Given the ubiquity of thumb-drives and use of personal devices for work, it should come as no surprise that former employees frequently download and even retain their former employer’s sensitive information on their personal devices. A Symantec study in 2013 found that ½ of the employees surveyed admitted to keeping confidential corporate data from their previous employer and 40% planned to use it in their new jobs. However, is the fact that an employee downloaded confidential information, standing alone, enough to trigger a lawsuit and possibly an injunction? A recent case out of the U.S. District Court for the Southern District of New York, AUA Private Equity Partners, LLC v. Soto, Case No. 1:17-cv-8035 (April 5, 2018), held downloading and refusing to return confidential information was enough to give rise to a claim under the Defend Trade Secrets Act (DTSA) (for more on that case, see William Brian London’s post for Fisher & Phillips’ Non-Compete and Trade Secrets Blog). As for the other question — whether a court will be willing to enter an injunction based on downloading — the answer is less clear.
The issue of trade secret identification, on its face, seems like an elementary and uncontroversial one. In concept, every trade secret plaintiff should be expected to identify the trade secrets in the lawsuit it brings. After all, the plaintiff knows best what it considers to be a trade secret and what it doesn’t consider to be a trade secret, and the defendant shouldn’t be left to guess what those trade secrets might be. For these and other reasons, California, a key bellwether state for trade secret law, has long required by statute that a party claiming trade secret misappropriation identify those trade secrets with specificity before being permitted to conduct discovery relating to its trade secret claim. However, nothing tests the limits of common sense like the realities of litigation, and plaintiffs in California have complained that this procedure has been misused by defendants to frustrate or derail otherwise meritorious trade secret cases. Perhaps for these reasons, courts outside California remain divided over the so-called California rule as several recent rulings have demonstrated. Continue Reading Are Other States Following California’s Lead On Trade Secret Identification?
Here are the noteworthy trade secret and restrictive covenant posts from September and some of October:
- Massachusetts is once again contemplating multiple bills regarding non-competes as well as a possible adoption of what appears to be the DTSA advises Russell Beck in his Fair Competition Blog. Russell and his team also have summaries of legislative activity in Maryland, Maine, Michigan, New York, Oregon, Pennsylvania, Washington and West Virginia, among others.
One of the most hotly contested disputes in the Waymo v. Uber trade secrets lawsuit has centered around the disclosure of a forensic consultant’s due diligence report that Uber commissioned after learning that its former star engineer, Anthony Levandowski, had taken confidential files from his former employer Waymo. Uber and Levandowski had vigorously resisted the production of the report but the court order directing its production was recently affirmed by the U.S. Court of Appeals for the Federal Circuit. That due diligence report, which was prepared by the reputable forensics firm Stroz Friedberg, has now been made public. As I discuss below, the report is a jarring document and it has information that may be damaging to both sides. However, its most significant contribution to the lawsuit may be the fact that Uber’s own consultant (Stroz Friedberg) was providing multiple red flags to Uber that it was going to pay $680 million to someone that Stroz Friedberg suspected had lied, destroyed key documents and orchestrated efforts with other former Waymo employees to frustrate its investigation. Waymo is not unscathed by the report either, as it is evident that substantial amounts of highly confidential information made its way out the door, calling into question the safeguards Waymo had in place to protect trade secrets it is now valuing at over $1.8 billion. A copy of the due diligence report can be found here.
Here are the noteworthy trade secret, restrictive covenant and cybersecurity posts from the month of August (warning, there are a lot):
Defend Trade Secrets Act
- Munger Tolles’ Miriam Kim, Carolyn Hoecker Luedtke and Laura Smolowe have put together another fine summary of the trends they are tracking under the Defend Trade Secrets Act. There are several interesting findings in the summary. For example, state courts and state law remain the preferred forum and substantive law for trade secrets claimants, at least at this time. According to the summary, while 378 DTSA cases have been filed in federal and state courts, more than 515 complaints with trade secret claims have been filed with no DTSA claims in federal and state courts throughout the U.S. I have to admit that I was surprised by this finding, as I expected that litigants would be eager to secure a federal forum using the DTSA. I suspect that most of those state law cases involve restrictive covenants and that the plaintiffs are more comfortable with a local judge enforcing a non-compete or want to avoid entanglements arising from the DTSA’s limitations on injunctions. Or it might be that they simply want to go with the law they know best, which would be the more developed state trade secret law regime. In any event, a very interesting finding.
- One of the more recent (and unexpected) developments under the DTSA has been the number of motions to dismiss challenging DTSA claims. Olga May has a post for Fish & Richardson’s Litigation Blog detailing those decisions on those motions, which range from challenges to the specificity of the trade secrets pleaded to whether the complaint comports with the standards under Twombly and Iqbal.
- For an update on the modest number of ex parte seizure order filings under the DTSA, see Michael Renuad of Mintz Levn’s article in the National Law Journal.
Two federal courts have issued important rulings scaling back the use of the Computer Fraud & Abuse Act (“CFAA”), 18 U.S.C. 1030, et seq., for alleged violations of online agreements. These decisions are noteworthy in the trade secret area because employers and businesses have used the CFAA when they believe that a former employee or competitor has improperly accessed their electronic records. In the first decision, EarthCam, Inc. v. OxBlue Corp., et al., 2017 WL 3188453 (11th Cir. Aug. 1, 2017), the U.S. Court of Appeals for the Eleventh Circuit rejected a claim that a competitor’s access of a customer account violated the CFAA (a link to the opinion can be found here). And in the second, hiQ Laboratories, Inc. v. LinkedIn Corp., Case No. 3:17-cv-03301 (EMC) (N.D. California Aug. 14, 2017), Judge Edward Chen of the U.S. District Court for the Northern District of California found that a violation of LinkedIn’s online terms and conditions did not support a CFAA claim. (A link the opinion can be found here). Judge Chen’s opinion is particularly noteworthy because it appears to depart from some of the reasoning of a recent decision by the U.S. Court of Appeals for the Ninth Circuit that allowed Facebook to invoke the CFAA. As explained below, these rulings may signal a growing judicial reluctance to allow the CFAA to be used to limit otherwise publicly-available information.
Yesterday, Uber released a letter that it had sent to Anthony Levandowski notifying him of its intention to terminate him as an employee because of his failure to cooperate with an Order issued on May 11, 2017 by U.S. District Court Judge William Alsup. While most of the media coverage of the case had previously focused on the portion of the Order effectively quarantining Levandowski from Uber’s development of its LiDAR technology, perhaps the most noteworthy portions of the Order proved to be Judge Alsup’s directives to Uber to get to the bottom of what Waymo trade secrets Levandowski might have shared with others at Uber. (A link to Judge Alsup’s Order can be found here). As I explain below, those two paragraphs of Judge Alsup’s Order inevitably set Uber against Levandowski and led to his termination.
Continue Reading Why Uber’s Firing of Anthony Levandowski Became Inevitable
There have been two significant developments in the Waymo lawsuit against Uber, which is unquestionably the highest profile trade secrets case of the year. In the first ruling, U.S. District Court William Alsup referred the record of the case to the U.S. Attorney’s office for investigation of possible theft of trade secrets. In the second, Judge Alsup released a copy of his opinion yesterday explaining the injunction that he entered against Uber last week. Significantly, Judge Alsup declined Waymo’s primary request to shut down Uber’s driverless car business.
Instead, he ordered that Uber continue to quarantine former Waymo engineer Anthony Levandowski from its development of Uber’s Lidar technology, the technology that was the subject of the trade secrets he was alleged to have stolen. Judge Alsup declined to shutdown of Uber’s driverless program because Waymo could not establish that Uber had used the trade secrets that Levandowski allegedly took with him.
Referring the record for a pending civil case to the local federal prosecutor is highly unusual (in fact, I can’t remember it being done) and appears to be directed at Levandowski and his other former Waymo colleagues who joined him at Uber. However, the injunction looks like a victory for Uber, at least at this early stage in the proceeding. Continue Reading Waymo v. Uber: What Judge Alsup’s Injunction and Criminal Referral Mean for Uber
Here are some noteworthy posts from the past week and some catch-up on other posts from the past couple of weeks:
Trade Secret and Non-Compete Cases, Posts and Articles:
- “CBS Settles Dispute Over ABC’s ‘Glass House,'” reports Law360. For more on this long-running trade secrets dispute, see my posts from last year here and here.
- In “Bloomberg reveals safeguards for client info,” The Wall Street Journal reports on the various safeguards Bloomberg is committing to after the imbroglio last year when its journalists improperly accessed and reported on the subscriber information of its Wall Street clients.
- “Failure To Define Trade Secrets Establishes Subjective Bad Faith For Attorneys’ Fees Award Under California UTSA,” advises James Goodman for Epstein Becker’s Trade Secrets & Noncompete Blog.
- “Do Non-Compete Agreements Stifle Innovation?” Distil Networks CEO Rami Essaid and LevelEleven CEO Bob Marsh debate the impact of non-compete agreements.
- “Concerns Over Economic Growth Leads Some States to Limit Non-Compete Agreements,” advises John Paul Nefflen for Burr & Forman’s Non-Compete Trade Secrets Blog.
- “How to draft an enforceable noncompete agreement in 5 steps,” recommends Jon Hyman for the Ohio Employer’s Law Blog.
- “Do the Final Episodes of ‘Breaking Bad’ Qualify As Trade Secrets?” asks Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
- “New Hampshire Court Voids Non-Compete Clause in Independent Contractor Agreement,” reports Paul Freehling for Seyfarth Shaw’s Trading Secrets Blog.
- “On Non-Compete Agreements: A Response to the Wall Street Journal’s Recent Article,” advises Jonathan Pollard for the non-compete blog.
- For those in Michigan, “Dana Can’t Prove Trade Secrets Theft, Judge Rules,” reports Law360.
- For more on the Dana case, see, “Accessing trade secrets is not the same as misappropriating trade secrets” by Tim Bukher for LawTechie.
- “Is the DOJ Avoiding Domestic Trade Secret Cases?” asks Jan Wolfe for The AmLaw Litigation Daily.
- “You Need To Work Harder To Fight Trade Secret Theft,” warn Michael Bunis and Anna Dray-Siegel of Choate Hall & Stewart LLP for Law360.
- For those in Massachusetts, see Michael Rosen’s recent post, “More on ‘Material Change’ and Legislative Update,” for Foley Hoag’s Massachusetts Noncompete Law Blog.
Cybersecurity Posts and Articles:
- “White House Posts Preliminary Cybersecurity Incentives,” advises Jessica Goldenberg for Proskauer’s Privacy Law Blog.
- “Tackling Cyber Security Challenges in the Healthcare Industry,” reports Healthtech.
Computer Fraud & Abuse Act Posts and Articles:
- “IP Cloaking Violates Computer Fraud and Abuse Act, Judge Rules,” advises David Kravets for Wired.
- “Southern District of Georgia Judge Narrowly Construes Computer Fraud and Abuse Act,” advises Neil Weinrich for Berman Fink Van Horn’s Georgia Non-Compete and Trade Secrets News Blog.
- David Nosal’s criminal conviction under the CFAA has been upheld by the U.S. District Court for the Northern District of California, reports Bob Egelko in, “Executive’s conviction upheld in trade-secrets theft,” for SFGate.
- “It’s Time to Reform the Computer Fraud and Abuse Act,” argues Scientific American.
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.