Does the Inevitable Disclosure Doctrine Apply Under the DTSA? It Depends on the State.

The Defend Trade Secrets Act (“DTSA”) went into effect in May 2016. Since then, federal courts have largely adhered to existing law in their respective states to determine whether the inevitable disclosure doctrine applies to DTSA claims. This article provides a sampling of existing opinions that have either permitted or rejected the inevitable disclosure doctrine under DTSA claims, broken down by state.[1]  READ MORE

Protecting IP in a COVID-19 Remote-Work-World

Even before the COVID-19 pandemic, many employers offered remote work options. Now employers all over the world are encouraging or requiring their employees to work remote from home. This means employees are accessing, maintaining, and sharing proprietary information outside of the office more frequently than ever before, thereby increasing the risk of employee and third-party IP theft. READ MORE

In Pursuit of Chinese Trade Secret Theft: Fresh Allegations Against Huawei and Chinese Military Grabs 145 Million SSNs

Loyal readers are familiar with the DOJ’s “China Initiative,” launched in November 2018 to prosecute the theft of U.S. trade secrets by or for Chinese interests. Attorney General Barr reaffirmed the DOJ’s commitment “to combat the threat posed by theft directed and encouraged by the PRC” in an address at the China Initiative Conference last month. The DOJ’s campaign recently intensified with two new, gripping indictments. READ MORE

FTC Holds Workshop Examining Potential for Regulation of Non-Compete Agreements

After a busy year for non-compete regulation at the state level, the Federal Trade Commission (FTC) held a public workshop last Thursday in Washington D.C. to examine the legal basis and economic support for a contemplated FTC rule restricting the use of non-compete clauses in employment agreements. A link to the FTC’s webpage with details about the workshop is located here: https://www.ftc.gov/news-events/events-calendar/.

The workshop brought together experts from academia, organized labor and the private sector to discuss the impact of non-competes on the American workforce and overall economy. Multiple panels involved presentations of academic studies taking the position that non-competes negatively impact workers and the labor market. In particular, there appeared to be broad consensus among panel presenters that non-competes restrict worker mobility, limit the exchange of information, and cause a suppression of wages. One study estimated that an outright ban on non-competes clauses would cause wages of workers in the U.S. to increase, on average, by approximately 7%.

There was also discussion about the potentially positive impact of non-compete agreements for certain categories of employees, such as physicians and CEOS. In particular, one study found that physician groups that utilized non-competes saw doctors make significantly more patient referrals within the physician group and led to higher overall earnings. Moreover, the study found CEOs bound by non-compete clauses tend to be more accountable and typically receive higher compensation.

There was also significant discussion regarding the FTC’s authority to promulgate a rule regulating the use of non-compete agreements. Several participants noted that the FTC has broad statutory authority to regulate unfair competition. Non-competes could theoretically fall within the FTC’s authority pursuant to the FTC’s view that non-compete agreements are anti-competitive and an unfair restraint on the ability of employers to compete for labor.

Overall, workshop participants agreed that more empirical evidence is needed before there can be meaningful discussion about an outright ban of non-compete agreements. Other proposals for an FTC rule included setting a nationwide minimum earnings threshold for workers against whom a non-compete may be enforced and requiring employers to disclose the terms of a non-compete with an offer of employment (not after an offer has been accepted).

To aid its continuing analysis of non-competes, the FTC is seeking public comments on several questions aimed to determine how the Commission should focus its rulemaking efforts. Public comments are due by February 20, 2020. More information about submitting a public comment to the FTC can be found at the link above. Trade Secrets Watch will continue to monitor developments from the FTC.

Indirect Competition Enough to Enforce Non-Compete Against Former CEO in Pennsylvania

In the midst of nationwide efforts to reform the use of non-compete restrictions, a recent decision from the Eastern District of Pennsylvania illustrates the broad approach courts may take when enforcing restrictive covenants against high-level executives. READ MORE

In a Blockbuster Economic Espionage Act Prosecution, an Attempt by the Government to Hide the Ball?

An ongoing, headline-grabbing trade secret theft prosecution against a Chinese spy is also quietly presenting a, say, disquieting attempt by prosecutors to stretch the law on what it is required to plead and prove.  On the civil side, when a plaintiff sues for trade secret theft, there’s almost always a hotly contested point of proof on whether the alleged stolen material is really a trade secret.  It’s well-established, though, that when the government charges a defendant criminally with the inchoate forms of trade secret theft—attempt or conspiracy being the two spelled out under the Economic Espionage Act—the government has no burden to prove that the underlying information was actually a trade secret.  (Loyal readers will recall our recent post on United States v. O’Rourke, where the defendant tried to argue otherwise at sentencing.)  Now, in a brief filed just last week, the government seems to be taking this one step further and arguing that it has no duty even to identify the trade secrets at issue. READ MORE

From Corn-Gate to You-Stole-My-Trade-Secrets-Gate (Maybe): Defendant Beer Maker Moves to Add a Counterclaim for Trade Secrets Misappropriation in False Advertisement Litigation

MillerCoors (beer maker of Coors Light and Miller Lite) and Anheuser-Busch (“AB”) (competing beer maker of Bud Light) have been embroiled in a contentious federal district court litigation in the W.D. of Wisconsin since March 2019. MillerCoors filed a lawsuit against AB for false advertising and trademark dilution shortly after AB aired an ad during Super Bowl LIII saying that MillerCoors uses corn syrup during brewing. MillerCoors’ lawsuit alleges that this ad was part of a “false and misleading advertising campaign” designed to deceive consumers into thinking they will consume corn syrup if they drink Coors Light and Miller Lite, which MillerCoors denies. READ MORE

Court Upholds One Year in Prison for Theft of non-Trade Secrets

A federal district court judge in Chicago sentenced Robert O’Rourke, a former employee of iron bar manufacturer Dura-Bar, to one year and one day in prison last week for stealing trade secrets.  Well, not quite.  O’Rourke was convicted on February 25 of seven counts of stealing and attempting to steal trade secrets, but moved for a new trial.  In her October 11 order, Judge Andrea Wood denied the motion, holding that the trial evidence demonstrated O’Rourke’s intent to steal and use trade secrets—even if some of the proprietary information stolen did not actually constitute a trade secret. READ MORE

Professor’s Prosecution Shows Importance of Disclosing All Foreign Ties

In August 2019, federal prosecutors indicted Feng Tao, a Chinese scientist conducting research at the University of Kansas, on fraud charges. The indictment may not appear notable at first glance. But when viewed against the backdrop of the Trump administration’s escalating trade war and the Department of Justice’s “China Initiative,” the facts underlying this prosecution may tell a deeper story.

As part of its China Initiative—a program announced in November 2018 to combat state-sponsored intellectual property theft—the DOJ set out to develop an enforcement strategy concerning universities and research laboratories. These institutions are considered particularly vulnerable targets of Chinese espionage because of their status as recruiters of foreign talent and incubators of state-of-the-art technology. The FBI has since begun scrutinizing universities’ ties to China, reaching out to schools around the country to curb the threat of technology and trade secret theft posed by researchers tapped by the Chinese government. READ MORE