“It’s all in your head but I own it anyway.” It’s a tough argument to make, let alone swallow, and, fortunately, it has been recently rejected by two federal courts in cases that follow an increasingly common fact pattern:  an employee abides by their restrictive covenant but goes on to compete against their former employer after the covenant expires.  Fearing the competition, the employer pursues a trade secrets claim, arguing that the employee will inevitably disclose its trade secrets or that the employee has memorized and is therefore misappropriating the trade secrets.  Or it involves a similarly-attenuated fact pattern:  the employer has no restrictive covenant at all and there is no evidence of tangible misappropriation (i.e., no evidence of thumbdrives or downloading, no Dropbox or GoogleDoc dumps, nor emailed documents to personal email accounts), but it relies on a trade secret claim that an employee must still be using those trade secrets because they are successfully competing.

The two decisions, CAE Integrated, Inc. v. Moov Technologies, Inc., issued by the U.S. Court of Appeals for the Fifth Circuit, and First Interstate BancSystem, Inc. v. Hubert, issued by the U.S. District Court for the District of Wyoming, both reach the same conclusion:  an employer has a very high burden to overcome when making a trade secret claim on these facts in the absence of compelling evidence of misappropriation.  As I explain below, taken together, these are significant decisions that demonstrate that employers should think carefully before pursuing employees on claims that the former employees were or would be relying on their memories to improperly use trade secrets rooted in customer identity or customer preferences. Continue Reading Working through the Thicket of Memory, Misappropriation and the Inevitable Disclosure Doctrine: Two Recent Cases Demonstrate Judicial Skepticism

Trade secret and restrictive covenants are messy affairs.  Accusations of theft, claims of betrayal of trust, skullduggery, late night visits to the office to remove documents, thumb drives and share files, computer forensics.  But there is always a need to cut through this volatile morass and get to the heart of the dispute to determine whether there is truly a breach of an obligation triggering the right to relief from a court or jury.

In virtually all trade secret cases, there is a written agreement at the center of the dispute–a restrictive covenant, or a non-disclosure agreement (NDA), or an inventorship agreement or a licensing agreement–that should determine the obligations, if any, of the parties over the information at issue.  If the trade secret owner is seeking a TRO or preliminary injunction, that request for an injunction should ensure an important decision is rendered promptly so that the parties get the necessary clarity over any obligations over that information.  But what happens if a trade secret owner instead elects to seek damages or doesn’t have the grounds for an immediate injunction?  Is there a tool that helps a party cut through these issues, frame the important questions for the court, and move its case forward?  Let me introduce you to Federal Rule of Civil Procedure 42(b) and the Federal Declaratory Judgment Act, 28 U.S.C. § 2201(a), two critical mechanisms that should help parties in a trade secret dispute streamline their case. Continue Reading So You Say You Want a Bifurcation: Imposing Order and Framing the Issues in a Chaotic Trade Secrets Case

Episode 14 of Fairly Competing is out!  In this episode, Ben, Russell  and I are joined by special guest Vicki Cundiff, one of the true deans of the trade secret bar, as we discuss the requirement of proving irreparable harm in trade secret disputes.

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 14: Irreparable Harm in Trade Secret Cases

As always, please email Ben, Russell or me with any topics you’d like to hear us discuss. While we cannot offer legal advice on the show, we can certainly discuss any issues you may be wondering about.

*Thank you again to Erika Hahn for the intro and outro voice over, Tyler Beck for the music, and mohamed_hassan for the base image.

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There is a significant amount of activity going on in the trade secret and restrictive covenant space, so I am going to do my best to resume my monthly wrap up posts, after a long (although some might say not long enough) hiatus.  Without further ado, here are the noteworthy developments of the past month:

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

  • The Motorola v. Hytera litigation in the U.S. District Court for the Northern District of Illinois has generated a number of noteworthy developments, including a seminal opinion affirming the DTSA’s extraterritorial reach, as well as a substantial jury verdict ($597 million).  Last month, U.S. District Court Judge Ronald Norgle denied a request to reconsider his denial of Motorola’s request for a permanent injunction (that earlier opinion can be found here December 17, 2020).  The December 17, 2020 opinion provides an excellent analysis of the roadmap courts will likely follow when contemplating a permanent injunction in connection with a significant monetary award (spoiler alert:  a royalty looks like the best option given the reality that the trade secrets have now been monetized).  In his most recent July 5, 2022 ruling, Judge Norgle notes that Hytera’s inability to satisfy the judgment might establish the irreparable injury element necessary for that injunction, but Hytera’s pending appeal forecloses his ability to exercise jurisdiction on that order.  Stay tuned for the Seventh Circuit’s eventual ruling.
  • A recent ruling by the U.S. Court of Appeals for the Tenth Circuit should serve as a reminder to trade secret owners to make sure their claim of misappropriation is sufficiently tied to the proximate cause required for damages.  Kyle Jahner of Bloomberg Law has a summary of that decision, GeoMetWatch Corp. v. Hall, et. al, Case No. 19-4130, in which the Tenth Circuit affirmed the district court’s dismissal of those claims on the grounds their damages were speculative.
  • Are federal courts imposing higher pleading standards on trade secret owners to identify their trade secrets with particularity?  Foley & Hoag’s Jeff Lewis, Paul Downs and Robert Haney Jr. persuasively argue that a consensus for that higher standard is emerging in the U.S. District Court for the Southern District of New York and elsewhere.
  • Is manipulating documents produced in discovery enough to get you sanctioned?  The U.S. Court of Appeals for the Seventh Circuit says “kind of.”  In REXA Inc. v. Chester, the Seventh Circuit reversed an order imposing sanctions on the plaintiff for producing documents in a manner that obscured, among other things, whether the defendant had actually signed an employment agreement.  The Seventh Circuit reasoned that while this discovery misconduct was troubling, the $2.3 million in attorneys’ fees for that misconduct were not sufficiently broken down and remanded for further consideration.
  • If you’re a trade secret owner trying to fend off a motion for summary judgment and get your case to a jury, take a look at U.S. Magistrate Christina Bryan’s Memorandum and Recommendation in Vest Safety v. Arbor Environmental, LLC.  The opinion, which comes out of the U.S. District Court for the Southern District of Texas’ Houston Division, shows how a well-organized and tight trade secret claim — addressing among other things, the §757 of Restatement of Tort’s comment b  six factor test — can survive such a motion.
  • What comes first, a motion to challenge jurisdiction or a preliminary injunction?  In Aquate II v. Jesse Myers, the U.S. District Court of Alabama elected to entertain a motion challenging subject matter jurisdiction rather than the pending motion for preliminary injunction.  Although U.S. District Court of for the Northern District of Alabama Judge Abdul Kallon does not provide a lot of analysis for that choice, the decision provides support that challenges to subject matter jurisdiction can take priority.

Continue Reading Monthly Wrap Up (August 2, 2022): Noteworthy Trade Secret and Restrictive Covenant Cases, Developments and Posts

Sooooo I am just a wee bit late with this one.  Episode 13 of Fairly Competing is out and has been for some time!  In this episode, Ben, Russell  and I take a look back on some of the more significant developments in trade secret and restrictive covenant law in 2021, and give our thoughts on what to expect in 2022.

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

As always, please email Ben, Russell or me with any topics you’d like to hear us discuss. While we cannot offer legal advice on the show, we can certainly discuss any issues you may be wondering about.

*And, thank you again to Erika Hahn for the intro and outro voice over, Tyler Beck for the music, and mohamed_hassan for the base image.

Episode 12 of Fairly Competing is out and we discuss the high profile Wisk Aero litigation in California.

In this episode, Ben, Russell  and I explore the decision by U.S. District Court Judge William Orrick in Wisk Aero LLC v. Archer Aviation Inc.  Readers will remember that I wrote about this case last year.  The case provides some interesting lessons for lawyers seeking a preliminary injunction in a trade secret case, including that compelling circumstantial evidence alone — i.e., a former employee downloading 5,000 documents and invoking the 5th Amendment — may not be enough to get you an injunction.

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

And if there are any topics you’d like to hear us discuss, please email Ben, Russell or me . While we cannot offer legal advice on the show, we can certainly discuss any issues you may be interswondering about.

 

*And, thank you again to Erika Hahn for the intro and outro voice over, Tyler Beck for the music, and mohamed_hassan for the base image.

To establish a trade secret claim, the trade secret owner (usually an employer) must show that it used reasonable measures to protect that information’s secrecy.  As a result, the question of whether that owner’s efforts were sufficiently reasonable is frequently the point of contention in trade secret litigation, as the parties argue over whether the owner did enough to prevent the potential disclosure or use of those trade secrets.  There are a multitude of questions that can arise:  Did the owner limit the access of its employees to the trade secrets on a “need to know” basis?  If the information was stored electronically, did the owner use adequate electronic safeguards such as passwords, encryption or multi-factor authentication?  If the trade secrets are tangible or visible to the eye, were the the trade secrets or the facilities in which they were stored under lock and key and were visitors prohibited?  And perhaps most importantly, did the owner require employees or third parties with access to that information to sign non-disclosure agreements (NDAs) or confidentiality provisions to protect those trade secrets?  The use of NDAs has long been considered a key protection, as courts and juries can readily appreciate a written agreement that sets out the trade secret owner’s expectations about protecting that information.  A recent decision by the U.S. Court of Appeals for the Second Circuit, Turret Labs USA, Inc. v. Cargosprint, LLC, 2022 U.S. App. LEXIS 6070,. Case No. 21-952 (March 9, 2022 2d Cir. 2022), reinforces that courts consider these agreements to be a critical safeguard and that a trade secret’s owner’s failure to have them in place may prove fatal to a trade secret owner’s claims. Continue Reading Turret Labs USA, Inc. v. CargoSprint, LLC: The Second Circuit Affirms the Importance of Non-Disclosure Agreements in Trade Secret Cases

In this episode, Ben, Russell  and I explore the ins and outs of mediating trade secret disputes through a discussion with our special guest James Pooley, one of the key thought leaders in the trade secret and intellectual property community.

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 11: Mediating Trade Secret DisputesAnd, because this show is for you, please email Ben, Russell or me with any topics you’d like to hear us discuss. While we cannot offer legal advice on the show, we can certainly discuss any issues you may be wondering about.

Episode 10 of Fairly Competing is out!

In this episode, Ben Fink, Russell Beck, and I explore the Supreme Court’s decision in Van Buren v. U.S., narrowly interpreting the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 — and what it means for protecting proprietary electronic materials.

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 10: The Supreme Court’s Decision in Van Buren v. U.S. (Computer Fraud and Abuse Act)

And, because this show is for you, please email Ben, Russell or me with any topics you’d like to hear us discuss. While we cannot offer legal advice on the show, we can certainly discuss any issues you may be wondering about.

*And, thank you again to Erika Hahn for the intro and outro voice over, Tyler Beck for the music, and mohamed_hassan for the base image.

One of the primary arguments for enacting the Defend Trade Secrets Act (DTSA) in 2016 was the perceived need for the protection of the trade secrets of U.S. companies abroad.  These issues received significant media attention with the focus far and away on China; by way of example, 60 Minutes cited the Justice Department as saying “the scale of China’s corporate espionage is so vast it constitutes a national security emergency, with China targeting virtually every sector of the U.S. economy, and costing American companies hundreds of billions of dollars in losses — and more than two million jobs.”  A consensus emerged that existing civil trade secret remedies at the state court level were inadequate.  These concerns led to calls for a robust federal statute that would provide a civil remedy empowering federal courts to assert their jurisdiction over parties outside the United States.  An important decision issued by the U.S. District Court for the Northern District of Illinois last year, Motorola Solutions v. Hytera Communications Corp.,  2020 U.S. Dist. LEXIS 35942 (N.D. Ill. Jan. 31, 2020), paved the way for other federal courts over the past year to exercise jurisdiction over international actors and international conduct under the DTSA.  This blog post summarizes these recent decisions. Continue Reading Trade Secrets Without Borders: The Defend Trade Secret Act’s Promise as an Extra-Territorial Statute Finally Comes to Pass