Trade Secrets & Employee Mobility

An action pending in federal court in New York demonstrates that the Computer Fraud and Abuse Act ("CFAA") should not simply be added to an employer's complaint against its former employees and a competitor, primarily alleging common law claims sounding in misappropriation of trade secrets and unfair competition, in connection with the alleged poaching of the employer's clients. In a recent decision, the Court dismissed the state law claims, finding that they formed the real body of the case, and retained jurisdiction over the CFAA claim. The CFAA claim is now the subject of defendants' motion to dismiss, on the grounds that the former employees had authorized access to the computer systems of the employer, and therefore the statutory prerequisites to state a claim were not met.

Peter A. Steinmeyer and Jake Schmidt recently published an updated and expanded guide to drafting enforceable non-competition agreements in Illinois, addressing the Illinois Appellate Court's Sunbelt Rentals decision and the proposed "Illinois Covenants Not to Compete Act."

There has been a serious push to clarify the way Massachusetts regulates noncompetition agreements, and a bill attempting to reach a compromise between freedom of movement for employees and protection of employers' business interests has been making its way through the legislature.

On February 4, 2010, the United States District Court for the District of Maryland granted summary judgment to Plaintiff TEKsystems, Inc., a leading technical staffing and services company, and enjoined its former Director of Strategic Accounts, Jonathan Bolton, from violating certain restrictive covenants contained in his Employment Agreement

A recent New Jersey Supreme Court decision, Stengart v. Loving Care Agency Inc., et al., calls into doubt the enforceability of employer policies prohibiting employees from using the employer's computers for personal use, and effectively holds that an employee's communications with personal counsel concerning matters adverse to the company may occur during work time using the employer's resources.

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.

An article recently published in the New York Law Journal explores an employee's duty of loyalty and the permissible steps that employee may take, prior to termination of employment, in preparing to compete with the employer.

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.