Employee Misappropriation

Earlier this week, a Virginia jury awarded software company Appian Corp. more than $2 billion in damages after finding that competitor software company Pegasystems Inc. had misappropriated its trade secrets. The complaint alleged that Pegasystems engaged in corporate espionage and trade secrets theft in an effort to better compete with Appian. Pegasystems hired Youyong Zou, an employee of a government contractor and former developer for Appian. In exchange for payment, Zou provided Pegasystems with copies of Appian’s confidential software and documentation in violation of confidentiality restrictions that barred him from sharing Appian’s trade secrets. In 2020, Appian filed suit against both Pegasystems and Zou.
Continue Reading $2B Jury Verdict in Trade Secrets Suit

As a part of our series on trade secret employee contract clauses, we have surveyed the Seventh Circuit for updates on  the law pertaining to Restrictive Covenants. Each state’s laws are set forth below. But generally in the Seventh Circuit, states focus on reasonableness, geographic, and income restraints in restrictive covenant agreements. Indiana applies a reasonableness-standard common law approach to enforcing covenants, strictly construed against the employer. Wisconsin’s restrictive covenant statute also focuses on reasonableness restraints, and will void all parts of the covenant even if remaining portions are reasonable. Illinois recently passed a restrictive covenant statute in 2021, the Illinois Freedom to Work Act, which codifies the state’s longstanding common law, adding provisions restricting covenants against certain incomes and professions.
Continue Reading Restrictive Covenants in the Seventh Circuit

Within the Tenth Circuit, states vary in their enforcement of restrictive covenants. Wyoming, Kansas, and New Mexico govern the use of restrictive covenants through common law while Utah, Colorado, and Oklahoma govern through statute. Oklahoma is unique in that it prohibits restrictive covenants through statute. In the other five states, despite the variations in governing authority, many of the factors used are similar given the widely accepted “reasonableness” standard many jurisdictions have adopted as a metric for adjudicating the propriety of such agreements.
Continue Reading Restrictive Covenants in the Tenth Circuit

In 2004, 19-year-old college sophomore Elizabeth Holmes dropped out of Stanford University to create a company that would change the world. Theranos, Inc. was going to revolutionize medicine with its proprietary blood testing devices that could detect high cholesterol, cancer, and other medical conditions with a single finger pinprick. In 2014, the company’s valuation peaked at over $9 billion, making Holmes the youngest self-made female billionaire in the world with a net worth of about $4.5 billion. Four years later, in June 2018, Holmes was indicted on eleven counts of fraud. On January 3, 2022, Holmes was convicted on one count of conspiracy to defraud investors and three counts of wire fraud. She faces a maximum sentence of twenty years in prison, and a fine of $250,000, plus restitution, for each count.

Hulu’s new limited series, The Dropout, chronicles the rise and fall of Theranos through the lens of its CEO, played by Amanda Seyfried. Episode 7, Heroes, touches on Holmes’s well-documented preoccupation with trade secrets. During its first decade, Theranos operated in stealth mode – no media communications, no public disclosures, and no product releases.
Continue Reading The Dropout: Trade Secrets in Pop Culture

The Sedona Conference, Working Group 12 on Trade Secrets, has issued guidance on protecting trade secrets throughout the employment life cycle. This significant Commentary analyzes the tension between an employer’s interest in protecting its trade secrets and an employee’s interest in engaging in future employment.
Continue Reading The Sedona Conference Issues Commentary on Protecting Trade Secrets Throughout the Employment Life Cycle

On October 29, 2021, the District of Delaware allowed Park Lawn Corporation to continue with its trade secret claims against fellow cemetery management competitor, PlotBox, Inc., holding that the competitor only needed to have a “reason to know” improper means were used to access alleged trade secrets, based on the position of the individual feeding them the secrets.

Both Park Lawn and PlotBox develop technological solutions to manage cemetery plot placement methods, using software to facilitate mapping of gravestones electronically. This software helps automate cemetery design plans and expedites managerial tasks. The lawsuit also states that Park Lawn planned to license the trade secrets in the software to others in the industry. This plan was eventually disrupted by the Chief Executive Officer of Park Lawn, who was allegedly feeding the trade secret information to PlotBox, which also tried to hire on Park Lawn’s Chief Technology Officer. Park Lawn sued under the Defend Trade Secrets Act (“DTSA”).
Continue Reading Cemetery Company’s Trade Secret Claims Survive Motion to Dismiss by Reasonable Interference of Misappropriation after CEO Fed Competitor Information

On November 23rd, Pfizer filed a complaint against former employee Chun Xiao “Sherry” Li in a California federal court alleging that Li pilfered over 12,000 files worth of critical documents and trade secrets. U.S. District Judge Cathy Ann Bencivengo granted Pfizer’s motion for a temporary restraining order barring Li from using, disclosing or transmitting any confidential information or trade secrets owned by Pfizer, destroying or altering any of that information or destroying any devices storing the information. Li also must return any hard copy documents containing Pfizer’s confidential information or trade secrets, Judge Bencivengo said.

Hired as associate director of statistics in Pfizer’s global product development group at Pfizer’s facility in La Jolla, California in 2006, Li sought greener pastures at Xencor Inc. in 2021. Perhaps in the spirit of the upcoming holiday season, Li treated herself to a parting gift of what Pfizer calls its clinical “playbook.” Its complaint also cited misappropriation of documents containing operational goals, goals for various drugs including cancer drugs, clinical development plans and clinical trial techniques.
Continue Reading Bad Medicine: Pfizer Files Complaint to Halt Potential COVID-Related Trade Secret Misappropriation

As we have previously posted, proper trade secret identification is often a key issue for parties bringing or defending against trade secret misappropriation claims. The precise standard of identification varies across jurisdictions and continues to evolve, but trade secret identification often functions as a gating issue early in a case. A recent decision from the Third Circuit serves as reminder that failure to properly identify purported trade secrets may not just be fatal to a party’s claim, but may render a preliminary injunction unenforceable.
Continue Reading Half-Baked Trade Secret Identification Leads Third Circuit to Vacate Preliminary Injunction

As the sci-fi dream of commercialized flying cars seems close to landing in reality, the electronic vertical takeoff and landing (“eVTOL”) industry is heating up, spurring new bouts over trade secrets.

Wisk Aero LLC (“Wisk”) is a veteran eVTOL company, and has been developing the technology for over a decade. The aircraft they manufacture are often described as “air taxis” or “flying cars.”  The technology behind these aircraft is now at a sufficiently sophisticated stage that commercialized versions are imminent.

Continue Reading Flying Car Trade Secrets Dispute to Be Heard on the Merits

Following a national trend that we previously posted about, Illinois recently passed legislation to further restrict the use of non-compete agreements against low-wage workers.  Under the previous version of the Illinois Freedom to Work Act, employers were prohibited from entering into non-compete agreements with employees making less than $13 per hour.  The new version expands this restriction to include employees earning $75,000 or less and defines “earnings” to include salary, bonus, and other forms of taxable income.  In addition, the amendment prohibits employers from entering into non-solicitation agreements with employees making $45,000 or less annually.

Continue Reading Illinois Law Imposes New Restrictions on Non-Compete Agreements