Restrictive Covenants

Courts Continue to Enforce Foreign Non-Competes in California While the Window for Such Agreements Slowly Closes

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

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

Filer Beware! E-Filing Error Can Destroy Trade Secret Status

First rule of thumb in trade secrets litigation? A trade secret must be kept secret. It is painfully obvious, but modern practitioners must not grow complacent due to the convenience of electronic filing. Although trade secrets law does not command absolute secrecy, a recent e-filing snafu in HMS Holdings Corp. v. Arendt offers a cautionary tale from New York on how one botched upload could jeopardize a client’s most prized possession. READ MORE

White House Proposal: Beef Up Anti-Hacking Laws and Resolve a Circuit Split

President Obama wants to go where the Supreme Court refused to tread.  As part of his cybersecurity and privacy initiatives, which we discussed last week, the President would strengthen the federal anti-hacking provisions of the Computer Fraud and Abuse Act (CFAA), including an expansion of activity covered by the statutory phrase “exceeds authorized access.”  In so doing, the President would resolve a circuit split between the First, Fifth, Eighth, Seventh, and Eleventh Circuits, on the one hand, and the Ninth and Fourth Circuits, on the other.  His reason?  “No foreign nation, no hacker, should be able to shut down our networks, steal our trade secrets, or invade the privacy of American families.” READ MORE

Trade Secrets and Third Parties: Litigation Traps To Avoid

Orrick’s Chris Ottenweller and Derek Knerr recently took to Law360 to review recent cases involving theories of third-party liability for trade secret misappropriation.  New employees are one obvious source of potential liability if they bring to the job information obtained from their prior employer. But in recent years companies have also increasingly faced suits based on relationships with contractors and vendors. Chris and Derek offer some practical considerations to help companies mitigate potential liability in the first place.

Running Interference: S.D.N.Y. Lays Out Standards for Tortious Interference in Dispute Between Watchmaker and Former Employees

The U.S. District Court for the Southern District of New York recently cleared the way for a Michigan watchmaker to pursue claims for trade secret misappropriation, among other things, against two former employees who left to work with a competitor, but not without first dismissing claims based on tortious interference with contract.

For companies whose business model depends on a key contract (e.g., with a licensor, vendor, or supplier), the biggest worry with departing employees might not be the theft of intellectual property or trade secrets—but rather the loss of the contract or business relationship.
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New Strings Attached: LinkedIn Contacts Are Now Trade Secrets?

From a birds-eye view, Cellular Accessories For Less, Inc. v. Trinitas, LLC appears to be a typical dispute between an employer and its former employee. However, a closer look reveals an issue new to the world of trade secrets—specifically, do LinkedIn contacts qualify as trade secrets? For now, they may: a federal judge in the Central District of California denied defendants’ motion for summary judgment last month, finding there were triable issues of material fact surrounding the question whether LinkedIn contacts were protectable trade secrets. READ MORE

FOURTH OF JULY EDITION [FROM THE ARCHIVES]: Family Fireworks: Plot to Steal Client Lists Goes Up in Smoke

As Americans head for the beach or the barbecue to celebrate the Fourth of July (many with a bolstered sense of patriotism following the United States’ valiant World Cup efforts), Trade Secrets Watch marks this Independence Day by pulling an explosive story from its archives.

Pyro Spectaculars North, Inc. v. Souza is a case that’s full of fireworks—literal and figurative—as a family pyrotechnics business broke apart, with one member starting a rival company, apparently armed with a USB and a hard drive of purloined client lists and other company files. You can read our full post below the jump.

We wish all our readers and safe and happy holiday weekend. We’ll return to our regular blogging and tweeting schedules on Monday. READ MORE

Enforcing Non-Competes Against Telecommuters

The number of people working from home, or “telecommuting,” has increased over time, with Census data showing that 17 percent of American employees do their jobs remotely.  When someone is working very far from the office, even out-of-state, to what extent can an employer enforce non-compete obligations against employees who leave their jobs?  READ MORE

THANKSGIVING POST: 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