Trade Secrets & Noncompete Blog

Trade Secrets & Noncompete Blog

News & Updates On Developments in the Law of Restrictive Covenants, Unfair Competition & Trade Secrets

Tag Archives: California

A Temporal Limitation on the Reach of DTSA Claims

shapiroAs we have written about and discussed extensively on this blog over the past year, the Defend Trade Secrets Act (“DTSA”) – enacted on May 11, 2016 – provides the first private federal cause of action for trade secret misappropriation, allowing parties to sue in federal court for trade secret misappropriation regardless of the dollar value of the trade secrets at issue.  Given that the law is less than a year old, federal courts seeing DTSA cases for the first time are still parsing through its language and clarifying its scope.  Although it is still a developing issue, two recent … Continue Reading

“List of Holiday-Related Trade Secret/Non-Compete Cases”

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 … Continue Reading

Webinar, Nov. 30: Year in Review – Trade Secrets and Non-Compete Developments

Many businesses progressively fear that their trade secrets and valued business relationships are at risk of attack by competitors – and even by their own employees. Do you know what it takes to protect those critical assets in the ever-changing world of trade secret and non-compete law?

Join Epstein Becker Green attorneys Anthony J. Laura,  Robert D. Goldstein, and Peter A. Steinmeyer on Wednesday, November 30, 2016 at 1:00 p.m. EST for a complimentary, 75-minute webinar hosted by Practical Law.  This webinar offers insights into recent developments and expected trends in the evolving legal landscape of trade … Continue Reading

Bad Leaver Pays the Price

A former California State judge in an arbitration awarded nearly $1.7 million to an employer against its former employee based primarily on his acts taken going out the door.  His joking email with a co-worker after recruiting three others, characterizing their resignations as “Three bullets to the back of the head” of his employer, was clearly shooting himself in the foot in the eyes of the arbitrator.  The Award is interesting for many reasons – – the interplay between fiduciary duties and non-solicitation of employees provisions, the allowable damages when such a fiduciary duty is breached by co-worker solicitation, and … Continue Reading

California Supreme Court Will Review Malicious Prosecution Claim Against Latham & Watkins

Latham & Watkins isn’t off the hook yet.

On April 17, 2012 and September 3, 2014, we blogged about a malicious prosecution claim brought against Latham & Watkins in the Los Angeles Superior Court.  The suit alleged the Plaintiffs, William Parrish and Timothy Fitzgibbons, were former officers and shareholders of Indigo Systems Corporation, which was purchased by FLIR Systems, Inc. in 2004.  From 2004 to 2006 the Plaintiffs worked for FLIR, leaving in 2006 to start their own business.  FLIR retained Latham & Watkins and sued Plaintiffs for, among other things, misappropriation of trade secrets.  The trial court denied the … Continue Reading

California Court Of Appeal Holds That Party Seeking To Enforce Forum Selection Clause As To Unwaivable Statutory Rights Has Burden To Show Enforcement Would Not Diminish Rights

California Business & Professions Code § 16600 contains a strong public policy against non-competition agreements.  To address this prohibition, some employers have included choice of forum provisions in their employment contracts to give them the option of initiating an action in a more non-compete friendly jurisdiction and obtain leverage in the litigation.  Some federal district courts have enforced those forum selection clauses.  Marcelo v. Ivy Ventures, LLC, No. C 10-04609, 2010 U.S. Dist. LEXIS 134333 (N.D. Cal. Dec. 9, 2010); Google, Inc. v. Microsoft Corp., 415 F. Supp. 2d 1018 (N.D. Cal. 2005); Hartstein v. Rembrandt IP SolutionsContinue Reading

No Future Employment Provisions In Employment Litigation Settlement Agreements May Violate California Law

In another decision expansively interpreting California Business & Professions Code § 16600 and which could have a significant effect on employment litigation settlements, the Ninth Circuit Court of Appeals reversed the district court’s enforcement of a settlement agreement and remanded the case to the district court to determine whether a no employment provision in the agreement is a “restraint of substantial character” to the Plaintiff’s medical practice.  Golden v. California Emergency Physicians Medical Group; Med America; Mark Alderdice; Robert Buscho, United States Court of Appeals for the Ninth Circuit (No. 12-16514) (April 8, 2015).

The case has an interesting … Continue Reading

Criminal Conviction Affirmed By Ninth Circuit For Trade Secret Theft

Co-authored by Ted A. Gehring.

On November 5, 2014, the United States Court of Appeals for the Ninth Circuit, in an unpublished disposition, issued its opinion in U.S. v. Suibin Zhang. There, the Ninth Circuit upheld the criminal conviction of Suibin Zhang under 18 U.S.C. Section 1832 for the theft of Marvell Semiconductor Inc.’s trade secrets. According to an FBI release, Zhang was an employee of Netgear, Inc., and through that employment had access to Marvell’s secure extranet. According to the release:

Evidence at trial showed that Zhang, 44, of Belmont, California, was employed as a Project … Continue Reading

Court of Appeal Reinstates Malicious Prosecution Case Against Latham & Watkins

Co-authored by Ted A. Gehring.

On April 17th, 2012, we blogged about a malicious prosecution claim brought against Latham & Watkins in Los Angeles Superior Court. The suit alleged that the Plaintiffs, William Parrish and Timothy Fitzgibbons, were former officers and shareholders of Indigo Systems Corporation, which was purchased by FLIR Systems, Inc. in 2004. From 2004 to 2006 the Plaintiffs worked for FLIR, leaving in 2006 to start their own business. FLIR retained Latham and sued them for, among other things, misappropriation of trade secrets. The trial court denied FLIR’s request for a permanent injunction, found FLIR brought … Continue Reading

California Resident Forced To Litigate Non-Compete And Trade Secrets Case In Illinois

A threshold tactical decision in virtually every non-compete and trade secret case is where to file the suit. This decision is particularly important when a non-compete dispute has a California angle, because non-compete agreements are generally void as against public policy in California. Not surprisingly, employers seeking to enforce non-compete agreements try to stay away from the Golden State, while those seeking to avoid enforcement find it welcoming.

That scenario was recently faced by a federal judge in Chicago, where a California resident (Jon Thorsell) was sued by his former employer (Brunswick Corporation, which is headquartered in Illinois) for allegedly … Continue Reading

The Enforceability Of Employee Non-Solicits Remains Unclear In California

The high profile lawsuit filed on February 11, 2014 by Anschutz Entertainment Group against Shervin Mirhashemi and his new employer, Legends Hospitality, LLC, again raises the question of when a California Court of Appeal will decide whether employee non-solicits are enforceable in California. The Complaint alleges that Mirhashemi started as an AEG in-house attorney and was promoted over time to executive positions and was paid millions of dollars. The Complaint also alleges that Mirhashemi signed various employment agreements at least one of which provided, in part, that he would not “directly or indirectly” “participate in any effort to entice away … Continue Reading

Knocking Out A Trade Secret Claim–Your Own If You Are Not Careful

A recent federal court decision in California illustrates the care that plaintiffs should take when pleading their own claims in trade secrets cases, lest they provide defendants a ready basis for dismissal. In a January 9, 2014 decision in Jobscience, Inc. v. CV Partners, Inc., et al., the federal district court in the Northern District of California dismissed state law based trade secrets claims as pre-empted by the federal Copyright Act. Luckily for the plaintiff in that case, the plaintiff had actually obtained a copyright registration on the relevant materials and included a copyright infringement claim in the complaint. … Continue Reading

California Court of Appeal Revisits CUTSA “Preemption” of Other Tort Claims

California is one of the 47 states to have adopted the Uniform Trade Secrets Act. Among other things, “CUTSA,” as it is sometimes referred to in the Golden State, brought greater clarity to what qualifies as a “trade secret” and “misappropriation” of a trade secret, and it established an enforcement scheme that provides for an award of attorneys’ fees to a prevailing party and for potential award of a “royalty” in cases where the aggrieved party cannot prove actual damages.

By the plain language of the statute, CUTSA was intended to take the place of most business tort causes of … Continue Reading

Failure To Define Trade Secrets Establishes Subjective Bad Faith For Attorneys’ Fees Award Under CUTSA

Co-authored by Ted A. Gehring.

California Courts have discretion to award attorneys’ fees to a prevailing defendant in a trade secrets action where the commencement or continued prosecution of a trade secrets action is in bad faith. We have blogged about this issue twice previously. First, in connection with a malicious prosecution action that was filed against Latham & Watkins after the unsuccessful prosecution of a trade secrets action on behalf of a client. Second, in connection with SASCO v. Rosendin Electric, Inc., 2012 WL 2826955 (Cal.App. 4 Dist.), where the California Court of Appeal, Fourth … Continue Reading

Fitness Club Seeks Protection of Trade Secrets from Instructor Who Set up Competing Business

As readers of the Trade Secrets & Noncompete Blog are aware, companies routinely seek to enforce their employment agreements with departing employees in order to prevent the disclosure and unauthorized use of confidential or proprietary and trade secret information by employees on behalf of a competitor. The sports club and fitness industry is no exception and a recent lawsuit filed by nationwide fitness club, Equinox, demonstrates the importance of maintaining enforceable restrictive covenants in employment agreements.

In this suit filed in California state court, Equinox is alleging that its former fitness instructor breached his employment contract by creating a … Continue Reading

California Federal Courts Enforce Forum Selection Clauses in Non-Compete Litigation

Co-authored with Ted A. Gehring.

Except for very limited statutory exceptions (which do not apply to most employer/employee disputes), California courts will not enforce non-compete agreements, or any restrictive covenant by which anyone is restrained from engaging in a lawful profession, trade or business. Cal. Bus. & Prof. Code § 16600. Since § 16600 embodies a strong California public policy, California law is clear that a party cannot circumvent the § 16600 restrictions with a choice of law provision that designates a more non-compete friendly jurisdiction as the applicable law. The Application Group, Inc. v. The Hunter Group, … Continue Reading

A Mere Good Faith “Suspicion” That Defendants Misappropriated Trade Secrets Is Insufficient To Establish Plaintiff Did Not Engage In Objective Bad Faith

The commencement and continued prosecution of a misappropriation of trade secrets action without objective evidence of actual misappropriation can result in the imposition of attorneys’ fees against the plaintiff if it does not prevail on that cause of action.  On April 17, 2012, we blogged about this issue in connection with a malicious prosecution action that was filed against Latham & Watkins after the unsuccessful prosecution of a trade secrets action on behalf of a client.

On July 11, 2012, in SASCO v. Rosendin Electric, Inc., 2012 WL 2826955 (Cal.App. 4 Dist.), the California Court of Appeal, Fourth Appellate … Continue Reading

California Court Of Appeal Reverses Trial Court Order Compelling Disclosure Of Trade Secret Source Code

In Sybase, Inc. v. Superior Court of Alameda County, No. A132541, 2011 WL 5117117 (2011), the Court of Appeal of the State of California First Appellate District found, in an unpublished opinion, that the trial court abused its discretion when it ordered the production of a trade secret source code. The court found that the real party in interest did not meet the evidentiary burden imposed by the California Supreme Court in Bridgestone/Firestone, Inc. v. Superior Court, 7 Cal.App. 4th 1384 (1992) (“Bridgestone”) which set forth the standards governing whether a trade secret must be disclosed in litigation.

Plaintiff in … Continue Reading

You May Think That All Non-Compete Agreements Are Unenforceable Under California Law, But You Would Be Wrong

Co-authored by Betsy Johnson and Viktoria Lovei.

Contrary to popular perception, California law does not bar all restrictive covenants in the employment context. Rather, in certain very narrow circumstances (i.e., non-competes arising in connection with the sale or dissolution of certain businesses), non-competes are permissible under California law.

The General Prohibition of Non-Competes Under California Law

Under California Business and Professions Code § 16600, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” Cal. Bus. & Profs. Code § 16600 (2008). In Edwards v. Arthur Andersen Continue Reading

California Employer Held Liable For “Honoring” A Prior Employer’s Unenforceable No-Compete

Co-authored by Ted A. Gehring.

On July 30, 2010, in Silguero v. Creteguard, Inc., the California Court of Appeal (2nd District) held that an employee could state a claim for wrongful termination against her subsequent employer when that employer terminated her after having been informed by her former employer that the employee was subject to a non-compete clause.  The decision will have important consequences for companies with California employees in industries where non-competition and non-solicitation agreements are common.

The plaintiff, Rosemary Silguero,  began employment with Floor Seal Technology Inc. (“FST”)  in 2003 as a sales representative.  In 2007, FST threatened to terminate her employment unless she signed a confidentiality agreement which contained … Continue Reading

EMC Corporation v. David Donatelli

Last week, we wrote briefly about EMC v. Donatelli, a case that is being litigated simultaneously in California and Massachusetts. On May 4, the Superior Court in Massachusetts ruled that EMC, a Massachusetts corporation, could obtain injunctive relief preventing Mr. Donatelli, who had been President of one of EMC’s major divisions, from starting a job at HP in California even though California has a statutory prohibition on covenants not to compete. The Court made some important findings in its decision which are summarized below.

Choice of Law – The court relied on the language of the agreement that Donatelli signed to … Continue Reading

EMC Corp. and New Employee of Hewlett Packard Race to Courthouses in Massachusetts and California

An executive’s resignation and intention to begin work for a competitor of his former employer has resulted in a bicoastal battle of lawsuits over the terms of a noncompete clause in his employment agreement.

On April 27, 2009, David Donatelli resigned his position as president of EMC Corp.’s storage division. That same day, Donatelli filed a lawsuit in California state court asking for a declaratory judgment voiding the noncompete clause in his employment agreement with EMC Corp. Donatelli’s attorneys are no doubt cognizant of California law’s hostility to noncompete clauses and sought to establish jurisdiction where the chances of enforcement … Continue Reading

Drafting Enforceable Noncompetition Agreements in Illinois

States vary widely in their willingness to enforce noncompetition agreements. Some states, such as California, are openly hostile and will not enforce them, while others will do so so, subject to varying degrees of judicial scrutiny.

My home state of Illinois, for example, will enforce a noncompetition agreement, but only after fairly rigorous judicial scrutiny. Notwithstanding such scrutiny, Illinois employers can draft enforceable noncompetition agreements. The attached article that I published in the April 2009 Illinois Bar Journal offers practical guidance on how to do so.
 … Continue Reading