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
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 Lawrence H. Pockers, Co-Chair, Duane Morris Non-Compete and Trade Secrets practice
Following passage by the House of Representatives on April 27, 2016, President Obama is expected to sign the Defend Trade Secrets Act of 2016 into law any day. Once signed into law, the Defend Trade Secrets Act will amend Chapter 90, Title 18 of the United State Code (The Economic Espionage Act of 1996) to create a federal, private cause of action for trade secret misappropriation where “the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” The Defend Trade Secrets Act will apply with respect to any misappropriation of a trade secret “for which any act [of misappropriation] occurs on or after the date of the enactment of the Act.” Much of the early commentary surrounding the Defend Trade Secrets Act has focused on the fact that employers will now be able to rely on federal law instead of navigating the sometimes subtle differences in state laws concerning claims for trade secret misappropriation, and the provisions of the Defend Trade Secrets Act which permit the civil seizure “of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”
One aspect of the Defend Trade Secrets Act that has received little attention, but that should be top of mind for employers, is a provision buried at the end of the Act that will necessitate a change in the form of employment agreements many employers use in order to maintain maximum leverage over employees and ex-employees who misappropriate trade secrets. More specifically, Section 7 – the very last section – of the Act, amends the Economic Espionage Act to create immunity from liability where an individual (for example, an employee or ex-employee) confidentially discloses a trade secret to a government official, an attorney or in a court filing. This Section of the Act requires that “[a]n employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” An employer that fails to comply may not be awarded exemplary damages or attorneys’ fees in an action under the Act unless the employee was provided with this form of notice.
Continue reading Federal Defend Trade Secrets Act Necessitates Changes to Form Employment Agreements