Non-Disclosure Agreements

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

Trade secrets are always at risk when engaging in corporate deals that require the disclosure of confidential information. Though there is no sure-fire solution to protecting a company’s trade secrets, if handled properly, there is legal recourse to help mitigate any loss and deter trade secret theft. In a recent decision, the 8th Circuit affirmed the grant of a motion to dismiss a breach of contract action between a company and its financial advising firm. The facts, as presented in the District Court’s September 29, 2020 decision (19-cv-03125-JRT-HC, EFC No. 73), are instructive:

Protégé specializes in researching and developing blood-clotting products and maintains its work as trade secrets. In late 2017, looking to sell its business, Protégé entered into an Engagement Agreement with Duff & Phelps. The Engagement Agreement required Duff & Phelps to keep confidential any of Protégé’s non-public information, as well as provided immunity for certain corporate and individual liability and disclaimed a fiduciary duty. Smith reached out to Doug Schillinger, a Managing Director at a private equity firm, and board member at Z-Medica, which is also in the blood-clotting products space, to coordinate a meeting between Z-Medica and Protégé.
Continue Reading An NDA Leads to the Loss of Trade Secrets, a Failed Deal and No Recourse

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

Last week, the Western District of Washington concluded that a multi-level marketing beauty company sufficiently alleged that it exercised reasonable efforts to maintain the secrecy of its training materials, and network salespeople and contact lists, despite the salespeople using their personal Facebook accounts, and despite making the training materials available to a Facebook group comprising thousands of members. Accordingly, the court denied defendants’ motion to dismiss with respect to defendants’ alleged trade secret misappropriation in violation of the Defend Trade Secrets Act.

Plaintiff, Tori Belle Cosmetics LLC (“Belle Cosmetics”), sells its cosmetics and false eyelashes through a network of salespeople, allowing each salesperson to earn a portion of any revenue generated by any salespeople they recruit to join their sales network, i.e., a multi-level marketing business. Defendants are five former network salespeople of Belle Cosmetics, who plaintiff alleges, helped design and launch a competing product line for a company called Juvanae LLC. Belle Cosmetics alleges its trade secrets include, inter alia, lists containing contact information of customers and network salespeople including in the form of social media contacts, and training materials in the form of videos, photos, informational posts, webinars and other instructional materials that it makes available to thousands of its network salespeople through a Facebook group called “Team Lash Out.”
Continue Reading Multi-Level Marketing Company Sufficiently Alleges Reasonable Efforts Despite Posting Trade Secret Materials to Thousands

The District Court for the Southern District of California held that despite not alleging direct evidence of misappropriation, a complaint’s allegations about a company’s lack of experience in the particular industry coupled with its purported behavior during business negotiations were sufficient to state a claim that an allegedly competing product misappropriated trade secrets under the Defend Trade Secrets Act (DTSA) and to defeat a motion to dismiss. According to the Complaint, Applied Biological Laboratories (ABL), a biotechnology company that researches, develops, manufacturers, and distributes healthcare products, developed an antiviral nasal technology using immunoglobulin G, a common antibody in body fluids. ABL’s antiviral nasal spray is allegedly effective against rhinoviruses and novel respiratory pathogens, such as COVID-19. With an application to the mouth and nose, the antiviral spray allegedly aids in naturally flushing pathogens and foreign particles in the digestive tract.

Continue Reading Curiosity Killed A Motion to Dismiss: A Biotech Company’s Business Negotiations Turn into a Trade Secrets Fight

Tips for European employers on how to protect company trade secrets.

7 to 12 years. According to an Organisation for Economic Co-operation and Development study, this is the average amount of time spent by an employee with any one European Union employer. However, in some countries, regions and sectors, employees move around more frequently than this, and the current COVID-19 pandemic will also have had an impact on these numbers.

In any event, if one of your employees leaves, you do not want your company’s trade secrets and other confidential information to leave with them.

Continue Reading Employees may come and go. But will your trade secrets follow them?

A Complaint recently filed in the Southern District of New York may shed light on courts’ willingness to apply a broad interpretation of “misappropriation” in trade secrets cases. Plaintiff Greenpoint Capital Management, which grants loans to law firms to fund high-stakes litigation, has accused Apollo Hybrid Value Management LP and Apollo Hybrid Value Management GP

On February 10, the U.S. International Trade Commission (“ITC”) issued a final determination finding South Korean lithium-ion electric vehicle battery maker SK Innovation misappropriated the trade secrets of its Korean competitor LG Chem in violation of Section 337 of the Tariff Act of 1930.  The ITC issued a 10-year exclusion order blocking SK’s imports into the U.S. of lithium-ion batteries and related products, but with substantial exceptions: SK is permitted to continue importing these products specifically for Ford Motor Co.’s EV F-150 program for four years, for Volkswagen of America’s modular electric drive line for two years, and for the repair and replacement of EV batteries for Kia vehicles sold to U.S. customers.  President Biden and his U.S. Trade Representative—Katherine Tai has been nominated but not yet confirmed—now have 60 days to review the ITC’s electric vehicle battery exclusion order, an order that could be seen as in tension with the new administration’s promotion of green energy.

Continue Reading ITC Finds Trade Secret Misappropriation and Bars Electric Vehicle Batteries from SK Innovation—With Exceptions

The legal saga between L’Oreal USA Inc. and Olaplex LLC (“Olaplex”) over a hair-coloring product continues. In August 2019, a Delaware federal jury found that L’Oreal misappropriated Olaplex’s trade secrets, willfully infringed two Olaplex patents, and breached a nondisclosure agreement. The jury awarded Olaplex $22.3 million for willful infringement of trade secrets, $22.3 million for breach of contract, and $47 million for patent infringement. On March 24, 2020, the court entered a $66.2 million final judgment including attorneys’ fees and prejudgment interest.

Earlier this month, L’Oreal appealed and asked the Federal Circuit to reverse this judgment based on purported errors by the district court in (1) improperly excluding two witnesses and (2) improperly granting summary judgment on patent infringement.
Continue Reading L’Oreal Appeals $66 Million Trade Secret Judgment

On May 6, 2020, the U.S. District Court for the District of Maine denied plaintiff Alcom’s request for a temporary restraining order (“TRO”), which sought to enjoin a competitor’s alleged misappropriation of trade secrets. The court denied the request for a TRO, holding that Alcom’s speculation about the potential harm it would suffer absent the TRO was not enough to show a likelihood of irreparable harm, as required to obtain a TRO. The case serves as a reminder that when proving irreparable harm, courts require more than just speculation.

In 2015, Alcom (a trailer manufacturer) hired Mr. Temple (defendant) as a sales representative for its horse and livestock trailers. As the sole salesperson in North America for the Frontier line of trailers, Mr. Temple gained significant responsibilities including developing and maintaining sales leads, as well as growing Alcom’s customer base for those trailers. Mr. Temple signed various agreements as conditions to his employment, including (i) confidentiality agreement, (ii) non-disclosure agreement, (iii) non-compete agreement, and (iv) a non-solicitation agreement. Alcom required Mr. Temple to sign the agreements as a precondition for accessing highly valuable and confidential company information relating to customer incentive program details, sales and marketing information, and unique insights into the needs and operational requirements of the trailer dealers he solicited.
Continue Reading Under Alcom v. Temple, Speculative Harm Does Not Meet the Irreparable Harm Requirement