employee misappropriation

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

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

On October 2, 2020, a federal judge for the Central District of California denied a motion for a temporary restraining order (“TRO”) to enjoin the Discovery Channel from airing “The Lost Lincoln,” a documentary about an allegedly long-lost photograph of Abraham Lincoln on his deathbed.  Only 130 photographs of Lincoln are known to exist.

Plaintiffs Jerry Spolar and Terry Williamson own the photograph, known as an ambrotype, and spent years researching and authenticating it.  In 2018, they partnered with Whitny and James Braun to make a documentary about the photo and shared the details of their authentication efforts with the Brauns pursuant to non-disclosure agreements.  The project fell through at first, but late last month, Plaintiffs learned that their former partners had created a documentary about the photograph for the Discovery Channel.
Continue Reading Court Denies TRO in “The Lost Lincoln” Misappropriation Case

The U.S. Department of Justice has secured yet another conviction against a Chinese national for trade secret theft which is part of a larger push to protect valuable intellectual property.

Li Chen, a long time biotech researcher in a medical lab at Nationwide Children’s Hospital Research Institute in Ohio, pled guilty to conspiracy to misappropriate trade secrets and conspiracy to commit wire fraud.  Chen, and her husband Yu Zhou, a fellow biotech researcher, were indicted in September 2019 following an extensive investigation. The indictment and plea agreement details their efforts to steal trade secrets related to exosome isolation technology, which represents a critical development in the diagnosis and treatment of pediatric diseases, including liver cancer and a condition found in premature babies.

Continue Reading Chinese Biotech Researcher Pleads Guilty to Trade Secret Misappropriation

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

Plaintiffs wishing to sue for patent, copyright, or trademark infringement all have one thing in common: they must prove they own the IP at issue. Not so for trade secrets. Last month, the United States Court of Appeals for the Third Circuit held that the Pennsylvania Uniform Trade Secrets Act only requires a plaintiff to lawfully possess, rather than formally own, the trade secrets it wishes to vindicate. With this opinion, the Third Circuit affirmed a district court decision awarding $3.5 million in damages and fees to NASA subcontractor Applied Fluid Systems Inc. (“AFS”) in its suit for trade secret misappropriation.

The “sorry story of disloyalty and deception piled upon deception” began in 2009, when AFS entered into a three-year contract with the Virginia Commonwealth Space Flight Authority (the “Authority”) to build, install, and maintain a hydraulic system for a NASA rocket launch facility. However, the Authority experienced financial difficulty, and eventually had to cede control of the launch system to a private entity, Orbital Sciences Corp. (“Orbital”). Through this acquisition, Orbital inherited the AFS contract. Importantly, the initial contract between AFS and the Authority made any materials generated by AFS for the Authority the property of the Authority.
Continue Reading A Story of Disloyalty and Deception: The Third Circuit Chimes in on Ownership Requirements in Trade Secrets Act Cases