Here are this week’s notable posts, articles and links:

Trade Secrets and Covenant Not Compete Posts, Articles and Links: 

  • In a high profile case filed in California last week, American International Group and its subsidiary ILFC sued the co-founder and former chief executive of its aircraft-leasing business, Steven Udvar-Házy, and accused the industry veteran of stealing trade secrets and other confidential information for Air Lease Corp., a rival company he now runs.  The complaint alleges several employees, while still working at ILFC, downloaded confidential files and allegedly diverted deals with certain ILFC customers to Air Lease, before leaving to join Air Lease.  The case has generated a lot of headlines in the financial press and will be worth following. 
  • Law360 is reporting that two former Alliance-Bernstein executives have been held in contempt for using confidential information to lure their former clients to their new employer, Morgan Stanley. The two executivies, Peter A. Gelwarg and Kenneth A. Mayer, apparently violated a June 2011 TRO issued by New York Supreme Court Judge Eileen Bransten.
  • Does the practice of psychology fall within “the practice of medicine”? In Thomas Krajacich v. Great Falls Clinic, the Montana Supreme Court recently found that it did, at least based on its review of the four corners of the covenant not to compete. The court affirmed a lower court’s ruling that three psychologists who had left a medical practice forfeited their partnership shares when they began competing with their former partners. (A PDF copy of the opinion can be found below).
  • How long can a non-compete last in Texas? According to Strasburg’s Non-Compete Blog, in a recent case, Heritage Operating v. Rhine Bros., the Fort Worth Court of Appeals found that a 10 year covenant that accompanied the sale of a business was not per se unreasonable.
  • In the latest article extolling prior user rights under the America Invents Act (AIA), Fast Company’s John Villasenor concludes that the AIA’s new prior user rights have effectively given trade secrets a “promotion” over patents. In “5 Ways To Leverage Trade Secrets,” John writes that trade secrets “retain the same advantages as before in terms of offering a competitive advantage, while one of their risks–the possibility of being held liable for practicing your own trade secret–has been lowered.” 
  • Two weeks ago, I wrote about a non-compete dispute between an Ohio radio station and a pair of its former radio personalities over whether a streaming online show was covered by that non-compete. Stark County Court of Common Pleas Judge Charles E. Brown, Jr. has since issued his opinion finding that WDJQ’s covenant not to compete did not apply to the online venture launched by Patrick DeLuca and Charlotte DiFranco. (A copy of the opinion can be found in the second PDF below).
  • Apple is notoriously good at keeping its trade secrets secure. Its latest idea? Building its own employee-only restaurant to keep prying ears from listening to shop-talk between Apple employees. 
  • In the latest legislative development involving non-competes, Tennessee’s legislature recently eliminated the six-year limitation on non-compete agreements and extended the statute to include osteopathic physicians, reports Burr & Forman’s new Non-Competes & Trade Secrets Blog. However, the statute will continue to prohibit non-compete agreements for physicians specializing in emergency medicine.

China and Trade Secrets:

  • “US Grapples With Growing Threat From Trade Secret Theft,” reports The Wall Street Journal. The article details efforts by the Obama administration to work more closely with the private sector to address this threat which it details is primarily originating within China. The Journal says the catalyst for this planned public-private partnership was a recent study released by The Center for Responsible Enterprise and Trade, or Create, a nonprofit that promotes “better practices in the supply chains of multinationals on issues like corruption and intellectual property rights.” According to the article, Pamela Passman, a former deputy general counsel at Microsoft who founded Create, said trade secret theft is becoming an “epidemic,” but isn’t discussed much because of the sensitivities involved.

Computer Fraud & Abuse Act Articles and Posts: 

  • The Computer Fraud and Abuse Act (CFAA) does not apply to throttling cases, according to the Eastern District of New York. The practice of “throttling,” or limiting heavy users’ access to Internet servers to free up bandwidth for others has spawned a number of lawsuits against ISPs who are struggling to manage their bandwith. Robert Milligan of Seyfarth’s Trading Secrets Blog reports that in Serrano v. Cablevision Systems Corp., the Eastern District dismissed a class action under the CFAA, finding the claims were barred “by the clear language of the Terms of Service and the Acceptable Use Policy.”

Cybersecurity Articles and Posts:

  • The U.S. House of Representatives passed the Cyber Intelligence Sharing and Protection Act (CISPA) last week, and it is shaping up to be a battle as it moves to the Senate. The Washington Post has a good summary of the legislation.
  • For a fairly balanced view of CISPA, check out Alex Howard’s “Passage of CISPA in the U.S. House Highlights Need for Viable Cybersecurity Legislation” on O’Reilly’s Radar.
  • “An Ex-FBI Cybersecurity Expert’s Dire Warnings for Corporate America,” reports Catherine Dunn of Corporate Counsel. Former FBI official Shawn Henry has become one of the stronger advocates for greater corporate emphasis on cybersecurity.

News You Can Use:

  • “Do iPhones Make Us Narccisists”? asks SmartMoney.  

Krajacich v. Great Falls.pdf (144.86 kb)

DeLuca v. DA Peterson.pdf (1.13 mb)