The U.S. Court of Appeals for the Seventh Circuit, which hears federal appeals from Illinois, Wisconsin, and Indiana, recently issued a decision clarifying the level of specificity required to claim trade secret protection for software under federal law. In NEXT Payment Solutions, Inc. v. CLEAResult Consulting, Inc., the court explained a plaintiff cannot get to a jury just by describing software features in broad, everyday terms. To bring a viable trade secret claim under the federal Defend Trade Secrets Act, (“DTSA”), 18 U.S.C. §§ 1836 et seq., the party must be able to clearly explain what the “secret” is, not merely point to the system’s visible functions or the results it produces.Continue Reading Trade Secret Claims Require Describing the Secret, Not the Software

The Federal Circuit recently confirmed the importance of properly identifying the trade secrets underlying a claim under the Ohio Uniform Trade Secrets Act (“OUTSA”) [Ohio Rev. Code §§ 1333.61…

Continue Reading Federal Circuit Upholds Setting Aside of Jury Verdict Where Trade Secrets Not Identified With Sufficient Particularity

Earlier this Fall, the Federal Trade Commission (the “Commission” or the “FTC”) officially ceded its fight to impose a nationwide ban on employee noncompete agreements (the “Noncompete Ban”).Continue Reading FTC Signals Shift to Targeted Enforcement of Non-Competes in the Healthcare Industry

The Ninth Circuit’s recent decision in Quintara Biosciences, Inc. v. Ruifeng Biztech, Inc. underscores an important distinction in trade secret law between California’s Uniform Trade Secrets Act (“CUTSA”) [Cal. Civ. Code, §§ 3426 et seq.] and the federal Defend Trade Secrets Act (“DTSA”) [18 U.S.C.A. §§ 1832 et seq.]. Specifically, the Court’s reasoning clarifies when and how plaintiffs must identify their alleged trade secrets under each regime.Continue Reading Ninth Circuit Refuses to Apply California’s “Reasonable Particularity” Requirement to Claims Under the Defend Trade Secrets Act

Delaware Courts Continue to Scrutinize Noncompete Agreements

As previously reported (here, here and here), courts in Delaware, the once favored “employer-friendly” jurisdiction, have increasingly scrutinized and refused to enforce noncompete agreements. In recent cases, Delaware courts have continued this trend, this time focusing on forfeiture-upon-competition provisions in equity or profit incentive agreements that also include affirmative restrictive covenants. Two of these cases are Delaware Chancery Court noncompete cases. Following on the heels of the Delaware Supreme Court’s affirmation of the employee choice doctrine, three trial courts have held that forfeiture of equity results in a failure of consideration such that the affirmative restrictive covenants are unenforceable. The practical effect of these cases is to force companies to choose between forfeiture or affirmative restrictions when crafting their equity contracts with employees. We can expect further developments in Delaware noncompete law and its implications for drafting incentive units and noncompete agreements under Delaware law, as two of the three cases are now on appeal. Recent cases are discussed below.Continue Reading Delaware Courts Limit Noncompete Enforcement in Incentive Plans

A recent federal district court ruling serves as an important reminder that a former employee may be held liable for trade secret misappropriation even if the alleged trade secrets are not physically or electronically taken by the departing employee, but instead retained only in memory.Continue Reading Evidence of a Defendant’s Physical or Digital Retention of Trade Secret Information Is Not Required to Prove Trade Secret Misappropriation Under the California Uniform Trade Secrets Act

As previously reported (here and here), some Delaware courts have recently declined to “blue pencil,” i.e., modify and narrow overbroad restrictive covenants. Instead, they have stricken in their entirety covenants deemed overbroad and declined to enforce them. On December 10, 2024, in Sunder Energy, LLC v. Tyler Jackson, et al., the Delaware Supreme Court affirmed that Delaware courts have the discretion to decline to blue pencil overbroad restrictive covenants, even if the defendant’s conduct would violate a more narrowly circumscribed covenant. Continue Reading Delaware Supreme Court Refuses to Enforce Noncompete Against Company Founder Who Joined Competitor

This is a boom time for trade secret litigation in the U.S. The underlying conditions driving the boom include the growing mobility of the global workforce, the ease with which electronic data can be captured and moved, the emergence of nation-state actors participating in the theft of information in the global marketplace, and the time-limited benefits and uncertainties of patent litigation. Also fueling this rise are the federalization of trade secret laws with the Defend Trade Secrets Act (DTSA), the extraterritorial application of such laws to acts committed outside the U.S., and the availability of robust legal remedies in the U.S. for trade secret misappropriation. For companies seeking remedy against trade secret misappropriation, the United States offers unparalleled advantages as a legal venue: extraterritorial application of its laws combined with a broad range of monetary remedies in U.S. District Courts and the powerful exclusion of goods at the border offered in U.S. International Trade Commission (ITC) Section 337 proceedings. For international companies doing or planning to do business in the U.S., understanding the risks of lawsuit is now critical.Continue Reading The Proliferation of Trade Secret Misappropriation and U.S. Enforcement Choices

Following the Seventh Circuit’s recent decision in Motorola Solutions Inc. v. Hytera Communications Corp. Ltd., the United States may become a destination venue for resolution of global trade secret disputes. The Seventh Circuit held that U.S. trade secret law applies extraterritorially—reaching the theft of trade secrets outside the United States—so long as “an act in furtherance” of the offense was committed in the United States. The court held, for example, that marketing products in the United States qualified as an “act in furtherance” if the products were made using stolen trade secrets. Once an “act in furtherance” is identified, damages can be based on a company’s global sales. Motorola, for example, resulted in an award of $135.8 million in compensatory damages based on Hytera’s worldwide sales. Similar to the global impact of U.S. antitrust and anti-bribery laws, the Seventh Circuit’s decision highlights the critical importance to companies of considering U.S. trade secret laws. For example, if a company suffers the theft of its trade secrets anywhere in the world, it should consider the United States as a possible venue for bringing a legal claim. Conversely, companies should take measures to train employees and ensure compliance with U.S. trade secret laws even if the employees are located outside of the United States.Continue Reading Companies Should Take Notice of the Extraterritorial Reach of U.S. Trade Secret Law

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

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