In Seyfarth’s final webinar in its series of 2017 Trade Secrets Webinars, Seyfarth attorneys Justin Beyer, Dawn Mertineit, and Ryan Behndleman presented Protecting Trade Secrets in the Social Media Age. The panel focused on how to define and protect trade secrets on social media.

As a conclusion to this well-received webinar, we compiled a summary of takeaways: Continue Reading Webinar Recap! Protecting Trade Secrets in the Social Media Age

Social media and related issues in the workplace can be a headache for employers. There is no denying that social media has transformed the way that companies conduct business. In light of the rapid evolution of social media, companies today face significant legal challenges on a variety of issues, ranging from employee privacy and protected activity to data practices, identity theft, cybersecurity, and protection of intellectual property.

On September 28th at 12:00 p.m. Central, in Seyfarth’s fifth installment in its Trade Secrets Webinar Series, Seyfarth attorneys Justin Beyer, Ryan Behndleman, and Dawn Mertineit will discuss the relationship between trade secrets and social media.

The panel will specifically address the following topics:

  • The interplay between social media privacy laws and workplace investigations and how developing internal company policy and/or contracts can protect company assets
  • Defining, understanding, and protecting trade secrets in social media
  • How courts are interpreting ownership of social media accounts and whether social media sites constitute property
  • How to prevent trade secret misappropriation or distribution through social media channels
  • The interplay between protection of company information and ownership of company accounts in the social media age

Please join us for this informative webinar.

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By Gary Glaser, James McNairy and Marc Jacobs

We are pleased to announce the webinar “Trade Secrets, Restrictive Covenants and the NLRB: Can They Peacefully Coexist?” is now available as a podcast and webinar recording.

In Seyfarth’s fifth installment of its 2016 Trade Secrets Webinar series, attorneys Jim McNairy and Marc Jacobs conveyed strategies and best practices to help you, as in-house counsel and HR professionals, to ensure that your company and internal clients are protected.

As a conclusion to this well-received webinar, we compiled a list of  brief summaries of the more significant cases that were discussed during the webinar:

  • The National Labor Relations Act applies to all private sector workplaces — not just unionized facilities.   Among other things, the Act protects an employee’s right to engage in protected concerted activities, which in general are group action (usually by two or more employees) acting together in a lawful manner, for a common, legal, work-related purpose (e.g., wages, hours and other terms and conditions of employment).  Limits on these rights and retaliation against an employee for engaging in protected concerted activity violates the Act.  The National Labor Relations Board is aggressively protecting employees’ rights to engage in protected concerted activity. As part of this effort, the NLRB will find unlawful workplace rules, policies, practices and agreements that explicitly restrict Section 7 activities (such as a rule requiring employees to keep their wage rate confidential) or that employees would reasonably believe restricts their Section 7 rights (e.g., a confidentiality agreement or policy that generally includes in the definition of confidential information “personnel information”).
  • In the 2015 Browning-Ferris Industries decision, the NLRB substantially broadened the definition of “joint employer”.  Under this new expanded definition, an entity can be found to be a joint employer if it has the authority, even if unexercised, to control essential terms and condition of employment.  As a result, if one entity has agreements with other entities to provide labor or services, that entity may be a joint employer of the other entities’ employees based on the level of control it has over the terms and conditions of employment of the other entities/ employees.  One indicia of that control would be requirements for hiring or employment, such as requirements to sign agreements or adopt policies for the protection of confidential information and similar restrictions.
  • As a result, and also because of the signing of the federal Defend Trade Secrets Act, now is a critical time for all employers to review their policies, practices, procedures and agreements (1) regarding the protection of confidential information; and (2) with third-party service and labor providers.  In reviewing confidential information policies and agreements, the focus should be on narrow tailoring using specifics and examples to protect information that lawfully may be protected in a lawful manner.  For agreements with parties, the review should include an analysis of the factors that may show joint employer status so that you can balance the risk of a joint employer finding with the needs to protect your organization.

Join us Monday, May 16 at 2:00 p.m. Central. for our next webinar, “The Defend Trade Secrets Act: What Employers Should Know” To register, click here.

shutterstock_328329848Over the last decade, communication via email and text has become a vital part of how many of us communicate in the workplace. In fact, most employees could not fathom the idea of performing their jobs without the use of email. For convenience, employees often use one device for both personal and work-related communications, whether that device is employee-owned or employer-provided. Some employees even combine their personal and work email accounts into one inbox (which sometimes results in work emails being accidentally sent from a personal account). This blurring of the lines between personal and work-related communications creates novel legal issues when it comes to determining whether an employer has the right to access and review all work-related communications made by its employees.

Employers have legitimate business reasons for monitoring employee communications. Take, for example, the scenario in which an employee leaves her employment, and the employer is concerned that she has taken proprietary information or solicited clients in violation of her duty of loyalty or a contractual agreement. Another common scenario that gives rise to the need for employers to review all of an employee’s work-related emails is when the employer is in litigation that requires production of employee communications.

Most employers are comfortable with the notion that, with a properly worded policy that provides notice to employees of the ability and intent to monitor email, an employer can access emails on an email server provided by the employer. However, what about cases in which the employer does not provide the email service? With employees using web-based emails, like Gmail and Hotmail, and texts to communicate in the workplace, the relevant communications may be elsewhere. In these situations, what are an employer’s rights to access and review such communications?

An employer’s ability to review electronic communications is governed by the Electronic Communication Privacy Act (ECPA) and the Stored Communications Act (SCA). The ECPA prohibits the interception of electronic communications, and the term “interception” as used in the ECPA has been interpreted so narrowly that this title of the ECPA rarely comes into play in cases involving an employer’s review of employee email or texts. The SCA makes it illegal to access without authorization a facility through which electronic communication service is provided and thereby obtain access to communications in electronic storage.

With regard to an employer’s review of employee emails sent through web-based email accounts like Gmail or Hotmail, the most frequent scenario confronted by courts is one in which a former employer accesses the web-based email of a former employee, looking for evidence of malfeasance. In these cases, the former employer is typically able to access the former employee’s web-based email account because the employee has saved her username and password on a device provided by the employer, which was returned at termination, or failed to delink an account from such a device. In these cases, courts have been reluctant to punish the former employee for failing to take appropriate steps to secure their own personal, and allegedly private, communications.

For example, a district court in New York considered an employee’s claim that his former employer’s review of emails in his Hotmail account after his termination violated the SCA because it was unauthorized. The defendant argued that its review of the emails did not violate the SCA because the employee had implicitly authorized its review of the emails on his Hotmail account because the employee had stored his username and password on the employer’s computer system or forgot to remove such an account from an employer-provided phone before returning it.

The court rejected this argument, holding that it was tantamount to arguing that, if the employee had left his house keys on the reception desk at the office, he would have been implicitly authorizing his employer to enter his home without his knowledge. The court also noted that the employer’s computer usage policy did not provide the necessary authorization because it only referred to communications sent over the employer’s systems.

Likewise, a district court in Ohio confronted with similar facts, refused to hold the plaintiff responsible for his own failure to safeguard his information. In this case, the employee had turned in a company-issued blackberry upon termination without first deleting the Gmail account he had added to the phone. The former employer reviewed the emails in the former employee’s Gmail account, and the former employee alleged that this violated the SCA. The former employer argued that the former employee had negligently or implicitly consented to their review of the emails in her Gmail account by returning the blackberry to the company without deleting the account. However, the court held that the employee’s “negligence” in leaving the Gmail account on her phone when she turned it in was not tantamount to her authorizing the defendant to review the emails on her Gmail account.

However, a federal district court in California reached a different result in a case involving text messages. In this case, a company had sued its former employee for misappropriating trade secrets when it discovered, upon his termination, a number of text messages on the former employee’s company-issued iPhone that documented his misappropriation. The former employee had forgotten to delink his Apple account from the company phone he returned, and thus, his text messages continued to go to the phone — and his former employer. The court granted the company’s motion to dismiss the former employee’s counter claim that the company’s review of his text messages violated the SCA. The court held that text messages stored on phones are not in “electronic storage” within the meaning of the SCA, citing a Fifth Circuit case that reached the same conclusion about text messages. Of course, a violation of the SCA is not the only issue in these cases.

For example, in this case, the employee also alleged that his employer had invaded his privacy. However, the court held that the employee had no reasonable expectation of privacy in a company-owned phone that was no longer in his possession. In contrast to the two cases above, the court found that the employee’s failure to undertake precautions to maintain the privacy of his text messages showed he had no right to exclude others from accessing them.

The main lesson from these cases is that, if an employer wants to have the ability to review all employee communications that take place in the workplace, the employer needs to have, at a minimum, a policy that specifically provides for the right to monitor and review, for legitimate business reasons, any work-related communications made by the employee on a device provided by the company or a personal device used for work purposes. (Although the SCA does not require any showing about the employer’s motives in accessing the emails, a traditional invasion of privacy analysis would take this into account.) As a practical matter, the employer may not have the ability to access such accounts, but where access is available, this policy language is critical.

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The explosion of digital and social media enables companies to work more efficiently and to easily and creatively promote their products and services to large audiences across the globe. Modern technological developments in the workplace, however, come with modern issues – one such challenge for companies is protecting intellectual property (IP) and confidential information in today’s dynamic, digital and mobile environment.

On January 19, the State Bar of California is bringing together leading IP and employment attorneys from private industry, public agencies, private law firms and law schools for a conference in San Francisco on these issues: “Intellectual Property Protection and Social Media Issues in the Workplace.” Seyfarth Shaw is a proud sponsor of the conference and I have the honor of serving as the conference chair.

In this Q&A, I  was interviewed by CREATe.org President and CEO Pamela Passman about the conference and these important issues.

1)    The issue of social media and IP protection is a daunting one for companies. As you were putting together topic areas for the conference, how did you decide what to focus on?

Indeed, companies are challenged today with a broad range of issues related to IP protection in today’s digital and social media environment. For this conference, we considered the top areas of concern and information that would be most practical for participants.

For example, the session “Ownership of IP in the Workplace,” looks at the types of agreements you should and can have employees sign. The “IP Issues You Didn’t Know you Had” panel takes a look at emerging challenges stemming from hackers, third-party hosted sites, open source software, unscrupulous partners who claim your IP as their own, and users of torrents and the Darknet, to name a few. The luncheon program – “Testimonials and Endorsements: How to Properly Involve Employees” – will provide an overview of the restrictions on the use of testimonials and endorsements and will offer general and specific approaches to staying out of trouble when navigating new advertising media. Closing the day is the session featuring Ms. Passman – “IP Theft in the Workplace.” It looks at insider threats – both malicious and unintentional – to confidential information and provides practical steps for improving the protection of IP, including trade secrets.

2)    Why should companies be more proactive when it comes to social media in the workplace?

First, companies need to be aware of the legal risks related to the use of social media in the workplace. These include:

  • Document retention and electronic discovery issues
  • Exposure of confidential information and trade secrets and cybersecurity concerns
  • Securities law concerns, including insider trading
  • Vicarious liability for discrimination, retaliation, defamation, invasion of privacy, trademark & copyright infringement, obscene material and otherwise illegal content

A 2013 Ponemon study, while a bit dated, illustrates some of the scenarios that can get companies in trouble. They interviewed 3317 individuals in six countries (United States, United Kingdom, Brazil, France, China, and Korea) and found that of those surveyed:

  • Over half e-mail business documents from their workplace to their personal e-mail accounts (41 percent say they do it at least once a week);
  • 41 percent download intellectual property to their personally owned smart phones or tablets; and
  • 37 percent use file-sharing applications (e.g., Dropbox™ or Google Docs™) without company permission.

3)    Where should companies start? Is it necessary for your company to have a social media policy in place and, if so, what should your policy include?

Social media platforms attract large audiences worldwide: Facebook has over 1.4 billion account holders and over 936 million daily active users. LinkedIn has over 364 million members in over 200 countries in territories. Given these statistics, it is more than likely that some of your employees are active social media users. It is absolutely necessary for your company to have a social media policy in place, one which should address:

  • Proper Use: acknowledging your company provides its employees internet access, that it is a useful business tool and that employees must use it properly
  • Use During Work Hours While Using Company Provided Equipment/Systems: no or limited use of social media by your employees unless directly related or necessary to perform the job
  • Limitations on Social Media Activity to Those Impacting The Company: acknowledging that social media may be a personal activity and that your company will only seek to impose limitations on its use when it impacts your company, co-workers, clients or third parties who deal with your company

4)    Are there any legal issues for your company to consider regarding employee social media activity?

If your company decides to implement a social media policy or agreement, there are legal implications to take into consideration. Most states have limits on what you can ask an employee regarding social media accounts. Other implications include (but are not limited to):

  • First Amendment: protects free speech
  • Fourth Amendment: protects against unreasonable searches and seizures
  • National Labor Relations Act (NLRA): An employee is protected under the National Labor Relations Act (NLRA) when engaging in a discussion of work conditions with other co-workers on social media, including sharing information about wages, complaining about policies or managers and expressing union support. Section 7 of the NLRA prohibits employers from enacting policies that stifle or prevent employees from engaging in “concerted activity” for “mutual aid and protection”

You should always consult with your company’s legal department to determine the limitations you can impose on employee social media activity.

5)    You have mentioned trade secrets as one type of IP that is particularly vulnerable. What are trade secrets and how can employees access company trade secrets in the workplace?

Because trade secrets can be central to your company’s competitive edge, these company ‘crown jewels’ must be properly protected in the workplace. There are six factors to determine whether information constitutes a trade secret:

  • Extent known outside company
  • Extent known by employees and others inside company
  • Measures taken by company to protect secrecy
  • Value of trade secret to company and competitors
  • Time, effort and money expended in development
  • Ease of difficulty which it can be properly acquired or duplicated by others

Examples of trade secrets include: product launches and designs, formulas, processes, business plans and customer lists. Rogue employees and business partners account for 90% of trade secret misappropriation, the vast majority of this misappropriation occurring by electronic means.

For more information about the conference, please click here. There is still time to register.

CalBarThe workplace is often the laboratory where creative ideas are hatched and innovative products are launched. While striving to create environments where innovation and creativity thrive, successful companies must also ensure that appropriate safeguards and agreements are in place to protect intellectual property. Employers also face challenges in navigating fair trade practices and employee privacy rights while capitalizing on the explosion of social media. Complicating the entire picture are the increasingly fluid borders of where, when, and how work is accomplished in this dynamic economy.

Seyfarth’s Trade Secret and IP groups are scheduled to participate in the State Bar of California’s Day Program entitled “Intellectual Property Protection and Social Media Issues in the Workplace Program,” taking place January 19, 2016 in San Francisco, California.

Seyfarth is a sponsor of the prestigious program, which brings together preeminent speakers from leading intellectual property and employment attorneys from private industry, public agencies, private law firms, and distinguished law schools that will identify and discuss the important intellectual property and social media issues that arise in today’s workplace and suggest practical strategies for addressing them.

Seyfarth Shaw Partner Robert B. Milligan serves as the conference chair of the program and as an officer of the State Bar Intellectual Property Section’s Trade Secret Interest Group and Partner Kenneth L. Wilton will present the luncheon program “Testimonials and Endorsements: How to Properly Involve Employees”.

The State Bar of California and the Intellectual Property Law Section are approved State Bar of California MCLE providers. 7 Hours of MCLE Credit will be awarded to registrants.

For more information, please click here.

shutterstock_345999860Throughout 2015, 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 nine webinars:

  1. 2014 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. International Trade Secrets and Non-Compete Law Update
  4. Employee Social Networking: Protecting Your Trade Secrets in Social Media
  5. How and Why California is Different When It Comes to Trade Secrets and Non-Competes
  6. State Specific Non-Compete Oddities Employers Should Be Aware Of
  7. So You Want An Injunction in A Non-Compete or Trade Secret Case?
  8. Social Media Privacy Legislation Update
  9. Enforcing Non-Compete Provisions in Franchise Agreements

As a conclusion to this well-received 2015 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, the webinars are available on CD upon request, or you may click on the title below each webinar for the online recording. We are pleased to announce that Seyfarth will continue its trade secrets webinar programming in 2016, and we will release the 2016 trade secrets webinar series topics in the coming weeks.

2014 National Year in Review: What You Need to Know About the Recent Cases/Developments in Trade Secrets, Non-Compete and Computer Fraud Law

The first webinar of the year, led by Michael Wexler, Robert Milligan and Daniel Hart, reviewed noteworthy cases and other legal developments from across the nation in the areas of trade secret and data theft, non-compete enforceability, computer fraud, and the interplay between restrictive covenant agreements and social media activity, and provided predictions for what to watch for in 2015.

  • As demonstrated by high-profile hacking attacks and criminal prosecutions for trade secrets theft, companies’ trade secrets are at greater risk today than ever before. To mitigate the risk of trade secrets theft, companies should review their security procedures, policies on IT resources and email usage, and employee exit interview/termination processes to ensure that the company’s assets are adequately protected.
  • Use of social media continues to generate disputes. As more and more states adopt social media privacy laws, companies increasingly seek to assert an ownership interest in work-related social media accounts. Additionally, as the NLRB cracks down on social media policies that prohibited employees from engaging in protected activities, employers should periodically review their policies regarding use of social media in the workplace.
  • Courts and regulatory agencies continue to scrutinize non-competes and other restrictive covenants.  In light of these and other continuing developments in non-compete law, employers should periodically review their existing agreements and on-boarding procedures to maximize the likelihood that their agreements will be upheld. To learn more, please see our 50 State Non-Compete and Trade Secrets Desktop Reference.

Protecting Confidential Information and Client Relationships in the Financial Services Industry

The second installment, led by Scott Humphrey, Jason Stiehl and James Yu, focused on trade secret and client relationship considerations in the banking and finance industry, with a particular focus on a firm’s relationship with its FINRA members.

  • Enforcement of restrictive covenants and confidentiality obligations for FINRA and non-FINRA members are different. Although FINRA allows a former employer to initially file an injunction action before both the Court and FINRA, FINRA—not the Court—will ultimately decide whether to enter a permanent injunction and/or whether the former employer is entitled to damages as a result of the former employee’s illegal conduct.
  • Address restrictive covenant enforcement and trade secret protection before a crisis situation arises. An early understanding of the viability of your company’s restrictive covenants and the steps your company has taken to ensure that its confidential information remains confidential will allow your company to successfully and swiftly evaluate its legal options when a crisis arises.
  • Understand the Protocol for Broker Recruiting’s impact on your restrictive covenant and confidentially requirements. The Protocol significantly limits the use of restrictive covenants and allows departing brokers to take client and account information with them to their new firm.

International Trade Secret and Non-Compete Law Update

In the third installment, attorneys Wan Li, Ming Henderson and Daniel Hart focused on non-compete and trade secret considerations from an international perspective. Specifically, the webinar involved a discussion of non-compete and trade secret issues in Europe and China as compared to the United States. This webinar provided valuable insight for companies who compete in the global economy and must navigate the legal landscape in these countries to ensure protection of their trade secrets and confidential information, including the effective use of non-compete and non-disclosure agreements.

International…Local Law Compliance is Key

  • One size does not fit all! Requirements for enforceable restrictive covenants vary dramatically from jurisdiction to jurisdiction. However, there are some common requirements and issues regarding enforceability based on the region (e.g., in Europe; see below). Bearing in mind non-compete covenants across the world may be unlawful in certain countries or heavily restricted, employers should carefully tailor agreements to satisfy local legal requirements and appropriately apply local drafting nuances to aid enforceability of any restrictive covenants.
  • The general approach to restrictive covenants in Europe is that the restrictions should not go further than is reasonably necessary to protect the employer’s legitimate business interests. This restrictive approach is a continuing trend across Europe. For example, there is a recent prohibition in the Netherlands on non-compete clauses in fixed-term contracts unless justified by the special interests of the company. In practice, this means that employers should particularly focus on the duration and scope (in terms of geographical coverage and the employee’s own personal activities) of the restrictions and be mindful of any local payment obligations when preparing restrictive covenants (e.g., in France and in Germany). Europe is also making an attempt to remedy the uneven levels of protection and remedies in relation to trade secrets. The draft EU Directive for trade secret protection is currently making its way through the legislative process with no firm timeline for adoption.
  • In addition to local or regional nuances, employers should take advantage of other contractual and/or tactical mechanisms as a “belt-and braces” approach, such as claw-backs and forfeiture of deferred compensation (where permitted), use of garden leave provisions, and strategic use of forum selection and choice-of-law provisions. Employers operating in the U.S. should also consider strategic use of mandatory forum selection and choice-of-law provisions in restrictive covenant agreements with U.S.-based employees.
  • Practical measures should also be taken to protect confidential information and trade secrets, including limiting access to sensitive information, using exit interviews, and (provided that applicable privacy laws are followed) monitoring use of company IT resources and conducting forensic investigations of departing employees’ computer devices.

France…Do Not Miss the Deadline

  • Drafting a non-compete clause under French labor law requires specific care as courts are particularly critical of the following: duration, the geographical and activities scope, the conditions in which the employer releases the employee from such obligation, the employee’s role, the interests of the company, and the financial compensation provided by the clause.
  • Recent case law shows that French courts are strict when it comes to the interpretation of the non-compete clauses and the possibility to waive the non-compete clause. If an employer misses the relevant contractual deadline to release an employee from her/his non-compete, the financial compensation will be due for the entire period. Similarly, if the employer waives the non-compete prematurely, the courts will consider the waiver as invalid.
  • During employment, an employee is subject to a general obligation of confidentiality and breach may be subject to civil and criminal sanctions. Only “trade secrets,” however, are protected post-termination under certain circumstances. Employers should therefore automatically include a confidentiality clause in employment agreements to strengthen the protection of the company’s data post-termination. Good news for employers: the French High Court recently confirmed that, unlike non-compete covenants, a confidentiality clause does not require any financial compensation.

United Kingdom…Less is NOT More

  • Restrictive covenants are potentially void as an unlawful restraint of trade. In practical terms, this means that such covenants are only likely to be enforceable where they are fairly short in duration, the restriction is narrowly focused on the employee’s own personal activities (e.g., by geographical scope), and is specific to the commercial environment. Unlike in some European jurisdictions, payment will not “rescue” an unenforceable restriction. In addition, the English courts tend to have an unforgiving nature when it comes to poor drafting even if the intention of the parties is obvious. Employers should therefore also consider other creative and acceptable ways to aid enforceability, such as deferring remuneration and varying and reaffirming covenants.
  • Absent any agreement, only “trade secrets,” which are narrowly defined, will be protected after employment. Employers should therefore ensure that employment contracts and/or other free-standing binding agreements provide full coverage for the protection of confidential and other valuable business information post-termination. Often the physical protection of confidential information is underestimated (e.g., encrypting data, installing passwords, secure storage, etc.), which can be a more effective and less costly approach for employers in the long-term. Employers should therefore also seek to retain physical control of such information in order to reduce and limit unwanted disclosure and misuse.

China….Stay ON TOP of An Evolving Regulatory System

  • In China, employers should ensure that they have a non-compete agreement with the employee at the time of employment, so that the employer can decide whether to enforce or not to enforce the non-compete agreement for a period of post-employment.
  • In addition, employers should ensure that documents are marked with “confidential,” or that other measures are taken to protect confidential information. Otherwise, remedies may not be available under the Chinese law for breach of confidential obligations. Employers should also review and update rules and policies regarding confidentiality and security arrangements. Pre-employment vetting of R&D staff is also essential to prevent unexpected breach or non-compliance with trade secret and intellectual property rights.
  • As a notable (and relatively recent) development, injunctive relief for trade secret misappropriation is available in Shanghai and Anhui.

Employee Social Networking: Protecting Your Trade Secrets in Social Media

The fourth installment, presented by John Tomaszewski, Eric Barton and Joshua Salinas, addressed the relationship between trade secrets, social media, and privacy.

Social Media Privacy Laws are on the Rise

  • At least 20 states now have laws prohibiting employers from requiring or even asking for access to employees’ or job applicants’ personal social media accounts. Penalties for violations range from nominal administrative fines to much larger damages, including punitive damages and attorneys’ fees. Many of the laws, however, have broad exceptions and loopholes, including required employer access of “nonpersonal” accounts and on suspected data theft or workplace misconduct. To learn more, please see our Social Media Privacy Legislation Desktop Reference.

Safeguard Your Trade Secrets

  • Protecting your company’s valuable confidential information and trade secrets from disloyal employees is a very different exercise than keeping strangers and competitors locked-out. This exercise is further complicated by inconsistent privacy legislation, which can vary wildly from state to state. For example, a disloyal employee secretly copies a confidential employer customer list onto his personal LinkedIn account. The employee works in a state that has adopted the new privacy legislation, which has an exemption for suspected data theft. The employer hears unsubstantiated gossip about that list copying, but does not investigate based on the flimsy evidence and for fear of violating the privacy law. The employee later resigns, and uses that list for a competitor. Did the former employer waive a trade secrets claim against the employee because it decided not to investigate, even though it could have? Did that decision amount to an unreasonably insufficient effort to protect its trade secrets?

Social Media and Bring Your Own Device (BYOD)

  • Social media is an extension of the trend to combine work, and non-work related activities within the same platform. Just like smartphones allow you to engage in both work and non-work related emailing, the social media platforms continue to drive the conflation of personal and employee activity. As a result, a holistic approach needs to be taken in managing the employee. Otherwise, what was once considered a reasonable policy at work may get applied to private or protected activity and thereby become at a minimum, unreasonable; and in some cases, illegal.

How and Why California is Different When it Comes to Trade Secrets and Non-Competes

The fifth installment, directed by Robert Milligan, James McNairy and Joshua Salinas, focused on recent legal developments in California trade secret and non-compete law and how it is similar to and diverse from other jurisdictions, including: a discussion of the California Uniform Trade Secrets Act; the interplay between trade secret law and Business and Professions Code Section 16600 (which codifies California’s general prohibition of employee non-compete agreements), and recent case developments regarding non-compete agreements and trade secret investigations. The panel discussed how these latest developments impact counseling, litigation and deals involving California companies.

  • Broad “no re-hire” provisions in settlement agreements may, under certain circumstances, constitute unlawful restraints of trade under California law, as reflected in Golden v. California Emergency Physicians Medical Group (9th Cir. Apr. 8, 2015).
  • Alone, voluntary dismissal of a trade secret claim is not a safe harbor to liability for attorneys’ fees if the claim otherwise meets the criteria for having been brought or maintained in bad faith.
  • The preemptive scope of California’s Uniform Trade Secrets Act is very broad. As a result, tort or conversion claims that might be viable in other states may be preempted when pleaded in California with a trade secret claim, provided independent unlawful acts are not alleged.

State Specific Non-Compete Oddities Employers Should Be Aware Of

In Seyfarth’s sixth installment, attorneys Michael Baniak and Paul Freehling discussed the significant statutory changes to several jurisdictions’ laws regarding trade secrets and restrictive covenants and pending legislation proposed in additional jurisdictions over the past year. As trade secrets and non-compete laws continue to evolve from state to state in piecemeal fashion, companies should continually revisit their trade secrets and non-compete strategies in light of the evolving legal landscape and legislative trends.

  • Enforceability of non-compete, non-solicit, and confidentiality covenants in employment agreements depends primarily on the applicable statutes, and pertinent judicial decisions and conflict of laws principles, regarding (a) the acceptable breadth of such covenants, and (b) appropriate balancing of the legitimate business interests of employers, employees, and the public. Enforceability requires constant vigilance in updating the covenants because the law, business, and employment evolves often very rapidly.
  • Because each jurisdiction’s version of the Uniform Trade Secrets Act as enacted (it has been adopted in one form or another in the District of Columbia and each of the 50 states except New York and Massachusetts) is unique, all relevant jurisdictions’ versions must be analyzed.
  • Oddities in the law of restrictive covenants include: (a) hostility in a few states to non-competes and/or non-solicit covenants in general; (b) in some states (whether by statutory provision or judicial fiat); certain employees are exempt from such covenants; (c) there are disparities in various courts’ willingness to “blue pencil,” reform, or invalidate covenants deemed overbroad as written; and (d) there are variations in different courts’ views as to whether only actual disclosure, or also threatened or inevitable disclosure, of trade secret or confidential information will be enjoined.

So You Want An Injunction in A Non-Compete or Trade Secret Case?

In Seyfarth’s seventh installment, attorneys Justin Beyer, Eric Barton and Bob Stevens focused on the issues confronting plaintiffs in preparing for and prosecuting trade secret cases and the various ins and outs of seeking both temporary restraining orders and preliminary injunctions.

  • Employers can best protect their trade secrets by instituting robust training, policies and procedures aimed at educating its work force as to what constitutes confidential information, and that this information belongs to the employer, not the employee. By utilizing confidentiality, invention assignment and reasonable restrictive covenants, as well as implementing onboarding and off-boarding protocols, educating employees on non-disclosure obligations, educating employees on that data which the employer considers confidential, clearly marking the most sensitive data, and restricting access to confidential information, both systemically and through hardware and software blocks, employers can both educate and prevent misappropriation.
  • If an employee voluntarily resigns his or her employment with the company, the employer should already have in place a specific protocol to ensure that the employee does not misappropriate company trade secrets. Such steps include questioning the employee on where he intends to go, evaluating whether to shut off access to emails and company systems prior to the expiration of the notice period, requesting a return of company property, including if the company utilizes a BYOD policy, and reminding the employee of his or her continuing obligations to the company. Likewise, companies should have robust onboarding policies in place to help avoid suit, such as attorney review of restrictive covenants, offer letters that specifically disclaim any desire to receive confidential information from competitors, and monitoring of the employee after hire to ensure that they are not breaching any confidentiality or non-solicitation obligations to the former employer.
  • If a company finds itself embroiled in litigation based on either theft of its trade secrets or allegations that it either stole or received stolen trade secrets, it is important to take swift action, including interviewing the players, preserving the evidence, and utilizing forensic resources to ascertain the actual theft or infection (if you are on the defense side). Companies defending against trade secret litigation also need to analyze and consider whether an agreed injunction is in its best interests, while it investigates the allegations. These types of cases tend to be fast and furious and the internal business must be made aware of the impact this could have on its customer base and internal resources.

Social Media Privacy Legislation Update

In Seyfarth’s eighth installment, Seyfarth attorneys Robert Milligan, Daniel Hart and Joshua Salinas discussed their recently released Social Media Privacy Legislation Desktop Reference and addressed the relationship between trade secrets, social media, and privacy legislation. We compiled a list of brief summaries of the more significant cases that were discussed during the webinar:

  • In KNF&T Staffing Inc. v. Muller, No. 13-3676 (Mass. Super. Oct. 24, 2013), a Massachusetts court held that updating a LinkedIn account to identify one’s new employer and listing generic skills does not constitute solicitation. The court did not address whether a LinkedIn post could ever violate a restrictive covenant.
  • Outside of the employment context, the Indiana Court of Appeals in Enhanced Network Solutions Group Inc. v. Hypersonic Technologies Corp., No. 951 N.E.2d 265 (Ind. Ct. App. 2011) held that a non-solicitation agreement between a company and its vendor was not violated when the vendor posted a job on LinkedIn and an employee of the company applied and was hired for the position, because the employee initiated all major steps that led to the employment.
  • In the context of Facebook, a Massachusetts court ruled in Invidia LLC v. DiFonzo, No. 2012 WL 5576406 (Mass. Super. Oct. 22, 2012) that a hairstylist did not violate her non-solicitation provision by “friending” her former employer’s customers on Facebook because “one can be Facebook friends with others without soliciting those friends to change hair salons, and [plaintiff] has presented no evidence of any communications, through Facebook or otherwise, in which [defendant] has suggested to these Facebook friends that they should take their business to her chair.”
  • Similarly, in Pre-Paid Legal Services, Inc. v. Cahill, No. CIV-12-346-JHP, 2013 U.S. Dist. LEXIS 19323 (E.D. Okla., Jan. 22, 2013), a former employee posted information about his new employer on his Facebook page “touting both the benefits of [its] products and his professional satisfaction with [it]” and sent general requests to his former co-employees to join Twitter. A federal court in Oklahoma denied his former employer’s request for a preliminary injunction, holding that communications were neither solicitations nor impermissible conduct under the terms of his restrictive covenants
  • The Virginia Supreme Court in Allied Concrete Co. v. Lester, 285 Va. 295 (2013) upheld a decision sanctioning a plaintiff and his attorney a combined $722,000 for deleting a Facebook account and associated photographs that undermined the plaintiff’s claim for damages stemming from the wrongful death of his wife in a car accident. The deleted photographs showed plaintiff holding a beer while wearing a T-shirt with the message “I Love Hot Moms.” Subsequent testimony revealed that the plaintiff’s attorney had instructed his paralegal to tell the plaintiff to “clean up” his Facebook entries because “[they did] not want blowups of [that] stuff at trial.”
  • PhoneDog v. Noah Kravitz, No. C11-03474 MEJ, 2011 U.S. Dist. LEXIS 129229 (N.D. Cal. 2012) involved a dispute over whether a Twitter account’s followers constitute trade secrets even when they are publically visible. The court denied the defendant’s motion to dismiss and ruled that PhoneDog, an interactive mobile news and reviews web resource, could proceed with its lawsuit against Noah Kravitz, a former employee, who PhoneDog claimed unlawfully continued using the company’s Twitter account after he quit. The court held that PhoneDog had described the subject matter of the trade secret with “sufficient particularity” and satisfied its pleading burden as to Kravitz’s alleged misappropriation by alleging that it had demanded that Kravitz relinquish use of the password and Twitter account, but that he refused to do so. With respect to Kravitz’s challenge to PhoneDog’s assertion that the password and the Account followers do, in fact, constitute trade secrets—and whether Kravitz’s conduct constitutes misappropriation, the court ruled that such determinations require the consideration of evidence outside the scope of the pleading and should, therefore, be raised at summary judgment, rather than on a motion to dismiss. The parties ultimately resolved the dispute.
  • The Second Circuit Court of Appeals in Triple Play v. National Labor Relations Board, No. 14-3284 (2d. Cir. Oct. 21, 2015) affirmed an NLRB decision that a Facebook discussion regarding an employer’s tax withholding calculations and an employee’s “Like” of the discussion constituted concerted activities protected by Section 7 of the National Labor Relations Act. The Facebook activity at issue involved a former employee posting to Facebook, “[m]aybe someone should do the owners of Triple Play a favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I OWE money . . . Wtf!!!!” A current employee “Liked” the post and another current employee posted, “I owe too. Such an asshole.” The employer terminated the two employees for their Facebook activity. The Second Circuit affirmed the NLRB’s decision that the employer’s termination of the two employees mentioned Facebook activity was unlawful.

Enforcing Non-Compete Provisions in Franchise Agreements

In Seyfarth’s ninth and final installment, attorneys John Skelton, Erik Weibust and Anne Dunne focused on how to implement and enforce covenants against competition in the franchise context. A franchisor’s trade secrets, confidential information, and goodwill are often among its core assets, and implementing and enforcing covenants against competition are a common, and effective, means of protecting such business interests.

  • For franchisors, non-compete provisions, especially post-termination restrictive covenants, are an important part of the franchise relationship because franchisees are given access to a franchisor’s confidential information and trade secrets. Upon the termination, expiration or non-renewal of the franchise agreements, franchisors have a vested interest in preventing the use of such information in a competitive business and in protecting the integrity of the franchise network and their goodwill.
  • The enforceability of non-compete provisions is most often litigated in the context of a request for a preliminary injunction, and thus franchisors need to be able present evidence to establish: (1) all of the necessary elements, especially that the franchisor will suffer irreparable harm to its legitimate business interests and goodwill if the franchisee violates the terms of the agreed upon non-compete; and (2) that the restrictions are reasonable in time and scope.
  • The enforceability of non-compete provisions varies significantly by state, so national franchisors must ensure that restrictive covenants are drafted to comply with the various definitions of legitimate business interests and protected goodwill, and the different blue pencil, red pencil and reformation rules.

2016 Trade Secret Webinar Series

Beginning in January 2016, we will begin another series of trade secret webinars. The first webinar of 2016 will be “2015 National Year in Review: What You Need to Know About the Recent Cases/Developments in Trade Secrets, Non-Compete, and Computer Fraud Law” on January 28. To receive an invitation to this webinar or any of our future webinars, please sign up for our Trade Secrets, Computer Fraud & Non-Competes mailing list by clicking here. We are also tracking the latest on the movement to federalize trade secrets law. Please visit our dedicated page on the blog.

Seyfarth Trade Secrets, Computer Fraud & Non-Compete attorneys are happy to discuss presenting similar presentations remotely or in person to your groups for CLE credit.

shutterstock_276783140We are pleased to announce the webinar “Social Media Privacy Legislation Update” is now available as a podcast and webinar recording.

In Seyfarth’s eighth installment in its series of Trade Secrets Webinars, Seyfarth social media attorneys discussed their recently released Social Media Privacy Legislation Desktop Reference and addressed the relationship between trade secrets, social media, and privacy legislation.

As a conclusion to this well-received webinar, we compiled a list of  brief summaries of the more significant cases that were discussed during the  webinar:

  • In KNF&T Staffing Inc. v. Muller, Case No. 13-3676 (Mass. Super. Oct. 24, 2013) a Massachusetts court held that updating a LinkedIn account to identify one’s new employer and listing generic skills does not constitute solicitation. The court did not address whether a LinkedIn post could ever violate a restrictive covenant.
  • Outside of the employment context, the Indiana Court of Appeals in Enhanced Network Solutions Group Inc. v. Hypersonic Technologies Corp., 951 N.E.2d 265 (Ind. Ct. App. 2011) held that a nonsolicitation agreement between a company and its vendor was not violated when the vendor posted a job on LinkedIn and an employee of the company applied and was hired for the position, because the employee initiated all major steps that led to the employment.
  • In the context of Facebook, a Massachusetts court ruled in Invidia LLC v. DiFonzo, 2012 WL 5576406 (Mass. Super. Oct. 22, 2012) that a hairstylist did not violate her nonsolicitation provision by “friending” her former employer’s customers on Facebook because “one can be Facebook friends with others without soliciting those friends to change hair salons, and [plaintiff] has presented no evidence of any communications, through Facebook or otherwise, in which [defendant] has suggested to these Facebook friends that they should take their business to her chair.”
  • Similarly, in Pre-Paid Legal Services, Inc. v. Cahill, Case No. CIV-12-346-JHP, 2013 U.S. Dist. LEXIS 19323 (E.D. Okla., Jan. 22, 2013) a former employee posted information about his new employer on his Facebook page “touting both the benefits of [its] products and his professional satisfaction with [it]” and sent general requests to his former co-employees to join Twitter. A federal court in Oklahoma denied his former employer’s request for a preliminary injunction, holding that communications were neither solicitations nor impermissible conduct under the terms of his restrictive covenants
  • The Virginia Supreme Court in Allied Concrete Co. v. Lester, 285 Va. 295 (2013) upheld a decision sanctioning a plaintiff and his attorney a combined $722,000 for deleting a Facebook account and associated photographs that undermined the plaintiff’s claim for damages stemming from the wrongful death of his wife in an car accident. The deleted photographs showed plaintiff holding a beer while wearing a T-shirt with the message, “I Love hot moms.” Subsequent testimony revealed that the plaintiff’s attorney had instructed his paralegal to tell the plaintiff to “clean up” his Facebook entries because “we do not want blowups of this stuff at trial.”
  • PhoneDog v. Noah Kravitz, No. C11-03474 MEJ, 2011 U.S. Dist. LEXIS 129229 (N.D. Cal., 2012) involved a dispute over whether a Twitter account’s followers constitute trade secrets even when they are publically visible. The court denied the defendant’s motion to dismiss and ruled that PhoneDog, an interactive mobile news and reviews web resource, could proceed with its lawsuit against Noah Kravitz, a former employee, who PhoneDog claimed unlawfully continued using the company’s Twitter account after he quit.  The court held that PhoneDog had described the subject matter of the trade secret with “sufficient particularity” and satisfied its pleading burden as to Kravitz’s alleged misappropriation by alleging that it had demanded that Kravitz relinquish use of the password and Twitter account, but that he has refused to do so.  With respect to Kravitz’s challenge to PhoneDog’s assertion that the password and the Account followers do, in fact, constitute trade secrets — and whether Kravitz’s conduct constitutes misappropriation, the court ruled that the such determinations require the consideration of evidence outside the scope of the pleading and should, therefore, be raised at summary judgment, rather than on a motion to dismiss.  The parties ultimately resolved the dispute.
  • The Second Circuit Court of Appeals in Triple Play v. National Labor Relations Board, No. 14-3284 (2d. Cir. Oct. 21, 2015) affirmed an NLRB decision that a Facebook discussion regarding an employer’s tax withholding calculations and an employee’s “like” of the discussion constituted concerted activities protected by Section 7 of the National Labor Relations Act. The Facebook activity at issued involved a former employee posting to Facebook, “[m]aybe someone should do the owners of Triple Play a favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I OWE money . . . Wtf!!!!” A current employee “liked” the post and another current employee posted, “I owe too. Such an asshole.” The employer terminated the two employees for their Facebook activity. The 2nd Circuit affirmed the NLRB’s decision that the employer’s termination of the two employees for their aforementioned Facebook activity was unlawful.

The following is a collection of social media policies that have been implemented by various companies:  http://socialmediagovernance.com/policies/. While these policies can serve as a helpful guide, companies should tailor their own social media policies and consult with counsel.

For more information, please contact your Seyfarth Shaw LLP attorney, Robert B. Milligan at rmilligan@seyfarth.com, Daniel P. Hart at dhart@seyfarth.com or Joshua Salinas at jsalinas@seyfarth.com.

WebinarSocial media and related issues in the workplace can be a headache for employers. There is no denying that social media has transformed the way that companies conduct business. In light of the rapid evolution of social media, companies today face significant legal challenges on a variety of issues ranging from employee privacy and protected activity to data practices, identity theft, cybersecurity, and protection of intellectual property.

On Tuesday, October 27, 2015 at 10:00 a.m. Central, Robert B. Milligan, Daniel P. Hart and Joshua Salinas will present the eighth installment in its series of Trade Secrets Webinars. They will discuss their recently released Social Media Privacy Legislation Desktop Reference and address the relationship between trade secrets, social media, and privacy legislation.

The Seyfarth panel will specifically address the following topics:

  • ​​Discussing recent and proposed employee privacy legislation, and how it may impact policies dictating mandatory turnover of social networking passwords and employee privacy concerns.
  • Discussing the National Labor Relations Board’s (NLRB) treatment of employer social media policies, whether it applies to you, and what steps should be taken to avoid potential penalties for violating NLRB rulings.
  • Discussing the interplay between social medial privacy laws and workplace investigations, and how developing internal company policy and/or contracts can protect companies’ assets.
  • Defining, understanding, and protecting trade secrets in social media.
  • How courts are interpreting ownership of social media accounts and whether social media sites constitute property and preventing trade secret misappropriation or distribution through social media channels.
  • Discussing the interplay between protection of company information and ownership of company accounts in the social media age.

register

There is no cost to attend this program, however, registration is required.

*CLE Credit for this webinar has been awarded in the following states: CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

If you have any questions, please contact events@seyfarth.com.

Social Media Privacy Legislation Desktop Reference
What Employers Need to Know

There is no denying that social media has transformed the way that companies conduct business. In light of thSMPLe rapid evolution of social media, companies today face significant legal challenges on a variety of issues ranging from employee privacy and protected activity to data practices, identity theft, cybersecurity, and protection of intellectual property.

Seyfarth’s Social Media practice group has prepared an easy-to-use “Social Media Privacy Legislation Desktop Reference,” as a starting point to formulating guidance when these issues arise.

The Desktop Reference:

  • Describes the content and purpose of the various states’ new social media privacy laws.
  • Delivers a detailed state-by-state description of each law, listing a general overview, what is prohibited, what is allowed, the remedies for violations, and special notes for each statute.
  • Provides an easy-to-use chart summarizing existing social media privacy laws by state.
  • Offers our thoughts on the implications of this legislation in other areas, including technological advances in the workplace, trade secret misappropriation, bring your own device (BYOD) issues and concerns, social media discovery, and federal law implications.
  • Concludes with some best practices to assist companies in navigating this challenging area.

We hope that you find its content useful.

How to get your Desktop Reference:

This publication may be requested from your Seyfarth contact in hard copy or is available as an eBook, which is compatible with PCs, Macs and most major mobile devices*. The eBook format is fully searchable and offers the ability to bookmark useful sections for easy future reference and make notes within the eBook.

To request the 2015-2016 Edition of the Social Media Privacy Legislation Desktop Reference in eBook or hard copy, please click the button below:

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