There is a significant amount of activity going on in the trade secret and restrictive covenant space, so I am going to do my best to resume my monthly wrap up posts, after a long (although some might say not long enough) hiatus. Without further ado, here are the noteworthy developments of the past month:
Noteworthy Defend Trade Secrets Act Cases, Federal Trade Secret Opinions and Related Commentary:
- The Motorola v. Hytera litigation in the U.S. District Court for the Northern District of Illinois has generated a number of noteworthy developments, including a seminal opinion affirming the DTSA’s extraterritorial reach, as well as a substantial jury verdict ($597 million). Last month, U.S. District Court Judge Ronald Norgle denied a request to reconsider his denial of Motorola’s request for a permanent injunction (that earlier opinion can be found here December 17, 2020). The December 17, 2020 opinion provides an excellent analysis of the roadmap courts will likely follow when contemplating a permanent injunction in connection with a significant monetary award (spoiler alert: a royalty looks like the best option given the reality that the trade secrets have now been monetized). In his most recent July 5, 2022 ruling, Judge Norgle notes that Hytera’s inability to satisfy the judgment might establish the irreparable injury element necessary for that injunction, but Hytera’s pending appeal forecloses his ability to exercise jurisdiction on that order. Stay tuned for the Seventh Circuit’s eventual ruling.
- A recent ruling by the U.S. Court of Appeals for the Tenth Circuit should serve as a reminder to trade secret owners to make sure their claim of misappropriation is sufficiently tied to the proximate cause required for damages. Kyle Jahner of Bloomberg Law has a summary of that decision, GeoMetWatch Corp. v. Hall, et. al, Case No. 19-4130, in which the Tenth Circuit affirmed the district court’s dismissal of those claims on the grounds their damages were speculative.
- Are federal courts imposing higher pleading standards on trade secret owners to identify their trade secrets with particularity? Foley & Hoag’s Jeff Lewis, Paul Downs and Robert Haney Jr. persuasively argue that a consensus for that higher standard is emerging in the U.S. District Court for the Southern District of New York and elsewhere.
- Is manipulating documents produced in discovery enough to get you sanctioned? The U.S. Court of Appeals for the Seventh Circuit says “kind of.” In REXA Inc. v. Chester, the Seventh Circuit reversed an order imposing sanctions on the plaintiff for producing documents in a manner that obscured, among other things, whether the defendant had actually signed an employment agreement. The Seventh Circuit reasoned that while this discovery misconduct was troubling, the $2.3 million in attorneys’ fees for that misconduct were not sufficiently broken down and remanded for further consideration.
- If you’re a trade secret owner trying to fend off a motion for summary judgment and get your case to a jury, take a look at U.S. Magistrate Christina Bryan’s Memorandum and Recommendation in Vest Safety v. Arbor Environmental, LLC. The opinion, which comes out of the U.S. District Court for the Southern District of Texas’ Houston Division, shows how a well-organized and tight trade secret claim — addressing among other things, the §757 of Restatement of Tort’s comment b six factor test — can survive such a motion.
- What comes first, a motion to challenge jurisdiction or a preliminary injunction? In Aquate II v. Jesse Myers, the U.S. District Court of Alabama elected to entertain a motion challenging subject matter jurisdiction rather than the pending motion for preliminary injunction. Although U.S. District Court of for the Northern District of Alabama Judge Abdul Kallon does not provide a lot of analysis for that choice, the decision provides support that challenges to subject matter jurisdiction can take priority.
Noteworthy State Court Trade Secret and Restrictive Covenant Cases:
- Hawaii’s Supreme Court has concluded that a 2015 statute affording protection to technology workers subject to restrictive covenants didn’t go far enough. In a thorough analysis of that decision, Prudential Locations, LLC v. Gagnon, Russell Beck notes that court, among other things, effectively expanded the definition of what qualifies as a solicitation under the 2015 statute.
Federal Trade Commission and Restrictive Covenants:
- I have covered the FTC’s creeping efforts to expand its regulatory reach to non-competes and NDAs in posts here and here. One would expect the U.S. Supreme Court’s recent ruling in West Virginia v. EPA (curtailing the discretion of federal regulators in the absence of a specific grant from Congress) would dampen the ardor of the FTC as it seeks to exercise jurisdiction over agreements which have been traditionally governed by state law. If you thought that, you would of course be ignoring one of the organizational imperatives of bureaucracies. Erik Weibust and Stuart Gerson write in Epstein Becker’s Trade Secrets & Employee Mobility Blog that the FTC is thumbing its nose at that ruling and plowing ahead with its enforcement efforts.
- Washington state’s Attorney General wants a piece of the action and announced this month that it had successfully brought an Ohio-based company, Tradesman International, LLC, to heel for its use of unlawful restrictive covenants against low wage employees.
- Colorado is the latest state to enact legislation imposing wage limits on restrictive covenants. Duane Morris’ Lawrence Pockers’ article nicely summarizes the statute’s key provisions.
- The ongoing dumpster fire that is the District of Columbia’s effort at enacting a ban on non-competes continues to unfold, or unravel, depending on your perspective. Russell Beck writes about recent efforts to add a broadcast exemption.
- If you are looking for an update on the status of New Jersey’s pending bill to limit non-competes and non-solicitation agreements, go to James Yu’s post on Seyfarth’s Trading Secrets blog.
Noteworthy Trade Secret Articles:
- Jim Pooley has a clever and insightful article published on IP Watchdog taking the American Law Institute (ALI) to task for its hostility to trade secrets. In a delightfully dismissive post, Jim says he is going to write about the artificial distinctions between confidential information and trade secrets; in reality, however, Jim takes multiple digs at the ALI (not coincidentally an association dominated by academics) for its failure to account for the underpinnings of trade secret law.
- Wondering whether trade secrets generated by artificial intelligence are protectable? Dean Pelletier and Erik Weibust have a fine article in IP Watchdog noting that trade secret protection may be the best intellectual property protection available but that it may be prudent to protect the underlying AI first.
- Patents or NDAs? Paul J. Sutton of Sutton Magidoff Barkume analyzes the considerations that an IP owner should weigh in WIPO’s Review.
Social Media Ownership:
- I have written before about disputes that can arise between a departing employee and her former employer over ownership of social media. This was an issue of note for restrictive covenant and trade secret lawyers before companies got wise and updated their employment agreements to address the ownership of customer information and Twitter handles. That being said, the Fashion Law website is following a recent Southern District of New York decision in a dispute between fashion bridal wear designer Hayley Paige Gutman and her former employer JLM Couture over social media accounts bearing her name.