A recent opinion from the U.S. District Court for the Northern District of Illinois has stirred up a hornets’ nest of commentary because it appears to recognize the viability of the inevitable disclosure doctrine under the Defend Trade Secrets Act (DTSA). Those familiar with the DTSA will recall that the inevitable disclosure doctrine was supposed to be prohibited under the DTSA because of California Senator Diane Feinstein’s concern that the doctrine might be enforced against California residents. Now, in what appears to be the first federal appellate court opinion construing the DTSA, the U.S. Court of Appeals for the Third Circuit may have further muddied the waters about the inevitable disclosure doctrine in Fres-co Systems USA, Inc. v. Hawkins, Case No. 16-3591, ___ Fed. Appx. __ (3rd Cir. 2017), 2017 WL 2376568 (June 1, 2017) (a link to the opinion can found here). Continue Reading Fres-co Systems v. Hawkins: Did The Third Circuit Just Create More Confusion Around The DTSA’s Ban On The Inevitable Disclosure Doctrine?
Given the increasing number and quality of fine posts about trade secret, non-compete and cybersecurity issues, I am resurrecting my regular updates post (although it will be monthly rather than weekly). Without further adieu, here are the noteworthy posts of the past month:
Defend Trade Secrets Act:
- With the recent passage of the 1-year anniversary of the DTSA, there have been a number of interesting posts that have detailed compilations about the cases filed with DTSA claims over the past year. Professor David Opderbeck of Seton Hall has an interesting guest post for Patently O and Fish & Richardson’s Claire Collins, Jeffrey Schneidman and Carol Simons have some noteworthy statistics in their Litigation Blog as well.
- Finnegan’s John Williamson, Paula Miller and Jon Self have a guest post nicely summarizing the extra-territorial reach of the DTSA and other statutes for the IP Watchdog.
- Robert Milligan and Josh Salinas offer their take on likely developments for the DTSA in its second year in Seyfarth’s Trading Secrets Blog.
- Maxwell Goss has a post that suggests that reports of the death of the inevitable disclosure doctrine under the DTSA may be greatly exaggerated in his Law and the Creative Economy Blog.
I’ve been invited in the past to speak on trade secret issues for the Columbus Intellectual Property Law Association and I will have the opportunity to do it again this year on the Defend Trade Secrets Act (DTSA). For those in Central Ohio who may be interested in attending, I will be providing a presentation entitled “The Defend Trade Secrets Act After One Year: Its Impact on Trade Secret Law in the U.S. and Abroad” this Thursday, June 15, 2017. The presentation will be at the Athletic Club of Columbus, 135 East Broad Street at 11:30 a.m.
I will be covering a number of important issues involving the DTSA, including a brief discussion of the forces that led to its enactment, the legislative history of the DTSA, the DTSA’s key provisions, and recent cases interpreting the standards for the DTSA’s ex parte seizure order, Whistleblower provision, injunctions involving employment and other noteworthy issues. I will also cover the impact of the DTSA on trade secrets law abroad, include the EU’s Trade Secrets Directive.
Registration for the presentation can be found here. Hope you can join us for what should be a very interesting seminar.
One of the Defend Trade Secrets Act’s (DTSA) most noteworthy features is its provision forbidding injunctions that would prevent a former employee from entering into another employment agreement. As explained below, this provision,18 U.S.C. §1836(b)(3)(A)(i)(I), was included to preserve employee mobility and assuage concerns that covenants not to compete, as well as what is known as the “inevitable disclosure” doctrine, might be enforced by federal courts in states that have rejected their enforceability. Today’s post looks at the legislative history of that provision and how courts have interpreted it. Continue Reading The Defend Trade Secrets Act After One Year: Injunctions Affecting New Employment
Yesterday, Uber released a letter that it had sent to Anthony Levandowski notifying him of its intention to terminate him as an employee because of his failure to cooperate with an Order issued on May 11, 2017 by U.S. District Court Judge William Alsup. While most of the media coverage of the case had previously focused on the portion of the Order effectively quarantining Levandowski from Uber’s development of its LiDAR technology, perhaps the most noteworthy portions of the Order proved to be Judge Alsup’s directives to Uber to get to the bottom of what Waymo trade secrets Levandowski might have shared with others at Uber. (A link to Judge Alsup’s Order can be found here). As I explain below, those two paragraphs of Judge Alsup’s Order inevitably set Uber against Levandowski and led to his termination.
Continue Reading Why Uber’s Firing of Anthony Levandowski Became Inevitable
As the first year anniversary of the Defend Trade Secrets Act (DTSA) has just passed, it is worth taking a step back and taking stock of how courts have treated key provisions. This will be the first of several posts covering developments under the DTSA and analyzing how it has been used since its enactment.
One of the most-discussed features of the DTSA was its creation of a “whistleblower” immunity that allows employees to share evidence of an employer’s alleged misconduct with government authorities or present that evidence in support of a retaliation claim under seal in court and avoid a claim that the employee misappropriated trade secrets when they disclosed that information. This provision, 18 U.S.C. §1833, is the only provision of the DTSA that preempts state law, so it affords protection to an employee against an employer’s claims under the Uniform Trade Secrets Act or common law as well.
As readers may recall, the DTSA requires employers who want to take advantage of the DTSA’s full protections to amend their contracts, employee agreements, and policies to provide notice of that whistleblower defense to its employees, which has been broadly defined to include independent contractors. If a company fails to include that notice in its agreements or policies, it is foreclosed from seeking claims for attorney’s fees and exemplary damages under the DTSA. The DTSA broadly defines an employee to include “any individual performing work as a contractor or consultant for an employer” so both 1099 and W-2 employees are covered under this provision.
Not surprisingly, when the DTSA was enacted, many employers were concerned about what, if any notice, needed to be supplied to its employees about this immunity and to what extent they needed to amend their employment agreements and policies. Section 1833(b)(3)(B) makes clear that an employer can comply with this notice provision if its employment agreement simply cross-references a policy document that more fully describes the employer’s reporting policy for a suspected violation of the law. However, the DTSA does not define what kind of notice or language must be provided, so it remains an open question of whether a specific citation to the DTSA would be sufficient or whether the relevant language of the DTSA’s whistleblower provision needs to be included.
To date, there is only one case involving the DTSA’s whistleblower provision. This should not come as too much of a surprise since the whistleblower provision’s primary consequences — a challenge to an award of attorneys’ fees or exemplary damages under the DTSA for failure to provide notice of that immunity or the viability of the immunity itself– will generally require that a case have been fully litigated, something that has not happened with many DTSA cases. Continue Reading The Defend Trade Secrets Act After One Year: The Whistleblower Provision
There have been two significant developments in the Waymo lawsuit against Uber, which is unquestionably the highest profile trade secrets case of the year. In the first ruling, U.S. District Court William Alsup referred the record of the case to the U.S. Attorney’s office for investigation of possible theft of trade secrets. In the second, Judge Alsup released a copy of his opinion yesterday explaining the injunction that he entered against Uber last week. Significantly, Judge Alsup declined Waymo’s primary request to shut down Uber’s driverless car business.
Instead, he ordered that Uber continue to quarantine former Waymo engineer Anthony Levandowski from its development of Uber’s Lidar technology, the technology that was the subject of the trade secrets he was alleged to have stolen. Judge Alsup declined to shutdown of Uber’s driverless program because Waymo could not establish that Uber had used the trade secrets that Levandowski allegedly took with him.
Referring the record for a pending civil case to the local federal prosecutor is highly unusual (in fact, I can’t remember it being done) and appears to be directed at Levandowski and his other former Waymo colleagues who joined him at Uber. However, the injunction looks like a victory for Uber, at least at this early stage in the proceeding. Continue Reading Waymo v. Uber: What Judge Alsup’s Injunction and Criminal Referral Mean for Uber
As readers of this blog know, I’ve been invited in the past to speak on trade secret issues for the Ohio State Bar Association. For those in Ohio who may be interested in attending, I will be providing an update on the Defend Trade Secrets Act this Friday, May 12, 2017 as part of the OSBA’s Business Law Conference. The Conference will be held in Columbus and broadcast live to locations in Akron, Cleveland, Dayton, Fairfield and Perrysburg, Ohio.
I will be covering a number of important issues involving the DTSA, including a brief backdrop that led to its enactment, the legislative history of the DTSA, the DTSA’s key provisions, and recent cases interpreting the standards for the DTSA’s ex parte seizure order, Whistleblower provision and other noteworthy issues. The Conference will also address issues such as Cybersecurity for Business Law Attorneys and Employment Law Issues under the Trump Administration.
Registration for the Business Law Conference can be found here. Hope you can join us for what should be a very interesting seminar.
When moving to enforce a non-compete, the last thing a litigator wants to do is to stumble out of the gates and struggle over a profound legal issue that could delay consideration of that normally urgent request. A new and little-talked-about section of the Defend Trade Secrets Act (DTSA), however, has the potential to trip up employers seeking to enforce non-competes if they are not prepared to address this new entanglement.
There has been a significant amount of commentary about the DTSA and its new amendments since President Obama signed the DTSA into law on May 11, 2016. The “whistle-blower” immunity and ex parte seizure order, for example, have generated the most discussion to this point. However, the section of the DTSA that may have the greatest future impact on litigation under the DTSA is 18 U.S.C. §1839(3)(A)(i)(1)(I), which prohibits injunctions that “prevent a person from entering into an employment relationship.”
That new provision, which I will refer to as the “No-Ban-on-Employment” provision, was intended to curb, if not eliminate, the use of the inevitable disclosure doctrine under the DTSA. However, it may have a significant unintended consequence–namely, it may complicate employers’ efforts to enforce non-competes through temporary restraining orders (TRO), the key legal mechanism for non-compete disputes. For the reasons below, employers may want to reconsider invoking the DTSA when they want to enforce their non-competes because of the potential complications of this section’s language and instead opt to file them in state court, at least in the short-term. As the DTSA is likely to overtake the Uniform Trade Secret Act (UTSA) as the dominant statutory regime for trade secret law, this DTSA provision may well set another blow in motion to the viability of the non-compete as an effective tool to protect trade secrets.
Continue Reading Does the Defend Trade Secrets Act Contain a Potential Roadblock for Non-Competes? Why the DTSA’s Limitations on the Inevitable Disclosure Doctrine May Complicate Enforcing Non-Competes
To the excitement of many in the trade secret law community, this past Thursday, May 11, 2016, President Obama signed a new federal trade secret act into law that will give employers and businesses a new federal right to file trade secret claims in federal court. That legislation, the Defend Trade Secrets Act (DTSA), moved swiftly through Congress as the Senate voted 87-0 in favor of the legislation on April 4, 2016 and the House of Representatives passed the bill by a 410 to 2 vote on April 30, 2016. A link to the new statute can be found here.
As readers of this blog know, I have supported a federal trade secret bill and worked with others to advance it’s passage. The DTSA has been recently described by The Wall Street Journal as “the most significant expansion” of federal intellectual property law in 70 years. I believe it will transform trade secrets law in the United States and worldwide, which will I detail in future posts. Today, I am going to provide a high level history and summary of this important new federal remedy.
What will the DTSA’s passage mean to employers and the business community in the short term? First, the DTSA will now provide them with the ability to present their trade secret claims in federal court in a new federal cause of action.
Second, the DTSA will provide a new and unique procedural remedy, the ex parte seizure order, that is designed to prevent the dissemination of trade secrets in extraordinary situations.
Third, the DTSA has created an immunity for whistleblowers that may require employers to amend their policies and agreements if they want to take full advantage of the DTSA.
Finally, for companies that believe that their trade secrets have been stolen overseas, the DTSA will provide a powerful federal remedy for them here in the U.S. Continue Reading The Defend Trade Secrets Act: A Primer on Its Key Provisions and Immediate Impact for U.S. Companies