Economic Espionage Act

AT_YOUR_OWN_RISKWhen 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

Here are some noteworthy posts from the past week and some catch-up on other posts from the past couple of weeks:
 
Trade Secret and Non-Compete Cases, Posts and Articles:

  • “CBS Settles Dispute Over ABC’s ‘Glass House,'” reports Law360. For more on this long-running trade secrets dispute, see my posts from last year here and here.
  • In “Bloomberg reveals safeguards for client info,” The Wall Street Journal reports on the various safeguards Bloomberg is committing to after the imbroglio last year when its journalists improperly accessed and reported on the subscriber information of its Wall Street clients.
  • “Failure To Define Trade Secrets Establishes Subjective Bad Faith For Attorneys’ Fees Award Under California UTSA,” advises James Goodman for Epstein Becker’s Trade Secrets & Noncompete Blog.
  • “Do Non-Compete Agreements Stifle Innovation?” Distil Networks CEO Rami Essaid and LevelEleven CEO Bob Marsh debate the impact of non-compete agreements.
  • “Concerns Over Economic Growth Leads Some States to Limit Non-Compete Agreements,” advises John Paul Nefflen for Burr & Forman’s Non-Compete Trade Secrets Blog.
  • “How to draft an enforceable noncompete agreement in 5 steps,” recommends Jon Hyman for the Ohio Employer’s Law Blog.
  • “Do the Final Episodes of ‘Breaking Bad’ Qualify As Trade Secrets?” asks Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • “New Hampshire Court Voids Non-Compete Clause in Independent Contractor Agreement,” reports Paul Freehling for Seyfarth Shaw’s Trading Secrets Blog.
  • “On Non-Compete Agreements: A Response to the Wall Street Journal’s Recent Article,” advises Jonathan Pollard for the non-compete blog.
  • For those in Michigan, “Dana Can’t Prove Trade Secrets Theft, Judge Rules,” reports Law360.
  • For more on the Dana case, see, “Accessing trade secrets is not the same as misappropriating trade secrets” by Tim Bukher for LawTechie.
  • “Is the DOJ Avoiding Domestic Trade Secret Cases?” asks Jan Wolfe for The AmLaw Litigation Daily.
  • “You Need To Work Harder To Fight Trade Secret Theft,” warn Michael Bunis and Anna Dray-Siegel of Choate Hall & Stewart LLP for Law360.
  • For those in Massachusetts, see Michael Rosen’s recent post, “More on ‘Material Change’ and Legislative Update,” for Foley Hoag’s Massachusetts Noncompete Law Blog.

Cybersecurity Posts and Articles:

  • “White House Posts Preliminary Cybersecurity Incentives,” advises Jessica Goldenberg for Proskauer’s Privacy Law Blog.
  • “Tackling Cyber Security Challenges in the Healthcare Industry,” reports Healthtech.

Computer Fraud & Abuse Act Posts and Articles:

  • “IP Cloaking Violates Computer Fraud and Abuse Act, Judge Rules,” advises David Kravets for Wired.
  • “Southern District of Georgia Judge Narrowly Construes Computer Fraud and Abuse Act,” advises Neil Weinrich for Berman Fink Van Horn’s Georgia Non-Compete and Trade Secrets News Blog.
  • David Nosal’s criminal conviction under the CFAA has been upheld by the U.S. District Court for the Northern District of California, reports Bob Egelko in, “Executive’s conviction upheld in trade-secrets theft,” for SFGate.
  • “It’s Time to Reform the Computer Fraud and Abuse Act,” argues Scientific American.

Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week, as well as one or two that I missed over the past couple of weeks:

Trade Secret and Non-Compete Cases. Posts and Articles:

  • “Connecticut Governor Vetoes Noncompete Statute Passed By Legislature,” reports Daniel P. Hart for Seyfarth Shaw’s Trading Secrets Blog. Last Friday, Governor Dannel P. Malloy vetoed Public Act No. 13-309, sending the bill to the legislature with a letter noting his concerns about a lack of clarity in the final version of the bill. The bill essentially required employers to provide some reasonable notice of a non-compete to an employee or prospective employee.  David Popick has a post for Epstein Becker’s Trade Secrets & Noncompete Blog, as does Russell Beck in his Fair Competition Blog.
  • “Texas Appeals Court Guts $40M Energy Trade Secret Verdict” against Southwestern Energy Group, reports Law360.
  • “Elevator Sales Company and Former Employee in Interesting Non-Compete Fight,” reports Jonathan Pollard in the non-compete blog.
  • “Are WWE Wrestling Results Trade Secrets?” asks Eric Ostroff in his Trade Secrets Protection Blog.
  • “Recent Conflicting Decisions Make It Potentially Easier and Harder to Enforce Non-Competition and Non-Solicitation Covenants,” advises Choate Hall & Stewart’s Employment and Benefit Group for JDSupra.
  • “Using Covenants Not to Compete in the Health Care Industry Part 1 – Understand the Basics,” advises Lee A. Spinks from Poyner Spruill.
  • And while on the topic of non-competes and doctors, “Judges giving departing doctors new leverage,” reports Claire Bushey for Crain’s Chicago Business.
  • “Restaurant Wars: Restrictive Covenants for Chefs & Tandoori Chicken Tikka,” reports Daniel Schwartz for the Connecticut Employment Law Blog.
  • “California officials wrestle with handling trade secrets on fracking,” reports The Los Angeles Times.
  • “Benefits of Early Discovery in Defending Trade Secret Misappropriation Claims,” advise Brent J. Gurney, Joshua T. Ferrentino and Alexander B. White for The New York Law Journal.
  • “Factors to Consider in Cross-Border Trade Secret Protection,” recommends The IP Exporter.
  • “Smoking Gun or Blowing Smoke? Five Tips to Make Sure That Computer Forensic Evidence of Trade Secret Theft Is What You Think It Is,” advise Thomas Gray and Elizabeth McBride for Orrick’s Trade Secrets Watch.
  • “My Issue With PRATSA: The Rule of Lenity,” argues Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • “Please, Do Not Trust Your New Employer to Interpret Your Non-Compete Clause,” pleads Laura Ellerman for Frith & Ellerman’s Virginia Non-Compete Law Blog.
  • “Money, Money, Money: Top 10 Trade Secret Verdicts,” reports Rob Shwartz and Cam Pham for Orrick’s Trade Secrets Watch.
  • “Five Things to Consider When Hiring an Employee From a Competitor,” recommends Benjamin Fink for Berman Fink Van Horn’s Georgia Non-Compete & Trade Secrets Report Blog.

Cybersecurity Posts and Articles:

  • “U.S., Firms Draw a Bead on Chinese Cyberspies,” reports The Wall Street Journal. This fascinating articles details the recent cooperation between the Obama Administration and various technology and internet companies.
  • “Nations Buying as Hackers Sell Computer Flaws,” reports The New York Times.
  • “Cybersecurity Pros Call For Federal Breach Notification Law,” advises Law360.

01042013Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week, as well as one or two that I missed over the past couple of weeks:

Trade Secret and Non-Compete Cases. Posts and Articles:

  • The reaction from the trade secret community to the recently-released Obama IP Strategy Report has been one of disappointment. Expectations soared after the Obama administration announced its trade secrets initiative in February but the recent Report barely mentions trade secrets.  In a post for Orrick’s Trade Secrets Watch, Michael Spillner notes the strategy’s need for a civil cause of action.  Likewise, Misty Blair of Seyfarth Shaw’s Trading Secrets Blog observes the Report’s failure to address trade secret protection more comprehensively as “a bit of a surprise.” 
  • “Illinois Appellate Court Requires Two Years of Employment for Postemployment Restrictive Covenants” reports Stacey Smiricky and Trina Taylor of Faegre Baker & Daniels for Lexology. Epstein Becker’s Trade Secrets & Noncompete Blog and Seyfarth Shaw’s Trading Secrets Blog also have posts on the decision.  And Kenneth Vanko unloads on the decision in his Legal Developments in Non-Competition Agreements Blog.
  • In “Contractual Override of Trade Secret Law,” Dennis Crouch details a recent Federal Circuit decision in his Patently-O Blog affirming a New York federal court’s holding that a non-disclosure agreement’s requirement that confidential information be specifically designated trumped state trade secret law holding otherwise. As a result of the plaintiff’s failure to designate the information as “confidential” under the NDA, the court applied California law and held the information could not qualify as a trade secret.  Lesson?  Don’t include this language in your NDA, because in my experience, parties rarely have the time (or inclination) to designate each and every piece of information as “confidential.”
  • “Are An Employer’s Business Plans Discoverable In Non-Compete Litigation?” asks Jason Cornell of Fox Rothschild about a case in Ohio for Mondaq.
  • “New Jersey Federal Court Allows Non-Party to Employment/Non-Compete Agreement to Invoke Arbitration Clause,” advises David Walsh for Jackson Lewis’ Non-Compete & Trade Secret Report Blog.
  • “China Worries Improve Prospects Of Trade Secrets Bill” reports Ryan Davis for Law360.
  • “Chemical, oil companies fear potential EPA rule will expose trade secrets” advises Julian Hattem for The Hill.
  • “Face It: Judges Sometimes Hate Competition Cases” delivers Kenneth Vanko in a bit of hard of truth in his Legal Developments in Non-Competition Agreements Blog.
  • “Answers To Your Questions On Noncompete Agreements” provides Donna Ballman for her Screw You Guys, I’m Going Home Blog.
  • “Detecting Insider Threats to Trade Secrets” advises Catherine Dunn for Corporate Counsel.
  • If you don’t have a non-compete with a Chinese employee, don’t expect to restrain him or her advises the China Bridge IP Law Commentary Blog. In “Why China Supreme Court Agreed with Resigned Employees Establishing Competing Businesses?,” Luo Yanjie details a recent high court ruling explaining Chinese law on this issue.
  • For The Wall Street Journal’s take on the recent indictment of Chinese turbine manufacturer Sinovel, see “U.S. Looks to Blunt Corporate Espionage by Chinese Firms.”
  • “Best Practices For Enforcing Restrictive Covenants” advises Susan Trench of Arnstein & Lehr for Law360.

Cybersecurity Posts and Articles:

  • “Beware the Internet and the danger of cyberattacks,” warns Robert Samuelson for The Washington Post.
  • “NSA revelations throw wrench into lawmakers’ cybersecurity push” advises Brendan Sasso for The Hill.
  • “5 Ways to Boost Your Company’s Cybersecurity Strategy” recommends Catherine Dunn for Corporate Counsel.

Computer Fraud & Abuse Act Articles, Cases and Posts:

  • “You May Not Like Weev, But Your Online Freedom Depends on His Appeal” advises Wired on the appeal of Andrew Aurnheimer of his CFAA conviction.
  • “There Is Now a Split Within the District of Massachusetts over the Proper Interpretation of the Computer Fraud and Abuse Act” announces Brian Bialas for Foley & Hoag’s Massachusetts Noncompete Law Blog.

Have a happy and safe Fourth of July!

In an unexpected but significant development, Silicon Valley Congressman Zoe Lofgren has introduced a bill that would add a civil cause of action to the Economic Espionage Act (EEA).  At the present time, the EEA only authorizes the federal government to pursue civil and criminal actions.  Last week, Congresswoman Lofgren introduced H.R. 2466, which is titled the “Private Right of Action Against Theft of Trade Secrets Act of 2013” (“PRATSA”) and it is a welcome effort to provide a federal civil remedy to companies that have had their trade secrets stolen.  (A hat tip to Robert Milligan and Daniel Joshua Salinas for their excellent post on this amendment).

PRATSA is remarkably simple. First, it only seeks to add a civil remedy for violations of 18 U.S.C. §1832(a) which presently permits criminal prosecutions for trade secrets “related to a product or service used in or intended for use in interstate or foreign commerce.”  Second, it explicitly exempts efforts to lawfully reverse engineer a trade secret, addressing a potential ambiguity that existed previously under the EEA.

In this respect, Congresswoman Lofgren’s bill stands in contrast to previous efforts to add a civil cause of action to EEA that sought to add a number of provisions that may have, in retrospect, unduly complicated their passage.  In 2011 and again in 2012, Senators Chris Coons and Herb Kohl introduced the Protecting American Trade Secrets and Innovation Act (PATSIA) that was directed primarily at international trade secret misappropriation.  PATSIA proposed, among other things, an ex parte seizure order that would have allowed a claimant to seize misappropriated product or preserve evidence, as well as heightened pleading requirements.  Both of those efforts to enact PATSIA ultimately languished in committee.

The amendment is a shrewd one because it complements another amendment that Congresswoman Lofgren recently introduced with Senator Ron Wyden (D-OR) to narrow the Computer Fraud and Abuse Act (CFAA).  That proposal, which has been named Aaron’s Law, seeks to remedy perceived abuses of the CFAA, the complaints over which reached a crescendo earlier this year when Internet activist Aaron Swartz committed suicide during the course of his prosecution under the CFAA.  (For more on the Swartz prosecution, see my post earlier this year here). 

Among other things, Congresswoman Lofgren’s amendment to the CFAA would effectively prohibit employers from using the CFAA for trade secret misappropriation claims.  A number of courts, including the U.S. Courts of Appeal for the Fifth, Seventh and Eleventh Circuits have allowed employers to use the CFAA to ensnare former employees who violated computer use policies when they improperly accessed and then took trade secrets from their computers with them to their new employer.

In other words, Congresswoman Lofgren has dangled the carrot of a possible trade secret civil remedy in exchange for the stick of narrowing the CFAA to eliminate its use as a trade secret statute.  I suspect that her proposal will be particularly popular in her home state of California, since it provides those employers with a federal trade secret remedy that has been lacking since the U.S. Court of Appeals for the Ninth Circuit held that the CFAA should not be applied to violations of computer use policies.

All in all, a very positive development.  The simplicity of the amendment, coupled with the recent recognition that trade secret theft has become a matter of national security, will hopefully ensure its passage into law.

01042013The corrected version of today’s Thursday Wrap-Up post is posted below. A technical glitch caused the post to inadvertently launch last night so we apologize to our subscribers. We appreciate your loyalty and work hard to deliver valuable content. Thank you for your patience. 

Now, to the noteworthy trade secret, non-compete and cybersecurity stories from the past week:

Trade Secret and Non-Compete Cases, Posts and Articles:

  • For you sports fans, a budding dispute is emerging in the NBA over the enforceability of Boston Celtics coach Doc Rivers’ non-compete. Rivers, one of the more highly regarded NBA coaches, has been approached by the Los Angeles Clippers but a non-compete in his contract may prevent his move. For their take on the situation, check out Rob Dean’s post, “Calling Foul on Doc Rivers’ Non-Compete Contract,” for Frith & Ellerman’s Virginia Non-Compete Blog as well as Kenneth Vanko’s post in his Legal Developments in Non-Competition Agreements Blog.
  • Wondering how the U.S. Supreme Court’s Myriad decision may affect the use of trade secrets? Then check out “In Setting Genes Free, Supreme Court Decision Will Put Greater Emphasis on Trade Secret Protection in Biotech,” by Michael Baniak for Seyfarth Shaw’s Trading Secrets Blog.
  • For the latest on the high profile prosecution of Walter Liew and the Pangang Group, see “Trade Secrets Charges Survive Dismissal Bid In DuPont Case,” reports Law360.
  • “Creators of 5-hour ENERGY file complaint against DOJ for requesting ‘trade secrets,'” advises Joyce DeWitt for the Statesman Journal Blog.
  • In a surprisingly sympathetic article about Sergey Aleynikov’s legal travails entitled “Questions Linger in Case of Copied Code,” Reed Albergotti expresses concern about the most recent prosecution in The Wall Street Journal.
  • “Google, Judges Duck Latest Version of Trade Secrets Case,” reports Law360.
  • Looking for a “Broker Update” on trade secret and non-compete disputes in the financial industry? Then check out Rob Radcliff’s post in his Smooth Transitions Blog.
  • “Enforceability of a Noncompete Agreement will Often Depend Upon Context,” advises Jason Shinn for the Michigan Employment Law Advisor Blog.
  • “No, No, No – Your Independent Contractor Cannot Sign a Noncompete. Never. Ever,” exclaims Tiffany Hildreth for Strasburger’s Noncompete Blog.
  • “No Sanctions For Text Message Deletion,” advises Christopher Brif for the IT-Lex Blog.
  • Trade Secret Suit Against Defense Co. Sent To Arbitration,” reports Law360.
  • “The New Prior User Rights Defense: How Often Will It Be Asserted?” ask Robert A. Pollock and Matthew R. Van Eman for Finnegan’s America Invents Act Blog.

Cybersecurity Posts and Articles:

  • “Why The NSA Leaks Will Lead To More Economic Espionage Against American Companies,” warns John Villasenor for Forbes Tech.
  • “Why Your CEO Is a Security Risk,” cautions Rohyt Belani  for the Harvard Business Review Network Blog.
  • Looking for a concise summary of all the pending federal cybersecurity and trade secrets legislation? Then check out “Pols Gone Wild: Congress Discovers Trade Secret Theft and Cybersecurity are Problems; We Sort Through the Explosion of Legislation,” by Sophie Yu and Gabriel M. Ramsey for Orrick’s Trade Secrets Watch Blog.
  • “5 Data Breach Risks You Can Prevent,” proclaim Clark Schweers and Jeffrey Hall for Law Technology News.
  • “The Public/Private Cooperation We Need on Cyber Security,” advises Harry D. Raduege, Jr. for the Harvard Business Review Network Blog.
  • “After Profits, Defense Contractor Faces the Pitfalls of Cybersecurity,” reports The New York Times.

Computer Fraud & Abuse Act Articles, Cases and Posts:

  • “Minnesota Federal Court Dismisses Computer Fraud and Abuse Act Claim Based on Departing Employee’s Downloading of Customer List,” reports Erik von Zeipel for Seyfarth Shaw’s Trading Secrets Blog.
  • For more on the recent decision denying a motion to dismiss the CFAA claim in the AMD trade secret case, see Erik Ostroff’s post “Computer Fraud and Abuse Act Applied Narrowly In AMD Case,” for his Protecting Trade Secrets Blog.

05242013A blue-ribbon panel issued a report on Wednesday focusing on trade secret theft by China and urging a number of executive and legislative reforms, including enactment of a federal trade secrets statute and providing American companies with some limited right to “hack back” against those that launch cyberattacks against them.  The report has already generated a fair amount of media coverage and is sure to spark further debate on what to do about international trade secret theft and cyberattacks (for more on the report, see this Op-Ed piece in The Washington Post, as well as these articles in Forbes, the BBC and PCWorld). 

The Commission on the Theft of American Intellectual Property by The National Bureau of Asian Research (that’s a mouthful) assembled the report.  The panel that authored the report includes high profile figures such as the former Ambassador to China (Jon M. Huntsman, Jr.), the former Chairman and CEO of Intel Corporation (Craig R. Barrett), the former Director of National Intelligence and Commander in Chief of the U.S. Pacific Command (Retired Admiral Dennis C. Blair), and former U.S. Senator Slade Gorton from Washington state.

The Reasons for the Report:  For those that have been following these issues, the report relies on many of the statistics and developments that are by now considered to be conventional wisdom or accepted as true:  $300 billion estimated annual losses due to foreign trade secret and cybertheft, drag on U.S. GDP growth, American job losses, and corrosion of the incentives to innovate, among others.

However, unlike other reports and commissions, this one unambiguously singles out China “as the world’s largest source of IP theft” and quotes estimates that “China’s share of international IP theft” is “roughly 70%.”  In this respect, the Commission differs substantially from other high profile reports — most notably, the Obama Administration’s Trade Secrets Initiative launched last February, which elected not to single out China (although that initiative did detail incident after incident of theft involving a China connection).

The report also addresses what it believes to be the root causes of this serious international problem, as well as the role of the Chinese government in allowing or promoting it.  It posits that “much of this theft stems from the undirected, uncoordinated actions of Chinese citizens and entities who see within a permissive domestic legal environment an opportunity to advance with their own commercial interests.  With rare penalties for offenders and large profits to be gained, Chinese businesses thrive on stolen technology.”  However, the report does note that role of the Chinese government in some of these efforts, citing the recent Verizon risk report that found that “‘state-affiliated actors’ accounted for 19% of the 621 successful ‘breaches’ in the 47,000 attacks reported.”

The Commission’s Notable Recommendations:  A number of short-term solutions are advocated to reorganize and finetune the federal executive branch’s focus and responsibility.  However, it is the “medium-term solutions” proposal that I thought was the most noteworthy, which is the section that advocates for legislative and legal reforms.

In my view, the most important legislative reform proposed in the report is the very first one — the call for an amendment to the Economic Espionage Act (EEA) to provide for a private right of action to allow companies and businesses to sue for the theft of their trade secrets (readers of this blog already know that I have supported this effort).  The report does not advocate a particular bill (such as the pending Protecting American Trade Secrets and Innovation Act) or particular remedy.  Rather, the report focuses on the practical reasons that require that legislation:  over-burdened federal prosecutors who lack the resources to pursue these actions under the EEA and the jurisdictional and evidentiary limitations of state court actions that may frustrate the ability of companies to protect their trade secrets overseas.

The Commission also recommends that the EEA be amended so that the Federal Circuit would serve as the Federal Court of Appeals for all federal trade secret actions, “since it serves as the appellate court for nearly all IP-related cases and thus has a high degree of competency on IP issues.”  This is a good suggestion and would provide uniformity and clarity on any new statute as well as for future prosecutions under the EEA.

Finally, the Commission advocates two noteworthy but controversial cyber proposals.  It supports the present Cyber Intelligence Sharing Protection Act (CISPA) that has passed the House of Representatives but faces opposition within the Senate and by the Obama Administration on privacy grounds.

The Commission also supports giving American companies the right to a some limited form of a “hack back” against foreign cyberattacks (for a fine and brief analysis of this provision, see the recent post of Steptoe’s Stewart Baker for The Volokh Conspiracy).  This would likely require an amendment to the Computer Fraud and Abuse Act (CFAA), which as presently drafted, would expose American companies to civil claims or prosecution under the CFAA.  (For a debate on the merits of allowing a hack back amendment, see the exchange between Stewart Baker (in favor) and Professor Orin Kerr (against) in The Volokh Conspiracy).

For those with the time, I would recommend reading the report which has a host of other comprehensive proposals that should be strongly and seriously considered by the Administration and Congress.

Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week, as well as one or two that I missed over the past couple of weeks:

Trade Secret and Non-Compete Posts and Articles:

  • A Pennsylvania Court of Appeals has rejected the two-prong test (objective test of speciousness and subjective test for bad faith) used by many federal courts for an award of attorneys fees for a bad faith trade secrets action under the Pennsylvania Uniform Trade Secrets Act reports Law360. In Kraft v. Downey, the Superior Court reversed a trial court’s dismissal of a claim for attorneys fees by the defendants, even though the plaintiffs prevailed at trial on other claims. (A hat tip to Mark Grace for forwarding the opinion to me).
  • Ericsonn and Airvana have reached an agreement in principle to settle their trade secrets case, Bloomberg is reporting. Airvana had secured a preliminary injunction in New York Supreme Court that had threatened to disrupt a $3 billion opportunity with Sprint and had resulted in Airvana’s claim that Ericsonn had violated the injunction. For more on the case and injunction, see my March post here.
  • For the latest involving the prosecution of Walter Liew for the alleged theft of DuPont’s titanium dioxide trade secrets, see “Feds Say Execs Can’t Ax DuPont Trade Secrets Charges,” as reported by Law360.
  • “Using Computer Forensics to Investigate IP Theft,” advise Sid Venkatasen and Elizabeth McBride for Law Technology News.
  • “Kentucky Court Finds No Insurance Coverage for Trade-Secrets Claim,” reports Eric Ostroff in his Trade Secrets Law Blog.
  • “Massachusetts Federal Court Takes Jurisdiction Over ‘One-Man’ Georgia Corporation Whose Agent Allegedly Stole Trade Secrets in Massachusetts,” reports Brian Bialas for Foley & Hoag’s Massachusetts Noncompete Law Blog.
  • “Recapping the Latest Blue Belt Tech. Non-Compete Dispute (This Time vs. Stryker),” summarizes Jonathan Pollard for the non-compete blog.
  • “Act On Clarifying Ownership of Work-Related Social Media Accounts Before You Become ‘Dinner,'” recommends Daniel Schwartz in his Connecticut Employment Law Blog.
  • If you are into podcasts, check out, “The Administration is Focused on Preventing Trade Secrets Misappropriation. Your Business Should Be, Too,” by Victoria Cundiff of Paul Hastings.
  • “Proposed Non-Compete Legislation in Connecticut Follows Legislative Trend” advises Kenneth Vanko in his Legal Developments in Non-Competition Blog.
  • If you are interested in more on the $44 million verdict in the Wellogix/Accenture dispute, check out “I Thought We Broke Up Years Ago! Why You Should “Throw Out” Trade Secrets As Soon As A Business Relationship Ends” by Matthew Kugazaki and Valerie Goo for Orrick’s Trade Secrets Watch and Eric Ostroff’s “A Cautionary Tale About Sharing Trade Secrets With Consultants — Fifth Circuit Affirms $44 Million Verdict.”

Cybersecurity Posts and Articles:

  • “California law would require breach notice if online account information is stolen,” reports Dan Kaplan for SC Magazine.
  • “Cyber Compliance: Hiring a Cybersecurity IT Firm for Rookies,” advises Christopher Matthews for The Wall Street Journal’s Risk & Compliance Reporter.
  • “Why CISPA is a global problem,” warns TechnoLlama.
  • “Data Breach – Your Organization Needs a Plan” recommends Nicole Reiman of Schnader Harrison Segal & Lewis LLP for JDSupra.
  • “Corporate Security’s Weak Link: Click-Happy CEOs: Top Bosses, Exempt From Companywide Rules, Are More Likely to Take Cyber-Attackers’ Bait,” reports The Wall Street Journal. For more on Spearphishing (or attacks geared towards senior executives better known as whaling, see my post here).
  • “GSA, DOD Solicit Advice On Revamping Cybersecurity,” advises Kathryn Brenzel for Law360.

Computer Fraud and Abuse Act Posts and Cases: 

  • “Applying Georgia Long-Arm Statute, Eleventh Circuit Finds No Personal Jurisdiction Based on Internet Activity” in a CFAA dispute, courtesy of Colin Freer for Berman Fink Van Horn’s Georgia Non-Compete and Trade Secret News Blog.

Kenneth Vanko, Russell Beck and I have completed our eighth Fairly Competing Podcast, “Has the Time Come for a Federal Trade Secrets Statute?” 

In Episode 8, Russell, Ken and I discuss the need for a federal statute for civil claims of trade secret theft.  The Fairly Competing team discusses the proposed Protecting American Trade Secrets and Innovation Act (PATSIA), which would amend the Economic Espionage Act to allow private parties to sue for the theft of their trade secrets.  We also talk about whether the proposed statute should be modified and confined to instances of international trade secret misappropriation and whether the ex parte seizure order under the statute should exist in its present form.

You can listen to the podcast by going to the Fairly Competing website or clicking the link below. Or you can subscribe to the podcast on iTunes.  (As always, we’d appreciate your feedback).

If you are looking for more on the proposed federal legislation, see our posts here, here, here and here.

Our next podcast will address the recent conviction of David Nosal, the former Korn/Ferry International executive, under the Computer Fraud & Abuse Act.

Listen to the episode here.