In April, our editor, Joe Lavigne, explained how employers can ensure trade secret protections while allowing employees to work from home during the pandemic. The article advised employers to restrict the transmission of trade secrets through social media platforms like Zoom. A recent decision out of Delaware confirmed that the failure to use Zoom privacy and security settings may result in the loss of trade secret protections.
Three Appellate Court Decisions Provide Valuable Lessons for the Enforceability of Restrictive Covenants in Employment Agreements
Recently, the US Court of Appeals for the First Circuit, Fifth Circuit and Sixth Circuits reached decisions that analyze the enforceability of restrictive covenants in employment agreements. These decisions ultimately offer employers some valuable lessons when drafting employment agreements that contain restrictive covenants. An analysis of the decisions can be found here.
The Wild (Kanye) West of Trade Secret Theft
Musical artist and fashion icon Kanye West is being sued by a video and ecommerce company called MyChannel Inc. (MYC) that claims he breached their mutual nondisclosure agreement and took “their proprietary and confidential technology and information to fuel the e-commerce engine” of his Yeezy brand. MYC filed its lawsuit in the US District Court for the Central District of California. The minority-owned business alleges that West made “lavish promises to MYC of millions of dollars in economic reward,” as well as the formation of a lucrative partnership providing millions more[.]” In return, MYC asserted that it agreed to provide Kanye West—and did in fact provide Kanye West—with “tens of thousands of hours of investment in Yeezy in reliance on those promises and the MYC-Kanye partnership.”
UPDATE: Self-Driving Car Executive Sentenced to 1.5 years in Prison and Public Speech Tour for Trade Secret Theft
Since 2017, we have been covering the legal saga of Anthony Levandowski – the executive/engineer who allegedly stole Google’s trade secrets related to self-driving car technology and used it for the benefit of his new company, which he ultimately sold to Uber. The saga included civil litigation, arbitration, bankruptcy, and criminal charges, but it seems like the story is coming to an end.
Federal Court Rejects Request for In-Person Deposition in Trade Secret Case
With the COVID-19 pandemic still ongoing throughout the United States, lawyers have had to come up with creative solutions to complete discovery, particularly when it comes to taking depositions. Over the past few months and for the foreseeable future, most depositions are taking place, at least in part, using videoconferencing technology. As these depositions have become more widespread, some attorneys have asked courts to require in-person depositions.
Texas Court Overturns Record $706 Million Verdict
In early June of 2020, a Texas appellate court overturned a record $706 million verdict rendered by a San Antonio jury more than two years ago, and, in doing so, it ordered a new trial.
The case centered on real estate analytic firm HouseCanary Inc.’s fraud and misappropriation of trade secret claims against Amrock Inc., a Detroit home appraisal company related to Quicken Loans Inc.
In 2015, Amrock entered into an agreement to license HouseCanary’s proprietary home appraisal software. Amrock later filed a lawsuit alleging HouseCanary failed to deliver functioning software for valuing residential properties.
HouseCanary, on the other hand, asserted its own claims, accusing Amrock of fraudulently misappropriating technology “even after purporting to terminate” their agreement. At issue was HouseCanary’s purported revoluationary app that would allow appraisers to submit appraisals in the field.
Following a seven-week trial, a 12-person jury found in favor of HouseCanary. Amrock was ordered to pay $235.4 million in compensatory damages, $470.8 million in punitive damages, $29 million in prejudgment interest, and $4.5 million in attorneys’ fees.
Ultimately, the appellate court reversed the jury’s verdict because of flaws with the jury charges, including a problem with the definition of trade secrets theft, which the appellate court found tainted the verdict.
Food Fight Breaks Out In Trade Secret Aisle
A trade secret fight has broken out among rival food companies. Mars, Inc. contends that a former executive downloaded several thousand files containing trade secrets and confidential business information shortly before switching sides to work for JAB Holding Company, LLC and its subsidiary Pret Panera Holding Company, Inc.
The former executive is not Mars’s only target. It also squarely points the finger at JAB and Pret Panera. Mars alleges that JAB and Pret Panera tried to conceal the former executives misdeeds and that it “is disturbing that no one at JAB or Pret Panera sounded the alarm when presented with stolen Mars documents.” Mars goes on to allege that the former executive’s “new colleagues instead appear to have accepted the stolen confidential Mars materials without question.”
In recent public statements, JAB and Pret Panera have denied any wrongdoing, contending that the lawsuit is “completely without merit” and pointing to an internal investigation conducted by outside counsel.
The lawsuit, which is pending in federal district court in Washington, DC., will likely be contentious and generate potentially significant rulings. We will continue monitor the case and provide timely updates.
DOJ and FTC Signal Crackdown on Anticompetitive Behavior in light of COVID-19
The COVID-19 pandemic has brought unprecedented changes to seemingly all aspects of modern life and the American economy, some of which may last for years to come. The response to the pandemic has shown similarly unprecedented levels of cooperation between governmental and corporate entities, many of whom are direct competitors, particularly in the pharmaceutical, healthcare, and manufacturing industries. This cooperation has raised concerns about potential anticompetitive behavior.
Protecting Trade Secrets and Confidential Information from the Side Effects of the Coronavirus
The coronavirus has had an incredible negative impact across the globe. Besides the obvious medical issues, the virus has multiple side effects: closed schools, devastated the economy, multiple “stay at home” orders across the country, etc. In order to continue to do business and comply with the stay at home orders, many employers are allowing employees to work from home. While this is likely a necessary move for many companies to continue to operate, it does raise added concerns for protecting trade secrets and other confidential information.
Defining Business in Louisiana Non-Competition Agreements is Essential, Appeals Court Holds
A Louisiana appeals court in New Orleans recently overturned a trial court’s refusal to enforce a non-competition agreement. The appellate court’s decision instructs employers on the need to define the scope of their businesses for an enforceable agreement. Environmental Safety & Health Consulting Services, Inc. v. Fowler, 2019-CA-813 (La. 4 Cir. 3/11/20).
