Trade Secrets and Noncompete Blog : Non-Compete Lawyer & Attorney : Epstein Becker Green Law Firm : Trade Secrets & Confidentiality Agreements

In an article published in yesterday’s New York Law Journal (December 22, 2010, New York Law Journal, p.4 (col. 4), Nonhire Agreements as Antitrust Violations), we discuss a complaint filed in September 2010 by the Department of Justice ("DOJ") against Adobe Systems, Inc., Apple Inc., Google Inc., Intel Corporation, Intuit, Inc., and Pixar, which alleges that those companies entered into various bilateral agreements in which they agreed not to actively solicit each other’s highly skilled technical employees, and that those agreements violated Section 1 of the Sherman Act, 15 U.S.C. § 1. Calling such agreements “facially anticompetitive,” the DOJ alleged that such concerted behavior both reduced the companies’ ability to compete for employees and disrupted the normal price-setting mechanisms that apply in the labor arena. At the same time that it filed the Complaint, the DOJ filed a proposed Final Judgment, Stipulation and Competitive Impact Statement, effectively announcing the settlement of its claims, by which the defendant companies would agree to refrain from entering into similar agreements in the future.

On December 21, 2010, the DOJ filed a similar complaint against Lucasfilm Ltd., alleging that company agreed with Pixar to restrict certain employee recruiting practices. The DOJ also filed a Competitive Impact Statement in the Lucasfilm matter, in connection with a proposed settlement that would restrict Lucasfilm from agreeing with any person to refrain from cold-calling, soliciting, recruiting or otherwise competing for the employees of the other person.

Legal practitioners thus should be aware that a corporate client entering into mutual non-solicitation and non-hire agreements with certain competitors, seeking relief from those competitors’ efforts to recruit away its employees, could expose the company to unwanted interest and even prosecution by governmental authorities under the antitrust laws. In most cases, particularly for large, high-profile corporate clients operating in a concentrated market, this quick fix should be avoided. There are a few legitimate business reasons that could support a “no direct solicitation provision,” and these are discussed further in our New York Law Journal article on the prior DOJ suit.
 

Please join me and other attorneys from my firm, EpsteinBeckerGreen, as we present a full-day program covering labor and employment law topics that have increasingly impacted employers over the past two years. In addition, we will offer an outlook of what we should expect in the coming two years. Our keynote speaker is Darrel Thompson, Senior Advisor to Senate Majority Harry Reid, who will offer comments concerning the agenda of the 112th Congress. We are particularly pleased that Norah O'Donnell, MSNBC Chief Washington Correspondent, is attending the event as our guest luncheon speaker.

For more details and registration information, please visit the EpsteinBeckerGreen website. 

I hope to meet you and other readers of this blog.
 

Last September, we wrote about David Yen Lee, a former Technical Director for a painting and coating company who pled guilty to downloading trade secrets from a secure computer system and transferring them to external thumb drives with the intention of using the trade secrets for the benefit of another.

Proving once again that crime does not pay, last week Lee was sentenced to 15 months in federal prison to be followed by three years of supervised release. As a condition of his supervised release, he is also barred from working in the paint industry.
 

The Iowa Court of Appeals recently affirmed a jury’s conclusion that detailed information about insurance policy holders was a protected trade secret. Monona County Mutual Insurance Association v. The Hoffman Agency, Inc., Case No. 0-640/10-0136 (Iowa Ct. App. Nov. 24, 2010). The customer information at issue, which was kept in a vault to which access was very limited and which was not shared with the public, included customer names, the type of insurance coverage held by each customer, policy expiration dates and the premiums paid for such policies. This information is used by insurance agents to contact customers before their policies have expired “to see if the customer’s needs have changed and to ensure the customer’s continued business.” An expert witness testified that this information “went to the heart of a business” and that if a competitor received such information, “business would essentially be handed to the competitor on a plate.” Although the defendant claimed that this information “was readily available to it” and therefore not a trade secret, the Court rejected that argument, explaining that it was unclear how the defendant “would know who to contact and when, without the information contained on the list.”

While this decision does not break new legal ground, it nevertheless illustrates the significance of customer information in the insurance industry and the need to take appropriate steps to maintain its secrecy.