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
Hiring external contractors is common practice in the fast-paced tech-industry where talent is scarce and in high-demand, but such a practice can expose a company’s most valuable IP to the confidentiality measures, or lack thereof, of those external contractors. This type of common business model is an area ripe for trade secret theft. University Accounting Services (“UAS”) alleges that this is exactly what happened when their point person at ScholarChip, an external tech company hired by UAS to design and maintain their tuition collection software “eUAS,” left ScholarChip and formed a product in direct competition with UAS. UAS filed suit in Oregon against ScholarChip and its former employee, and both filed a motion for summary judgement. The court denied the motion and held that there were genuine disputes of material fact surrounding the breach of contract and misappropriation of trade secrets claims, among others. 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
Oregon recently enacted HB2992, further limiting its already restrictive non-compete law, which will apply to any agreements entered on or after January 1, 2020. The new law amends Oregon’s prior non-compete law by requiring the employer, as a condition of the non-compete’ s enforceability, to provide a signed, written copy of the terms of the non-compete agreement to the employee within thirty days of the termination of employment. This is effectively a mandatory reminder, as Oregon’s non-compete law already required the employer to inform the employee at the outset of employment of the non-compete agreement, either two weeks prior to the employee’s first day of employment or as part of a bona fide advancement of the employee. Oregon’s non-compete law also already required that the employee be in an “administrative, executive, or professional” position and have access to trade secrets, other competitively sensitive information, or be “on-air” talent subject to other restrictions.
Oregon’s state legislature thus created a new hoop for employers to jump through before it can subject a limited subset of employees to non-competes. Oregon’s mandatory reminder at the end of an employee’s employment, and not just at the beginning, further aligns its non-compete law with one of the Obama administration’s final mandates for state legislators to improve the transparency and fairness of non-competes.
The stakes couldn’t be higher in the race amongst Silicon Valley self-driving companies vying to be the first to bring the industry-changing technology to market. With competition so steep, and the potential value counted in the trillions, the efforts to protect this technology have given rise to frequent trade secrets theft disputes.
In the most recent instance of alleged autonomous vehicle technology trade secret theft, a federal district court judge ordered the former director of hardware of WeRide Corp., Kun Huang, to return all files he allegedly downloaded from WeRide before his departure in 2018. WeRide formerly credited Huang with its success in becoming the fastest autonomous vehicle company to complete its first public road test. Now, WeRide alleges Huang copied confidential information from a company shared-laptop, deleted files from the laptop, cleared its web browsing history, and then erased the hard drive on his WeRide-issued personal MacBook. Shortly thereafter, Huang began working at Zhong Zhi Xing Technology Co., Ltd. (ZZX), another defendant in the case, which WeRide alleges was founded by its former CEO, Jing Wang, also named as a defendant.
Based on these allegations, the Court granted WeRide a preliminary injunction against Huang and his new companies, ZZX and a related entity AllRide.AI, Inc., barring these parties from using or sharing WeRide’s trade secrets and requiring them to return all WeRide materials within four days of the order.
This case is but one of many recent trade secret disputes amongst Silicon Valley autonomous vehicle technology companies. And with autonomous vehicle employee turnover high and trillions of dollars at stake, we expect to see many more trade secret disputes arise.
Consider this: a former employee has just left his or her employer and may have taken trade secrets to a competitor. Can the employer log in to that former employee’s personal social media account to search for potentially incriminating evidence? For most employers, the answer may be “no,” as doing so may be unlawful or at a minimum, may constitute “unclean hands” (a doctrine barring equitable relief when the party seeking the relief has committed misconduct related to the claims at issue) possibly jeopardizing the employer’s trade secret misappropriation (and other claims) against the former employee. READ MORE
Last November, we discussed the potential impact of a recent California appellate court decision, AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal. App. 5th 923 (2018), which called into question long-standing California precedent enforcing certain employee non-solicitation provisions. However, we noted it was too soon to forecast the implications of that case.
Though it is still early, it appears the tide may be turning, as a California federal district court recently issued a decision that relied upon AMN’s holding and found that the employee non-solicitation provision in the plaintiff’s contract was unenforceable under California law.
As we reported in August, Massachusetts became the penultimate state to enact the Uniform Trade Secrets Act (UTSA), leaving New York as the sole remaining holdout. Massachusetts’ new law, which took effect October 1, 2018, significantly expanded the state’s existing trade secrets law by broadening protections for trade secret owners and narrowing the scope of noncompete agreements. As we reported earlier this month, the new law does not apply retroactively even if the violation is ongoing in nature.
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.