Trade Secrets & Employee Mobility

In a new case filed by Charles Schwab & Co. Inc. against former employees who staggered their departures to a competitor, we have a prime example of the risks involved when a team departs over time versus simultaneously.

The Obama Administration's "Strategy on Mitigating the Theft of U.S. Trade Secrets," announced on February 20, 2013, encourages companies and industry associations to participate in efforts to develop and adopt voluntary best practices to protect trade secrets.

Although California has a strong public policy, based on Cal. Bus. & Prof. Code § 16600, against the enforcement of employer/employee non-compete agreements, employers might get some traction in this area by including a choice of venue or forum selection provision in their employment contracts and - through that provision - having the case transferred to a jurisdiction that will be more likely to enforce a restrictive covenant.

An employee who joined a corporate employer that was not a competitor with his former employer was still enjoined and restrained by restrictive covenants he signed with his former employer when his new employer merged with his prior employer's competitor.

Forum selection clauses are common in non-compete agreements, particularly when the employer is multi-state or multi-national. One question that often arises, however, is whether a court will actually require an employee to litigate in a distant jurisdiction with which he had minimal contacts. In a recent case from the Eastern District of Missouri, a federal judge enforced just such a forum selection clause.

In a recent NLRB decision, confidentiality and proprietary information and non-disparagement provisions contained in a mortgage banker's employment agreement were found to violate the NLRA.

In the latest salvo in a long-running legal dispute stemming from a classic raid by a competitor upon a commercial insurance broker's business and employees, a New York appellate court has refused to dismiss a New York lawsuit in favor of a prior-filed California lawsuit which has already addressed many of the same issues.

On December 21, 2012, the Supreme Court of New Hampshire, in Ellis v. Candia Trailers & Snow Equipment, Inc., found that a non-compete agreement was a fundamental component of a purchase and sale transaction which was memorialized in three separate agreements. The Seller began competing with Buyer shortly after the sale. After the Buyer did not follow through on purchasing all required assets of the Seller, the Supreme Court reversed the trial court's decision to partially rescind the non-compete agreement, and instead decided that the non-compete was so essential to the transaction that it required complete rescission of the transaction.

Trade secret misappropriation cases turn on details. A recent Indiana misappropriation of trade secrets case turned on a contractual clause requiring the return of all company property and confidential information at termination.