LightsWhether you are a young child missing teeth, or a grown-up taking account of her life, or Santa Claus himself checking up on everyone else’s life, many of us make lists at holiday time.  They can be lists of gifts we want, or those we need to get, or people we wish to see or write to, or things we need or want to do before the end of the year.  Sometimes they are just lists of things that happened this year or that we want to happen next year.  Certainly there are lots of “Top Ten” holiday lists.  This one may be neither an exception nor exceptional, but here is a “Top Ten List of Holiday-Related Trade Secret/Non-Compete Cases”:

  1. “It may be better to be naughty than nice”—In Ivy Mar Co., Inc. v. CR Seasons Ltd., 907 F. Supp. 547 (EDNY 1995), the Court denied plaintiff a preliminary injunction in a non-compete/trade secret case in large part because of plaintiff’s months-long delay in bringing the action. This occurred notwithstanding plaintiff’s claim that it only delayed filing the action so as not to ruin Christmas—“they delayed bringing this motion because they feared defendant Jetmax would not ship goods to its customers during the Christmas season,” or so they claimed.
  2. “Or maybe not.”—In Agero Inc. v. Rubin et al., an appellate court in Massachusetts affirmed dismissal of plaintiff’s claims, holding that Agero failed to establish that two of the defendants, Timothy Schneider and Matthew Capozzi, owed Agero a duty of loyalty.  Though the Court when on at some length as to the reasons it had for affirming the result against Agero, what was perhaps most telling was the Court’s taking the time to express a reason that it was not relying on:
    • We need not comment on the defendants’ suggestion that Agero brought this complaint against them, despite Agero’s size and apparent lack of interest in pursuing ViewPoint, to send a message to other Agero employees who might entertain thoughts of leaving and lawfully competing. That Agero reportedly sued Schneider on Christmas Eve, when Schneider’s oldest child was five years old, might lend credence to the charge. However, we do reiterate that noncompetition agreements would be the better practice to achieve that goal. Based on the record before us, Agero’s claims were properly dismissed.
  3. “Check your list twice”—If you think departing employees had accomplices or other help, don’t just add a bunch of John Does to your complaint without defining and describing who those co-conspirators are.  Otherwise you run the risk of having those claims dismissed and those avenues of discovery shut down in your non-compete or trade secret case just as happens in other types of cases, such as Southwest Materials Handling Co. v. Nissan Motor Co., 2000 U.S. Dist. LEXIS 16275 (N.D. Tex. 2000), where the court said, with respect to civil conspiracy allegations against John Doe defendants, that “[t]his Court is not in the position of channeling or divining potential co-conspirators who are presently as tangible as Santa Claus, the Easter [B]unny or the Tooth Fairy.”  I guess the court did not find the testimony of Frank Church credible.
  4. “What is the secret to making a good snowman?”—Though there is now a patent on for an apparatus for facilitating the construction of a snow man/woman out of snow, making snowman holiday decorations has also spawned litigation like the case of  Gemmy Industries Corporation v. Chrisha Creations Limited, Dist. Court, SD New York 2004. In Gemmy, plaintiff claimed that defendant’s marketing of an inflatable snow man, among other causes of action, violated plaintiff’s trade secrets, especially after defendant hired plaintiff’s former sales representative.  But the court concluded that even plaintiff did not treat the snowman and its marketing as involving trade secrets since plaintiff “did not request and [the sales representative] did not execute any non-disclosure agreement, non-compete agreement or confidentiality agreement prior to acting as a sales representative for [plaintiff].”
  5. “‘It was always said of him, that he knew how to keep Christmas well, if any man alive possessed the knowledge.’”—Dickens’ closing words in A Christmas Carol were a celebration of the Christmas spirit, and sharing but not everyone wants to share the knowledge they have about Christmas traditions.  While some have asked, we think tongue in cheek, whether Christmas may be patented, it does appear that at least some aspects of our Christmas traditions can be protected as trade secrets.  In the case of IPI, INC. v. Monaghan, 2008 Ohio 975 (Court of Appeals, 6th Appellate Dist. 2008), an Ohio Court found that plaintiff had stated a claim for relief, and could proceed to trial, on a claim that plaintiff’s unique methods of “‘event’ photography” such as involved in its “Santa Claus programs” could involve protectable trade secrets under the Ohio Trade Secrets Act, where plaintiff had alleged that “it developed, inter alia, ‘confidential and specialized techniques for event photography, a business marketing plan for its franchisees, a training program, and proprietary and confidential software that it makes available to its franchise systems’” and that “appellees/cross-appellants misappropriated these systems, techniques, etc., that is, its alleged trade secrets. If it is shown that these are truly trade secrets and that appellees/cross-appellants misappropriated the same, IPI would be directly injured by that misappropriation.”
    • Not all courts, however, are willing to give litigants credit for the alleged uniqueness of their holiday-related ideas. This can be seen in Oxenhandler v. Dime Sav. Bank of Brooklyn, 33 Misc. 2d 626 (NY Supreme Court 1962), where plaintiff was denied relief in his trade secret/business information claims against the financial institution to which he had suggested “a ‘Chanukah Savings Plan’ which could be made available to [the bank’s] Jewish depositors in the same manner that a Christmas Club had been available to the general public.”  In fact, the Court concluded that “plaintiff’s idea was neither new, novel, original nor concrete,” and that the Court “cannot perceive how plaintiff on any theory in law can succeed in this action.”  New settings for Christmas Savings Clubs faired no better as alleged trade secrets or protectable ideas either, as seen in Moore v. Ford Motor Co., 43 F. 2d 685 (2nd Cir. 1930). There, plaintiff Moore sought to protect the idea of Christmas Club accounts as a way to save for down payments on automobiles.  The Court concluded that there was nothing secret or unique about such a plan, and that “idea was old in Christmas Savings clubs” for some time.
  6. Beware the office Christmas party.”—Normally this is a phrase you see in HR guides, but it can also hold true in the non-compete area of the law as seen in Plastic Surgery Associates Of Kingsport Inc. v. Pastrick, a 2015 decision of the Tennessee Court Of Appeals 2015. In this case, the court held that the defendant was indeed an employee and an owner of the plaintiff medical practice, and subject to the express terms of his employment agreement (including its non-compete provisions) and liable as an owner for a portion of the practice’s debts.  The court rested its conclusions of ownership on three key facts, one of which was that defendant “hosted a Christmas party at his home that was billed to the company.”  Unless that party was epic, it probably would have been cheaper to pay for the punch and appetizers out of his own pocket.  It would have eliminated that troublesome fact and helped him avoid the necessity of disgorging $246,633.00.
  7. Christmas cards, why bother?”—In Vizant Technologies, LLC v. Whitchurch, 97 F. Supp. 3d 618 (ED Pa. 2015), plaintiff brought a ten-count complaint against defendant alleging misappropriation of trade secrets in violation of the Delaware Uniform Trade Secrets Act (“DUTSA”) as well as two violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), breach of contract, defamation, tortious interference with existing and prospective relationships, abuse of process, conversion, fraud, and civil conspiracy. Finding that defendant was using confidential information and otherwise acting tortiously in contacting plaintiff’s (i.e. her former employer’s) employees, officers, and directors, and with their family members, and in interfering with plaintiff’s business with customers.  This resulted in Whitchurch’s being enjoined from carrying through on her stated “intention to send a ‘Christmas card direct mail piece’” out further criticizing Vizant and its principals to that same audience.
  8. New Year’s resolutions should be thought out.”—Many times, employees will decide to leave for new employment after the upcoming holidays pass.  So it was in Alexander & Alexander v. Wohlman, 578 P. 2d 530 (Wash: Court of Appeals, 1st Div. 1978), where “[b]etween Christmas 1975 and New Year’s Day 1976, the defendants decided to leave the employment of A&A.”   The problem was not their resolve to leave, but the things that they did before they left:
    • On Friday afternoon, January 16, 1976, after Mr. Maier, the manager of the Seattle office, had left for the weekend, they submitted their letters of resignation and took with them personal possessions and certain schedule books for use as forms in the conduct of their business. Between January 12 and 16, 1976, each of the defendants personally contacted clients of theirs to inform them of their decision to leave A&A and the formation of the new firm, Wohlman & Sargent, Inc. On January 17 and 19 defendants sent letters to clients requesting broker-of-record letters.
    • The appeals court found that such conduct did violate their legal obligations to A&A, and found them liable for damages.
  9. Sometimes you get coal in your stocking.”—Courts often work through the holidays, despite the general impression to the contrary. For instance, in Direx Israel, Ltd. v. Breakthrough Medical Corp., 952 F. 2d 802 (4th Cir. 1991), plaintiff obtained a preliminary injunction from the District Court against the defendant who, when he was discharged, illegally appropriated and exploited the plaintiffs’ trade secrets, and were using such trade secrets to manufacture, with intent to market, a machine competitive with the plaintiffs’ product.  The 4th Circuit reversed the grant of the preliminary injunction, but did so “without prejudice to the right of the plaintiffs to renew such motion on the basis of any new or additional facts that may have occurred since the grant under review.”  The appellate court’s decision issued on December 24th.  Likewise, in Viad Corp. v. Cordial, 299 F. Supp. 2d 466 (WD Pa. 2003), the Court issued a Christmas Eve denial of a preliminary injunction request in case in which Defendants Cordial and Hellberg were alleged to have violated their employment contracts, which prohibited them from competing with plaintiff directly or indirectly, or aiding its competitors, for a period of one year following the termination of their employment, though in the holiday spirit the Court pointed out that plaintiff and defendants had been “represented by counsel who tried the matter skillfully and efficiently.”
  10. Sometimes, though, you get what you asked for.”—In Devos Ltd. v. Record, Dist. Court, ED New York 2015, on the other hand, the court issued on Christmas Eve a wide ranging injunction against defendants in a trade secret misappropriation and unfair competition case even though the plaintiff had been indicted and had been placed on a federal exclusion list that meant that no federal agency can do business with plaintiff and that any pharmaceutical distributor who receives federal funding, including Medicare and Medicaid (which includes almost every distributor of pharmaceuticals), also cannot do business with plaintiff. Concluding that an indictment was just an accusation of being naughty rather than a finding of same, the court issued the injunction.  There was no mention of where Santa had come out when double checking Devos’ placement on his list.

Happy holidays.

In a complimentary webinar on May 20 (1:00 p.m. ET), our colleagues James A. Goodman and Ian Carleton Schaefer will lead a webinar focusing on how the cloud and employee mobility are impacting trade secret protection strategies.

Join the Technology, Media, and Telecommunications (TMT) strategic industry group and the Non-Competes, Unfair Competition, and Trade Secrets group of Epstein Becker Green’s Labor and Employment practice for a discussion on the following topics: 

  • The Cloud and Its Impact on Employee Mobility and Trade Secrets
  • Trade Secret Law, Disclosure Risks, and Reasonable Efforts to Safeguard Trade Secrets
  • Employment Law and Corporate Strategies to Identify and Mitigate Risks When Operating in the Cloud

Click here to read more about this webinar, or click here to register.

The beginning of the year is a time of high employee mobility, and with that mobility comes a risk of litigation between the hiring employer and the former employer – particularly when the two companies are direct competitors.

When a lawyer is asked to weigh in on a potential hire and to advise regarding the litigation risk, the legal analysis is just one part of the puzzle; the human element is equally important. Not infrequently, raw human emotion — anger, feelings of betrayal, and/or pure competitive fire – serves as the triggering straw for litigation in such situations. Fortunately, there are practical steps that employers can take to minimize the risk of such litigation. The attached article, which was recently published by the author in Law360, discusses ten suggested ones; some to address the legal elements, others the human ones.

Peter A. Steinmeyer of Epstein Becker & Green, P.C. will be speaking in an upcoming live phone/web seminar entitled "Hiring a Competitor’s Employees: Avoiding Legal Pitfalls" scheduled for Tuesday, July 10, 1:00pm-2:30pm EDT.

As readers of this blog well know, hiring an employee from a competitor involves a great deal of risk due to the employee’s access to the competitor’s trade secrets, customers and other employees. Because of this, a competitor is likely to take aggressive measures to protect its proprietary information and resources from the new employer.

Key employees are often bound by restrictive covenants with the competitor, usually in the form of noncompete, nondisclosure or nonsolicitation agreements. Such restrictions could limit the employee’s value to the new company and put the new employer at risk of suit for trade secret misappropriation or breach.

Counsel to employers considering hiring from a competitor can provide guidance on the extent of the risk of the hiring and on steps to minimize the employer’s exposure. The more transparent the recruitment and hiring process, the less likely the new employer will be subject to liability.

In the upcoming webinar, Jessica Brown, Partner at Gibson Dunn & Crutcher and Peter A. Steinmeyer, Member at Epstein Becker & Green, will provide guidance to counsel to understand and mitigate risks for clients hiring an employee from a competitor. The panel will explain best practices to decrease litigation exposure and will highlight key defenses to competitor suits.

The panel will review these and other key questions:

• What risks are inherent in hiring key employees from a competitor?
• What special considerations come into play when a new employee is subject to a noncompete, nondisclosure or nonsolicitation agreement with a competitor?
• What are some best practices for employers to follow when hiring a competitor’s employee to protect the company and avoid litigation?
• What potential claims might the competitor bring against the new employer—and what are some effective defenses to those claims?

Following the speaker presentations, you’ll have an opportunity to get answers to your specific questions during the interactive Q&A.

For more information or to register, click here, or call 1-800-926-7926 ext. 10 (mention code: ESZEU1-PZB2AZ).

The national law firm of EpsteinBeckerGreen, in conjunction with the Practical Law Company, recently wrote and published statewide guides on the trade secret laws of Illinois, Massachusetts, and New Jersey.

These guides, which were written by EpsteinBeckerGreen’s attorneys in a "question and answer" format, address trade secret and confidentiality laws affecting employers and employees. They focus on the legal requirements related to protecting trade secrets and confidential information.

Here is a list of the aforementioned guides which are now available:

• "Trade Secret Laws: Illinois" – written by Zachary C. Jackson and David J. Clark

• "Trade Secret Laws: Massachusetts" – written by Barry A. Guryan

• "Trade Secret Laws: New Jersey" – written by James P. Flynn and Amy E. Hatcher

These guides follow an earlier group of similar guides which EpsteinBeckerGreen and the Practical Law Company published regarding non-compete laws of Illinois, Massachusetts, New Jersey and Connecticut, and trade secrets laws of the District of Columbia.
 

Peter A. Steinmeyer of Epstein Becker & Green, P.C. will be speaking in an upcoming live phone/web seminar entitled "Noncompete Agreements: Latest Litigation Developments" scheduled for Thursday, August 11, 1:00pm-2:30pm EDT.

As readers of this blog well know, employers frequently use noncompete agreements to protect confidential business information from misappropriation by departing employees. With continuing layoffs and business information easily accessible via computers and the Internet, enforceable noncompetes are critical in today’s economy.

Employment attorneys crafting noncompete agreements must avoid unreasonable and overbroad provisions. Courts are increasingly scrutinizing and, in some instances, refusing to enforce agreements that go too far to restrict employee activity.

This program was developed to prepare employment counsel to craft clear and enforceable non-compete agreements that are likely to stand up in court, and will also include discussion of litigation strategies for employment counsel pursuing or defending noncompete litigation.

Perspectives and guidance on these and other critical questions will be offered:

• How can noncompete agreements be structured to avoid being found an unfair restraint on trade and competition?
• What are the key steps for employers to follow, beginning with hiring and prior to a termination, to reinforce the confidentiality of company information with employees?
• What legal considerations should employment counsel take into account when deciding whether litigation is the most appropriate means for addressing an alleged breach of a noncompete agreement?

After presentations of the program’s panelists, there will be a live question and answer session with participants — to answer your questions about these important issues directly.

For more information or to register >
 

Please join the attorneys of EpsteinBeckerGreen on June 7, 2011, at the National Press Club, as we present eight panels covering labor and employment topics that have increasingly impacted employers in the health care industry. 

Our first panel, entitled Significant Labor and Employment Issues that Affect Health Entities, will include representatives from the health care industry, such as a hospitals, skilled nursing facilities, and emergency medical services. These executive panelists will discuss the critical labor and employment issues they are currently experiencing and the greatest challenges they expect to manage. 

EpsteinBeckerGreen attorneys representing the Labor and Employment, Health Care and Life Sciences, and Corporate Services practices will review the issues of concern and, over the course of the day, offer practical advice and solutions.

For more details and registration information, please visit the EpsteinBeckerGreen HEAL Summit page.

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