Trade Secrets & Noncompete Blog

Trade Secrets & Noncompete Blog

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

Tag Archives: Trade Secrets and Confidential Information

“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

Appeals Court Divided On Bad Faith Under Illinois Trade Secrets Act

In a question of first impression, the Illinois Appellate Court recently addressed what constitutes “bad faith” for purposes of awarding attorneys’ fees to the prevailing party under §5 of the Illinois Trade Secret Act (ITSA). That section provides, in pertinent part, that if “a claim of [trade secret] misappropriation is made in bad faith” or “a motion to terminate an injunction is made or resisted in bad faith,” “the court may award reasonable attorney’s fees to the prevailing party.” The Illinois Appellate Court delivered a split decision on the legal standards for assessing whether a “bad faith” fee award is … Continue Reading

Try, Try Again – Recent Bill Renews Effort to Create Federal Private Right of Action for Trade Secret Theft

On April 29, 2014, Senators Chris Coons (D-Del.) and Orrin Hatch (R-Utah) introduced a bill which seeks to create a private right of action under federal law for theft of trade secrets. As noted in the press release accompanying the bill, the so-called “Defend Trade Secrets Act would empower companies to protect their trade secrets in federal court.”

The Defend Trade Secrets Act of 2014 echoes and amplifies a similar effort made last year, in which Representative Zoe Lofgren (D-Cal.) introduced a bill entitled the “Private Right of Action Against Theft of Trade Secrets Act of 2013.” We discussed that … Continue Reading

Failure To Follow The Court’s Preliminary Injunction In A Trade Secrets Case Results In Default

In what turned out to be a disastrous result for defendants, a Massachusetts Court issued a default judgment against certain salespeople who left their former company to form the new competing company. The default judgment was based on the defendants’ conduct during the discovery phase of the case, in which they failed to follow the terms of the Court’s Preliminary Injunction, including misrepresenting their compliance to the Court, destroying evidence, and using confidential information to sell products to certain businesses, all of which was specifically barred by the terms of the Court’s Order.

In Pacific Packaging Products, Inc. v. Continue Reading

Conspiracy to Sell Trade Secrets to Chinese Companies Brings Conviction for Economic Espionage

On March 5, 2014, the U.S. Attorney’s Office in San Francisco secured the first-ever federal jury conviction on charges brought under the Economic Espionage Act of 1996. The defendants — two individuals (Walter Liew and Robert Maegerle) and Mr. Liew’s company USA Performance Technology Inc. — were convicted of stealing DuPont Co.’s method for making titanium dioxide, a “white pigment” chemical used to whiten various products from cars to the middle of Oreo cookies, which garners $17 billion in sales worldwide.

Prosecutors said that Liew and his wife launched their small California company in the 1990s, aimed at exploiting China’s … 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

Michigan Federal Court OKs Former Employer’s Cease and Desist Letter to New Employer

When an individual threatens to disclose a company’s confidential information gained during employment at the company to a new employer, the common first reaction by the company is to send a “cease and desist” letter to the individual, and also a similar letter to the new employer. Yet before sending such a cease and desist letter to the new employer, the company may wonder whether it is opening itself up to potential liability — on a tortious interference claim by the individual — if the new employer should turn around and fire the individual on the basis of the allegations … Continue Reading

Pre-emption Under The California Uniform Trade Secrets Act

Co-authored by Ted A. Gehring.  

There are three important holdings from the recent California Court of Appeal opinion in Angelica Textile Services, Inc. v. Park, 220 Cal. App. 4th 495 (2013).

First, while the California Uniform Trade Secrets Act (“CUTSA”) preempts tort claims based upon the same nucleus of operative facts as a claim for misappropriation of trade secrets, it does not preempt contract causes of action, even when based on the alleged misappropriation of trade secrets.

Second, even where tort claims may be related to an alleged claim for misappropriation of trade secrets, provided the theory … Continue Reading

New Jersey Federal Court Decision Concerning Flavor & Fragrance Formulas Presents Enforcement Conundrum For Trade Secret Owners

When an employee trusted with access to trade secret information leaves to join a competitor, many former employers have concerns. Merely warning a former employee and his/her new employer not to make use of the former employer’s “trade secrets and confidential information” may be insufficient to hold the new employer accountable for such employee’s transgressions, at least according to one New Jersey federal district court. As that court said in Givaudan Fragrances Corporation v. Krivda, decided October 25, 2013, “The onus is on the former employer to come forward and put the current employer on specific notice of trade … 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

Trade Secret Theft Conviction of Former Motorola Engineer Affirmed By Seventh Circuit

Thirteen months ago, we blogged about Hanjuan Jin, a former Motorola software engineer who was sentenced in the United States District Court for the Northern Division of Illinois to four years in prison for stealing Motorola trade secrets related to its proprietary cellular telecommunications technology. Jin was first arrested after she attempted to board a flight at Chicago-O’Hare International Airport on a one-way ticket to China while carrying a variety of electronic storage devices, Motorola documents marked as “confidential and proprietary information,” and more than $31,000 in cash.

Jin was prosecuted on theft of trade secrets and economic espionage charges … Continue Reading

A Reaffirmation of the Seventh Circuit’s Reluctance to Permit Filing Under Seal

Courts in the Seventh Circuit don’t like to permit parties to file documents under seal. That philosophy is evident in many places, including Seventh Circuit precedent and the local rules for the United States District Court for the Northern District of Illinois. A new decision from the United States District Court for the Eastern District of Wisconsin reaffirms that the Circuit’s attitude against sealing is alive and well these days.

The case of Marine Travelift, Inc. v. Marine Lift Systems, Inc. (Case No. 10 C 1046) is ongoing and involves a claim of misappropriation of confidential information and trade secrets … Continue Reading

Seventh Circuit Holds That Maintaining A Trade Secrets Suit In Bad Faith Can Subject The Plaintiff To An Award Of Attorneys’ Fees

The Uniform Trade Secrets Act, which has been adopted in some form in every state except New York, Massachusetts, and North Carolina, provides that if “a claim of misappropriation is made in bad faith . . . the court may award reasonable attorney’s fees to the prevailing party.” Uniform Trade Secrets Act, § 4 (emphasis added). One question under this provision is whether it only applies to lawsuits filed in bad faith, or whether it also applies to lawsuits that are maintained in bad faith (i.e., lawsuits that continue to be prosecuted – even after it becomes clear that there … 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

Angel Gomez: In Light of Snowden – How to Use Independent Contractors

Our Epstein Becker Green colleague Angel Gomez, a Member of the Firm in the Labor and Employment and Litigation practices, based in Los Angeles, wrote an article for Law360 titled "In Light of Snowden: How to Use Independent Contractors." (Read the full version – subscription required.)

Following is an excerpt:

Recent events connected with Edward Snowden have captured the world’s attention. Snowden, an admitted leaker of national security secrets, was, at the time of the leaks, an employee of the well-known consulting firm Booz Allen Hamilton — Booz Allen Hamilton was a contractor to the National Security Agency,

Continue Reading

Congress Considers Companion Bills That Could Have Far Reaching Consequences For Companies Facing Trade Secret Theft And/Or Computer Fraud And Abuse

A California legislator recently introduced two bills in Congress which, if passed, could have profound effects for companies seeking to pursue claims relating to trade secrets and confidential information – one bill would create a new private right of action under federal law for trade secret theft, while the other bill would appear to limit plaintiffs’ abilities to pursue existing remedies for computer fraud and abuse.

In its current form, the Economic Espionage Act allows only federal prosecutors to bring criminal trade secrets charges against persons who have stolen trade secrets. On June 20, 2013, however, Representative Zoe Lofgren (a … Continue Reading

Federal Trade Secret Enforcement Initiative Results in Swift Action

In February 2013, the Justice Department announced a federal trade secret enforcement initiative that rested in large part on encouraging American businesses to adopt best practices in the area and diligent pursuit of civil remedies, and on parallel criminal law enforcement. As noted in the initiative outline, "The Department of Justice has made the investigation and prosecution of corporate and state sponsored trade secret theft a top priority."

Over the last ten days, events unfolded in New Jersey that showed this new policy initiative to be one involving real action. Those events began with a timely filed civil action by … Continue Reading

Trade Secret, Proprietary Information, & Regulatory Requirements Concerns Contribute To Veto of New Jersey Social Media Bill

The New Jersey Legislature was overwhelmingly in favor of a measure that would have barred employers from obtaining social media IDs and other social media related information from employees and applicants. Click here for A2878 as passed.  But Governor Chris Christie vetoed A-2878 because it would frustrate a business’s ability “to safeguard its business assets and proprietary information” and potentially conflict with regulatory requirements on businesses in regulated industries such as finance and healthcare. Click here for the Governor’s Veto Statement. While the Governor thought the bill well-intentioned, he conditionally vetoed it for painting “with too broad a brush,” citing the … Continue Reading

Texas Adopts Uniform Trade Secrets Act; New York, Massachusetts and North Carolina Remain Lone Holdouts

On May 2, 2013, the Texas Uniform Trade Secrets Act (UTSA) was signed into law by Governor Rick Perry. The new law becomes effective on September 1, 2013. Nearly every state in the United States now has adopted some variation of the model Uniform Trade Secrets Act; only New York, Massachusetts and North Carolina have not.

The UTSA includes statutory definitions for terms such as trade secrets, misappropriation, and wrongful means, and provides several potential remedies for wrongs committed under the act, including injunctive relief, damages and attorneys’ fees.

Until now, claims of misappropriation of trade secrets in Texas were … Continue Reading

Keeping Trade Secrets Secret Is Key

Failure to protect corporate trade secrets had dire consequences for AGC, Inc., a Connecticut aviation component manufacturer forced to file a Chapter 11 bankruptcy on April 16, 2013. AGC blamed its circumstances in substantial part on the theft of its trade secrets by one of its former key executives who joined a rival competitor where he used the valuable proprietary information. AGC obtained little judicial sympathy because it failed to keep its trade secrets secret in the fashion required to be awarded injunctive relief.

Former AGC Vice President David J. Baillargeon was laid off in July 2009, due to a … Continue Reading

Sanctions Imposed For Deleted Facebook Account

A United States Magistrate Judge recently held that a plaintiff had a duty to preserve his Facebook account and that his deletion of it warranted an “adverse inference” jury instruction for failing to preserve it.

In Gatto v. United Air Lines, Inc. and Allied Aviation Services, Inc., the defendants sought discovery related to the plaintiff’s social activities, and made a document request for “documents and information related to social media accounts maintained by Plaintiff.” The parties also discussed the plaintiff’s Facebook account during a settlement conference. Accordingly, when the plaintiff subsequently deactivated his Facebook account, causing it to be … Continue Reading

Uncle Sam Wants You To Mitigate The Theft of U.S. Trade Secrets

On February 20, 2013, the White House published an “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets.” While the Strategy takes a macroeconomic view of, and approach to, the problems of trade secret theft, readers of this blog should consider the possibility that they may have practical experience in the future with one of the Strategy’s particular action items: promoting voluntary best practices by private industry to protect trade secrets.

In the Strategy, while couching its recommendations in the context of protecting the innovation that drives the American economy and supports jobs in the United States, the Obama … Continue Reading

Be Careful Who You Sue – You May Face an NLRA Claim That Your Employment Agreement’s Confidentiality, Non-Disclosure, and Non-Disparagement Provisions Violate the NLRA

At the firm’s October 2012 client briefing we discussed the new attitude of the National Labor Relations Board (“NLRB”) and the fact that non-unionized employers were not immune from the provisions of the National Labor Relations Act (“NLRA”). The NLRA has been increasingly applied in non-union workplaces and to handbook policies relating to areas not previously traditionally considered ripe for NLRB consideration, such as at-will employment, social media, intellectual property, confidentiality, contact with the media, and privacy policies. It may then come as little surprise that the NLRB will examine similar provisions to the extent that they are contained in … Continue Reading

Contractual Clause Requiring Return Of Confidential Information At Termination Helps Former Employer Obtain Injunction On Misappropriation Claim

Trade secret misappropriation cases turn on details. Accordingly, it is always interesting to see the particular details which tilt a court’s decision one way or the other.

In Lincoln Chemical Corp. and Dole v. Dubois Chemicals, Inc. and Galaxy Associates, Inc., Judge Miller of the Northern District of Indiana was faced with a motion for a preliminary injunction in a case involving, among other things, an alleged misappropriation of trade secrets by a former employee, Edward Dole. According to Judge Miller’s decision, when Dole switched employers, he “retained on his personal computer considerable proprietary information” of his former employer. … Continue Reading