Democratic U.S. Senators Elizabeth Warren (D-MA), Chris Murphy (D-Conn.), and Ron Wyden (D-Ore.) introduced legislation on April 26, 2018, entitled the Workforce Mobility Act (“WMA”). Although the text of the WMA is not yet available, according to various press releases, it would prohibit the use of covenants not to compete nationwide. In Senator Warren’s press release announcing her co-sponsorship of the bill, Senator Warren stated that “[t]hese clauses reduce worker bargaining power, stifle competition and innovation, and hurt Americans striving for better opportunities. I’m glad to join Senator Murphy to put an end to these anti-worker, anti-market agreements.” Continue Reading Democratic U.S. Senators Seek to Abolish Non-Compete Agreements
In Seyfarth’s second installment in its 2018 Trade Secrets Webinar Series, Seyfarth attorneys Scott Humphrey, Erik Weibust, and Marcus Mintz focused on trade secret and client relationship considerations in the banking and financial services industry, with a particular focus on a firm’s relationship with its FINRA members. In addition, the panel covered what to do if trade secrets are improperly removed or disclosed or if a former employee is violating his/her restrictive covenant agreements, how to prosecute a case against a former employee who is a FINRA member, and the impact of the Protocol for Broker Recruiting on trade secrets and client relationships.
As a conclusion to this well-received webinar, we compiled a summary of takeaways:
- Remember that you can seek court injunctive relief (Temporary Restraining Order and, possibly, Preliminary Injunction) before proceeding in FINRA
- The definition of a trade secret varies, but you must take adequate steps to protect them as a company, and the information cannot be publicly available or easily discovered, to merit enforcement under the law.
- Employers can take steps at all stages to protect their confidential information—don’t forget to implement on-boarding and off-boarding procedures, as well as policies and procedures that will be in effect during an employee’s tenure, to protect your information before a problem arises.
Continuing our annual tradition, we present the top developments/headlines for 2017/2018 in trade secret, computer fraud, and non-compete law.
1. Notable Defend Trade Secrets Act Developments
Just two years after its enactment, the Defend Trade Secrets Act (“DTSA”) continues to be one of the most significant and closely followed developments in trade secret law. The statute provides for a federal civil cause of action for trade secret theft, protections for whistleblowers, and new remedies (e.g., ex parte seizure of property), that were not previously available under state trade secret laws. Continue Reading Top Developments/Headlines in Trade Secret, Computer Fraud, and Non-Compete Law in 2017/2018
This post originally appeared on the Workplace Class Action blog.
Seyfarth Synopsis: On February 1, 2018, the U.S. District Court for the Middle District of North Carolina entered an order granting in part, and denying in part, the plaintiff’s motion for class certification in a no-hire antitrust case entitled Seaman v. Duke University, 1:15-CV-462, at 1-2 (M.D.N.C. Feb. 1, 2018) (A copy of the decision can be found here.) The case was brought against Duke University, Duke University Health System (collectively “Duke”), and various University of North Carolina entities and one of its executives (collectively “UNC”). The complaint alleged that the defendants had entered into an agreement not to hire each other’s medical faculty employees in violation of federal antitrust laws. With some notable exceptions it has been difficult for plaintiffs to achieve class certification in wage suppression cases such as Seaman. The ruling is a “must read” for employers, as the Court’s reasoning and conclusions make it difficult to predict whether this case will be helpful to the plaintiffs’ bar in other cases.
Background To The Case
Seaman, an Assistant Professor of Radiology at Duke, contended that she applied for a position at UNC in 2015. She alleged that she was denied consideration due to an agreement among the Duke and UNC defendants that they would not hire each another’s medical faculty employees unless the hire involved a promotion. Seaman alleged that this agreement not only suppressed the compensation of defendants’ medical faculty members, but also their other skilled medical employees. Thus, Seaman sought to certify a class consisting not only of defendants’ medical faculty members, but also their physicians, nurses, and skilled medical staff. Id. at 1-2. Continue Reading Court Certifies Class In Duke-UNC No-Hire Workplace Antitrust Lawsuit
On Monday, January 29th, Faraday & Future Inc., the electric car manufacturer founded by Chinese billionaire and entrepreneur Jia Yueting, filed a one-count Defend Trade Secrets Act complaint against Evelozcity, Inc., an electric car manufacturer that was recently created by Faraday & Future’s former CFO and CTO. The case is Faraday & Future Inc. v. Evelozcity Inc., 18-cv-00737, U.S. District Court, Central District of California (Western Division). Continue Reading Start-Up Car Companies Clash in Electrifying Trade Secrets Case
The Protocol for Broker Recruiting (“Protocol”) allows for reciprocal poaching of brokers. More specifically, if a broker leaves one Protocol firm for another Protocol firm, the broker can a) take certain account information (client names, addresses, telephone numbers, e-mail addresses, and account title information) to his/her new firm and b) solicit the clients he/she serviced at his/her former firm. Naturally then, the Protocol’s requirements conflict with confidentiality and restrictive covenant provisions that are commonly found in broker employment agreements and firm policies. Continue Reading Are Financial Services Firms Reconsidering the Protocol?
In Seyfarth’s first webinar in its 2018 Trade Secrets Webinar Series, Seyfarth attorneys Michael Wexler, Robert Milligan, and Joshua Salinas presented 2017 National Year In Review: What You Need to Know About the Recent Cases/Developments in Trade Secrets, Non-Compete, and Computer Fraud Law. The panel reviewed noteworthy cases and other 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 their predictions for what to watch for in 2018.
As a conclusion to this well-received webinar, we compiled a summary of takeaways:
- While the Defend Trade Secrets Act provides for an ex parte seizure order, courts have been very unwilling to provide such relief except in extraordinary circumstances.
- In light of recent state laws and appellate court decisions at both the federal and state level in 2017, choice of venue and choice of law provisions must be carefully considered and strategically implemented.
- The ABA’s May 4, 2017, Ethics Opinion encourages lawyers to have an open exchange of communication with their clients about the securities measures their firms are taking to safeguard the clients’ confidential information.
In a meaty decision involving the intersection of restrictive covenant and franchise law, the United States District Court for the Southern District of Ohio recently denied a request by D.P. Dough Franchising, LLC (“D.P. Dough”), a calzone restaurant franchisor known for late night delivery in college towns across the nation, to enjoin its former franchisee, Edward Southworth, from operating a series of Eddie’s Calzones shops in Athens, Georgia, and Columbia, South Carolina—where D.P. Dough did not even have locations at the time.
D.P. Dough asserted six different causes of action against the defendant, including (1) breach of the franchise agreement, (2) misappropriation of trade secrets, (3) copyright infringement, (4) trademark infringement, trade dress infringement, Ohio Deceptive Trade Practices Act and unfair competition, (5) tortious interference with prospective of contractual business relationships, and (6) unjust enrichment. Continue Reading Federal Court Rules Against Calzone Franchisor in Meaty Lawsuit Against Former Franchisee
Throughout 2017, 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 six webinars:
- 2016 National Year in Review: What You Need to Know About the Recent Cases/Developments in Trade Secrets,
Non-Compete and Computer Fraud Law
- Simple Measures for Protecting Intellectual Property and Trade Secrets
- Protecting Confidential Information and Client Relationships in the Financial Services Industry
- Protecting Your Trade Secrets in the Pharmaceutical Industry
- Trade Secret Protection: What Every Employer Needs to Know
- Protecting Trade Secrets in the Social Media Age
Illinois is one of several jurisdictions that recognizes the authority of courts to blue pencil or judicially modify otherwise unenforceable restrictive covenants to be enforceable. See, e.g. Weitekamp v. Lane, 250 Ill. App. 3d 1017, 1028, 620 N.E.2d 454, 462 (4th Dist. 1993) (affirming judicial modification of 300-mile non-compete to specific county); Arpac Corp. v. Murray, 226 Ill. App. 3d 65, 80, 589 N.E.2d 640, 652 (1st Dist. 1992) (affirming the circuit court’s modification of restrictive covenant when it was modified “only slightly” and holding that the balance of the restrictions were reasonable and necessary to protect Arpac’s legitimate business interests).
Recent reported decisions, however, cast doubt on the availability of judicial modification in all but exceedingly limited circumstances. In the past three years, only a handful of cases even mentioned judicial modification and, of those cases, not one actually modified, or affirmed the modification of, an otherwise unenforceable covenant. See AssuredPartners, Inc. v. Schmitt, 2015 IL App (1st) 141863, ¶ 52 (2015) (refusing to modify restrictive covenants because “deficiencies too great to permit modification”); Bankers Life & Cas. Co. v. Miller, No. 14 CV 3165, 2015 WL 515965, at *3 (N.D. Ill. Feb. 6, 2015) (deciding choice of law, noting that “Illinois courts are circumspect in their modification” and that “Illinois courts look skeptically at modifications, and may modify covenants only after ensuring that fairness is not harmed”); Fleetwood Packaging v. Hein, No. 14 C 9670, 2014 WL 7146439, at *9 n.7 (N.D. Ill. Dec. 15, 2014) (rejecting a proposed modification that would a create a durational limitation where none existed before, noting that “[e]ven when courts have found judicial reformation to be warranted, the challenged restrictive covenants needed only slight modification to become reasonable”). Continue Reading Illinois Employers Should Not Depend on Blue Penciling to Enforce Restrictive Covenants