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

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:

  • “Seagate Technology Recoups $630 Million Trade-Secrets Award” reports Business Week.  A Minnesota state appeals court has ruled that an arbitrator didn’t exceed his authority in awarding Seagate $525 million (and an additional $105 million in interest) in its trade secret dispute with Western Digital and a former Seagate employee. The arbitrator had found that some of the defendants’ evidence was fabricated regarding three of the trade secrets at issue and entered judgment against Western and the employee, Sining Mao, as a sanction.
  • “Even Preparing To Compete In Texas May Be Prohibited During A Non-Competition Covenant Period” advises Paul Freehling for Seyfarth Shaw’s Trading Secrets Blog.  Rob Radcliff also has a post on this decision, “Anti-Planning Provisions – A New Non-Compete Weapon?” in his Smooth Transitions Blog.
  • And speaking of Texas, “Physician Noncompetition Agreements May Be Challenged More Often After Recent Texas Appellate Decision” warns Randy Bruchmiller for Seyfarth Shaw’s Trading Secrets Blog.
  • “Five Year Non-Compete Enforced In Indiana” reports Peter Steinmeyer for Epstein Becker’s Trade Secrets & Noncompete Blog.
  • For the latest on non-compete legislation in Massachusetts, see “Massachusetts Noncompete Bill – Hearing Date” by Russell Beck in his Fair Competition Law Blog.  Seyfarth Shaw’s Erik Weibust also has a post on the legislation.
  • The Southern District of New York has recently held “Marketing Concepts Are Not Trade Secrets” advises Eric Ostroff in his Trade Secrets Protection Blog.
  • In “Don’t Chase Your Tail in Pursuit of the “Perfect Non-Compete,” Michael Greco offers some sound and practical advice in Fisher & Phillips’ Non-Compete and Trade Secrets Blog.
  • “The Line Between Trade Secrets and Patents: Getting Dual IP Coverage on the Same Technology” recommends Matthew Poppe and Morvarid Metanat for Orrick’s Trade Secrets Watch Blog.
  • “Myriad’s Trade Secret Trump Card: The Myriad Database of Genetic Variants” reports Courtenay Brinckerhoff of Foley & Lardner for JDSupra Law News.
  • “The next controversy in genetic testing: clinical data as trade secrets?” ask Robert Cook-Deegan, John M. Conley, James P Evans and Daniel Vorhaus for The European Journal of Human Genetics.
  • “The Business End Of The ‘Snowden Lessons'” reports Anne Sutton of Dentons and Erik Laykin of Duff & Phelps Corp. for Law360.
  • “More Answers To Your Noncompete Questions” provides Donna Ballman for her Screw You Guys, I am Going Home Blog.
  • “Texas Public Information Act: Shielding Your Company from the Open Records Sword” advises Jack Skaggs of Jackson Walker for JDSupra Law News.
  • In “Trade Secrets Whistleblower SLAPPed In Effort to Dismiss Lawsuit,” Ken Vanko reports on the recent dismissal of a whistleblower claim brought against Anhueser-Busch in his Legal Developments in Non-Competition Agreements Blog.  For more on this case, see my post from the spring.

Cybersecurity Posts and Articles:

  • Looking to limit others from digitally eavesdropping you?  Then check out “Digital Tools to Curb Snooping” by Somni Semgupta for The New York Times Bigs Blog.
  • “U.S. Cybersecurity Plan Not Designed To Increase Regulation, Officials Say” claims Bloomberg BNA.
  • “How America Is Fighting Back Against Chinese Hackers” advises Adam Clark Estes for Gizomodo.

Computer Fraud & Abuse Act Posts and Articles:

  • “MIT Intervenes In Release Of Aaron Swartz Case Details” reports Gerry Smith for The Huffington Post.

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.

09062012Here 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:

Computer Fraud & Abuse Act Articles, Cases and Posts:

  • As I briefly noted in my post last night, Congresswoman Zoe Lofgren (D-CA) and Senator Ron Wyden (R-OR) have introduced an amendment to the CFAA popularly known as “Aaron’s Law,” to narrow the CFAA, reports Wired. As readers of this blog know, Swartz had been charged under the CFAA after allegedly accessing the server of MIT to improperly download approximately 4.8 million academic journals; he committed suicide earlier this year after negotiations over his plea bargain broke down. The amendment would, among other things, define access without authorization and exclude online agreements, computer use policies and employment agreements from serving as a basis for a claim under the CFAA.
  • For more commentary on Aaron’s Law, see Russell Beck’s post in his Fair Competition Blog, Robert Milligan’s post for Seyfarth Shaw’s Trading Secrets Blog, and Jason Weinstein’s take for Steptoe’s Cyberblog.

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

  • “Obama Administration Issues New Strategic Plan for Intellectual Property Enforcement,” announces Russell Beck, who provides a fine summary in his Fair Competition Law Blog.
  • The ITC and a Chinese court have come to opposite conclusions over the same basic trade secrets dispute, notes Orrick’s Trade Secrets Watch Blog. In, “Rubber Match? Resin Trade Secret Battle Results in a Multi-Jurisdictional Draw,” Mark P. Wine and Francis Cheever report that the ITC ruled in favor of American rubber manufacturer SI Group but that the Chinese court sided with Chinese manufacturer Sino Legend. For more on the ITC proceeding, see, “ITC judge rules for SI Group in intellectual property case,” in RubberNews.com.
  • Speaking of long-running trade secret imbroglios involving Chinese companies, “Chinese Wind-Turbine Maker Sinovel Charged With IP Theft,” reports Law360. The U.S. Attorney for Wisconsin has indicted Sinovel for the alleged theft of source code from American Superconductor’s computer system. The New York Times also has an article covering the indictment.
  • For those embroiled in a dispute over a forum selection clause in Georgia, “Atlantic Pacific Illustrates Impact of Georgia’s New Restrictive Covenants Law on Forum and Venue Selection Considerations,” advises Collin L. Freer for Berman Fink Van Horn’s Georgia Non-Compete and Trade Secret News Blog.
  • “U.S. District Judge in Massachusetts Declines to Enforce Noncompetes Because the Jobs of Two Employees ‘Materially Changed,’” advises Brian Bialas for Foley & Hoag’s Massachusetts Noncompete Law Blog.
  • “Tyco Accused Of Smear Campaign In Trade Secrets Row,” reports Law360.
  • For more on the new Connecticut non-compete statute, see “Non-Compete Legislation In Connecticut,” by David Popick for Epstein Becker’s Trade Secrets & Noncompete Blog, and, “Connecticut Law Restricts the Use of Non-Compete Agreements in Acquisitions and Mergers,” by Patricia Reilly, Matthew Curtin and Stephen Rosenberg for Littler’s Unfair Competition & Trade Secret Counsel Blog.
  • “Rogue Employees – What to do?” asks Rob Radcliff for his Smooth Transitions Blog.
  • “Takeaways From UK’s Vestergaard Trade Secrets Case,” advise Akash Sachdeva and Ben Hitchens of Edwards Wildman Palmer LLP for Law360.

Cybersecurity Posts and Articles:

  • “Bank’s new cybersecurity audits catch law firms flat-footed,” reports Martha Neil for the ABA News.
  • “Big Banks Worried About Outside Counsel Who BYOD,” advises David Hechler for Corporate Counsel.
  • “FINRA Sees ‘Proliferation’ of Complaints About Cybersecurity Breaches, Official Says,” reports Maria Lockshin for Bloomberg BNA.
  • “Federal Data Breach Legislation Introduced, But Will It Go Anywhere?” asks Christin McMeley of Davis Wright Tremaine for JDSupra.

05022013Here 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:

  • “Can Business Relationships Be Trade Secrets? VA Federal Court Says No” advises Eric Ostroff in his Protecting Trade Secrets Blog. In Cablecom Tax Services v. Shenandoah Telecomms. Co., U.S. District Court Judge Michael Urbanski dismissed a tax consultant’s trade secrets claim against its telecommunications customers, reasoning that the consultant’s alleged relationships with tax authorities, a  tax-law “accounting system,” and its ability to negotiate property tax discounts did not qualify as protectable trade secrets under Virginia’s Uniform Trade Secrets Act. Scott A. Schaefers also has a post on this case for Seyfarth Shaw’s Trading Secrets Blog.
  • And while we are on the topic of trade secrets cases in Virginia, are you looking for a primer on the epic DuPont v. Kolon case? Then check out the superb post analyzing DuPont’s case by Eulonda Skyles and Michael Spillner for Orrick’s Trade Secrets Watch Blog.
  • Speaking of DuPont and Kolon, “Kolon Succeeds in Getting Its Trade Secret Theft Arraignment Postponed,” advises Todd Sullivan in Sullivan’s Trade Secrets Blog.
  • “Ex-Advanced Micro Workers Can’t Shake Trade Secrets Suit,” reports Law360 and Bloomberg. For more on the AMD trade secrets dispute, see my post from last month on the recent preliminary injunction restraining those same employees from misappropriating AMD’s trade secrets.
  • “Newscaster tripped up by Non-Compete,” reports Dan Frith for Frith & Ellerman’s Virginia Non-Compete Law Blog.
  • “It’s Not Just for Patents Anymore: Using the ITC to Combat Theft of Trade Secrets,” recommends Mark Memelstein and Misasha C. Suzuki for Orrick’s Trade Secrets Watch Blog.
  • “Hey, I Thought We Had An Agreement: California Appellate Court Allows Party To Seek Attorney’s Fees In Trade Secret Case,” exclaims Paul Henson in a guest post for Seyfarth Shaw’s Trading Secrets Blog.
  • Jason Cornell of Fox Rothschild has another post comparing different state’s non-compete laws, this time “A Comparison Of Illinois And Florida Law Governing Non-Compete Agreements,” for Mondaq.
  • “UK Supreme Court Rules on Case Involving Misuse of Trade Secrets by Former Employee,” reports Ezra Steinhardt for Covington’s Inside TechMedia Blog.
  • Jay Yurkiw of Porter Wright continues to churn out fine posts on e-discovery issues relevant to trade secret and non-compete disputes. For his latest, see “Court Relies on Proportionality to Deny Inspection of Defendant’s Computers, Cell Phones and Email Accounts” for Porter Wright’s Technology Law Source Blog.
  • “Deter Cyber Theft Act Would Augment Federal Policy Against Industrial Espionage,” advises Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • Interested in the interplay between “Liquidated Damages and Non-Competes”? Then check out Devin C. Dolive’s post for Burr & Forman’s Non-Compete Trade Secrets Law Blog. 

Cybersecurity Posts and Articles:

  • “Outside Law Firm Cybersecurity Under Scrutiny,” advises Catherine Dunn for Corporate Counsel.
  • “China’s Cyber Stonewall: Beijing won’t stop until it pays a price for its Internet thievery,” thunders The Wall Street Journal.
  • “How Vulnerable is Your Company to a Cyber Breach?” ask Clark Schweers and Jeffrey Hall for Corporate Counsel.
  • “What If China Hacks the NSA’s Massive Data Trove?” ponders Conor Freidersdorf for The Atlantic.
  • “Could Overreaction to Cybersecurity Threats Hurt Transparency at Home?” worries David S. Levine for Slate.

Computer Fraud and Abuse Act Posts and Cases:

  • In an initial skirmish that will inevitably lead to a lawsuit against the prosecutors in the Aaron Swartz CFAA case, “Judge Rejects Aaron Swartz’s Estate’s Request to Release Names of Individuals Involved in his Prosecution,” reports Hayes Hunt in the From the Sidebar Blog.

01102013Here 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:

  • In yet another non-compete case involving a physician, an Illinois appellate court has affirmed a trial court’s rejection of a covenant not to compete because the employer, a medical clinic, lacked a protectible interest in the patient base at issue. Jeff Glass reports on the case, Gastroenterology Consultants of the North Shore, S.C. v. Meiselman, M.D., et al., for SmithAmundsen’s Labor and Employment Law Update. According to Jeff, the following facts caused the court to side with the doctor: prior to forming the corporation, he practiced for a decade in the area; after forming the clinic, he continued treating these patients and personally billed them, as opposed to the clinic; the clinic did not help him with advertising or marketing; and finally, his compensation depended on his independent practice.
  • “U.S., China Aim To Curb IP Theft Standoff With Talks” reports Law360.
  • Looking to protect your trade secrets under Chinese law? Then consult “Chinese Translation: Protecting Trade Secrets in China Requires Knowing Complex Layers of Laws and Practices,” by Mimiao Hu, Shelley Zang and Xiang Wang for Orrick’s Trade Secrets Watch.
  • “Former engineer at Bergen County based company charged with stealing trade secrets,” reports NewJersey.com. Ketankumar “Ketan” Maniar planned to relocate to India with trade secrets stolen from his employer, Becton, Dickinson and Company, U.S. Attorney Paul J. Fishman said.
  • For companies looking for a trade secrets lawyer, Kenneth Vanko has some fine practical advice, “The Employee’s First Client Meeting,” in his Legal Developments in Non-Competition Agreements Blog.
  • In the sad but true column, “(Practically) No Comment: White House Plea for Public Input on Trade Secret Theft Draws 13 Responses advise L. Kieran Kieckhefer and Warrington Parker for Orrick’s Trade Secrets Watch Blog. For 2 of the 13 responses, see Peter Torren’s opinion here and my submission here.
  • “New Oklahoma Law Clarifies Enforceability of Non-Solicitation of Employee Covenants” reports Daniel Joshua Salinas for Seyfarth Shaw’s Trading Secrets Blog.
  • Jason Cornell of Fox Rothschild provides “A Comparison Of New York And Florida Law Governing Non-Compete Agreements” for Mondaq.
  • “Can My Employer Enforce A Noncompete When We Get Our Customers Through Bidding?” asks Donna Ballman in her Screw You Guys, I’m Going Home Blog.
  • A New York Federal “Court Finds Potential Liability For Sending Cease And Desist Letter reports Lauri Rasnick for Epstein Becker’s Trade Secrets & Noncompete Blog. For more on the risks of a claim of intentional interference from a cease and desist letter, see my post here.
  • “District of Connecticut Addresses Trade Secret Act Preemption advises Eric Ostroff in his Protecting Trade Secrets Blog.
  • “Why Non-Competes are bad for the economy,” advises Laura Ellerman for Frith & Ellerman’s Virginia Non-Compete Law Blog.
  • “Public Policy Trumps Non-Compete in North Carolina,” reports Eric Welsh for Parker Poe’s Trade Secrets & Unfair Competition Reporter Blog.
  • “Medical Device Manufacturer Bound By The Restrictive Covenants It Implemented,” reports Zachary Jackson for Epstein Becker’s Trade Secrets & Non-Compete Blog.

Cybersecurity Posts and Articles:

  • In an interesting Op-Ed piece for The New York Times entitled “Elizabethan Cyberwar,” Jordan Chandler Hersch and Sam Adelsberg liken the current cyber conflict between China and the U.S. to the battle for the seas between Elizabethan England and Spain, arguing that China is sponsoring cyber-pirates to level the playing field with the U.S.
  • “Facebook Urges Cooperation To Tackle Mobile Security Risks,” reports Law360.
  • “Mobile Device Forensics – Are You in the Know?” asks James Whitehead in a guest post for Seyfarth Shaw’s Trading Secrets Blog.
  • The IP Commission’s adoption of the “hack back” defense continues to stir controversy. GCN’s William Jackson asks “The hack-back vs. the rule of law: Who wins?” and Lisa Shuchman expresses concern in “IP Theft Report Offers Over-the-Top Solutions” for Corporate Counsel.
  • And The Wall Street Journal’s Christopher Matthews chimes in as well, in “Support Grows to Let Cybertheft Victims ‘Hack Back.'”
  • Public Interest “Group Backs FTC Authority In Wyndham Data Breach Case,” reports Law360.

Computer Fraud and Abuse Act Posts and Cases:

  • “Recent Alleged Cyberattack By Ex-Employee Demonstrates Importance of Employer Diligence On Protecting Network Passwords,” advises Robert Milligan for Seyfarth Shaw’s Trading 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.

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 Posts and Articles:

  • Bloomberg has received withering criticism for allowing the presumably confidential information of its customers to be viewed (and most likely used) by its reporters. Last week, Bloomberg said it had now restricted its journalists from accessing information about terminal subscribers, including when they last logged on, when they subscribed and how often they accessed features like news or the chat function. CNBC, The New York Times and The Wall Street Journal all have comprehensive articles on the scandal. Bloomberg’s troubles underscore the challenges of maintaining ethical screens and walls between business units who have potentially divergent interests over confidential information. 
  • “Credit Suisse says ex VP stole trade secrets in move to Goldman,” reports Reuters
  • “5th Circ. Affirms $44M Wellogix Jury Award In Trade Secret Spat,” reports Law360.
  • “Trade Secret ‘Watch List’: Bill Would Establish Monitoring List of Countries Engaging in Cybertheft, and Make U.S. Intelligence Czar the Point Person,” reports Robert Isaackson for Orrick’s Trade Secrets Watch.
  • “New Massachusetts Superior Court Noncompete Decision Discusses the ‘Material Change’ Defense and Shows the Benefit to Employers of Having a ‘Material Change’ Clause in Noncompete Agreements,” advises Brian Bialas for Foley & Hoag’s Massachusetts Noncompete Law Blog.
  • Josh Durham reports on the latest non-compete involving a doctor, “NC Court of Appeals Orders Injunction In OB-GYN Covenant Not To Compete Case,” for Poyner Spruill’s Under Lock & Key Blog.
  • And while we are talking about physician non-competes, the recent $39 million “Tuomey verdict could make hospitals more cautious in doctor contracts,” advises Adam Kerlin for Reuters.
  • “Florida Court Discusses Trade Secrets in Discovery,” reports Solomon Genet for the Trade Secrets Law Blog.
  • “Show Me the Money – Injunctions are Not Cheap,” warns Rob Radcliff in his Smooth Transitions Blog.
  • “You Can’t Reverse Blue-Pencil a Non-Compete,” advises Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • “Trade Secrets Law Still Murky in Georgia Courts,” reports Alyson Palmer for Corporate Counsel.
  • Fracking and trade secrets remain a combustible combination, as Law 360 reports that, “Enviros Must Show Need To Get Trade Secret Docs: Pa. Court.”
  • For an excellent summary of the key points of the new Texas Uniform Trade Secrets Act, see, “Texas Trade Secrets Law Gets Business-Friendly Upgrade,” by Jesse Davis for Law360.
  • A recent study finds that over 90% of innovative products are never patented, reports Eric Ostroff in a recent post for his Trade Secrets Law Blog. According to Eric, the study looked at the “R&D 100 Awards” to reach its conclusions. The results of this study of course reinforce the importance of making sure your trade secret protections are adequate.
  • Attention eBay shoppers: “Coca Cola’s secret formula for sale for 15 million dollars,” reports DailyBhaskar.com

Cybersecurity Posts and Articles:

  • The theft of nearly $45 billion was from New York banks by cyberthieves was widely reported in the past week. For an analysis of the legal fallout, see, “Lessons From the New York ATM Heist,” by Jason Weinsten for Steptoe’s Cyberblog.
  • “Legal Showdown on Cybersecurity: Hotelier Wyndham Challenges FTC’s Authority to Police Corporate Data Practices,” reports The Wall Street Journal.
  • “Cyberattacks Against U.S. Corporations Are on the Rise,” reports The New York Times.
  • “‘Bring Your Own Device’ is Evolving from a Trend to a Requirement,” advises Arik Hesseldahl for All Things Digital
  • “Hacking back: Digital revenge is sweet but risky,” advises Melissa Riofrio for PCWorld.  

Computer Fraud and Abuse Act Posts and Cases:

  • “No Damages? Illinois Federal Court Tosses Computer Fraud and Abuse Act Claim Alleging Hacking of Law Firm Network,” reports Paul Freehling for Seyfarth Shaw’s Trading Secrets Blog.
  • “Should Lying About Your Age Online Be a Federal Crime?” asks Peter Torren in an article for Corporate Counsel.

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:

Cybersecurity Posts and Articles:

  • Well, it’s official: “U.S. Blames China’s Military Directly for Cyberattacks,” reports The New York Times. Also see “PENTAGON: Chinese Hackers Have Stolen Data From ‘Almost Every Major U.S. Defense Contractor,'” asserts The Business Insider, “Pentagon report says U.S. computer hacking ‘appears to be attributable’ to Chinese government,” reports The Verge and “U.S. Says China’s Government, Military Used Cyberespionage,” reports The Wall Street Journal.
  • “A cybersecurity primer for legal departments: Understanding the basic terms and concepts needed to protect your company from cyber attacks” by David Lim for Inside Counsel.

Trade Secret and Non-Compete Posts and Articles:

  • Less than two months after its introduction, Texas has adopted the Uniform Trade Secrets Act effective Sept. 1, 2013, reports Orrick’s Trade Secrets Watch Blog. It appears that the version adopted is similar to that proposed by Dallas State Senator John Carona and will include a presumption in favor of granting protective orders to protect trade secrets in litigation, including limiting access to confidential information to attorneys and their experts. (For more on the proposed statute, see my post earlier this year as well as Robert Milligan’s recent post).
  • Connecticut is joining the list of states tinkering with their non-compete laws, advises Daniel Schwartz in his Connecticut Employment Law Blog.  In “Bill Targets Non-Compete Agreements But Would Also Create New Cause of Action,” Daniel reports that the bill allows “reasonable” non-competes but would permit an aggrieved employee the right to sue if the non-compete was unreasonable or the employee was not provided with at least 10 days to consider the non-compete before signing it.
  • “Chinese Couple Sentenced to 3 Years and 1 Year for Theft of GM Hybrid Technology,” advises Todd Sullivan in his Trade Secrets Blog.
  • And in another prosecution, “Ex-Frontier Chemist Dodges Prison For Disclosing Recipes,” as Law360 reports that the U.S. District Court for Utah sentenced Prabhu Prasad Mohapatra to time served — three days — and ordered him to pay $3,435 in restitution.
  • “Georgia Supreme Court Rejects Independent Claim for Inevitable Disclosure of Trade Secrets,” reports Eric Ostroff in his Trade Secrets Law Blog.  Kenneth Vanko has a post on the case as well in his Legal Developoments in Non-Competition Agreements Blog.
  • Eric Ostroff also has a fine post entitled “Five Ways to Protect Trade Secrets When an Employee Departs.”  If you have not bookmarked Eric’s blog, you should as he is churning out very good content regularly.
  • Those in Pennsylvania should be aware of a decision out of the U.S. Eastern District of Pennsylvania reports the Employee Discrimination Reporter. In De Lage Landen v. Thomasian, the District Court refused to enforce a non-compete despite proof that the former employee had breached a non-solicitation provision by approaching a former colleague. The court reasoned that the parties were not sufficient competitors, there was no showing of future harm, money damages were available, and therefore no irreparable harm was present.
  • “Fracking and Trade Secrets: An Introduction,” advises Kenneth Vanko in his Legal Developoments in Non-Competition Agreements Blog.
  • “Fisher/Unitech (Basically) Loses Non-Compete Fight Against Former Sales Exec,” advises Jonathan Pollard for the non-compete blog.
  • “Doctor Non-Solicitation Agreement Not Supported By Legitimate Business Interest,” reports Zach Jackson for Epstein Becker’s Trade Secrets & Noncompete Blog.
  • “Employers Slow To Guard Data Amid Social Media, Tech Boom,” bemoans Erin Coe for Law360.
  • “Data Security Policies and Procedures Still Lacking,” warns Catherine Dunn for Corporate Counsel.
  • In “Unleashing job hoppers could give economy a bounce,” Reynolds Holdings posits in an article for Reuters that releasing unemployed workers from their non-competes might help the economy.
  • “China Non-Competes. The Basics Have Become Clearer,” advises Dan Harris in his China Law Blog.

Computer Fraud and Abuse Act Posts and Cases:

  • “California Federal Court Dismisses Computer Fraud and State Unfair Competition Claims Alleged Against Ex-Employees Accused Of Stealing Computer Source Code,” reports Paul Freehling for Seyfarth Shaw’s Trading Secrets Blog.
  • “Programmer Arrested For Cyberattack On Ex-Employer,” reports Law360.
  • “Use a Software Bug to Win Video Poker? That’s a Federal Hacking Case,” proclaims Kevin Paulson for Wired.
  • “Who’s at Fault for the CFAA Mess? Blame Congress,” sighs Brian Bialas for Foley & Hoag’s Massachusetts Noncompete Law Blog. Sounds good to me.