The U.S. Court of Appeals for the Seventh Circuit recently affirmed the imposition of a preliminary injunction obtained by Illinois-based medical device maker, Life Spine Inc., against a former business partner who allegedly misappropriated Life Spine’s trade secrets and gave them to its parent company, a competitor of Life Spine. The outcome affirms that injunctive relief is available to plaintiffs when irreparable harm is plausibly alleged, but also highlights that a company need not personally use the trade secrets to be found liable under the Defend Trade Secrets Act (DTSA), 18 U.S.C. §1836 et seq., and the Illinois Trade Secrets Act (ITSA), 765 ILCS 1065/1 et seq.

This trade secret misappropriation case arises from a short-lived business relationship between two companies that sell spinal implant devices. Life Spine makes and sells a spinal implant device known as the ProLift Expandable Spacer System. Life Spine partnered with Aegis Spine, Inc. to distribute the ProLift to hospitals and surgeons. In the distribution agreement, Aegis promised to protect Life Spine’s confidential information, act as a fiduciary for Life Spine’s property, and refrain from reverse engineering the ProLift. Unbeknownst to Life Spine, Aegis allegedly funneled information about the ProLift to its parent company, L&K Biomed, Inc., to help L&K develop a competing spinal implant device.

Shortly after L&K’s competing device hit the market, Life Spine filed suit against Aegis alleging claims of trade secret misappropriation and breach of contract. Following a nine-day evidentiary hearing, the district court ruled in favor of Life Spine and entered a preliminary injunction against Aegis and its business partners, preventing them from marketing the competing product. Aegis appealed arguing that a company cannot have trade secret protection in a device that it publicly discloses through patents, displays, and sales. The Seventh Circuit disagreed. Continue reading ›

It is not at all uncommon for a company to require individuals to agree to its Terms of Use when they sign up for an online service or when creating an account on a website or mobile app. It is also not uncommon for that service, website, or app to incorporate technology from multiple different providers. Such was the case in a case recently decided by the federal Seventh Circuit Court of Appeals. In its opinion, the Seventh Circuit rebuffed arguments by a technology company that it should be entitled to enforce certain arbitration provisions in a user agreement between OfferUp and its users.

Onfido owns and licenses the TruYou facial recognition software, which is marketed as software aimed at helping online resellers verify their identity. OfferUp, an online marketplace for buying and selling used items, uses the TruYou software in its mobile app to verify the identities of its users.

One of OfferUp’s users, Fredy Sosa, sued Onfido, alleging that its TruYou software violated the Illinois Biometric Information Privacy Act (BIPA). Sosa signed up to become a verified user on OfferUp’s mobile app. The identity verification process involved uploading photographs of his driver’s license and face. OfferUp’s verification process allegedly involved using Onfido’s TruYou software to extract and store biometric identifiers contained in the uploaded photos to verify that the face in the photograph matches the face on the driver’s license. Sosa subsequently filed a putative class action lawsuit against Onfido alleging that the company violated the BIPA by failing to provide him with a biometric data retention policy or to advising him whether and when it will permanently delete the biometric identifiers that it derived from his face. Sosa additionally alleged that Onfido violated the BIPA by failing to require him to sign a written release allowing it to “collect, use, or store his biometric identifiers derived from his face.”

After Onfido removed the case to an Illinois federal court, it sought to have the lawsuit dismissed and to compel arbitration of Sosa’s claims. The company relied on an arbitration provision in OfferUp’s Terms of Service which Sosa agreed to when signing up as a user of the OfferUp marketplace as the basis for seeking to compel arbitration of Sosa’s claims. The district court denied Onfido’s motion to stay Sosa’s complaint and compel individual arbitration, finding that Onfido cannot enforce the arbitration provision because it wasn’t a party to the agreement between OfferUp and its users. Continue reading ›

As we previously wrote about, this May the Illinois legislature passed a major bill that significantly alters how and when employers can use restrictive covenants, such as non-compete and non-solicitation agreements, with Illinois employees. As expected, Governor JB Pritzker signed the bill into law. It will go into effect January 1, 2022, and will only apply to agreements entered into after that date.

The new law amends the Illinois Freedom to Work Act and serves both to codify existing requirements under Illinois case law but also to impose new restrictions on Illinois employers as to when, with whom, and under what circumstances they may use restrictive covenants with employees. The goal of the new bill is to clarify when Illinois courts will and will not enforce non-compete and non-solicitation agreements.

The current version of the Freedom to Work Act defines a “covenant not to compete” as an agreement between an employer and a low-wage employee that restricts such low-wage employee from performing:

  • any work for another employer for a specified period of time;
  • any work in a specified geographical area; or
  • work for another employer that is similar to such low-wage employee’s work for the employer included as a party to the agreement.

Continue reading ›

Amazon is facing a class-action lawsuit filed in the Madison County Circuit Court alleging that Amazon’s Alexa violates the Illinois Biometric Information Privacy Act (BIPA). In setting out its case against Amazon, the Complaint quotes an interview with former Amazon senior editor James Marcus in which he said that “It was made clear from the beginning that data collection was also one of Amazon’s businesses. All customer behavior that flowed through the site was recorded and tracked. And that itself was a valuable commodity.”

The Complaint details the near ubiquity of Amazon’s voice-based virtual assistant Alexa by alleging that Alexa is embedded in numerous Amazon devices such as Echo speakers, Fire tablets, and others. The Complaint goes on to allege that Alexa can additionally be integrated into other devices such as phones, TVs, thermostats, appliances, lights, and many more consumer products.

The Complaint alleges that after Alexa responds to a request, Amazon collects and subsequently stores “voiceprints” of the user, and “transcriptions” of the voiceprints. These voiceprints and transcriptions constitute biometric identifiers or biometric information regulated by BIPA, according to the Complaint. The suit goes on to allege that Amazon does not delete the voiceprint or transcription after Alexa has responded. Instead, the Complaint alleges, Amazon uses these recordings to collect biometric information which it uses to improve the speech and voice recognition capabilities of Alexa.

Although Alexa is supposed to activate only after hearing its “wake word,” the Complaint alleges that Alexa-enabled devices frequently capture conversations by accident without being triggered. The Complaint cites a study conducted by Ruhr-Universität Bochum and the Bochum Max Planck Institute for Cyber Security and Privacy that allegedly discovered more than 1,000 sequences of words that incorrectly trigger smart speakers, such as Alexa. According to the Complaint, the study found that Alexa was inadvertently activated by the words “unacceptable” and “election.” Continue reading ›

When you’re a politician, your career is made or broken on your reputation. Donald Trump has been sued for defamation several times, with varying rates of success. Now his son, Donald Trump, Jr., is also being sued for defamation over allegations he made concerning another Republican candidate.

Don Blankenship was a Republican candidate for Senate in West Virginia in 2018, trying to unseat the incumbent, Joe Manchin III, who’s a Democrat. Trump and his allies opposed Blankenship in the primary, and their smear campaign included allegations that he’s a felon.

The allegations refer to an explosion at a mine run by Blankenship, and while felony charges were brought against him, he was only convicted of a misdemeanor. He was sentenced to 1 year in prison, which is the maximum penalty for a misdemeanor and could have caused some of the confusion leading to him being called a felon.

Blankenship also sued multiple media outlets for publishing the same misinformation, but those media outlets corrected their mistake as soon as it was brought to their attention. Trump Jr., on the other hand, doubled down and continued insisting Blankenship is a felon. The tweet he posted on May 3rd, 2018, calling Blankenship a felon was not deleted until late June of the same year, after Blankenship had already lost the primary, and long after Trump, Jr. had allegedly been made aware of the correction. Continue reading ›

No company should ever overlook the value of trade secrets. Those that do rarely achieve or maintain market dominance. One company that has undoubtedly achieved market dominance is Apple, which in late 2020 achieved a market capitalization that eclipsed $2 trillion. One reason for Apple’s dominance is its legendary protection of its intellectual property, including its trade secrets. One former veteran product designer found out just how serious Apple is about protecting its trade secrets when Apple recently filed a trade secret misappropriation lawsuit against the designer and his new employer alleging that the former product designer stole the company’s trade secrets to help his new employer, Arris Composites, and then leaked those secrets to the media to advance his own financial interests.

The former product design architect being accused of trade secret theft is Simon Lancaster who worked at Apple for more than 10 years and helped design the MacBook Pro that is nearly ubiquitous at coffee shops and college campuses across the country. The lawsuit accuses Lancaster of selling trade secrets and details concerning unreleased Apple products to an unnamed journalist in exchange for publicity for his own start-up company.

According to the Complaint, Lancaster used his seniority and position of trust to gain access to internal meetings and documents outside the scope of his job responsibilities that contained Apple’s trade secrets. He then allegedly fed those trade secrets to a journalist who published the insider information citing an unnamed “source at Apple.” The lawsuit does not reveal the identity of the journalist. Continue reading ›

In one of its final decisions of the term, the United States Supreme Court issued one of the most significant class-action decisions in recent years. The decision tightened the requirements for showing standing in class action lawsuits and has the potential to significantly affect class action litigation. Building on its 2016 decision in Spokeo, Inc. v. Robins, the Supreme Court held that, to recover damages in a class action, every class member must satisfy the standing requirement of Article III, at least when the requested relief involves recovery of money damages.

The plaintiff in the case, Sergio Ramirez, obtained a credit report from TransUnion in the course of purchasing a car, as countless consumers do each year. Ramirez’s credit report stated that his name was a possible match for a name on the Office of Foreign Assets Control (OFAC) watch list, a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries that typically contains the names of known terrorists, drug traffickers, and other individuals prohibited from conducting business in the U.S. for national security reasons.

Because of this alert on his credit report, the car dealership refused to sell Ramirez a vehicle. When he contacted TransUnion and requested a copy of his credit file, TransUnion first sent him his credit file and the statutorily required summary of rights. This first set of documents omitted any mention of the OFAC alert. TransUnion then sent Ramirez a second mailing, which included the OFAC alert but did not include the required summary of rights.

Based on these events, Ramirez filed suit alleging three violations of the federal Fair Credit Reporting Act (FCRA). First, he alleged that TransUnion did not implement and follow “reasonable procedures” to ensure the accuracy of his credit file. Second, he claimed that TransUnion violated the FCRA by failing to provide him with all the FCRA-required information in his credit file in connection with the first mailing he received which did not mention the OFAC alert. Finally, he alleged that TransUnion failed to provide him with the required summary of his rights “with each written disclosure” because the second mailing he received from TransUnion did not include a summary of his rights. Ramirez filed the case as a class action seeking to represent a class of similarly situated individuals. Continue reading ›

The Illinois Supreme Court ruled recently that an energy company could not sustain a claim for stolen corporate opportunities against two of its former business developers. In doing so the Court overturned a ruling by the appellate court which had revived the stolen corporate opportunity claim. The ruling, which many consider to be a bombshell in stolen corporate opportunity jurisprudence, was not without its detractors with three justices dissenting from the majority’s decision.

The plaintiff, Indeck Energy Services, is a privately held Buffalo Grove company that develops, owns, and operates independent power plants. Indeck’s lawsuit targets two former Indeck employees, Christopher M. DePodesta and Karl G. Dahlstrom, whom the energy company alleged secretly operated their own company while employed by Indeck and in doing so secured certain opportunities for themselves in breach of their fiduciary duties to Indeck.

Indeck hired DePodesta in 2010 as its vice president of business development and Dahlstrom in 2011 as its director of business development. The two were brought in to help Indeck scout out and secure new opportunities to develop natural gas powered plants within a region of Texas known as the Electrical Reliability Council of Texas.

Dalhstrom founded Halyard Energy Ventures, LLC (HEV) in late 2010. DePodesta became a member of HEV in 2011. HEV is a consulting, management, and administration firm that develops electrical power generation projects. Following DePodesta and Dalhstrom’s departure from Indeck, the two allegedly negotiated a deal for HEV to partner with a private equity fund to develop, construct, and operate electrical power generation plants. Continue reading ›

In 1964 the case of New York Times v. Sullivan reached the Supreme Court, which interpreted the First Amendment of the U.S. Constitution to mean public figures have a higher bar to clear when suing for libel.

The intention of the First Amendment is to give citizens the freedom to voice their opinion and publicly discuss public figures. At first, this just meant political officials, since the founding fathers saw the value in people being able to publicly debate and gain access to information on the people they would be voting into office. But subsequent rulings have expanded the actual malice doctrine to apply to public figures as well, including entertainers.

Because public figures are subject to a certain amount of public scrutiny, it makes sense for them to bear a higher burden of proof when suing for defamation and/or libel. Not only do they have to be able to prove the claim was false, they also have to prove that the person making the statement knew it was false at the time they made it, and that they made the false statement with the intention of causing financial harm to the plaintiff, hence the term “actual malice doctrine”. Now two Supreme Court justices are saying it’s time to reevaluate that ruling.

The two justices calling for a reexamination of the actual malice doctrine are Justice Clarence Thomas and Justice Neil M. Gorsuch, both of whom cite the modern news media landscape as having influenced their views on the actual malice doctrine and whether it should apply to all public figures.

Although we have long been told not to believe everything we see online, not only do many people believe what they see on the internet, they often act on what they see without bothering to verify those claims. Justice Thomas pointed to a New York Times article that described how someone might need to set up a home security system after being called things like “thief” or “pedophile” online, even if those claims are false. The person making those claims might not realize they’re false and/or might have no intention of causing financial harm to their target, but nevertheless, the harm is done. Does that mean the target of the vitriol should be able to sue the person making the false statements? Continue reading ›

An Illinois Appellate Court recently revived a breach of fiduciary duty and shareholder oppression lawsuit filed by minority shareholders against the president, director, and majority shareholder of a lumber company. The suit accused the majority shareholder of diverting nearly a million dollars from the lumber company to a separate company owned by the majority shareholder’s son. The trial court dismissed several of the minority shareholders’ claims and ruled in favor of the majority shareholder following a trial on the breach of fiduciary duty claims. In a blow to the majority shareholder, the Second District appeals court reversed the trial court finding that the majority shareholder did breach his fiduciary duties to the company and engaged in shareholder oppression.

The case provides practitioners and shareholders a useful primer on pleading and evidence requirements for successfully asserting breach of fiduciary duty and shareholder oppression claims against a corporate officer. It also sheds light on the contours and limits of a key legal doctrine implicated in such claims: the business judgment rule doctrine.

The case, Roberts v. Zimmerman, involved four separate but related lumber companies:  Our Wood Loft, Inc. (OWL), Outstanding, 3 Corp. Lumber Company, and Lake City Hardwood. The plaintiffs in the case were minority shareholders who collectively owned one-third of OWL, with the defendant, Stefan Zimmerman, owning the other two-thirds of the company. Zimmerman’s son, Thomas, owned Lake City.

The plaintiffs’ complaint alleged that Zimmerman initially sought to have his son buy shares in OWL but the minority shareholders refused. Instead, the plaintiffs agreed to allow Thomas to work as a manager at OWL. While working at OWL, Thomas started Lake City. Shortly thereafter, Lake City began purchasing lumber and re-selling it to OWL at a profit. The complaint alleged that Zimmerman did not reveal the relationship between OWL and Lake City and that Thomas owned Lake City until several years after OWL started buying lumber from Lake City. Continue reading ›

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