In a decision of first impression issued last week, the United States District Court for the Western District of Tennessee held, in Gus’s Franchisor, LLC v. Terrapin Restaurant Partners, LLC, that the COVID-19 pandemic did not excuse a terminated franchisee of Gus’s World Famous Fried Chicken (“Gus’s”) from complying with a temporary restraining order (TRO) and permanent injunction prohibiting it from using Gus’s trademarks, trade secrets and proprietary business information.
Continue Reading Don’t Play Chicken With Court Orders: COVID-19 Is No Excuse for a Terminated Franchisee to Continue Using the Franchisor’s Intellectual Property and Trade Secrets

Called upon by the Ninth Circuit in Ixchel Pharma, LLC v. Biogen, Inc. to answer two key questions concerning the validity of a settlement provision requiring a party’s termination of a collaboration agreement with a third-party, the California Supreme Court unanimously held:

  1. to state a claim for tortious interference with an at-will contract, a plaintiff must allege that the defendant engaged in an independently wrongful act, and
  2. in determining the validity of a competitive restriction in a business-to-business agreement under Business and Professions Code section 16600, the rule of reason applies and such restriction is not per se void.

The Court’s decision will impact how companies contracting under California law decide to set up their contracts and whether they will agree to the at-will termination of such contracts. The decision also provides some clarity for businesses that include competitive restraints with other companies in their commercial dealings, such as exclusive dealing and collaboration agreements, licenses, leases, and franchise agreements, as such restraints are not per se void under Section 16600 but subject to a rule of reason analysis.
Continue Reading California Supreme Court Clarifies Pleading Requirements for Claims of Tortious Interference with At-Will Contracts and Adopts Rule of Reason in Evaluating Competitive Restraints in Contracts Between Businesses

The much-ballyhooed legal battle over trade secrets concerning self-driving automobile technology involving Uber took its latest (and perhaps final) turn last week, when engineer Anthony Levandowski was sentenced to 18 months in prison and ordered to pay over $700,000 in restitution.

Embroiled in the middle of a billion-dollar dispute between tech giants, Levandowski had previously pled guilty to the single count of trade secret theft and was already facing a $179 million judgment awarded to his former tech employer. Naturally, the length of prison sentence and the amount of restitution had been of particular interest to the business and legal communities to see what kind of message would be sent by US District Judge William Aslup. But interestingly, it was another (non-traditional) aspect of the sentence that perhaps sent the clearest and most impactful message to tech companies and their employees: the requirement that Levandowski, whom the judge described as a “good person” and a “brilliant man”, must give speeches to the public entitled “Why I Went to Federal Prison.”
Continue Reading Self-Driving to Federal Prison: The Trade Secret Theft Saga of Anthony Levandowski Continues

The American Intellectual Property Law Association’s (AIPLA) Trade Secret Committee (of which partner Erik Weibust is Vice Chair) is taking its annual Trade Secret Law Summit online this year, with a series of weekly webinars. The first of the series, on Wednesday, August 12, 2020, at 2:00 p.m. EST, features partner Scott Humphrey, who will

At the end of 2019, Coty Inc. (“Coty”) expanded its brand portfolio by closing a notable $600 million deal for a majority stake in reality star Kylie Jenner’s young cosmetics company, King Kylie LLC (d/b/a Kylie Cosmetics). The purchase placed the valuation of the Kylie Cosmetics at $1.2 billion. Drama soon followed the acquisition as reports questioning Ms. Jenner’s net worth (and consequently, the value of her cosmetics empire) surfaced in May 2020, overshadowing Coty’s launch of the Kylie Skin beauty line in Europe. On June 29, 2020, Coty announced a 21% investment in KKW Beauty (Ms. Jenner’s sister’s company) for $200 million. Prompted by these deals, the manufacturer behind both Kylie Cosmetics and KKW, Seed Beauty, LLC, filed two trade secret lawsuits in Superior Court in Los Angeles, California.
Continue Reading Not so Pretty: Cosmetic Company Acquisitions Lead to Contentious Trade Secret Spat

The American Intellectual Property Law Association’s Trade Secret Summit will be held virtually this year. The Summit will consist of two 45-minute presentations every Wednesday beginning on August 12 and ending on September 2. Erik Weibust is Vice Chair of the AIPLA’s Trade Secret Committee, which hosts the Summit each year, and Scott Humphrey will

Seyfarth partners Erik Weibust, Jeremy Cohen, Scott Humphrey, and Marcus Mintz recently published an article entitled “Protecting Trade Secrets Without Breaking the Bank (or Even Negatively Affecting Profits)” in the Intellectual Property & Technology Law Journal. The article addresses the use of litigation funding in trade secret cases.

The Intellectual Property & Technology Law

Social distancing, a term which few of us had heard of before this year (despite the fact that it has been used since at least the early 2000s), is stretching into its third month. Notwithstanding some loosening of shelter-in-place advisories, and the fact that some employers are starting to open up offices and invite their workforce back in, a majority of employees are still working from home. This has broad implications for protection of employers’ trade secrets and confidential information—in many cases, a company’s most precious asset.
Continue Reading Security From Afar: How Best to Protect Trade Secrets in a World of Remote Working, Zoombombing, and Uncertainty

As a special feature of our blog—guest postings by experts, clients, and other professionals—please enjoy this blog entry from Hon. Elizabeth D. Laporte (Ret.)

Trade secret litigation in California is growing, in both volume and impact. The second-largest plaintiffs’ verdict in 2019 was $845 million, as reported by the Daily Journal, which was awarded to ASML, a Dutch semiconductor chip processing software company, in its case against XTAL, a company founded by two ex-employees of the plaintiff’s subsidiary in Santa Clara who allegedly worked in secret for XTAL using stolen trade secrets to get a head start in development and siphon off a major customer contract (ASML US Inc. v. XTAL Inc.). Another large verdict was a $66 million jury award, including a worldwide injunction, given to a San Jose LED manufacturer that sued a company for allegedly poaching its top scientist so that it could transfer its technology to China (Lumileds LLC v. Elec-Tech International Co. Ltd.). In these types of cases, plaintiffs have the advantage of being able to craft a compelling narrative of theft—most commonly, former employees surreptitiously appropriating the plaintiff company’s trade secrets for their own benefit in a rival venture—and to overcome employees’ general freedom to switch employers under California law, which voids almost all non-compete agreements (Bus. & Prof. Code Sec. 16600) and does not recognize the doctrine of inevitable disclosure (Schlage Lock Company v. Whyte, 101 Cal.App.4th 1443 (2002)). Moreover, trade secrets do not expire automatically; they allow broad protection without disclosure, unlike copyrights and patents.
Continue Reading Trade Secret Litigation on the Rise in California: How ADR Can Help

As a special feature of our blog—guest postings by experts, clients, and other professionals—please enjoy this blog entry from Neil Eisgruber, Director in the Disputes, Compliance & Investigations group at Stout.

For decades, companies have turned to federal courts to protect valuable business assets, such as trade secrets. Legal action has expanded over the years and recent trends have set the foundation for a continuing surge in federal trade secret litigation.
Continue Reading Trade Secret Litigation: Activity on the Rise