Trade Secrets & Employee Mobility

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.

A recent California decision indicates that the commencement and continued prosecution of a misappropriation of trade secrets action without objective evidence of actual misappropriation can result in the imposition of attorneys' fees against the plaintiff if it does not prevail on that cause of action.

Addressing an argument frequently encountered in restrictive covenant litigation, an Illinois Appellate Court recently reiterated that only a material breach of a contract containing a restrictive covenant will relieve the other party of its contractual obligation to abide by the restrictive covenant

One of the most elusive forms of damage that a company may suffer when its trade secrets are misappropriated or its former employees breach their post-employment restrictive covenants is the loss of goodwill. When seeking money damages for lost goodwill, it is essential for businesses to carefully select their supporting evidence and legal arguments. One information technology service provider recently found out the hard way when the Virginia Supreme Court slashed its $14 million verdict by over $11 million based on the company's failure to present sufficient evidence of the value of its lost goodwill.

A recent decision by the United States Court of Appeals for the Seventh Circuit rejected a claim of tortious interference asserted by James Nation, an executive whose former employer suspended severance payments contractually owed to him at the behest of the Defendant, American Capital, Ltd. The former employer was experiencing financial difficulties and the Defendant -- which was also the former employer's majority shareholder and primary creditor - directed suspension of the severance payments in order to preserve cash for operations. The Court's decision relied on the conditional privilege recognized under Illinois law to interfere with contracts, where the defendant acts to protect interests of value greater than or equal to the plaintiff's contractual rights.