The US Department of Justice (“DOJ”) recently filed a Statement of Interest in connection with a pending case in Nevada State Court, Samuel Beck, et al. v. Pickert Medical Group, P.C. et al., further highlighting the DOJ’s heightened scrutiny of post-employment restrictive covenants under the antitrust laws and their effects on competition. In this noteworthy Statement of Interest, the DOJ takes the position that post-employment restrictive covenants may constitute both horizontal and vertical restraints of trade that violate the Sherman Antitrust Act. The Statement of Interest follows the DOJ and FTC’s 2017 Antitrust Guidance for Human Resources Professionals which addressed how antitrust law can apply to employee hiring and compensation and a December 2021 DOJ and FTC workshop that addressed how contractual restraints on trade can harm labor markets, as well as recent executive orders and statements by the Biden administration limiting and criticizing the use of noncompetition agreements with employees. The DOJ’s Statement of Interest thus represents yet another step up in pressure by the federal government signaling it will continue taking more action to discourage the use of contractual restraints on trade in employment-related agreements.
Continue Reading Enforceability of Non-Compete Agreements; Recent Input from the DOJ
Michelle Chipetine
Michelle Chipetine is a counsel in Crowell & Moring’s New York office and a member of the firm’s Intellectual Property and Health Care groups. Michelle’s practice focuses on patent litigation and representing health care entities and not-for-profit corporations on a wide range of transactional, corporate, and regulatory matters. Michelle also maintains an active pro bono practice.
Michelle graduated cum laude from Fordham University School of Law, where she was a legal writing and torts teaching assistant and actively involved with Fordham’s Neuroscience and Law Center. During law school, Michelle worked for Mount Sinai Innovation Partners, where she facilitated the transfer and commercialization of technologies developed by Mount Sinai researchers. Michelle also studied neuroscience at Vassar College, where she graduated cum laude.
Who Spilled the (Kidney) Beans? 11th Circuit Unseals Private Emails in Organ Transplant Dispute
The 11th Circuit upheld a decision to unseal “embarrassing internal communications” between members of the United Network for Organ Sharing (“UNOS”) relating to its new policy directing liver transplants to go to the sickest patients within a certain radius of the donor.
The Court opened its opinion with a powerful question: “Organ donation saves lives—but whose?” Decades ago, Congress enacted the National Organ Transplant Act which authorized UNOS to create policies to facilitate the equitable distribution of organs among potential recipients. UNOS recently approved the Acuity Circles Policy, claiming its intent is to provide more liver transplants to patients in the greatest need, even if they are farther away from donors. Several hospitals and transplant centers who oppose the policy (and filed this lawsuit to prevent implementation of the policy), argue that it will make it more difficult for those outside of urban areas – and in particular those in socioeconomically disadvantaged areas – to access organs.
Continue Reading Who Spilled the (Kidney) Beans? 11th Circuit Unseals Private Emails in Organ Transplant Dispute
Fifth Circuit Rules Delayed Discovery of Misappropriation Not A Bar To Suit
A recent decision from the Fifth Circuit showcased the usefulness of the “discovery rule” for trade secret plaintiffs facing statute of limitations issues. The court reversed the dismissal of a claim for misappropriation of trade secrets because the plaintiff could not have discovered the misappropriation using reasonable diligence within the applicable statute of limitations period.
Continue Reading Fifth Circuit Rules Delayed Discovery of Misappropriation Not A Bar To Suit
DOJ Indicts Hong Kong Citizen in Attempted Trade Secrets Scheme
The U.S. Justice Department indicted a man for allegedly conspiring to steal proprietary data from General Electric (“GE”) and produce and sell it in China.
Continue Reading DOJ Indicts Hong Kong Citizen in Attempted Trade Secrets Scheme
Too Much or Never Enough? Another Trade Secret Misappropriation Claim Dismissed
On August 13, 2020, a Delaware District Court judge granted Defendant Azstrazeneca Pharmaceuticals LP’s motion to dismiss, finding that Plaintiff Lithero, LLC failed to plead a plausible trade secret misappropriation claim under the federal Defend Trade Secrets Act (“DTSA”).
Lithero’s complaint alleged that Azstrazeneca misappropriated Lithero’s confidential and proprietary information regarding Lithero’s Automated Regulatory Assistant (“LARA”), including information regarding how it is trained and the process by which it learns, as well as “years of past research and development, the current capabilities of LARA coming as a result of that research and development, and detailed plans for future areas of growth.” But none of these allegations were sufficient to survive dismissal at the pleadings stage.Continue Reading Too Much or Never Enough? Another Trade Secret Misappropriation Claim Dismissed
Caught between a rock and a hard place; that is, a subpoena and a protective order
A federal judge in Colorado declined to sanction Plaintiff DTC Energy Group Inc. (“DTC”) for disclosing information governed by a civil protective order. DTC Energy Group, Inc. v. Hirschfeld, 1:17-cv-01718 (D. Colo. July 27, 2020).
DTC, a consulting and staffing firm serving the oil and gas industry across the United States, filed suit in July 2017 against Defendants Ally Consulting, LLC (“Ally”), a former business partner and direct competitor of DTC, and two former DTC employees.
The amended complaint alleged a variety of claims, including trade secret misappropriation, unfair competition, breach of employment contract, and civil conspiracy to steal trade secrets.
During discovery, and subject to an oral protective order issued by the court, Ally produced to DTC documents and information that contained certain of Ally’s trade secrets. DTC later shared documents produced as “confidential” in the litigation with both its outside criminal attorney and with a Denver assistant district attorney after receiving a grand jury subpoena for those documents. Ally and the other defendants accused DTC of malfeasance and of willful violation of the protective order, and sought sanctions in the litigation.Continue Reading Caught between a rock and a hard place; that is, a subpoena and a protective order
Livestock Feed Trade Secrets Case Put Out to Pasture
A Kansas District Court judge recently dismissed a trade secrets misappropriation action between two competing livestock nutrition companies.
In Biomin Am. Inc. v. Lesaffre Yeast Corp., Plaintiff Biomin America, Inc. (“Biomin”) sued competitor Lesaffre Yeast Corporation (“Lesaffre”) and two former Biomin employees who now work for Lesaffre, asserting trade secret misappropriation under the Federal Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836 (“DTSA”) as well as a handful of state law claims, including breach of contract, tortious interference, civil conspiracy, and unfair competition.
Specifically, Biomin alleged that the two employees misappropriated trade secrets and violated restrictive covenants contained within their Biomin employment agreements by soliciting Biomin employees and customers and marketing Lesaffre’s competing products at a lower price.
Continue Reading Livestock Feed Trade Secrets Case Put Out to Pasture
Scientist Pleads Guilty to $1 Billion in Trade Secret Theft
Chinese national and materials scientist Hongjin Tan has pled guilty to stealing from his former employer Phillips 66 (“Phillips”) more than $1 billion in trade secrets related to next generation battery technology.
DOJ announced Tan’s guilty plea this week which revealed that he copied substantial research and development files that he knew contained protected company…
Restrictive Covenants in the First Circuit
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.
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Restrict Covenants in the Eleventh Circuit
Each of the states within the Eleventh Circuit governs the use of restrictive covenants through statutes. Generally, both Florida and Alabama permit the use of restrictive covenants where the restrictive covenant is “reasonably necessary” to protect a legitimate business interest, but the legitimate business interest requirement is applied differently in both jurisdictions. Alabama law prohibits…