Another California Court Raises Doubts on Employee Non-Solicitation Provisions

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.

READ MORE

Using Non-Compete Agreements in Employment Contracts to Protect Trade Secrets

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.

READ MORE

Bad Artists Copy. Good Artists Steal: Trade Secrets in the Art World

“Bad Artists Copy. Good Artists Steal” – Pablo Picasso

In the small world of exclusive and upscale art sales, competing galleries inevitably form and maintain relationships with one another.  This is the case for Lévy Gorvey gallery partner Dominque Lévy, and Lehmann Maupin Group co-founder Rachel Lehmann, who have known each other for over 20 years.  Now, Lehmann Maupin is involved in a trade secrets fight with their former sales director, Bona Yoo, who is currently employed by Lévy Gorvey.  In this tightknit artist’s community, the news of a trade secrets lawsuit against a former employee is admittedly more shocking than the typical Silicon Valley trade secret theft story, where employees leave for competitor companies as frequently as they come.  But it should not be surprising that trade secrets in the art industry are just as valuable to their owners as they are to tech industry leaders—because in both worlds, client relationships are key. READ MORE

Possession is not 9/10ths of the Law in Continuing Use Misappropriation Under DTSA

When Congress enacted the DTSA on May 11, 2016, it left open the issue of whether the DTSA would apply to misappropriation that occurred prior.  As we previously reported, many federal district courts have since found that it does apply if there were continuing acts of misappropriation after enactment of the statute.  Now, the 10th Circuit Court of Appeals has weighed in, upholding a district court’s dismissal of a DTSA claim where the plaintiff failed to allege a continued act of misappropriation after the date of enactment. READ MORE

To Patent or Not to Patent? Preserving Trade Secret Status During Prosecution

Amid a growing body of unsettled law regarding the patentability of software and business methods patents, companies are increasingly choosing to maintain their valuable innovations as trade secrets rather than risk a rejected patent application. There are pros and cons to both forms of intellectual property protection. However, the decision need not be binary – at least not during the pendency of the patent application. Instead, by opting to go the “non-publication” route, inventors can maintain trade secret protection over an invention during the patenting process and decide whether to forego trade secret status and allow the patent to issue at the end of the patent prosecution process. READ MORE

Titanic Texas Trade Secrets Verdict Contested as Colossal Collusion

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

One Step Away from Uniform: Taking a Closer Look at Massachusetts’ New Trade Secrets 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.

READ MORE

Intent to Use is Sticking “Pointe” In Denial of Preliminary Injunction

On October 25, the U.S. District Court for the District of Massachusetts denied motions for injunctive relief in a case involving trade secrets allegedly stolen by a departing consultant using his personal computer to sync with the company’s Dropbox.  This case established (1) Massachusetts’ newly enacted Uniform Trade Secrets Act (“UTSA”) does not apply retroactively even if the violation is continuing; and (2) intent to use a trade secret is a hurdle which Plaintiffs can struggle to show where there is not evidence of actual use and the defendant takes steps at remediation. READ MORE

T-R-NO: Nevada District Court Denies Motion for TRO Despite Evidence of Mass Download of Company Files and Steps Taken to Cover Tracks

Our readers have seen enough of our blog posts to be familiar with the classic ex-employee trade secrets theft scenario:  employee downloads confidential files to his personal computer; employee attempts to cover his tracks with deletions of those files; employee resigns from the company to work for a competitor. When such a classic case results in litigation, the plaintiff company typically succeeds in obtaining injunctive relief against the ex-employee. We posted about one successful preliminary injunction motion last year. A recent district court decision out of the District of Nevada, however, shows that a motion for TRO on seemingly slam-dunk facts is never guaranteed. This decision highlights two important takeaways for litigators: (1) if your client is facing imminent business harm, seek an injunction immediately; and (2) in the Ninth Circuit, there is no presumption of irreparable harm, even if the evidence shows trade secret misappropriation or a breach of the employee’s confidentiality agreement. READ MORE