Trade Secrets & Employee Mobility

Readers of this blog know that long settled understandings regarding what constitutes adequate consideration for a restrictive covenant in Illinois were turned upside down when the First District Appellate Court in Illinois held in Fifield v. Premier Dealer Services Inc., 2013 IL App. (1^st) 120327 that, absent other consideration, two years of employment are required for a restrictive covenant to be supported by adequate consideration, regardless of whether the covenant was signed at the outset of employment or after, and regardless of whether the employee quit or was fired.

About four months ago, to some fanfare, a handful of legislators in Congress introduced a bill called the Defend Trade Secrets Act of 2015.  The bill seeks to create a private right of action allowing companies to assert civil trade secret misappropriation claims under federal law (which would supplement the existing patchwork of state law remedies).  What has happened to the bill since then?  Is there still a chance that it could be signed into law?

Upon introduction, the respective versions of the bill, H.R. 3326 and S. 1890, were referred to the Judiciary Committees of the House and ...

One of the top stories on Employment Law This Week – Epstein Becker Green’s new video program – is about a bad leaver and the hefty price he had to pay.

A former VP of Fortinet, Inc., must pay nearly $1.7 million to the company, after poaching three of his subordinates when he left his job for a competitor. The former VP joked in an email that the employees he took with him were “three bullets to the back of the head” of his former employer. In the arbitration, a former California state judge ruled that the employee had breached his fiduciary duty and his contractual obligations not to ...

A former California State judge in an arbitration awarded nearly $1.7 million to an employer against its former employee based primarily on his acts taken going out the door.  His joking email with a co-worker after recruiting three others, characterizing their resignations as “Three bullets to the back of the head” of his employer, was clearly shooting himself in the foot in the eyes of the arbitrator.  The Award is interesting for many reasons - - the interplay between fiduciary duties and non-solicitation of employees provisions, the allowable damages when such a fiduciary duty ...

Weighing in on an issue that is drawing attention nationwide, the Pennsylvania Supreme Court recently held, in Socko v. Mid-Atlantic Systems of CPA, Inc., that the mere continuation of employment is not sufficient consideration to support a restrictive covenant.  Rather, for there to be sufficient consideration, the Court held that the employee must receive “some corresponding benefit or a favorable change in employment status.”  As examples of such sufficient additional consideration, the Court cited “a promotion, a change from part-time to full-time employment, or ...

In a decision issued in late October, AssuredPartners, Inc. et al. v. William Schmitt, 2015 IL  App. (1^st) 141863 (Ill. App. 2015),  the Illinois Appellate Court struck down as overbroad and unreasonable, the noncompete, nonsolicit and confidentiality provisions in an employment agreement.  The Court then refused to judicially modify or “blue pencil” these provisions because the Court deemed their deficiencies “too great to permit modification.”  This decision is essentially a primer on current Illinois law regarding restrictive covenants and confidentiality ...

One of the top stories on Employment Law This Week – Epstein Becker Green’s new video program – is the Fifth Circuit’s ruling that a Texas bank cannot enforce non-compete agreements signed by four former employees based in Oklahoma, where courts do not recognize the pacts, because the agreements would violate Oklahoma's strong public policy favoring worker mobility. The fundamental law of the state trumped the choice of law.

See below to view the episode or read more about this important decision in an earlier post on this blog.

This morning the Obama administration publicly released the previously-undisclosed text of the Trans Pacific Partnership, or TPP, revealing, among other things, the provisions related to trade secrets that had previously been discussed here.  As noted in that earlier piece, the administration had said that the TPP would “provide strong enforcement systems, including, for example, civil procedures, provisional measures, border measures, and criminal procedures and penalties for commercial-scale trademark counterfeiting and copyright or related rights piracy. In ...

The United States Court of Appeals for the Fifth Circuit opened its October 29th opinion in Cardoni v. Prosperity Bank by noting that “[i]n addition to their well-known disagreements over boundaries and football” known as the Red River Rivalry, “Texas and Oklahoma do not see eye to eye on a less prominent issue: covenants not to compete.”   As the Court went on to note, “Texas generally allows them so long as they are limited both geographically and temporally… Oklahoma generally does not.”  “These different policy choices—Texas's view which prioritizes parties ...

Latham & Watkins isn’t off the hook yet.

On April 17, 2012 and September 3, 2014, we blogged about a malicious prosecution claim brought against Latham & Watkins in the Los Angeles Superior Court.  The suit alleged the Plaintiffs, William Parrish and Timothy Fitzgibbons, were former officers and shareholders of Indigo Systems Corporation, which was purchased by FLIR Systems, Inc. in 2004.  From 2004 to 2006 the Plaintiffs worked for FLIR, leaving in 2006 to start their own business.  FLIR retained Latham & Watkins and sued Plaintiffs for, among other things, misappropriation of trade ...