Trade Secret | Noncompete – Issues and Cases in the News – May

extras_03Below are the latest issues and cases making trade secrets | noncompete news since our last update …

Federal:  The president has until Saturday to sign or veto the DTSA. “[D]escribed as the ‘most significant expansion of federal law in intellectual property since the Lanham Act in 1946,’” see Congress May Be About to Shake Up Trade Secret Law: Is That a Good Thing?the DTSA will provide federal court access without diversity of citizenship and the express ability to obtain ex parte seizure orders (albeit only in extraordinary circumstances) to protect trade secrets. For more, see Jim Pooley‘s guest post on PatentlyO: What you need to know about the amended defend trade secrets act.

Federal:  On March 31, 2016, the United States Department of the Treasury issued a report entitled, “Non-compete Contracts: Economic Effects and Policy Implications.” As the Treasury Department explains, the “report seeks to begin a discussion of potential reforms in the usage of non-compete agreements.” The report is a substantial effort and worth a read (and not just because it relies in part on my 50 State Noncompete Survey!).

6th Circuit:  It’s a common theme: employees secretly competing through a company they created and worked for while employed by their “real” employer. In a recent case in Michigan, the two defendants formed a competing company using their wives’ names. (I’ve seen the same consciousness of guilt result in the competing company ostensibly owned by the employee’s son.) See Sixth Circuit Affirms $3.7 Million Award And Permanent Injunction In Trade Secret/Breach Of Duty Of Loyalty Case.

9th Circuit: Forum selection clauses have received a lot of attention since the Supreme Court’s 2013 decision in Atlantic Marine Construction Company, Inc. v. United States District Court for the Western District of Texas, 134 S.Ct. 568 (2013), discussed here. In a 2016 decision by the 9th Circuit in In re Orange, S.A. v. United States District Court for the Northern District of California, San Francisco, the court held that a nondisclosure agreement’s forum selection clause did “not cover trade secret misappropriation and related claims that are not based on the agreement.” See 9th Circuit: Claims proceed in California despite French forum selection clause.

Connecticut:  On April 27, 2016, the Connecticut Senate passed a bill (S.B. No. 351) to restrict the duration, geographic reach, and scope of physician noncompetes. The vote was 35-1. The bill has now progressed to the House. Thank you to Jeffers Cowherd for noting the vote.

North Carolina:  As Caitlin M. Goforth of Poyner Spruill reports, in a recent case in North Carolina, Beverage Sys. Of the Carolinas, LLC v. Associated Beverage Repair, LLC, the North Carolina Supreme Court rejected the efforts of two companies to expressly authorize the court to reform their noncompete, rather than rely only North Carolina’s blue-pencil approach. (Note that the case was not the employment context, but rather in the B2B context, where courts tend to be more permissive of the parties’ noncompete agreements.)

Rhode Island:  Rhode Island (unlike a handful of states including in particular Delaware, Massachusetts, and Illinios) does not have a statutory exemption to its noncompete laws for physicians. In an unusual move, despite the fact that the legislature has not declared physician noncompetes unenforceable, a Rhode Island state Superior Court judge refused to enforce a noncompete against a physician on public policy grounds (under the injunction standards, which consider injury to the public). The case is Medicine and Long Term Care Associates, LLC v. Khurshid, 2016 WL 1294194 (R.I. Super. Ct. Mar. 29, 2016).

Other Noteworthy News…

Don’t forget to check Changing Trade Secrets | Noncompete Laws for coverage of all major developments nationally and internationally. 

Please note that the most current version of both the 50 State Noncompete Chart and 50 state and federal survey chart of trade secret laws can always be found on my firm’s resources page.