A recent decision in the Northern District of Illinois gave life to the inevitable disclosure doctrine under the Defend Trade Secrets Act. Inevitable disclosure is a common law doctrine by which a court can prevent a former employee from working for a competitor of his or her former employer where doing so would require the employee to depend upon his or her former employer’s trade secret information. See, e.g., PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995). To date, some commentators have suggested that the inevitable disclosure doctrine is not available under the DTSA because of language in the statute indicating that any injunction granted under the statute to prevent trade secret misappropriation may not “prevent a person from entering into an employment relationship,” and that any conditions placed on employment must be based on “evidence of threatened misappropriation and not merely on the information the person knows.” The Northern District of Illinois’s decision in Molon Motor and Coil Corp. v. Nidec Motor Corp., No. 16 C 03545 (N.D. Ill. May 11, 2017), however, suggests that the inevitable disclosure doctrine may continue to be useful for trade secret plaintiffs asserting claims under the DTSA.
Bret is Co-chair of the firm’s Employee Mobility, Noncompetes & Trade Secrets Practice, and is a Member based in the firm’s Boston and DC offices. His practice includes representing employers in labor and employment litigation, including claims arising under FLSA, Title VII, ADA, ADEA, Mass. Gen. Laws ch. 151B, Massachusetts Wage Act, as well as state common law, breach of contract, wrongful termination, and defamation claims. Bret has extensive experience litigating noncompetition and nonsolicitation agreements and executive compensation agreements.
A recent decision in the Western District of Kentucky highlights the importance of explaining in a complaint under the Defend Trade Secrets Act why the allegedly misappropriated information qualifies for trade secret protection. The decision is an important reminder that it is not enough to simply call something a “trade secret” in a complaint under the DTSA. Rather, a plaintiff must plausibly allege how the information qualifies as a trade secret. Where a plaintiff fails to do so, the complaint is susceptible to dismissal with prejudice under Fed. R. Civ. P. 12(b)(6).
The Defend Trade Secrets Act (DTSA) civil seizure mechanism provides victims of trade secret theft with a tool to immediately freeze dissemination of stolen proprietary information. Using civil seizure, a court may direct federal marshals to seize property necessary to prevent the promulgation of stolen trade secrets. Civil seizure can only be employed in “extraordinary circumstances,” however, and a request for civil seizure has never been granted, though only a handful of requests have been made under this DTSA mechanism, which is still less than a year old (the most recent request was denied in the Northern District of California in OOO Brunswick Rail Mgt., et al. v. Sultanov, et al., No. 5:17-cv-00017 (N.D. Cal. Jan. 6, 2017)).
The story of civil seizure and the DTSA does not end there. Continue Reading The DTSA and Civil Seizure Under Federal Rule of Civil Procedure 65
An important question for any plaintiff alleging trade secret misappropriation is: “How much detail should I provide about the stolen trade secrets in the complaint?” Answering this question often requires the balancing of two important considerations. On the one hand, plaintiffs alleging trade secret theft are rightly cautious about detailing proprietary company information in a public complaint, especially given that public disclosure of a trade secret may cause the information to lose its protected trade secret status. On the other hand, plaintiffs must put a sufficient amount of detail into the complaint to state a claim and survive a motion to dismiss. This is a very important yet often difficult balance to strike. The U.S. District Court for the Northern District of Illinois in Mission Measurement Corp. v. Blackbaud, Inc., Case No. 16 C 6003, U.S. Dist. LEXIS 148607 (N.D. Ill. Oct. 27, 2016) recently addressed how much detail to include about a misappropriated trade secret in a complaint under the Defend Trade Secrets Act (DTSA). The court found that only a general description of trade secret information was required to survive a motion to dismiss.
Trade secret theft is a growing threat to American businesses. One obstacle to addressing misappropriation through a lawsuit can be a lack of direct evidence of theft. For example, if an employee leaves his company to work for a competitor and, some months later, the competitor comes out with a product similar to that of the original employer with features previously unique to the original product, it might be inferred that the employee improperly took trade secret information to the competition. A decision in the U.S. International Trade Commission (ITC) this past summer suggests that these facts, without more compelling evidence, may be insufficient to support a finding of trade secret misappropriation. The decision is an important reminder to all trade secret owners to develop a comprehensive trade secret management plan that tracks a company’s trade secrets and who has access to them so that theft can be documented and used in judicial actions, if necessary.
In August 2015, the ITC instituted an investigation based on allegations by Jawbone that Fitbit misappropriated 154 Jawbone trade secrets through the recruitment of a former Jawbone employee. The trade secrets at issue generally relate to the manufacturing and testing of Jawbone wrist worn activity monitors that track a user’s activity and the number of calories the user has expended.
As regular readers of the Global IP Matters blog will know, our cross-disciplinary Trade Secrets team recently published an article through the ABA’s Business Law Today newsletter focused on the Defend Trade Secrets Act (DTSA). Other publications have inquired about our background in the space and have requested articles with slightly different takes on the impact of the law. On October 26, two such articles were published, one in Bloomberg BNA’s Daily Labor Report and the other in the Boston Patent Law Association’s Fall newsletter.
The importance of the DTSA to business segments across organizations cannot be underestimated, a point driven home by the varying audiences of those three disparate publications – one targeted to corporate counsel generally, another toward human resources and employment-focused lawyers, and the third toward patent and technology attorneys.
Each article on the DTSA takes a slightly different approach and we invite you to read the one (or ones) which match most closely your business focus. If you have questions about the law, do not hesitate to reach out to our experienced team who will be happy to field them.
Boston Patent Law Association’s Fall Newsletter – The DTSA: Examining the DTSA’s Language, Use, and Future
Bloomberg’s BNA Daily Labor Report – Explaining the Defend Trade Secrets Act
Three attorneys from Mintz Levin’s IP and Employment practices are featured writers in the American Bar Association’s Business Law Today publication, explaining the ins-and-outs of the Defend Trade Secrets Act (DTSA). For the first time, the DTSA gives American companies the opportunity to protect against and remedy misappropriation of important proprietary information in federal court.
Businesses should be aware of the salient provisions of the DTSA in order to adequately prepare to employ its protections. This article discusses these provisions, which include:
- the impact of instituting a uniform statute to be applied nationwide in federal court, where previously, companies seeking redress for trade-secret misappropriation had no choice but to sue in state court
- the now uniform definitions for the critical terms “trade secret” and “misappropriation”, as provided by the DTSA
- the new civil seizure mechanism
- the whistle blower immunity provision
To read the full article, please click here.
American corporations are facing an ever increasing threat of misappropriation of their valuable trade secrets through industrial espionage, defined as the theft of a company’s trade secrets by an actor intending to convert the trade secret to the economic benefit of a competitor. Indeed, former Attorney General Eric Holder has said that “[t]here are only two categories of companies affected by trade-secret theft: those that know they’ve been compromised and those that don’t know yet.” (See Protection of Trade Secrets: Overview of Current Law and Legislation). With this “significant and growing threat” of industrial espionage by competitors, current and former employees, and even foreign intelligence services, American companies must be vigilant and employ all available measures to protect against misappropriation of valuable trade secrets. (See Office of the National Counterintelligence Executive, Foreign Spies Stealing U.S. Economic Secrets in Cyberspace). In the recently enacted Defend Trade Secrets Act (“DTSA”), which creates a federal civil cause of action for trade secret misappropriation, American companies have been given a number of robust tools to prevent, or remedy ongoing misappropriation of valuable trade secrets. Continue Reading Industrial Espionage and the Defend Trade Secrets Act
On July 5, 2016, in United States v. Nosal, the Ninth Circuit Court of Appeals clarified the definition of “trade secret,” finding that data derived from a compilation of publicly available information can constitute a protectable trade secret in a case involving allegations under the Economic Espionage Act (EEA). The Defend Trade Secrets Act (DTSA) amended the EEA to create a federal private civil cause of action for trade secret misappropriation. Thus, the Ninth Circuit’s opinion in United States v. Nosal provides important guidance regarding the definition of “trade secret” in cases under the DTSA. With this decision, the Ninth Circuit recognizes that a collection of public information can be a protectable trade secret, especially where a proprietary process is used to compile or search that information. Continue Reading Ninth Circuit Provides Clarification Concerning the Definition of Trade Secret
In some of the first decisions under the newly enacted Defend Trade Secrets Act, on June 10 and 22, 2016, United States District Judge Jon S. Tigar granted a temporary restraining order and preliminary injunction in Henry Schein, Inc. v. Cook, No. 16-cv-03166-JST (N.D. Cal. June 10, 2016) that prevents a sales consultant from accessing, using or sharing confidential data that she allegedly stole from her former employer before leaving the company in violation of trade secret laws and employment agreements. These decisions mark the beginning of new jurisprudence under the DTSA that may have significant impact on prospective trade secret actions in the U.S. District Courts and U.S. International Trade Commission.
In 2005, Plaintiff Henry Schein, Inc. (HSI), which is in the business of selling medical, dental, and veterinary supplies, hired the Defendant Jennifer Cook as a sales consultant. As part of her employment, Cook entered into a confidentiality and non-solicitation agreement that required her to hold in confidence confidential information relating to HSI’s business and to not copy or take any such material upon leaving HSI’s employ. In May 2016, Cook resigned from HSI and began working for one of HSI’s competitors. HSI alleged that before leaving HSI, Cook misappropriated HSI’s propriety and trade secret documents with the goal of diverting HSI’s customers by (1) forwarding from her work email to her personal email numerous customer related reports created using HSI’s proprietary software, (2) updating her work laptop with sensitive customer related data and failing to return the laptop for a number of weeks, and (3) remotely accessing proprietary ordering and purchasing data following her resignation. HSI also alleged that Cook attempted to erase the emails she sent to herself from her HSI computer.