Having looked back over the last couple of years, I realized that I have failed to provide enough updates on issues and cases making trade secrets | noncompete news. So, I am going to try to resume those efforts moving forward. Given my earlier IP Year in Review post, this post will be primarily update two of the topics there and provide a few other recent updates …
The DTSA. The Defend Trade Secrets Act, which would create a federal private right of action for the protection of trade secrets, has – with some amendments – been reported out of the Senate Judiciary Committee. Bloomberg BNA has a terrific summary here: Senate Judiciary Committee OKs Federal Trade Secret Bill. Testimony was taken back in December 2015, and is available here. Persons appearing to testify were: Karen Cochran, Chief Intellectual Property Counsel at E.I. DuPont de Nemours and Company, Tom Beall Vice President and Chief Intellectual Property Counsel at Corning Incorporated, James Pooley, a leading trade secrets expert, and Sharon Sandeen, Professor of Law at Hamline University School of Law. In addition, a letter was submitted in lieu of live testimony by a number of trade secrets practitioners (myself included) around the country. That letter is available here.
EU Trade Secrets Directive. The text of the Directive of the European Parliament and of the Council on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure is now available here.
Washington State Noncompete Bills. The Washington state legislature’s House Labor & Workplace Standards Committee will be conducting public hearings on the noncompete bills pending in Washington. GeekWire has an excellent summary here: New bills target non-compete clauses in Wash. state employment contracts.
Noncompetes with Customers (Texas). A Texas shrimp farm (Global Blue Technologies (“GBT”)) that had a noncompete agreement with a Florida shrimp farm (Shrimp Improvement Systems (“SIS”), which is owned by a Thai company (CP Foods)) is suing SIS to invalidate the noncompete so GBT can use SIS’s broodstock for GBT’s new shrimp farm operation. See Texas shrimp farm challenges CP Foods over non-compete and Antitrust Complaint Against Big Shrimp.
New Federal Trade Secrets Prosecutions. Last week, the Pennsylvania U.S. Attorney’s Office brought charges against two GlaxoSmithKline scientists (Yu Xue and Lucy Xi) who allegedly stole trade secrets and emailed them to a Chinese startup called Renopharma. A summary of the case, as well as the backlash sparked by questions about racial profiling, is available here: U.S. charges drug researchers with sending trade secrets to China, but will case stand up? (The article quotes well-known trade secrets lawyer (and friend) Peter Toren.)
Damages Unfair Competition Case (Georgia). The Georgia Court of Appeals took a page from the Massachusetts Supreme Judicial Court’s decision in LightLab Imaging, Inc. v. Axsun Technologies, Inc., 469 Mass. 181 (2014), in which the SJC opened the door to new theories of damages in trade secrets litigation (in Massachusetts, at least). The Georgia case case is available here: Lyman v. Cellchem Int’l LLC. In addition, a tip of the hat to Chip Collins of Burr & Forman, who provides a nice summary of Lyman here: Recent Georgia Court of Appeals Case Highlights Alternative Theories of Relief in Unfair Competition Case.
Discovery in Trade Secrets Cases – and Who to Sue. Companies seeking to protect their trade secrets from theft by wayward former employees frequently wrestle with the question of whether to sue just the employee or the new employer as well. A good reminder of one of the downsides of suing the new employer is demonstrated by a recent California Superior Court decision ordering Jawbone (who sued several former employees for and their new employer, FitBit) to turn over alleged trade secrets to Fitbit. A summary of the decision is here: Court Orders Jawbone to Give Fitbit Access to Confidential Information.
Noncompetes and Independent Contractors (Virginia). Another issue that arises every now and again is whether noncompetes can be used to bind independent contractors (as opposed to employees, franchisees, or other business partners). A recent federal court decision in Virginia answered the question in the affirmative. For a summary, see The Non-Compete Agreements Enforceable Against Independent Contractors.
Fiduciary Duties and Trade Secrets (California). Every now and again trade secrets and restrictive covenant cases involve not just conduct occurring around the employee’s departure, but long-term secret competition with the then employer. As also sometimes happens, an employee is laid off for unrelated reasons (sometimes a result of decreased sales caused by the employee’s secret competition, unknown to the employer). In Blackbird Technologies, Inc. v. Joshi, the Northern District of California was faced with just such an issue. In fact, the former employer found out about the secret competition as a consequence of a Youtube video posted by the former employee. For a summary, see The Duty of Loyalty Awakens.
Confidential Information vs. Trade Secrets (6th Circuit / Texas law). Different states handle confidential information that does not rise to the level of a trade secret differently. A recent 6th Circuit case, Orthofix, Inc. v. Hunter, 2015 WL 7252996 (6th Cir. Nov. 17, 2015), highlights the need for (and benefits of) a nondisclosure agreement to reach that broader category of information. Although the case is a bit older, Fisher & Phillips recently posted a nice summary here: Confidential Information that isn’t a Trade Secret?
Other noteworthy news…
- Lawyer Noncompetes. Ken Vanko has a very interesting post about Rule 5.6 of the Rules of Professional Responsibility and indirect restraints that can work like noncompetes. See Rule 5.6 and the Indirect Restraint.
- Innocent Third Party Access to Trade Secrets. What happens when you obtain a trade secret and delete it upon realizing that it was a trade secret? A recent U.S. District Court Judge in the Middle District of Florida says that you did not misappropriate. See Dyncorp International LLC v. AAR Airlift Group, Inc. as discussed here: Aviation Contractor Glides Away From Liability After Receiving Unsolicited Email Containing Trade Secrets.
- FAR Regulation and Confidentiality. Apparently, the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration have proposed an amendment to the Federal Acquisition Regulation that would “prohibit[] the use of funds, appropriated or otherwise made available, for a contract with an entity that requires employees or subcontractors to sign an internal confidentiality agreement that restricts such employees or subcontractors from lawfully reporting waste, fraud, or abuse to a designated Government representative authorized to receive such information.” For more, see Crowell & Moring‘s post, Proposed FAR Rule Targets Restrictive Confidentiality Agreements.