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Non-Compete and Trade Secrets Blog

Posts from May 2016.

An eternal debate in trade secrets cases is how much exposure the defendant's business personnel can get to the information that their company has allegedly misappropriated.  This fight proved to be the first instance in which the Texas Supreme Court opined on that state's new trade secrets statute.

On April 27, 2016, Congress passed federal trade secrets legislation known as the "Defend Trade Secrets Act" ("DTSA"). On May 11, 2016, President Obama signed DTSA into law. The enactment of DTSA creates, among other things, a federal civil remedy for the misappropriation of trade secret business information. However, DTSA will not preempt or otherwise override state laws concerning trade secrets, such as the Uniform Trade Secrets Act ("UTSA"), which many states have adopted. Further, the rights to recovery under DTSA and UTSA are very similar. For example, both statutes provide a right to recover exemplary damages equal to twice the amount of actual damages awarded and attorney's fees

With President Obama's signature on the Defend Trade Secrets Act, the doctrine of inevitable disclosure took a timid step toward an early death, at least with respect to federal trade secret law. After years of judicial disagreement about the propriety of the doctrine, it is worth examining how DTSA's supposed rejection of the doctrine could affect trade secret litigation.

One of the most frequent Texas non-compete questions I am asked is whether an employee and employer can enter an enforceable non-compete agreement at the time of termination.

It was five years ago this week (May 11, 2011, to be precise) that Georgia's new restrictive covenant statute went into effect.  Prior to the effective date of the statute, Georgia was (surprisingly for many out-of-state lawyers and businesses) one of the hardest states in which to enforce a restrictive covenant. As the Georgia Supreme Court stated in a a self-deprecating manner in Fuller v. Kolb, "Ten Philadelphia lawyers could not draft an employer-employee restrictive covenant agreement that would pass muster under the recent rulings of this court."  (No one knows why Justice Ingram selected Philadelphia as the home of the most astute lawyers in the country, but I'm sure that the lawyers in our Philadelphia office would whole-heartedly agree.)  The Georgia Supreme Court made this comment in 1977, well before the case law on restrictive covenants proliferated and became difficult for all but the most experienced practitioners to navigate.

This week, President Obama signed into law the Defend Trade Secrets Act.  Among its many interesting provisions is a detailed procedure for a party to request, ex parte, the seizure of property in order to "prevent the propagation or dissemination" of the trade secret at issue. Such an order would only be available in "extraordinary circumstances." This could be a very powerful tool in a fight against misappropriation of trade secrets as it could impair the defendant's ability to conduct business.

With the recent passage of the Defense of Trade Secrets Act (DTSA), businesses are welcoming the many benefits the statute brings, including federal jurisdiction, robust equitable relief, and the ability to recover compensatory damages, punitive damages, and attorneys’ fees.  However, in the midst of celebrating this new federal cause of action, many employers are overlooking a requirement embedded deep within the statute. 

Trade secret practitioners often find ourselves having to explain what a trade secret is.  The most common example (and one which I frequently use) is the Coca-Cola formula, as it can be easily used to illustrate each of the prongs of the trade secret test.  That example can then dovetail into a description of the Joya Williams case from a decade ago, which is a good example of an effective internal investigation on the part of an employer protecting its trade secrets.

President Obama is expected to sign the Defend Trade Secrets Act, which passed with overwhelming, bipartisan support in the House and Senate in recent weeks (and about which we will have a lot more to say in the coming days). Now, his Administration is moving from one major arena in which companies protect their confidential information to the other: enforcement of non-compete restrictions. And in this instance, the Administration would seek to reduce the options available to American businesses, rather than expand them.

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