Legal regimes are shifting, including in the intellectual property world as businesses increasingly seek the protection of trade secrets rather than patents to secure their confidential information. When the Defend Trade Secrets Act was passed in 2016, trade secret litigation skyrocketed, increasing more than 25 percent in a single year. While the number of trade secret cases filed in federal court fell briefly during COVID, that number is back on the rise, with over 1,200 cases filed last year. Meanwhile, patent litigation is experiencing the opposite trend: the number of patent cases filed in 2023 fell to their lowest levels since 2010. These trends highlight a shift in how businesses are protecting their companies’ confidential information that reflects an increased desire for comprehensive yet informal protection.Continue Reading The Rise of Trade Secret Litigation
Virginia Court of Appeals Reverses Record $2 Billion Verdict, Emphasizing Damages Resulting from Misappropriation Must Actually Be Proved Under Virginia Trade Secrets Law
The Virginia Court of Appeals recently issued a consequential trade secrets ruling, reversing a jury’s multi-billion dollar damages award, and finding that the trial court committed several legal errors which improperly led to the largest damages verdict in Virginia’s history. The case, Pegasystems Inc. v. Appian Corp., No. 1399-22-4, involved two companies in the business process management (BPM) industry, each of whom offer platforms that enable third party business customers to build complex software applications using “low-code application development platforms.” Continue Reading Virginia Court of Appeals Reverses Record $2 Billion Verdict, Emphasizing Damages Resulting from Misappropriation Must Actually Be Proved Under Virginia Trade Secrets Law
Attorney’s Fees May Be Recoverable in Trade Secret Cases, Even Without Damages
In California, although the prevailing rule is that each party in litigation must cover their own fees and costs, a litigant can be awarded reasonable attorney’s fees and costs if expressly permitted in a contract. Proprietary information agreements often include an award of attorney’s fees and costs if a company prevails in seeking injunctive relief for misappropriation of its trade secrets by a current or former employee. However, there is an ambiguity in whether a plaintiff actually prevails on a claim for trade secret misappropriation, entitling it to injunctive relief and therefore attorney’s fees, even without a showing of damages. In Applied Medical Distribution Corp. v. Jarrells, 100 Cal. App. 5th 556 (2024), the California Court of Appeals ended this uncertainty and affirmed that monetary damages are not an element of a claim for trade secret misappropriation, and a plaintiff may be entitled to attorney’s fees even where the jury found the plaintiff was not damaged by the misappropriation.Continue Reading Attorney’s Fees May Be Recoverable in Trade Secret Cases, Even Without Damages
California Court of Appeal Rules That Partial Sale of Business Can Bind Seller-Owner to a Noncompetition Agreement
In Samuelian v. Life Generations Healthcare, LLC, — Cal. App. 5th —, 2024 WL 3878448 (Cal. App. Aug. 20, 2024), the California Court of Appeal answered two long outstanding questions of California law concerning the enforceability of noncompetition agreements in the context of the sale of a business:Continue Reading California Court of Appeal Rules That Partial Sale of Business Can Bind Seller-Owner to a Noncompetition Agreement
Maine Governor’s Veto of Non-Compete Ban Bucks Growing Trend Among States and Federal Trade Commission
Amidst a wave of non-compete bans sweeping California, North Dakota, Oklahoma, Minnesota and, most recently, the nation via the Federal Trade Commission’s non-compete prohibition, Maine Governor Janet Mills departed from this growing trend and vetoed L.D. 1496, An Act To Prohibit Noncompete Clauses (“L.D. 1496”) in April 2024. If enacted, the L.D. 1496 would have effectively foreclosed employers from entering into non-compete clauses with employees in Maine.Continue Reading Maine Governor’s Veto of Non-Compete Ban Bucks Growing Trend Among States and Federal Trade Commission
Not So “Final”? Texas Federal Court Enjoins Enforcement of FTC’s Noncompete Ban, Leaving Future of Commission’s Rule in Doubt
On July 3, District Judge Ada Brown of the Northern District of Texas issued an order enjoining the Federal Trade Commission (“FTC”) from enforcing its “Final Rule” against plaintiffs Ryan, LLC (“Ryan”) and the U.S. Chamber of Commerce (the “Chamber”). If implemented, the Final Rule would effectively render nearly all non-compete agreements unlawful. Accordingly, this opinion was one of the most highly anticipated judicial decisions in antitrust and labor and employment law in recent memory.Continue Reading Not So “Final”? Texas Federal Court Enjoins Enforcement of FTC’s Noncompete Ban, Leaving Future of Commission’s Rule in Doubt
FTC Votes to Ban Noncompete Agreements
On April 23, 2024, the Federal Trade Commission (the “FTC”) voted 3-2 to issue its final rule (“Final Rule”) banning employers from imposing noncompete clauses on their workers, approving the final rule in a special Open Commission Meeting. Continue Reading FTC Votes to Ban Noncompete Agreements
Lesson Learned: Man Charged with Insider Trading After Misappropriating Information from Wife’s Work-From-Home Calls
As we previously reported here in March 2020, the implementation of remote work policies heightens the risk of misappropriation of trade secrets in remote work environments and could require businesses to take additional steps to ensure the security of their trade secrets and confidential information. In the last few years, the Securities and Exchange Commission (“SEC”) has charged several individuals with insider trading after they misappropriated material, nonpublic information obtained as a result of their remote work environment.[1] Most recently, a man was charged with insider trading after misappropriating trade secrets he obtained by listening to his wife’s[2] business calls while the two worked from home. Continue Reading Lesson Learned: Man Charged with Insider Trading After Misappropriating Information from Wife’s Work-From-Home Calls
Mind Your Audience: Disclosure of Confidential Information to AI Programs Can Give Rise to Trade Secret Misappropriation Claims
AI tools such as Chat GPT and Otter are becoming common programs that employees use to help streamline business tasks. Otter, for example, is an AI Meeting Assistant that automatically transcribes and summarizes meetings in real time, records audio, captures slides, extracts action items, and generates content such as e-mails and status updates. While tools like Otter may provide quick answers or help synthesize a large volume of information, employers and employees alike should be mindful of the types of information fed to (and possibly stored in) AI programs. The use of an AI tool to, for example, record a meeting that discusses company confidential information, can give rise to claims of trade secret misappropriation.Continue Reading Mind Your Audience: Disclosure of Confidential Information to AI Programs Can Give Rise to Trade Secret Misappropriation Claims
California Strengthens Non-Competition Law
California has passed two new items of legislation, Senate Bill 699 and Assembly Bill 1076, which will further regulate and restrict the enforcement of employment non-compete agreements in California, and expand the scope of remedies for those affected by them. These new laws will become effective on January 1, 2024, and now is the time for employers to assess and revise their employment-related agreements and restrictive covenants accordingly. As detailed below, they also require employers to notify employees and certain former employees by February 15, 2024 that certain non-compete provisions are void. The two new laws are detailed below.Continue Reading California Strengthens Non-Competition Law
Texas Revolution: State Legislature Creates New Business Court System to Handle Significant Commercial Disputes
On May 25, 2023, the Texas Legislature enacted the biggest structural change to the Texas court system in recent memory. House Bill 19 (“HB 19”)—signed by Governor Greg Abbott in June—creates a new “Business Court” system for the Lone Star State. HB 19’s passage comes after four previous legislative efforts to enact a business court system in Texas failed. Texas’s Business Courts will activate on September 1, 2024, and will handle complex commercial disputes with significant amounts in controversy. The purpose is to create an efficient, specialized court for complex, high-value commercial disputes needing timely resolutions—matters that could otherwise languish in overworked district courts with broad dockets that include, among other things, criminal, personal injury, and family law cases. Ideally, specialized business courts also promote consistent interpretations of commercial laws and contracts, thereby leading to more predictable outcomes. Texas is now the 31st state to adopt a business court system of this kind.Continue Reading Texas Revolution: State Legislature Creates New Business Court System to Handle Significant Commercial Disputes