December was unusually busy and 2023 started with a bang courtesy of the Federal Trade Commission’s (FTC) proposed rule banning noncompetes.  Here are the noteworthy cases and posts from last month, with several notable posts regarding the FTC’s big announcement on Thursday, for good measure:

Noteworthy Defend Trade Secrets Act Cases, Federal Trade Secrets Opinions and Related Commentary:

  • Courts continue to scrutinize claims of irreparable injury in trade secret cases, and no court runs a tighter ship than the U.S. District Court for the Southern District of New York.  In Tomgal LLC v. Castano, District Court Judge John Koeltl of the U.S. District Court for the Southern District of New York denied an injunction request, reasoning that irreparable injury did not exist because any injury arising from the misappropriated trade secrets could be easily calculated.  Judge Koeltl found “every unit of inventory that [defendant] Fashion Code sells to a Robin Ruth distributor is a sale that Robin Ruth did not make,” i.e., profits from the sale of the products containing the misappropriated trade secrets could be easily monetized. Judge Koeltl also rapped the plaintiff’s knuckles on laches grounds, finding that a 7-month delay was substantial and unreasonable.
  • If you don’t identify your trade secrets with particularity, you are not going to get an injunction.  That is the simple message that many federal courts are sending to trade secret owners, and a recent decision by District Court Judge Nugent of the U.S. District Court for the Northern District of Ohio is the latest. To date, most of the discussion regarding trade secret identification has been at the discovery stage but now courts are reinforcing that message by denying early requests for an injunction. In Collar Jobs, LLC v. Slocum, Judge Nugent denied the request for an injunction against a former joint venture partner, expressing concern that “it is not entirely clear what Collar Jobs’ ‘trade secret’ is.”   He also questioned the novelty of the alleged “platform” trade secret before him, which appeared to be a combination trade secret of customer and prospect data.
  • So Judge Nugent’s opinion begs the following question: should the DTSA be amended to include a requirement that trade secret identification is provided early in a case?  In an article for Law360, Willenken LLP’s Amelia Sargent details recent rulings by the U.S. Courts of Appeal for the Seventh Circuit and Ninth Circuit recognizing the need for identification and advocates for that amendment.  It’s a good read and Amelia’s points are reasonable and sound.
  • A recent decision out of Massachusetts cuts against the trend of decisions broadly interpreting the extraterritorial reach of the DTSA.  In Sysco Machinery Corp. v. Cymtek Solutions, Inc., District Court Judge Leo Sorokin of the U.S. District Court for Massachusetts ruled the sale of products in the U.S. that were made using the alleged trade secrets, without more, did not qualify as “an act in furtherance” of misappropriation under the DTSA.  According to Judge Sorokin, the defendant Cymtek used the misappropriated trade secrets improperly to make competing machines in Taiwan, but all of that conduct occurred in Taiwan or outside the United States; as a result, on this record, he found that there was neither “misappropriation” in the United States nor an “act in furtherance of the offense . . . committed in the United States” as required under §1837(2) of the DTSA.  Contrast this ruling to the decisions described in my September 2021 post.  Tough to reconcile in my judgment.


Continue Reading Monthly Wrap Up (January 9, 2023): Noteworthy Trade Secret and Restrictive Covenant Posts, Cases and Developments

I had a trial this month, so I was delayed in my wrap up of noteworthy developments from November.  Here they are:

Noteworthy Defend Trade Secrets Act Cases, Federal Trade Secrets Opinions and Related Commentary:

  • Who would have thought a case about broccoli seeds could sprout so many interesting legal issues?  Certainly not me.  But the U.S. Court of Appeals for the Sixth Circuit just issued an opinion in Caudill Seed & Warehouse Co. v. Jarrow Formulas, Inc., that is, to quote the jurist Robert Bork, a veritable “intellectual feast” of trade secret issues.  In the culmination of a nearly-decade long dispute, the Sixth Circuit affirmed the verdict and several rulings by the district court about the viability of trade secrets arising from the collective research for those broccoli seeds.  The opinion is worth reading for several reasons.  In particular, the opinion provides guidance on what needs to be shown to assert a combination trade secret, which is a trade secret composed of multiple publicly available elements.  The Sixth Circuit held that because a combination trade secret has those publicly available elements, the trade secret owner must make an additional showing that the combination trade secret is unique, a requirement normally not imposed on other trade secrets.  The opinion is also noteworthy for its analysis of what needs to be shown for misappropriation of a combination trade secret as well for its analysis of the damages related to the defendant’s saved costs in connection with the research and development of those broccoli seeds.  For other takes on the Sixth Circuit’s opinion, check out Anthony Ferrara’s post for McDermott Will & Emery’s trade secrets section for its IP Update Blog and Siena Sylvester’s post for Sheppard Mullin’s Trade Secrets Law Blog.
  • And while we’re on the topic of an opinion covering multiple interesting trade secret issues, the U.S. District Court for the Central District of California has issued a highly factual decision that addresses, among other things, the intersection of a researcher’s general skill and knowledge and his former employer’s confidential research information. In Masimo Corp. v. True Wearables, Inc., Judge James Selna issued an injunction restraining the former researcher and his current company from using trade secrets arising from pulse oximetry, which involves measuring oxygen in the blood.  The opinion addresses a range of tricky issues such as the use of trade secrets from memory, the concept of independent development and a good discussion of the affirmative defense of what is readily ascertainable under California law, but I found Judge Selna’s application of the “person of ordinary skill in the art” test to differentiate the former employee’s general skill and knowledge to be particularly important.  Courts have grappled with tests to distinguish an employee’s general skill and knowledge from an employer’s trade secrets, and so far as I can tell, this is the first time that a court has used this objective test from the patent world to separate the two categories of information.
  • IBM scored a major victory in a dispute brought by a Chinese venture capital partner against one of IBM’s Chinese affiliates, securing the dismissal of a complaint for failure to state a claim for relief and lack of personal jurisdiction grounds.  In a post for The IP Watchdog, Alex Pronk summarizes the ruling in Beijing Neu Cloud Oriental System Tech. Co., Ltd. v. International Business Machines Corporation, in which U.S. District Court for the Southern District of New York Judge Alvin Hellerstein found that (a) the plaintiff had failed to adequately identify the trade secrets at issue (confidential customer information), and (b) that the information was “available through public and independent sources”, reasoning “it is implausible that [IBM] would not be able to identify potential users of IBM technology without [Beijing Neu Cloud] having identified some of them.”
  • Would you like insurance coverage for your trade secrets case?  Then you should review the U.S. Court of Appeals for the First Circuit’s opinion in Lionbridge Tech., LLC v. Valley Forge Ins. Co., which held that a trade secret claim that allegedly caused reputational damage to the plaintiff triggered defamation coverage for what were otherwise traditional trade secret claims.  Hannah Cohen details the opinion for the Trade Secrets section of McDermott Will & Emery’s IP Update Blog.
  • Here’s a head-scratcher out of California dismissing a statute of limitations defense.  In Pinkerton Tobacco v. Kretek Int’l, the defendant Kretek produced evidence that plaintiff knew in 2016 that Kretek was importing and selling a competing device that included the trade secrets, knew that another party (Ericsson) was involved in the manufacture of that device, and suspected that Ericsson was using the trade secrets to manufacture the device that he had sold to the plaintiff. As a result, Kretek moved for summary judgment, arguing the plaintiff’s claim was barred by the three-year statute of limitations because the plaintiff knew that the device was manufactured using its trade secrets. The U.S. District Court for the Central District of California, however, denied the motion, reasoning that the defendant had only shown that the plaintiff had knowledge that the product was manufactured using misappropriated trade secrets, as opposed to demonstrating that the defendant had the requisite knowledge of the trade secrets themselves.  Mark Klapow and Ryan Fitzgerald have a post for Crowell’s Trade Secret Trends Blog on this curious decision.
  • Wrestling with what you need to plead to ensure that your DTSA claim satisfies the interstate commerce requirement?  Then check out U.S. District Court for the Northern District of Ohio Judge Bridget Brennan’s opinion in Health Care Facilities Partners, LLC v. Diamond, which lays out the particulars required to satisfy that pleading requirement.


Continue Reading Monthly Wrap Up (December 15, 2022): Noteworthy Trade Secret and Restrictive Covenant Posts, Cases and Developments

While there was minimal legislative actively last month, there were a number of interesting decisions and articles on the trade secret and restrictive covenant front:

Noteworthy Defend Trade Secrets Act Cases, Federal Trade Secrets Opinions and Related Commentary:

  • Perhaps the biggest news last month was the $104.65 million verdict against Ford Motor Co. delivered by a Michigan federal jury for the breach of its contract with Versata Software and the misappropriation of Versata’s trade secrets.   The dispute arose over a 2004 agreement between Versata and Ford for software that Versata developed to manage how components in Ford vehicles would be configured during assembly.  Versata had been a vendor of Ford’s since the 1990’s until 2015 when Ford terminated the relationship.  The jury found that after off-ramping Versata, Ford improperly reverse engineered the software for its own use.  The jury awarded $22.39 million to Versata for three of the software trade secrets and $82.26 million for Ford’s breach of contract.  Ford plans to appeal.  Like the Goodyear case that I recently wrote about, this dispute highlights the fact that trade secret cases don’t just involve departing employees.
  • Speaking of cases involving employees, Patently O‘s Dennis Crouch did an informal survey of 10 recently filed federal trade secret cases.  Dennis noted that all 10 of the cases involved employer/employee disputes and many arose in the sales representative context over customer and sales information.  One of the cases, Cartiga, LLC v. Robles, provides a textbook example of how NOT to respond to a cease-and-desist letter from your former employer’s lawyer (the emojis below were attached as an exhibit to the complaint):
  • Having prevailed before the U.S. Court of Appeals for the Eleventh Circuit, Boeing successfully secured the dismissal of trade secrets claims asserted against it by arguing that a limitation of liability provision in its nondisclosure agreement (NDA) also applied to the same trade secret claims.  Reasoning that because the NDA’s choice of law provision applied to those trade secret claims, the U.S. District Court for the Northern District of Alabama held that the NDA’s limitation of liability provision applied to those claims as well.  That opinion, Alabama Aircraft Indus., Inc. v. The Boeing Company, can be found here.
  • The U.S. Court of Appeals for the Third Circuit issued yet another opinion taking a narrow approach to a trade secrets claim, affirming the trial court’s decision to deny an injunction against a group of employees.  In Matthews Int’l Corp. v. Lombardi, the Third Circuit found that the trial court properly exercised its discretion to limit injunctive relief to a single bad actor and not impose a broader injunction against the remaining individual defendants preventing them from otherwise lawfully competing.  The other individuals had already agreed, as memorialized by a subsequent order, to (1) return all of the plaintiff’s information, (2) remove the information from their devices, and (3) refrain from servicing customers who had the plaintiff’s cremation equipment.  The Third Circuit reasoned that no injunction was necessary for multiple reasons, including the absence or expiration of any restrictive covenants, the absence of any breach and the plaintiff’s inability to show irreparable injury.  Isaiah Weedn has a good summary of the case in Sheppard Mullin’s Trade Secrets Law Blog.
  • Federal courts continue to grapple with the importance of circumstantial evidence to demonstrate misappropriation at the summary judgment stage.  Last month, I wrote about a decision out of the U.S. District Court for the Northern District of Illinois holding mere possession of a trade secret was insufficient to show use.  However, in Clean Energy v. Trillium Transportation Fuels, Inc., Magistrate Peter Bray of the U.S. District Court for the Southern District of Texas held that “proof of ‘use’ often depends upon circumstantial evidence” and found that the circumstantial evidence presented to him was sufficient to deny the defendants’ motion for summary judgment.  The cases probably can be reconciled by the fact that there was more circumstantial evidence to offer in the Clean Energy case, but the decisions do highlight a schism on the significance of direct vs. circumstantial evidence.
  • Federal courts are also split on the availability of the inevitable disclosure doctrine under the DTSA, according to Mintz’s Oliver Ennis, Nicholas Armington and Adam Samansky in an article for The National Law Journal.
  • One of the signature developments of the DTSA has been the mind-numbing number of opinions addressing motions to dismiss under Federal Rule of Civil Procedure 12(b)(6).  Fisher & Phillips’ David Walton provides a five-step action plan for making sure your bases are covered if you are filing a claim under the DTSA.  Maxwell Goss also has an earlier post this year on the same topic that was published by The Michigan Law Journal.
  • Is there a circuit split on the enforceability of forum selection clauses?  Given the many differences between state laws on restrictive covenants, a forum selection clause can be outcome determinative.  Sarah Tisher of Beck Reed Riden has a post about that split and the prospects that the U.S. Supreme Court may address it.
  • The avoided cost theory of damages continues to gain traction as an element of damages in trade secret cases, advises Andrea Feathers for Sheppard Mullins Trade Secrets Law Blog.  In essence, the doctrine recognizes the cost savings that a misappropriator realizes when it is able to shortcut the research or development of a product or service by using that trade secret.  Heather writes about a recent decision of the U.S. District Court for the Southern District of California in Medimpact Healthcare Sys. v. IQVIA Inc., No. 19cv1865-GPC(DEB), 2022 U.S. Dist. LEXIS 186470, at *1 (S.D. Cal. Oct. 7, 2022), that recognized the availability of the doctrine but deferred ruling on how best to calculate those damages in further briefing.  Heather’s post provides a solid summary of the development of this theory of damages and the key decisions that have led to its increasing recognition and use by trade secret owners.


Continue Reading Monthly Wrap Up (November 11, 2022): Noteworthy Trade Secret and Restrictive Covenant Cases, Developments and Posts

And away we go:

Noteworthy Defend Trade Secrets Act Cases, Federal Trade Secrets Opinions and Related Commentary:

  • If an employer presents specific evidence that former employees emailed, printed out or took copies of customer lists, is that sufficient evidence to establish that those former employees misappropriated those trade secrets for purposes of defeating summary judgment?  In Busey Bank v. Michael G. Turnery, et al., U.S. District Court for the Northern District of Illinois Judge Sara Ellis concluded that it was not enough since “mere possession of trade secrets does not suffice to plausibly allege disclosure or use of those trade secrets, even when considered in conjunction with solicitations of former clients.”  A link to the opinion can be found here, and Law360′s article on the case can be found here.  The opinion is interesting to me in two respects:  (1) it is consistent with an emerging trend requiring direct, rather than circumstantial, proof of misappropriation (see my earlier post on the Wisk Aero v. Archer Aviation case and on other federal cases finding that mere downloading isn’t enough for an injunction); and (2) reading between the lines, it seemed like Judge Ellis saw this case as an employee “raiding case” masquerading as a trade secrets case.
  • Although most trade secret disputes arise in the employer/employee relationship, a recent opinion by the U.S. Court of Appeals for the Second Circuit serves as a reminder that the contours of trade secret law are often shaped by disputes in the public records context.  In a post for Crowell’s Government Contracts Legal Forum, John McCarthy, Anuj Vohra and Daniel Wolff describe the decision that better defined what degree of competitive harm needs to be presented to support a trade secret invocation under the 2016 FOIA Improvement Act.
  • Discovery disputes are common in trade secret litigation because of the nature of information at issue (i.e., highly sensitive trade secrets) and the potential intrusiveness of some of the types of discovery (imaging and forensic analysis of personal devices).  However, a defendant’s continued resistance and non-compliance with discovery requests and court orders led to the rarest of sanctions–a default on the merits.  In RedWolf Energy Trading, LLC v. BIA Capital Management, LLC, et al., the U.S. District Court for the District of Massachusetts imposed this sanction against the individual defendant and his company.  Erik Weibust details the court’s 72-page decision for Epstein Becker’s Trade Secrets & Employee Mobility Blog.  Erik’s post highlights the fact that the defendant tried to save costs on a discovery vendor (blaming him for its failure) and is now on the hook for more than $10 million in damages.
  • And the U.S. District Court of Massachusetts is not the only court that has issued terminating sanctions against a party for failing to abide by discovery obligations and court orders.  For a comprehensive list of spoliation cases involving requests for severe sanctions, check out Arent Fox’s Linda Jackson, Matthew Prewitt, Taniel Anderson, Nadia Patel and Pascal Naples’ article for The National Law Journal describing multiple cases over the past 3 years in which courts have imposed severe sanctions on recalcitrant parties.
  • Speaking of discovery disputes, there is an interesting decision coming out of the Wisk Aero v. Archer Aviation case in the U.S. District Court for the Northern District of California (for more on that case and its well-reasoned decision denying a preliminary injunction, see my post from last year).  U.S. District Court Judge Orrick affirmed the ruling of Magistrate Judge Donna Ryu that permitted the individual defendants accused of trade secret theft in that case to review the trade secrets at issue; frankly, given the need for a defendant to evaluate the trade secret claims against it, it never fails to amaze me that employers and trade secret owners resist these types of disclosures.  However, the most interesting feature of the Magistrate’s order is that each defendant was only allowed to view the trade secret for 15 minutes.  Jim Pooley briefly touches on this dispute in a post he wrote for The IP Watchdog as he describes the many situations where courts have to balance competing policies and interests in trade secret litigation.
  • Steve Brachman has a post for the IP Watchdog on the viability of an argument that the DTSA’s policy supporting federal protection for trade secrets trumps a forum selection clause directing litigation to Denmark.  In Amyndas Pharmaceuticals, S.A. v. New Zealand Pharma AS, the U.S. Court of Appeals for the First Circuit rejected that and other arguments and shipped the case out to a Danish court.  The First Circuit made short work of the argument that the terms “defendants’ venue” meant anything other than the corporate headquarters of that defendant, reasoning any other interpretation would render the phrase meaningless.  Dennis Crouch also has a post on the decision for the Patently-O blog.


Continue Reading Monthly Wrap Up (October 5, 2022): Noteworthy Trade Secret and Restrictive Covenant Cases, Developments and Posts

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:

Legislative Developments

  • 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.


Continue Reading Monthly Wrap Up (May 8, 2018): Noteworthy Trade Secret and Non-Compete Cases, Developments and Posts

Here are the noteworthy trade secret and restrictive covenant posts from September and some of October:

Legislative Developments
  • 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.


Continue Reading Monthly Wrap Up (October 27, 2017): Noteworthy Trade Secret and Restrictive Covenant Posts from Around the Web

As the first year anniversary of the Defend Trade Secrets Act (DTSA) has just passed, it is worth taking a step back and taking stock of how courts have treated key provisions.  This will be the first of several posts covering developments under the DTSA and analyzing how it has been used since its enactment.

One of the most-discussed features of the DTSA was its creation of a “whistleblower” immunity that allows employees to share evidence of an employer’s alleged misconduct with government authorities or present that evidence in support of a retaliation claim under seal in court and avoid a claim that the employee misappropriated trade secrets when they disclosed that information. This provision, 18 U.S.C. §1833, is the only provision of the DTSA that preempts state law, so it affords protection to an employee against an employer’s claims under the Uniform Trade Secrets Act or common law as well.

As readers may recall, the DTSA requires employers who want to take advantage of the DTSA’s full protections to amend their contracts, employee agreements, and policies to provide notice of that whistleblower defense to its employees, which has been broadly defined to include independent contractors.  If a company fails to include that notice in its agreements or policies, it is foreclosed from seeking claims for attorney’s fees and exemplary damages under the DTSA.  The DTSA broadly defines an employee to include “any individual performing work as a contractor or consultant for an employer” so both 1099 and W-2 employees are covered under this provision.whistle 2

Not surprisingly, when the DTSA was enacted, many employers were concerned about what, if any notice, needed to be supplied to its employees about this immunity and to what extent they needed to amend their employment agreements and policies.  Section 1833(b)(3)(B) makes clear that an employer can comply with this notice provision if its employment agreement simply cross-references a policy document that more fully describes the employer’s reporting policy for a suspected violation of the law.  However, the DTSA does not define what kind of notice or language must be provided, so it remains an open question of whether a specific citation to the DTSA would be sufficient or whether the relevant language of the DTSA’s whistleblower provision needs to be included.

To date, there is only one case involving the DTSA’s whistleblower provision.  This should not come as too much of a surprise since the whistleblower provision’s primary consequences — a challenge to an award of attorneys’ fees or exemplary damages under the DTSA for failure to provide notice of that immunity  or the viability of the immunity itself– will generally require that a case have been fully litigated, something that has not happened with many DTSA cases.
Continue Reading The Defend Trade Secrets Act After One Year: The Whistleblower Provision

Sunday Wrap-Up (Aug. 25, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web
Continue Reading Sunday Wrap-Up (Aug. 25, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

Thursday Wrap-Up (July 25, 2013): Noteworthy Trade Secret, Covenant Not to Compete and Cybersecurity News from the Web
Continue Reading Thursday Wrap-Up (July 25, 2013): Noteworthy Trade Secret, Covenant Not to Compete and Cybersecurity News from the Web

Friday Wrap-Up (July 19, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web
Continue Reading Friday Wrap-Up (July 19, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web