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.
As you will see, I have changed the format of my monthly wrap up post in two ways. First, I am going to start including links to noteworthy decisions that I come across or are forwarded to me. Unfortunately, since neither I nor other bloggers writing in this space can cover everything, this will be a useful feature for those practicing in this area. Second, I am going to provide more commentary on some posts and cases, in the hope of creating further dialogue on many trade secret and non-compete issues. Given the hot button nature of some of these issues, I am going to share my thoughts, for whatever they are worth. Now, on to posts and links from the last month:
- Last week, Democratic Senators Elizabeth Warren, Chris Murphy and Ron Wyden announced their intention to introduce the Workers Mobility Act (WMA) that would abolish non-competes throughout the United States. As many of you will recall, Senator Murphy previously introduced a similar bill, the Mobility and Opportunity for Vulnerability Employees Act (MOVE) but that bill stalled on the Senate floor. Russell Beck has a post with a link to the House and Senate bills, along with his well-reasoned concerns about the breadth and scope of the bills.
- A blog post about legislation over non-competes wouldn’t be complete if there wasn’t some mention of some activity in Massachusetts. Key features of the latest bill under serious consideration would limit non-competes to 12 months (unless the employee stole trade secrets or breached his fiduciary duty) and finally adopt the UTSA. For more details, see Russell Beck’s post in his Fair Competition Blog.
- Idaho (repealing its recent changes in 2016) and Utah (restricting their use against broadcasters) have recently amended their statutes addressing restrictive covenants. See Russell Beck again.
- Colorado has modified its law affecting physician non-competes, carving out protections for physicians treating patients with rare genetic disorders to eliminate any interruption of care for those patients. Peter Greene summarizes the changes in Epstein Becker’s Trade Secrets & Employee Mobility Blog.
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.
I am very excited to announce that I have been invited to speak on trade secret issues for the 27th All Ohio Annual Institute on Intellectual Property in Cincinnati and Cleveland this week. For those in Kentucky, Ohio and Indiana who may be interested in attending, I will be providing a presentation entitled “What Driverless Cars, Solar Panels and Tapping Robots Can Teach Us About Trade Secrets Law” this Wednesday, September 13, 2017 in Cincinnati and Thursday, September 14, 2017 in Cleveland.
The All Ohio Institute is sponsored by the Cincinnati Bar Association and Cleveland Intellectual Property Law Association, with the cooperation of the Cincinnati Intellectual Property Law Association and the Dayton Intellectual Property Law Association. The Cincinnati presentation will begin at 8:30 a.m. at the Northern Kentucky Convention Center, 1 West River Center Blvd., Covington, Kentucky. The Cleveland presentation will also start at 8:30 a.m. and will be held at the Marriott Downtown at Key Center, 127 Public Square, Cleveland, Ohio.
I will be covering noteworthy developments under the Defend Trade Secrets Act (DTSA), including the forces that led to its enactment, its legislative history, the DTSA’s key provisions, and recent cases involving the DTSA’s ex parte seizure order, whistleblower provision and injunctions involving employment, as well as its interplay with Ohio’s state trade secrets law. I will also cover some of the other big developments in trade secrets law, including the Waymo v. Uber case, the recent American Bar Association opinion reinforcing lawyers’ obligations to protect trade secrets, and other noteworthy rulings and opinions.
Registration for the presentation can be found here. Hope you can join us for what should be a very interesting seminar.
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.
Here are the noteworthy trade secret, restrictive covenant and cybersecurity posts from the past month or so:
The Defend Trade Secrets Act
- The U.S. District Court for the Eastern District of Texas has found that certain deer registry information qualified as a combination trade secret under the DTSA and Oklahoma’s version of the UTSA, as explained by Michael Weil and Tierra Piens for Orrick’s Trade Secrets Watch blog.
- The issue of whether the DTSA applies to misappropriation that may have taken place prior to the DTSA’s enactment has been one of the more frequent areas of litigation under the DTSA. Jonathan Shapiro of Epstein Becker has a summary on these cases for Law360.
A recent opinion from the U.S. District Court for the Northern District of Illinois has stirred up a hornets’ nest of commentary because it appears to recognize the viability of the inevitable disclosure doctrine under the Defend Trade Secrets Act (DTSA). Those familiar with the DTSA will recall that the inevitable disclosure doctrine was supposed to be prohibited under the DTSA because of California Senator Diane Feinstein’s concern that the doctrine might be enforced against California residents. Now, in what appears to be the first federal appellate court opinion construing the DTSA, the U.S. Court of Appeals for the Third Circuit may have further muddied the waters about the inevitable disclosure doctrine in Fres-co Systems USA, Inc. v. Hawkins, Case No. 16-3591, ___ Fed. Appx. __ (3rd Cir. 2017), 2017 WL 2376568 (June 1, 2017) (a link to the opinion can found here). Continue Reading Fres-co Systems v. Hawkins: Did The Third Circuit Just Create More Confusion Around The DTSA’s Ban On The Inevitable Disclosure Doctrine?
Given the increasing number and quality of fine posts about trade secret, non-compete and cybersecurity issues, I am resurrecting my regular updates post (although it will be monthly rather than weekly). Without further adieu, here are the noteworthy posts of the past month:
Defend Trade Secrets Act:
- With the recent passage of the 1-year anniversary of the DTSA, there have been a number of interesting posts that have detailed compilations about the cases filed with DTSA claims over the past year. Professor David Opderbeck of Seton Hall has an interesting guest post for Patently O and Fish & Richardson’s Claire Collins, Jeffrey Schneidman and Carol Simons have some noteworthy statistics in their Litigation Blog as well.
- Finnegan’s John Williamson, Paula Miller and Jon Self have a guest post nicely summarizing the extra-territorial reach of the DTSA and other statutes for the IP Watchdog.
- Robert Milligan and Josh Salinas offer their take on likely developments for the DTSA in its second year in Seyfarth’s Trading Secrets Blog.
- Maxwell Goss has a post that suggests that reports of the death of the inevitable disclosure doctrine under the DTSA may be greatly exaggerated in his Law and the Creative Economy Blog.
I’ve been invited in the past to speak on trade secret issues for the Columbus Intellectual Property Law Association and I will have the opportunity to do it again this year on the Defend Trade Secrets Act (DTSA). For those in Central Ohio who may be interested in attending, I will be providing a presentation entitled “The Defend Trade Secrets Act After One Year: Its Impact on Trade Secret Law in the U.S. and Abroad” this Thursday, June 15, 2017. The presentation will be at the Athletic Club of Columbus, 135 East Broad Street at 11:30 a.m.
I will be covering a number of important issues involving the DTSA, including a brief discussion of the forces that led to its enactment, the legislative history of the DTSA, the DTSA’s key provisions, and recent cases interpreting the standards for the DTSA’s ex parte seizure order, Whistleblower provision, injunctions involving employment and other noteworthy issues. I will also cover the impact of the DTSA on trade secrets law abroad, include the EU’s Trade Secrets Directive.
Registration for the presentation can be found here. Hope you can join us for what should be a very interesting seminar.