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Social Media Update: Massachusetts Court Holds Mere Posting of New Position on LinkedIn Does Not Violate Restrictive Covenant

 
by John Marsh 7. November 2013 16:23

As employers continue to sort out the legal implications of social media in the context of restrictive covenants, a Massachusetts court has recently held that the mere posting of a former employee's new position on a LinkedIn profile does not qualify as a solicitation under her agreement with her former employer. The former employer, KNF&T Staffing Resources, had complained that the change in her profile resulted in a solicitation that was sent to her more than 500 contacts, including customers. (A hat tip to Sheri Qualters who has a fine summary of the case for The National Law Journal).

In KNF&T Inc. v. Muller, KNF&T filed an action in Suffolk Superior Court against its former vice president Charlotte Muller and her new employer, claiming Muller violated her one-year non-compete agreement in various ways. On October 24, 2013, Associate Justice Thomas P. Billings denied KNF&T’s bid for a preliminary injunction, finding that she was not directly competing with her former employer in her new position and that evidence of any violation was "between weak and non-existent." 

As for KNF&T's claim regarding the LinkedIn profile, Justice Billings found that Muller’s update about her new job was full of generic terms like “Staffing Services” and “Recruiting.” “So long as Muller has not and does not, prior to April 12, 2014, solicit or accept business in the Fields of Placement for herself or others (including her new employer), she will not have violated the covenant not to compete,” Billings wrote. (A PDF of the opinion can be found below).

The Takeaway: First, Justice Billings' holding is consistent with other recent social media rulings that require some overt act that is directed or targeted to particular customers. A mere update in a profile that reflects a change in employment, with generic terms describing that employment, that is sent to all contacts in LinkedIn (which would likely include former classmates, competitors as well as customers) is simply not enough. 

On the other hand, targeted communications or emails to particular customers through LinkedIn could qualify as a solicitation. Whether a communication qualifies as a solicitation generally depends on the context and circumstances of the communication, as Ken Vanko's excellent discussion of the recent opinion out of the U.S. Court of Appeals Court of Appeals, Corporate Technologies v. Hartnett, illustrates.

Second, the opinion reinforces the importance of employment agreements that address the ownership of social media and profiles or contacts that might be found in LinkedIn. If these are indeed important to an employer, they should be addressed in the employment agreement.

KNF&T v Muller - Order.pdf (4.49 mb)

Tags:

Non-Compete Enforceability | Restrictive Covenants

 

Mitigating Your Trade Secret Risk When Hiring an Employee From a Competitor: The Trade Secret Litigator's Five Golden Rules for On-Boarding A New Employee (Part II)

 
by John Marsh 31. October 2013 16:14

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Mitigating Your Trade Secret Risk When Hiring an Employee From a Competitor: The Trade Secret Litigator's Five Golden Rules for On-Boarding A New Employee (Part I)

 
by John Marsh 30. October 2013 19:34

When hiring an employee away from a competitor, one of the last things a company wants is to be embroiled in litigation with that competitor over accusations that it hired the employee for the purpose of stealing that competitor's trade secrets. Consequently, the process of "on-boarding" a new employee -- taking steps to make sure that the employee is properly and lawfully brought aboard a company to minimize risk of litigation by the former employer -- is proving to be an increasingly important one and needs to be part of every trade secret lawyer, in-house lawyer and HR administrator's trade secrets toolkit.

On-boarding is becoming a bigger and bigger issue, and was a topic of much discussion at the recent AIPLA Trade Secret Summit, as both in-house counsel and outside counsel noted that on-boarding was increasing as a part of their practice (I have noticed an uptick in this area as well in my practice this year). There have also been a number of recent articles on the topic of on-boarding (Seyfarth Shaw has two entertaining YouTube videos on best and worst on-boarding practices and Karin McGinnis wrote a fine post last month for Corporate Counsel).

Why this increase in concern over on-boarding? One reason is an improving economy that is in turn causing companies to increase their hiring from the ranks of their competitors. Another factor is the increase in non-compete and trade secret litigation generally, and companies' growing awareness of the risks of that litigation if they do not manage their hiring process correctly.

The process of on-boarding can be a challenging and delicate one. There are potential conflicts for the unwary, as the interests of the new employee and the new employer may not always be aligned and separate counsel may be required. In addition, those challenges are compounded by the prevalence of ESI, BYOD and other workplace technologies that serve to complicate the transition process. In short, in any important employee transition, in-house counsel, and frequently outside counsel, now need to be involved.

Despite these potential complexities, I believe there are five basic Golden Rules to remember. I will cover the first two Golden Rules today and wrap up with the remaining three rules tomorrow:

Rule No. 1: Ask for and Review All Employment Agreements. This the first and most important of the Golden Rules, because without it, you are almost certainly flying blind in the hiring process. Courts will no longer tolerate an employer turning a blind eye to an agreement and will hold it accountable if there is any trade secret misappropriation or improper breach of a restrictive covenant. Courts expect a new employer to conduct some analysis of the agreement and to have taken steps to protect the legitimate business interests of the former employer (to be addressed in tomorrow's post). You can't protect those interests if you don't know what the former employer and new employee agreed to during their relationship.

Don't confine your analysis to the most recent employment agreement as there may be previous ones that come into play if the last one is defective or unenforceable for some reason. And if you are concerned about confidentiality, arrange for counsel for the employee who can at least review it and advise the employee (be mindful of conflicts though). A prospective employee's claim that he does not remember any agreement or does not have a copy should be a red flag and, and perhaps even grounds for not hiring him/her.

Once you have and review the employee's agreement, your company may decide that the employee is still worth pursuing because the non-compete is too broad or unfair, or because you conclude that you can hire the person and still manage to protect the legitimate interests of a competitor (tomorrow's post). Given the increasing judicial ambivalence to restrictive covenants, that may be a risk worth taking. However, you cannot take any reasoned approach until you know what issues are presented under that agreement.

Rule No. 2: Leave All Former Employer's Trade Secrets Behind. It would be nice if you had a special hermetically-sealed chamber through which you could direct the new employee so that he/she could emerge on the first day of work completely sanitized of all his/her previous employer's trade secrets. Until that technology is available, however, a new employer has to clearly and emphatically prohibit the prospective employee from using or bringing his previous employer's trade secrets with him/her. This means copies of all customer lists, contact information, marketing and business strategies and other potentially proprietary information of the previous employer need to be returned to the former employer before the employee transitions.

Of course, it is not that simple anymore in the era of BYOD and the 24/7 work cycle. The reality is that we all work at home and that frequently digital or paper copies of confidential information sometimes make their way into personal devices or inadvertently find their way into a home office desk drawer. Consequently, not only should an employer instruct the new employee to leave everything behind but it should remind him/her to double-check personal devices and their desks and files at home. Finally, an employer needs to reinforce the consequences that might ensue (suspension, termination, etc.) should the employee bring or attempt to use his or her employer's trade secrets. All of this should be in writing and preferably a term in the new employee's agreement. This agreement will not only protect an employer but will also provide cover to the new employee in any subsequent litigation because it will be proof of the steps taken to protect the trade secrets of the former employer.

I remember an in-house speaker emphasizing that one of his former bosses used to send a polite but direct letter to each new employee that told them to leave everything behind because the confidential information of the competitor would no longer be needed. I thought this approach, a simple letter that only concerned this subject, was a very effective way of reinforcing the importance of a culture of integrity and responsibility in the trade secrets context. This approach may be particularly useful when hiring researchers, coders or others who might be involved in the development of products for a competitor.

Of course, the new employer and former employee may face a claim of inevitable disclosure -- i.e., that the employee simply cannot be trusted to not use or disclose those trade secrets in a competitive setting. However, as I have written before, courts have increasingly viewed this doctrine with disfavor and are requiring some evidence of misconduct before they are willing to enjoin an otherwise proper hire from going forward.

Stay tuned for tomorrow's post which will cover Golden Rules 3, 4 and 5.

Tags:

Non-Compete Enforceability

 

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

 
by John Marsh 25. August 2013 11:19

Here are some noteworthy posts from the past week and some catch-up on other posts from the past couple of weeks:
 
Trade Secret and Non-Compete Cases, Posts and Articles:

  • "CBS Settles Dispute Over ABC's 'Glass House,'" reports Law360. For more on this long-running trade secrets dispute, see my posts from last year here and here.
  • In "Bloomberg reveals safeguards for client info," The Wall Street Journal reports on the various safeguards Bloomberg is committing to after the imbroglio last year when its journalists improperly accessed and reported on the subscriber information of its Wall Street clients.
  • "Failure To Define Trade Secrets Establishes Subjective Bad Faith For Attorneys' Fees Award Under California UTSA," advises James Goodman for Epstein Becker's Trade Secrets & Noncompete Blog.
  • "Do Non-Compete Agreements Stifle Innovation?" Distil Networks CEO Rami Essaid and LevelEleven CEO Bob Marsh debate the impact of non-compete agreements.
  • "Concerns Over Economic Growth Leads Some States to Limit Non-Compete Agreements," advises John Paul Nefflen for Burr & Forman's Non-Compete Trade Secrets Blog.
  • "How to draft an enforceable noncompete agreement in 5 steps," recommends Jon Hyman for the Ohio Employer's Law Blog.
  • "Do the Final Episodes of 'Breaking Bad' Qualify As Trade Secrets?" asks Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • "New Hampshire Court Voids Non-Compete Clause in Independent Contractor Agreement," reports Paul Freehling for Seyfarth Shaw's Trading Secrets Blog.
  • "On Non-Compete Agreements: A Response to the Wall Street Journal’s Recent Article," advises Jonathan Pollard for the non-compete blog.
  • For those in Michigan, "Dana Can't Prove Trade Secrets Theft, Judge Rules," reports Law360.
  • For more on the Dana case, see, "Accessing trade secrets is not the same as misappropriating trade secrets" by Tim Bukher for LawTechie.
  • "Is the DOJ Avoiding Domestic Trade Secret Cases?" asks Jan Wolfe for The AmLaw Litigation Daily.
  • "You Need To Work Harder To Fight Trade Secret Theft," warn Michael Bunis and Anna Dray-Siegel of Choate Hall & Stewart LLP for Law360.
  • For those in Massachusetts, see Michael Rosen's recent post, "More on 'Material Change' and Legislative Update," for Foley Hoag's Massachusetts Noncompete Law Blog.

Cybersecurity Posts and Articles:

  • "White House Posts Preliminary Cybersecurity Incentives," advises Jessica Goldenberg for Proskauer's Privacy Law Blog.
  • "Tackling Cyber Security Challenges in the Healthcare Industry," reports Healthtech.

Computer Fraud & Abuse Act Posts and Articles:

  • "IP Cloaking Violates Computer Fraud and Abuse Act, Judge Rules," advises David Kravets for Wired.
  • "Southern District of Georgia Judge Narrowly Construes Computer Fraud and Abuse Act," advises Neil Weinrich for Berman Fink Van Horn's Georgia Non-Compete and Trade Secrets News Blog.
  • David Nosal's criminal conviction under the CFAA has been upheld by the U.S. District Court for the Northern District of California, reports Bob Egelko in, "Executive's conviction upheld in trade-secrets theft," for SFGate.
  • "It’s Time to Reform the Computer Fraud and Abuse Act," argues Scientific American.
 

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

 
by John Marsh 25. July 2013 10:30

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 Cases. Posts and Articles:

  • "Seagate Technology Recoups $630 Million Trade-Secrets Award" reports Business Week.  A Minnesota state appeals court has ruled that an arbitrator didn’t exceed his authority in awarding Seagate $525 million (and an additional $105 million in interest) in its trade secret dispute with Western Digital and a former Seagate employee. The arbitrator had found that some of the defendants’ evidence was fabricated regarding three of the trade secrets at issue and entered judgment against Western and the employee, Sining Mao, as a sanction.
  • "Even Preparing To Compete In Texas May Be Prohibited During A Non-Competition Covenant Period" advises Paul Freehling for Seyfarth Shaw's Trading Secrets Blog.  Rob Radcliff also has a post on this decision, "Anti-Planning Provisions - A New Non-Compete Weapon?" in his Smooth Transitions Blog.
  • And speaking of Texas, "Physician Noncompetition Agreements May Be Challenged More Often After Recent Texas Appellate Decision" warns Randy Bruchmiller for Seyfarth Shaw's Trading Secrets Blog.
  • "Five Year Non-Compete Enforced In Indiana" reports Peter Steinmeyer for Epstein Becker's Trade Secrets & Noncompete Blog.
  • For the latest on non-compete legislation in Massachusetts, see "Massachusetts Noncompete Bill – Hearing Date" by Russell Beck in his Fair Competition Law Blog.  Seyfarth Shaw's Erik Weibust also has a post on the legislation.
  • The Southern District of New York has recently held "Marketing Concepts Are Not Trade Secrets" advises Eric Ostroff in his Trade Secrets Protection Blog.
  • In "Don't Chase Your Tail in Pursuit of the "Perfect Non-Compete," Michael Greco offers some sound and practical advice in Fisher & Phillips' Non-Compete and Trade Secrets Blog.
  • "The Line Between Trade Secrets and Patents: Getting Dual IP Coverage on the Same Technology" recommends Matthew Poppe and Morvarid Metanat for Orrick's Trade Secrets Watch Blog.
  • "Myriad’s Trade Secret Trump Card: The Myriad Database of Genetic Variants" reports Courtenay Brinckerhoff of Foley & Lardner for JDSupra Law News.
  • "The next controversy in genetic testing: clinical data as trade secrets?" ask Robert Cook-Deegan, John M. Conley, James P Evans and Daniel Vorhaus for The European Journal of Human Genetics.
  • "The Business End Of The 'Snowden Lessons'" reports Anne Sutton of Dentons and Erik Laykin of Duff & Phelps Corp. for Law360.
  • "More Answers To Your Noncompete Questions" provides Donna Ballman for her Screw You Guys, I am Going Home Blog.
  • "Texas Public Information Act: Shielding Your Company from the Open Records Sword" advises Jack Skaggs of Jackson Walker for JDSupra Law News.
  • In "Trade Secrets Whistleblower SLAPPed In Effort to Dismiss Lawsuit," Ken Vanko reports on the recent dismissal of a whistleblower claim brought against Anhueser-Busch in his Legal Developments in Non-Competition Agreements Blog.  For more on this case, see my post from the spring.

Cybersecurity Posts and Articles:

  • Looking to limit others from digitally eavesdropping you?  Then check out "Digital Tools to Curb Snooping" by Somni Semgupta for The New York Times Bigs Blog.
  • "U.S. Cybersecurity Plan Not Designed To Increase Regulation, Officials Say" claims Bloomberg BNA.
  • "How America Is Fighting Back Against Chinese Hackers" advises Adam Clark Estes for Gizomodo.

Computer Fraud & Abuse Act Posts and Articles:

  • "MIT Intervenes In Release Of Aaron Swartz Case Details" reports Gerry Smith for The Huffington Post.
 

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

 
by John Marsh 19. July 2013 11:30

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 Cases. Posts and Articles:

  • "Connecticut Governor Vetoes Noncompete Statute Passed By Legislature," reports Daniel P. Hart for Seyfarth Shaw's Trading Secrets Blog. Last Friday, Governor Dannel P. Malloy vetoed Public Act No. 13-309, sending the bill to the legislature with a letter noting his concerns about a lack of clarity in the final version of the bill. The bill essentially required employers to provide some reasonable notice of a non-compete to an employee or prospective employee.  David Popick has a post for Epstein Becker's Trade Secrets & Noncompete Blog, as does Russell Beck in his Fair Competition Blog.
  • "Texas Appeals Court Guts $40M Energy Trade Secret Verdict" against Southwestern Energy Group, reports Law360.
  • "Elevator Sales Company and Former Employee in Interesting Non-Compete Fight," reports Jonathan Pollard in the non-compete blog.
  • "Are WWE Wrestling Results Trade Secrets?" asks Eric Ostroff in his Trade Secrets Protection Blog.
  • "Recent Conflicting Decisions Make It Potentially Easier and Harder to Enforce Non-Competition and Non-Solicitation Covenants," advises Choate Hall & Stewart's Employment and Benefit Group for JDSupra.
  • "Using Covenants Not to Compete in the Health Care Industry Part 1 – Understand the Basics," advises Lee A. Spinks from Poyner Spruill.
  • And while on the topic of non-competes and doctors, "Judges giving departing doctors new leverage," reports Claire Bushey for Crain's Chicago Business.
  • "Restaurant Wars: Restrictive Covenants for Chefs & Tandoori Chicken Tikka," reports Daniel Schwartz for the Connecticut Employment Law Blog.
  • "California officials wrestle with handling trade secrets on fracking," reports The Los Angeles Times.
  • "Benefits of Early Discovery in Defending Trade Secret Misappropriation Claims," advise Brent J. Gurney, Joshua T. Ferrentino and Alexander B. White for The New York Law Journal.
  • "Factors to Consider in Cross-Border Trade Secret Protection," recommends The IP Exporter.
  • "Smoking Gun or Blowing Smoke? Five Tips to Make Sure That Computer Forensic Evidence of Trade Secret Theft Is What You Think It Is," advise Thomas Gray and Elizabeth McBride for Orrick's Trade Secrets Watch.
  • "My Issue With PRATSA: The Rule of Lenity," argues Kenneth Vanko in his Legal Developments in Non-Competition Agreements Blog.
  • "Please, Do Not Trust Your New Employer to Interpret Your Non-Compete Clause," pleads Laura Ellerman for Frith & Ellerman's Virginia Non-Compete Law Blog.
  • "Money, Money, Money: Top 10 Trade Secret Verdicts," reports Rob Shwartz and Cam Pham for Orrick's Trade Secrets Watch.
  • "Five Things to Consider When Hiring an Employee From a Competitor," recommends Benjamin Fink for Berman Fink Van Horn's Georgia Non-Compete & Trade Secrets Report Blog.

Cybersecurity Posts and Articles:

  • "U.S., Firms Draw a Bead on Chinese Cyberspies," reports The Wall Street Journal. This fascinating articles details the recent cooperation between the Obama Administration and various technology and internet companies.
  • "Nations Buying as Hackers Sell Computer Flaws," reports The New York Times.
  • "Cybersecurity Pros Call For Federal Breach Notification Law," advises Law360.
 

Wednesday Wrap-Up (July 10, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

 
by John Marsh 10. July 2013 21:20


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 Cases. Posts and Articles:

  • There has been an uptick in media coverage and criticism of non-competes this week, which dovetails with the growing legislative efforts in several states to limit or restrict the use of non-competes.  "More firms requiring non-compete agreements: Efforts to retain employees being tested in courts, statehouses," reports Jonnelle Mart for The Wall Street Journal's Market Watch. Likewise, The Los Angeles Times has chimed in, "Contracts, court rulings giving employers legal upper hand: Emboldened by Supreme Court decisions and a weak job market, employers are starting to require workers to sign away their rights in return for a job."
  • "Legally Smited Eaton Asks Supreme Court of Mississippi to Reinstate Civil Trade Secret Theft Case Against Five Former Employees," reports Todd Sullivan in his Sullivan's Trade Secrets and Employee Defections Blog.
  • Texas "Appeals Court OKs Extension Of Insurer's Noncompete Deal," advises Law360.
  • "Can Confidential Info That’s Not a Trade Secret Be Misappropriated?" asks Eric Ostroff in his Protecting Trade Secrets Blog as he discusses a recent case out of Arizona.
  • Jon Cavicchi is ramping his Trade Secrets Vault Blog back up. Check out his many new posts, including his re-posting of some valuable advice on "Implementing a Trade Secret Audit."
  • "Is An Assigned Non-Compete Agreement Enforceable?" asks Monika Vyas Scott for Burr & Forman's Non-Compete Trade Secrets Law Blog and she summarizes the law in states throughout the Southeast.
  • For those looking for more on the Illinois Appellate Court's recent decision that an employee must be employed at least two years for a non-compete to be enforceable, Kenneth Vanko is not quite yet done venting about the reasoning in Fifield v. Premier Dealer Services.
  • "Scientist pleads guilty in Pa. trade secrets case" reports Associated Press. Tung Pham, who was charged with stealing trade secrets from his employer to take to a competitor in China, pleaded guilty in federal court in Philadelphia to seven counts of wire fraud, prosecutors said last week.
  • "Medtech inventor claims Ethicon lawyer tricked him into divulging trade secrets" advises the Massachusetts Medical Device Journal. Todd Sullivan also provides his take on the case here.
  • For tips on dealing with whistleblowers and trade secrets, check out Robert Milligan's post "An Employee Is Stealing Company Documents…That Can’t Be Protected Activity, Right?" for Seyfarth Shaw's Trading Secrets Blog.
  • "When An Employee Goes 'Snowden:' State High Court To Decide If An Employer Can Be Liable For A Rogue Employee's Disclosure of Confidential Information," reports Joe Wilson for Kelley Drye's DC Metropolitan Business Law Alert.
  • "iPads and Blackberries: The Hidden Dangers for Employers," warns Amy Dehnel for Berman Fink Van Horn's Georgia Non-Compete & Trade Secrets Reporter.
  • For a primer on "Health Care Non-Compete Agreements," in Tennessee, check out Cole Dowsley's post for Thompson Burton's Litigation & Dispute Resolution Blog.

Cybersecurity Posts and Articles:

  • "NIST Releases Draft Outline of Cybersecurity Framework for Critical Infrastructure," notes the National Institute of Standards and Technology's Tech Beat.
  • For two completely different takes on recent testimony before the House Energy and Commerce Oversight Subcommittee yesterday, compare "China Bears Burden Of Stopping IP Theft, Panel Hears," from Law360 with "U.S. Defenses 'Feeble' against Chinese Cyber Threat, Experts Testify," from Main Justice.
  • "Report Details Data Breaches in California," advises Cheryl Miller for Corporate Counsel.
  • "US, China kick off annual dialogue with talks on cybersecurity," reports The Washington Post.
  • "You Aren't Using These 10 Simple Security Settings," laments Jess Fee for Mashable.
 

Thursday Wrap-Up (July 4, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

 
by John Marsh 4. July 2013 07:30

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 Cases. Posts and Articles:

  • The reaction from the trade secret community to the recently-released Obama IP Strategy Report has been one of disappointment. Expectations soared after the Obama administration announced its trade secrets initiative in February but the recent Report barely mentions trade secrets.  In a post for Orrick's Trade Secrets Watch, Michael Spillner notes the strategy's need for a civil cause of action.  Likewise, Misty Blair of Seyfarth Shaw's Trading Secrets Blog observes the Report's failure to address trade secret protection more comprehensively as "a bit of a surprise." 
  • "Illinois Appellate Court Requires Two Years of Employment for Postemployment Restrictive Covenants" reports Stacey Smiricky and Trina Taylor of Faegre Baker & Daniels for Lexology. Epstein Becker's Trade Secrets & Noncompete Blog and Seyfarth Shaw's Trading Secrets Blog also have posts on the decision.  And Kenneth Vanko unloads on the decision in his Legal Developments in Non-Competition Agreements Blog.
  • In "Contractual Override of Trade Secret Law," Dennis Crouch details a recent Federal Circuit decision in his Patently-O Blog affirming a New York federal court's holding that a non-disclosure agreement's requirement that confidential information be specifically designated trumped state trade secret law holding otherwise. As a result of the plaintiff's failure to designate the information as "confidential" under the NDA, the court applied California law and held the information could not qualify as a trade secret.  Lesson?  Don't include this language in your NDA, because in my experience, parties rarely have the time (or inclination) to designate each and every piece of information as "confidential."
  • "Are An Employer's Business Plans Discoverable In Non-Compete Litigation?" asks Jason Cornell of Fox Rothschild about a case in Ohio for Mondaq.
  • "New Jersey Federal Court Allows Non-Party to Employment/Non-Compete Agreement to Invoke Arbitration Clause," advises David Walsh for Jackson Lewis' Non-Compete & Trade Secret Report Blog.
  • "China Worries Improve Prospects Of Trade Secrets Bill" reports Ryan Davis for Law360.
  • "Chemical, oil companies fear potential EPA rule will expose trade secrets" advises Julian Hattem for The Hill.
  • "Face It: Judges Sometimes Hate Competition Cases" delivers Kenneth Vanko in a bit of hard of truth in his Legal Developments in Non-Competition Agreements Blog.
  • "Answers To Your Questions On Noncompete Agreements" provides Donna Ballman for her Screw You Guys, I'm Going Home Blog.
  • "Detecting Insider Threats to Trade Secrets" advises Catherine Dunn for Corporate Counsel.
  • If you don't have a non-compete with a Chinese employee, don't expect to restrain him or her advises the China Bridge IP Law Commentary Blog. In "Why China Supreme Court Agreed with Resigned Employees Establishing Competing Businesses?," Luo Yanjie details a recent high court ruling explaining Chinese law on this issue.
  • For The Wall Street Journal's take on the recent indictment of Chinese turbine manufacturer Sinovel, see "U.S. Looks to Blunt Corporate Espionage by Chinese Firms."
  • "Best Practices For Enforcing Restrictive Covenants" advises Susan Trench of Arnstein & Lehr for Law360.

Cybersecurity Posts and Articles:

  • "Beware the Internet and the danger of cyberattacks," warns Robert Samuelson for The Washington Post.
  • "NSA revelations throw wrench into lawmakers’ cybersecurity push" advises Brendan Sasso for The Hill.
  • "5 Ways to Boost Your Company's Cybersecurity Strategy" recommends Catherine Dunn for Corporate Counsel.

Computer Fraud & Abuse Act Articles, Cases and Posts:

  • "You May Not Like Weev, But Your Online Freedom Depends on His Appeal" advises Wired on the appeal of Andrew Aurnheimer of his CFAA conviction.
  • "There Is Now a Split Within the District of Massachusetts over the Proper Interpretation of the Computer Fraud and Abuse Act" announces Brian Bialas for Foley & Hoag's Massachusetts Noncompete Law Blog.

Have a happy and safe Fourth of July!

 

Friday Wrap-Up (June 28, 2013): Noteworthy Trade Secret, Covenant Not to Compete and Cybersecurity News from the Web

 
by John Marsh 28. June 2013 01:00

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.
 

Thursday Wrap-Up (June 20, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

 
by John Marsh 20. June 2013 11:30

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.

About John Marsh

John Marsh Hahn Law AttorneyI’m a Columbus, Ohio-based attorney with a national legal practice in trade secret, non-compete, and emergency litigation. Thanks for visiting my blog. I invite you to join in the conversations here by leaving a comment or sending me an email at jmarsh@hahnlaw.com.

Disclaimer

The information in this blog is designed to make you aware of issues you might not have previously considered, but it should not be construed as legal advice, nor solely relied upon in making legal decisions. Statements made on this blog are solely those of the author and do not necessarily reflect the views of Hahn Loeser & Parks LLP. This blog material may be considered attorney advertising under certain rules of professional attorney conduct. Regardless, the hiring of a lawyer is an important decision that should not be based solely upon advertisements.

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