A new study of federal court trade secret litigation published in the Gonzaga Law Review on March 17, 2010 confirms that the number of lawsuits involving alleged trade secret misappropriation continues to grow exponentially.
A former engineer and salesman for DuPont, Michael Mitchell, was recently sentenced to 18 months in prison after pleading guilty to stealing trade secrets and providing them to a Korean rival of DuPont.
A bill recently introduced in the Illinois House of Representatives, the "Illinois Covenants Not To Compete Act," would substantially alter the law regarding non-competition agreements in Illinois. In most respects, it would limit the enforceability of no-competes and make them easier for individuals to challenge. However, in certain respects, the bill would make no-competes easier to enforce.
A recent Alabama Court of Appeals case, Jones v. Hamilton, Case No. 2081077 (January 22, 2010), illustrates how a failure to take reasonable steps to maintain the confidentiality of documents and information will result in the loss of trade secret status.
In Zambelli Fireworks Manufacturing Co., Inc. v. Wood, the U.S. Court of Appeals for the Third Circuit recently held that a stock sale did not invalidate an employee's non-compete agreement.
In Baker v. Tremco Incorporated, a case applying Ohio law, the Indiana Supreme Court recently held that, for purposes of a non-competition agreement, competition with a subsidiary corporation also constituted competition with the parent.
As noted in a blog post in October 2009, in Sunbelt Rentals, Inc. v. Ehlers, 333 Ill.Dec. 791, 915 N.E.2d 862 (Ill. App. Ct. 2009), an Illinois appellate court reexamined and rejected over thirty years of well-established precedent regarding the enforceability of restrictive covenants. To date only one published decision, Aspen Marketing Services, Inc. v. Russell, No. 09 C 2864, 2009 WL 4674061 (N.D. Ill. Dec. 3, 2009), has cited Sunbelt. In that case, the Court noted its awareness of Sunbelt and its rejection of the legitimate business interest test, but applied that test anyway.
A trial court in Chicago recently held that because a restrictive covenant did not contain a provision extending the restricted period during any time of breach, there was no basis to re-write the contract to extend the restricted period. The court also declined to extend the restricted period on any equitable basis.
From the mid-1970s until a few weeks ago, Illinois law on enforceability of restrictive covenants was clear: employers seeking to enforce a restrictive covenant first had to establish that the covenant was necessary to protect either confidential information or a near permanent customer relationship - the two recognized "legitimate business interests" sufficient to support a restrictive covenant under Illinois law.
In late September 2009, the Illinois Fourth District Court of Appeal, in Sunbelt Rentals, Inc. v. Ehlers, determined that the "legitimate business interest" test was not supported by any decision of the Illinois Supreme Court. Accordingly, the Sunbelt court held that, in determining whether a restrictive covenant is enforceable under Illinois law, a court should evaluate only the time-and-territory restrictions contained therein. In doing so, the Fourth District Court of Appeals departed from the clearly established case law of all appellate courts in Illinois (and also previous decisions of the Fourth District).
A federal judge in Illinois recently held that a contractual requirement that a professional race car driver pay post-employment royalties to his former employer is unenforceable.
A federal judge in Chicago recently held that continued employment for less than one year was not sufficient consideration for a post-employment restrictive covenant.
Not many lawsuits under the Employee Retirement Income Security Act (“ERISA”) turn on whether an employer legitimately insisted that an employee sign a no-compete agreement in order to receive benefits, but a federal court lawsuit currently pending in Chicago presents that very scenario.
Specifically, in a case brought by a former Bank of America employee against Bank of America and others, Charles Corbisiero alleges that he was lured into continuing to work for Bank of America by a promise of certain allegedly vested bonuses and other benefits, only to be told upon his ...
A high-profile no-compete case currently pending in Chicago may turn on whether merely "preparing to compete" constitutes "engaging in" contractually prohibited business activities.
Although issues involving misappropriation of trade secrets are frequently litigated, they rarely result in criminal charges. However, according to recent stories in The Chicago Tribune, Reuters.com, and other media outlets, a former employee of Goldman Sachs was recently arrested by the FBI for allegedly stealing trade secrets (software code regarding a proprietary trading system) worth millions of dollars.
While there is no magic wand that will prevent a theft or stop a thief in his tracks, a company can substantially lower the risk of trade secret misappropriation through proactive policies and procedures.
States vary widely in their willingness to enforce noncompetition agreements. Illinois, for example, will enforce a noncompetition agreement, but only after fairly rigorous judicial scrutiny. Notwithstanding such scrutiny, Illinois employers can draft enforceable noncompetition agreements.
A study released by Ponemon Institute LLC on February 23, 2009 confirms a human resources truism: departing employees frequently steal company data while heading out the door. The study contains a wealth of other interesting statistics about employee data thefts.
If, as expected, the Paycheck Fairness Act becomes law (it was passed by the U.S. House in January 2009 and is currently pending in the Senate), employers may want to review provisions in confidentiality agreements and policies that expressly bar the disclosure of wage information.
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