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Apologies for the lateness of this month’s post (another trial) but it contains some important developments from the past week. The potential impact of the FTC’s proposed ban on noncompetes continues to reverberate through the legal and business communities and bipartisan federal legislation has been introduced in Congress so I am emphasizing developments there, rather than leading with the past month’s DTSA decisions (I will supplement next month’s post with any decisions/posts I missed):

Latest on the FTC’s Proposed Ban on Noncompetes and Overly Broad NDAs:

  • Let’s start with the most recent news on the FTC’s proposed ban on noncompetes and overly broad NDAs. On Thursday, the FTC held a public forum to discuss its proposed rule. Russell Beck was there and his most recent blog post reports on the discussions and comments at what appears to have been a highly political forum. While the speakers/comments were balanced in number, many of the speakers who advocated for the FTC’s proposed ban were former employees who condemned their noncompetes; their comments were naturally anecdotal and emphasized specific abuses by their former employers. In contrast, Russell says the speakers/commenters opposing the ban were more policy-oriented and spoke to the rationales and interests that noncompetes may legitimately protect.
  • The other big news last week was the so-called “noisy exit” of FTC Commissioner Christine Wilson from the FTC, an exit punctuated by a pointed op-ed piece in The Wall Street Journal asserting that FTC Chair Lina Khan has disregarded the rule of law and due process in her management of the FTC. As you will recall, Commissioner Wilson, the lone Republican appointee to the FTC, dissented from the FTC’s proposed ban last month. Her dissent provided a roadmap of the potential legal and administrative infirmities of the proposed rule that will likely be used by employers and other stakeholders opposing the ban. Kate Perrelli and Dan Hart provide their take on her resignation in a recent post for Seyfarth’s Trading Secrets Blog and Erik Weibust provides his take as well for Epstein Becker’s Trade Secrets & Employee Mobility Blog.
  • The FTC’s proposed rule has now been published in the Federal Register, so interested parties have until March 20, 2023 to provide comments. However, it is generally believed that the FTC will extend that deadline as multiple stakeholders have asked for more time. Russell Beck and Scott Humphrey have both said over 12,000 comments have been submitted already.
  • In yet another op-ed for The Wall Street Journal, which is becoming the preferred forum for challenges to the FTC, the U.S. Chamber of Commerce’s lawyer makes the interesting observation that the FTC has never issued a rule before. If true, this would further support the argument that the FTC is engaging an administrative overreach.
Continue Reading Monthly Wrap Up (February 18, 2023): Noteworthy Trade Secret and Restrictive Covenant Posts, Cases and Developments

On Saturday, February 18, 2023, I will be speaking at the American Bar Association’s Corporate Counsel CLE Seminar in Orlando on “Tips from the Trenches: Hot Issues and Best Practices in Trying a Trade Secrets Claim under the Defend Trade Secrets Act (DTSA)” with Nicole Galli of ND Galli Law LLC, Benesch’s Scott Humphrey, and DecisionQuest’s Ann Greeley, Ph.D. 

This presentation will cover the changing paradigm of trade secret litigation, which is increasingly becoming more damages-oriented and therefore, more likely to be tried to a jury. We will focus on the forces causing this change and what outside counsel and in-house counsel need to do when deciding whether they want to go proceed with bench trial or jury trial. For more on this trend in trade secret trials, see my recent posts (here and here) from last December.

I’m delighted for the opportunity to speak at this Corporate Counsel CLE Seminar. For over 30 years, in-house and outside counsel have come together each winter to learn, network, and share expertise about the unique challenges they face in representing corporations of all types. Designed by and for general counsel and their outside law firms, this innovative seminar takes place over three days. The Seminar offers a mix of CLEs by industry thought leaders, business meetings, luncheons, dinners, receptions, and the opportunity to connect with some of the best in-house lawyers, outside litigation counsel, and judges in the country.

You can register for this CLE here. Hope you can join me.

The FTC’s proposed ban on noncompete agreements (and other “de facto” noncompetes such as overly broad nondisclosure agreements) relies in large part on the research done by University of Maryland’s Robert H. Smith School of Business Professor Evan Starr — one of the leading scholars in the field.

Join Ben, Russell and me as we talk with Professor Starr about the strengths and weakness of his research, any key insights that he has into other research in the field, and an important working paper of HEC Paris Professor Jessica Jeffers, The Impact of Restricting Labor Mobility on Corporate Investment and Entrepreneurship.

So, come join us on Spotify or Apple Podcasts. Or, if you’re just looking for the feed, it’s here: Fairly Competing RSS feed.

Fairly Competing, Episode 21: Exploring the Research Behind the FTC’s Proposed Noncompete Ban with Professor Evan Starr

As many of you know from my post last week, the Federal Trade Commission (FTC) just proposed a ban on noncompetes with virtually no exceptions. And, the FTC has also placed nondisclosure agreements (NDAs) in its crosshairs.

No one knows this area better than Russell, and I mean no one, so please join Ben and me as we get Russell’s insights and take a look at the FTC’s proposed ban, the lead up to its announcement, what the proposed ban would do and when, the potential practical and legal problems with the proposed ban, the opportunity to provide comments to the FTC about it, what employers should do in the interim to protect their trade secrets and customer goodwill, and predictions on where this all goes.

So, come join us on Spotify or Apple Podcasts. Or, if you’re just looking for the feed, it’s here: Fairly Competing RSS feed.

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

Earlier today, the Federal Trade Commission announced it has issued a proposed rule banning noncompetes. This development should come as no surprise since President Biden issued an executive order in July 2021 authorizing the FTC and other agencies to investigate the unfair use of noncompetes and other restrictive covenants and curtail their use. I expect that most of the commentary will focus on noncompetes and the ability of the FTC to effectively legislate over a body of law reserved for the states for over a hundred years. However, what should be of particular concern to the trade secret community is that the proposed FTC rule also potentially targets nondisclosure agreements (NDAs) that are “written so broadly” as to amount to “de facto noncompetes.” In other words, employers in California, Oklahoma and North Dakota–states that forbid noncompetes–may find that their employee NDAs could qualify as de facto noncompetes under the FTC’s new rule. As explained below, this post briefly describes how we got here, what the proposed rule addresses, and suggests some actions employers can take to protect themselves in the meantime.

Continue Reading It’s Official: The Federal Trade Commission Seeks to Ban Noncompetes and Overly “Broad” NDAs

2022 was a momentous year in trade secret and restrictive covenant law. Join Ben, Russell and me as we take a look back on some of the more significant developments in trade secret and restrictive covenant law from the past year and what we are expecting in the coming year. We discuss recent criminal prosecutions for use of no-poach agreements, legislative changes to state noncompete and nonsolicitation laws, federal regulatory and legislative efforts to limit or ban noncompetes, eye-popping trade secret damage awards, and developing trends in the way trade secret cases are being handled and tried.

So, come join us on Spotify or Apple Podcasts. Or, if you’re just looking for the feed, it’s here: Fairly Competing RSS feed.

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Part I of this post explored the increasing number of trade secret cases being presented to juries for damages, rather than to a judge for an injunction. This development appears to have accelerated in the past 6 months, as juries awarded $2 billion in a verdict for Appian Corp., a $65 million verdict against Goodyear Tire & Rubber Company, and a $105 million verdict against Ford Motor Company. Part II (below) describes the many forces that I believe are contributing to this shift, as well as the impact this development will have on trade secret owners, small companies, large companies and lawyers whose practices focus on trade secret cases.

Continue Reading The Changing Shape of Trade Secret Trials: An Increasing Shift to Juries and What that Means for Trade Secret Owners and their Lawyers (Part II)

There is a subtle but important shift that is taking place in the way that many trade secret cases are being litigated and going to trial.  In the not-too-distant past, the vast majority of trade secret owners focused primarily on getting an injunction–generally in the form of a TRO or preliminary injunction–against a former employee.  However, some trade secret owners are increasingly pursuing a different path–namely, a claim for damages–usually against a large partner, vendor, customer or competitor with substantially deeper pockets.  Because these claims for damages are generally determined by a jury, unlike an injunction which is decided by a judge, this development presents a potentially seismic shift in how some trade secret cases are litigated.  As I explain below, several of these cases have resulted in substantial verdicts in recent months and they more closely resemble the path taken in many patent damages cases.  This post analyzes this development, offers some theories on why these changes are now taking place, and provides some thoughts on what clients and lawyers long accustomed to seeking injunctions need to do to adapt to these changes. Continue Reading The Changing Shape of Trade Secret Trials: An Increasing Shift to Juries and What that Means for Trade Secret Owners and their Lawyers (Part I)

On Wednesday, December 21, I will be giving a one-hour Webinar/CLE for the Ohio State Bar Association (OSBA) entitled “Trade Secret and Restrictive Covenant Law Year in Review.” 

As readers of this blog know, the number of trade secret and restrictive cases continues to grow each year. At the same time, federal and state legislators, as well as the Federal Trade Commission, are aggressively moving to curtail the use of restrictive covenants and non-disclosure agreements. In this seminar, I’ll  give an update on these and other important legal and legislative developments, as well as practical tips for employers and businesses to minimize their risk and protect themselves in the event of litigation.

You can register for this CLE here.  It starts at 1 p.m. ET on Wednesday.  Hope you can join me.