Bradley LectureTrade Secrets, NDA’s and Non-competes IM 350 – Fall 2012 Steven L. Baron October 30, 2012
Top Trends In Trade Secrets • Increase in trade secret litigation and size of verdicts • High profile criminal prosecutions • Protecting American Trade Secrets and Innovation Act of 2012 (“PATSIA”) • Illinois Supreme Court adopts a flexible approach to enforceability of restrictive covenants • Trade Secrets in a Social Media World
Increase in Trade Secret Litigation • $4.6 billion in verdicts in TS and Patent Litigation in 2011 (compared to $2.4 billion in 2010) (Business Week, Feb. 1, 2012) • Trade secrets verdicts accounted for 4 of top 10 in size in 2011: • $2.3 billion against ex-employee of St. Jude – medical device maker • $920 million against Korean company over secret connected to DuPont’s kevlar.
High Profile Criminal Prosecutions • Ex-Goldman Sachs programmer sentenced to more than 8 years in prison for theft of information relating to trading system • Ex-Dow scientist sentenced to more than 7 years in prison for theft of secret information about organic insecticides
PATSIA • Protecting American Trade Secrets and Innovation Act • Introduced in July 2012 by Kohl (WI) and Whitehouse (RI) and Coons (DE) • Create a unified federal statute that would allow TS owners to bring claims in federal court
Illinois Supreme Court and Restrictive Covenants • Reliable Fire Equipment Co., v. Arredondo, 2011 IL 111871 (December 1, 2011). • Under what circumstances is a restrictive covenant over customer identities protectable?
Illinois Supreme Court and Restrictive Covenants Court applies more flexible seven factor test: • the number of years required to develop the customer; • the amount of money invested to acquire customers; • the degree of difficulty in acquiring customers; • the extent of personal customer contact by the employer; • the extent of the employer’s knowledge of its customers; • the duration of customer association with the employer; and • the intent to retain employer-customer relations.
Trade Secrets in a Social Media World • PhoneDog v. Noah Kravitz, No. C11-03474 MEJ, 2011 U.S. Dist. LEXIS 129229 (N.D.Cal.)(November 8, 2011) • Kravitz worked for PhoneDog as a product reviewer. • Kravitz was given and maintained a Twitter account at PhoneDog. • Account generated 17,000 followers. • Kravitz left company and maintained account.
Trade Secrets in a Social Media World • PhoneDog v. Noah Kravitz • PhoneDog sues Kravitz for misappropriating trade secrets, including Twitter password and followers. • Kravitz moves to dismiss, claiming that followers are “public” and not secret and password has no inherent value. • Court denies motion to dismiss and says that PhoneDog has sufficiently stated a claim.
Trade Secrets in a Social Media World • Can an employer claim ownership in an employee’s LinkedIN profile? • Possibly yes. • Eagle v. Morgan, No. 11-4303, 2011 WL 6739448 (E.D. Pa. Dec. 22, 2011) • Company required employee to create account based on company template. • Company monitored the account. • Company could not claim ownership in contacts.
Ask Mr. or Ms. IP – Trademark Questions: • What is the universe of trade secrets at issue? • Does the fact that you didn’t sign an agreement help your case? • What is the impact of the clause in the employee handbook? • Can the employer really claim a trade secret in programming information that is only in your head? • Does the fact that you can easily download the information onto a flash drive help your defense against a claim of misappropriation of trade secrets? • What steps do you think the employer should take in the future to better protect itself?