A federal court in Texas recently provided useful insights on what constitutes “solicitation” by a former employee under that employee’s restrictive covenant with his former employer, and the court provided further insights on what inferences courts will, and will not, draw in favor of a plaintiff seeking a preliminary injunction based on alleged misappropriation of trade secrets.[1]

The defendant worked for the plaintiff, Sunbelt, for over twenty years, primarily as a salesperson covering institutional customers.[2] As part of his employment, the defendant signed an employment agreement that, among other things, prohibited him from “solicit[ing]” Sunbelt’s customers or competing with Sunbelt within a certain geographic area.[3] He later left to join one of Sunbelt’s competitors. Sunbelt filed suit and sought a preliminary injunction, asserting that the employed had, among other things, solicited Sunbelt’s former customers, worked for Sunbelt’s competitor within the area prohibited by the non-competition agreement, and misappropriated Sunbelt’s trade secrets.[4]
Continue Reading Federal Court Provides Insight on Meaning of “Solicitation” and Plaintiff’s Burden on Motion for Preliminary Injunction

After a four day bench trial on August 10, 2021, a Houston federal judge ruled that the conceptual designs an oil and gas manufacturing company disclosed to its erstwhile collaborator under an NDA were not eligible for trade secret protection because they were neither secret nor misappropriated due predominantly to disclosure in a prior public patent. The ruling underscores the necessity that trade secrets are—in fact—kept actually secret. Moreover, any prior patent of the party seeking to protect its trade secrets should be scrutinized for similarity with the technology or information allegedly comprising a trade secret.
Continue Reading Texas Oil & Gas Manufacturing Company’s DTSA/TUTSA Lawsuit Unraveled by Public Disclosure of Alleged Trade Secret in its Own Expired Patent

A federal district court recently issued summary judgment in favor of a retail defendant in a trade secret misappropriation case involving the alleged misappropriation of a CBD cream formula. On September 3, 2020, Healthcare Resources Management Group, LLC (“HRMG”) filed suit in the Southern District of Florida against several parties, including hemp products retailer Medterra CBD, LLC (“Medterra”), alleging that Medterra misappropriated its proprietary trade secret formula for a CBD cooling cream by selling a product similar to HRMG’s cream. On May 14, 2021, Medterra filed an amended motion for summary judgment against HRMG, arguing that HRMG’s claims for trade secret misappropriation could not stand, as the partial list of HRMG’s ingredients disclosed to it did not constitute a protectable trade secret formula, nor did Medterra “use” or “disclose” any secret formula owned or controlled by HRMG. The court agreed with Medterra, granting its summary judgment motion in full on October 27, 2021. This case serves as an important reminder that trade secret misappropriation claims require proof that a trade secret was either wrongfully acquired, used, or disclosed by the alleged wrongdoer—mere similarity of products is insufficient to succeed on a claim absent these additional elements.
Continue Reading Federal Court Issues Summary Judgment in Favor of Retail Defendant in Alleged Trade Secret Misappropriation of a CBD Cream Formula

The California Court of Appeal recently upheld the dismissal of claims against Mattel, which alleged that Mattel stole the idea for its flying Barbie doll from Technology from Heaven Unlimited (“TFHU”). Applying New York law, the Court found that Mattel did not misappropriate TFHU’s idea to create a flying Barbie using drone technology, as this idea did not have general novelty, even if the idea was novel to the buyer. Moving forward, companies should ensure that they have clear policies and procedures in place before accepting ideas and before entering into contracts for the disclosure of ideas, because whether an idea may be novel may depend on the timing of the contract.
Continue Reading Hoverboard Barbie: A Novelty Toy Without a Novel Concept

Seyfarth Synopsis: In a case of first impression, the Ninth Circuit held that the continued use doctrine is available under the DTSA, and the court permitted a plaintiff to raise a DTSA claim for misappropriation of trade secrets even though the initial misappropriation allegedly occurred before the DTSA was passed. The Ninth Circuit also held that a patent application may preclude a DTSA claim when the plaintiff does not claim that any trade secret information was misappropriated beyond what was included in the patent application.
Continue Reading Ninth Circuit Recognizes Continued Use Doctrine under the DTSA, but Confirms that Patent Publication Precludes Claim

Consistent with many jurisdictions which have adopted the Uniform Trade Secrets Act, Delaware’s version expressly preempts common law claims based on the misappropriation of trade secrets. See 6 Del. C. § 2007. In a recent opinion, Vice Chancellor Slights of the Court of Chancery dismissed a claim for unjust enrichment based on defendant’s alleged misappropriation and use of plaintiff’s confidential and proprietary data because Delaware’s trade secret statute “occupies the filed” and preempts claims for common law unjust enrichment.
Continue Reading Spam Trap Evading Plaintiff Falls into Statutory Preemption Trap under Delaware Trade Secret Act

Social distancing, a term which few of us had heard of before this year (despite the fact that it has been used since at least the early 2000s), is stretching into its third month. Notwithstanding some loosening of shelter-in-place advisories, and the fact that some employers are starting to open up offices and invite their workforce back in, a majority of employees are still working from home. This has broad implications for protection of employers’ trade secrets and confidential information—in many cases, a company’s most precious asset.
Continue Reading Security From Afar: How Best to Protect Trade Secrets in a World of Remote Working, Zoombombing, and Uncertainty

The Sedona Conference’s working group on trade secrets has created a draft Commentary on the Proper Identification of Asserted Trade Secrets in Misappropriation Cases.

The draft Commentary explains:

The burden is on the party asserting trade secret misappropriation to answer this question by “identifying” the alleged trade secrets. While this requirement for “identification” is ubiquitous, the rules for doing
Continue Reading The Sedona Conference Seeks Public Comment on the Identification of Asserted Trade Secrets in Misappropriation Cases

On April 16, 2020, the White House issued its “Guidelines for Opening Up America Again,” and several states have begun a slow process of emerging from the shutdown. But even the most optimistic scenarios are fraught with uncertainty. Nobody can predict when the economy will fully reopen, or what that even means in the post-COVID-19 business world. Will increased remote work become the “new normal”? Will business meetings, pitches, and conferences, continue to take place by videoconference or other remote means? What about investigations, depositions, mediations, and court proceedings? And how long will all of that last? We also do not know when the next pandemic will strike, or even if COVID-19 will rear its ugly head again in the near future.
Continue Reading Normalizing the Abnormal—Protecting Trade Secrets in a Post-COVID-19 World

As we previously reported, on February 18, 2020, Medterra CBD (“Medterra”) filed a motion to dismiss a lawsuit alleging that it had misappropriated Healthcare Resources Management Group LLC’s (“Healthcare Resources”) proprietary formula for a CBD cream aimed at treating pain. In its motion, Medterra argued that Healthcare Resources failed to allege that it had provided or that Medterra had otherwise acquired any proprietary information. Additionally, Medterra claims that even if Healthcare Resources could establish that it had provided its propriety CBD cream formula to Medterra, Healthcare Resources did not take adequate steps to protect its trade secret by mandating Medterra sign a non-disclosure agreement.
Continue Reading CBD Cream Manufacturer Responds to Motion to Dismiss in Trade Secret Litigation