Courts often require a plaintiff to identify a trade secret with reasonable particularity before commencing discovery (and it is a statutory obligation in California).  But frequently a trade-secret plaintiff does not know precisely which trade secrets have been taken by the defendant before discovery commences.  In the recent Ninth Circuit decision InteliClear v. ETC Global Holdings (9th Cir. Oct. 15, 2020), the appellate court held that, under its particular circumstances, a plaintiff who had not adequately specified its trade secrets at issue should nevertheless be permitted to engage in discovery for this purpose, where the plaintiff had shown discovery could provide the necessary information.  (Disclaimer: Sheppard Mullin served as co-counsel to the successful appellant-plaintiff in this case.)
Continue Reading Trade Secret Takeaways from the Ninth Circuit’s Decision in InteliClear, LLC v. ETC Global Holdings, Inc.

On September 21, 2020, in a published 2-1 opinion in Doe v. Google Inc., the California Court of Appeal (Dist. 1, Div. 4), permitted three current and former Google employees to proceed with their challenge of Google’s confidentiality agreement as unlawfully overbroad and anti-competitive under the California Private Attorneys General Act (“PAGA”) (Lab. Code § 2698 et seq.).  In doing so, the Court of Appeal reversed the trial court’s order sustaining Google’s demurrer on the basis of preemption by the National Labor Relations Act (“NLRA”) (29 U.S.C. § 151 et seq.) under San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236, 244–245 (1959).  The court held that while the plaintiffs’ claims relate to conduct arguably within the scope of the NLRA, they fall within the local interest exception to Garmon preemption and may therefore go forward.  It remains to be seen whether plaintiffs will be able to sustain their challenges to Google’s confidentiality policies on the merits.  However, Doe serves as a reminder to employers to carefully craft robust confidentiality agreements, particularly in the technology sector, in anticipation of potential challenges employees may make to those agreements.
Continue Reading California Court of Appeal Rules that Challenge to Google’s Confidentiality Agreements May Proceed Past the Pleading Stage

Grounded in California’s recognized hostility against restraints on competition, a recently published opinion from the California Court of Appeal, Hooked Media Grp., Inc. v. Apple Inc.[1], held that to establish trade secret misappropriation under California law,[2] it is not enough to show that the defendant has knowledge of the plaintiff’s trade secrets. Rather, in addition to proving that the subject information constitutes a trade secret,[3] the plaintiff must prove that the defendant improperly acquired or actually used the information. The ruling should be of interest to both former and new employers, as we explain below.
Continue Reading As A Reminder That California Has Rejected The Doctrine Of Inevitable Disclosure, Court of Appeal Rules Knowledge Of Former Employer’s Trade Secret Information Does Not By Itself Constitute Misappropriation

Why should companies considering trade secret litigation consider their patent portfolios?  After all, trade secrets, by definition, are secret.  They have value in the marketplace by virtue of not being disclosed.  And like the formula for Coca-Cola, that value can continue perpetually as long as the secrecy of trade secrets is maintained.  Patents, on the other hand, represent a limited monopoly granted to the patent-holder in exchange for an enabling disclosure of the patented invention, a disclosure sufficient to enable those skilled in the art to practice the invention.  Of course, this public disclosure requirement for patentability destroys secrecy.  This means that once the invention is disclosed in a published patent or application, it cannot be subject to trade secret protection.  In the context of a litigation concerning whether a claimed trade secret is covered by a patent, the interface between trade secret protection and patent protection can become existential.  The defendant may contend that once the claimed trade secrets found their way into the patent’s enabling disclosure, they lost any trade secret protection.  The plaintiff will try to delineate sharply between technology covered by the patent and its disclosures, and technology that remains undisclosed and thus properly subject to trade secret protection.  So a proper understanding of the interplay between trade secret protection and patent protection can be critical to the outcome in a trade secret case.
Continue Reading Why Patents Can Matter In Trade Secret Cases

On September 2, 2020, the Fifth Circuit declined to void a fee award of nearly $2.3 million in favor of an employer that had prevailed on its trade secret theft claim against its former employee, because the employee willfully failed to comply with the bankruptcy court’s “extremely explicit” order regarding his objections to the award.
Continue Reading Fifth Circuit Affirms Attorney’s Fee Award of $2.3 million in Misappropriation Case Against Former Employee who Failed to Comply with Court’s Objections Order

As the COVID-19 pandemic spreads throughout the United States and Americans anxiously await the arrival of a vaccine, biotech companies are grappling with the uncertainty of patent protection for COVID related biomedical advances and, as a result, are turning to trade secret protection instead.  For policy-makers looking to incentivize the search for the magic bullet of an effective vaccine, this raises tough questions:  What is the best policy or mix of policies to incentivize industry and stimulate a rapid, effective vaccine?  And should that policy tilt towards sharing information or towards protecting monetary incentives?  This article addresses the limitations on patent eligibility, the role of trade secret protection, and the current federal policy landscape on biological innovation incentives during the pandemic.
Continue Reading Trade Secret Protection & the COVID-19 Cure: Observations on Federal Policy-Making & Potential Impact on Biomedical Advances

As if 2020 hasn’t caused enough hardship and headaches for employers already, the FBI and U.S. Cybersecurity Infrastructure Security Agency (“CISA”) recently issued a joint Cybersecurity Advisory Alert warning employers about the rise in voice phishing, or “vishing,” scams targeting remote workers.
Continue Reading Cybercrime 2020 – The Rise of “Vishing”

Business-to-business contracts often concern trade secrets. Contracts such as NDAs, joint development agreements, license agreements, vendor agreements, and other commercial agreements commonly contain restrictive covenants relating to the protection of trade secrets or other protectible interests. But when do these terms constitute an illicit restraint of trade under California law? The California Supreme Court just addressed this very question in Ixchel Pharma v. Biogen , holding that most B2B agreements are governed by the common law rule of reason, instead of the flat prohibition on noncompetes applicable to the employment context.
Continue Reading Ixchel v. Biogen: California B2B Noncompetes Do Not Per Se Violate B&P Section 16600, and Are Instead Subject to Rule of Reason

As previously noted in this forum: “[p]reservation of electronically stored evidence (ESI) may be critical in trade secret cases.”  See 3 Steps in Furtherance of Avoiding Devastating Spoliation Sanctions in Trade Secrets Misappropriation Litigation.  This is true for both plaintiffs and defendants, as the fate of modern trade secrets claims regularly turns on the existence or absence of a digital trail left by the accused appropriator.  Given the often transitory nature of this evidence, potential litigants must carefully and proactively preserve it in order to mount an effective case or defense.  This is especially true for early-stage entities with limited resources, as the “consequences for spoliation of electronically stored information may be severe” – including case terminating sanctions that may be devastating to such an entity’s continued operation.  See id.
Continue Reading Self-Driving Cars and Auto-Deletes: An Epic E-Discovery Mismatch

Given the prevalence of trade secret misappropriation litigation among members of the fashion, beauty, and retail industry, those in that industry should (1) take care to protect their trade secrets from misuse by others and (2) consider steps to try to reduce the risk of misappropriation claims against them by others.  Both situations – loss of a valuable trade secret and burdensome litigation – can be devastating to a business.  We offer here some potential measures that businesses can take to attempt to avoid such undesirable situations.
Continue Reading Members Of The Fashion and Retail Industry: Trade Secret Claims Are In Vogue These Days

While traditionally healthcare businesses have tended to look to patent protection, it would behoove them to also think about trade secret protection to protect their valuable inventions.  Given the financial strains on businesses from the COVID-19 pandemic, some businesses may find trade secret protection a cost-efficient alternative to the patent process. Trade secret enforcement also potentially can yield hundreds of millions, sometimes even over a billion, dollars for the trade secret holder.[1] Further, patent protection is not always available.[2]
Continue Reading Admonition To Members Of The Healthcare Industry: Don’t Give Trade Secret Protection The Short Shrift!