Trade Secrets & Employee Mobility

A recent decision by the United States Court of Appeals for the Seventh Circuit rejected a claim of tortious interference asserted by James Nation, an executive whose former employer suspended severance payments contractually owed to him at the behest of the Defendant, American Capital, Ltd. The former employer was experiencing financial difficulties and the Defendant -- which was also the former employer's majority shareholder and primary creditor - directed suspension of the severance payments in order to preserve cash for operations. The Court's decision relied on the conditional privilege recognized under Illinois law to interfere with contracts, where the defendant acts to protect interests of value greater than or equal to the plaintiff's contractual rights.

Continuing class action litigation against Google and Intuit arising from agreements between those and other companies to refrain from hiring each other's highly skilled technical employees -- which agreements previously were the subject of a Department of Justice complaint asserting antitrust violations -- serves to remind employers to carefully consider the costs and benefits of any no-hire agreements.

The Ohio Supreme Court recently held that when a company that was the original party to a noncompete agreement merges in to another company, unless the noncompete agreement contained a "successors and assigns" clause, the merger is a termination of employment which triggers the running of the restrictive period in the noncompete.

We are pleased to announce that "Preparing for Non-Compete Litigation," a guide published by The Practical Law Company and authored by EpsteinBeckerGreen's Peter A. Steinmeyer and Zachary C. Jackson, is now available in PDF format. The guide is a valuable discussion of the primary considerations for employers seeking to initiate legal action to enforce a non-compete agreement.

In Western Blue Print Company, LLC v. Myrna Roberts et al., the Missouri Supreme Court recently affirmed a tortious interference verdict against a manager who left to join a competitor, largely because the manager engaged in inappropriate conduct when departing one employer for another. While such tortious interference claims are commonly raised in disputes with former employees who leave to join a competitor, actual determinations of the merits of such claims are not common, and state supreme court parsings of such claims are even less common. Accordingly, this decision is worth reviewing.

In an important recent decision, the Supreme Court of the State of New York, New York County, required plaintiffs asserting a cause of action for misappropriation of trade secrets to identify the trade secrets with particularity before being able to proceed with discovery.

Social media has become an increasingly important tool for businesses to market their products and services. As the use of social media in business continues to grow, companies will face new challenges with respect to the protection of their confidential information and business goodwill, as several recent federal district court decisions demonstrate.

On April 6, 2012, Latham & Watkins was sued for malicious prosecution in Los Angeles Superior Court in connection with an unsuccessful lawsuit that the firm brought on behalf of one of its clients, asserting misappropriation of trade secrets and other claims.

An increasingly common type of provision found in employment agreements, allowing for extension of an employee's post-employment non-compete restrictions by a period of time that the employee violates the restrictions, was upheld in a recent decision by New York's Appellate Division, First Department.