Trade Secrets & Employee Mobility

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.

Continuing class action litigation against Google and Intuit arising from agreements between those and other companies to refrain from hiring each other's highly skilled technical employees -- which agreements previously were the subject of a Department of Justice complaint asserting antitrust violations -- serves to remind employers to carefully consider the costs and benefits of any no-hire agreements.

The Ohio Supreme Court recently 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 is a termination of employment which triggers the running of the restrictive period in the noncompete.

We are pleased to announce that "Preparing for Non-Compete Litigation," a guide published by The Practical Law Company and authored by EpsteinBeckerGreen's Peter A. Steinmeyer and Zachary C. Jackson, is now available in PDF format. The guide is a valuable discussion of the primary considerations for employers seeking to initiate legal action to enforce a non-compete agreement.

In Western Blue Print Company, LLC v. Myrna Roberts et al., the Missouri Supreme Court recently affirmed a tortious interference verdict against a manager who left to join a competitor, largely because the manager engaged in inappropriate conduct when departing one employer for another. While such tortious interference claims are commonly raised in disputes with former employees who leave to join a competitor, actual determinations of the merits of such claims are not common, and state supreme court parsings of such claims are even less common. Accordingly, this decision is worth reviewing.

In an important recent decision, the Supreme Court of the State of New York, New York County, required plaintiffs asserting a cause of action for misappropriation of trade secrets to identify the trade secrets with particularity before being able to proceed with discovery.