It’s that time of the year when the media and bloggers provide story after story detailing the most important stories and events of the past year. The Trade Secret Litigator cannot resist that temptation either, especially because 2012 was another remarkable year for trade secrets and non-compete law.
Not only were there a number of high profile cases that garnered significant media attention either because they involved high profile prosecutions or multi-million dollar verdicts, but there were a number of significant legislative developments on the state and federal level that served to reinforce the growing importance of this area of the law.
Without further ado . . .
10. Motorola v. Lemko (N.D. Illinois, Feb. 2012), Milliken & Co. v. Morin (South Carolina Supreme Court), and Preston v. Marathon Oil (Federal Circuit, Aug. 2012). These three cases arose out of claims that a former employee breached an “ownership” provision and attempted to misappropriate or patent technology that they helped develop while they were employees. The Motorola v. Lemko case is perhaps the most notorious, since it resulted from the arrest of Hanjuan Jin, a former Motorola engineer who was apprehended just as she was about to board a one-way flight to Beijing with a cache of Motorola trade secrets.
Why do I think these ownership cases are important? It is getting harder and harder to preserve the secrecy of trade secrets. The growth of social media has made it easier for employees to display or share information over the Internet. Likewise, the increased ease and accessibility of new technology makes it easier for employees to move and transmit data and information. Finally, the ever-expanding growth of what is included within the Internet make it easier for an employee to argue that confidential information has already been made available to the public. Having the ability, therefore, to enforce a provision that establishes that specific technology is the property of an employer may prove critical in cases where a claim of trade secrecy is in doubt.
9. Martin Marietta v. Vulcan Materials (Delaware Chancery Court and Delaware Supreme Court 2012). This high profile case did not involve trade secrets but instead arose out of claims that a corporate suitor misused confidential information in the context of a hostile takeover. After finding that Martin Marietta misued the confidential information in connection with the hostile bid for Vulcan Materials, Chancery Court Judge Leon Strine, Jr. restrained Martin Marietta from taking any further actions for the next four months, which essentially ended Martin Marietta’s hostile bid. His opinion was affirmed by the Delaware Supreme Court after an expedited appeal.
I think the case merits inclusion in the top ten for two reasons: First, as many non-disclosure agreements provide for the application of Delaware law, any statement from a respected Chancery judge and the Delaware Supreme Court addressing the scope of these provisions is noteworthy. Second, for purposes of potential claims under Delaware law,contractual stipulations that acknowledge irreparable injury in the event of a material breach will be enforced. In the post-eBay v. MercExchange world, many courts have increasingly been unwilling to presume irreparable injury and have required parties to make a showing of irreparable harm to justify an injunction.
However, in the wake of the Martin Marietta decision, commercial parties that rely on Delaware law are now armed with a powerful and well-reasoned decision that should make it easier for them to secure a presumption of irreparable harm provided their agreement includes this stipulation. In essence, Judge Strine gave Vulcan a pass on irreparable injury (compare the difficulties of establishing irreparable injury for an injunction for a patent these days, as the recent Apple v. Samsung ruling reinforces). As these stipulations are frequently in license agreements and commercial NDAs, this could be a significant ruling for the trade secret community when enforcing contracts applying Delaware law.
8. Allergan v. Merz Pharmaceuticals (U.S. Central Dist. California, March 2012). This case arose out of the alleged misappropriation of “Botox” trade secrets by Merz Pharmaceuticals, which hired a team of sales representatives and managers from Botox manufacturer Allergan to help Merz launch a competitive product Xeomin. Although Merz prevailed at an early TRO by arguing that it was not using and did not intend to use Allergan’s trade secrets, subsequently-produced documents showed that sales and other confidential information had in fact been exchanged between Merz employees and the former Allergan employees. As a result, U.S. District Court Judge Andrew Guilford brought down the hammer, forbidding a March 15, 2012 rollout of Merz’s competing product, Xeomin, for ten months.
My post about this case received a tremendous amount of traffic (it was my second most visited post of the year) and the case received a fair amount of media scrutiny, thus easily justifying its inclusion in the top 10. The unfortunate facts giving rise to the case provide the proverbial “cautionary tale” for in-house counsel about the challenges of trying to monitor a team of employees hired from a competitor for a high-stakes project. Despite apparent good faith efforts by in-house counsel, Judge Guilford found that there was still a significant exchange of forbidden information between the newly hired employees and Merz employees. For more on the lessons that the case provides to both inside and outside counsel, see my post here.
Stay tuned for my next installment, which will have Nos. 5 through 7.