The 2018 Trading Secrets Year in Review is a compilation of our significant blog posts from throughout the 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

In Seyfarth’s first installment in its 2019 Trade Secrets Webinar Series, Seyfarth attorneys Michael Wexler, Robert Milligan, and Joshua Salinas reviewed 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 provided predictions

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.
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Last week, Florida Senator Marco Rubio introduced the “Freedom to Compete Act” (the “Act”) proposing to amend the Fair Labor Standards Act (FLSA) of 1938 to ban non-competes for most non-exempt workers. The Act is broadly drafted to void any agreement that restricts “any work for another employer,” “any work in a specified geographical area,” and “any work for another employer that is similar” to the employee’s prior work. While it purports to void only non-compete agreements, the bill’s use of the sweeping language “any work” could be interpreted to ban not only non-compete agreements, but other post-employment restrictive covenants such as customer and employee non-solicitation agreements. Further, the Act (if passed) would purportedly apply retroactively to agreements entered into before its enactment. 
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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

Throughout 2018, Seyfarth Shaw’s dedicated Trade Secrets, Computer Fraud & Non-Competes Practice Group hosted a series of CLE webinars that addressed significant issues facing clients today in this important and ever-changing area of law. The series consisted of seven webinars:

  1. 2017 National Year in Review: What You Need to Know About the Recent Cases/Developments in Trade Secrets, Non-Compete and Computer Fraud Law
  2. Protecting Confidential Information and Client Relationships in the Financial Services Industry
  3. The Anatomy of a Trade Secret Audit
  4. Protecting Trade Secrets from Cyber and Other Threats
  5. 2018 Massachusetts Non-Compete and Trade Secrets Reform
  6. Protecting Trade Secrets Abroad and Enforcing Rights Abroad and in the U.S.
  7. Criminal Trade Secret Theft: What You Need to Know

As a conclusion to this well-received 2018 webinar series, we compiled a list of key takeaway points for each program, which are listed below. For those clients who missed any of the programs in this year’s series, recordings of the webinars are available on the blog, or you may click on the title of each available webinar below for the online recording. Seyfarth Trade Secrets, Computer Fraud & Non-Compete attorneys are happy to discuss presenting similar presentations to your company for CLE credit. Seyfarth will continue its trade secrets webinar programming in 2019, and we will release the 2019 trade secrets webinar series topics in the coming weeks.
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As we have discussed on this Blog over the past several years, the Protocol for Broker Recruiting (“Protocol”) allows for reciprocal poaching of brokers. More specifically, if a broker leaves one Protocol firm for another Protocol firm, the broker can (a) take certain account information (client names, addresses, telephone numbers, email addresses, and account title information) to his/her new firm and (b) solicit the clients he/she serviced at his/her former firm. Naturally then, the Protocol’s requirements conflict with confidentiality and restrictive covenant provisions that are commonly found in broker employment agreements and firm policies.
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A small, Chicago-based magnetic picture frame developer’s claims for trade secret misappropriation against a photo album manufacturer will be headed to trial after an Illinois federal district court largely denied the parties’ cross-motions for summary judgment. Puroon, Inc.’s (“Puroon”) founder and CEO, Hyunju Song, developed the “Memory Book,” “an all-in-one convertible photo frame, album, and scrapbook” that included magnetic openings and an “interchangeable outside view.” In 2013, Puroon launched a website displaying the Memory Book and Song attended various trade shows where attendees were able to interact with the product. Song also sent samples of the Memory Book to representatives of certain retailers without requiring them to sign a nondisclosure agreement.
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On November 1, 2018, the California Court of Appeal, Fourth Appellate District affirmed a trial court’s ruling in AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. et al., No. D071924, 2018 WL 5669154 (Cal. App. 2018), which (1) invalidated the plaintiff’s non-solicitation of employees provision in its Confidentiality and Non-Disclosure Agreements (CNDAs), (2) enjoined AMN from enforcing or attempting to enforce the employee non-solicitation provision in its CNDA with any of its former employees, and (3) awarded $169,000 in reasonable attorneys’ fees to defendants for plaintiff’s use of the provision.

The case is a significant decision which may impact some employers’ continued use of employee non-solicitation provisions with their California employees, at least in certain industries. There is now a split in California authorities and the issue is likely ripe for California Supreme Court guidance.

AMN and Aya are competitors in the business of staffing temporary healthcare professionals, namely providing “travel nurses” to medical care facilities across the country.  When former employees, named as individual defendants in the action and who worked as travel nurse recruiters in California, left AMN for Aya, AMN brought suit against Aya and the former employees, asserting 11 causes of action, including for breach of contract and trade secret misappropriation.
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