Non-Solicitation

Another California Court Raises Doubts on Employee Non-Solicitation Provisions

Glenn Dassoff and Roland ChangPosted on February 11, 2019

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.

Employee Non-Solicitation and No-Hire Covenants? What’s the Scoop, California?

Glenn Dassoff and Stephanie LeePosted on March 7, 2018

The law in California is well settled that, with few exceptions, non-compete agreements are unenforceable. Less clear is whether and to what extent employee non-solicitation and no-hire agreements can withstand a court’s scrutiny. These types of agreements often exist between employers and employees, as well as between employers themselves. And while non-solicitation provisions containing broad language prohibiting direct or indirect solicitation are common, there is significant confusion over the extent of their enforceability in California. Are these agreements enforceable? As is often the case, the answer is “it depends.” Fortunately, there are a handful of published appellate cases highlighting the fine distinctions that guide the analysis: READ MORE →

TOTAL ECLIPSE EDITION: Trade Secret Disputes That Are Out of This World

Vann PearcePosted on August 25, 2017

Take off your eclipse glasses, close that NASA photo gallery, and stop thinking about how “path of totality” would make an awesome band name: it’s time to get back to work. As the country recovers from Eclipse Mania 2017, we take a look at some space-related trade secrets cases.

Turn Around…

Someone might be stealing your trade secrets behind your back! A federal court found that’s what happened to Pacific Aerospace & Electronic, Inc. (PAE), a company that designs components for electronic circuitry in the aerospace and space exploration industries and whose products are used on the Hubble Telescope and the International Space Shuttle. According to PAE, the specialized nature of its business makes the identity of its customers—who are relatively few in number—critical to its business success. That’s why it was a problem when two PAE employees who had access to proprietary information about PAE’s technologies and customers left for a rival company, RAAD Technologies, Inc. One of the former employees allegedly copied backup tapes of design information weeks before leaving, and both employees allegedly compiled a list of prospective customers after leaving which they gave to RAAD’s sales representative for use in soliciting business. PAE brought a claim for misappropriation of trade secrets (among others) against these former employees and RAAD in the Western District of Washington, and moved for a preliminary injunction. The court ruled that PAE’s detailed customer information was a protectable trade secret, and that PAE risked irreparable harm in the absence of an injunction and would likely prevail on the merits of its misappropriation claim. However, the court limited the scope of injunctive relief only to future misuse of the trade secret customer list, rather than ongoing misuse—i.e., continued sales to wrongfully-acquired customers—as PAE had requested. The court reasoned that given the importance of PAE’s (and later RAAD’s) customers, public interest concerns favored permitting these ongoing business relationships and remedying any harm by an award of monetary damages.

Diamonds Are Forever, but Joint Ventures Are Not: Court Finds Claims Preempted by CUTSA in Business Deal Gone Bad

Editorial BoardPosted on December 14, 2016

The holiday season is officially upon us: peppermint mochas have popped up on coffee shop menus, carols ring from department store speakers, and you can’t turn on the television without seeing at least three diamond commercials. But it’s not all yuletide and merriment for those in the diamond business. As one diamond importer and wholesaler recently learned, sometimes instead of a gem you get a lump of coal—in this case, from the Northern District of California, which tossed out certain claims against a former business partner on the grounds those claims were preempted by the California Uniform Trade Secrets Act. READ MORE →

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

Mark MermelsteinPosted on July 31, 2015

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 →

New Year’s Resolutions for Companies Seeking to Protect Their Trade Secrets in 2015

James McQuadePosted on January 8, 2015

The start of a new year is a perfect opportunity to set lofty goals of self-improvement. While the odds of completing a New Year’s resolution aren’t exactly inspiring (over half are expected to fail within six months) studies still show that people who make specific resolutions are more likely to achieve their goals than those who don’t. The payout for making a specific plan (particularly when it comes to protecting trade secrets) can be quite rewarding. READ MORE →

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

James McQuadePosted on November 19, 2014

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.
READ MORE →

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

Editorial BoardPosted on July 3, 2014

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

Editorial BoardPosted on January 14, 2014

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 →