As reported by Trade Secrets Watch last month, several states (including Maryland, Maine, New Hampshire, and Rhode Island) recently passed legislation curtailing the use of non-compete agreements. Now, the federal government wants in on the action.
James McQuade, an employment partner in the New York office, represents clients in high-stakes employment, trade secrets and restrictive covenant litigation throughout the United States.
Jim's practice focuses on matters involving trade secret misappropriation and the enforcement of post-employment restrictions. Jim has conducted numerous temporary restraining order and preliminary injunction hearings in connection with these types of cases. Jim also has extensive experience defending employers on a broad range of employment matters, including whistleblowing, discrimination, retaliation and wrongful termination matters.
In recognition of his career trade secrets and restrictive covenant work, Jim has been inducted into the Legal 500 Hall of Fame for Trade Secrets Litigation. Jim also serves as Co-Editor-In-Chief to Orrick's acclaimed Trade Secrets Watch blog.
Posts by: James McQuade
In January of this year, the DOJ indicted the Chinese telecom giant Huawei on counts of theft of trade secrets conspiracy, attempted theft of trade secrets, wire fraud, and obstruction of justice. On August 1, Huawei moved to dismiss the indictment for “selective prosecution.” Huawei contends that it is the “target of the politically motivated decision, at the highest levels of the U.S. government, to pursue the selective prosecution of Chinese companies and nationals for the alleged misappropriation of intellectual property.” In essence, it argues that the DOJ unconstitutionally seeks to punish Huawei because it is a large, successful Chinese company, not because of illegal behavior by the company or its agents. READ MORE
Earlier this year, Washington adopted a new law—Engrossed Substitute House Bill 1450—that places significant restrictions on the enforceability of non-competition agreements. The law applies to “every written or oral covenant, agreement, or contract by which an employee or independent contractor is prohibited or restrained from engaging in a lawful profession, trade, or business of any kind.” Importantly, the law does not address nonsolicitation, confidentiality, or trade secrets agreements. Employers using non-competition agreements should understand the key provisions of the law—which takes effect on January 1, 2020—and how they affect their non-competition agreements. READ MORE
After a weeklong June trial, a Texas federal jury awarded Six Dimensions, Inc. (“Six Dimensions”), a digital marketing firm, $287,000 for its breach-of-contract claim against its former employee but rejected its behemoth $50 million claim for trade secret misappropriation against its competitor, Perficient Inc. (“Perficient”). READ MORE
Last week, the United States Senate Judiciary Committee announced the creation of a new subcommittee on intellectual property. The IP subcommittee will address a range of IP issues, including theft by state actors such as China. The announcement of the subcommittee comes in the wake of increasing tension over trade with China and shortly after the Department of Justice announced criminal charges against China’s Huawei Technologies for alleged trade secrets theft. READ MORE
Employers in many industries use non-compete agreements as a key tool to protect trade secrets. According to U.S. Treasury reports, non-compete agreements impact approximately 30 million – nearly one in five – U.S. workers, including roughly one in six workers without a college degree.
Some employers have imposed non-compete agreements across a broad segment of their workforce, including imposing them on low-wage earning employees and employees who are not privy to trade secrets or other confidential information. Non-compete agreement opponents argue that such broad non-compete agreements can interfere with the employee’s right to make a living without any off-setting benefit for the employer. In the past few years, state attorneys general have been successfully suing companies to invalidate what many see as overly-expansive non-compete agreements.
A $700 million jury award for trade secrets misappropriation and fraud is the product of a collusive scheme to deceive the jury, claims title insurance and valuations provider Amrock, formerly known as Title Source, in its recent bid for a new trial.
The blockbuster award to technology start-up HouseCanary arose out of its 2015 contract to provide Amrock with access to its proprietary app designed to generate real estate valuations for house appraisers based on a proprietary automated valuation model. Several months later, Amrock accused HouseCanary of breaching the contract by failing to provide any usable products. Amrock terminated the agreement and sought a declaratory judgment in Texas state court that it need not pay HouseCanary the contracted $5 million in annual access fees. HouseCanary countersued, claiming that Amrock used HouseCanary’s products and offerings without paying for them, collected a “critical mass” of HouseCanary’s proprietary data, and ultimately used that information to “secretly replicate” HouseCanary’s protected technology and intellectual property. HouseCanary ultimately convinced the San Antonio jury that Amrock lied about its intended purpose in entering the contract and that Amrock misappropriated HouseCanary’s data and technology to develop competing property analytics and software. In March 2018, the jury awarded HouseCanary $200 million for trade secrets misappropriation, $400 million in punitive damages for the misappropriation, $34 million for fraud relating to the contract, and $68 million in punitive damages for the fraud. In October 2018, the judge upheld the award and ordered Amrock to also pay $29 million in prejudgment interest and $4.5 million in attorneys’ fees. READ MORE
Now, roughly five years and one federal trade secrets statute later, Massachusetts has become the 49th state, leaving New York as the lone holdout. The new law, which takes effect on October 1, 2018, is part of an amendment to a $1.1 billion economic development bill that Massachusetts Governor Charlie Baker signed into law on August 10, 2018. With the enactment of the UTSA, Massachusetts courts will have newfound power to enter injunctions against actual or threatened misappropriation of trade secrets.
In July 2018, a federal judge in Wisconsin imposed a $1.5 million penalty—the maximum statutory fine—against Chinese wind turbine manufacturer, Sinovel Wind Group Co. Ltd., for stealing trade secrets from Massachusetts-based technology company, AMSC Inc. In addition to the fine, Sinovel was sentenced to 1 year probation and ordered to pay $57.5 million in restitution to AMSC, an amount the companies had settled on prior to the ruling. Sinovel also agreed to pay $850,000 to Massachusetts wind turbine operators. READ MORE
On May 3, 2018, the New York Court of Appeals held that data copied onto a server constitutes a tangible reproduction for purposes of liability under the New York Penal Code, marking the end of Sergey Aleynikov’s nine year battle with federal and state prosecutors. Trade Secrets Watch has kept you up to date with the seemingly never-ending saga – most recently here, here, and here.
As a refresher, Programmer Sergey Aleynikov was accused of copying thousands of lines of code from his former employer, Goldman Sachs Group Inc. in July 2009. The Second Circuit upheld Aleynikov’s conviction under the National Stolen Property Act (NSPA) and the Economic Espionage Act (EEA), but later prompted legislative changes when it reversed, finding that Aleynikov had not stolen a “good” as defined by the NSPA, nor a trade secret intended for use in interstate or international commerce, as required by the EEA. READ MORE