On Monday, August 12, a Delaware federal jury found that L’Oreal USA Inc. misappropriated Olaplex LLC’s trade secrets, breached a nondisclosure agreement, and willfully infringed on two of Olaplex’s patents related to a hair-coloring product. The patents in question related to a three-step system that protects hair from damage during bleaching.

The jury deliberated for only half a day, granting Olaplex approximately $22.3 million in damages for L’Oreal’s willful infringement of its trade secrets, another $22.3 million for breach of contract, and $47 million for infringements of Olaplex’s patents. The court still has to verify the actual damages amount and ensure that damages are not duplicative. Olaplex estimates that it will likely receive closer to $37.4 million in damages, but the court may also decide to multiply the award because the patent infringement and misappropriation were willful in nature.

The circumstances giving rise to the suit date back to discussions between the two companies over L’Oreal’s potential purchase of Olaplex. L’Oreal decided not to pursue the acquisition. Olaplex argued at trial that L’Oreal learned of its trade secrets during these discussions and opted to steal the secrets rather than pay millions of dollars to purchase the company. In response, L’Oreal asserted that: 1) the alleged secrets were public knowledge, and 2) that it had independently developed its own version of the hair-coloring products Olaplex claims it stole.

This verdict is not likely to end the dispute between L’Oreal and Olaplex. L’Oreal plans to appeal, and Olaplex has another suit pending against L’Oreal. In July, Olaplex asked a Los Angeles federal court to reassign a L’Oreal patent that embraces Olaplex’s misappropriated secrets.

In the First Circuit, restrictive covenants are governed predominately by statute (with the exception of Puerto Rico, which governs such agreements through common law). Within the last year, Maine, Rhode Island, and New Hampshire have amended their restrictive-covenant statutes to prohibit employers from requiring lower-wage earners to sign noncompete agreements. A recently proposed amendment to Massachusetts law, if passed, would render all noncompetition agreements void and unenforceable effective January 1, 2021. These efforts reflect increasing hostility towards, and increased scrutiny of, restrictive covenants in the First Circuit.

Continue Reading Restrictive Covenants in the First Circuit

On August 26th, 2019, a federal indictment was unsealed, revealing that federal prosecutors have brought 33 criminal charges against a former Google engineer who worked on the company’s self-driving car project from its founding in 2009 through his resignation in January 2016. The indictment alleges that in the months before his departure, the former Google employee downloaded from a secure database multiple engineering, manufacturing and business files related to Google’s custom LiDAR and self-driving car technology. The indictment further alleges that when the employee stole the files he was also working for two of Google’s main competitors in the self-driving space, Tyto LiDAR LLC, and 280 Systems, Inc. Continue Reading Unsealed Indictment Reveals Criminal Charges Related to Uber/Waymo Dispute

As in other states, the enforceability of restrictive covenants or non-compete clauses in the Sixth Circuit turns primarily on the reasonableness of the restriction’s geographic and temporal scope. Michigan has enacted a statute explaining when non-competes may be enforced. In Kentucky, Ohio and Tennessee, enforcement is determined entirely by common law. In Ohio and Tennessee, courts will consider the public interest in addition to the interests of the parties involved.

Continue Reading Restrictive Covenants in the Sixth Circuit

On July 30th, 2019, the District Court for the Southern District of New York held that a news outlet’s publication of the Democratic National Convention’s (DNC) allegedly stolen trade secrets did not violate the Defend Trade Secrets Act, 18 U.S.C. § 1831, et seq. (“DTSA”).

In April 2018, the DNC filed suit against the Defendants, alleging that the Russian Federation’s military intelligence agency unlawfully hacked into the DNC’s computers and conspired with WikiLeaks to publicly distribute stolen campaign materials, which were at times helpful to the Trump Campaign. Continue Reading S.D.N.Y. Holds the 2016 DNC WikiLeaks Dump Did Not Violate The Defend Trade Secrets Act

After posts considering confidentiality protections under the EU Trade Secrets Directive 2016/943 when litigating in various jurisdictions, we next turn to how these issues arise in the context of arbitration.

Where trade secrets are protected by a contract, an opportunity arises for parties to consider alternative dispute resolution mechanisms including arbitration and whether to adopt express rules in arbitration that protect confidentiality. Continue Reading Confidentiality of Trade Secrets in Arbitration

In our next post on the EU Trade Secrets Directive 2016/943, we turn to the Netherlands. In the Netherlands, the EU Trade Secrets Directive was implemented in 2018 by the Act on the Protection of Trade Secrets (Wet bescherming bedrijfsgeheimen) and led to amendments to Dutch procedural law including those related to confidentiality clubs. For example, access to alleged trade secrets introduced in proceedings is granted to at least one person of the opposing party and that party’s lawyer under confidentiality restrictions. (Article 1019ib, Dutch Code of Civil Procedure). Depending on the nature of the trade secret, however, the court may order that access to certain documents be limited to only a lawyer or another authorized representative but not a representative of the opposing party. (Article 22a(3), Dutch Code of Civil Procedure). Continue Reading The Expansion of Confidentiality Protections in Trade Secret and IP Cases in the Netherlands and Belgium

The EU Trade Secrets Directive 2016/943 contains a variety of confidentiality protections expressly protecting the publicity of the proceedings because “[t]he prospect of losing the confidentiality of a trade secret in the course of legal proceedings often deters legitimate trade secret holders from instituting legal proceedings to defend their trade secrets, thus jeopardising the effectiveness of the measures, procedures and remedies provided for.  For this reason, it is necessary to establish, subject to appropriate safeguards ensuring the right to an effective remedy and to a fair trial, specific requirements aimed at protecting the confidentiality of the litigated trade secret in the course of legal proceedings instituted for its defence.”  Article 9 of the Directive specifically required EU member states to implement rules creating such protections, such as by restricting access to hearings and creating so-called “confidentiality rings” or “confidentiality clubs” limiting the dissemination of confidential information and documents to designated persons.

The United Kingdom’s implementing law, the Trade Secrets (Enforcement, etc.) Regulations 2018, requires that the court have the power to restrict access to documents containing alleged trade secrets and to hearings. s. 10(5).  There is already significant maturity in the kinds of confidentiality protections available in English litigation so this is unlikely to lead to significant change.  Although the principle of open justice is a fundamental feature of the legal system and departures are permitted only if necessary in the interests of justice, exceptions and restrictions to openness and respect for confidentiality are actually already well-established in the United Kingdom. See McKillen v Misland (Cyprus) Investments Ltd and others [2012] EWHC 1158 (Ch). Continue Reading English Confidentiality Protections in Trade Secret and IP Cases

In Food Marketing Institute v. Argus Leader Media, the Supreme Court strengthened the federal government’s ability to protect trade secrets and confidential business information from disclosure in response to a Freedom of Information Act (“FOIA”) request. Food Mktg. Inst. v. Argus Leader Media, __ U.S. __, 139 S. Ct. 2356, 2366 (June 24, 2019). Under the facts of that case, the Court held that where the government received a third-party’s commercial and financial information and this information was treated confidentially, the information was exempt from disclosure and the government could not disclose it in response to a FOIA request. Many predict that this decision, which we previewed earlier this year, will help protect companies that provide sensitive information to government agencies and make it more difficult for the general public (including journalists and competitors) to access this information. Continue Reading Supreme Court Weighs In On Protecting Trade Secrets and Confidential Information From FOIA Requests

Pay equity continues to be one of the most significant workforce issues facing employers today. Pay equity laws aim to increase transparency into employers’ pay practices – with the ultimate goal of ensuring that employees are paid fairly regardless of demographic factors including race and gender. However, they may also require employers to release sensitive, propriety information about internal pay practices – which arguably constitute trade secrets – potentially compromising employers’ ability to remain competitive in hiring and retaining top talent. See, e.g., In re High-Tech Employee Antitrust Litig., No. 11-cv-02509, 2013 WL 163779, at *2, 5 (N.D. Cal. Jan. 15, 2013) (explaining that trade secrets include “sources of business information that might harm a litigant’s competitive standing,” including “confidential information regarding . . . recruitment strategies, policies, and procedures, [and] quantitative data concerning those topics”). Continue Reading Trade Secret Implications For Pay Scale Provisions