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A judge in the Northern District of Texas recently declined to dismiss a lawsuit, CiCi Enterprises LP et al. v. Mucho Pizza, LLC et al., alleging a pizza franchisee failed to maintain the confidentiality of Texas pizza chain CiCi Enterprises LP’s trade secrets after two affiliates inked a development deal with competitor, Papa John’s. This case highlights the importance of comprehensive agreements and the reduction of agreement modifications to writing.

Beginning in 2010, CiCi Enterprises[1] and Mucho Pizza, LLC[2] entered into 17 franchise agreements, which provided Mucho Pizza access to CiCi Enterprises’ trade secrets and other confidential information, including confidential financial and store performance information, pricing, supplier contacts, strategic marketing research, and sales techniques. Each agreement required Mucho Pizza commit to not communicating, divulging, or otherwise using for another party’s benefit these trade secrets and confidential information. The agreements also required Mucho Pizza not to directly or indirectly hold an interest in a competitive pizza restaurant during or immediately after the agreements’ term. These agreements were signed by Mucho Pizza and Mucho Pizza’s personal guarantor, Guillermo Perales. CiCi Enterprises asserts both were bound by the agreements’ terms.Continue Reading Trade Secrets Food Fight Spotlights Importance of Comprehensive Agreements

To continue our series on trade secret employee contract clauses, we’ve surveyed the First Circuit for updates to the law relating to restrictive covenants. Such covenants remain predominantly governed by statutes in Maine, Massachusetts, New Hampshire, and Rhode Island, while Puerto Rico continues to govern them by common law. And with no significant updates since 2020, restrictive covenants remain disfavored and under increased scrutiny in the First Circuit. Generally, these courts will only enforce noncompete agreements that are reasonable, no broader than necessary to protect an employer’s legitimate business interests, properly noticed, and in line with public policy. The applicable law for each state is set forth below.
Continue Reading Restrictive Covenants in the First Circuit

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

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

In October, we published a blog post describing how trade secret claims filed by AbbVie were dismissed by the Northern District of Illinois for lack of personal jurisdiction over AbbVie’s former employee in Singapore and the competitor that poached him, Alvotech of Iceland. At that time, we thought AbbVie might replead to keep its trade secret claims in Federal District Court. AbbVie chose instead to appeal the District Court’s dismissal to the Seventh Circuit.

In addition, AbbVie has now pursued a second route—one that is becoming more and more common for global corporations claiming injury from trade secret misappropriation: AbbVie has also filed a Section 337 Complaint to the International Trade Commission (“ITC”), seeking to block imports of Alvotech’s biosimilar of AbbVie’s Humira arthritis treatment. Unlike the Federal Court action, the Section 337 Complaint is against both Alvotech and Teva (Israel) as a commercialization partner.
Continue Reading AbbVie Turns Next to the U.S. International Trade Commission in Biosimilar Trade Secret Row

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

In a case pitting Wasco County, Oregon residents and a newspaper against the City of Dalles, Oregon, a court will decide whether a public interest exception in a state law will mandate the disclosure of potential trade secrets. After a reporter from The Oregonian inquired into Google’s water use, the City of Dalles (“Dalles”) filed a Complaint against both the reporter and the newspaper (the “Defendants”) seeking declaratory relief, requesting that the court declare Google’s water use a trade secret under Oregon’s Public Records Law, ORS 192.311 et seq, and the Oregon Uniform Trade Secrets Act, ORS 646.461 et seq. As described below, the issue is whether Google’s water use is a trade secret, and if so, if the public interest exception, which may permit public disclosure of trade secrets, applies.
Continue Reading City Claims Google’s Water Use Is A Trade Secret and Exempt from Oregon’s Public Records Laws

In March 2021, AbbVie, Inc. and AbbVie Biotechnology Ltd. (“AbbVie”) sued rival pharmaceutical company Alvotech hf. (“Alvotech”) for trade secret misappropriation under the federal Defend Trade Secrets Act (“DTSA”) and the Illinois Trade Secret Act. In May, Alvotech filed a motion to dismiss the Complaint for both failure to state a claim and lack of jurisdiction. And just a few days ago, the North District of Illinois Court issued an order finding that it lacked jurisdiction over AbbVie’s causes of action, and dismissed the case.
Continue Reading AbbVie Trade Secret Claims Fail at Pleading Stage for Lack of Jurisdiction

The Supreme Court recently denied a petition for certiorari by Monib Zirvi and others, in which petitioners sought Supreme Court intervention regarding the notice required to trigger the statute of limitations clock for trade secret misappropriation claims. The case is Zirvi et al. v. Flatley et al. (Case No. 20-1612). You can review the petition here. The case arises out of a 2018 lawsuit, in which four self-described inventors of DNA Arrays brought suit against Illumina, a “multibillion-dollar, global player in genetic analysis,” alleging that Illumina and its associates conspired to steal Petitioner’s trade secrets and covertly conceal the information in patent applications. According to Petitioners, the DNA Arrays at issue are now used in the detection of cancer, inherited genetic defects, and viral infections such as COVID-19.
Continue Reading Supreme Court Declines to Weigh in on Notice Required to Trigger Statute of Limitations for Trade Secret Misappropriation Claims

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