Trade Secrets & Employee Mobility

In a per curiam opinion issued yesterday, the United States Supreme Court reversed a decision of the Oklahoma Supreme Court that had determined the enforceability of a non-compete agreement arising out of a contract that contained an arbitration provision. Despite the fact that the restraint at issue was found to violate Oklahoma law, the US Supreme Court determined that the Oklahoma Supreme Court overstepped its bounds and that under the Federal Arbitration Act enforceability of the non-compete should have been left to the Arbitrator.

In a recent decision in Pactiv Corporation v. Rupert, the U.S. District Court for the Northern District of Illinois held that under an employer's severance pay plan, the employer could not require a former employee to agree to a restrictive covenant in order to receive severance pay.

Last week, the Ohio Supreme Court reversed its decision of earlier this year in Acordia of Ohio, L.L.C. v. Fishel et al., in which the Court held that when a company that was the original party to a noncompete agreement merges in to another company, unless the noncompete agreement contained a "successors and assigns" clause, the merger was a termination of employment which triggered the running of the restrictive period in the noncompete.

Although the California courts have steadily eroded employers' ability to contractually limit their former employees' solicitation of their customers, a recent decision held that a stipulated injunction limiting solicitation can still be enforced.

A recent Texas case provides a good lesson about workplace paperwork formalities. In Holloway v. Dekkers and Twin Lakes Golf Course, Inc., a Texas appellate court ruled that a one-year employment agreement that was not signed by the employer fell within the statute of frauds and was therefore unenforceable.

Last week, American Airlines and one of its former employees entered in to an agreed permanent injunction which prohibits the former employee from disseminating certain confidential, proprietary or trade secret information through any medium.

In California, a non compete given in return for the sale of a business' goodwill is one of the few exceptions to the state's broad prohibition against non competes. In Fillpoint, LLC v Maas, a California appellate court narrowly construed the exception and invalidated a non compete/non solicit agreement contained in an employment agreement which was signed in connection with the sale of goodwill.

Yesterday, U.S. District Judge Ruben Castillo of the Northern District of Illinois sentenced a former Motorola software engineer, Hanjuan Jin, to four years in prison for stealing Motorola trade secrets related to proprietary technology.

The Georgia Court of Appeals recently ruled that a company failed to present sufficient evidence that its former employee had misappropriated its trade secrets, where the former employee's denials conflicted with circumstantial evidence of misconduct.

Last week, the U.S. Court of Appeals for the Fourth Circuit issued a decision regarding the scope of liability under the Computer Fraud and Abuse Act ("CFAA"), and sided with the Ninth Circuit in adopting a narrow reading of the statute. In affirming dismissal, the Fourth Circuit adopted "a narrow reading of the terms 'without authorization' and 'exceeds authorized access' and held that they apply only when an individual accesses a computer without permission or obtains or alters information on a computer beyond that which is authorized to access." The Fourth Circuit further rejected any CFAA liability grounded on an agency theory, noting that such a theory for liability has far-reaching effects unintended by Congress.