Supreme Court of South Carolina Addresses Validity of Invention Assignment Clause

Cases addressing invention assignment clauses are few and far between. But 2012 has produced two state supreme court decisions in this area of intellectual property law. Earlier this year, Wyoming addressed the matter, and now South Carolina has.

I have discussed this subject infrequently, but assignment clauses often intersect non-compete law. In essence, they provide that any inventions (patentable or not) that an employee develops in association with her employer are the property of the employer. The only real controversial element of these clauses is the holdover or trailer aspect of them - which are found, I'd say, in about half the contracts I've seen. Those holdover clauses bear some passing resemblance to a post-termination non-compete, as they require an employee to assign inventions if they are developed within a period of time - usually 6 months or a year - after termination.

The purpose of holdover clauses is fairly obvious. Assume an employee in product development is working on a rollout of new smart phone technology, whose planned launch is several months away. If she leaves and starts development of a product based on that same technology, an assignment clause without a trailer may not capture this invention. The holdover clause creates a disincentive for an employee to delay or hide work on a technological development, because presumably the employee knows the trailer clause won't allow her to lie in the weeds and exploit it after termination. One can also look at a holdover clause as an extension of an employee's duty of loyalty, in effect providing a remedy in contract for improperly exploiting valuable commercial information after departure.

The Supreme Court of South Carolina in Milliken & Co. v. Morin held that holdover clauses were not restraints of trade subject to the traditional three-part rule of reason. More importantly, they are not strictly construed against the employer. Still, because there is potential for overreaching and for holdover clauses to restrict some competition, courts will assess whether they're reasonable. It's difficult to distinguish between a more lax test of reasonableness (applicable to clauses like an invention assignment holdovers and even non-disclosure covenants) and a three-part rule of reason (applicable to non-competes). In fact, the test that the Court in Morin established sounds almost identical to the non-compete test.

Practically speaking, courts will simply check to see what the economic impact of the holdover clause is on the marketplace. If it looks and acts like a more expansive non-compete, such as a term that is too long (say 5 years) or a clause that is too vague so as to not put someone on notice of its scope, then a court more likely will apply a strict scrutiny test. If the clause looks commercially reasonable and designed to protect an employer's inventions, then a simple reasonableness check almost certainly will uphold the covenant.

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Court: Supreme Court of South Carolina
Opinion Date: 8/1/12
Cite: Milliken & Co v. Morin, No. 27154
Favors: Employer
Law: South Carolina

Fourth Circuit Adopts Reasoning From U.S. v. Nosal in Limiting CFAA Application

In my opinion, the civil remedy provisions of the CFAA - outside those applicable to hackers - are totally useless.

The Act is nothing more than a jurisdictional hook to get into federal court, where a host of state law claims are the real focus of a case. In a case where there is diversity of citizenship, the Act is uber-useless.

The Fourth Circuit in WEC Carolina Energy Solutions LLC v. Miller, 2012 U.S. App. LEXIS 15441 (4th Cir. July 26, 2012), affirmed the dismissal of a CFAA complaint arising out of an allegation that an ex-employee improperly downloaded confidential business information and used that information to make a presentation on behalf of a competitor following termination of employment.

The court agreed with the Ninth Circuit's narrow view of "without authorization" in United States v. Nosal and disagreed with the Seventh Circuit's expansive application of the CFAA under common-law agency principles in Int'l Airport Centers, LLC v. Citrin. Readers may recall that Nosal was written by Judge Kozinski and Citrin, the "cessation-of-agency" theory, was the work of Judge Posner.

The Fourth Circuit did not extend liability to so-called use-policy violations. In other words, if an employee obtains or access information from a protected computer to which he or she is not entitled to retrieve in the first place, then the CFAA would provide a remedy under the plain text of the statute. Conversely, misusing information to which the employee had a right to access falls outside the Act's scope.

Because the CFAA is both a criminal and civil statute, the Fourth Circuit relied on the rule of lenity to chose an interpretation of the statute that would not result in criminal sanctions. The court indicated its holding would "disappoint employers hoping for a means to rein in rogue employees," but it also noted that other legal remedies exist. Indeed, these types of disputes are fundamentally the province of state contract and tort law. Just as much of trade secret law is in fact duplicative of common law remedies, so too is the CFAA. WEC Carolina - the plaintiff - has a state court complaint pending against the same defendants in the federal case, a case that has nine other claims for relief.

The Bad Edition: On Bad Faith and Bad Laws (Courtesy of Judge Posner)

Describing the parameters of bad faith should be no more complicated than Justice Potter's famous test for identifying pornography: you know it when you see it.

Trade secrets laws generally allow for a prevailing defendant to recover its attorneys' fees if a claim of misappropriation is made in bad faith. The uniform act contains no definition of what that means, but really it's no more complicated than the "exceptionality" standard used to determine fee-shifting for patent and trademark infringement. If a plaintiff uses the litigation process to heap litigation costs on a competitor (and not to win), then this is pure abuse of process - the normative equivalent of bad faith.

The trade secrets provision hasn't been the subject of much litigation outside California, and the interpretations of bad faith generally hinge on some showing of objective speciousness in the claim. Many courts also look for some indicators of the plaintiff's subjective intent to harass or abuse the litigation process.

A recent California case demonstrates that the concept of bad faith has to be flexible and necessarily looks at a variety of circumstances outside the initial pleadings. In SASCO v. Rosendin Electric, 2012 Cal. App. LEXIS 797 (Cal. Ct. App. 4th Dist. 2012), the Court of Appeal affirmed an award of nearly $500,000 in attorneys' fees for the defendants who prevailed on a trade secrets claim arising out of "off-the-shelf"software. (They prevailed, actually, because SASCO voluntarily got rid of the case before entry of summary judgment.)

The court discussed the objective/subjective test, noting fees are proper if a plaintiff either brings or maintains a claim in bad faith. The court rejected the defense argument that it was appropriate to look to California's Rule 11 equivalent in determining the speciousness of the claim. Rejecting this argument, the court stated: "...it simply makes no sense as a matter of statutory interpretation to insert a general pleading abuse statute applicable to attorneys or others signing pleadings and motions...into a ...section limited to the recovery of attorney fees and costs in trade secret misappropriation claims."

This malleable use of bad faith dovetails nicely with the abuse of process, or exceptionality, test used by some courts - notably the Seventh Circuit - in other intellectual property litigation. Both the Patent Act (Section 285) and the Lanham Act (Section 1117) allow for fees in "exceptional" cases. Equating exceptional cases with those containing "abuse of process" elements is pragmatic and recognizes the realities of competitive litigation, much of which is driven for retributive - not remedial - purposes. So exceptionality equals "abuse of process" equals "bad faith."

Speaking of patents...you might have heard Apple and Motorola's dust-up over smart phone technology ended with a whimper, not a bang. Judge Posner presided over that trial, sitting as a district court judge, and ruled that neither damages nor injunctive relief was appropriate. The ruling is certain to be appealed. What's interesting, though, is Judge Posner's general views on the problems with our patent laws and how they can be fixed. His op-ed article from The Atlantic describes why there are too many patents and how the current system is broken.

Firms generally make decisions whether to patent or keep valuable information secret. Those are mutually exclusive ideas. If Posner's views on reform are implemented, it is likely that many firms would be encouraged to exploit ideas or inventions through secrecy rather than a government-sanctioned monopoly. I don't necessarily think that's a good thing, since trade secrets are not objectively verifiable and are often overused to cannibalize general knowledge. But Posner's clearly right that the patent system is a wreck.

So we come full circle on fees. The best way to deter this overuse of the trade secret branch of intellectual property is to give some real teeth and meaning to fee-shifting. Given the sheer expense of trade secrets litigation (the Rosendin Electric case being an example), the deterrent effect of pursuing a weak claim would be quite high if fee-shifting were more than a pipe dream. Courts in California, where much of our technology innovation occurs, have taken steps in interpreting its trade secrets laws to create the proper incentives and to put trade secrets plaintiffs on notice that unsupported claims will result in a significant sanction.

Applying the Logic of Empro to Non-Compete Cases

One of my favorite opinions is Judge Easterbrook's decision in Empro Mfg. Co., Inc. v. Ball-Co Mfg., Inc., 870 F.2d 423 (7th Cir. 1989). It's classic Easterbrook: short, clear, rooted in public policy, and beautifully persuasive in the way it resolves an issue that divided courts. Judge Easterbrook himself has said that he is surprised Empro still has enduring impact more than 20 years after he wrote it.

The case dealt with pre-closing liability, addressing what legal obligations parties to a business transaction have to each other when they reach a preliminary agreement (that is, a letter of intent) with details to be ironed out later. Judge Easterbrook applied an objective theory of contract law, finding that the parties' "intent" is grounded in the contract terms they use, not some ephemeral, or subjective, "meeting of the minds." Written terms are the best expressions of intent; the parties tend to forget, or selectively interpret, what they said leading up to the contract signing.

Okay, so on its face, the case has nothing to do with non-competes. Or does it?

Non-compete agreements are one of main areas of litigation that deal with common-law (not UCC) contract rules. General principles of contract construction often are front-and-center in non-compete litigation. And, from my experience, non-compete cases bear a tang of similarity to the Empro problem. Let me explain three situations in which the parties' subjective expectations - expectations which often are not contained in a contract term or condition and which arise pre-closing - can become an issue in litigation.

Preliminarily, it's important to keep in mind that non-competes usually are standardized agreements that are applied (perhaps slightly modified) throughout an organization. This is a good thing, as form agreements reduce transaction costs - savings that are passed down throughout the company in the form of better bonuses, commissions, and salary increases. But because agreements are standardized, they often are not tweaked when an employee is brought on board. So pre-signing discussions or "terms" may not make their way into a final signed document, even if the new employee and his recruiter (usually a mid-level manager or human resources officer) have some preliminary understanding of what is expected. This is the Empro problem through and through. Here are three paradigms:

1. The scope of restricted customers. This problem creeps up often. A sales employee who accepts a job may have a garden-variety customer non-solicitation covenant. He or she may think that any customer brought to the new company should be exempted from the restriction. After all, the employer may do nothing to facilitate the relationship. But unless something is written in the contract to express this intent objectively, the employee will have to defend on reasonableness - a much more arduous task than defending on breach.
2. Policy on enforcement. I've had many employee clients come to me after a lawsuit has been filed and who have said something along these lines: "When I was hired, I was told as long as I avoid my top accounts, the company wouldn't come after me." This may persuade an employee to join, but it's certainly not a binding statement and shouldn't even be admitted into evidence. Still, it is an unfortunate reality of non-compete cases when an employee seeks broad, irrelevant discovery into the company's "policy" of enforcement, either in whole or in part.
3. Indemnification. What happens when an employer tells an employee that it will "cover" any litigation costs incurred as a result of hiring him or her away? The best protection for an employee is to make sure the indemnity is contained in some agreement - usually the new employment agreement or a separate indemnity contract. Often, though, employers won't write in such an obligation. If litigation ensues, the employer may feel differently about spending money on lawyers. For starters, the employee may not perform up to anticipated standards, so the marginal cost of retaining that employee through a lawsuit is prohibitive. The litigation itself could be expensive. And it could go south quickly, particularly if a restraining order is entered. An employee's expectation to receive a continued defense, or even salary indemnity, may not be binding if a contract does not contain a term confirming this expectation.

These problems may give rise to other defenses. But Empro would seem to significantly undercut alternative theories of recovery or extra-contractual defenses. The beauty of a case like Empro is its certainty and clarity. In a perfect world, parties would set forth all the material terms and conditions rather than rely on pre-contract expectations. The world of non-compete litigation is not perfect, though, and these issues creep up repeatedly. An Empro-like analysis would go a long way towards simplifying litigation. 

Post-Reliable Fire, Illinois Courts Are Really All Over the Place

When the Supreme Court of Illinois rendered its decision in Reliable Fire Equipment Co. v. Arredondo, I really didn't think much had changed. Though I suspected courts would be less susceptible to motions to dismiss, Reliable Fire really did not set forth any hard-and-fast rules - even if it did broaden the types of interest a company can protect through a non-compete agreement. In essence, I thought employers might have a slightly easier time enforcing contracts than in the past.

Less than a year later, courts continue to struggle with Reliable Fire in application. The problem continues to be that each judge views non-competes differently, and that very few generalist judges are in the position of reading the 150 or so Illinois decisions to try and reconcile cases all over the map. Further, there are very few areas of commercial litigation that call upon courts to make policy judgments and to resolve tensions with significant public interests at stake.

But non-compete litigation poses a number of challenges for litigants, attorneys, and judges. For instance, it's widely assumed - rightfully so - that only the most extreme non-competes will be tossed before discovery. This is what Judge Holderman held a week or so ago in Instant Technology, LLC v. DeFazio, 2012 U.S. Dist. LEXIS 90911 (N.D. Ill. June 26, 2011). That case involved a three-year non-solicitation covenant in the IT staffing business - one of my top three markets for non-compete litigation (insurance agents and medical device sales run a solid one and two). Citing Reliable Fire, Judge Holderman noted that the three-part reasonableness test requires a court to balance the totality of the circumstances to determine whether a covenant is enforceable.

But the Appellate Court of Illinois looked at the issue differently in Kairies v. All Line, Inc., 2012 IL App (2d) 111027-U, when it affirmed a circuit court's order granting judgment on the pleadings in a non-compete case. That dispute involved a declaratory judgment claim brought by an employee who was bound to a two-year non-solicitation/non-compete covenant. The court found that the non-solicitation covenant was unenforceable on its face because it extended to all of the company's customers - not just those the employee contacted or developed. The non-compete proved an easier analysis, because it was an outright prohibition on competition anywhere (though, for some reason, the court never notes the absence of a geographic term).

The really screwy part of this is that the Kairies court held Reliable Fire was of limited impact, since the "principles governing the determination" of the non-solicitation covenant's reasonableness were "well settled and predate Reliable Fire." Essentially, Kairies seems to suggest Reliable Fire only deals with determining the existence of a legitimate business interest, and that prior cases concerning reasonableness were undisturbed.

But this can't be right. If Reliable Fire requires consideration of the totality of the circumstances, and indeed says that the "identical contract and restraint may be reasonable and valid under one set of circumstances...and invalid under another set" then a court must look at the protectable interest and the covenant's language together, with the unique facts of each case.

As an example, a customer non-solicitation covenant may not have the necessary tie in to the employee, which the agreement in Kairies did not. But what if the facts show that the company was small and that all employees had access to, or worked on, all customers' accounts? Or what if the employee was a manager, such that he had indirect contact with (but extensive knowledge of) a wide range of customers?

This is not to say that some agreements are so patently overbroad that a pre-discovery motion is never a useful tool to dispose of a case. But there is no way that the Supreme Court intended for Reliable Fire to be interpreted so narrowly.

It's hard to say whether Kairies will be revisited on a motion to reconsider. It has a shaky foundation. At this point, it's non-precedential (why, I don't know...) under Rule 23. For lawyers, the case is a continuing reminder that they must be careful advising clients on enforceability. Courts just continue to miss significant legal issues.

A final word. I am not defending the contract provisions in Kairies. They weren't the greatest, and perhaps the employer deserved its fate. The policy rationale, and the potential impact, for future cases, though, is of real concern.

New Hampshire Employer Alert: Notice Required for Non-Compete Agreements

A few years ago, Oregon enacted legislation requiring that employers give employees notice they will have to sign non-compete agreements. New Hampshire has just followed suit.

In a statute passed May 15 - to take effect July 14 - employers in New Hampshire must provide a copy of any "non-compete or non-piracy agreement" to an employee or potential new hire. The terms are not defined, but it seems obvious any restriction on competitive conduct or solicitation (or employees or customers) would fall within the statute. Less certain is whether a non-disclosure agreement would, though the text of the agreement suggests it wouldn't.

The statute also applies to a "change in job classification." As Seyfarth Shaw's blog points out, this too is not defined and could include a promotion, demotion, or lateral move. I doubt it would include a change in pay, since that doesn't seem to alter how one is classified.

The law is vague enough that crafty lawyers will soon litigate over its meaning.

I don't think it's worth reading too much into this, though. Smart employers should provide a copy of a non-compete to a new hire with reasonable notice. This helps mitigate any consideration defense, to be sure. But it also is a sound business practice. Experience shows that employees are more satisfied and less likely to leave if they feel as though they have been treated fairly by their employers.

Case Update...The Trade Secrets Edition

I've come up with a better way to differentiate between trade secrets (protected nearly everywhere by statute) and confidential information (somewhere protected by the common law; more often, by contract). I may be totally off-base on this, but here goes.

A trade secret is a form of intellectual property whose value can be monetized like a patent or trademark. Confidential information is information that generally is not available to outsiders but which lacks independent value as a firm asset.

(I actually thought of this yesterday while changing a diaper.)

We're in the dead of summer, but the law continues to churn out interesting cases for us nerds to ruminate over.

Inevitable Disclosure in Massachusetts

A preliminary injunction ruling out of the District of Massachusetts rejected a rather expansive view of the inevitable disclosure doctrine. U.S. Elec. Svcs., Inc. v. Schmidt, 2012 U.S. Dist. LEXIS 84272 (D. Mass. June 19, 2012), involved the departure of a national accounts manager who did not have a non-compete agreement with the plaintiff (he actually left to work for a subsidiary two years prior). When a project coordinator followed the manager to a competing electrical distributor, the distributor sued under a variety of theories. Surveying Massachusetts' interpretation of the inevitable disclosure rule, the district court held that the rule is best applied to establish irreparable injury - basically, a protectable interest - supporting a non-competition agreement. It did not approve of using the theory as the foundation for a trade secrets claim. Factually, the claim appeared to be a stretch since the manager had not dealt with the key customer at issue - Dollar Tree Stores - for over two years.

Royalty Damages for Misappropriation

Royalty damages are the back-up plan for victims of trade secrets theft who can't prove lost profits or gains the misappropriator realized. This is a derivative of patent law, and it seeks to figure out a hypothetical licensing price that the misappropriator would pay for the privilege of using the information taken from the owner.

An Arizona court has held that a trade secret owners license fees for other patents and investment costs in developing the trade secret can provide a basis for a royalty award. It also rejected the argument that because a product may never be brought to market - the product involved an intestinal sleeve to treat morbid obesity - damages were inherently speculative. Using corporate finance theory, the court stated that a risky future cash flow is simply discounted with a risk-adjusted rate. The case is W.L. Gore & Assocs., Inc. v. GI Dynamics, Inc., 2012 U.S. Dist. LEXIS 75055 (D. Ariz. May 30, 2012).

Attorneys' Fees In Non-Compete Agreements

What happens when an employee wins a non-compete case and tries to recover attorneys' fees he never was obligated to pay? In my experience, new employers pay the freight on non-compete suits about 1/4 of the time, depending on the employee's value and position within the company. (An executive, for instance, likely will be able to negotiate this as part of his employment agreement.)

In Rogers v. Vulcan Mfg. Co., 2012 Fla. App. LEXIS 8793 (Fla. Ct. App. June 1, 2012), the Court of Appeal of Florida reversed a $0 attorneys' fee award to the employee after he prevailed on the employer's non-compete claim. The fee-shifting clause provided the employee could recover fees "incurred to enforce any term, condition, or provision" of the contract. The court found the clear intent of the clause was that "the loser pays, and the winner does not." It did not matter who the source of the funds was, because the language in the fee provision was passive.

And who said never to use the passive voice??

The "Weekly" Posner, Starring Judge Easterbrook

A few years ago in Hess Newmark Owens Wolf, LLC v. Owens, Judge Frank Easterbrook of the Seventh Circuit explained in simple terms that the law's grudging attitude towards restrictive covenants is best explained by the fact employees often are tricked into signing, or feel compelled to sign, agreements that later turn out to be disabling.

There's good reason to cite to Posner and Easterbrook opinions, and it doesn't require lawyers to subscribe to a particular brand of law-and-economics analysis. Judge Easterbrook's affirmance rate by the Supreme Court is twice that of the average circuit court judge. And measuring a circuit judge's effectiveness by how often he or she is cited by other circuit court judges, Posner and Easterbrook rank 1 and 2 respectively - by a wide margin.

Plus, they just make sense.

The reason I bring up the Owens case is that it helps coalesce the various reasonableness factors into a very simple, straightforward analysis. In my previous discussion of the Capital One v. Kanas case, Judge Liam Grady in Virginia took special pains to differentiate that John Kanas was hardly the novice when signing a covenant he later challenged as unreasonable. Though it's sometimes hard to figure out where in the compartmentalized analysis this factor fits, it permeates the reasonableness test. In Kanas (as in Owens, for that matter), the individual signing the covenant was sophisticated and gained more than just a mere job opportunity in exchange for signing the restriction. It was hard for Judges Grady and Easterbrook to conclude either defendant was the type of individual the law meant to protect from disabling restrictions.

The Easterbrook formulation is helpful, too, to assess covenants from the employee's perspective. I think it's fair to say that when an employee signs a non-compete she may have a layman's understanding of what it means. For a sales person, the thought process likely is "stay away from my accounts." But she may not anticipate the actual scope of the restrictions beyond this, particularly if the covenant is written in dense legalese. A non-lawyer is not trained to think in hypotheticals, so the sales person may not appreciate what type of competition the covenant actually prohibits beyond what is foremost in her mind at the point of signing.

The overall point is this. Assessing reasonableness does not need to be highly fragmented, and lawyers don't have to always fit the facts into the little black boxes of three-part tests. Sometimes, as Judge Easterbrook points out, it is enough to hone in on the purpose of the law and argue your case around that.

John Kanas, What's In Your Wallet ($24M in Restricted Stock...)

Last year, I wrote about the non-compete case involving high-profile New York banker, John Kanas. Along with his associate, John Bohlsen, Kanas sold North Fork Bancorporation to Capital One Financial in 2006 for $13.2 billion. Along the way, Kanas pocketed $24 million in restricted stock (Bohlsen received $18 million).

Not long after the business deal closed, Kanas and Bohlsen - who had agreed to remain employed by Capital One for three years - split under a Separation Agreement. That agreement narrowed the non-competes in the restricted stock agreement to prohibit work in a competitive business only in New York, New Jersey, and Connecticut.

When Kanas and Bohlsen formed BankUnited in 2011, Capital One claimed a breach of the covenants. I described in a previous post the facts underlying Capital One's claim. Kanas and Bohlsen moved for summary judgment, requesting a federal court in Virginia to void the non-competes.

The court, in a very well-written opinion by Judge Liam O'Grady, found the agreements reasonable. He found the case highly unique, given the extraordinary amount of consideration the defendants received out of the North Fork acquisition and because they were highly sophisticated businessmen.

The interesting aspect of the case involved Capital One's claim that the covenants should be examined under the more lax sale-of-business standard. They weren't, as the court found two factors dispositive of that claim: (1) the covenants were triggered by the end of employment, not the closing date of the transaction; and (2) the covenants were not a condition to the North Fork acquisition. The points are debatable given that the covenants were, in effect, replacements for those that did get signed at the deal's closing. But the court was correct in that the terms of the contract were tied more towards the employment of Bohlsen and Kanas.

The court was tempted to apply the sale-of-business standard, but stated that "policy considerations, such as the bargaining power of the parties, are more properly considered as part of the Court's analysis of enforceability." For a long time, I have been saying that the sale-of-business/employment framework simply does not account for a lot of cases that fall within the two extremes. Cases that are more difficult to assess include covenants between:

(1) franchisor and franchisee;

(2) commercial transactions short of a sale of business (for instance, a staffing agreement); and

(3) executive employment contracts.

Often times you see courts apply a sale-of-business standard to situations where sale-of-business precedents don't fit. It would be far preferable if courts considered such factors as negotiations, bargaining power, commercial realities, and monetary benefits conferred on the promisor when examining restrictions under the traditional reasonableness test. Judge O'Grady's opinion did that, discounting the framework used and focusing more on the public policy aspects of what he was deciding.

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Court: United States District Court for the Eastern District of Virginia
Opinion Date: 5/17/12
Cite: Capital One Fin. Corp. v. Kanas, 2012 U.S. Dist. LEXIS 69385 (E.D. Va. May 17, 2012)
Favors: Employer
Law: Virginia

New Hampshire Takes Broad View of Trade Secrets Preemption

Courts interpreting the Uniform Trade Secrets Act interpret the preemption provision either narrowly or broadly. The narrow view does not limit similar claims for misappropriation based on lesser-protected confidential information, while the broad view does.

New Hampshire is one of the adherents to the broad view, along with a number of other states including Ohio. As explained in the recent unreported case of Wilcox Indus. Corp. v. Hansen, 2012 U.S. Dist. LEXIS 63668 (D.N.H. May 7, 2012), broad view preemption eliminates "other tort causes of action founded on allegations of misappropriation of information that may not meet the statutory standard for a trade secret." Put another way, there are two classes of information - trade secrets (defined by statute, interpreted by cases) and general knowledge (always unprotected). Something in between won't cut it.

Except if you have a contract claim. The cleanest way to assert a claim for misappropriation or improper use of confidential information is to show a breach of some non-disclosure covenant. That won't be preempted by trade secret law, and an employer need not worry about establishing the standards of secrecy applicable to UTSA claims.

In the Hansen case, the preempted claims were unjust enrichment and breach of fiduciary duty. Conversion claims and those based on common law unfair competition often suffer a quick demise at the hands of the preemption clause.