Information Sharing On The Internet May Mean Fewer Confidential Trade Secrets
As a matter of course, we automatically Google someone, something, anything, in search of more information. In courtrooms, the attorneys choosing a jury are going beyond the information provided in the courtroom. One judge tried to stop the practice, and a court of appeal held that there was nothing wrong with it.
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California Court of Appeal Clarifies What Constitutes "Use" of a Trade Secret
Silvaco Data Systems v. Intel Corp., 184 Cal.App.4th 210 (April 29, 2010)
In a recent case, Silvaco Data Systems v. Intel Corp., 184 Cal.App.4th 210 (April 29, 2010), the California Court of Appeal clarified what constitutes use of a trade secret in the software context. At issue in Silvaco was whether defendant, Intel, was liable for trade secret misappropriation based on its use of software it had purchased from a third party, that was derived from plaintiff's trade secret source code, which in turn, had been misappropriated by a third party.
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California Court Takes On Trade-Secret Preemption of Other Civil Claims
Recently, a California court of appeal took up an issue that is more often examined by federal courts than state courts: trade-secret preemption of related tort claims.
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Employers Should Carefully Consider Whether To Sue Former Employees For Threatened Trade Secret Misappropriation Based On Recent California Court of Appeal Decision Awarding Over $1.6 Million To Former Employees
A recent decision by a California Court of Appeal should give employers pause before they use California's trade secret laws to try to stifle competition in violation of California law.
In the case of FLIR Systems, Inc. v. Parrish, the Court of Appeal affirmed a decision by the trial court awarding $1,641,216.78 in attorneys’ fees and costs to two former employees who successfully defended a trade secret action brought by their former employer. The Court agreed with the trial court that the action was filed and maintained in bad faith within the meaning of the California Uniform Trade Secrets Act.
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Does Edwards v. Arthur Anderson Bar The Use of Employee Confidentiality Agreements?
In Edwards v. Arthur Andersen, the California Supreme Court reaffirmed California's strong public policy against covenants not to compete. The primary issue in Edwards was whether the Ninth Circuit's "narrow restraint" exception was a proper interpretation of California law. Under the narrow restraint exception, employers could enforce noncompetition agreements that did not "entirely preclude" an employee from practicing his or her trade, such as an agreement not to solicit specified customers for a specified period of time after employment. The agreement in Edwards was drafted to fall under this judicially-created exception. The Court rejected the "narrow restraint" exception, expressed a stark disapproval for judicially created exceptions to California Business and Professions Code Section 16600, and held that any time an agreement restricts an employee's "ability to practice his [] profession" in any way not explicitly excepted by the statute, it is void.
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Ninth Circuit Report: Raymond Edwards II v. Arthur Andersen LLP
In Raymond Edwards II vs. Arthur Andersen, the California Supreme Court has broadly interpreted the California Business and Professions Code to further prohibit employee noncompetition agreements which seek to prevent a former employee from working for a competitor, subject to specific statutory exceptions.
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California Court of Appeals Rejects Anti-SLAPP Motion in Trade Secrets/16600 Case
In World Financial Group, Inc. v. HBW Insurance & Financial Services, Inc. the Court of Appeal for the Second Appellate District rejected an Anti-SLAPP motion to strike in a breach of contract, theft of trade secrets, and unfair competition case. The defendants moved to strike the complaint under the Anti-SLAPP statute, claiming that their activities in soliciting the customers and employees of their previous employer were protected speech involving a "matter of public interest," to whit, their pursuit of employment under the public policies expressed in California Business and Professions Code section 16600 (California's prohibition of covenants in restraint of trade). The court upheld the trial court's denial of the motion, finding that solicitation of customers in a business context was not protected activity for the purposes of anti-SLAPP.
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Questions Unanswered: The Application of California's New Trade Secret Jury Instructions
In December, 2007, the California Judicial Council published sample jury instructions for trade secret misappropriation claims. Some of the instructions were revised and others added in April, 2008 (the Table of Contents directs the reader down to Section 4400 of the instructions entitled “Trade Secret”). The instructions raise a number of interesting unanswered questions that are likely to be faced in litigation leading up to, or following, their use.
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Trade Secrets Can Be All In Your Mind
In Al Minor & Associates, Inc. v. Martin, 117 Ohio St.3d 58, 2008-Ohio-292, the Ohio Supreme Court recently held that memorizing information, including specifically client lists, constitutes trade secret misappropriation. The court found that neither the Uniform Trade Secret Act nor the Ohio legislature "intended to distinguish between information that has been reduced to some tangible form and some information that has been memorized."
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Work Computers and Personal Privacy: Mutually Exclusive or Co-Existent?
Just about every company has the provision in its employee handbook that its employees have no expectation of privacy when using computers provided by the employer. However, to what extent these provisions are enforceable differs between jurisdictions.
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Ensuring Compliance With Changes To The FRCP
On December 1, 2006, several amendments to the Federal Rules of Civil Procedure ("FRCP") will become effective. The changes that deal directly with electronically stored information ("ESI") will likely affect the means, method, and timing of discovery. Selected amendments to the FRCP are discussed below:
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The Cost Of Non-Compliance
For instance, in United States Securities and Exchange Commission v. Morgan Stanley & Co., Inc., No. 06 0882 (D.C., May 12, 2006), the SEC alleged that defendant failed to produce tens of thousands of emails sought by the SEC in two investigations. The court entered an 8-page consent judgment against defendant. Three of the major points in the judgment are:
- Defendant was ordered to pay $15,000,000
- Defendant was permanently enjoined from violating Section 17(b) of the Securities Exchange Act of 1934 (requiring a prompt document production, including electronic documents); and
- For one year, Defendant, at its own cost, was ordered to hire an independent consultant (acceptable to the SEC) to review and evaluate defendant's policies, procedures, and training in order to comply with the judgment. The independent consultant is to make recommendations which must, absent undue burden or impracticality, be adopted by Defendant.
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