Non-Compete and Trade Secrets News for the week ended March 24, 2017
Florida Non-Competes and Evidentiary Presumptions
The Florida District Court of Appeal's decision last week in Allied Universal Corp. v. Given illustrates why Florida is the safest haven for non-compete enforcement. It further shows how employers have benefited from a statutory directive that entitles them to a presumption of irreparable injury upon the showing of a legitimate business interest. That irreparable-injury showing is an indispensable component of injunctive relief. The case also shows the uphill burden an employee faces in trying to rebut evidence of a legitimate business interest, here the relationships that enable a salesperson to generate business. Employees who do so face a high discovery burden in amassing that type of evidence. Typically, they'll need something like high turnover or customer attrition or a narrative that shows how the new company provides a different customer value-proposition than the old one. A link to the Allied Universal case is available here.
(Eric Ostroff also discusses this decision in a blog post.)
The "Cloud" as a "Protected Computer" under the CFAA
The employment-related claims that a company may have under the Computer Fraud and Abuse Act all have a common requirement, which often is just assumed to exist in litigation: the access of a "protected computer." The way the CFAA is worded, any computer connected to the internet falls within the definition.
A fair number of cases now do not deal with claims where sensitive information was removed from a workplace computer. Instead, they concern disputes over information stored on a cloud-based platform that employees from computers access. So what happens when an employee continues to access this same platform, wrongfully, following termination of employment? Is this access of a cloud-based device equivalent to a "protected computer"? In Estes Forwarding Worldwide, LLC v. Cuellar, a federal judge in the Eastern District of Virginia said yes. But the analysis was very thin and not particularly persuasive.
Prior decisions, such as the Hawaii case of Property Rights Law Group v. Lynch, suffer the same flaw: no real attempt to reconcile a cloud-based service with the definition of a "protected computer." They seem to pivot to the fact that the computer was connected to the internet and end it right there. To the extent this issue becomes a genuine dispute among district courts, it seems Congress could head off the problem by extending the jurisdictional hook to accessing information stored on a cloud-based platform. After all, what's one more amendment to the CFAA?
The Estes Forwarding decision is available here.