Contrary to common perception, California employees who signed restrictive covenants prior to January 1, 2017 are not completely immune to enforcement of all restrictions on competition. For the second time in several years, a foreign corporation, Synthes, Inc., successfully enforced a non-competition agreement against former employees who were California residents. In the most recent case, the U.S. District Court for the Eastern District of California, enforced the company’s agreement against a Sacramento resident. READ MORE
When I was in Geneva trying to engage developing countries about the value of robust IP laws, occasionally I heard a response like this: “What hypocrites you are! The U.S. economy got its start by stealing from abroad. Why should today’s poor nations be denied the same opportunity to catch up?” The argument stung enough that I thought I should check out the real story. Here’s what I found.
On an early September day in 1789, Samuel Slater, 21 years old, boarded a ship in London to begin a voyage to New York. His family didn’t know he was doing this. He presented himself as a simple laborer, a farm hand. He was lying. Hidden in his pocket were his only official papers, identifying him as a recently released apprentice to a cotton mill. READ MORE
I still remember the day I decided never to do another divorce case. My client called to tell me that her ex was taking the kids to his mother’s house where she would look for holes in their socks and then rip them with her fingers. This surely was grounds for a restraining order! No, it wasn’t, I insisted.
Back then we accepted any kind of case that involved a courtroom: accidents, real estate, criminal, contracts, and “domestic relations.” It was the divorces that often involved the worst behaviors, seeming to require more therapy than legal advice.
These were also the early days of Silicon Valley, and it wasn’t long before commercial litigation, and trade secret cases in particular, came to fill up my calendar. Hardly a week went by without a group leaving to do a start-up or join the competition, provoking a lawsuit. After 30 or 40 of these, a common theme emerged: somebody always had done something foolish, like overheating the photocopier or bragging about how they were going to destroy their old employer. So it seemed to me that if people just understood the rules, they would never get into these scrapes. But the same kinds of mistakes were made even by experienced, sophisticated actors, and the lawsuits kept coming. I was baffled.
Then I married Laura-Jean, who is a psychotherapist. When she learned about my trade secret cases, it was immediately clear to her what was going on. These people were distracted—and sometimes blinded—by their emotions. And that’s when it hit me: trade secret disputes were a lot like divorces, and if you could understand the emotional forces at work, you could do a better job for your clients. The analogy wasn’t perfect, because people choosing to end their marriages were often consumed by their feelings to a level that didn’t usually apply in a business context. But the parallels were striking, and illuminating. READ MORE
In the recent lawsuit filed against Uber by Waymo for hiring the head of its driverless car project, what would have been a normal discovery dispute over access to a report suddenly became a lot more complicated when the former Waymo executive asserted the fifth amendment, claiming that forcing disclosure of the document could incriminate him.
Trade secret litigation between companies is common, but criminal charges—or the threat of them—isn’t. So how is it that commercial disputes become criminal?
The answer usually is that the trade secret holder believes it has very strong evidence of theft and decides to approach the authorities. If you are located in a state with criminal trade secret laws, you have a choice of reporting to the county prosecutor or going to the FBI or Department of Justice, who operate under the authority of the Economic Espionage Act. In a number of states, and in each of the 93 federal districts, there will be prosecutors and investigators trained in handling technology cases. If yours seems sufficiently serious, they may agree to take it on.
But would you want them to? The answer may not be obvious. READ MORE
During a recent seminar I was asked, “What can companies do to stop the loss of trade secrets to places like China?” The questioner seemed stressed and a bit angry, perhaps reflecting a certain frustration that there may not really be an answer. Although there is no way to entirely eliminate information security risks when doing business overseas, we certainly can reduce them.
The modern commercial environment is inescapably digital and global. Long supply chains and open innovation strategies require sharing valuable information with actors in countries where legal protection systems are not robust. Companies increasingly employ foreign nationals, both in the United States and in installations abroad, and just like any other employees with knowledge of your secrets, they tend to move about. READ MORE
With all the hubbub over the Presidential election, it would not be hard to overlook some of the Obama administration’s final moves. Recently, the White House issued a call to action to state legislators to ban non-compete agreements for most classes of workers. In an era where even sandwich makers can be bound to a non-compete agreement, the White House is concerned about the overuse of non-compete agreements and the potential stifling effect of these agreements across the economy. According to the White House, 20 percent of U.S. workers are bound by non-compete agreements, including 14 percent of those earning less than $40,000 per year. READ MORE
Virgin Galactic expanded and continued its attack on its former VP of Propulsion, Thomas Markusic, and his new company, Firefly Space Systems, this month. Markusic co-founded Firefly around the time he left Virgin Galactic, and the two companies compete in the market for rockets capable of launching small and medium sized satellites into lower earth orbit. As the demand for services from such satellites increases steadily; the race to provide a more cost effective method for delivering those satellites into space is also growing and becoming more competitive. READ MORE
Non-compete agreements have long been used by employers as an effective tool to protect their valuable trade secrets and confidential information. However, employers’ overuse of non-compete agreements and employers’ practice of requiring all of their employees to sign non-compete agreements recently has come under significant attack by federal and state governments. In July, Trade Secrets Watch discussed some of those recent attacks. Since July, there have been a number of additional efforts by government to prohibit the overuse of non-compete agreements. READ MORE
As many TSW readers are aware, 2016 has been a big year for trade secret law, with both the United States and the European Union expanding trade secrets protections and increasing the uniformity of their laws. But as good as this year has been for trade secrets protection, it’s been every bit as bad for noncompete agreements.
Jimmy John’s can’t seem to escape the limelight. Last year, the company made headlines (discussed here) when employees hit it with a putative class action lawsuit seeking to invalidate their non-compete agreements. The District Court determined that the employees did not have standing to pursue their claims, and never reached the issue of whether the non-competes were valid. Just last month, the Illinois Attorney General filed suit against Jimmy John’s over the same non-compete agreements. READ MORE