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?

AT_YOUR_OWN_RISKWhen moving to enforce a non-compete, the last thing a litigator wants to do is to stumble out of the gates and struggle over a profound legal issue that could delay consideration of that normally urgent request.   A new and little-talked-about section of the Defend Trade Secrets Act (DTSA), however, has the potential to trip up employers seeking to enforce non-competes if they are not prepared to address this new entanglement.

There has been a significant amount of commentary about the DTSA and its new amendments since President Obama signed the DTSA into law on May 11, 2016. The “whistle-blower” immunity and ex parte seizure order, for example, have generated the most discussion to this point.  However, the section of the DTSA that may have the greatest future impact on litigation under the DTSA is 18 U.S.C. §1839(3)(A)(i)(1)(I), which prohibits injunctions that “prevent a person from entering into an employment relationship.”

That new provision, which I will refer to as the “No-Ban-on-Employment” provision, was intended to curb, if not eliminate, the use of the inevitable disclosure doctrine under the DTSA.  However, it may have a significant unintended consequence–namely, it may complicate employers’ efforts to enforce non-competes through temporary restraining orders (TRO), the key legal mechanism for non-compete disputes.  For the reasons below, employers may want to reconsider invoking the DTSA when they want to enforce their non-competes because of the potential complications of this section’s language and instead opt to file them in state court, at least in the short-term.  As the DTSA is likely to overtake the Uniform Trade Secret Act (UTSA) as the dominant statutory regime for trade secret law, this DTSA provision may well set another blow in motion to the viability of the non-compete as an effective tool to protect trade secrets.

Continue Reading Does the Defend Trade Secrets Act Contain a Potential Roadblock for Non-Competes? Why the DTSA’s Limitations on the Inevitable Disclosure Doctrine May Complicate Enforcing Non-Competes

Today’s post wraps up the Trade Secret Litigator’s Five Golden Rules for on-boarding a new employee and, fittingly, falls on Halloween. Today’s remaining Golden Rules primarily address the steps an employer needs to take in managing the employee who has been hired, and, as the case law reveals, may prevent various tricks (and rarely treats) to the new employer.

Golden Rule No. 3. The Visentin Rule: Protect the Legitimate Business Interests of the Former Employer. Having taken the steps to avoid or minimize risk during the hiring process, an employer still has to properly manage the employee once he/she joins the company, especially if that employee has a non-compete or non-solicitation agreement with his/her former employer. Fortunately, one of the leading cases on managing an employee with a covenant not to compete provides a textbook example of how to handle this situation. That case, IBM v. Visentin, came out of the U.S. District Court for the Southern District of New York and was affirmed by the U.S. Court of Appeals for the Second Circuit in 2012. In Visentin, the new employer, Hewlett-Packard undertook a number of affirmative steps to ensure that IBM’s trade secrets were protected and agreed that the new employee would not solicit his former customers for the remainder of the term of the non-compete.

The Southern District and Second Circuit approved of these efforts and refused to enjoin the employee – a mid-level manager – from working at HP. In the absence of any proof of misconduct by the employee, those courts found that this was a proper way to protect IBM’s trade secret and customer relationship interests while balancing the former employee’s right to find proper gainful employment.

The Visentin approach was also applied effectively by Google earlier this year in a high-profile dispute over its hiring of a cloud computing services manager who had worked previously for Amazon.com and was subject to a non-compete. As in Visentin, the Washington district court found that in the absence of evidence of misconduct by the former employee, Amazon.com’s interests were adequately protected by the safeguards put in place by Google to protect its trade secrets.

Of course, this approach is not foolproof, as the holding in a recent Massachusetts case, Aspect Software v. Barnett, unfortunately demonstrates. In that case, despite similar good faith efforts by the new employer and former employee, the court still enforced the non-compete at issue, although it commended the new employer and former employee for their efforts.

At the end of the day, an employer will increase its odds of avoiding litigation or minimizing its risk in that litigation by taking affirmative steps to prevent the use or disclosure of the competitor’s trade secrets and minimize intrusion into legitimately protected customer relationships. I have found that these steps are particularly effective in the “cease and desist” letter stage because they serve to put the former employer on notice that it may not have a basis for a lawsuit and can effectively give that employer pause before initiating litigation.

Golden Rule No. 4: If Litigation is Possible, Preserve, Preserve, Preserve. Given the reality of BYOD and the overlap between work and personal time, it is practically inevitable that some confidential information will make its way onto an employee’s personal computer or devices. This sometimes puts an employee between the proverbial rock and a hard place: if the employee deletes the information, there may be a claim of spoliation of evidence or a claim of some nefarious purpose behind the deletion. Alternatively, if the employee does not remove or delete the confidential information, he or she will almost certainly be accused of having improperly used or taken it.

As a result, if there is a chance of litigation, it is critical to preserve what was on the devices before deleting it. This means that forensic computer consultant will need to be engaged and likely image all devices before the information is removed and the devices sanitized under the guidance of counsel and that consultant. The images will then need to be kept by outside counsel so that they can be produced in litigation, if necessary.

Golden Rule No. 5: Keep a Close Eye on Mass Hirings. As readers of this blog know, cases involving the hiring of a team of people from a competitor (especially a sales team) generate the greatest waves and present the greatest risk of trade secret litigation by a former employer. The group dynamics in these situations also seem to foster greater opportunities for mischief — i.e., more pressure on business units and new hires to perform, the fact that the team may have been hired for a specific product, client or opportunity, etc. This means that in-house counsel and HR administrators need to monitor, follow up on, and continue to train these teams on the importance of preserving the confidentiality of the legitimate trade secrets of their former employer.

Last year’s Allergan v. Merz case out of the U.S. District Court for the Central District of California illustrates the special dangers associated with hiring teams of people. In that case, a federal judge issued a permanent injunction enjoining the rollout of the cosmetic drug Xeomin for 10 months because he found that a sales team hired from Allergan had improperly used confidential marketing and customer information for Botox in connection with the prospective launch of Xeomin. Based on statements made at an early hearing, the outside and in-house counsel did not know about communications between the new sales team and its managers disseminating that confidential information and argued that Merz had no intention of using Allergan’s trade secrets. However, a year after defeating a TRO, Merz’s counsel produced documents that were contrary to those representations.

How can in-house counsel and outside counsel avoid this disaster? It starts with a culture of security and responsibility. Both in-house and outside counsel need to know that their business people have their back and that a culture respecting the rules outlined above will be enforced. In the Allergan v. Merz case, the disconnect between what was apparently going on at the Merz business level and what the lawyers understood was going on is striking. This suggests, at least to me, that the appropriate follow up was not done to ensure that counsel’s representations about not using Allergan’s trade secrets would be followed.

The best way to ensure new teams are following the rules of their new employer includes: (1) an emphatic initial face-to-face meeting communicating the importance of leaving the prior employer’s trade secrets behind, preferably chaired by the head of the business group, (2) periodic follow up, certifications and acknowledgements that no trade secrets or confidential information are being used or retained, and (3) training to reinforce those principles. However, all of the follow up in the world will be ineffective if managers and supervisors have not bought into these principles and do not enforce them among their team.

In sum, as these cases illustrate, courts will generally reward the employer who imposes safeguards and acts responsibly; conversely, the failure to on-board properly can be catastrophic.

I wanted to continue my wrap up of some of the other high points from the American Intellectual Property Law Association (AIPLA) Trade Secrets Summit on Tuesday but there was so much fine content that I could not do it justice in a single post.  Consequently, I will follow up with a final post on the Summit as well as high points from the cybersecurity and trade secret presentations from the AIPLA Annual Meeting last week.  Here are some additional highlights:

In the litigation and procedure session, Russell Beck of Beck Reed Riden, Kenneth Vanko of Clingen Callow and Anthony Sammi of Skadden Arps covered the important issues to consider when bringing a TRO or injunction in a trade secrets case.

Decline of the Inevitable Disclosure Doctrine?  Russell noted the realities of the increasingly high standard for injunctions in state and federal courts. He also started an interesting conversation within the panel about the inevitable disclosure doctrine (a doctrine that holds that even the most conscientious employee may not be able to avoid using a former employer’s trade secrets if he/she joins a competitor). Russell noted that the recent case in Washington involving Amazon.com and Google — which rejected the inevitable disclosure doctrine — is consistent with what he is seeing by courts. In short, if the employee is clean when he/she leaves, it is simply very difficult to restrain him or her from working for a competitor in the absence of a non-compete.

The Increasing Importance of Trade Secret Identification.  Kenneth Vanko outlined the trend of recent cases requiring plaintiffs to identify their trade secrets early in a case. This was a key theme at the Summit and at the AIPLA Annual Meeting as it seemed each speaker observed greater emphasis from courts requiring plaintiffs to identify their trade secrets at key junctures.  Ken emphasized the importance of specificity and doing your best to focus on pursuing the best trade secrets at issue throughout the proceeding.  Ken noted that other jurisdictions are following the lead of California, Delaware and Minnesota in requiring some degree of disclosure early in a proceeding. For those asserting trade secrets that involve some compilation of publicly known information, Ken noted that courts have imposed a higher burden on those types of trade secrets — requiring plaintiffs not only to identify those trade secrets but to explain how those compilations qualify as a trade secret.

The Importance of Selecting Your Best Witness Early.  Tony Sammi’s presentation focused on the special challenges of trade secrets in highly technical cases. Tony emphasized the importance of identifying the witness who could best explain the technology and trade secrets to a judge or jury. Tony noted that the most knowledgeable witnesses in his cases are generally not the managers but instead the coders themselves.

Negative Use.  The panel emphasized the importance of “negative use” in trade secrets cases — the concept that a defendant doesn’t have to necessarily use or incorporate a trade secret into its product to receive a benefit from that trade secret. They agreed that this concept can be a tricky one and often does not get the attention it deserves despite the fact that a defendant can benefit from avoiding the blind alleys and goose chases of the development process by finding out what hasn’t worked.

In the afternoon, the Summit focused on the criminal trade secrets front. Gabriel Ramsey of Orrick, Eduardo Roy, and Michael Weil of Orrick provided plenty of war stories in their panel discussion about their experiences in advising clients who bring, or are on the receiving end of, a criminal trade secrets prosecution.

Know Your Federal District. The panel agreed that knowing the dynamics of your local federal prosecutors and investigators’ office was key to securing a criminal referral. They noted that you will likely have to package your trade secret claim to the duty agent for the FBI or other contact. The panel observed that these agents and officials are no different from those in the private sector and they are most interested in cases that will bring attention and favorable press to them and their offices.  Also, the panel emphasized that you may find that your best contact is not necessarily a prosecutor but a secret service agent or FBI agent.  Every district is different and relationships matter.

Factors that may make a trade secret case more sexy for a criminal referral include the potential for a powerful press release, high dollar numbers, travel opportunities for the officer, the existence of a foreign national in the alleged theft, or the potential for a civil case that might bring big fines. The panel acknowledged that only the most egregious cases between domestic competitors will get a prosecutor or agent’s attention.  They noted that there is frequently a bias against trade secrets cases because of the existence of a civil remedy.

The panel also emphasized the importance of the absence of skeletons in the client’s closet and that the client should be clean. Otherwise, the client might find itself in a situation where the prosecutor turns the tables and prosecutes the client, as these cases frequently involve former employee who can be expected to throw dirt right back at their prior employer (accusing them of securities violations, whistleblower, etc.).

Miscellaneous Points.  The panel agreed that in concurrent civil and criminal investigations, that while the government can’t use a civil case as a stalking horse for its criminal case and for discovery, there is nothing wrong with a civil defendant bringing evidence to prosecutors.  The risk of course is that whatever is given to the prosecutor will have to be shared with the defendants’ legal team.  Another interesting issue that the panel raised involved the company’s obligations to a former employee charged with stealing from that company – namely, is there insurance coverage?  As readers of this blog know, this question is now front and center in Sergey Aleynikov’s long-running dispute with Goldman Sachs and is the subject of a pending declaratory relief action in New Jersey.  The panel could offer no clear answers on this question but advised that companies need to be aware of their potential coverage.

One point of discussion was how best to defuse criminal proceeding when representing the company.  Eduardo noted that it may be in the company’s interest to clean house and fire everybody that was involved to mitigate the company’s damages and exposure.  The panel emphasized the importance of having a full legal team given the range of important legal issues – i.e., counsel skilled in internal investigations, labor and employment counsel for possible terminations.

Again, I will wrap up next with a discussion of the final session of the Summit that covered prosecuting trade secret claims before the International Trade Commission as well as the trade secrets and cybersecurity presentations at the AIPLA’s Annual Meeting.

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:

Cybersecurity Posts and Articles:

  • Well, it’s official: “U.S. Blames China’s Military Directly for Cyberattacks,” reports The New York Times. Also see “PENTAGON: Chinese Hackers Have Stolen Data From ‘Almost Every Major U.S. Defense Contractor,'” asserts The Business Insider, “Pentagon report says U.S. computer hacking ‘appears to be attributable’ to Chinese government,” reports The Verge and “U.S. Says China’s Government, Military Used Cyberespionage,” reports The Wall Street Journal.
  • “A cybersecurity primer for legal departments: Understanding the basic terms and concepts needed to protect your company from cyber attacks” by David Lim for Inside Counsel.

Trade Secret and Non-Compete Posts and Articles:

  • Less than two months after its introduction, Texas has adopted the Uniform Trade Secrets Act effective Sept. 1, 2013, reports Orrick’s Trade Secrets Watch Blog. It appears that the version adopted is similar to that proposed by Dallas State Senator John Carona and will include a presumption in favor of granting protective orders to protect trade secrets in litigation, including limiting access to confidential information to attorneys and their experts. (For more on the proposed statute, see my post earlier this year as well as Robert Milligan’s recent post).
  • Connecticut is joining the list of states tinkering with their non-compete laws, advises Daniel Schwartz in his Connecticut Employment Law Blog.  In “Bill Targets Non-Compete Agreements But Would Also Create New Cause of Action,” Daniel reports that the bill allows “reasonable” non-competes but would permit an aggrieved employee the right to sue if the non-compete was unreasonable or the employee was not provided with at least 10 days to consider the non-compete before signing it.
  • “Chinese Couple Sentenced to 3 Years and 1 Year for Theft of GM Hybrid Technology,” advises Todd Sullivan in his Trade Secrets Blog.
  • And in another prosecution, “Ex-Frontier Chemist Dodges Prison For Disclosing Recipes,” as Law360 reports that the U.S. District Court for Utah sentenced Prabhu Prasad Mohapatra to time served — three days — and ordered him to pay $3,435 in restitution.
  • “Georgia Supreme Court Rejects Independent Claim for Inevitable Disclosure of Trade Secrets,” reports Eric Ostroff in his Trade Secrets Law Blog.  Kenneth Vanko has a post on the case as well in his Legal Developoments in Non-Competition Agreements Blog.
  • Eric Ostroff also has a fine post entitled “Five Ways to Protect Trade Secrets When an Employee Departs.”  If you have not bookmarked Eric’s blog, you should as he is churning out very good content regularly.
  • Those in Pennsylvania should be aware of a decision out of the U.S. Eastern District of Pennsylvania reports the Employee Discrimination Reporter. In De Lage Landen v. Thomasian, the District Court refused to enforce a non-compete despite proof that the former employee had breached a non-solicitation provision by approaching a former colleague. The court reasoned that the parties were not sufficient competitors, there was no showing of future harm, money damages were available, and therefore no irreparable harm was present.
  • “Fracking and Trade Secrets: An Introduction,” advises Kenneth Vanko in his Legal Developoments in Non-Competition Agreements Blog.
  • “Fisher/Unitech (Basically) Loses Non-Compete Fight Against Former Sales Exec,” advises Jonathan Pollard for the non-compete blog.
  • “Doctor Non-Solicitation Agreement Not Supported By Legitimate Business Interest,” reports Zach Jackson for Epstein Becker’s Trade Secrets & Noncompete Blog.
  • “Employers Slow To Guard Data Amid Social Media, Tech Boom,” bemoans Erin Coe for Law360.
  • “Data Security Policies and Procedures Still Lacking,” warns Catherine Dunn for Corporate Counsel.
  • In “Unleashing job hoppers could give economy a bounce,” Reynolds Holdings posits in an article for Reuters that releasing unemployed workers from their non-competes might help the economy.
  • “China Non-Competes. The Basics Have Become Clearer,” advises Dan Harris in his China Law Blog.

Computer Fraud and Abuse Act Posts and Cases:

  • “California Federal Court Dismisses Computer Fraud and State Unfair Competition Claims Alleged Against Ex-Employees Accused Of Stealing Computer Source Code,” reports Paul Freehling for Seyfarth Shaw’s Trading Secrets Blog.
  • “Programmer Arrested For Cyberattack On Ex-Employer,” reports Law360.
  • “Use a Software Bug to Win Video Poker? That’s a Federal Hacking Case,” proclaims Kevin Paulson for Wired.
  • “Who’s at Fault for the CFAA Mess? Blame Congress,” sighs Brian Bialas for Foley & Hoag’s Massachusetts Noncompete Law Blog. Sounds good to me.

05022013Here 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 Posts and Articles:

  • Good advice from Josh Durham: “Use Covenants Not To Compete To Protect Legitimate Business Interests, Not Just Because You’re Scared Of A Little Competition.” In his post for Poyner Spruill’s Under Lock & Key Blog, Josh recounts the holding of a recent North Carolina case, Phelps Staffing LLC v. CT Phelps, Inc., in which the court found that a non-compete involving temporary staffing employeees lacked a legitimate business interest to justify the restraint. It is an important reminder to companies to ensure that their non-competes be narrowly tailored to protect interests that actually arise from the former employee’s employment.
  • Sergey Aleynikov will stand trial a second time, this time in New York State’s Supreme Court, for the alleged theft of Goldman Sachs’ trade secrets, reports The Wall Street Journal and Law360. Judge Ronald Zweibel ruled that the state charges were not barred by the dismissal of his federal conviction under the Economic Espionage Act last year by the U.S. Court of Appeals for the Second Circuit. (For more on the Aleynikov saga, see my posts here and here).
  • For more on the Ohio Supreme Court’s recent holding that rental payments are trade secret, see Todd Sullivan’s take in his Trade Secrets Blog. Todd notes the incongruity in the Court’s reasoning that disclosure of the trade secrets would lead to a “poisonous” tenant environment, despite the fact that it noted later in its opinion that the landlord’s expert said tenants were incentivized not to share rental information. (My post on the case can be found here).
  • “Pushing Back Against Restrictive Covenants in Physician Agreements” advocates Mark Gisler as he questions whether non-competes violate the American Medical Association’s code of ethics.
  • “Illinois Federal Court Issues Preliminary Injunction Prohibiting Use Of Misappropriated Trade Secrets But Rejects Request For Expanded Injunction Based On Alleged “Inevitable Disclosure” reports Paul Frehling for Seyfarth Shaw’s Trading Secrets Blog.
  • “Florida Court Reverses Preliminary Injunction on Restrictive Covenant,” reports Peter Vilmos for Burr & Forman’s Non-Compete Trade Secrets Law Blog.  Eric Ostroff also has a post on the case in his Trade Secrets Law Blog.
  • “When a Restriction on Soliciting “Prospective” Customers Is Unreasonable (and How to Fix It),” recommends Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • “Never Bring a Knife to a Gun Fight: One Simple Weapon to Fight Economic Espionage in a Cyberspace World,” warns Hayden J. Silver III for Womble Carlyle for The Compass.
  • “Why intellectual property theft is everyone’s problem,” remind Texas U.S. Attorneys Sarah Saldana and John M. Bales for The Dallas Morning News.
  • “Does social media change the meaning of “solicitation”? How to prevent ex-employees from using social networks to lure employees or customers” recommends Jon Hyman for Inside Counsel. 
  • “Why Abuse of Discretion Matters to Employers (Non-Compete),” advises Rob Radcliff for his Smooth Transitions Blog.
  • “Trade Secret “Inevitable Disclosure” Doctrine Taking Shape in North Carolina,” advises Betsy Cook Lanzen of Womble Carlyle for The National Law Journal.

Cybersecurity Posts and Articles:

  • “Reflections On Recent Cybersecurity Developments,” ponder David N. Fagan, John K. Veroneau, Robert Nichols and Kristen E. Eichensehr of Covington & Burling LLP for Law360.
  • “The War On Cybercrime: How Far Can You Go?” posits Gabriel Ramsey, Mark Mermelstein and James Hsaio of Orrick for Corporate Counsel.
  • “Is the Specter of a Cyber Cold War Real?” asks James McGregor for The Atlantic.
  • “Law firm fell victim to phishing scam, precipitating $336K overseas wire transfer, bank suit alleges,” reports Debra Cassens Weis for The ABA Journal’s Law News Now.
  • “Looking at the Future of Cybersecurity,” predicts Sue Reisinger for Corporate Counsel.

Computer Fraud and Abuse Act Posts and Cases:

  • Looking for a post-mortem on the recent CFAA trial of David Nosal? Then check out “In Executive’s Trade Secret Prosecution, a Company’s Outsized Role,” by Vanessa Blum who covered the trial for The Recorder, Venkat Balasubrumani’s post in the Technology & Marketing Law Blog and Daniel Joshua Salinas’ post for Seyfarth Shaw’s Trading Secrets Blog.
  • Earlier this week, The Washington Post ran a front-page story, “As cyberthreats mount, hacker’s conviction underscores criticism of government overreach,” detailing the prosecution of hacker Andrew Auernheimer.
  • Similarly, The ABA Journal has drawn attention to efforts to reform the CFAA, in an article “Hacker’s Hell: Many want to narrow the Computer Fraud and Abuse Act,” by Stephanie Francis Ward.

I know there a number of you out there who are former English or liberal arts majors and who may fondly remember Chaucer’s The Canterbury Tales, the collection of bawdy and insightful stories told by various pilgrims as they travel to St. Thomas Becket’s shrine in 14th Century England. Where I am going with this, you ask? Well, if you are looking for a collection of enthralling stories to better understand the intricacies of trade secret law, you won’t do any better than David Almeling and Darin Snyder’s Trading Secrets: A Practical Introduction to Trade Secret Law and Strategy.

It is a considerably easier read than Chaucer’s Middle English verse, and in the style of the classic work, it draws from many fascinating trade secret cases — some well known, some not so well known — to make its points. David and Darin use literally dozens of short stories to explain and to illustrate. Like Chaucer’s ribald Miller’s Tale about the cuckolding of the carpenter John, there is the story of the betrayal of the founder of Alpha Mining Systems, who said his trusted lieutenant’s theft of Alpha’s trade secrets left him feeling “like the husband whose wife was getting it on the side.” 

And there is the story of the epic rivalry between Oracle and Informix in the 1990’s, a rivalry so bitter that each company took to posting billboards taunting the other at the entry of their headquarters (Oracle’s famously read “Informix: Hiring lawyers experienced in suing programmers. Oracle: Hiring experienced programmers”). That story is effectively used to emphasize the dangers of over-reaching, as Informix was forced to issue a public mea culpa to its hated rival when it couldn’t back up its claims. 

Trade secret disputes are modern day morality tales of theft and betrayal, fueled by fear and greed. Keeping Secrets’ appeal lies in the fact that it captures the essence of trade secret law through those stories. Keeping Secrets is short and an easy read, and I would especially recommend it for the in-house lawyer or HR administrator who has to juggle many potential areas of the law, as well as to members of the trade secret community looking for an entertaining refresher.

More information on Keeping Secrets can be found here. 

(Full disclosure: I have known David through the years as we have traded notes and thoughts on our respective articles and posts. As some of you may remember, he and Darin contributed a wonderful post taking me to the woodshed for my comments on the impact of the America Invents Act upon trade secrets (specifically, the newly-expanded “prior use defense”)).

08232012Here are the noteworthy trade secret, non-compete and cybersecurity stories from the past week, as well one or two that I missed over the past few weeks (better late than never): 

Noteworthy Trade Secret and Non-Compete Posts and Cases: 

  • CBS has dismissed its trade secret and copyright lawsuit against ABC over the “Glass House” reality show. Readers of this blog will recall U.S. District Court Gary Feess denied CBS’ request for a TRO back in June. CBS announced its decision last week and said the lawsuit was no longer necessary because its “Big Brother” show had trumped “Glass House” where it counted, in the battle for ratings.
  • Interested in the dark side of trade secrets? Set your DVR or watch Crime, Inc.’s episode on corporate espionage tonight at 9:00 p.m. on CNBC. (Thanks to Josh Durham for the reminder.)
  • “How to Protect Your IP in China? Don’t Hire Anyone,” recommends Dan Harris in his always-interesting China Law Blog. 
  • Texas federal courts are divided over whether to extend a non-compete’s duration when an employee has violated the non-compete, reports Paul Freehling in Seyfarth Shaw’s Trading Places Blog.
  • For those in Missouri, Robert Milligan has an important post in Seyfarth’s Trading Secrets Blog about the Missouri Supreme Court’s recent opinion reaffirming the enforceability of non-competes in that state. 
  • The U.S. District Court for the District of South Carolina has reaffirmed that a compilation of information can qualify as a trade secret, according to Parker Poe’s Trade Secret & Unfair Competition Reporter Blog
  • Burr & Forman’s Non-Compete & Trade Secrets Blog has a nice primer on the Inevitable Disclosure doctrine. 
  • “Trade Secrets: Your Secret Weapon under Patent Reform” argues Nixon Peabody’s R. Mark Halligan and Stout Risius & Ross’ David A. Haas.
  • Kenneth Vanko’s Legal Developments in Non-Competition Agreements Blog has a fine wrap-up of some noteworthy posts and articles. 

Computer Fraud and Abuse Act Posts: 

  • Yet another district court has adopted the reasoning of U.S. v. Nosal and WEC Carolina v. Miller, reports Littler’s Unfair Competition & Trade Secrets Blog. In International Airport Centers, LLC v. Citrin, U.S. District Court for the District of Minnesota Patrick Schlitz dismissed the agency’s CFAA claim, reasoning that had Congress “meant to so vastly expand the jurisdiction of the federal courts, Congress would have been much more explicit.” 

Cybersecurity Posts and Articles: 

  • “Are smart buildings the next cyber-threat?” asks TechnoLlama. 
  • “Cybersecurity Is Top of Mind for General Counsel and Co. Directors” writes Molly McDonough for the ABAJournal.
  • “Is An International Cyber Regulatory Agency Needed?” asks Richard Stiener in an article for Forbes.
  • “The Business BYO Craze: Has It Gone Too Far?” asks the HR Bartender Blog.
  • “Are Lawyers Safe Up in the Cloud? asks Martin Scarinci for the Martindale.com Blog

News You Can Use:

  • “Ten Tips and Tricks Every iPhone and iPad User Should Know” offers The Wall Street Journal.

Here are the noteworthy posts, articles and cases of the past week:

Trade Secret and Non-Compete Cases and Posts:

  • U.S. District Court Judge Gary Keess issued his opinion explaining his reasons for denying CBS’ Motion for TRO to prevent the premiere of ABC’s Glass House reality show.  A copy of the Opinion can be found in the PDF below. As expected, Judge Keess expressed “serious doubts” about whether CBS had any trade secrets, let alone whether ABC had misappropriated them. He dismantled CBS’ claims that its Big Brother “House Guest” manual qualified as a trade secret (labelling it “generic”) and found that the “filming, editing and production techniques” were commonplace in the industry. Judge Keess also rejected any claim of irreparable injury, reasoning any harm was readily compensable by a damages award.  For more on this case, see my earlier posts here and here.
  • MGA’s insurers have sued for their share of the $137 million in lawyers’ fees and costs award in the epic MGA v. Mattel “Bratz” case according to Alison Frankel’s On The Case Blog. National Union Fire Insurance Company of Pittsburgh and Crum & Forster Specialty Insurance Company have filed a declaratory action for those fees and MGA is expected to oppose the complaint as premature.
  • The “inevitable disclosure doctrine” appears to be on life support in Massachusetts, according to recent posts in Kenneth Vanko’s Legal Developments in Non-Competition Agreements Blog and Seyfarth Shaw’s Trading Secrets Blog. Both posts describe the U.S. District Court of Massachusetts’ ruling in U.S. Elec. Svcs., Inc. v. Schmidt, 2012 U.S. Dist. LEXIS 84272 (D. Mass. June 19, 2012), that the doctrine cannot be applied in the absence of a non-compete, at least under Massachusetts law. 
  • For those practicing before the International Trade Commission, the ITC 337 Blog has a comprehensive summary of the latest trade secret cases filed before the ITC. 
  • In a post entitled “Can I Protect My Trade Secrets Via Social Media Policy,” James Douglass provides a nice recap of the recent National Labor Relations Board’s opinion on social media and how to draft enforceable social media policies to protect your trade secrets in Fisher & Philips’ Trade Secrets and Noncompete Blog
  • “You Want to Enforce a Non-Compete? Bad Facts, Sir, Give Me Some Bad Facts!”  advises the Mass Law Blog. Well stated, Mass Law Blog, well stated.
  • “Employers beware: Revisions of non-compete agreements are becoming essential” writes Richard Glovsky for Inside Counsel. Richard’s article details the challenges of enforcing non-competes against employees who are promoted, reassigned or take on additional responsibilities. 
  • How will the America Invents Act’s “prior user rights” impact the bio and pharma industries? The Patent Docs Blog has a post that concisely summarizes the debate at the recent BIO International conference (the post concludes that the impact may be minimal). 
  • Are you representing both the employee accused of stealing trade secrets and his/her new employer? Then you should read “Three Pitfalls of Joint Representation in Non-Compete Cases” by W. Mark Bennet for Strasburger’s NonCompete Blog


  • “Lawyers Get Vigilant on Cybersecurity” reports The Wall Street Journal. For more on this issue, please see my February post detailing increasing cyberattacks directed at lawyers. 
  • The latest headache in BYOD? “Who Owns the Email?” asks Gardere’s Peter Vogel in his Internet, Information Technology and e-Discovery Blog
  • Monica Bay details “The Fast Rise of the ‘Bring Your Own Device’ Buzzword” in Corporate Counsel
  • For an interesting take on the ongoing debate over the pending cybersecurity legislation, check out Forbes writer Ken Silverstein’s “Cyber Security Debate Pits Corporate Interests Against National Security.”
  • Looking for “An App that Encrypts, Shreds, Hashes and Salts”?  Check out this post on The New York Times Bits Blog.

News You Can Use: 

  • The Time Management Ninja has “10 Apps to Make Your iPad More Productive.”
  • In “Stunning Progress in Technology: The Death of Unskilled Labor,” Forbes‘ Aaron Franks details the changes in tech manufacturing that may mean these jobs are never coming back.

CBS v ABC Order 06 21 12.pdf (63.65 kb)

The Ohio State Bar Association has invited me to speak at 2:00 p.m. this Friday afternoon as part of its annual “Advising Corporate Directors and Officers” Seminar. I’ll be presenting on the topic, “Drafting and Enforcing Covenants to Not Compete in the Present Economy: Noteworthy Legal Developments and Practical Pointers.” The seminar will provide a total of 6.0 CLE hours. 

Here is a rundown of all of the speakers and topics being offered:

8:30 a.m. – “Duties of Directors and Officers Under Ohio Law,” John Beavers & Kevin Kinross, Bricker & Eckler LLP (Columbus)

10:15 a.m. – “The SEC Whistleblower: Corporate Best Practices,” James Cummins, Waite Schneider Bayless & Chesley (Cincinnati) & Phyllis Brown, The Law Offices of Phyllis Brown, LLC (Cincinnati)

12:45 p.m. – “Seven Habits of Highly Ineffective Global Contract Negotiations,” Anthonio Fiore & Martijn Steger, Kegler Brown Hill & Ritter (Columbus)

2:00 p.m. – “Drafting and Enforcing Covenants to Not Compete in the Present Economy: Noteworthy Legal Developments and Practical Pointers,” John Marsh, Hahn Loeser & Parks LLP (Columbus)

3:00 p.m. – “Records Retention Policies,” Martin Susec, Nationwide (Columbus)

Registration begins at 8 a.m. at the offices of the Ohio State Bar Association (1700 Lake Shore Drive in Columbus). I have attached a PDF of the flyer with further information for those that are interested. Hope to see you there.

OSBA Seminar and Schedule.pdf (234.65 kb)