these acts.’”

As the Department of Justice reported at the time of Correa’s plea:

The plea agreement details a selection of instances in which Correa unlawfully accessed the Astros’ computers. For example, during 2013, he was able to access scout rankings of every player eligible for the draft. He also viewed, among other things, an Astros weekly digest page which described the performance and injuries of prospects who the Astros were considering, and a regional scout’s estimates of prospects’ peak rise and the bonus he proposed be offered. He also viewed the team’s scouting crosscheck page, which listed prospects seen by higher level scouts. During the June 2013 amateur draft, he intruded into that account again and viewed information on players who had not yet been drafted as well as several players drafted by the Astros and other teams.

Correa later intruded into that account during the July 31, 2013, trade deadline and viewed notes of Astros’ trade discussions with other teams.

Another set of intrusions occurred in March 2014. The Astros reacted by implementing security precautions to include the actual Ground Control website address (URL) and required all users to change their passwords to more complex passwords. The team also reset all Ground Control passwords to a more complex default password and quickly e mailed the new default password and the new URL to all Ground Control users.

Shortly thereafter, Correa illegally accessed the aforementioned person’s e mail account and found the e mails that contained Ground Control’s new URL and the newly-reset password for all users. A few minutes later, Correa used this information to access another person’s Ground Control account without authorization. There, he viewed a total of 118 webpages including lists ranking the players whom Astros scouts desired in the upcoming draft, summaries of scouting evaluations and summaries of college players identified by the Astros’ analytics department as top performers.

On two more occasions, he again illicitly accessed that account and viewed confidential information such as projects the analytics department was researching, notes of Astros’ trade discussions with other Major League Baseball teams and reports of players in the Astros’ system and their development.

The parties agreed that Correa masked his identity, his location and the type of device that he used, and that the total intended loss for all of the intrusions is approximately $1.7 million.

Michael McCann provides a good analysis of the sentence for Sports Illustrated and describes potential penalties Major League Baseball may pursue against the Cardinals.