trade secret theft

Subscribe to trade secret theft via RSS

The COVID-19 pandemic is shining a new light on the risk of trade secret theft to businesses worldwide from greater employee mobility associated with rising unemployment and a looming recession, cyberattacks by opportunistic hackers, and a growing remote workforce with technological threats from increased use of smart devices that may leave little to no data trail.

Companies should not only consider what to do to safeguard their trade secrets now, as explored in our earlier post on Trade Secret Protection During the COVID-19 Pandemic, but how best to create and communicate the plan for responding to any discovery of trade secret misappropriation.
Continue Reading Are You Ready to Respond to Trade Secret Theft in the COVID-19 Age?

Are non-competes still enforceable in middle of the unprecedented economic disruption caused by COVID-19? Many employers have reacted to the business impact of COVID-19 by downsizing and laying off employees, some of whom signed non-compete agreements or restrictive covenants to protect the employer’s legitimate business interests, including its trade secrets and confidential information. Those same businesses now are left wondering whether those non-compete agreements are enforceable in the wake of massive unemployment triggered by the pandemic.

The answer to this question is complex, and depends on state law, public policy, and the terms of the specific agreements. Each state scrutinizes non-competes and restrictive covenants differently and, therefore, the answer may be different depending on where the business and employee are located or the agreement’s choice of law provision.
Continue Reading Non-Compete Agreements and Restrictive Covenants During COVID-19

Companies sometimes discover warning signs or clear activity of trade secret theft but do not know how to deal with the issue right away.  Whether it is a current employee who remotely accesses company trade secret information while on vacation, or a departing employee who conveniently failed to return a company laptop, that company may be heading toward eventual trade secret litigation. But the immediate path forward seems unclear and presents so many options of what to do. Because the hours and days after discovery of a potential trade secret theft are extremely important, we suggest a simple set of best practices for responding to that potential trade secret theft: 1) understand the issue, 2) contain the issue, 3) exhaust the issue, and 4) consider bringing the issue to court.
Continue Reading Best Practices for Responding to Potential Trade Secret Theft

Last week the United States Senate unanimously approved legislation that would create a private right of action in federal court for trade secret theft. We reported on this legislation — The Defend Trade Secrets Act of 2015 – last summer, and explained how it would modify the Economic Espionage Act (EEA), 18 USC Chapter 90. See The Growing Momentum for Federal Trade Secrets Legislation. 
Continue Reading U.S. Senate OKs Federal Trade Secret Bill

One of the most complicated parts of litigating a trade secret case is the discovery process.  Plaintiffs often seek discovery immediately to determine the full extent of information that was taken and how it was used, and often seek expedited discovery to prevent the defendants from destroying or hiding evidence of wrongdoing.  Defendants, on the other hand, resist discovery in order to prevent the plaintiff from using the defendant’s information to help structure its claims, and to prevent the plaintiff from acquiring the defendant’s trade secrets.  Recognizing this danger, courts typically require the plaintiff to identify its trade secrets before the plaintiff may obtain any discovery from the defendant. Many states, including California, have made this preemptive disclosure requirement statutory.
Continue Reading Designation of Trade Secrets a One-Way Ratchet in Discovery

Plaintiffs in trade secret cases are often torn between two conflicting interests: the need to state their trade secrets with enough specificity to survive a motion to dismiss, and the necessity of keeping their trade secrets confidential. In order to resolve this dilemma, plaintiffs often seek to file their complaints under seal, so that the contents are withheld from the public but still available to the parties and the court.

In deciding whether to seal a court filing, the court must balance the need for privacy against the public’s “general right to inspect and copy public records and documents, including judicial records and documents.” Nixon v. Warner Comm., 435 U.S. 589, 597 (1978). In federal court, in order to succeed on a motion to seal, a plaintiff must state compelling reasons, supported by specific factual findings, that outweigh the public’s right of access to court filings and the public policies favoring disclosure of court documents. In re Hewlett-Packard Co., 2015 WL 8570883, *2 (N.D. Cal. 2015); see also Sherwin Williams Co. v. Courtesy Oldsmobile Cadillac, Inc., 2015 WL 8665601, *1 (E.D. Cal. 2015). State courts employ similar standards.  For example, in California, in order to seal a document the moving party must demonstrate: (1) There is an overriding interest that overcomes the right to public access to the record; (2) the overriding interest supports sealing the record; (3) there is a substantial probability that the overriding interest will be prejudiced if the record is not sealed; (4) the proposed sealing is narrowly tailored; and (5) there is no less restrictive means to achieve the overriding interest. California Rule of Court 2.550(d).Continue Reading Recent Decision Reinforces the Significance of Motions to Seal in Trade Secret Cases

Last week the Appellate Division of the Superior Court of New Jersey dismissed a lawsuit brought by pipe-maker JM Manufacturing Co. Inc. against former JM quality assurance engineer John Hendrix and his counsel. JM had accused Hendrix and his counsel of improperly using stolen trade secrets documents and other confidential information to launch a False Claims Act (FCA) case against the company. The FCA is a federal law that imposes liability on individuals and companies who defraud governmental programs. The Superior Court refused to revive the lawsuit, finding that those claims should have been raised in California federal court with the underlying FCA claim.
Continue Reading Countersuit for Trade Secret Misappropriation Impermissible in the Face of FCA Claim Based on Trade Secret, New Jersey Appeals Court Holds

Last year saw many important trade secret developments in the court. Here is our Top 5:

1. DuPont v. Kolon

This case had it all. What appeared at first to be the actions of one disgruntled employee turned out to be a long-standing high-level initiative of Kolon to target former DuPont employees in order to develop its fledgling para-aramid fiber using the secrets behind industry standard Kevlar. There was spoliation, 400 page expert reports arguing all of DuPont’s trade secrets were disclosed in its own patents, antitrust counterclaims, criminal charges, Korean investigations, a two-month jury trial culminating in a damages award just shy of a billion dollars, an appeal, and finally—in 2015—resolution. This epic battle came to end with Kolon being criminally indicted, paying $275 million to DuPont in restitution, and settling the civil case under undisclosed terms. Read about it here.Continue Reading 2015 Trade Secret Year in Review: Key Courtroom Developments

Last week, the California Court of Appeal issued a decision highlighting the need for employers, especially large employers with operations and employees in several states or countries, to take great care in drafting mandatory forum selection clauses and to always be aware of the relevant law in the chosen jurisdiction. In Richtek USA, Inc. v. UPI Semiconductor Corp., 2015 WL 7479125, a state Court of Appeal affirmed that a mandatory forum selection clause in an employment agreement is binding on both the employee and the employer.
Continue Reading Be Careful What You Wish For: The Importance of Forum Selection Clauses

Capitol Buidling 1
[via Flickr user Glyn Lowe Photoworks]
On Monday November 30, the House demonstrated its resolve to fight high-tech crime such as trade secret theft by passing the Strengthening State and Local Cyber Crime Fighting Act (H.R. 3490). The Act formally establishes the National Computer Forensics Institute, which is located in Hoover, Alabama and has been operating since 2008. Under the Act, the Institute will:

  • Educate law enforcement officers, prosecutors, and judges on (i) cyber and electronic crimes; (ii) methods for investigating such crimes, including forensically examining computers and mobile devices; and (iii) prosecutorial and judicial challenges related to such crimes and forensic examinations; and
  • Train law enforcement officers to (i) investigate cyber and electronic crimes; (ii) forensically examine computers and mobile devices; and (iii) respond to network intrusions.

Continue Reading Keeping Up with Cybercriminals: House Passes Bill to Formally Establish National Computer Forensics Institute