Articles Posted in Trade Secrets

New Washington Law Makes Sweeping Changes to Non-Compete Agreement Law 

Non-compete law in the state of Washington underwent sweeping changes last week with the signing into law of HB1450 (“Washington Non-Compete Act”) which targets the use of restrictive covenants within the state. The new law regulates the use and scope of non-competition agreements with both employees and independent contractors and restricts the use of non-poaching agreements in franchise agreements as well as policies against moonlighting. The new law takes effect on January 1, 2020.

Under the new law, a non-competition covenant will be void and unenforceable unless the following criteria are met:

  1. If the covenant is entered into at the commencement of employment, it must be disclosed in writing to the employee by no later than the date of the employee’s acceptance of the offer of employment;
  1. If the covenant is entered into at the outset of employment but will not take effect until a later date due to a foreseeable change in the employee’s compensation, the agreement must specifically disclose that it may be enforceable at a future time;
  1. If the covenant is entered into after the commencement of employment, it must be supported by additional consideration;
  1. The worker’s annual earnings must exceed $100,000 (in the case of an employee) or $250,000 (in the case of an independent contractor)based upon the income reflected in Box 1 of an employee’s IRS Form W-2 or an independent contractor’s IRS Form 1099; and
  1. The post-separation duration of the non-compete must last no longer than 18 months unless the employer can show by clear and convincing evidence that a longer duration is necessary to protect its business or goodwill.

The new law defines the term “non-competition covenant” to expressly carve out certain types of restrictive covenants such as employee and customer non-solicitation covenants, confidentiality/non-disclosure covenants, and covenants relating to the purchase or sale of a business or franchise. Continue reading ›

Where an employee was free to take the knowledge he had accumulated over his nearly 30-year long career into his next job as a consultant, representing buyers of the products of his former employer.

Archer Daniels Midland is one of the largest manufacturers of corn-based sweeteners in the United States. In its most recent fiscal year, the sweeteners division of ADM realized a profit of $600 million. ADM sells its sweeteners to a few hundred buyers in the United States, including Sensory Effects, Inc. and PMP, Inc.

ADM categorizes buyers in one of two categories: toll contract or flat rate. Toll contract buyers contract to buy a fixed quantity of sweetener from ADM during a year, with the price fluctuating in response to the price of corn. Toll contracts may be entered into at any time of the year. Flat rate contracts can be entered into only during ADM’s annual contracting season, which lasts 30 to 60 days, beginning in the late summer. Under a flat rate agreement, the buyer agrees to pay a fixed price for a full year’s supply of sweetener.

Lane Sinele worked for ADM from January 1990 until his retirement in August 2018. At his retirement, Sinele was the manager of national accounts for ADM’s sweetener division. Sinele represented ADM, soliciting, procuring, and servicing buyers of sweeteners. Sinele handled the accounts for both Sensory Effects and PMP. As part of his employment, Sinele signed two non-disclosure agreements, though he did not sign either non-compete or non-solicitation agreements. During his career, Sinele had access to ADM’s Tableau system, which contained proprietary information about freight systems, factories, customer orders, manufacturing costs, and margins. Continue reading ›

A complaint alleging breach of a non-disclosure agreement and misappropriation of trade secrets was successfully dismissed for lack of jurisdiction where the defendant was not alleged to have sold a competing product within the state in which the action was filed.

Brad Diedrich worked from May 2003 through September 2017 for Mitek Corporation, an Illinois manufacturer of audio equipment. Diedrich worked as a Senior Engineering Manager for most of his time at the company. Through his work, Diedrich learned trade secrets and confidential information at Mitek. In 2016, Diedrich signed a non-disclosure agreement. The agreement also contained non-competition and non-solicitation clauses.

In April 2017, Diedrich went with Mitek’s President and CEO, John Ivey, to a Hong Kong electronics fair. At the fair, one of Mitek’s business partners, EVR, proposed to sell Mitek a digital signal processing amplifier. Ivey asked the company to send information regarding the proposal to Diedrich, but Diedrich failed to follow up on the proposal. Soon after, EVR agreed to work with a division of MTX to develop the new product. After executing a confidentiality agreement, EVR sent a prototype to MTX, which Diedrich viewed and examined. Continue reading ›

A make of medical devices was denied on its motion to dismiss a complaint alleging breach of a confidentiality agreement and breach of the Defend Trade Secrets Act. The court found that the plaintiff had sufficiently alleged facts showing that the defendant misappropriated confidential information to bring a rival product to market, and that the misappropriation potentially occurred after the DTSA was enacted, even though the initial disclosures occurred several years prior to the statute’s effective date.

Invado is a pharmaceutical company that developed two oral treatment products, NeutraSal and NeutraCaine. In 2014, Invado held discussions with Forward Science, an Illinois company, about the possibility of Forward Science becoming an independent sales agent for Invado. The two parties later signed a confidentiality agreement, in which Forward Science agreed to use any confidential information Invado provided only for the purpose of exploring a business relationship with Invado. After the agreement was signed, Invado disclosed proprietary information to Forward Science regarding its business models, and its processes for manufacturing, distribution, and pricing. The parties ultimately did not form a business relationship.

A year later, the president of Forward Science made a medical device filing with the Food and Drug Administration for a new oral treatment product. The filling stated that Invado’s products were predicate devices for its new product, SalivaMAX. In 2017, Forward Science announced a new oral pain relief product, SalivaCAINE. Prior to 2015, Forward Science did not manufacture or sell products in the same market as Invado. Continue reading ›

When small companies compete against larger, more established companies working in the same space, they often rely on their unique selling points to set them apart from their competition and establish their own niche in the marketplace. But succeeding with that tactic becomes much more difficult if your competition starts using your own tactics against you.

According to a recent lawsuit against Ray Borg, the UFC flyweight allegedly stole trade secrets and took them to a competitor, broke his contract with a gym and a management company without warning, and committed fraud, among other things.

The lawsuit was filed by Wild Bunch Management, which is run by Tim Vaughn, who’s a team member of the gym, Fit NHB. According to the complaint, Borg was working out at Fit NHB and had a three-year contract with Wild Bunch in which the management company would arrange fights for Borg, as well as train and promote the fighter and manage the business side of his fighting career. For his end of the deal, Borg was allegedly supposed to pay Wild Bunch 20% of everything he earned in the cage up to $10,000, plus 10% of any bonuses of $10,000 or more. The contract also allegedly included a non-compete clause in which Borg agreed not to teach martial arts within 50 miles of Fit NHB for the first year after his contract with Wild Bunch had been terminated.

Wild Bunch had allegedly negotiated Borg’s five-fight contract with UFC when Borg allegedly broke off all ties with both the gym and the management company after just the first fight and without any warning. After that point, Borg allegedly switched to Jackson Wink MMA in Albuquerque, a direct competitor of Wild Bunch that’s located across town. Continue reading ›

When a worker starts saying bad things about their employer in public, it tends to raise a certain question: are they a whistleblower or are they a disgruntled employee trying to sabotage an honest company?

According to Tesla, Martin Tripp, who used to work as a process technician for the car manufacturer, is allegedly a saboteur who is actively trying to inflict financial harm on the company. Among the allegations listed in Tesla’s complaint are defamation and theft of trade secrets.

The business defamation and trade secret lawsuit alleges Tripp wrote software that was designed to hack Tesla’s manufacturing operating system (MOS). The lawsuit claims Tripp admitted to doing so and to transferring data to third parties without Tesla’s knowledge or consent. The data Tripp allegedly stole is said to include dozens of photos and at least one video, all showing how Tesla’s MOS works.

As if that weren’t bad enough, the business lawsuit further alleges Tripp made defamatory comments about the company to the media. As an example, Tesla’s complaint points to some comments Tripp made saying some of the company’s Model 3 vehicles had punctured battery cells, but the company insists no punctured cells (battery or otherwise) have ever been used in any of their vehicles. Continue reading ›

Sometimes truth really is stranger than fiction.

As if the idea of a monkey (a “crested macaque,” to be precise) taking a perfect selfie wasn’t strange enough, the lawsuit that followed is.

In 2011, David Slater, a British nature photographer, was taking pictures of the wildlife on the Tangkoko reserve in Indonesia when a monkey by the name of Naruto managed to get Slater’s camera away from him. Naruto took several pictures before Slater managed to get his camera back and one of those pictures turned out to be a perfect selfie – Naruto even smiled and looked right at the camera as he snapped a picture of himself.

Later on, Slater published a book that included some of the pictures Naruto had taken, which had been dubbed “monkey selfies.” That’s when the People for the Ethical Treatment of Animals (PETA) got involved.

PETA sued Slater on behalf of Naruto, trying to claim that, because Naruto had taken the picture, Naruto owned the copyright to that photo. By publishing those photos, Slater had allegedly violated Naruto’s copyright, according to PETA’s lawsuit.

A federal district judge in San Francisco dismissed PETA’s claims in early 2016, saying that, since Naruto was not a person, he could neither own a copyright. Continue reading ›

The world of intellectual property and protection of rights often requires complex filings with governmental offices and high costs are to be attached with the process.  The world of the internet has meant that a product launched, quickly catches on and can be easily copied and done at a fast rate.  Trade Secrets are offered great protection and do not have an expiration date. Trade secrets depend on whether reasonable measures have been made to keep the information a secret and if economic value is able to be derived.  It extends to include financial, business, scientific, technical, economic, or engineering information.  This can consist of patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible.

Normally you can look up a good recipe or ask a friend for some cooking tips.  However, not all recipes can be so easily shared.  Recipes used for cooking purposes can also be confidential information, in terms of a secret formula for people when it becomes a form of profit!  A recent case involved the production of jam and a recipe violation which came at a high price.  The case involved two different fig spreads where one company, Dalmatia, had a recipe protected by trade secrets.  It utilized another company, Foodmatch, for its distribution and manufacturing.  Unhappy with the quality of product that was being produced, they decided to engage in the services of someone else.  Shortly thereafter, Foodmatch came out with a fig spread of its own by the name of Divinia.  Of course, a court battle had to ensue.  The facts of the case highlight the issues involved with disclosing trade secrets to vendors or distributors. Dalmatia argued that these actions were in violation of the Defend Trade Secrets Act of 2016.  It was the seller of the leading fig jam in the USA, it had every desire to want to fight for their rights. In the first of its kind, and under the new law and before a jury, this case was going to test waters. Continue reading ›

Uber settled its legal fight after being accused of plotting to steal self-driving technology, which is considered to be the way of the future. It took more than four days in court, which included arguments and testimony. An overall case worth stood at $245 million.  The settlement was mainly concerning the trade secrets. The case was between Google’s parent company, Alphabet, and could be considered one of the most intense legal fights of Silicon Valley. This is especially since it concerns a startup vs. one of the biggest technology giants’ parent. The overall potential of the industry is trillion-dollars that are predicted to transform transportation.

The case showcased what many in Silicon Valley normally struggle with: the sudden rise of start-ups, the workings of the rich companies, the rivalries, and competition for talent.  Continue reading ›

The already expensive battle to acquire engineers with knowledge and experience in the field of self-driving cars just cost Uber another estimated $245 million, not including the money they spent defending their legal battle against Waymo for a year before the parties agreed on a settlement.

As engineers get closer to developing the technology necessary to produce viable self-driving automobiles, it’s becoming increasingly clear that, not only is self-driving technology the future, it is going to be a very lucrative future. It has driven up the costs of engineers in the field to unprecedented heights, but Uber may have topped them all by spending $590 million to buy an entire self-driving truck company from Anthony Levandowski, a former Google engineer. The terms of the agreement were for Levandowski to receive an additional $250 million in Uber stock if Otto reached certain performance goals, but before that could happen, Levandowski was fired from Uber for refusing to cooperate in the investigation into the alleged stolen Google files.

Levandowski and Travis Kalanick, the founder and former CEO of Uber, had allegedly been hanging out and brainstorming ideas for self-driving technology even when Levandowski was still working for Google. Kalanick recently testified in court that he had wanted to hire Levandowski, but Levandowski wanted to break out on his own. Continue reading ›