By Dan Terzian
When people switch jobs, both sets of employers face known risks. The former employers risk their former employees decamping with their trade secrets. And the new employers risk inviting trade secret lawsuits.
But that’s not all. A related risk lurks in the background, one that you might not know of and that could expose your company to criminal liability. Or, more likely, a risk that would be an additional arrow in a plaintiff’s quiver.
The risk is computer fraud claims. Maybe your new employee never deleted her prior corporate email account from her phone, and the competitor never invalidated her access credentials (or delayed in doing so). That alone might be enough for a claim under the California Comprehensive Computer Data Access and Fraud Act.
Read the full article on the Duane Morris LLP website.
This article originally appeared in The Recorder.
With 2018 well underway, it’s time to look ahead to what are likely to be some of the key issues/stories relating to non-competition agreements and trade secrets this year:
- Continued Push in State Legislatures for Non-Compete Reform
Last year saw the enactment of a number of state laws relating to non-competition agreements. See, e.g., Cal. Lab. Code § 925 (setting conditions on requiring employees who primarily reside and work in California to sign agreements containing a mandatory non-California choice of law clause or a mandatory forum selection clause outside of California); 820 Ill. Comp. Stat. 90/1 through 90/10 (prohibiting covenants not to compete between Illinois employers and their low-wage employees, i.e., those who earn no more than “the greater of (1) the hourly rate equal to the minimum wage required by the applicable federal, State, or local minimum wage law or (2) $13.00 per hour.”); Nev. Rev. Stat. Ann. § AB 276, § 1 (setting forth new standard for Nevada courts to analyze non-competition agreements and reversing Nevada Supreme Court’s 2016 Golden Road decision to restore Nevada to a “blue pencil” state).
This year is likely to see a continued push in state legislatures for the enactment of laws relating to non-competition agreements. Legislators in New Jersey, Pennsylvania, New Hampshire and Vermont have all recently introduced bills that would limit enforcement of non-competition agreements. Pennsylvania’s bill (House Bill No. 1938), if enacted, would ban covenants not to compete entered into after the effective date of the legislation, except those involving the sale of a business or the dissolution or disassociation of a partnership or a limited liability company. If enacted, the bill would also entitle an employee who prevails in a suit against an employer related to the enforcement of a covenant not to compete to recover attorneys’ fees and punitive damages, and would require any dispute arising out of or related to a covenant not to compete involving a Pennsylvania resident to be exclusively decided by a Pennsylvania state court applying Pennsylvania law. Continue reading 2018 Non-Compete and Trade Secrets Law Preview
Duane Morris partners Lawrence Pockers, Shannon Hampton Sutherland and Daniel Walworth shared their views on the latest trends in trade secret law.
Thomson Reuters: What trends are you seeing in trade secret litigation?
Shannon Hampton Sutherland: Last year, President Barack Obama signed into law the Defend Trade Secrets Act, which gives plaintiffs the ability to file trade secret cases in federal court without diversity jurisdiction. That is fairly significant because in the past, plaintiffs would have to file in state court, and now there is a federal cause of action that allows plaintiffs to go directly to federal court, which generally is a benefit. The second thing is that anecdotally, we are seeing more criminal cases come out of trade secrets theft than we’ve seen in the past. Prosecutors are taking up cases at a rate higher than normal, especially when foreign nationals are involved.
To read the full text of this article, please visit the Duane Morris LLP website.
By Gregory S. Bombard
On June 9, 2017, the Business Litigation Session (BLS) of the Massachusetts Superior Court issued a decision about the extraterritorial application of California’s public policy against non-competition agreements (Full text of the decision: Oxford Global Resources, LLC v. Jeremy Hernandez). The plaintiff, Oxford, is a recruiting and staffing company headquartered in Massachusetts. It hired the defendant to work as an entry-level “account manager” in an office in California. As a condition of his employment, the employee signed a “protective covenants agreement” that included non-solicitation, non-competition, and confidentiality provisions. This agreement contained a Massachusetts choice-of-law provision and a Massachusetts choice-of-venue provision. Continue reading Massachusetts Court Rules California Law Supersedes Massachusetts Choice-of-Law Provision and Non-Compete Clause in Employment Contract
The Pennsylvania Superior Court’s recent decision in Metalico Pittsburgh, Inc. v. Douglas Newman, et al., No. 354 WDA 2016, 2017 PA Super. 109 (Apr. 19, 2017), confirms the importance of careful contractual drafting in agreements containing non-compete clauses and other post-employment restrictive covenants. In circumstances where an employee is hired for a term of employment but later becomes an at-will employee, that contractual language may determine the enforceability of the agreement’s non-compete and non-solicitation provisions.
To read the full text of this post by Duane Morris partner Luke McLoughlin, please visit the Duane Morris Appellate Review Blog.
By Shannon Hampton Sutherland and Gregory S. Bombard
Last week, the White House called on states to enact sweeping reforms to their non-compete laws. The White House’s new policy position is that “most workers should not be covered by a non-compete agreement” and that, although “each state faces different circumstances,” many employers have sufficient other targeted remedies to protect their legal interests.
In its policy statement, the White House called on states to enact “non-compete” reforms, including one or more of the following: Continue reading White House Recommends Non-Compete Reforms
By Shannon Hampton Sutherland and Julian A. Jackson-Fannin
On September 27, 2016, in Adams Arms, LLC v. Unified Weapon Systems, Inc., et al., the U.S. District Court for the Middle District of Florida issued one of the first substantive opinions concerning claims brought under the new Defend Trade Secrets Act (“DTSA”).
The DTSA, which became effective on May, 11, 2016, expanded the jurisdiction of federal courts by, among other things, creating a new federal civil cause of action for trade secret misappropriation when “the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” Although the DTSA has been hailed as the new “national standard for trade secret misappropriation,” with certain exceptions, its provisions are largely consistent with the well-known Uniform Trade Secrets Act (“UTSA”) currently adopted by 48 states, the District of Columbia and the U.S. Virgin Islands. The DTSA prohibits both the improper “acquisition” of a trade secret as well as its “disclosure.” As the DTSA continues to make its first impressions on federal courts around the country, threshold questions have arisen concerning the timing of misappropriations and what theories of recovery apply under the freshly minted law. Continue reading A Call to Arms: How Timing Matters Under the New Defend Trade Secrets Act
By Bronwyn L. Roberts
As reported in The Boston Globe, the Massachusetts Senate and House concluded their legislative session on July 31, 2016, without passing noncompete reform legislation. This comes as a bit of a surprise as the House and Senate have in 2016 each passed a noncompete reform bill. Additionally, Governor Charlie Baker has, through a spokesperson, recently indicated support for the House bill that sought to restrict noncompetes by creating “Garden Leave,” consisting of payment during the restricted period of at least 50 percent of the employee’s annualized base salary. However, for those who have followed this process over the years, the fact that neither bill passed is consistent with many other failed attempts over the years to overhaul the Massachusetts noncompete landscape.
Thus, the noncompete reform debate, which has been ongoing in the Massachusetts legislature since at least 2009, continues. We will keep you updated.
Continue reading The “No Update” Update: Massachusetts Legislature Concludes Session Without Passing Noncompete Reform
By Bronwyn L. Roberts
On June 29, 2016, just four months after Massachusetts House Speaker Robert A. DeLeo promised to put new legislative limits on noncompetition agreements, the House unanimously passed a bill (150-0) doing just that and also passed the Massachusetts Uniform Trade Secrets Act. To become law, the bill (House Bill 4434) still needs to pass the Senate and be signed by Governor Charlie Baker.
While much of the bill would merely codify some of the key issues judges already look at when analyzing whether an agreement is enforceable under Massachusetts law, there are some provisions that represent a sea change in the noncompete landscape.
Continue reading House Unanimously Passes Legislative Limits on Massachusetts Noncompetes and Passes Massachusetts Uniform Trade Secrets Act and, in Doing so, Introduces Paid Garden Leave
On June 9, 2016, Duane Morris attorney Gregory S. Bombard moderated a panel at the Boston Bar Association on “Negotiating and Enforcing Protective Orders in Trade Secret Cases.” The panel discussed best practices for protecting a client’s secret information during litigation, from discovery through motion practice and trial. Michael R. Gottfried, the managing partner of Duane Morris’s Boston office, spoke about his experience using trade secret information at trial. Also on the panel were Kenneth Berman of Nutter, McClennen & Fish and Sarah Herlihy of Jackson Lewis.
For more information, please contact Mr. Gottfried or Mr. Bombard of the Boston office or the members of the Non-Compete and Trade Secrets Practice.