On January 5, 2023, the Federal Trade Commission announced its proposal of a new rule that would ban employers from imposing noncompete clauses on their workers and invalidate nearly all existing noncompetes currently in effect. According to the FTC, this will affect 30 million, or one in five, American workers currently covered by a noncompete
Maine Magistrate Recommends Dismissal of Defense Against Trade Secrets Claim
The inevitable disclosure doctrine is a concept rooted in common law that allows a plaintiff to prove trade secret misappropriation by “demonstrating that defendant’s new employment will inevitably lead him [or her] to rely on plaintiff’s trade secrets.” PepsiCo., Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995). Thus, the defendant threatens misappropriation merely by holding the trade secreted information in his or her head while working for a direct competitor. States take varying approaches to this doctrine either fully allowing its use, allowing its use with limitations, or prohibiting its use.…
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Not Immune From Misappropriation: Companies Fight Over COVID-19 Vaccine Intellectual Property
At the height of the pandemic, companies and governments around the world scrambled to develop and distribute COVID-19 vaccines. One such relationship involving HDT Bio, a Seattle-based biotechnology company, and Emcure, one of India’s largest manufacturers and distributors of generic drugs, has resulted in a fight over ownership of the life-changing formula. According to HDT Bio, in early 2020, the head of an Emcure subsidiary, Gennova Biopharmaceuticals Ltd. (“Gennova”), visited the HDT Bio headquarters to discuss bringing HDT Bio’s then-incipient COVID-19 vaccine to market in India. The parties formalized this relationship with an exclusive license agreement, and Gennova received a limited license to use HDT Bio’s COVID-19 vaccine and delivery platform, while HDT Bio received payments and royalties along with data from Gennova’s distribution to enable the development and sale of vaccines around the world.…
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No Award of Attorneys’ Fees for Claims Filed Without Factual Support
In 1992, Elizabeth Elting and Philip R. Shawe founded TransPerfect Global, Inc. (“TransPerfect”), a provider of language and technology solutions for businesses around the globe. When Ms. Elting wanted to dissolve her relationship with TransPerfect, the company held an auction and a custodian made some of TransPerfect’s confidential information available to potential bidders. The custodian’s agent, however, mistakenly gave the bidders access to trade secreted materials, such as TransPerfect’s proprietary pricing methodology, the average rate of pay for linguists, and customer revenue averages.…
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Virtual Trials Increase Courtroom Access but Also Risk Trade Secret Disclosures
For better or for worse, virtual civil trials—a product necessitated by the pandemic—are likely here to stay. Proponents of virtual civil trials laud the virtual format, in part because it provides participants with opportunities for greater engagement. For example, jurors might be able to see and hear evidence better via their computer screens and headphones than they would in the courtroom. But litigants should beware that jurors are not the only ones with increased courtroom access.
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Texas Supreme Court Gives New Life to Dismissal of Misappropriation Claim
In 2016, Sanchez Oil and Gas Corporation, Sanchez Energy Corporation, and Sanchez Production Parts LP (collectively “Sanchez”) sued three former employees—B.J. Reynolds, Mark Mewsha, and Wes Hobbs—and their new employer, Terra Energy Partners, LLC (“Terra Energy”) (collectively “Defendants”) for misappropriation of trade secrets. For the past three years, the parties have been litigating whether Defendants could move to dismiss an amended petition. A recent decision by the Texas Supreme Court has again sent this case to the Texas Court of Appeals to review its December 2020 decision.
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The Cost of Litigating “the Largest and Most Complex Case”: The Northern District of Illinois Awards over $34 Million in Attorneys’ Fees to Motorola
On October 15, 2021, Judge Charles Ronald Norgle, of the United States District Court for the Northern District of Illinois, awarded Motorola Solutions, Inc., and Motorola Solutions Malaysia SDN (collectively “Motorola”) $34,244,385.50 in attorneys’ fees from defendant Hytera Communications Corporation Ltd. ( “Hytera”). Motorola prevailed over Hytera on its trade secret misappropriation and copyright infringement claims, with the jury awarding $760 million on the trade secret misappropriation claim. The Court later reduced the award to $543.7 million, plus future royalties for Hytera’s continued use of the infringing radios. Motorola was entitled to reasonable attorneys’ fees under federal and Illinois trade secret acts because Hytera was found to have willfully and maliciously misappropriated Motorola’s trade secrets.
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Court Dismisses Computer Fraud and Abuse Act Conspiracy Claim in Trade Secrets Case under the Intra-Corporate Conspiracy Doctrine
The U.S. District Court for the Eastern District of California recently dismissed a conspiracy claim under the federal Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030(b), even while finding a likelihood of success on the merits of plaintiff’s trade secret claims. The court found the CFAA conspiracy claim was barred by the intra-corporate conspiracy doctrine, which provides that “concerted action by officers within a single corporate entity cannot give rise to liability for conspiracy.” Cool Runnings International Inc. v. Gonzalez, et al., No. 1:21-cv-00974-DAD-HBK, 2021 WL 5331453, at *14 (E.D. Cal. Nov. 16, 2021) (citations omitted).
Plaintiff Cool Runnings International Inc. (CRI) sued three former employees and their new employer for trade secret misappropriation, breach of contract, and violations of the CFAA following the departure of the employees to a newly created company, DRC Contracting, LLC (“DRC”). CRI submitted evidence that at least one of the former employees deliberately transferred a large quantity of electronic information from his CRI laptop to an external drive around the time he left the company, and that DRC used at least some of CRI’s trade secrets to its competitive advantage.
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Remember Your Clients, Remember Your Contracts
The U.S. District Court for the District of Minnesota recently denied a former employer’s motion for a preliminary injunction seeking to restrict a former employee’s ability to work for a direct competitor, in part on the grounds that soliciting customers from memory does not constitute statutory misappropriation of trade secrets.
The former employee had resigned…
Not All or Nothing: Trade Secrets Survive Patents and Other Limited Disclosures
The U.S. Court of Appeals for the Seventh Circuit recently held that limited disclosures of a product, such as through patents and trade show displays, would not defeat a company’s reasonable efforts to protect its confidential information.
The case involves two competing medical device manufacturers: Life Spine, Inc. (Life Spine), which makes and sells surgically implanted medical devices to treat spine disorders; and AegisSpine, Inc. (Aegis), which sells similar medical devices created by its parent company L&K Biomed, Inc. (L&K). Life Spine spent more than three years of intensive study and exhaustive trial and error to design and develop its ProLift Expandable Spacer System (ProLift), an expandable cage used to treat degenerative disc disease. Eventually, it was FDA approved and Spine Life obtained a patent. Although the patent displays drawings and figures of the expandable cage, Life Spine considers the “precise dimensions and measurements of the ProLift components and subcomponents and their interconnectivity” to be confidential trade secrets. …
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