Friday, February 17, 2017

The Reading List (2017, No. 7)

Non-Compete and Trade Secret News for the week ended February 17, 2017

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Choice-of-Forum Clauses

The Illinois case of Aon, PLC v. Heffernan, No. 1:16-cv-1924, shows the difficulty of transferring a non-compete case in federal court when the parties have agreed in advance to a forum-selection clause. This difficult became more pronounced after the Supreme Court's Atlantic Marine decision. And the presence of a California defendant does not appear to alleviate this difficulty. Put simply, a defendant's motion to transfer venue, in the face of a clear forum-selection clause, is the exception and must cite a clear public-interest rationale. The transfer decision in Heffernan is available here.

For those wanting a deeper analytical dive into forum-selection clauses post-Atlantic Marine, please read Professor Stephen Sachs' article in the Hastings Law Journal.

Defend Trade Secrets Act

In my second weekly column of the year, I alluded to the New Jersey case of Chubb INA Holdings v. Chang, No. 3:16-cv-02354, which presented an interesting procedural question about the Defend Trade Secrets Act. Specifically, the case raised the issue of whether the DTSA applies to potential acts of misappropriation that arose before the Act went to effect.

The key fact concerning the DTSA's reach are simple: certain ex-Chubb employees allegedly downloaded critical sales and operational information before leaving Chubb. Importantly, this occurred before May 11, 2016 when the DTSA went into effect. But Chubb alleged something else: that the employees inevitably would use that misappropriated information for their new employer's benefit. And that allegation implicated concerns after May 11. This illustrates that the concept of "misappropriation" embodies three separate and distinct branches of conduct: (1) improper acquisition, (2) improper disclosure, and (3) improper use. Because Chubb (at least in part) relied on the "use" branch, the DTSA claim was viable at the initial filing stage. Put another way, each improper use (if proven) would be a separate wrong and independent of the initial acquisition that enabled the use.

The opinion on Chubb's motion for preliminary injunction (which was denied) is available here.

Contract Acceptance

The Third Circuit Court of Appeals has rejected the argument of two ex-ADP employees, who contended that they did not "agree" to non-compete obligations by electronically accepting stock awards electronically on ADP's website. The non-competes were embedded within the electronic documents that each employee signed online. As with many of these click-wrap agreements, the employees acknowledged reading the contracts. The agreements further noted that the non-compete restrictions were a condition of accepting the stock award. The court had no trouble rejecting the employees' novel defense about contract interpretation. A contrary ruling potentially would have lead to absurd results in other cases.

You can read the Third Circuit's unpublished opinion in ADP, LLC v. Lynch, No. 16-3617, by clicking here.

Judge Gorsuch and Trade Secrets

For Supreme Court watchers, Judge Neil Gorsuch of the Tenth Circuit has written one rather notable opinion that delves into trade secrets law. His discussion of Utah's trade secret statute, and the availability of unjust enrichment damages, comprises only part of his opinion for the 10th Circuit in Russo v. Ballard Medical Products, but it is nonetheless an interesting read.

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A few interesting new law review articles have appeared recently.

Jim Pooley, a former Deputy Director General of the World Intellectual Property Organization, published The Myth of the Trade Secret Troll: Why the Defend Trade Secrets Act Improves the Protection of Commercial Information. Mr. Pooley addresses and refutes many of the arguments advanced, particularly in the academy, against the DTSA.

On the non-compete side, Kristen Almond published in the Louisiana Law Review an extensive analysis of that State's quirky non-compete law. Having advised on Louisiana law recently (and frequently in the past), articles like this are essential for a practitioner's full understanding of the law from all perspectives. The publication is called Equalizing the Threat of Noncompete Agreements: Solutions Beyond Louisiana's Tangled Web of Nullity.

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Finally, next Friday I am speaking at the University of Denver at CLE International's Defend Trade Secrets Act conference. I will be presenting with John Marsh on the topic "The Search for Uniformity and Understanding: Reconciling Differences Among the States." I plan to use my upcoming March monthly column to discuss the CLE International conference and the impressions I gained. Many thanks to Mike Greco of Fisher Phillips, who is chairing this event.

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