Trade Secret | Noncompete Issues and Cases in the News February 2016UpdateFebruary 21, 2016
Russell BeckFair Competition News, Inevitable Disclosure Doctrine, Noncompetes, Restrictive Covenants, Trade Secrets, Uncategorizedconfidential information, Economic Espionage Act, inevitable disclosure, Massachusetts, noncompete, noncompete bill, restrictive covenants, trade secret, trade secret audit, unfair competition
There havebeen a few issues
and cases making trade secrets | noncompete news recently thatare worth taking note of ifyou missed them. They are as follows
Michigan: Republican (yes, Republican)State Representative Peter Lucio of Michigan has introduced abillthat would requirethatemployers whohavenew employees sign noncompetes must provide advance notice ofthe terms of the noncompete to the prospective employee. It would alsoprohibit the use of noncompete for low-wage employees. Neither of these approaches is new; nor shouldtheybe particularly controversial (especially the notice requirement). For example, Oregons noncompete statuteemploysboth of theseconcepts, New Hampshires 2012 noncompete statute requires advance notice, and some of the earlier Massachusetts noncompete law overall bills included these concepts.
Utah:One of the recent states to enter theban-or-no-ban-of-noncompetes frayis Utah. Joining on the side of Massachusetts,Michigan, Pennsylvania, and Washington (although Michigan (as noted above) and Washington have other more limited bills pending), Utah has recentlyhad some success in moving toward a ban. Specifically, on February 11, 2016, the Utah House of Representatives committee considering the bill unanimously approved it.
Although themost vocal side of the debate around noncompetes favors a ban (see,e.g., here, here,here, and here), the opposition occasionally surfaces. That was apparently the case during the Utah noncompete bill debate. As the Salt Lake Tribunereported, businesses oppose theban, arguingthat they would be reluctant toinvest money in training orinnovation if they did not have noncompete agreements available to protect those investments. Taken one step further, the article reports thatsome companies say that theyleft California in favor ofstates permitting enforcement of noncompetes. (Although there are a handful of studiesattempting to ascertain what impact, if any, noncompete agreements have on innovation (and that they are sometimes cited as conclusive authority), it does not appear that there is in fact agreement or even a generally-accepted conclusion at this point about theactual impact pro or con.)
Instructively, Wisconsin, which has historically been extremely hostile to noncompete agreements, has pending a bill that would make enforcement of noncompetes significantly easier, adding presumptions of reasonableness (and what is unreasonable) and bringing Wisconsin in line with the majority of states by permitting reformation (i.e.,judicial modification) of overly broad noncompetes. (Indeed, if adopted, Wisconsin would seemly be joining Arkansas, Texas, and Florida inmandating judicial modification.)
Federal/DTSA update: If you have not been paying attention, the Defend Trade Secrets Act of 2015(commonly referred to as the DTSA) was reported out of the Senate Judiciary Committee with a few amendments, including, in particular, in connection with the inevitable disclosure doctrine. Given that so much has been written on this, I will not repeat the details. However, Ben Finkrecently summarizedthem well inFederal Trade Secrets Law Takes Another Step Toward Reality.
Federal/criminal: In yet one more headline-grabbing story about American companies secrets being sold to China, five people including two GlaxoSmithKline scientists were charged in January withconspiring to steal trade secretsfor the manufacture of cancer medication.See 5 charged with theft of GSK cancer drug secrets.
Trade Secret Protection Plan: Pamela Passman, President and CEO of the Center for Responsible Enterprise And Trade (CREATe.org), posted a terrific (and brief) primer on securing trade secrets. Entitled,Eight steps to secure trade secrets, the primeris availableonthe World Intellectual Property OrganizationsWIPO Magazine.Trade secret protection tools: Tworecent blog posts (byCathy Shyong of Orrick hereand Dylan Carp of Jackson Lewis here) highlight tools available in California (and elsewhere) to assistcompaniesin the protection of their trade secrets and other confidential business information. Those tools include (1) acause of action for breach of the duty of loyalty where an employee takes information during the course of employment;and (2) acontractualrequirement than an employeereimburse the costs of training upon resignation ofemployment (under certain circumstances).Public records acts vs. Ubers alleged trade secrets: Playing out in Broward County, Florida, is another dispute over apublic records act andinformation claimed to be a trade secret. Specifically, the local Yellow Cab company is seeking to find out how muchUberpaysthe Fort Lauderdale-Hollywood International Airport in monthly fees in order to be permitted to pick up and drop off passengers at the airport. Uber claims that information is a trade secret and protected from disclosure under the trade secrets exception to Floridas public records act. No surprise, Yellow Cab claims that that information is not a secret andmust be shared just as the county apparently did with similar information concerning Lyfts payments. The issue will be decided by the court.More Uber/Lyft: In May of 2014,Uber experienced a cybersecurity databreach. Uber traces the breach to an employee of Lyft. Given that, not surprisingly, Uber has subpoenaed voluminous amounts of information from Lyft.Lyft claims that Uber is simply after Lyftstrade secrets and is seeking to quash the subpoena.See Lyft asks judge to stop Uberswitch hunt for trade secrets.Share this post:Like this: