Earlier today, the Illinois Supreme Court issued a much-anticipated ruling in Reliable Fire Equipment v. Arredondo, Illinois Supreme Court, Case No. 111871 (Dec. 1, 2011), holding that Illinois trial courts are required to determine whether a legitimate business interest exists based on the totality of the facts and circumstances of each individual case. 

In Reliable Fire Equipment, the trial court found the two non-competes before it to be unenforceable because the employer had failed to prove the existence of a legitimate business interest in support of the two non-competes. In what the Illinois Supreme Court described as a sharply divided panel, the appellate court nevertheless affirmed that decision.

According to the Legal Developments in Non-Competes blog by Illinois lawyer Kenneth Vanko, a three-way split had developed among Illinois Appellate District courts on how a legitimate business interest was to be analyzed. One line of cases had applied a categorical test that limited legitimate interests to customer relationships and confidential information, another had apparently questioned whether that requirement was even necessary, and the third had applied a fact-based analysis based on the circumstances of each case. Kenneth predicted, correctly it turns out, that the Illinois Supreme Court would adopt the fact-based analysis for determining business interests.

The Illinois Supreme Court reiterated that proof of a legitimate business interest was still required and that a covenant not to compete would only be enforced as reasonable if (1) it was no greater than required to protect the legitimate business interest of the employer; (2) did not impose an undue hardship on the employee; and (3) was not injurious to the public. In so doing, the Supreme Court explicitly rejected the holding of Sunbelt Rentals, Inc. v. Ehlers, 394 Ill.App.3d 421 (2009), which had held that an employer did not need to demonstrate a legitimate business interest when it sought to enforce a restrictive covenant. This came as no great surprise as the Sunbelt decision has been criticized and a number of Illinois appellate courts had declined to follow it.

Instead, the Illinois Supreme Court concluded that there must be an examination of the underlying business interest, focusing on the totality of the facts and circumstances of each individual case. Factors such as the near-permanence of the customer relationships to be protected, the employee’s acquisition of trade secrets or confidential information through his employment, and the time and place restrictions within the covenant are all to be considered and weighed.

The takeaway? Illinois trial courts are now indisputably vested with tremendous discretion to determine what qualifies as a legitimate business interest. While this ruling will lead to less certainty (something that is always good for lawyers, less so for their clients), one can hope it will lead to more equitable and practical results. 

Here are last month’s noteworthy cases, article and posts, as well as a few other cases that I didn’t have room for in last month’s wrap up post:

Noteworthy Defend Trade Secret Act and Other Federal Cases, Posts and Articles:

  • Can an employee be prohibited from communicating with his/her new employer’s lawyers? If there is a risk that they might share details of other trade secret disputes, they can, at least according to the U.S. Court of Appeals for the Sixth Circuit. In Stryker Emp. Co., LLC v. Abbas, Case No. 22-1563 (6th Cir. Feb. 16, 2023) (Clay, Bush, JJ.; Sutton, C.J.), the Sixth Circuit affirmed an injunction enforcing, among other things, a provision limiting the employee, Abbas, from communicating with his employer’s (Alphatec) counsel. Stryker was involved in three other cases against Alphatec involving other former Stryker employees, and the Sixth Circuit found that Abbas “was privy to confidential information that if disclosed to Alphatec or Alphatec’s counsel, would detrimentally affect Stryker” in those other lawsuits. McDermott Will & Emery’s Tessa Kroll has a summary of the decision. I have to confess this decision seems extreme, given that a standard confidentiality order would achieve the narrow purpose sought–protection of confidential information involving a pending litigation–and the breadth of this ruling may unfairly impinge on the ability of counsel to engage in joint defense communications.
  • The winner of this month’s Gladys Kravitz Award is EmergencyMD, LLC, an employer that couldn’t resist peering into the Gmail account of its former employee. That snooping led to a viable claim under the Stored Communications Act (SCA), ruled the U.S. Court of Appeals for the Fourth Circuit. In Carson v. EmergencyMD, LLCC, et al. the Fourth Circuit reversed the district court’s summary judgment dismissal of the former employee’s SCA claim, finding genuine issues of fact existed over whether the defendants’ accessing of the emails was unintentional and whether EmergencyMD’s policies authorized the defendants’ obtaining and disclosing their former employee’s emails.
  • How much risk does a cannabis-loving employee truly pose to his employer’s trade secrets? Not very much, according to Judge Kenneth Bell of the U.S. District Court for the Western District of North Carolina in Microban Int’l Ltd. v. William Bartley Kennedy. The employee had been terminated for ingesting a marijuana gummy bear before an important meeting, and Judge Bell found the former employee’s “hollow threats” to share his employer’s confidential information uttered during severance negotiations were insufficient for an injunction.
  • Illinois proudly claims the title of the Land of Lincoln. But it has another honor that it doesn’t boast about nearly as much. It is the birthplace of the infamous inevitable disclosure doctrine (see PepsiCo, Inc. v. Redmond), a doctrine much maligned by scholars and lawyers representing employees in trade secret cases. Fortunately, the doctrine may be close to expiring as a recent case, Petrochoice, LLC v. Amherdt, suggests. Judge Jorge Alonso of the U.S. District Court for the Northern District of Illinois rejected the former employer’s inevitable disclosure argument, ruling that the information the former employer was attempting to limit (the employee Amherdt’s “level” of performance of his “sales skills”) “is precisely the sort of sales acumen that employees are permitted to take with them.”
  • When can a new employer be vicariously liable for its newly-hired employee’s alleged trade secret misappropriation? In Alert Enterprises, Inc. v. Rana, Judge Jacqueline Scott Corley of the U.S. District Court for the Northern District of California dismissed claims by a former employer to include a competitor, SoloInsight, who hired a former employee who had downloaded over 2,600 of Alert Enterprises’ files and deleted other information to cover up those and other transfers. SoloInsight represented that none of those files had been uploaded to its system, which the plaintiff had to acknowledge in its complaint. On this record, Judge Scott Corley found there were no plausible claims of use or disclosure by SoloInsight and that it could not be vicariously liable for conduct that occurred before it hired that employee.
  • Many of the decisions ordering early trade secret identification fail to provide guidance on how a plaintiff should identify those trade secrets with particularity. The reason for this is obvious: the descriptions themselves include allegedly proprietary information and therefore the key portions of the court’s analysis are frequently under seal. This reality means there aren’t many decisions to assist trade secret owners on what qualifies as a defensible identification. However, in Carlyle Interconnect Tech. Inc. v. Foresight Finishing LLC, the U.S. District Court for the District of Arizona provides that rare roadmap. In that case, Judge Steven Logan oversaw a discovery dispute over the identification of the plaintiff’s plating process trade secrets, providing a fine explanation of the factual context at issue, and ultimately holding that the plaintiff must “identify[] the steps in the process and explain[] how those steps make their method or process unique.”
  • Consistent with the trend that I noted last month, federal courts continue to deny motions to dismiss trade secret claims but remain willing to narrow cases by getting rid of other tort claims. Check out the latest case, PRO MINERAL, LLC v. Marietta, Dist., where the U.S. District Court for the Northern District of Texas kept the trade secret and breach of contract claims but applied Texas’ preemption doctrine to dismiss claims for breach of fiduciary duty and civil conspiracy.
  • It must be frustrating for trade secret owners seeking an injunction before courts bound by decisions issued by the U.S. Court of Appeals for the Second Circuit. Why you ask? The fact that they have to contend with the ill-conceived Faiveley Transport Malmo AB v. Wabtec Corporation, 559 F.3d 110 (2d Cir. 2009) decision. For those unfamiliar with that opinion, the Second Circuit inexplicably ruled that irreparable injury did not exist in situations where a competitor was simply using trade secrets; the Second Circuit reasoned that the risk of further disclosure was not present because the misappropriating defendant and trade secret owner were both aligned on the issue of disclosure, and neither would therefore benefit from further disclosure. Of course, this rationale runs counter to a central tenet of ownership–namely, the owner’s right to exclude a competitor from using its IP. In Amimon, Inc. v. Shenzen Hollyland Tech Co. Ltd., et al., Judge Edgardo Ramos relied on Faiveley‘s holding and denied Amimon’s request for a preliminary injunction, ruling that it could recover money damages for the alleged misappropriation which was confined to the use of the trade secrets by defendants. It should be noted that Amimon did itself no favors, as its irreparable injury arguments were based on damage to its reputation and the threat that defendants might further share the trade secrets, neither of which were supported by sufficient facts.
Continue Reading Monthly Wrap Up (April 4, 2023): Noteworthy Trade Secret and Restrictive Covenant Cases, Posts and Developments

Earlier today, the Federal Trade Commission announced it has issued a proposed rule banning noncompetes. This development should come as no surprise since President Biden issued an executive order in July 2021 authorizing the FTC and other agencies to investigate the unfair use of noncompetes and other restrictive covenants and curtail their use. I expect that most of the commentary will focus on noncompetes and the ability of the FTC to effectively legislate over a body of law reserved for the states for over a hundred years. However, what should be of particular concern to the trade secret community is that the proposed FTC rule also potentially targets nondisclosure agreements (NDAs) that are “written so broadly” as to amount to “de facto noncompetes.” In other words, employers in California, Oklahoma and North Dakota–states that forbid noncompetes–may find that their employee NDAs could qualify as de facto noncompetes under the FTC’s new rule. As explained below, this post briefly describes how we got here, what the proposed rule addresses, and suggests some actions employers can take to protect themselves in the meantime.

Continue Reading It’s Official: The Federal Trade Commission Seeks to Ban Noncompetes and Overly “Broad” NDAs

While there was minimal legislative actively last month, there were a number of interesting decisions and articles on the trade secret and restrictive covenant front:

Noteworthy Defend Trade Secrets Act Cases, Federal Trade Secrets Opinions and Related Commentary:

  • Perhaps the biggest news last month was the $104.65 million verdict against Ford Motor Co. delivered by a Michigan federal jury for the breach of its contract with Versata Software and the misappropriation of Versata’s trade secrets.   The dispute arose over a 2004 agreement between Versata and Ford for software that Versata developed to manage how components in Ford vehicles would be configured during assembly.  Versata had been a vendor of Ford’s since the 1990’s until 2015 when Ford terminated the relationship.  The jury found that after off-ramping Versata, Ford improperly reverse engineered the software for its own use.  The jury awarded $22.39 million to Versata for three of the software trade secrets and $82.26 million for Ford’s breach of contract.  Ford plans to appeal.  Like the Goodyear case that I recently wrote about, this dispute highlights the fact that trade secret cases don’t just involve departing employees.
  • Speaking of cases involving employees, Patently O‘s Dennis Crouch did an informal survey of 10 recently filed federal trade secret cases.  Dennis noted that all 10 of the cases involved employer/employee disputes and many arose in the sales representative context over customer and sales information.  One of the cases, Cartiga, LLC v. Robles, provides a textbook example of how NOT to respond to a cease-and-desist letter from your former employer’s lawyer (the emojis below were attached as an exhibit to the complaint):
  • Having prevailed before the U.S. Court of Appeals for the Eleventh Circuit, Boeing successfully secured the dismissal of trade secrets claims asserted against it by arguing that a limitation of liability provision in its nondisclosure agreement (NDA) also applied to the same trade secret claims.  Reasoning that because the NDA’s choice of law provision applied to those trade secret claims, the U.S. District Court for the Northern District of Alabama held that the NDA’s limitation of liability provision applied to those claims as well.  That opinion, Alabama Aircraft Indus., Inc. v. The Boeing Company, can be found here.
  • The U.S. Court of Appeals for the Third Circuit issued yet another opinion taking a narrow approach to a trade secrets claim, affirming the trial court’s decision to deny an injunction against a group of employees.  In Matthews Int’l Corp. v. Lombardi, the Third Circuit found that the trial court properly exercised its discretion to limit injunctive relief to a single bad actor and not impose a broader injunction against the remaining individual defendants preventing them from otherwise lawfully competing.  The other individuals had already agreed, as memorialized by a subsequent order, to (1) return all of the plaintiff’s information, (2) remove the information from their devices, and (3) refrain from servicing customers who had the plaintiff’s cremation equipment.  The Third Circuit reasoned that no injunction was necessary for multiple reasons, including the absence or expiration of any restrictive covenants, the absence of any breach and the plaintiff’s inability to show irreparable injury.  Isaiah Weedn has a good summary of the case in Sheppard Mullin’s Trade Secrets Law Blog.
  • Federal courts continue to grapple with the importance of circumstantial evidence to demonstrate misappropriation at the summary judgment stage.  Last month, I wrote about a decision out of the U.S. District Court for the Northern District of Illinois holding mere possession of a trade secret was insufficient to show use.  However, in Clean Energy v. Trillium Transportation Fuels, Inc., Magistrate Peter Bray of the U.S. District Court for the Southern District of Texas held that “proof of ‘use’ often depends upon circumstantial evidence” and found that the circumstantial evidence presented to him was sufficient to deny the defendants’ motion for summary judgment.  The cases probably can be reconciled by the fact that there was more circumstantial evidence to offer in the Clean Energy case, but the decisions do highlight a schism on the significance of direct vs. circumstantial evidence.
  • Federal courts are also split on the availability of the inevitable disclosure doctrine under the DTSA, according to Mintz’s Oliver Ennis, Nicholas Armington and Adam Samansky in an article for The National Law Journal.
  • One of the signature developments of the DTSA has been the mind-numbing number of opinions addressing motions to dismiss under Federal Rule of Civil Procedure 12(b)(6).  Fisher & Phillips’ David Walton provides a five-step action plan for making sure your bases are covered if you are filing a claim under the DTSA.  Maxwell Goss also has an earlier post this year on the same topic that was published by The Michigan Law Journal.
  • Is there a circuit split on the enforceability of forum selection clauses?  Given the many differences between state laws on restrictive covenants, a forum selection clause can be outcome determinative.  Sarah Tisher of Beck Reed Riden has a post about that split and the prospects that the U.S. Supreme Court may address it.
  • The avoided cost theory of damages continues to gain traction as an element of damages in trade secret cases, advises Andrea Feathers for Sheppard Mullins Trade Secrets Law Blog.  In essence, the doctrine recognizes the cost savings that a misappropriator realizes when it is able to shortcut the research or development of a product or service by using that trade secret.  Heather writes about a recent decision of the U.S. District Court for the Southern District of California in Medimpact Healthcare Sys. v. IQVIA Inc., No. 19cv1865-GPC(DEB), 2022 U.S. Dist. LEXIS 186470, at *1 (S.D. Cal. Oct. 7, 2022), that recognized the availability of the doctrine but deferred ruling on how best to calculate those damages in further briefing.  Heather’s post provides a solid summary of the development of this theory of damages and the key decisions that have led to its increasing recognition and use by trade secret owners.

Continue Reading Monthly Wrap Up (November 11, 2022): Noteworthy Trade Secret and Restrictive Covenant Cases, Developments and Posts

And away we go:

Noteworthy Defend Trade Secrets Act Cases, Federal Trade Secrets Opinions and Related Commentary:

  • If an employer presents specific evidence that former employees emailed, printed out or took copies of customer lists, is that sufficient evidence to establish that those former employees misappropriated those trade secrets for purposes of defeating summary judgment?  In Busey Bank v. Michael G. Turnery, et al., U.S. District Court for the Northern District of Illinois Judge Sara Ellis concluded that it was not enough since “mere possession of trade secrets does not suffice to plausibly allege disclosure or use of those trade secrets, even when considered in conjunction with solicitations of former clients.”  A link to the opinion can be found here, and Law360′s article on the case can be found here.  The opinion is interesting to me in two respects:  (1) it is consistent with an emerging trend requiring direct, rather than circumstantial, proof of misappropriation (see my earlier post on the Wisk Aero v. Archer Aviation case and on other federal cases finding that mere downloading isn’t enough for an injunction); and (2) reading between the lines, it seemed like Judge Ellis saw this case as an employee “raiding case” masquerading as a trade secrets case.
  • Although most trade secret disputes arise in the employer/employee relationship, a recent opinion by the U.S. Court of Appeals for the Second Circuit serves as a reminder that the contours of trade secret law are often shaped by disputes in the public records context.  In a post for Crowell’s Government Contracts Legal Forum, John McCarthy, Anuj Vohra and Daniel Wolff describe the decision that better defined what degree of competitive harm needs to be presented to support a trade secret invocation under the 2016 FOIA Improvement Act.
  • Discovery disputes are common in trade secret litigation because of the nature of information at issue (i.e., highly sensitive trade secrets) and the potential intrusiveness of some of the types of discovery (imaging and forensic analysis of personal devices).  However, a defendant’s continued resistance and non-compliance with discovery requests and court orders led to the rarest of sanctions–a default on the merits.  In RedWolf Energy Trading, LLC v. BIA Capital Management, LLC, et al., the U.S. District Court for the District of Massachusetts imposed this sanction against the individual defendant and his company.  Erik Weibust details the court’s 72-page decision for Epstein Becker’s Trade Secrets & Employee Mobility Blog.  Erik’s post highlights the fact that the defendant tried to save costs on a discovery vendor (blaming him for its failure) and is now on the hook for more than $10 million in damages.
  • And the U.S. District Court of Massachusetts is not the only court that has issued terminating sanctions against a party for failing to abide by discovery obligations and court orders.  For a comprehensive list of spoliation cases involving requests for severe sanctions, check out Arent Fox’s Linda Jackson, Matthew Prewitt, Taniel Anderson, Nadia Patel and Pascal Naples’ article for The National Law Journal describing multiple cases over the past 3 years in which courts have imposed severe sanctions on recalcitrant parties.
  • Speaking of discovery disputes, there is an interesting decision coming out of the Wisk Aero v. Archer Aviation case in the U.S. District Court for the Northern District of California (for more on that case and its well-reasoned decision denying a preliminary injunction, see my post from last year).  U.S. District Court Judge Orrick affirmed the ruling of Magistrate Judge Donna Ryu that permitted the individual defendants accused of trade secret theft in that case to review the trade secrets at issue; frankly, given the need for a defendant to evaluate the trade secret claims against it, it never fails to amaze me that employers and trade secret owners resist these types of disclosures.  However, the most interesting feature of the Magistrate’s order is that each defendant was only allowed to view the trade secret for 15 minutes.  Jim Pooley briefly touches on this dispute in a post he wrote for The IP Watchdog as he describes the many situations where courts have to balance competing policies and interests in trade secret litigation.
  • Steve Brachman has a post for the IP Watchdog on the viability of an argument that the DTSA’s policy supporting federal protection for trade secrets trumps a forum selection clause directing litigation to Denmark.  In Amyndas Pharmaceuticals, S.A. v. New Zealand Pharma AS, the U.S. Court of Appeals for the First Circuit rejected that and other arguments and shipped the case out to a Danish court.  The First Circuit made short work of the argument that the terms “defendants’ venue” meant anything other than the corporate headquarters of that defendant, reasoning any other interpretation would render the phrase meaningless.  Dennis Crouch also has a post on the decision for the Patently-O blog.

Continue Reading Monthly Wrap Up (October 5, 2022): Noteworthy Trade Secret and Restrictive Covenant Cases, Developments and Posts

It was a busy August, so here are the highlights:

Noteworthy Defend Trade Secrets Act Cases, Federal Trade Secrets Opinions and Related Commentary:

  • Can a trade secret owner plead a claim of inevitable disclosure under the DTSA?  In Idexx Laboratories, Inc. v. Graham Bilbrough, Magistrate Nivoson of the U.S. District Court of Maine dismissed that claim, reasoning the majority of courts have rejected that theory based on the language and history of the DTSA.  Readers of this blog will remember that language was added to the DTSA near the end of legislative negotiations to placate concerns of California Senator Dianne Feinstein about the use of this doctrine, which is prohibited in California.  However, it is worth noting that multiple courts, including federal courts in Illinois and Pennsylvania, have allowed the doctrine to be pleaded under a pendent state law claim if that state recognizes the inevitable disclosure doctrine.  For a good primer on past decisions regarding the inevitable disclosure doctrine and the DTSA, check out this post from Orrick’s Trade Secrets Watch.
  • In a high profile case brought by NBA star Zion Williamson against his former agent, Williamson v. Prime Sports Marketing LLC et al., the U.S. District Court of North Carolina has ruled in his favor, holding that the concept of marketing Zion as the next Lebron James did not qualify as a trade secret.  Astor Heaven and Emily Tucker summarize the decision in Crowell’s Trade Secrets Trends Blog.
  • Avoided costs can qualify as damages for a trade secret claim says the U.S. Court of Appeals for the Third Circuit.  Eileen McDermott has a summary of the Third Circuit’s ruling in a post for the IP Watchdog.
  • Does a trade secret complaint’s allegations of misappropriation present facial plausibility or are they merely consistent with liability? Yes, that is lawyerspeak at its finest, but it’s an important question because it may determine whether your trade secret complaint will survive a motion to dismiss. As Federal Rule 12(b)(6) has become a more prominent tool for defendants in trade secret cases, the U.S. Court of Appeals for the Tenth Circuit provides a roadmap for plaintiffs and defendants alike for framing their arguments in connection pleading/attacking a trade secret or restrictive covenant claim.  In LS3 Inc. v. Cherokee Nation Strategic Programs, LLC, the Tenth Circuit applied this test to a dispute over the poaching of employees, holding that the breach of fiduciary duty and misappropriate of trade secret claims survived Rule 12(b)(6)’s standards but that the breach of contract claims were insufficient as a matter of law.
  • In the latest installment of lawyers behaving badly, Littler and Polsinelli continue to square off about whether a client development toolkit assembled at Littler qualifies as a trade secret and whether it was misappropriated when a lawyer and staff left to start a competing practice at Polsinelli.  The parties are sparring over the scope of discovery and Littler has now withdrawn its request for a TRO.  A summary of the arguments and related developments as reported by Law360 can be found here.
  • The Motorola v. Hytera case, the high-profile case I have written about pending in Chicago, has some interesting developments.  First, readers of this blog will know that Motorola prevailed in the case and is supposed to be receiving a sizable court-ordered royalty payment from Hytera; however, Hytera claims it can’t pay, so Motorola has filed a motion for contempt and is asking the district court to enter the injunction it previously denied (see this article summarizing the motion practice in Radio Research Mission Critical Communications).  Second, Hytera has been granted leave to assert antitrust counterclaims against Motorola.  These claims are rare in the trade secret context, so it will be interesting to see how they unfold.  Stay tuned.
  • I wrote about the Seventh Circuit’s opinion in Rexxa, Inc. v. Chester last month and there are two posts with different takes on the opinion worth reading.  Sheppard Mullins’ Mikela Sutrina and Jenna Crawford emphasize that the 11-year wait by the plaintiff Rexxa undermined its trade secret claim because certain aspects of the alleged trade secret had become widely known by the time of the lawsuit.  And Holland & Knight has a thorough client alert analyzing both the district court’s initial opinion and the Seventh Circuit affirming opinion; that post focuses on Rexxa’s failure to adequately identify the trade secrets as the key to the opinion dismissing the case.
  • There are multiple decisions addressing attorneys’ fees sought by successful litigants this past month.  U.S. District Court Judge Gray Miller ordered IBM to pay $21 million in attorneys’ fees after the $1.6 billion dollar verdict against it.  And Law360 is reporting on a $3.9  million award to Munck Wilson for its fees in a trade secrets case pending in the U.S. District Court for the Eastern District of Texas; the decision enforced a contractual indemnity as the basis for those fees.  Finally, Marcus Mintz and Robyn Marsh note that an unsuccessful plaintiff dodged a bad faith finding in a post for Seyfarth’s Trading Secrets Blog.  In Transperfect Global, Inc. v. Lionbridge Technologies, Inc., U.S. District Court Judge Denise Cote of the Southern District of New York, denied that request, although she chastised the plaintiff for pursuing that claim after it should known they were without merit, characterizing its litigation conduct as “unsavory business.”

Continue Reading Monthly Wrap Up (September 7, 2022): Noteworthy Trade Secret and Restrictive Covenant Cases, Developments and Posts

There is a significant amount of activity going on in the trade secret and restrictive covenant space, so I am going to do my best to resume my monthly wrap up posts, after a long (although some might say not long enough) hiatus.  Without further ado, here are the noteworthy developments of the past month:

Noteworthy Defend Trade Secrets Act Cases, Federal Trade Secret Opinions and Related Commentary:

  • The Motorola v. Hytera litigation in the U.S. District Court for the Northern District of Illinois has generated a number of noteworthy developments, including a seminal opinion affirming the DTSA’s extraterritorial reach, as well as a substantial jury verdict ($597 million).  Last month, U.S. District Court Judge Ronald Norgle denied a request to reconsider his denial of Motorola’s request for a permanent injunction (that earlier opinion can be found here December 17, 2020).  The December 17, 2020 opinion provides an excellent analysis of the roadmap courts will likely follow when contemplating a permanent injunction in connection with a significant monetary award (spoiler alert:  a royalty looks like the best option given the reality that the trade secrets have now been monetized).  In his most recent July 5, 2022 ruling, Judge Norgle notes that Hytera’s inability to satisfy the judgment might establish the irreparable injury element necessary for that injunction, but Hytera’s pending appeal forecloses his ability to exercise jurisdiction on that order.  Stay tuned for the Seventh Circuit’s eventual ruling.
  • A recent ruling by the U.S. Court of Appeals for the Tenth Circuit should serve as a reminder to trade secret owners to make sure their claim of misappropriation is sufficiently tied to the proximate cause required for damages.  Kyle Jahner of Bloomberg Law has a summary of that decision, GeoMetWatch Corp. v. Hall, et. al, Case No. 19-4130, in which the Tenth Circuit affirmed the district court’s dismissal of those claims on the grounds their damages were speculative.
  • Are federal courts imposing higher pleading standards on trade secret owners to identify their trade secrets with particularity?  Foley & Hoag’s Jeff Lewis, Paul Downs and Robert Haney Jr. persuasively argue that a consensus for that higher standard is emerging in the U.S. District Court for the Southern District of New York and elsewhere.
  • Is manipulating documents produced in discovery enough to get you sanctioned?  The U.S. Court of Appeals for the Seventh Circuit says “kind of.”  In REXA Inc. v. Chester, the Seventh Circuit reversed an order imposing sanctions on the plaintiff for producing documents in a manner that obscured, among other things, whether the defendant had actually signed an employment agreement.  The Seventh Circuit reasoned that while this discovery misconduct was troubling, the $2.3 million in attorneys’ fees for that misconduct were not sufficiently broken down and remanded for further consideration.
  • If you’re a trade secret owner trying to fend off a motion for summary judgment and get your case to a jury, take a look at U.S. Magistrate Christina Bryan’s Memorandum and Recommendation in Vest Safety v. Arbor Environmental, LLC.  The opinion, which comes out of the U.S. District Court for the Southern District of Texas’ Houston Division, shows how a well-organized and tight trade secret claim — addressing among other things, the §757 of Restatement of Tort’s comment b  six factor test — can survive such a motion.
  • What comes first, a motion to challenge jurisdiction or a preliminary injunction?  In Aquate II v. Jesse Myers, the U.S. District Court of Alabama elected to entertain a motion challenging subject matter jurisdiction rather than the pending motion for preliminary injunction.  Although U.S. District Court of for the Northern District of Alabama Judge Abdul Kallon does not provide a lot of analysis for that choice, the decision provides support that challenges to subject matter jurisdiction can take priority.

Continue Reading Monthly Wrap Up (August 2, 2022): Noteworthy Trade Secret and Restrictive Covenant Cases, Developments and Posts

One of the primary arguments for enacting the Defend Trade Secrets Act (DTSA) in 2016 was the perceived need for the protection of the trade secrets of U.S. companies abroad.  These issues received significant media attention with the focus far and away on China; by way of example, 60 Minutes cited the Justice Department as saying “the scale of China’s corporate espionage is so vast it constitutes a national security emergency, with China targeting virtually every sector of the U.S. economy, and costing American companies hundreds of billions of dollars in losses — and more than two million jobs.”  A consensus emerged that existing civil trade secret remedies at the state court level were inadequate.  These concerns led to calls for a robust federal statute that would provide a civil remedy empowering federal courts to assert their jurisdiction over parties outside the United States.  An important decision issued by the U.S. District Court for the Northern District of Illinois last year, Motorola Solutions v. Hytera Communications Corp.,  2020 U.S. Dist. LEXIS 35942 (N.D. Ill. Jan. 31, 2020), paved the way for other federal courts over the past year to exercise jurisdiction over international actors and international conduct under the DTSA.  This blog post summarizes these recent decisions. Continue Reading Trade Secrets Without Borders: The Defend Trade Secret Act’s Promise as an Extra-Territorial Statute Finally Comes to Pass

Earlier this month, I wrote a post about President Biden’s executive order directing the Federal Trade Commission (FTC) to take action to curtail the abuse of non-competes and other employment agreements that could limit employee mobility.  In response to that executive order, nearly sixty lawyers (including yours truly) joined in a letter asking the FTC to exercise care in deciding whether to assert jurisdiction in this area.  That letter, drafted by Russell Beck, lays out multiple grounds for concern about the FTC asserting itself in an area traditionally addressed by state legislatures.

Russell’s letter addresses a wide range of topics and I would commend those with interest in this area to read it.  It provides a thorough consideration of the reasons for the need for non-competes in certain situations and also addresses common misconceptions about their use.  The letter also notes a key development that is already taking place — that many states are actively taking steps to address the issues giving rise to the perceived need for federal intervention.  Most notably, the use of non-competes against low wage workers — arguably the biggest driver behind the push to curtail or ban non-competes — has been recently addressed by ten states including Illinois, Maine, Maryland, Massachusetts, Nevada, New Hampshire, Oregon, Rhode Island, Virginia and Washington.

We’ll see what actions the FTC decides to take and I will continue to blog about any future developments.

As he promised during the 2020 presidential campaign, President Joe Biden issued an Executive Order on Friday that directs the Federal Trade Commission (FTC) to curtail the use of unfair non-competes or other agreements that may limit employee mobility.  This Executive Order is the culmination of efforts by federal legislators to ban or limit non-competes.  A number of bills have been brought to the floor of the U.S. Senate, mostly by Democratic Senators, and none of been able to marshal sufficient bipartisan support to advance.   As those legislative efforts fizzled, several of those senators then lobbied the FTC to ban non-competes, which in turn held hearings over whether to take regulatory action early last year.

As explained in greater detail below, the Biden Executive Order is short on detail and simply encourages the FTC to take unspecified action against unfair non-competes and other agreements limiting employee mobility.  On its face, the Executive Order focuses on “unfair” agreements which have generally been understood to mean non-competes imposed on lower-wage workers.  Should, however, the FTC take a more aggressive approach to ban all non-competes, that could harm one of the key drivers of employment in the U.S. — small and medium-sized businesses that more heavily rely on non-competes to protect their companies. Continue Reading The Biden Executive Order Seeking to Curtail Non-Competes: Why It May Be Bad for Small Companies