It was a busy August, so here are the highlights:
Noteworthy Defend Trade Secrets Act Cases, Federal Trade Secrets Opinions and Related Commentary:
- Can a trade secret owner plead a claim of inevitable disclosure under the DTSA? In Idexx Laboratories, Inc. v. Graham Bilbrough, Magistrate Nivoson of the U.S. District Court of Maine dismissed that claim, reasoning the majority of courts have rejected that theory based on the language and history of the DTSA. Readers of this blog will remember that language was added to the DTSA near the end of legislative negotiations to placate concerns of California Senator Dianne Feinstein about the use of this doctrine, which is prohibited in California. However, it is worth noting that multiple courts, including federal courts in Illinois and Pennsylvania, have allowed the doctrine to be pleaded under a pendent state law claim if that state recognizes the inevitable disclosure doctrine. For a good primer on past decisions regarding the inevitable disclosure doctrine and the DTSA, check out this post from Orrick’s Trade Secrets Watch.
- In a high profile case brought by NBA star Zion Williamson against his former agent, Williamson v. Prime Sports Marketing LLC et al., the U.S. District Court of North Carolina has ruled in his favor, holding that the concept of marketing Zion as the next Lebron James did not qualify as a trade secret. Astor Heaven and Emily Tucker summarize the decision in Crowell’s Trade Secrets Trends Blog.
- Avoided costs can qualify as damages for a trade secret claim says the U.S. Court of Appeals for the Third Circuit. Eileen McDermott has a summary of the Third Circuit’s ruling in a post for the IP Watchdog.
- Does a trade secret complaint’s allegations of misappropriation present facial plausibility or are they merely consistent with liability? Yes, that is lawyerspeak at its finest, but it’s an important question because it may determine whether your trade secret complaint will survive a motion to dismiss. As Federal Rule 12(b)(6) has become a more prominent tool for defendants in trade secret cases, the U.S. Court of Appeals for the Tenth Circuit provides a roadmap for plaintiffs and defendants alike for framing their arguments in connection pleading/attacking a trade secret or restrictive covenant claim. In LS3 Inc. v. Cherokee Nation Strategic Programs, LLC, the Tenth Circuit applied this test to a dispute over the poaching of employees, holding that the breach of fiduciary duty and misappropriate of trade secret claims survived Rule 12(b)(6)’s standards but that the breach of contract claims were insufficient as a matter of law.
- In the latest installment of lawyers behaving badly, Littler and Polsinelli continue to square off about whether a client development toolkit assembled at Littler qualifies as a trade secret and whether it was misappropriated when a lawyer and staff left to start a competing practice at Polsinelli. The parties are sparring over the scope of discovery and Littler has now withdrawn its request for a TRO. A summary of the arguments and related developments as reported by Law360 can be found here.
- The Motorola v. Hytera case, the high-profile case I have written about pending in Chicago, has some interesting developments. First, readers of this blog will know that Motorola prevailed in the case and is supposed to be receiving a sizable court-ordered royalty payment from Hytera; however, Hytera claims it can’t pay, so Motorola has filed a motion for contempt and is asking the district court to enter the injunction it previously denied (see this article summarizing the motion practice in Radio Research Mission Critical Communications). Second, Hytera has been granted leave to assert antitrust counterclaims against Motorola. These claims are rare in the trade secret context, so it will be interesting to see how they unfold. Stay tuned.
- I wrote about the Seventh Circuit’s opinion in Rexxa, Inc. v. Chester last month and there are two posts with different takes on the opinion worth reading. Sheppard Mullins’ Mikela Sutrina and Jenna Crawford emphasize that the 11-year wait by the plaintiff Rexxa undermined its trade secret claim because certain aspects of the alleged trade secret had become widely known by the time of the lawsuit. And Holland & Knight has a thorough client alert analyzing both the district court’s initial opinion and the Seventh Circuit affirming opinion; that post focuses on Rexxa’s failure to adequately identify the trade secrets as the key to the opinion dismissing the case.
- There are multiple decisions addressing attorneys’ fees sought by successful litigants this past month. U.S. District Court Judge Gray Miller ordered IBM to pay $21 million in attorneys’ fees after the $1.6 billion dollar verdict against it. And Law360 is reporting on a $3.9 million award to Munck Wilson for its fees in a trade secrets case pending in the U.S. District Court for the Eastern District of Texas; the decision enforced a contractual indemnity as the basis for those fees. Finally, Marcus Mintz and Robyn Marsh note that an unsuccessful plaintiff dodged a bad faith finding in a post for Seyfarth’s Trading Secrets Blog. In Transperfect Global, Inc. v. Lionbridge Technologies, Inc., U.S. District Court Judge Denise Cote of the Southern District of New York, denied that request, although she chastised the plaintiff for pursuing that claim after it should known they were without merit, characterizing its litigation conduct as “unsavory business.”
Noteworthy State Court Trade Secret and Restrictive Covenant Cases and Commentary:
- Ben Fink has an excellent post presenting a cautionary tale for employers about an overzealous claim of alleged employee misconduct. In Patel v. Duke Hospitality, LLC. et. al., the Georgia Court of Appeals overturned a ruling in favor of an employer, finding that the employee had raised legitimate questions about the scope, propriety and accuracy of an investigation the employer had conducted on the employee’s computer.
- A curious appellate opinion out of North Carolina has Fenwick’s Stuart Meyer scratching his head over whether that court fully understood core elements of what is and what is not a trade secret. In Elite Vehicles, Inc. v. Lee, that Court of Appeals found that that the trade secret owner’s acknowledgement that it was “possible” that a competitor could come up with a design similar to the one at issue was sufficient to show that the design was not a trade secret as a matter of law.
- Looking for a primer on the latest restrictive covenant developments in the healthcare industry? Then check out Erik Weibust’s recent post at Epstein Becker’s Trade Secrets & Mobility Blog.
- As for in-house lawyers looking to transition, you should not only take a look your own agreements but make sure you check your state’s professional rules to see if a company can enforce restrictive covenants against you. For a primer on state laws for lawyers, see Peter Steinmeyer, Erik Weibust and Angel Perez’s post in Epstein Becker’s Trade Secrets & Mobility Blog.
- Breach of fiduciary duty and breach of the duty of loyalty claims are common to trade secret disputes, since some overly-enthusiastic individuals just can’t resist the temptation to contact customers or use information that an employer might consider proprietary before they resign. A related doctrine, the faithless servant doctrine, is chronicled in a blog post by Richard Friedman; the post examines the evolution of the doctrine under New York law and its current status.
Restrictive Covenant Legislative Activity:
- Can’t keep up with all the legislative activity around the country? The always-dependable Russell Beck has updated his chart showing the status and key terms of the many pending legislative bills in his Fair Competition Blog.
- Illinois has amended its Nursing Agency Licensing Act to ban non-competes effective July 1, 2022 as reported by Ogletree’s Tobias Schlueter and Cyle Catlett for The National Law Review.
- Benesch’s trade secret and restrict covenant team has a comprehensive Quarterly Review that covers a number of notable issues, but it has a particularly good summary of legislative activity around the country as well.
The Latest on the FTC and Restrictive Covenants:
- The recent resignation of GOP-appointed FTC commissioner Noah Philips is perceived as likely to embolden FTC Chair Lina Khan in implementing her progressive policies, writes Bloomberg’s Leah Nylen. But and