Seyfarth Shaw attorney James McNairy will lead a webinar entitled “Trading Secrets: How to Adequately Protect Trade Secrets and Balance Employee Rights in California” on Tuesday, January 25, 2011, 11:30 a.m. – 12:30 p.m. Pacific Time.

The webinar is part of the Cyber Institute Program hosted by the California State Bar Intellectual Property Section.  Mr. McNairy will lead a discussion of defining and understanding trade secrets in California, California’s general antipathy for non-compete agreements in the employment context, and remedies for trade secret misappropriation.

This webinar will focus on how the interplay between California trade secret law and Business and Professions Code Section 16600 makes California unique in terms of how companies use restrictive covenants to protect their trade secrets. The panel will also discuss appropriate policies and practices to effectively protect trade secrets, including hiring and termination protocols, a discussion regarding the use of restrictive covenants, and effective computer and physical security practices in light of recent technological advances.

California law is constantly evolving in this important area and this webinar will provide the latest developments. Considering joining Mr. McNairy in this informative webinar. 1 hour participatory MCLE credit will be given. If you are interested in attending, please sign up here.

By Paul Freehling and Scott Schaefers

The Eleventh Circuit Court of Appeals’ December 27, 2010 decision in U.S. v. Rodriguez, Appeal No. 09-15265, — F.3d –, 2010 WL 5253231 (11th Cir. Dec. 27, 2010) may mark a significant split among the federal appellate circuits over the meaning of the phrases “without authorization” and “exceeds authorized access” under the federal Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq. (“CFAA”). On one side of the fence sit decisions which reject such suits due to the employer’s prior grant of access, regardless of the employee’s purpose of access or subsequent use of the files. On the other side are decisions which allow CFAA claims where the employee’s purpose for accessing the files was unauthorized, even if the access itself was permitted.

In Rodriguez, the court upheld the criminal CFAA conviction of defendant Roberto Rodriguez, a former Social Security Administration (“SSA”) telephone service representative, because he accessed confidential and sensitive files for “a non-business reason.” The SSA had previously established a policy prohibiting employee access of confidential databases “without a business reason,” of which Rodriguez was made aware several times. Despite these clear warnings from his employer, Rodriguez accessed more than 100 times confidential, personal information from Social Security files concerning women with whom he had a romantic relationship. Even though Rodriguez’s access of the database itself was authorized, the purpose of the access was not, thus triggering the “without authorization” or “exceeds authorized access” provisions of the CFAA.

The Eleventh Circuit thus aligned itself with the Seventh Circuit, which in Int’l Airport Centers, LLC v. Citrin, 440 F.3d 418 (7th Cir. 2006), held that an employee violates the CFAA where he already has decided to quit, and thereafter accesses company files for unauthorized purposes in furtherance of his “breach of duty of loyalty” to the company (i.e. to erase valuable company data). That is, when an employee accesses computer files with a purpose to injure his employer, his access is necessarily unauthorized because by law because he never had permission to work against the company. 

On the other side of the split is the Ninth Circuit‘s September 2009 decision in LVRC Holdings LLC v. Brekka, 581 F.3d 1127 (9th Cir. 2009). There, the court dismissed the CFAA suit against the former employee for subsequent misuse of company files because the purpose and misuse of the employee’s access was irrelevant, so long as the access itself for was permitted, for any purpose. According to Brekka, reading a purpose-related qualification into the CFAA terms “without authorization” and “exceeds authorized access” would run counter to the plain meaning of those statutory requirements. In fact, Brekka explicitly rejected Citrin’s suggested interpretation along those lines.

Rodriguez did not explicitly reject Brekka. Rodriguez instead distinguished Brekka because in Brekka there was no express prohibition against the employee’s accessing files and e-mailing them to his home address, whereas in Rodriguez, a prohibition against non-business-related access was in place. Nevertheless, Rodriguez implicitly rejected Brekka, because Brekka limited CFAA claims to those instances in which an employee had not received permission to access a computer for “any purpose,” or where the permission had been previously rescinded and the employee accessed the computer anyway. Rodriguez had permission to access the SSA database, albeit for a limited purpose, so his conviction likely would have been overturned by the Ninth Circuit, not upheld as the Eleventh Circuit did. Also, because of the unique circumstances in Rodriguez, there is a possibility that it could be distinguished on its facts alone.

In any event, the lessons to be learned by corporate counsel and management from this conflict are not limited to whether an employer can sue an employee for violating the CFAA. These decisions serve as reminders to management that they must carefully and vigilantly create and enforce employee computer-use policies, including the following:

*Write clear computer-access policies, disseminate those policies among employees, and periodically remind employees of their obligations;

*Require employees, whether professional, clerical, or otherwise, to sign non-disclosure and computer confidentiality agreements, where access to computers is strictly limited to furthering company business; and

*Develop a limited-permission structure so that employees are provided access only to those files needed to do their job.

You may contact Seyfarth Shaw’s Trade Secret Protection attorneys for further ideas and discussion of issues related to employee misuse or theft of company intellectual property.

 

As we have noted in an earlier blog posting, many have raised questions about the effective date of Georgia’s new Restrictive Covenant Act.  The questions derive from inconsistencies in the effective dates between the amendment that gave life to the statute and the statute itself.  To cure this potential issue, Rep. Wendell Willard, Vice Chairman of the Rules Committee and Chairman of the Judiciary Committee, has introduced HB 30 to re-enact the statute.  In Section 1 of the Bill, the purpose of introducing HB 30 is set forth:

During the 2009 legislative session the General Assembly enacted HB 173 (Act No. 64, Ga. L. 2009, p. 231), which was a bill that dealt with the issue of restrictive covenants in contracts and which was contingently effective on the passage of a constitutional amendment. During the 2010 legislative session the General Assembly enacted HR 178 (Ga. L. 2010, p. 1260), the constitutional amendment necessary for the statutory language of HB 173 (Act No. 64, Ga. L. 2009, p. 231), and the voters ratified the constitutional amendment on November 2, 2010. It has been suggested by certain parties that because of the effective date provisions of HB 173 (Act No. 64, Ga. L. 2009, p. 231), there may be some question about the validity of that legislation. It is the intention of this Act to remove any such uncertainty by substantially reenacting the substantive provisions of HB 173 (Act No. 64, Ga. L. 2009, p. 231), but the enactment of this Act should not be taken as evidence of a legislative determination that HB 173 (Act No. 64, Ga. L. 2009, p. 231) was in fact invalid.

The speed with which this may pass through the legislature when it reconvenes on January 10 is unknown.  As of today, it is not yet on the legislative calendar.   

Throughout 2010, Seyfarth Shaw LLP’s dedicated Trade Secrets, Computer Fraud & Non-Competes practice group hosted a series of webinars that addressed key issues facing clients today in this important and ever changing area of law. The series consisted of five webinars: The Computer Fraud and Abuse Act: What You Need to Know, Protecting the Secrets in Your Employees’ Heads, Trade Secret Litigation and Protection in California, Franchise and Dealer Relations: Protecting Your Trade Secrets and Brand, and Protecting Your Trade Secrets in the Global Economy: Non-Compete and Trade Secret Considerations In Europe and Asia. As a conclusion to this well-received 2010 webinar series, we have compiled a list of key takeaway points for each of the webinars. If you were not able to attend the webinars, we invite you to request the archived recordings of the webinars by contacting your Seyfarth Shaw LLP attorney. We are also pleased to announce that Seyfarth Shaw LLP will continue its webinar programming in 2011 and has several exciting topics lined up.

The Computer Fraud and Abuse Act

Our first webinar this year, led by Seyfarth attorneys James Yu, Michael Elkon, and Carolyn Sieve, was entitled The Computer Fraud and Abuse Act: What You Need to Know. The Computer Fraud and Abuse Act (CFAA) is a federal statute that has been used for almost a decade to obtain injunctive relief against, and impose liability on, employees and hackers who steal or interfere with a company’s electronic information. This webinar covered the essential points that employers need to know about the CFAA and its potential uses in protecting electronic assets.

·         CFAA claims often turn on what an employee was authorized to do on an employer’s computer system. Therefore, handbooks, IT policies, sign-in screens, and other materials that cover IT authorization should address what an employee is (and is not) allowed to do on the system. 

·         The CFAA is not limited to employees. An employer should consider what authorization instructions it provides to clients, vendors, potential business partners, and contractors. It should also carefully monitor the security protections for its website and internal servers as hackers remain a continuous threat. 

·         There is a split among federal courts regarding whether the CFAA applies to employees who are initially provided access to company data but then either exceed that authorization or otherwise act in a manner that revokes the initial authorization. Some courts have limited the use of the CFAA to unauthorized users such as hackers. Therefore, the location of a possible violation of the CFAA is important.

Inevitable Disclosure

The second webinar of the 2010 series, led by Erik von Zeipel, Jason Stiehl, and David Countiss, focused on Inevitable Disclosure, an evolving doctrine recognized in a large number of jurisdictions that may prevent an employee from accepting employment when the employee’s duties cannot be performed without the disclosure of a former employer’s trade secrets. This discussion covered what employers need to know about the Inevitable Disclosure Doctrine, including jurisdictions which have adopted the doctrine and its application to both exiting and incoming employees. The panel also discussed best practices for handling the hiring and termination of employees in such jurisdictions.

·         Understand the state of the law regarding inevitable disclosure in your jurisdiction. Injunctive relief may be easier to obtain if your jurisdiction has adopted the doctrine.

·         Require new employees to sign agreements acknowledging their obligation to protect company’s trade secrets, as well as acknowledging that they understand that they need to respect their prior employer’s trade secrets and any related agreements. Be prepared to marshall any breaches of these agreements if litigation ensues.

·         When an employee departs, sequester technology assets, conduct exit interviews and have the employee acknowledge agreements and covenants protecting trade secrets.

California Trade Secrets Law

This third webinar, conducted by Robert Milligan, Robert Niemann, and Jim McNairy, focused on how California trade secret law is similar and diverse from other jurisdictions, including a discussion of the California Uniform Trade Secrets Act, trade secret identification requirements, remedies, and the interplay between trade secret law and Business and Professions Code Section 16600, which codifies California’s general prohibition of employee non-compete agreements. The webinar also covered effective California trade secret protection policies and practices.

·         Aside from a few narrow exceptions, non-competition agreements are presumed void under California law in the typical employment context and recent cases hold that most non-solicitation of customer clauses are synonymous with non-compete agreements and are therefore also unlawful. It remains to be seen whether the so-called “trade secret exception” will be a viable exception to California’s general prohibition against non-competition agreements. Employers should keep these developments in mind when assessing such agreements and make sure that their agreements comport with the recent developments in the law. Failure to do so places employers at risk for unlawful business practice suits. 

·         Because non-compete agreements are typically unenforceable in California, employers typically pursue trade secret misappropriation claims against former employees who steal proprietary company information. In such suits, the employer has the burden of showing that the information is a trade secret, including showing that reasonable secrecy measures were in place to protect the information. Accordingly, prudent companies should consider investing the time and money to conduct a trade secret audit. A trade secret audit generally assesses what company information may be protectable as a trade secret and the security measures the company has in place to protect such information. The results of a successful audit are clearly identified trade secrets with adequate protection measures (including updated trade secret protection agreements) in place: the existence of which are essential to success in trade secret litigation, as well as to ensure that key company assets are adequately protected.

·         Conduct a thorough investigation prior to filing a trade secret misappropriation suit to ensure that the claim can be supported from all lines of attack to enable the court to issue appropriate injunctive relief and award damages. This includes obtaining evidence of the trade secret’s existence and the efforts used to protect it. Employers will need to dedicate the time and resources to arm their counsel with this essential information before and during the litigation. Trade secret plaintiffs are also required to identify their trade secrets with particularity before discovery commences in the case, so be prepared to have a trade secret identification statement prepared in advance of serving your discovery.

Trade Secrets and Franchise Law

The fourth webinar of the 2010 series, led by Andrea Okun, Jim McNairy, and Marcus Mintz, discussed how to protect trade secrets, trademarks, trade dress, and goodwill while maintaining and enhancing successful franchises and dealerships. These are often the core assets of a franchise or dealership, and this webinar presented an overview of what assets are protectable, how those assets can be protected, what state and federal laws can be used to protect these assets, and what can be done if these assets are threatened.

·         One of the best ways to protect trade secrets, trademarks, trade dress and goodwill is by entering into clear, enforceable agreements at the outset of the business relationship. These agreements should clearly identify the assets (such as confidential information and intellectual property) that are being shared/licensed and expressly state the receiving party’s agreement to (a) not make unauthorized use or disclosure of those assets, (b) return all assets at the termination of the relationship, and (c) the need for injunctive relief should the receiving party breach the agreement.

·         In addition to the federal Lanham Act, know the law of your jurisdiction(s). 46 out of 50 states plus the District of Columbia have adopted some variation of the Uniform Trade Secrets Act protecting highly confidential information. Of the remaining 4 states, Massachusetts, New Jersey, and New York have introduced their own versions of the Uniform Trade Secrets Act (only Texas has no trade secret act in place or pending). The franchise acts in Illinois, Indiana, Iowa, Louisiana, Michigan and Minnesota make mention of the enforceability of non-competes. Further, Alabama, California, Colorado, Florida, Georgia, Hawaii, Michigan, Montana, New York, South Dakota, and Texas all have statutes specifically dealing with non-competes.

·         When drafting restrictive covenants and seeking injunctive relief, do not overreach. Drafting overly broad agreements or seeking injunctive relief beyond the scope of legitimate business needs may result in invalidation of the agreements at issue and denial of any form of injunctive relief. Be careful not to assume that every jurisdiction will blue pencil or re-write your restrictive covenants to make them enforceable. Many will not.

International Trade Secrets and Non-Compete Law

The final webinar of the 2010 series, led by Marjorie Culver, Dominic Hodson, and Robert Milligan, focused on non-compete and trade secret considerations from an international perspective. The webinar involved a discussion of non-compete and trade secret issues in Europe and Asia, including the threats to trade secrets and confidential information in these regions. The similarities and differences in approach among the various jurisdictions were discussed and compared to the United States. The panel discussed drafting considerations for confidential/trade secret protection and non-compete agreements as well as appropriate policies in these regions, along with a discussion of sources of protection other than written agreements and policies. This webinar provided valuable insight for companies who compete in the global economy and must navigate the legal landscape in these regions and ensure protection of their trade secrets.

·         One size does not fit all when it comes to drafting employment restrictive covenants for employers operating in international countries. Local jurisdictions take an active interest in agreements that restrict employees from competition as a matter of public policy. Companies must be mindful of the legal requirements for valid non-competes and non-solicits where the employees predominantly provide services or where the employees are likely to later compete. Even where the parties agree on a governing law or forum, the courts in the local jurisdiction often apply local law requirements and void restrictive covenants that do not comply.   

·         Trade secrets: default statutory protections only go so far. Though many countries make trade secret misappropriation unlawful (similar in some respects to the U.S.), this protection may not be helpful unless a company takes active measures to define and protect its proprietary information. Companies should execute confidentiality agreements adequately defining what a company considers confidential and proprietary and also put in place technological and security protocols to restrict access to the company’s most valuable proprietary information. Failure to take such measures can undermine a company’s claim that the information constitutes a trade secret. Companies must also be mindful that their security precautions do not interfere with employees’ privacy rights, particularly in Europe.

·         Non-competes: are they worth the effort in every instance? In some jurisdictions, non-competition restrictions require payment to the former employee during the restrictive period. And, in some cases, even an employer who no longer wishes to oblige the employee cannot waive the non-compete and the obligation to pay. Additionally, injunctive relief may not be available in some countries, making a non-compete the least expedient means for protecting the company from unfair competition. Across the board use of non-competes may not be the most cost-effective or efficient way to protect a company’s competitive position or trade secrets. Rather, companies should formulate a thoughtful strategy that only utilizes non-competes with employees for which there is a legitimate business and legal justification.

2011 Trade Secrets Webinar Series

Beginning in January 2011, we will begin another series of Trade Secret webinars. Planned topics for the 2011 series include Trade Secrets in the Financial Services Industry, Georgia’s New Non-Compete Statute, Choosing the Right IP Protection: Patent or Trade Secret, The Anatomy of a Trade Secret Audit, and Maintaining Trade Secrets in the New World of Cloud Computing. For notifications concerning our upcoming webinars, please sign up for our Trade Secrets, Computer Fraud & Non-Competes mailing list by clicking here.

A federal court recently declined to issue a blanket injunction to thwart the defendant’s campaign to obtain trade secrets information through public records requests, stressing the right and importance of access to public records. The court also pointed out that some jurisdictions — such as Mississippi, which was one of the jurisdictions where the defendant sought documents — have statutes providing a party with an opportunity to seek a court order blocking disclosure, and the plaintiff failed to show that this local protection was inadequate. Therefore, the plaintiff did not demonstrate a strong probability of success on the merits or the likelihood of establishing irreparable harm. Campuseal, Inc. v. Datatel, Inc., 2010 U.S. Dist. LEXIS 133607 (N.D. Ohio, 12/17/10).

A federal court recently entered a TRO to prevent disclosure of trade secrets justifiably shared, in confidence, with business associates. When two of those associates made plans, clandestinely, to form a competing company, they were enjoined from disclosing the trade secrets even though they had not signed a confidentiality agreement. Exl Labs., LLC v. Egolf, 2010 U.S. Dist. LEXIS 131105 (E.D. Pa., Dec. 7, 2010). 

Plaintiff Exl manufactures dairy hygiene products. Non-party Lancaster is the exclusive dealer for Exl products in Pennsylvania. Non-party Beers is VP and GM of Exl and also is a member of the Board of Directors of Lancaster. On several occasions, Beers discussed Exl’s confidential information at Lancaster’s Board meetings, but Beers cautioned the directors not to disclose any of it to third parties. 

Defendants Egolf and Dry, members of the Board and employees of Lancaster, used some of the confidential information in the course of making plans to compete with Lancaster. They also provided some of the information to a business consultant who was assisting them in their illicit venture. When Exl learned what Egolf and Dry were up to, Exl sued them in a Pennsylvania federal court, alleging trade secret misappropriation and requesting a TRO. 

Arguing that Exl’s disclosure of the trade secrets at Lancaster Board meetings defeated Exl’s lawsuit and request for a TRO, the defendants moved to dismiss. The court disagreed, holding that Exl had endeavored to achieve "substantial secrecy" which, rather than "absolute secrecy," is all that is required. The court also decided, apparently, that the limited disclosure had a business justification. The defendants maintained that Exl’s lawsuit failed because of the absence of any written confidentiality agreement between Exl on the one hand, and Lancaster or the defendants on the other. The court ruled that Exl had taken sufficient steps to maintain confidentiality and that, under these circumstances, a written agreement was not essential.

The defendants claimed that Lancaster was an indispensable party in federal court (its addition would destroy diversity jurisdiction). The court rejected the claim because Exl was suing solely for misappropriation of its own trade secrets.

On December 13, 2010, Kevin Crow was sentenced to serve thirty-six (36) months in Federal prison, without parole, which prison term was to be followed by 3 years’ supervised release. Mr. Crow was also fined $10,000.00. What was Mr. Crow’s alleged crime? He had been charged with one-count of Theft of Trade Secrets in violation of Title 18 United States Code, Section 1832. Specifically, Mr. Crow allegedly had stolen trade secrets from a former employer and used this information to the benefit of his new employer.

The facts as alleged by the prosecution were as follows. Mr. Crow had been an engineer with Turbine Engines Components Technologies Corporation (TECT) for just under thirty years, (August 1979 until June of 2007) when he was laid off by the company. Of particular interest, Mr. Crow’s duties at TECT were alleged to include creating and modifying company policy for the identification and protection of TECT’s trade secrets. As is common practice in many “trade-secret heavy” firms, Mr. Crow executed a statement upon his termination that he had returned all documents containing any trade secrets TECT. The prosecution, however, alleged that despite this statement, he had in fact taken approximately 100 computer discs containing information identified as trade secret by the Company.

After his termination at TECT, Mr. Crow became employed at Precision Components International (PCI), a direct competitor of TECT. Both companies manufacture and sell various parts used in military aircraft engines. While employed by PCI, the prosecution alleged that Mr. Crow contacted several employees of TECT and requested copies of pricing documents containing TECT vendor and customer information, as well as copies of other documents that contained information Mr. Crow knew to be TECT trade secrets. Of possibly the most importance, Mr. Crow was alleged to have admitted to a TECT employee that he had taken information off of TECT computers including blueprints and cost and pricing information, a course of conduct he is also alleged to have admitted to the same employee could be considered industrial espionage.

As part of a plea, Mr. Crow stipulated that TECT had suffered losses not exceeding $14,000,000 as a result of his conduct.  The United States Attorney was quoted as indicating that although the cost to TECT could be, and was, estimated in dollars, “…the potential harm to our military equipment readiness is still unknown.” The involvement of potential military secrets, specifically information used in the manufacture of military aircraft engines, likely contributed to the prosecution of what is, at surface, a matter of “corporate espionage,” but the application of the available criminal statute to an otherwise “garden variety” trade secrets case bears taking notice.

The matter was investigated by the Federal Bureau of Investigation in conjunction with agents of Immigration and Customs Enforcement,  and the prosecution was conducted by Assistant United States Attorney Jennifer Kolman.

Dakota Beef, a South Dakota processor and seller of organic beef products, hired Scott Lively in 2006 to be its CEO. He signed an employment agreement prohibiting him for two years after his employment terminated from disclosing confidential information, soliciting Dakota Beef’s customers, and competing in the organic beef business, anywhere Dakota Beef conducts business. South Dakota law permits such contracts. Lively was fired in November 2008. In May 2010, he began competing against Dakota Beef which filed suit against him the next month seeking a TRO and a preliminary injunction. Six days later, a South Dakota federal judge entered the requested TRO and set the matter for a preliminary injunction hearing one week thereafter. Howard Venture LLC v. Lively, 2010-2 Trade Cases ¶ 77,200 (D.S.D., June 23, 2010).

Finding that “Dakota Beef is in a business that relies heavily on customer lists and customer good will developed over a substantial period of time,” the court reasoned that “In competing against Dakota Beef and soliciting its customers, it is likely that Lively will either intentionally or unintentionally disclose [Dakota Beef’s] confidential information,” and that if a TRO was not entered, Dakota Beef could not be compensated for all damages sustained because of the difficulty of proving them. While recognizing that wrongful grant of a TRO could cause greater injury to a new business like Lively’s than denial might damage Dakota Beef’s established business, the court concluded that the irreparable harm to Dakota Beef’s “competitive place in the organic beef marketplace” by disclosure of its confidential information tipped the balance in favor of granting the TRO.

Lively’s confidential relationship necessarily would have provided him access to Dakota Beef’s trade secrets, the court said, and since there was no evidence that Dakota Beef had disclosed its trade secrets to anyone not in a confidential relationship or that they had “been legitimately discovered and openly used by others,” Dakota Beef was found to have “a fair chance of prevailing on the merits.” Finally, the court determined that a TRO was warranted because there is a public interest both in the enforcement of lawful contracts and in “fair competition by protecting confidential and secret information.”

By Robin Cleary

After nine years of protracted litigation, a Santa Clara jury unanimously decided that Marvell Semiconductor Inc. did not misappropriate Jasmine Network Inc.’s trade secrets and did not violate a non-disclosure agreement according to published reports. The lynch pin of Jasmine’s case was the infamous voice mail heard ’round Silicon Valley—in it, a conversation among Marvell’s former general counsel, in-house patent attorney and vice president of engineering was recorded when Marvell’s counsel inadvertently failed to hang-up the phone after leaving a message for Jasmine’s legal and business affairs director. According to a transcript of the voice mail, Marvell’s former general counsel stated that: "Sehat doesn’t go to jail. [Marvell vice president of business development] Manuel [Alba] might go to jail." Later, another company officer says: "If we took that IP on the pretense just evaluating it, and put it in our product …"

Jasmine’s attorney portrayed this voice mail as the pièce de résistance in its case to prove that Marvell conspired to steal Jasmine’s trade secrets and raid a group of Jasmine’s core engineers. But, after two weeks of deliberations, a Santa Clara jury disagreed.

According to reports, when the voice mail was actually played for the jury, it was difficult to hear because multiple voices were talking over each other. In addition, Marvell mounted an aggressive counter-attack on Jasmine. Marvell’s defense attorney argued that Jasmine had stolen technology from a Stanford professor in an alleged "night raid" and then tried to sell that same technology to Marvell. For added flair, Marvell’s defense attorney even waved a pair of toy night-vision goggles in front of the jury during his closing argument. Marvell’s counsel also downplayed the voice mail, saying that Jasmine was using it as an extortion tool against Marvell.

Santa Clara Superior Court Judge William Elfving presided over the trial in the case, which has made two trips to the Court of Appeal. 

It remains to be seen whether Jasmine will appeal but we would not be surprised if there is an appeal based upon the contentiousness of the parties’ dispute to date.

The question has been raised:  What is the effective date of Georgia’s new non-compete statute, O.C.G.A. § 13-8-50 et seq.?

The statute provides that it goes into effect on the day after the passage of an enabling Constitutional amendment. 

This Act shall become effective on the day following the ratification at the time of the 2010 general election of an amendment to the Constitution of Georgia providing for the enforcement of covenants in commercial contracts that limit competition and shall apply to contracts entered into on and after such date and shall not apply in actions determining the enforceability of restrictive covenants entered into before such date. If such amendment is not so ratified, then this Act shall stand automatically repealed.

Georgia’s electorate ratified Amendment 1 – the Constitutional amendment that enables the changes to Georgia’s restrictive covenant law – with 67.6% of the cast ballots. 

Article X, Section I, Paragraph VI of the Georgia Constitution, however, provides that amendments become effective on January 1 following an election “[u]nless the amendment or the new Constitution itself or the resolution proposing the amendment or the new Constitution shall provide otherwise.”  The enabling amendment and the resolution proposing the amendment are silent as to the effective date. 

Hence, already there is debate as to when the amendment will take effect.