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Category Archives: Trade Secrets and Competition

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Covenants Not To Compete: Restraining a Seller/Employee Against Competition – Not As Easy As it Looks

Posted in Trade Secrets and Competition

Section 16601 of the California Business and Professions Code provides a well-known exception to California’s statutory refusal to enforce contractual commitments not to compete.  Under that section, Courts will enforce “reasonable” restrictions on the seller of a business to engage in competition against the buyer of that business.  This is a commonsense approach: a buyer… Continue Reading

Covenants Not to Compete: Five “Exceptions” That Do Not Swallow the Rule

Posted in Trade Secrets and Competition

Everybody who cares probably knows that, in California, covenants not to compete (agreements that restrain an individual from pursuing a lawful trade of profession) are generally unenforceable.  There are only five “exceptions” to this rule.  I put “exceptions” in quotes because two of them really aren’t exceptions at all. They are independent legal doctrines that… Continue Reading

Trade Secret Defendants Beware: The Danger of Stipulated Injunctions

Posted in Trade Secrets and Competition

The Cruel Lessons of Wanke, Industrial, Commercial, Residential, Inc. v. Keck  (2012) 209 Cal.App.4th 1151 By:      Charles L. Post Defendants in trade secret and unfair competition cases often have fewer resources than the plaintiff companies that bring them.  This is often the case in “classic” trade secret misappropriation scenarios: former employees form a new company… Continue Reading

REFRESHER: When is a Customer List or Customer Information Trade Secret?

Posted in Trade Secrets and Competition

Courts are reluctant to protect customer lists when they consist of information from public sources (such as business directories).  (Morelife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1521-1527.)  On the other hand, where the employer has expended time and effort identifying customers with particular needs or characteristics, courts will prohibit former employees from using this… Continue Reading

Employers: Act Fast or Weaken Your Trade Secret Case

Posted in Trade Secrets and Competition

By: James Kachmar When one or more of your key employees leaves to join a competitor and begins soliciting your customers, one of your strongest weapons under California’s trade secret laws is the ability to obtain an immediate temporary restraining order to stop your former employee and his or new employer from unlawfully competing against… Continue Reading

Employee Theft of Employer Confidential Information is Widespread

Posted in Trade Secrets and Competition

A recent study by Symantec shows that employee theft of employer confidential information is widespread. A summary of the survey is available at www4.symantec.com/marketinginfo/data.  The survey was conducted by a private research institute.  Some of the more alarming results of the study include: Approximately 50% of the employees who left or lost their jobs in… Continue Reading

Trade Secret Preemption Revisited

Posted in Trade Secrets and Competition

This blog has periodically visited the issue of preemption in trade secret cases.  Preemption arises when a plaintiff alleges common law causes of action (such as conversion or interference with economic relations) with a trade secret misappropriation claim that is based on the “same nucleus of facts.”  California courts have repeatedly held that California’s Uniform… Continue Reading

“Animosity” Is Not Bad Faith For Attorneys’ Fees In Trade Secret Cases

Posted in Trade Secrets and Competition

Prior blog posts have addressed the issue of when a court may award attorneys’ fees in a trade secret misappropriation case.  Under the California trade secret statute, the court may award attorneys’ fees where there has been a willful and malicious misappropriation of plaintiff’s trade secrets or when a trade secret misappropriation claim is brought… Continue Reading

A Reminder to Employers of the Need for Social Media Policies

Posted in Trade Secrets and Competition

Those of you who attended our seminar on protecting confidential and trade secret information last Spring may recall our discussion about a trade secret misappropriation case involving a Twitter account. In that case, PhoneDog v. Kravitz, 2011 U.S. Dist. LEXIS 129229 (N.D. Cal. 2011), a product news and review company, PhoneDog, claimed it issued Twitter… Continue Reading

A Reminder to Employers of the Need for Social Media Policies

Posted in Trade Secrets and Competition

By:   James Kachmar Those of you who attended our seminar on protecting confidential and trade secret information last Spring may recall our discussion about a trade secret misappropriation case involving a Twitter account. In that case, PhoneDog v. Kravitz, 2011 U.S. Dist. LEXIS 129229 (N.D. Cal. 2011), a product news and review company, PhoneDog, claimed… Continue Reading

Government Targets eBay’s Alleged “No Hire” Agreements

Posted in Trade Secrets and Competition

One focus of this blog is how an employer’s use of non-compete agreements often runs afoul of California’s Business and Professions Code section 16600. Generally, the employer finds that its “non-compete” agreement will be held unenforceable by a court should it seek to enforce one against a former employee. But what can happen when one… Continue Reading

Another Door Closes on Non-Compete Agreements

Posted in Employment Contracts and Agreements, Trade Secrets and Competition

By:       James Kachmar Readers of this blog will note that we frequently remind them that California law generally prohibits non-compete agreements. There are very limited exceptions to this general rule, one being that the seller of goodwill in a business can be bound by a valid non-compete agreement to protect the goodwill that is being purchased. Sometimes,… Continue Reading

Pleading Around CUTSA Preemption

Posted in Trade Secrets and Competition

          Readers of this blog will note our frequent reminders that preemption under California’s Uniform Trade Secret Act (“CUTSA”) can threaten other common law claims if not properly pled.  A recent decision out of the Eastern District of California in Hat World, Inc. v. Kelly, 2012 U.S. Dist. Lexis 113060 (Aug. 10, 2012) reinforces this… Continue Reading

Steal Trade Secrets and Go to Jail

Posted in Trade Secrets and Competition

While the bulk of trade secret litigation focuses on civil claims and remedies, an article from last week’s Chicago Tribune is a reminder that stealing trade secrets can have serious consequences. The Chicago Tribune story (link here: http://www.chicagotribune.com/business/breaking/chi-chinese-engineer-to-be-sentenced-for-stealing-motorola-secrets-20120719,0,1594304.story) reports that the sentencing for a software developer caught with taking Motorola, Inc.’s trade secrets will be… Continue Reading

Surrender is Futile – Court of Appeal Affirms “Bad Faith” Attorney’s Fees Award in Trade Secrets Case

Posted in Trade Secrets and Competition

There are good, legitimate reasons for filing a trade secret and unfair competition case.  The protection of trade secrets and proprietary information and protection against unfair conduct by competitors are just a few.   There are also business reasons for bringing such a claim, including burdening a competitor or a startup competitor with the cost of… Continue Reading

Claims and Consequences

Posted in Trade Secrets and Competition

If location is the most important word in the restaurant business, then the three most important words for a plaintiff in a trade-secret or unfair-competition practice must be theory, theory, and theory.  Each legal theory must be supported by its own facts and evidence and a thorough understanding of the legal consequences of asserting and… Continue Reading

Upcoming Seminar: Protecting Trade Secrets – How to Manage Employee Use of Proprietary Information

Posted in Trade Secrets and Competition

Thursday, May 17, 2012 9:00 a.m. – Registration and Breakfast 9:30 a.m. – 11:30 a.m. – Program 400 Capitol Mall, 11th Floor, Sacramento, CA Can You Keep a Secret? From trade secrets like product recipes and algorithms to confidential details about financing, customers and costs, all businesses have information that could be devastating if it… Continue Reading

UPCOMING SEMINAR: Protecting Trade Secrets – How to Manage Employee Use of Proprietary Information

Posted in Employment Contracts and Agreements, Labor Law, Trade Secrets and Competition

Thursday, May 17, 2012 9:00 a.m. – Registration and Breakfast 9:30 a.m. – 11:30 a.m. – Program 400 Capitol Mall, 11th Floor, Sacramento, CA Can You Keep a Secret? From trade secrets like product recipes and algorithms to confidential details about financing, customers and costs, all businesses have information that could be devastating if it… Continue Reading

Recent Court of Appeal Decisions

Posted in Trade Secrets and Competition

Corrales v. Corrales, 198 Cal.App.4th 221 (August 10, 2011) Just as employees owe a duty of loyalty to their current employers, partners owe a duty of loyalty to one another. When one partner opens a secret “side business” (that does the same thing as the partnership) that partner breaches the duty of loyalty.  When that… Continue Reading

Act on Your Suspicions

Posted in Trade Secrets and Competition

Under California law, you must bring an action for trade secret misappropriation within three years after the misappropriation has been discovered or should have been discovered.  (Cal. Civ. Code §3426.6.)  This means that you must act when you first suspect you are the victim of trade secret misappropriation rather than waiting until you can confirm… Continue Reading

Courage or Folly? Superior Court Awards Significant Attorney’s Fees Against a Defeated Trade Secret Plaintiff

Posted in Trade Secrets and Competition

It is sometimes difficult to distinguish arrogance or hubris from their close cousin, courage and perseverance. When a Court looks back over a plaintiff’s unsuccessful prosecution of a trade secret case for purposes of determining an award of attorney’s fees, that postmortem evaluation of the plaintiff’s case can make for some disturbing reading. Recently, in… Continue Reading

Uncertain Future: Are Agreements Not to Solicit Employees Still Enforceable?

Posted in Trade Secrets and Competition

California courts have long held that agreements that prohibit a former employee from hiring a former co-worker are void.  These decisions are based on California’s fundamental public policy (which is codified in Business & Professions Code section 16600) protecting workers’ rights to pursue any lawful trade or profession.  With only a few narrow exceptions, California… Continue Reading