World IP Review included Seyfarth’s team in the first Global Trade Secrets Rankings, which was announced in 2023. The World IP Review Global Trade Secrets Rankings are based on feedback from the market and reflect the fact that trade secret issues are cross border, complex, and high value. Find more information on the World IP Review website.
Policy Matters Podcast: FTC’s Crackdown on Non-Competes Through Agency Rulemaking
In an unprecedented move, the FTC has issued a Notice of Proposed Rulemaking that would render unenforceable all non-compete agreements currently in existence (with limited exception), and would bar employers from entering into any contract that that could conceivably prevent a worker from seeking or accepting certain employment, or operating certain businesses, after the conclusion of the worker’s employment with the employer. In Part One of our in-depth look at these proposed changes, host Scott Mallery is joined by experts Daniel Hart and Robert Milligan to discuss the fundamentals of non-compete agreements and what the rule’s adoption would mean for employers. Stay tuned for Part Two, in which the same hosts discuss potential constitutional challenges to the proposed rulemaking, as well as a bit on the politics undergirding this move.
Upcoming Webinar Series! Commercial Litigation Outlook: Insights and Predictions for Litigation Trends in 2023
Welcome to the third annual installment of Seyfarth Shaw’s Commercial Litigation Outlook, in which our nationally-recognized team provides insights about litigation issues and trends to expect in 2023.
The likely continuing global tumult and increasing chances for a recession will weigh heavily on the litigation outlook for 2023. In short, we expect an uneven year where some litigation booms and some busts. As was true last year, the trick to navigating the upcoming challenges will require clients and their counsel to be adaptive, creative, and proactive.
Join us for a three-part webinar series, where members of our Commercial Litigation practice group will discuss key trends in the commercial litigation space.
Tuesday, February 7, 2023
1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific
In the first session of the series, we will provide insight on the tidal wave of ESG demands, reports, and conflicts (legal and otherwise), as well as significant trends, predictions and recommendations in the following areas:
- Trial Outlook
- Consumer Class Actions
- Trade Secrets, Computer Fraud & Non-Competes
- eDiscovery & Innovation
Kristine Argentine, Partner, Seyfarth Shaw
Jay Carle, Partner, Seyfarth Shaw
Rebecca Davis, Partner, Seyfarth Shaw
Dawn Mertineit, Partner, Seyfarth Shaw
Christopher Robertson, Partner, Seyfarth ShawContinue Reading Upcoming Webinar Series! Commercial Litigation Outlook: Insights and Predictions for Litigation Trends in 2023
Legislation Reintroduced in Congress to Ban Non-Compete Agreements and Seeking to Go Even Further than FTC’s Proposed Ban
US Senator Chris Murphy (D-Conn.) and US Senator Todd Young (R-Ind.) on February 1st reintroduced the Workforce Mobility Act. The legislation would ban the use of non-compete agreements with some limited exceptions. US Representative Scott Peters (D-Calif.-52) and US Representative Mike Gallagher (R-Wis.-08) introduced the legislation in the US House of Representatives. US Senator Tim Kaine (D-Va.) and US Senator Kevin Cramer (R-N.D.) co-sponsored the legislation. The bill was previously introduced in the House of Representatives in 2021.Continue Reading Legislation Reintroduced in Congress to Ban Non-Compete Agreements and Seeking to Go Even Further than FTC’s Proposed Ban
Business Organizations Seek Extension on Comment Period Deadline on FTC’s Proposed Rule Banning Non-Competes
100 business organizations submitted a letter today requesting a 60 day extension on the March 20, 2023, comment period deadline on the FTC’s proposed rule banning non-competes with employees and workers. The business organizations include organizations in manufacturing, commerce, retail, insurance, franchise, health care, technology, financial services, construction, and staffing.Continue Reading Business Organizations Seek Extension on Comment Period Deadline on FTC’s Proposed Rule Banning Non-Competes
Health Care Beat Podcast: Antitrust Enforcement of Employment Agreements
On this episode of Health Care Beat, host Chris DeMeo is joined by Kristine Argentine, partner in Seyfarth’s Chicago office and chair of the firm’s Commercial Consumer Class Action Defense group. Their discussion covers a string of recent cases involving the pursuit of employers across the health care industry (and others) for labor-related antitrust violations. Kristine also provides insight on how businesses can protect their investments in personnel, while successfully mitigating the threat of criminal prosecution.
Webinar Recap! 2022 Trade Secrets & Non-Competes Year in Review
In the second installment of the 2023 Trade Secrets Webinar Series, Seyfarth attorneys reviewed noteworthy legislation, cases, and legal developments from across the nation over the last year in the areas of trade secrets and data theft, non-competes and other restrictive covenants, and computer fraud. Plus, they provided predictions for what to expect in 2023.
As a conclusion to this webinar, we compiled a summary of takeaways:
- The FTC’s attempted regulation of employment non-competes as part of its rulemaking powers is unprecedent in the 109 years since its creation in 1914. The FTC bases its rulemaking authority on Section 5 of the Federal Trade Commission Act, which provides: “The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations … from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.” 15 USC § 45(2).
- The proposed rule impacts not just typical employee non-compete agreements but also non-compete agreements that are made in connection with the sale of business entities. While there is an exception for a substantial owner of, or substantial member or substantial partner in, the business entity at the time the person enters into the non-compete clause defined as an owner, member, or partner holding at least a 25 percent ownership interest in a business entity, the 25% interest threshold is arbitrary and ignores the business realities, complexity and individuality of such transactions. Moreover, it applies retroactively to such transactions so parties to the transaction may not get the benefit of their bargain.
- The proposed rule is only a proposal at this point, as the FTC has solicited public comment on the proposed rule before it issues a final rule. The deadline to submit comments is March 20, 2023, and we encourage all affected employers to submit comments.
- It’s unclear whether the final rule will be as sweeping as the current proposal. Regardless of the final form of the rule, we expect legal challenges to the FTC’s rulemaking, including significant constitutional challenges to whether the FTC has power to issue rules at all on worker non-competes.
- In the interim, employers should take a close look at their restrictive covenant agreements to ensure that they are reasonable and compliant with ever-evolving state law.
- There were several significant trade secret jury awards in 2022 in Virginia ($2 billion), Ohio ($65 million), and Michigan ($105 million). We expect to see even more large jury results in 2023. Courts continue to recognize combination trade secrets where a plaintiff can demonstrate a unique combination of processes and information that aid company processes, including research and development. Courts also continue to allow creative damage theories based upon avoided development costs or unjust enrichment even where there may only be disclosure rather than use or no competing market product embodying the misappropriated secrets.
- The Protecting American Intellectual Property Act signed on January 5, 2023, is designed to help American businesses from trade secret theft by foreign actors. The President is required to report annually to Congress foreign entities and individuals who engaged in trade secret theft that possess a threat to the country and sanction such entities and individuals.
- We saw some notable non-compete court decisions coming from Hawaii (must have legitimate business interest for employee non-compete, including protection of trade secrets), Wyoming (blue penciling overly broad employee non-competes not permitted), California (upholding customer non-solicit covenant in employment agreement that was part of business transaction accomplished to further joint venture), Delaware (Chancery court refuses to blue pencil overly broad non-compete in business transaction), and Louisiana (court refuses to enforce non-compete where individual executes non-compete merely as an applicant rather than employee).
- We saw Colorado, District of Columbia, Illinois, and Oregon enact new state laws governing restrictive covenants, and New Jersey, Connecticut, and New York introduced their own respective bills on employee mobility.
- California and Washington have new laws prohibiting employers from using employee agreements that prohibit the disclosure of certain conduct the employee believes is unlawful, such as illegal harassment or discrimination.
- The DOJ has revised its policy for charging CFAA cases after the Supreme Court Van Buren’s ruling that adopted a narrowed interpretation of the statute’s “exceeding authorized access” in Van Buren. And we expect combating ransomware to remain a top priority for the DOJ in 2023.
You can view a recording of the webinar and all other webinars in our Trade Secrets & Non-Competes Webinar Series here.
This post was originally published as a Seyfarth Legal Update.
11th Circuit Upholds Trial Court’s Rejection of Liquidated Damages in Trade Secret Case
Safeguarding trade secrets is typically Rule No. 1 for many companies—particularly technology companies. Therefore, when a company needs to share its highly-guarded trade secrets with a subcontractor in order to complete a project together, most companies understandably require the subcontractor to enter into a confidentiality agreement that includes a non-disclosure provision. Many of those confidentiality agreements also include a liquidated damages provision that is triggered by the subcontractor’s breach.Continue Reading 11th Circuit Upholds Trial Court’s Rejection of Liquidated Damages in Trade Secret Case
Comments on FTC’s Proposed Rule Banning Non-Competes With Employees and Workers Now Due March 20th
The FTC’s proposed rule banning non-competes with employees and workers has now been published in the Federal Register.
The rule would provide that noncompete clauses are an unfair method of competition and as a result, the rule would ban employers from entering noncompete clauses with their employees and workers (defined by the FTC to include independent contractors and others). The rule would require employers to rescind existing noncompete clauses with workers and actively inform their employees that the contracts are no longer in effect. The rule would include a limited exception for non-compete clauses between the seller and buyer of a business. This exception would only be available where the party restricted by the non-compete clause is an owner, member, or partner holding at least a 25% ownership interest in a business entity.Continue Reading Comments on FTC’s Proposed Rule Banning Non-Competes With Employees and Workers Now Due March 20th