07012013There have been a number of thought-provoking articles in the wake of the U.S. Supreme Court’s decision last week in Association for Molecular Pathology v. Myriad Genetics, a decision that found that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated. At least one commentator has opined that the decision has sent shockwaves through the very foundation of the biotech industry.  Not surpisingly, a decision of this magnitude tends to trigger ripples in all areas of intellectual property, and trade secret law is no exception.

In a provocative Op-Ed for The New York Times entitled “Our Genes, Their Secrets,” researcher Eleonor Pauwells takes Myriad to task because it has compiled a substantial and highly proprietary database of its genetic research but has declined to share the contents of that database with other research bodies and healthcare organizations. She advocates that the federal government should use its powers to compel Myriad and other BioTech companies to share their trade secrets for the public good.

Specifically, Eleonor advocates that the United States Food and Drug Administration “should immediately investigate the impact of trade-secret protection on innovation in personalized medical treatments. The FDA could also mandate public disclosure as a condition of market approval for genetic testing. Insurers too have some leverage: they could refuse reimbursements unless clinical data is shared for interpretation.” In other words, if Myriad wants to commercially benefit from its trade secrets, it should be compelled to share them with the government.

By some accounts, Myriad has invested more than $500 million in this proprietary database.  It does not appear that the database was created through federal funding or through some other federal largesse that might entitle the government to some claim to the database or the data contained within that database.  In other words, the database is the result of Myriad’s own money and effort.  So the question is whether the government can, or should, compel Myriad to share the fruits of its investment with others?

Growing Tensions Between Trade Secrets and The Public Interest: This is not the first time that someone has suggested that the public interest should trump the investment that a company has made in its trade secrets. Some have opined that the trade secrets of voting company manufacturers should be set aside so that the public can verify that their machines have properly tallied votes. Likewise, the highly-charged debate over fracking has pitted public interest groups against energy firms as they jockey over the disclosure of the chemicals and processes used by those companies in the fracking process. The dispute over Myriad’s database is not a new one and has been percolating for years as researchers and others have complained about its refusal to allow others to access its database.  As trade secret protection continues to grow as a means of protecting intellectual property, these disputes will continue to emerge.

Apples and Oranges?  The Supreme Court’s reluctance to provide a patent grant in the Myriad decision should not be construed as momentum to diminish trade secret status in situations involving the public interest. While patents and trade secrets are kindred spirits (the old adage that every patent starts its live as a trade secret comes to mind), the policies behind these two types of intellectual property are very different. The patent system is intended to spur innovation by providing a quid pro quo to the inventor — in exchange for revealing his or her invention, the patentholder receives a grant of exclusivity which allows others to study, design around or build upon that invention. This bargain necessarily involves disclosure of the novel invention, which is the cornerstone of this innovative process.

In contrast, while innovation may be a consequence and benefit of a trade secret, by its very nature, a trade secret is not intended to be shared nor is novely a key requirement.  Rather, the key purpose of trade secret law is to protect the investment of a particular company by preventing a employee, partner or other party from unfairly exploiting and stealing that investment. Unlike patent law, trade secret law is rooted on an ethical component.

Leaving aside this compact that recognizes the property interest inherent in trade secrets, the notion that a company should be compelled to divest itself of its research and share that research for the public good would almost certainly inhibit the very innovation that Eleonor seeks to promote. Why invest substantial resources in a process, invention or database if you are ultimately going to have to turn it over to the government so that it share that database with your competitors? 

The events of the past few months should temper any enthusiasm for having the federal government serve as a sentinel of proprietary and sensitive information.  Having the government serve as a broker in which it grants access to certain markets in exchange for access to that data is an even worse idea.  For these reasons, no matter how laudable the goal, the government should respect the property interest of a trade secret holder and resist the temptation to interfere. 

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: Computer Fraud & Abuse Act Articles, Cases and Posts:
  • As I briefly noted in my post last night, Congresswoman Zoe Lofgren (D-CA) and Senator Ron Wyden (R-OR) have introduced an amendment to the CFAA popularly known as “Aaron’s Law,” to narrow the CFAA, reports Wired. As readers of this blog know, Swartz had been charged under the CFAA after allegedly accessing the server of MIT to improperly download approximately 4.8 million academic journals; he committed suicide earlier this year after negotiations over his plea bargain broke down. The amendment would, among other things, define access without authorization and exclude online agreements, computer use policies and employment agreements from serving as a basis for a claim under the CFAA.
  • For more commentary on Aaron’s Law, see Russell Beck’s post in his Fair Competition Blog, Robert Milligan’s post for Seyfarth Shaw’s Trading Secrets Blog, and Jason Weinstein’s take for Steptoe’s Cyberblog.
Trade Secret and Non-Compete Cases. Posts and Articles:
  • “Obama Administration Issues New Strategic Plan for Intellectual Property Enforcement,” announces Russell Beck, who provides a fine summary in his Fair Competition Law Blog.
  • The ITC and a Chinese court have come to opposite conclusions over the same basic trade secrets dispute, notes Orrick’s Trade Secrets Watch Blog. In, “Rubber Match? Resin Trade Secret Battle Results in a Multi-Jurisdictional Draw,” Mark P. Wine and Francis Cheever report that the ITC ruled in favor of American rubber manufacturer SI Group but that the Chinese court sided with Chinese manufacturer Sino Legend. For more on the ITC proceeding, see, “ITC judge rules for SI Group in intellectual property case,” in RubberNews.com.
  • Speaking of long-running trade secret imbroglios involving Chinese companies, “Chinese Wind-Turbine Maker Sinovel Charged With IP Theft,” reports Law360. The U.S. Attorney for Wisconsin has indicted Sinovel for the alleged theft of source code from American Superconductor’s computer system. The New York Times also has an article covering the indictment.
  • For those embroiled in a dispute over a forum selection clause in Georgia, “Atlantic Pacific Illustrates Impact of Georgia’s New Restrictive Covenants Law on Forum and Venue Selection Considerations,” advises Collin L. Freer for Berman Fink Van Horn’s Georgia Non-Compete and Trade Secret News Blog.
  • “U.S. District Judge in Massachusetts Declines to Enforce Noncompetes Because the Jobs of Two Employees ‘Materially Changed,’” advises Brian Bialas for Foley & Hoag’s Massachusetts Noncompete Law Blog.
  • “Tyco Accused Of Smear Campaign In Trade Secrets Row,” reports Law360.
  • For more on the new Connecticut non-compete statute, see “Non-Compete Legislation In Connecticut,” by David Popick for Epstein Becker’s Trade Secrets & Noncompete Blog, and, “Connecticut Law Restricts the Use of Non-Compete Agreements in Acquisitions and Mergers,” by Patricia Reilly, Matthew Curtin and Stephen Rosenberg for Littler’s Unfair Competition & Trade Secret Counsel Blog.
  • “Rogue Employees – What to do?” asks Rob Radcliff for his Smooth Transitions Blog.
  • “Takeaways From UK’s Vestergaard Trade Secrets Case,” advise Akash Sachdeva and Ben Hitchens of Edwards Wildman Palmer LLP for Law360.
Cybersecurity Posts and Articles:
  • “Bank’s new cybersecurity audits catch law firms flat-footed,” reports Martha Neil for the ABA News.
  • “Big Banks Worried About Outside Counsel Who BYOD,” advises David Hechler for Corporate Counsel.
  • “FINRA Sees ‘Proliferation’ of Complaints About Cybersecurity Breaches, Official Says,” reports Maria Lockshin for Bloomberg BNA.
  • “Federal Data Breach Legislation Introduced, But Will It Go Anywhere?” asks Christin McMeley of Davis Wright Tremaine for JDSupra.

In an unexpected but significant development, Silicon Valley Congressman Zoe Lofgren has introduced a bill that would add a civil cause of action to the Economic Espionage Act (EEA).  At the present time, the EEA only authorizes the federal government to pursue civil and criminal actions.  Last week, Congresswoman Lofgren introduced H.R. 2466, which is titled the “Private Right of Action Against Theft of Trade Secrets Act of 2013” (“PRATSA”) and it is a welcome effort to provide a federal civil remedy to companies that have had their trade secrets stolen.  (A hat tip to Robert Milligan and Daniel Joshua Salinas for their excellent post on this amendment).

PRATSA is remarkably simple. First, it only seeks to add a civil remedy for violations of 18 U.S.C. §1832(a) which presently permits criminal prosecutions for trade secrets “related to a product or service used in or intended for use in interstate or foreign commerce.”  Second, it explicitly exempts efforts to lawfully reverse engineer a trade secret, addressing a potential ambiguity that existed previously under the EEA.

In this respect, Congresswoman Lofgren’s bill stands in contrast to previous efforts to add a civil cause of action to EEA that sought to add a number of provisions that may have, in retrospect, unduly complicated their passage.  In 2011 and again in 2012, Senators Chris Coons and Herb Kohl introduced the Protecting American Trade Secrets and Innovation Act (PATSIA) that was directed primarily at international trade secret misappropriation.  PATSIA proposed, among other things, an ex parte seizure order that would have allowed a claimant to seize misappropriated product or preserve evidence, as well as heightened pleading requirements.  Both of those efforts to enact PATSIA ultimately languished in committee.

The amendment is a shrewd one because it complements another amendment that Congresswoman Lofgren recently introduced with Senator Ron Wyden (D-OR) to narrow the Computer Fraud and Abuse Act (CFAA).  That proposal, which has been named Aaron’s Law, seeks to remedy perceived abuses of the CFAA, the complaints over which reached a crescendo earlier this year when Internet activist Aaron Swartz committed suicide during the course of his prosecution under the CFAA.  (For more on the Swartz prosecution, see my post earlier this year here). 

Among other things, Congresswoman Lofgren’s amendment to the CFAA would effectively prohibit employers from using the CFAA for trade secret misappropriation claims.  A number of courts, including the U.S. Courts of Appeal for the Fifth, Seventh and Eleventh Circuits have allowed employers to use the CFAA to ensnare former employees who violated computer use policies when they improperly accessed and then took trade secrets from their computers with them to their new employer.

In other words, Congresswoman Lofgren has dangled the carrot of a possible trade secret civil remedy in exchange for the stick of narrowing the CFAA to eliminate its use as a trade secret statute.  I suspect that her proposal will be particularly popular in her home state of California, since it provides those employers with a federal trade secret remedy that has been lacking since the U.S. Court of Appeals for the Ninth Circuit held that the CFAA should not be applied to violations of computer use policies.

All in all, a very positive development.  The simplicity of the amendment, coupled with the recent recognition that trade secret theft has become a matter of national security, will hopefully ensure its passage into law.

Kenneth Vanko, Russell Beck and I have completed our eleventh Fairly Competing Podcast, “Trade Secrets, Back to Basics Part 2.”

In Episode 11, Russell, Ken and I discuss commonly used security measures businesses implement to protect trade secret information. We examine security steps companies should take at the time key employees join the organization, as well as those exit interview steps that lead to the better protection of confidential business information. Finally, we discuss the perils of “bring your own device” policies that companies utilize, which may impact the ability to protect trade secrets adequately.

You can listen to the podcast by going to the Fairly Competing website or clicking the link below. Or you can subscribe to the podcast on iTunes. (As always, we’d appreciate your feedback).

Listen to this episode.

The corrected version of today’s Thursday Wrap-Up post is posted below. A technical glitch caused the post to inadvertently launch last night so we apologize to our subscribers. We appreciate your loyalty and work hard to deliver valuable content. Thank you for your patience.  Now, to the noteworthy trade secret, non-compete and cybersecurity stories from the past week: Trade Secret and Non-Compete Cases, Posts and Articles:
  • For you sports fans, a budding dispute is emerging in the NBA over the enforceability of Boston Celtics coach Doc Rivers’ non-compete. Rivers, one of the more highly regarded NBA coaches, has been approached by the Los Angeles Clippers but a non-compete in his contract may prevent his move. For their take on the situation, check out Rob Dean’s post, “Calling Foul on Doc Rivers’ Non-Compete Contract,” for Frith & Ellerman’s Virginia Non-Compete Blog as well as Kenneth Vanko’s post in his Legal Developments in Non-Competition Agreements Blog.
  • Wondering how the U.S. Supreme Court’s Myriad decision may affect the use of trade secrets? Then check out “In Setting Genes Free, Supreme Court Decision Will Put Greater Emphasis on Trade Secret Protection in Biotech,” by Michael Baniak for Seyfarth Shaw’s Trading Secrets Blog.
  • For the latest on the high profile prosecution of Walter Liew and the Pangang Group, see “Trade Secrets Charges Survive Dismissal Bid In DuPont Case,” reports Law360.
  • “Creators of 5-hour ENERGY file complaint against DOJ for requesting ‘trade secrets,'” advises Joyce DeWitt for the Statesman Journal Blog.
  • In a surprisingly sympathetic article about Sergey Aleynikov’s legal travails entitled “Questions Linger in Case of Copied Code,” Reed Albergotti expresses concern about the most recent prosecution in The Wall Street Journal.
  • “Google, Judges Duck Latest Version of Trade Secrets Case,” reports Law360.
  • Looking for a “Broker Update” on trade secret and non-compete disputes in the financial industry? Then check out Rob Radcliff’s post in his Smooth Transitions Blog.
  • “Enforceability of a Noncompete Agreement will Often Depend Upon Context,” advises Jason Shinn for the Michigan Employment Law Advisor Blog.
  • “No, No, No – Your Independent Contractor Cannot Sign a Noncompete. Never. Ever,” exclaims Tiffany Hildreth for Strasburger’s Noncompete Blog.
  • “No Sanctions For Text Message Deletion,” advises Christopher Brif for the IT-Lex Blog.
  • “Trade Secret Suit Against Defense Co. Sent To Arbitration,” reports Law360.
  • “The New Prior User Rights Defense: How Often Will It Be Asserted?” ask Robert A. Pollock and Matthew R. Van Eman for Finnegan’s America Invents Act Blog.
Cybersecurity Posts and Articles:
  • “Why The NSA Leaks Will Lead To More Economic Espionage Against American Companies,” warns John Villasenor for Forbes Tech.
  • “Why Your CEO Is a Security Risk,” cautions Rohyt Belani  for the Harvard Business Review Network Blog.
  • Looking for a concise summary of all the pending federal cybersecurity and trade secrets legislation? Then check out “Pols Gone Wild: Congress Discovers Trade Secret Theft and Cybersecurity are Problems; We Sort Through the Explosion of Legislation,” by Sophie Yu and Gabriel M. Ramsey for Orrick’s Trade Secrets Watch Blog.
  • “5 Data Breach Risks You Can Prevent,” proclaim Clark Schweers and Jeffrey Hall for Law Technology News.
  • “The Public/Private Cooperation We Need on Cyber Security,” advises Harry D. Raduege, Jr. for the Harvard Business Review Network Blog.
  • “After Profits, Defense Contractor Faces the Pitfalls of Cybersecurity,” reports The New York Times.
Computer Fraud & Abuse Act Articles, Cases and Posts:
  • “Minnesota Federal Court Dismisses Computer Fraud and Abuse Act Claim Based on Departing Employee’s Downloading of Customer List,” reports Erik von Zeipel for Seyfarth Shaw’s Trading Secrets Blog.
  • For more on the recent decision denying a motion to dismiss the CFAA claim in the AMD trade secret case, see Erik Ostroff’s post “Computer Fraud and Abuse Act Applied Narrowly In AMD Case,” for his Protecting Trade Secrets Blog.
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 Posts and Articles:
  • “Can Business Relationships Be Trade Secrets? VA Federal Court Says No” advises Eric Ostroff in his Protecting Trade Secrets Blog. In Cablecom Tax Services v. Shenandoah Telecomms. Co., U.S. District Court Judge Michael Urbanski dismissed a tax consultant’s trade secrets claim against its telecommunications customers, reasoning that the consultant’s alleged relationships with tax authorities, a  tax-law “accounting system,” and its ability to negotiate property tax discounts did not qualify as protectable trade secrets under Virginia’s Uniform Trade Secrets Act. Scott A. Schaefers also has a post on this case for Seyfarth Shaw’s Trading Secrets Blog.
  • And while we are on the topic of trade secrets cases in Virginia, are you looking for a primer on the epic DuPont v. Kolon case? Then check out the superb post analyzing DuPont’s case by Eulonda Skyles and Michael Spillner for Orrick’s Trade Secrets Watch Blog.
  • Speaking of DuPont and Kolon, “Kolon Succeeds in Getting Its Trade Secret Theft Arraignment Postponed,” advises Todd Sullivan in Sullivan’s Trade Secrets Blog.
  • “Ex-Advanced Micro Workers Can’t Shake Trade Secrets Suit,” reports Law360 and Bloomberg. For more on the AMD trade secrets dispute, see my post from last month on the recent preliminary injunction restraining those same employees from misappropriating AMD’s trade secrets.
  • “Newscaster tripped up by Non-Compete,” reports Dan Frith for Frith & Ellerman’s Virginia Non-Compete Law Blog.
  • “It’s Not Just for Patents Anymore: Using the ITC to Combat Theft of Trade Secrets,” recommends Mark Memelstein and Misasha C. Suzuki for Orrick’s Trade Secrets Watch Blog.
  • “Hey, I Thought We Had An Agreement: California Appellate Court Allows Party To Seek Attorney’s Fees In Trade Secret Case,” exclaims Paul Henson in a guest post for Seyfarth Shaw’s Trading Secrets Blog.
  • Jason Cornell of Fox Rothschild has another post comparing different state’s non-compete laws, this time “A Comparison Of Illinois And Florida Law Governing Non-Compete Agreements,” for Mondaq.
  • “UK Supreme Court Rules on Case Involving Misuse of Trade Secrets by Former Employee,” reports Ezra Steinhardt for Covington’s Inside TechMedia Blog.
  • Jay Yurkiw of Porter Wright continues to churn out fine posts on e-discovery issues relevant to trade secret and non-compete disputes. For his latest, see “Court Relies on Proportionality to Deny Inspection of Defendant’s Computers, Cell Phones and Email Accounts” for Porter Wright’s Technology Law Source Blog.
  • “Deter Cyber Theft Act Would Augment Federal Policy Against Industrial Espionage,” advises Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • Interested in the interplay between “Liquidated Damages and Non-Competes”? Then check out Devin C. Dolive’s post for Burr & Forman’s Non-Compete Trade Secrets Law Blog. 
Cybersecurity Posts and Articles:
  • “Outside Law Firm Cybersecurity Under Scrutiny,” advises Catherine Dunn for Corporate Counsel.
  • “China’s Cyber Stonewall: Beijing won’t stop until it pays a price for its Internet thievery,” thunders The Wall Street Journal.
  • “How Vulnerable is Your Company to a Cyber Breach?” ask Clark Schweers and Jeffrey Hall for Corporate Counsel.
  • “What If China Hacks the NSA’s Massive Data Trove?” ponders Conor Freidersdorf for The Atlantic.
  • “Could Overreaction to Cybersecurity Threats Hurt Transparency at Home?” worries David S. Levine for Slate.
Computer Fraud and Abuse Act Posts and Cases:
  • In an initial skirmish that will inevitably lead to a lawsuit against the prosecutors in the Aaron Swartz CFAA case, “Judge Rejects Aaron Swartz’s Estate’s Request to Release Names of Individuals Involved in his Prosecution,” reports Hayes Hunt in the From the Sidebar Blog.

06122013One of the issues that divides many states is whether a covenant not to compete that is offered after the start of employment is enforceable.  Most states (such as Florida, Illinois, Massachusetts, New York and Ohio) recognize that mere continued employment is sufficient consideration to support a non-compete that is signed after an employee begins working for his or her employer. 

However, a sizable minority of states (such as North Carolina, Pennsylvania and Texas) generally refuse to enforce a non-compete that is presented after an employee begins work. In those states, continued employment is considered insufficient consideration as a matter of law and those states require that any non-compete signed after an employee has begun working must be supported by new and independent consideration such as a genuine promotion, stock options or some other tangible exchange.

Not surprisingly, things can get tricky in jurisdictions that do not recognize “subsequent” non-competes when it is unclear when the employee actually begins working or where there is a potential number of employment agreements.  On May 31, 2013, the Pennsylvania Supreme Court was forced to address this situation and determine whether a signed offer letter that did not mention a non-compete was the parties’ agreement or whether a subsequent employment agreement with a restrictive covenant signed on the employee’s first day of work constituted the actual employment contract.

In Pulse Technologies, Inc. v. Notaro, the Pennsylvania Supreme Court found that the signed offer letter that did not mention a non-compete was not a binding  employment contract between the parties.  Instead, the Supreme Court held that the non-compete included in the formal employment agreement signed on the employee’s first day was part of the actual contract between the employer and employee, and that the non-compete was therefore supported by consideration (new employment) and enforceable. (A copy of the opinion can be found as a PDF below; a special thanks to Mark Grace of Cohen & Grace for giving me an update on the opinion).

Background Facts:  In 2005, Pulse Technologies extended an offer of employment to Peter Notaro in a letter that described the new position, responsibilities, location, base salary, benefits, effective date and confidentiality requirements. The offer letter stated “You will be asked to sign our employment/confidentiality agreement” and that “[w]e will not be able to employ you if you fail to do so.”  Finally, the offer letter stated “the first day of employment you will be required to sign an Employment Agreement with definitive terms and conditions outlining the offer terms and conditions contained herein.” The letter did not mention any covenant not to compete.

Notaro signed the offer letter as instructed and on the first day of his employment with Pulse Technologies, he was asked to sign an employment agreement that contained a covenant not to compete. Notaro read, understood and signed the employment agreement and never objected or questioned the non-compete.

In 2010, Notaro resigned from Pulse Technologies to join a competitor, MK Precision, LLC.  Pulse Technologies sued to enforce the non-compete and secured a preliminary injunction enforcing it. However, on appeal, the Pennsylvania Superior Court of Appeals reversed and vacated the preliminary injunction, reasoning that because the offer letter did not mention the non-compete, the subsequent non-compete was not supported by adequate consideration.

The Pennsylvania Supreme Court’s Reasoning: The Pennsylvania Supreme Court rejected that reasoning, reversed the Appellate Court’s holding and reinstituted the non-compete. The Supreme Court held that the offer letter was simply part of the hiring process and did not constitute the actual employment contract between Notaro and Pulse Technologies. 

Focusing on the language and circumstances surrounding the offer letter, the Supreme Court concluded that the offer letter was simply intended to summarize a number of the key terms of the proposed employment relationship and that it was executed with “a view toward executing a binding contract in the future.” The Supreme Court emphasized that the offer letter’s language made clear that execution of an actual employment agreement would be required for any employment relationship and that as a result, the restrictive covenant was ancillary (or a essentially a condition) of the proposed employment relationship. Consequently, the subsequent non-compete was enforceable because it was supported by consideration — the offer and acceptance of employment at the start of the parties’ relationship.

The Takeaway:  If you are an employer in a state that does not recognize continued employment as sufficient consideration for a non-compete, this is an important decision. To its credit, the Pennsylvania Supreme Court did not elevate form over substance and instead took a hard look at the language and the circumstances of the offer letter and properly recognized that it was not the actual employment agreement. This decision should provide comfort to employers who do not expect that an offer letter will summarize each and every term of the prospective employment.

However, on a practical level, the most effective step that an employer can take to avoid this situation is to be open from the beginning about its expectation that a new employee will have to sign a restrictive covenant. It is always preferable to explain to a prospective employee that a restrictive covenant will be part of any employment package. Not only will that approach ensure that an employer has conformed with the law in jurisdictions such as North Carolina, Pennsylvania and Texas, but it will reduce the potential for confusion, bitterness or litigation in the future.

Pulse Technologies v. Notaro.pdf (51.34 kb)

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 Posts and Articles:
  • In yet another non-compete case involving a physician, an Illinois appellate court has affirmed a trial court’s rejection of a covenant not to compete because the employer, a medical clinic, lacked a protectible interest in the patient base at issue. Jeff Glass reports on the case, Gastroenterology Consultants of the North Shore, S.C. v. Meiselman, M.D., et al., for SmithAmundsen’s Labor and Employment Law Update. According to Jeff, the following facts caused the court to side with the doctor: prior to forming the corporation, he practiced for a decade in the area; after forming the clinic, he continued treating these patients and personally billed them, as opposed to the clinic; the clinic did not help him with advertising or marketing; and finally, his compensation depended on his independent practice.
  • “U.S., China Aim To Curb IP Theft Standoff With Talks” reports Law360.
  • Looking to protect your trade secrets under Chinese law? Then consult “Chinese Translation: Protecting Trade Secrets in China Requires Knowing Complex Layers of Laws and Practices,” by Mimiao Hu, Shelley Zang and Xiang Wang for Orrick’s Trade Secrets Watch.
  • “Former engineer at Bergen County based company charged with stealing trade secrets,” reports NewJersey.com. Ketankumar “Ketan” Maniar planned to relocate to India with trade secrets stolen from his employer, Becton, Dickinson and Company, U.S. Attorney Paul J. Fishman said.
  • For companies looking for a trade secrets lawyer, Kenneth Vanko has some fine practical advice, “The Employee’s First Client Meeting,” in his Legal Developments in Non-Competition Agreements Blog.
  • In the sad but true column, “(Practically) No Comment: White House Plea for Public Input on Trade Secret Theft Draws 13 Responses advise L. Kieran Kieckhefer and Warrington Parker for Orrick’s Trade Secrets Watch Blog. For 2 of the 13 responses, see Peter Torren’s opinion here and my submission here.
  • “New Oklahoma Law Clarifies Enforceability of Non-Solicitation of Employee Covenants” reports Daniel Joshua Salinas for Seyfarth Shaw’s Trading Secrets Blog.
  • Jason Cornell of Fox Rothschild provides “A Comparison Of New York And Florida Law Governing Non-Compete Agreements” for Mondaq.
  • “Can My Employer Enforce A Noncompete When We Get Our Customers Through Bidding?” asks Donna Ballman in her Screw You Guys, I’m Going Home Blog.
  • A New York Federal “Court Finds Potential Liability For Sending Cease And Desist Letter reports Lauri Rasnick for Epstein Becker’s Trade Secrets & Noncompete Blog. For more on the risks of a claim of intentional interference from a cease and desist letter, see my post here.
  • “District of Connecticut Addresses Trade Secret Act Preemption advises Eric Ostroff in his Protecting Trade Secrets Blog.
  • “Why Non-Competes are bad for the economy,” advises Laura Ellerman for Frith & Ellerman’s Virginia Non-Compete Law Blog.
  • “Public Policy Trumps Non-Compete in North Carolina,” reports Eric Welsh for Parker Poe’s Trade Secrets & Unfair Competition Reporter Blog.
  • “Medical Device Manufacturer Bound By The Restrictive Covenants It Implemented,” reports Zachary Jackson for Epstein Becker’s Trade Secrets & Non-Compete Blog.
Cybersecurity Posts and Articles:
  • In an interesting Op-Ed piece for The New York Times entitled “Elizabethan Cyberwar,” Jordan Chandler Hersch and Sam Adelsberg liken the current cyber conflict between China and the U.S. to the battle for the seas between Elizabethan England and Spain, arguing that China is sponsoring cyber-pirates to level the playing field with the U.S.
  • “Facebook Urges Cooperation To Tackle Mobile Security Risks,” reports Law360.
  • “Mobile Device Forensics – Are You in the Know?” asks James Whitehead in a guest post for Seyfarth Shaw’s Trading Secrets Blog.
  • The IP Commission’s adoption of the “hack back” defense continues to stir controversy. GCN’s William Jackson asks “The hack-back vs. the rule of law: Who wins?” and Lisa Shuchman expresses concern in “IP Theft Report Offers Over-the-Top Solutions” for Corporate Counsel.
  • And The Wall Street Journal’s Christopher Matthews chimes in as well, in “Support Grows to Let Cybertheft Victims ‘Hack Back.'”
  • Public Interest “Group Backs FTC Authority In Wyndham Data Breach Case,” reports Law360.
Computer Fraud and Abuse Act Posts and Cases:
  • “Recent Alleged Cyberattack By Ex-Employee Demonstrates Importance of Employer Diligence On Protecting Network Passwords,” advises Robert Milligan for Seyfarth Shaw’s Trading Secrets Blog.

Kenneth Vanko, Russell Beck and I have completed our tenth Fairly Competing Podcast, “Trade Secrets, Back to Basics Part 1.”

In Episode 10, Russell, Ken and I discuss particular types of trade secrets, from those commonly recognized to those that are more difficult to define and uphold in court. We also compare and contrast trade secrets with other forms of intellectual property, discuss the benefits of conducting a trade secrets audit, and talk about the differences between trade secrets and lesser protected confidential information.

You can listen to the podcast by going to the Fairly Competing website or clicking the link below. Or you can subscribe to the podcast on iTunes.  (As always, we’d appreciate your feedback).
 
“Part 2 of Trade Secrets, Back to Basics” Podcast will focus on security measures and will be available soon to listeners.

 
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: 
  • Last week’s report from the privately-funded IP Commission has triggered a lot of commentary on the issue of China, cybersecurity, and the international misappropriation of trade secrets. The Economist has chimed in, “Fighting China’s hackers: Is it time to retaliate against cyber-thieves?,” The New York Times has offered an Op-Ed “Preventing a U.S.-China Cyberwar,” as has Gerry Smith for The Huffington Post, “‘Hacking Back’ Could Deter Chinese Cyberattacks, Report Says.” Lisa Kilday also has a post for The IP Watchdog, as does Sophie Yu for Orrick’s Trade Secrets Watch Blog.
  • For a contrarian view of the report and its authors, see TechDirt’s article, “Fear Mongering Report Suggests ‘IP Theft From China’ One Of The Biggest Problems America Faces.”
  • “A primer on the keys to a complete cybersecurity incident response plan: Inside counsel that understand cybersecurity become defenders of their companies,” advises Daniel Lim for Inside Counsel.
  • “Hackers Find China Is Land of Opportunity,” reports Edward Wong for The New York Times.
  • “FTC Fires Back In Cybersecurity Case,” reports Brent Kendall for The Wall Street Journal’s Law Blog.
  • “FTC Announces Information about Upcoming Mobile Security Forum,” advises Mike Nonanka for Covington’s Inside Privacy Blog.
  • Rob Radcliff provides his take on BYOD policies in his Smooth Transitions Blog.
  • “Employers Must Obtain Employee Consent For BYOD Programs,” recommends Yaron Dori and Jeff Kosseff of Covington & Burling LLP for Law360.
Trade Secrets and Non-Compete Cases, Posts and Articles
  • “Kolon Asks 4th Circ. To Ax $920M DuPont Trade Secrets Award” reports Law360.  In a summary of the oral arguments before the 4th Circuit Court of Appeals, Scott Flaherty reports that Kolon focused on Judge Robert Payne’s denial of its motion to recuse himself because of his former firm’s involvement in a patent dispute for DuPont and on what Kolon believed was DuPont’s failure to provide proof on a trade secret by trade secret basis.
  • “Illinois Appellate Court Partially Reverses Broad Non-Compete Injunction Against Physicians,” reports Molly Joyce for Seyfarth Shaw’s Trading Secrets Blog.
  • “Customer Lists as Trade Secrets: What Protections Are Sufficient?” asks Eric Ostroff in his Protecting Trade Secrets Blog.
  • Brian Bialas suspects that the recent AMD v. Feldstein decision by the U.S. District Court of Massachusetts may have extended the inevitable disclosure doctrine in Massachusetts. In his post for Foley & Hoag’s Massachusetts Noncompete Law Blog, Brian notes the fact that Judge Hillman entered an injunction despite the defendants’ protestations that they had already turned over all confidential information to a third-party neutral after the lawsuit was commenced, reasoning that they, “must all remember large amounts of confidential AMD information that they learned during their employment.”  (For more on the decision, see my take here).
  • A case out of New York’s Fourth Appellate Department suggests that coupling a grant of stock options with a non-compete can be a messy affair if not done right, advises Jonathan Pollard in a recent post for the non-compete blog.
  • “Former Outback Steakhouse Employee Not Necessarily ‘Down Under’ For Allegedly Breaching Fiduciary Duty” advises Amy Dehnel for Berman Fink & Van Horn’s Georgia Non-Compete & Trade Secret News Blog.
  • In “Pennsylvania Appellate Court Orders Sanctions for Plaintiff’s Bad-Faith Trade Secret Misappropriation Claims,” Scott Schaeffers examines the recent Kraft v. Downey case for Seyfarth Shaw’s Trading Secrets Blog.
  • Rob Radcliff provides his take on BYOD policies in his Smooth Transistions Blog.
  • “Employers Must Obtain Employee Consent For BYOD Programs,” recommends Yaron Dori and Jeff Kosseff, Covington & Burling LLP for Law360.
  • “Chinese Trade Secret Theft Hits Universities,” reports Press Millen for Womble Carlyle’s Trade Secrets Blog.
  • “Non-Compete Agreements Aren’t for Everyone: The Necessity of Proving a ‘Legitimate Business Interest,’” advises Betsy Lensan Cook of Womble Carlyle for National Law Review.
  • “Exercise Gym Instructor Enjoined By Non-Compete Agreement,” reports David Poppick for Epstein Becker’s Trade Secrets & Noncompete Blog.
Computer Fraud and Abuse Act Posts and Cases:
  • “Password Sharing and the Computer Fraud and Abuse Act, Revisited,” considers Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.