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This article was originally published on Seyfarth’s Gadgets, Gigabytes & Goodwill blog.

If there is anything movies like The Terminator have shown us, it’s that AI systems might one day become self-aware and wreak havoc. But until Skynet becomes self-aware, let’s enjoy the AI toy that is quickly becoming a part of our daily lives.  Some Samsung employees recently discovered that playing with AI models like ChatGPT may have unexpected consequences. These employees used ChatGPT for work and shared sensitive data, such as source code and meeting minutes. This incident was labeled as a “data leak” due to fears that ChatGPT would disclose the data to the public once it is trained on the data.  In response, many companies took action, such as banning or restricting access, or creating ChatGPT data disclosure policies.

Continue Reading Spilling Secrets to AI: Does Chatting with ChatGPT Unleash Trade Secret or Invention Disclosure Dilemmas?

We are pleased to share that our Trading Secrets blog was included as the top blog in Global Top 200 Law Blogs. The top 200 is an editorially chosen list of law blogs written by “Lawyers, Barristers & Firms” around the world by the editor and publisher of PracticeSource.com & The House of Butter Blog, Sean Hocking.

There are specific criteria to ensure that the blogs chosen for the list reflect currency, decent writing, adherence to topic and presentation.

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The Board sent shockwaves through employment law in its February 21, 2023, decision in McLaren Macomb, which held that simply offering a draft settlement agreement with broad confidentiality and non-disparagement provisions violated the National Labor Relations Act (“NLRA”). We previously blogged about the McLaren decision and encourage you to read that post for a summary of the decision.

McLaren left unanswered a host of critical questions and, in the month following the decision, employers have not received any further clarity from the Board regarding how this decision will play out in practice. But some clarity—welcome or unwelcome—is coming. At some point this week, General Counsel Jennifer Abruzzo plans to release a guidance memo that will elaborate on the Board’s position.

Continue Reading NLRB to Release Memo Clarifying Impact of McLaren Macombs on Confidentiality and Non-Disparagement Restrictions
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The FTC announced yesterday that it was extending the deadline to submit public comments on its proposed rule banning employment non-competes.

With the extension, the FTC will now be accepting comments on the proposed rule until April 19. Originally, the deadline for submitting comments was March 20.

Information on how to submit comments can be found in the Federal Register notice.

Continue Reading FTC Extends Public Comment Deadline on Proposed Rule Banning Employment Non-Competes Until April 19th
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On February 21, 2023, the National Labor Relations Board (“NLRB” or “Board”) once again issued new precedent when holding that the mere proffer of a draft severance agreement containing broad confidentiality and non-disparagement provisions violated the National Labor Relations Act (“NLRA” or “Act”). The severance agreement provisions before the Board contained extremely broad restrictions and arose in the context of underlying unfair labor practices (“ULPs”) that included circumventing a certified bargaining representative.  It remains to be seen, therefore, whether the Board will seek to invalidate more narrowly-tailored confidentiality and non-disparagement provisions.

Continue Reading NLRB Targets Confidentiality and Non-Disparagement Provisions
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The District of Maryland recently awarded a software developer a mere $1.00 in nominal damages for contract and trade secret claims against a former employee, citing the immateriality of defendant’s breach and plaintiff’s failure to prove a fair licensing price for its misappropriation damages.

In AirFacts, Inc. v. de Amezaga, AirFacts, a developer of accounting software for airlines, filed suit against Diego de Amezaga, its former director of product development, alleging that de Amezaga’s subsequent employment violated his employment agreement with AirFacts and that de Amezaga had misappropriated various trade secrets.

Continue Reading Federal Court Awards Company Only $1.00 in Damages in Misappropriation Case against Former Employee
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A recent motion for preliminary approval of a class action settlement filed in federal court in Georgia will bring to a close claims asserted on behalf of a class of Porsche owners for a purportedly botched over-the-air (“OTA”) software update sent to their vehicles. But a recent decision by a California federal court suggests that manufacturers may be able to avoid claims for violation of the Computer Fraud and Abuse Act (“CFAA”) so long as they do not “blatantly misdescribe” the OTA updates they transmit to vehicle owners. Taken together, these cases signal the challenges automakers will face in defending software malfunction cases and the benefits of robust disclosure when transmitting OTA software updates.

Continue Reading Computers on Wheels: One OEM Settles Claims While Another Scores a Win in Cases Involving Allegedly Botched OTA Updates
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On Wednesday, March 8 at 12 p.m. Pacific, Robert Milligan—Seyfarth partner and co-chair of the firm’s Trade Secrets, Computer Fraud & Non-Competes practice—is presenting the “What Does the FTC’s Crackdown on Non-Competes Mean for Trade Secrets?” webinar for the California Lawyers Association.

The panel will discuss:

  • The FTC’s recent non-compete enforcement activities and proposed rule banning non-competes
  • The FTC’s discussion and treatment of trade secrets in its supporting rule materials
  • Policy and practical implications related to trade secrets, including guidance concerning reasonable non-disclosure agreements
  • Effective strategies for companies to employ in current regulatory climate

For more information or to register for the webinar, visit the California Lawyers Association website.

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On February 16, 2023, the FTC hosted a public forum for the purpose of examining the proposed rule banning non-compete agreements. The agenda included, among other things, opening remarks from Chair Kahn, an overview of the rulemaking process by the FTC’s general counsel, a panel discussion, and comments from the public. A recording of the forum is available here.

In her preliminary remarks, Chair Kahn claimed that the proposed rule would increase workers’ earnings significantly and non-competes are an unfair method of competition. She claimed that the FTC has deep expertise on non-competes based upon enforcement, analysis, and addressing public comments. During the explanatory session, FTC staff explained that the comment period ends March 20th and encouraged the submission of additional comments. Staff also explained the functional test in the proposed rule and indicated that the ban applies to any agreement that functionally operates as a non-compete, which could be an overly broad non-disclosure agreement or training repayment agreement. FTC staff stated that the proposed rule does not apply to “run of the mill non-disclosures.”

Continue Reading FTC Holds Public Forum Examining Proposed Rule to Ban Noncompete Clauses and Business Organizations Sharply Criticize It
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As earlier reported on this blog, Commissioner Christine Wilson, the sole dissenter in the Federal Trade Commission’s proposed rule banning non-competes, announced yesterday that she is resigning from the agency over her fierce opposition to progressive FTC Chair Lina Khan’s methods of advancing her agenda. In a Wall Street Journal OpEd, Commissioner Wilson took aim at Ms. Khan’s “disregard for the rule of law and due process.” She cited several examples of this alleged disregard for the rule of law and due process, including the FTC’s launch of the rulemaking process to ban nearly all non-compete clauses in employee contracts, affecting roughly one-fifth of employment contracts in the US. As Commissioner Wilson noted in her vigorous dissenting statement to the FTC’s Notice of Proposed Rulemaking (“NPR”), the proposed rule defies the Supreme Court’s decision in West Virginia v. EPA (2022), which held that an agency can’t claim “to discover in a long-extant statute an unheralded power representing a transformative expansion in its regulatory authority.” As Commission Wilson noted in her dissent, and as we have pointed out here and here, the FTC’s NPR purports to undo hundreds of years of state legal precedent—dating from even before the American Revolution—that employs a fact-specific inquiry into whether a non-compete clause is unreasonable in duration and scope, given the business justification for the restriction.

Continue Reading “Noisy Exit” of FTC Commissioner Christine Wilson Signals Increasingly Contentious Efforts to Regulate Non-Compete Clauses at Federal Level for Foreseeable Future