Non-Compete

“It’s a Free Country, Right?” Court Declines to Enjoin Ex-Free Country Ltd. Employees From Contacting Customers on Purloined Contact List

Within days of each other, your clothing company―Free Country Ltd.―loses two employees who decamp to a rival to set up a competing apparel line.  You discover that just before leaving, they transferred some 50,000 documents to a personal account—customer orders, your master contact list, and product design information.  Incensed, you file a trade secrets lawsuit and seek an injunction prohibiting the thieves from soliciting your customers.  Their defense amounts to, “so what if we took the documents―it’s a free country!”  Easy win, right?  Wrong.  These are the facts of a recent trade secrets lawsuit in the Southern District of New York, in which the court denied the plaintiff’s request that its former employee defendants be prohibited from soliciting plaintiff’s customers. READ MORE

Court Order to U-Haul: Haul Your Non-Compete Clauses Out of California

A California appellate court recently upheld a permanent injunction in Robinson v. U-Haul Company of California barring U-Haul from enforcing its non-compete covenants in California. U-Haul also was required to pay over $800,000 in attorney’s fees to its former dealer. READ MORE

THANKSGIVING EDITION [FROM THE ARCHIVES]: Court Protects Quizno’s Franchise Turkey Trade Secrets

This Thanksgiving, Trade Secrets Watch is serving a delicious tale about protecting trade secrets in a franchising relationship.

In 1994, Quizno’s entered into a franchise agreement with Robert Kampendahl, an enterprising fellow who wanted to open up a Quizno’s sandwich shop in St. Charles, Illinois. Unfortunately, Kampendahl didn’t keep his food equipment clean, used unapproved foods, and had safety and sanitation problems, so Quizno’s terminated the franchise agreement. Upon termination, Kampendahl was subject to a covenant not to compete that prohibited him from opening a competing sandwich shop within five miles. READ MORE

One of Obama Administration’s Final Mandates: Non-Competes Should Be The Exception, Not The Rule

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

No Way Around It: SB 1241 Further Restricts Non-Compete Agreements For California Workers

Companies often seek to protect their trade secrets by requiring employees to sign non-compete agreements. California law invalidates such provisions except in very limited circumstances. See Bus. & Prof. Code §§ 16600 et seq. With the recent passage of a new statute, the ability of employers to enforce such agreements against California employees is more restricted than ever.   READ MORE

“Gist of Action” Doctrine: Don’t Contract Away Your Misappropriation Claim

The “gist of action” doctrine. Heard of it? Well, if you are dealing with Pennsylvania law, you need to know it. The “gist of action” doctrine asks whether the “gist” of a suit sounds in tort or contract. When applied to a claim of trade secret misappropriation, the doctrine questions whether the wrongful acts constitute a tort or a breach of contract. If the wrongful acts constitute a breach of contract, Pennsylvania law bars any trade secret claim. As evidenced by the case Wiggins v. Physiologic Assessment Services, LLC, whether a claim can be brought as a trade secret claim or a breach of contract claim can turn on the wording of the contract at issue. READ MORE

Government Attacks on Non-Compete Agreements Continue

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

RIGHT IN THE BREADBASKET: Lessons From Early Cases at the Intersection of Noncompetes and the DTSA

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.
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Government Involvement in Noncompetes… Against a Sandwich Maker?! Jimmy John’s Slapped With Another Lawsuit, This Time Brought by the Illinois Attorney General

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

The Gloves Are Off: Competing Biopics Battle For Hollywood Purse

Hollywood’s heavy-hitters often enter the ring over unauthorized biographies. Elizabeth Taylor famously invoked her rights of publicity and privacy in an attempt to shut down an unofficial docudrama about her life; Clint Eastwood sued the author and publisher of his unsanctioned biography for libel; and a film production company brought claims for copyright and trademark infringement against the producers of the biopic Lovelace starring Amanda Seyfried. Hollywood’s newest matchup involves misappropriation of trade secrets, a growing concern in the entertainment industry, especially after the recent Sony hack. READ MORE